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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3486
Mosaic Tax-Free Trust
(Exact name of registrant as specified in charter)
550 Science Drive, Madison, WI 53711
(Address of principal executive offices)(Zip code)
W. Richard Mason
Madison/Mosaic Legal and Compliance Department
8777 N. Gainey Center Drive, Suite 220
Scottsdale, AZ 85258
(Name and address of agent for service)
Registrant's telephone number, including area code: 608-274-0300
Date of fiscal year end: September 30
Date of reporting period: March 31, 2004
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspoection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. s 3507.
Item 1. Report to Shareholders.
Semi-Annual Report (unaudited)
March 31, 2004
Mosaic Income Trust
Mosaic Arizona Tax-Free Fund
Mosaic Missouri Tax-Free Fund
Mosaic Virginia Tax-Free Fund
Mosaic Tax-Free National Fund
Mosaic Funds
www.mosaicfunds.com
Contents
The semi-annual period ended March 31, 2004 produced positive returns for investors in the funds in Mosaic Tax-Free Trust. Total returns for tax-free bond funds are a function of two factors: the value of the underlying bonds and the yield on those bonds. The value of the bonds is a function of the interest rate environment. When rates drop, the value of bonds rises; when rates rise, the value of existing bonds falls. The yield on the 10-Year Treasury is a commonly used barometer for intermediate bond rates (although municipal bonds do not precisely track this benchmark). The 10-Year Treasury began the six-month period at 3.94%, remained well above 4.00% for most of the period, and then dipped in March to a low of 3.68%, before ending the period at 3.84%. In short, we saw a slight decrease in rates over the period. Combined with the income from the bonds, this spelled the following six-month returns: 1.92% for Tax-Free Arizona; 2.38% for Tax-Free Missouri; 2.22% for Tax-Free Virginia; and 1.65% for Tax-Free National.
Over the same period, the Lipper General Municipal Debt Index was up 2.94%. The Lehman Municipal Index, which provides a fee-free benchmark for the industry, was up 3.12% for the six months. While positive, these returns were considerably lower than many of the preceding periods, which were characterized by a deep bear market in stocks and steadily dropping interest rates. More recently, there has been a broadening recognition of economic recovery, which is expected to produce higher interest rates. As a result, we have positioned all the funds in Tax-Free Trust with a shorter duration than their benchmark; a stance which was not additive over the past six months, but which will help relative performance in a rising rate environment. However, we recognize that most investors in municipal bonds seek tax-free yield, and we continue to make this a major component of our strategy. Should interest rates make a major move upward, we would likely see a short-term decrease in the total return for these funds. Keep in mind that this is simply part of the normal cycle within the bond market, and our total return since inception includes other such periods.
Economic Overview
As we entered the final quarter of 2003, there were signs that the economy and equity market had finally made a turn. The economic expansion put upward pressure on interest rates, which was counterbalanced by the Federal Reserve’s conviction that they could hold interest rates at low levels for a considerable time. One aspect of this low-rate environment was fear of deflation–a general drop in prices. The Federal Reserve Board had commented on this possibility earlier in 2003, and only over the course of the year changed its assessment from a deflationary tilt to a more balanced risk. Another factor was the stubbornly low employment statistics, which continued to disappoint through the entire six-month period ending March 31, 2004.
On the other hand, there was growing evidence that economic activity had entered a strong and sustainable recovery. The monetary and fiscal stimulus seemed to be gaining traction, as the third quarter 2003 GDP came in at an 8% annual rate, and the fourth quarter 2003 near 5%. Growth was broad-based, with advancing capital spending, improving inventory stockpiles, strong housing, and stable consumer expenditures.
As we completed the first quarter of 2004, the contrary forces on interest rates were again at a deadlock, with rates drifting upwards for most of the quarter, but finishing slightly lower than they were at the beginning of the year. Once again, the story was Federal Reserve resolve and weak employment figures. Heavy buying of U.S. debt securities by foreign investors was another factor that helped mask underlying economic strength.
Outlook
We are of the belief that the low rates that characterized this period were not supported by economic fundamentals. We believe that it is just a matter of time, and a few good employment numbers, before rates resume their cyclical rise. This will be temporary bad news for most municipal bond holders, as valuations will be under pressure in this scenario. However, with time, higher yielding notes are likely to become available and in such an environment, investors will see their tax-free income increase towards levels that are closer to historic norms.
ARIZONA FUND
The State of Arizona continues to enjoy a strong, well-diversified service and tourism based economy. The State does not have a credit rating because it does not issue general obligation bonds. The Fund had a total return of 1.92% for the six-month period and the 30-day SEC yield was 2.49% as of March 31, 2004. The Mosaic Tax-Free Arizona Fund underperformed the Lipper General Municipal Debt Index, which advanced 2.94%, and the Lehman Municipal Index, which advanced 3.12%, largely due to its maintenance of a shorter average maturity throughout the six-month period. This defensive positioning was done in anticipation of increasing interest rates. We continue to believe that the risks of higher interest rates over the near term outweigh the benefits of extending maturities and therefore maintain a shorter duration posture. At period end, the Lehman Index’s duration was 7.84 years, while the duration of the portfolio was 5.83 years. The average credit quality remained at AA. Purchases during the period included Arizona State Transportation Board revenue bonds. Arizona ranked seventh in the country in terms of issuance on a year-to-date basis.
MISSOURI FUND
The State of Missouri has a broad-based and diversified economy that is service-sector oriented. The State’s general obligation bonds are rated AAA. The Fund had a total return of 2.38% for the annual period and the 30-day SEC yield was 2.44% as of March 31, 2004. The Mosaic Tax-Free Missouri Fund underperformed the Lipper General Municipal Debt Index, which advanced 2.94%, and the Lehman Municipal Index, which advanced 3.12% due largely to its maintenance of a shorter average maturity throughout the six-month period. This defensive positioning was done in anticipation of increasing interest rates. We continue to believe that the risks of higher interest rates over the near term outweigh the benefits of extending maturities and therefore maintain a shorter duration posture. At period end, the Lehman Index’s duration was 7.84 years, while the duration of the portfolio was 6.76 years. The average credit quality was maintained at AA. Purchases during the period included Platte County Industrial Development Authority. Missouri ranked 33rd in the country in terms of issuance on a year-to-date basis.
VIRGINIA FUND
The Commonwealth of Virginia maintains an AAA general obligation bond rating based on a well-diversified economy that emphasizes services and government. The Fund had a total return of 2.22% for the six-month period and the 30-day SEC yield was 2.65% as of March 31, 2004. The Mosaic Tax-Free Virginia Fund underperformed the Lipper General Municipal Bond Index, which advanced 2.94%, and the Lehman Municipal Index, which advanced 3.12%, largely due to its maintenance of a shorter average maturity throughout the six-month period. This defensive positioning was done in anticipation of increasing interest rates. We continue to believe that the risks of higher interest rates over the near term outweigh the benefits of extending maturities and therefore maintain a shorter duration posture. At period end, the Lehman Index’s duration was 7.84 years, while the duration of the portfolio was 6.85 years. The average credit quality was maintained at AA. Purchases during the period included Greater Richmond Convention Center Expansion revenue bonds. Virginia ranked 17th in the country in terms of issuance on a year-to-date basis.
NATIONAL FUND
The National Fund had a total return of 1.65% for the six-month period and the 30-day SEC yield was 2.23% as of March 31, 2004. The Mosaic Tax-Free National Fund underperformed the Lipper General Municipal Debt Index which advanced 2.94%, and the Lehman Municipal Index, which was up 3.12%, largely due to its maintenance of a shorter average maturity throughout the six-month period. This defensive positioning was done in anticipation of increasing interest rates. We continue to believe that the risks of higher interest rates over the near term outweigh the benefits of extending maturities and therefore maintain a shorter duration posture than the Index. At period end, the Lehman Index’s duration was 7.84 years, while the duration of the portfolio was 6.50 years. The average credit quality was maintained at AA. Purchases made during the period included University of Iowa for the Pomerantz Center and Hampton Virginia Museum revenue bonds. The United States and its territories have issued $85.4 billion in muni bonds year-to-date through the end of March which represents a .2% decrease in volume over the same period last year.
Sincerely,
(signature)
Michael J. Peters, CFA
Vice President
Arizona Fund - Portfolio of Investments (unaudited)
Credit Rating* | Principal Amount | Market Value | ||
Moody’s | S&P | |||
LONG TERM MUNICIPAL BONDS: 98.4% of net assets | ||||
EDUCATION: 29.4% | ||||
Aa3 | AA | Maricopa County Unified School District #210 (Phoenix), 5.375%, 7/1/13 | $400,000 | $438,792 |
Aaa | AAA | Maricopa County Unified School District #41 (Gilbert), 5.8%, 7/1/14 | 250,000 | 298,395 |
Baa2 | nr | Maricopa County, Unified School District #090 Saddle Mountain, 5%, 7/1/14 | 75,000 | 78,711 |
Aaa | AAA | Mohave County Elementary School District #16 (Mohave Valley) (MBIA Insured), 5.375%, 7/1/13 | 100,000 | 111,497 |
Aaa | AAA | Mohave County Elementary School District #1 (Lake Havasu) (FGIC Insured), 5.9%, 7/1/15# | 200,000 | 221,702 |
Aaa | AAA | Pima County Unified School District #10 (Amphitheater), (FGIC Insured), 5.1%, 7/1/11 | 190,000 | 215,107 |
Aaa | AAA | Pima County, Arizona School District, (MBIA Insured), 5%, 7/1/09 | 125,000 | 136,094 |
Aaa | AAA | University of Arizona, (AMBAC Insured) 5%, 6/1/17 | 125,000 | 135,429 |
Aaa | AAA | University of Arizona Board of Regents, (FGIC Insured) 5.8%, 6/1/24 | 275,000 | 311,404 |
GENERAL OBLIGATION: 12.1% | ||||
Baa1 | A- | Puerto Rico Commonwealth, 6.5%, 7/1/14 | 320,000 | 395,456 |
Aaa | AAA | Scottsdale Preserve Authority Excise Tax Revenue (FGIC Insured), 5.625%, 7/1/22# | 125,000 | 133,301 |
Aa2 | AA | Tucson Recreational Facility Improvements, 5.25%, 7/1/19 | 250,000 | 270,265 |
HOSPITAL: 6.7% | ||||
Aaa | AAA | Arizona Health Facilities Authority, Hospital Revenue (Phoenix Baptist Hospital) (MBIA Insured), 6.25%, 9/1/11# | 155,000 | 166,366 |
Aaa | AAA | Pima County Industrial Development Authority Revenue (Refunding Bonds), 5.625%, 4/1/14 | 250,000 | 277,697 |
HOUSING: 3.7% | ||||
nr | AA | Maricopa County Industrial Development Authority, Multifamily Housing Revenue, (Pines at Camelback Apartments), 5.45%, 5/1/28 | 150,000 | 150,009 |
Aaa | nr | Maricopa County Industrial Development Authority, Single Family Mortgage Revenue, 4.3%, 12/1/06 | 90,000 | 93,265 |
INDUSTRIAL DEVELOPMENT: 1.7% | ||||
Aaa | AAA | Phoenix Civic Improvement Corp. Excise Tax, 4.5%, 7/1/08 | 100,000 | 109,342 |
LEASING AND OTHER FACILITIES: 23.0% | ||||
Aaa | AAA | Arizona Board of Regents Certificate Participation, (AMBAC Insured), 5.5%, 6/1/13 | 320,000 | 366,064 |
Baa1 | nr | Arizona Tourism & Sports Authority Tax Revenue Bond, 5%, 7/1/16 | 100,000 | 103,662 |
A1 | A | Greater Arizona Development Authority Infrastructure Revenue Bond, 4.85%, 8/1/20 | 300,000 | 308,364 |
Aaa | nr | Maricopa County Public Corp. Lease Revenue Bond, (AMBAC Insured), 5.5%, 7/1/10 | 280,000 | 323,509 |
Aaa | nr | Maricopa County Stadium Revenue Bond, (AMBAC Insured), 5.25%, 6/1/12 | 250,000 | 285,558 |
Aaa | AAA | Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 125,000 | 136,677 |
TRANSPORTATION: 13.2% | ||||
Aa3 | AA- | Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | 135,000 | 152,568 |
Aaa | AAA | Flagstaff Street and Highway User Revenue, Junior Lien (FGIC Insured), 5.9%, 7/1/10 | 500,000 | 589,080 |
Aaa | AAA | Mesa Street and Highway Revenue Bond, (FSA Insured), 4%, 7/1/14 | 130,000 | 134,329 |
WATER AND SEWER: 8.6% | ||||
nr | AA | Buckeye Water and Sewer Improvements, 5.45%, 1/1/10 | 235,000 | 264,871 |
Aaa | AAA | Mesa Recreational, Water and Sewer Improvements (FGIC Insured), 6.5%, 7/1/10 | 250,000 | 303,078 |
TOTAL INVESTMENTS (Cost $5,966,818) | $6,510,592 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 1.6% of net assets | 106,161 | |||
NET ASSETS: 100% | $6,616,753 |
Missouri Fund - Portfolio of Investments (unaudited)
Credit Rating* | Principal Amount | Market Value | ||
Moody’s | S&P | |||
LONG TERM MUNICIPAL BONDS: 94.2% of net assets | ||||
EDUCATION: 30.2% | ||||
Aaa | AAA | Jackson County Reorg School District #7, Lees Summit, (FSA Insured), 5.25%, 3/1/14 | $300,000 | $339,513 |
Aa2 | nr | Jefferson County School District, 6.7%, 3/1/11 | 200,000 | 238,288 |
Aaa | AAA | Mehlville School District R-9, Certificate Participation, (FSA Insured), 5%, 9/1/19 | 300,000 | 321,447 |
nr | AA+ | Normandy School District General Obligation, 5.4%, 3/1/18 | 325,000 | 349,066 |
Aa1 | AA+ | North Kansas City School District, 4.25%, 3/1/16 | 300,000 | 310,569 |
Aa1 | AA+ | Platte County School District Park Hill, 5.5%, 3/1/14 | 300,000 | 327,357 |
Aaa | AAA | St. Louis Board of Education, 5.5%, 4/1/10 | 275,000 | 317,314 |
Aaa | AAA | St. Louis County Pattonville R-3 School District (FGIC Insured), 5.75%, 3/1/16 | 200,000 | 232,296 |
GENERAL OBLIGATION: 14.2% | ||||
Aa2 | nr | Lees Summit, 4.7%, 4/1/21 | 325,000 | 333,873 |
Aaa | AAA | Missouri State (Fourth State Building), 5.75%, 8/1/19 | 200,000 | 219,806 |
Baa1 | A- | Puerto Rico Commonwealth Public Improvement, 6.5%, 7/1/14 | 480,000 | 593,184 |
HOSPITAL: 1.5% | ||||
Aa2 | AA+ | Missouri State Certificate Participation, Rehabilitation Center, 6%, 11/1/15 | 115,000 | 122,434 |
HOUSING: 7.1% | ||||
nr | AAA | St. Louis County Mortgage Revenue (AMT), 5.65%, 2/1/20# | 500,000 | 575,620 |
LEASING AND OTHER FACILITIES: 31.1% | ||||
A1 | nr | Greene County Certificate Participation, 5.25%, 7/1/11 | 300,000 | 337,404 |
Aa3 | nr | Jackson County Missouri, Public Building Corp. Leasehold Revenue, 5.1%, 11/1/12 | 200,000 | 220,372 |
Aaa | AAA | Missouri Development Financial Board Cultural Facilities Revenue Bond, (MBIA Insured), 5.25%, 1/1/17 | 350,000 | 386,110 |
Baa1 | BBB+ | Missouri Development Financial Board Infrastructure Facilities Revenue Bond, 4.3%, 12/1/12 | 225,000 | 228,897 |
Aa1 | AA+ | Missouri State Board Public Buildings, 4.0%, 12/1/10 | 75,000 | 80,334 |
Aaa | AAA | Springfield Public Building Corp. Leasehold Revenue Bond, 5.8%, 6/1/13 | 275,000 | 321,002 |
Aa3 | nr | Springfield Public Building Corp. Leasehold Revenue Bond, 4.7%, 5/1/12 | 175,000 | 190,221 |
Aaa | nr | St Louis Municipal Finance Corporation, Leasehold Revenue Bond (AMBAC Insured), 5.75%, 2/15/17 | 300,000 | 346,197 |
Aaa | AAA | St Louis Parking Facilities Revenue (MBIA Insured), 5.375%, 12/15/21 | 375,000 | 405,709 |
POLLUTION CONTROL REVENUE: 3.1% | ||||
A1 | A+ | St Louis Industrial Development Authority Pollution Control Revenue, 6.65%, 5/1/16 | 200,000 | 250,130 |
TRANSPORTATION: 5.2% | ||||
Aa2 | AA | Missouri State Highway & Transportation, Street & Road Revenue, 5.25%, 2/1/20 | 250,000 | 270,187 |
nr | AA | Platte County Industrial Development Authority, Zona Rosa Retail Project, 3.75%, 12/1/13 | 150,000 | 150,477 |
WATER AND SEWER: 1.8% | ||||
Aaa | nr | Jefferson County Public Water Supply District Number C-1 (AMBAC Insured), 5.25%, 12/1/16 | 130,000 | 146,235 |
TOTAL INVESTMENTS (Cost $6,916,502) | $7,614,042 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 5.8% of net assets | 468,824 | |||
NET ASSETS: 100% | $8,082,866 |
Virginia Fund - Portfolio of Investments (unaudited)
Credit Rating* | Principal Amount | Market Value | ||
Moody’s | S&P | |||
LONG TERM MUNICIPAL BONDS: 98.0% of net assets | ||||
EDUCATION: 6.9% | ||||
A2 | nr | Loudoun County Industrial Development Authority, University Facilities Revenue (George Washington University), 6.25%, 5/15/22 | $500,000 | $502,900 |
nr | A | Roanoke County Industrial Development Authority, (Hollins College), 5.25%, 3/15/23 | 900,000 | 943,929 |
Aa2 | AA | Virginia College Building Authority, Educational Facilities Revenue (Washington and Lee University), 5.75%, 1/1/14 | 20,000 | 20,509 |
A1 | AA- | Virginia State Universities, University Revenue (Virginia Commonwealth University), 5.75%, 5/1/15 | 500,000 | 530,905 |
GENERAL OBLIGATION: 25.3% | ||||
Aaa | AAA | Alexandria, 5%, 1/1/16 | 200,000 | 226,808 |
Aaa | AAA | Arlington County, 5%, 2/1/19 | 250,000 | 266,783 |
Aaa | AAA | Culpepper County, 6%, 1/15/21 | 500,000 | 592,865 |
A2 | A | Henry County, 6%, 7/15/14 | 500,000 | 516,950 |
Aaa | AAA | Leesburg, (AMBAC Insured), 5.6%, 6/1/15 | 500,000 | 536,115 |
Aa1 | AA+ | Loudoun County, 5.25%, 5/1/13 | 750,000 | 855,165 |
Aa1 | AA+ | Loudoun County, 5%, 10/1/13 | 500,000 | 568,330 |
Aa3 | AA | Lynchburg, 5.7%, 6/1/25 | 1,170,000 | 1,316,671 |
A1 | nr | Prince George County, 4.5%, 8/1/12 | 400,000 | 433,756 |
Baa1 | A- | Puerto Rico Commonwealth, 6.5%, 7/1/14 | 1,115,000 | 1,377,917 |
Aa1 | AA+ | Virginia Beach, 5%, 3/1/12 | 540,000 | 609,293 |
HOSPITAL: 16.0% | ||||
A2 | nr | Arlington County Industrial Development Authority, Hospital Facilities Revenue Bond, 5.5%, 7/1/15 | 1,000,000 | 1,085,150 |
Aaa | AAA | Danville Industrial Development Authority, Hospital Revenue (Danville Regional Medical Center) (FGIC Insured) (Prerefunded 10/1/04 @ 101), 6.375%, 10/1/14# | 350,000 | 362,810 |
Aaa | AAA | Danville Industrial Development Authority, Hospital Revenue (Danville Regional Medical Center) (AMBAC Insured) 5%, 10/1/10 | 250,000 | 279,125 |
Aaa | AAA | Fredericksburg Industrial Development Authority Hospital Facilities Revenue, 5.25%, 6/15/06 | 800,000 | 875,136 |
Aaa | AAA | Hanover County Industrial Development Authority, Revenue Bon Secours Health System (MBIA Insured), 6%, 8/15/10 | 640,000 | 752,026 |
Aaa | nr | Prince William County Industrial Development Authority, Hospital Revenue, (Prerefunded 10/1/05 @ 102), 6.85%, 10/1/25# | 85,000 | 93,871 |
Aaa | AAA | Roanoke Industrial Development Authority, Hospital Revenue (Carilion Health Systems) (MBIA Insured), 5.5%, 7/1/16 | 500,000 | 572,165 |
Aaa | AAA | Roanoke Industrial Development Authority, Hospital Revenue (Roanoke Memorial Hospitals) (MBIA Insured), 6.125%, 7/1/17 | 500,000 | 608,925 |
HOUSING: 9.1% | ||||
nr | AAA | Fairfax County Redevelopment & Housing Authority, Multi-Family Housing Revenue (Castel Lani Project) (FHA Insured), 5.5%, 4/1/28 | 425,000 | 439,208 |
nr | A | Prince William County Industrial Development Authority, Multi-Family Housing Revenue, 5.35%, 7/01/23# | 830,000 | 839,279 |
nr | AAA | Suffolk Redevelopment & Housing Authority, Multi-Family Housing Revenue, 5.6%, 2/01/33 | 1,250,000 | 1,353,875 |
INDUSTRIAL DEVELOPMENT: 3.8% | ||||
Aaa | nr | Fairfax County Economic Development Authority (National Wildlife Assoc.), 5.25%, 9/1/19 | 1,000,000 | 1,091,180 |
LEASING AND OTHER FACILITIES: 9.4% | ||||
Aa1 | AA+ | Fairfax County Economic Development Authority, Lease Revenue, 5.5%, 5/15/18 | 500,000 | 512,560 |
Aaa | AAA | Portsmouth Industrial Development Authority Revenue, Hotel Conference Center & Parking, 5.125%, 4/1/17 | 1,000,000 | 1,079,820 |
Aaa | nr | Richmond Industrial Development Authority Government Facilities, 5%, 7/15/13 | 1,000,000 | 1,131,450 |
MUNICIPAL OTHER: 15.9% | ||||
A3 | A- | Greater Richmond Convention Center Expansion, 5.5%, 6/15/10 | $800,000 | $907,416 |
A | Hampton Museum Revenue, 3.25%, 1/1/10 | 400,000 | 400,612 | |
Aaa | AAA | Southeastern Public Service Authority Revenue, 5%, 7/1/15 | 1,000,000 | 1,124,470 |
Aaa | AAA | Southwest Regional Jail Authority Revenue, (MBIA Insured), 4.5% 9/1/10 | 1,000,000 | 1,092,280 |
Aa1 | AA+ | Virginia State Public Building Authority, Public Facilities Revenue, 5%, 8/01/18 | 1,000,000 | 1,059,640 |
TRANSPORTATION: 1.4% | ||||
Aaa | AAA | Richmond Metropolitan Authority Expressway Revenue, (FGIC Insured), 5.25%, 7/15/12 | 350,000 | 400,704 |
WATER & WASTE: 10.2% | ||||
Aaa | AAA | Frederick Regional Sewer System Revenue, (AMBAC), 5%, 10/1/15 | 570,000 | 642,253 |
Aaa | AAA | Henry County Water & Sewer Revenue, (FSA Insured), 5.25%, 11/15/16 | 700,000 | 809,116 |
Aaa | AAA | Stafford County Water & Sewer Revenue, (FSA Insured), 4.5%, 6/1/11 | 335,000 | 367,810 |
Aaa | AAA | Upper Occoquan Sewer, Regional Sewer Revenue, (MBIA Insured), 5.15%, 7/1/20 | 1,000,000 | 1,127,360 |
TOTAL INVESTMENTS (Cost $26,512,007) | $28,307,137 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 2.0% of net assets | 589,093 | |||
NET ASSETS: 100% | $28,896,230 |
National Fund - Portfolio of Investments (unaudited)
Credit Rating* | Principal Amount | Market Value | ||
Moody’s | S&P | |||
LONG TERM MUNICIPAL BONDS: 97.8% of net assets | ||||
ARIZONA: 8.0% | ||||
Aa3 | AA- | Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | $100,000 | $113,013 |
Aaa | AAA | Maricopa County Unified School District #48 Scottsdale, (FSA), 5%, 7/1/15 | 500,000 | 562,235 |
Aaa | AAA | Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 1,100,000 | 1,202,762 |
FLORIDA: 10.6% | ||||
Aaa | nr | First Florida Government Community Revenue Bond, (AMBAC Insured), 5.5%, 7/1/16 | 1,000,000 | 1,168,300 |
Aaa | AAA | Palm Beach County Solid Waste Authority Revenue Bond, (AMBAC Insured), 6%, 10/1/10 | 1,100,000 | 1,303,951 |
ILLINOIS: 10.4% | ||||
Aaa | nr | Grundy County School District #054, General Obligation, (AMBAC Insured), 8.35%, 12/1/07 | 720,000 | 879,797 |
Aaa | AAA | Regional Illinois Transportation Authority, Transit Revenue (AMBAC Insured), 7.2%, 11/1/20 | 300,000 | 390,930 |
Aaa | AAA | University of Illinois Certificates, Utility Infrastructure Projects (MBIA Insured), 5.75%, 8/15/09 | 1,000,000 | 1,159,360 |
INDIANA: 2.7% | ||||
Aaa | AAA | Indiana Bond Bank, 5.75%, 8/1/13 | 550,000 | 630,889 |
IOWA: 4.3% | ||||
Aa2 | AA- | University of Iowa Facilities Corp. Revenue, Pomerantz Center, 5%, 6/1/10 | 900,000 | 1,004,202 |
KANSAS: 2.5% | ||||
Aa2 | AA+ | Kansas State Department of Transportation, Hwy Revenue, 6.125%, 9/1/09 | 500,000 | 593,880 |
MARYLAND: 3.2% | ||||
Aa1 | AA+ | Anne Arundel County, Solid Waste Projects (AMT), 5.5%, 9/1/16 | 100,000 | 109,032 |
Aaa | AAA | Baltimore Auto Parking Revenue (FGIC Insured), 5.9%, 7/1/09 | 75,000 | 87,485 |
Aa3 | AA- | Baltimore, Port Facilities Revenue (Consolidated Coal Sales), 6.5%, 10/1/11 | 100,000 | 101,265 |
Aa2 | AA | Frederick County, 5.1%, 12/1/17 | 75,000 | 81,914 |
Aaa | AAA | Maryland State, 5%, 7/15/11 | 50,000 | 56,080 |
Aaa | AAA | Maryland State Transportation Authority Transportation Facilities Project Revenue, 6.8%, 7/1/16# | 100,000 | 121,803 |
nr | AA+ | Montgomery County Revenue Authority, Lease Revenue (Human Services Headquarters), 5.6%, 8/1/14 | 100,000 | 108,818 |
A2 | nr | Northeast Waste Disposal Authority, Solid Waste Revenue Bond, 5.8%, 7/1/04 | 70,000 | 70,697 |
MASSACHUSETTS: 5.4% | ||||
Aa2 | AA | Massachusetts Bay Transportation Authority, Transit Revenue, 7%, 3/1/14 | 1,000,000 | 1,262,480 |
MICHIGAN: 1.9% | ||||
Aaa | AAA | Redford United School District, (AMBAC Insured), 5%, 5/1/22 | 410,000 | 447,958 |
MINNESOTA: 0.6% | ||||
Aa1 | AA+ | Minnesota State Housing Finance Agency, Housing Revenue (Single-Family Mortgage) (AMT), 6.25%, 7/1/26 | 130,000 | 134,126 |
MISSISSIPPI: 5.8% | ||||
Aaa | AAA | Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 7.75%, 2/1/14 | 500,000 | 665,945 |
Aaa | AAA | Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 8.5%, 2/1/13 | 500,000 | 686,475 |
MISSOURI: 4.8% | ||||
Aa1 | AA+ | Missouri State Health & Educational Facilities Authority Revenue Bond, 5%, 11/1/09 | 1,000,000 | 1,133,160 |
NEW JERSEY: 5.0% | ||||
Aaa | AAA | New Jersey State Transportation Transit Fund Authority, 5.5%, 12/15/17 | 1,000,000 | 1,160,370 |
NORTH DAKOTA: 2.4% | ||||
Baa1 | nr | Grand Forks Health Care Systems Revenue Bond, 7.125%, 8/15/24 | 500,000 | 550,565 |
PENNSYLVANIA: 5.5% | ||||
Aaa | AAA | Lehigh County General Obligation (Lehigh Valley Hospital) (MBIA Insured), 7%, 7/1/16 | 1,000,000 | 1,286,890 |
PUERTO RICO: 0.4% | ||||
Baa1 | A- | Puerto Rico Commonwealth, 6.5%, 7/1/14 | 85,000 | 105,043 |
SOUTH CAROLINA: 0.8% | ||||
Aaa | AAA | Piedmont Municipal Power Agency Electrical Revenue (FGIC Insured), 6.5%, 1/1/16# | 145,000 | 181,006 |
TEXAS: 12.2% | ||||
Aaa | AAA | Lower Colorado River Authority, Utility Revenue, (AMBAC Insured), 6.0%, 1/1/17 | 305,000 | 372,588 |
Aaa | AAA | North Forest Independent School District, 6%, 8/15/11 | 1,050,000 | 1,252,041 |
Aaa | AAA | Texas Public Building Authority, Building Revenue (MBIA Insured), 7.125%, 8/1/11# | 1,000,000 | 1,216,850 |
VIRGINIA: 8.6% | ||||
A3 | nr | Fredericksburg Industrial Development Authority Hospital Facilities Revenue, 5%, 8/15/08 | 175,000 | 190,472 |
nr | A | Hampton Museum Revenue, 3.25%, 1/1/10 | 200,000 | 200,306 |
Aaa | AAA | Hanover County Industrial Development Authority Hospital (Bon Secours Health Systems) (MBIA Insured), 6%, 8/15/10 | 500,000 | 587,520 |
Aa1 | AA+ | Virginia Commonwealth Transportation Board, 4.5%, 4/1/18 | 1,000,000 | 1,033,900 |
WASHINGTON: 1.5% | ||||
Aaa | AAA | King County School District #415 Kent, (FSA Insured) 5.5%, 6/1/16 | 300,000 | 347,361 |
WISCONSIN: 1.2% | ||||
Aaa | AAA | Southeast Wisconsin Professional Baseball Park District, Sales Tax Revenue, (MBIA), 5.5%, 12/15/15 | 240,000 | 279,701 |
TOTAL INVESTMENTS (Cost $20,981,140) | $22,841,170 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 2.2% of net assets | 507,100 | |||
NET ASSETS: 100% | $23,348,270 |
Notes to Portfolios of Investments:
^ | Security has a variable coupon rate and/or is subject to a demand feature before final |
maturity. Coupon rate as of March 31, 2004. | |
# | Refunded or escrowed to maturity |
AMBAC | American Municipal Bond Assurance Corporation |
AMT | Subject to Alternative Minimum Tax |
FGIC | Financial Guaranty Insurance Company |
FHA | Federal Housing Administration |
FSA | Federal Security Assistance |
GNMA | Government National Mortgage Association |
LOC | Letter of Credit |
MBIA | Municipal Bond Investors Assurance Corporation |
Moody’s | Moody’s Investors Service, Inc. |
nr | Not rated |
PSF | Permanent School Fund |
S&P | Standard & Poor’s Corporation |
* | Credit ratings are unaudited |
+ | Aggregate cost for federal income tax purposes as of March 31, 2004. |
Statements of Assets and Liabilities (unaudited)
Arizona Fund | Missouri Fund | Virginia Fund | National Fund | |
ASSETS | ||||
Investments, at value (Note 1) | ||||
mInvestment securities* | $6,510,592 | $7,614,042 | $28,307,137 | $22,841,170 |
Cash | 25,483 | 383,961 | 277,879 | 223,277 |
Interest Receivable | 86,316 | 89,163 | 366,974 | 290,546 |
Total assets | 6,622,391 | 8,087,166 | 28,951,990 | 23,354,993 |
LIABILITIES | ||||
Payables | ||||
mInvestment securities purchased | 296,919 | 305,423 | -- | -- |
mDividends | 5,638 | 4,300 | 7,746 | 6,240 |
mCapital shares redeemed | -- | -- | 48,014 | 483 |
Total Liabilities | 5,638 | 4,300 | 55,760 | 6,723 |
NET ASSETS (Note 5) | $6,616,753 | $8,082,866 | $28,896,230 | $23,348,270 |
CAPITAL SHARES OUTSTANDING | 602,778 | 724,946 | 2,411,672 | 2,039,219 |
NET ASSET VALUE PER SHARE | $m10.98 | $m11.15 | $m11.98 | $m11.45 |
*INVESTMENT SECURITIES, AT COST | $5,966,818 | $6,916,502 | $26,512,007 | $20,981,140 |
Statements of Operations (unaudited)
For the period ended March 31, 2004
Arizona Fund | Missouri Fund | Virginia Fund | National Fund | |
INVESTMENT INCOME (Note 1) | ||||
mInterest income | $150,688 | $179,680 | $646,694 | $512,387 |
EXPENSES (Notes 2 and 3) | ||||
mInvestment advisory fees | 20,792 | 24,821 | 91,493 | 74,054 |
mService agreement fees | 15,968 | 18,268 | 57,092 | 52,134 |
Total expenses | 36,760 | 43,089 | 148,585 | 126,188 |
NET INVESTMENT INCOME | 113,928 | 136,591 | 498,109 | 386,199 |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
mNet realized gain on investments | 15,487 | 8,274 | 53,145 | 157,174 |
mChange in net unrealized appreciation (depreciation) of investments | (3,259) | 38,263 | 82,343 | (150,623) |
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 12,228 | 46,537 | 135,488 | 6,551 |
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $126,156 | $183,128 | $633,597 | $392,750 |
Statements of Changes in Net Assets
For the periods indicated
Arizona Fund | Missouri Fund | |||
Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 | Period Ended March 31, 2004 | Year Ended Sept. 30, 2003 | |
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | ||||
Net investment income | $m113,928 | $m223,924 | $m136,591 | $m283,043 |
Net realized gain (loss) on investments | 15,487 | (1,504) | 8,274 | 90,168 |
Net unrealized appreciation (depreciation) on investments | (3,259) | (29,725) | 38,263 | (215,557) |
Total increase in net assets resulting from operations | 126,156 | 192,695 | 183,128 | 157,654 |
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | (113,928) | (223,924) | (136,591) | (283,043) |
CAPITAL SHARE TRANSACTIONS (Note 7) | (552) | (164,632) | 195,567 | (602,951) |
TOTAL INCREASE (DECREASE) IN NET ASSETS | 11,676 | (195,861) | 242,104 | (728,340) |
NET ASSETS | ||||
Beginning of period | $6,605,077 | $6,800,938 | $7,840,762 | $8,569,102 |
End of period | $6,616,753 | $6,605,077 | $8,082,866 | $7,840,762 |
Virginia Fund | National Fund | |||
Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 | Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 | |
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | ||||
Net investment income | $m498,109 | $1,114,430 | $m386,199 | $m800,531 |
Net realized gain on investments | 53,145 | 322,133 | 157,174 | 232,568 |
Net unrealized appreciation (depreciation) of investments | 82,343 | (434,157) | (150,623) | (411,304) |
Total increase in net assets resulting from operations | 633,597 | 1,002,406 | 392,750 | 621,795 |
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | (498,109) | (1,114,430) | (386,199) | (800,531) |
From net capital gains | (332,133) | (117,232) | -- | -- |
Total distributions | (830,242) | (1,231,662) | (386,199) | (800,531) |
CAPITAL SHARE TRANSACTIONS (Note 7) | (587,994) | (170,024) | (147,403) | (606,280) |
TOTAL INCREASE (DECREASE) | ||||
IN NET ASSETS | (784,639) | (399,280) | (140,852) | (785,016) |
NET ASSETS | ||||
Beginning of period | $29,680,869 | $30,080,149 | $23,489,122 | $24,274,138 |
End of period | $28,896,230 | $29,680,869 | $23,348,270 | $23,489,122 |
*Unaudited
Selected data for a share outstanding for the periods indicated.
ARIZONA FUND
Period Ended March 31, 2004* | Year Ended September 30, | ||||
2003 | 2002 | 2001 | 2000 | ||
Net asset value, beginning of period | $10.96 | $11.00 | $10.63 | $10.06 | $10.03 |
Investment operations: | |||||
mNet investment income | 0.19 | 0.38 | 0.39 | 0.42 | 0.45 |
mNet realized and unrealized gain (loss) on investments | 0.02 | (0.04) | 0.37 | 0.57 | 0.03 |
Total from investment operations | 0.21 | 0.34 | 0.76 | 0.99 | 0.48 |
mLess distributions from net investment income | (0.19) | (0.38) | (0.39) | (0.42) | (0.45) |
Net asset value, end of period | $10.98 | $10.96 | $11.00 | $10.63 | $10.06 |
Total return (%) | 1.92 | 3.17 | 7.37 | 10.01 | 4.93 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $6,617 | $6,605 | $6,801 | $6,883 | $6,451 |
mRatio of expenses to average net assets (%)1 | 1.11 | 1.11 | 1.11 | 1.10 | 1.12 |
mRatio of net investment income to average net assets (%)1 | 3.42 | 3.47 | 3.69 | 4.01 | 4.53 |
mPortfolio turnover (%) | 2 | 5 | 15 | 20 | 29 |
MISSOURI FUND
Period Ended March 31,2004* | Year Ended September 30, | ||||
2003 | 2002 | 2001 | 2000 | ||
Net asset value, beginning of period | $11.08 | $11.24 | $10.72 | $10.17 | $10.12 |
Investment operations: | |||||
mNet investment income | 0.19 | 0.40 | 0.41 | 0.43 | 0.44 |
mNet realized and unrealized gain (loss) on investments | 0.07 | (0.16) | 0.52 | 0.55 | 0.05 |
Total from investment operations | 0.26 | 0.24 | 0.93 | 0.98 | 0.49 |
mLess distributions from net investment income | (0.19) | (0.40) | (0.41) | (0.43) | (0.44)? |
Net asset value, end of period | $11.15 | $11.08 | $11.24 | $10.72 | $10.17 |
Total return (%) | 2.38 | 2.24 | 8.96 | 9.79 | 5.03 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $8,083 | $7,841 | $8,569 | $7,943 | $7,321 |
mRatio of expenses to average net assets (%)1 | 1.08 | 1.09 | 1.08 | 1.08 | 1.09 |
mRatio of net investment income to average net assets (%)1 | 3.44 | 3.63 | 3.85 | 4.06 | 4.43 |
mPortfolio turnover (%) | 2 | 17 | 21 | 16 | 26 |
VIRGINIA FUND
Period Ended March 31, | Year Ended September 30, | ||||
2004* | 2003 | 2002 | 2001 | 2000 | |
Net asset value, beginning of period | $12.06 | $12.16 | $11.70 | $11.14 | $11.13 |
Investment operations: | |||||
mNet investment income | 0.20 | 0.45 | 0.48 | 0.49 | 0.50 |
mNet realized and unrealized gain (loss) on investments | 0.06 | (0.05) | 0.46 | 0.56 | 0.01 |
Total from investment operations | 0.26 | 0.40 | 0.94 | 1.05 | 0.51 |
mLess distribution from: | |||||
mmnet investment income | (0.20) | (0.45) | (0.48) | (0.49) | (0.50) |
mmnet capital gains | (0.14) | (0.05) | -- | -- | -- |
Total distributions | (0.34) | (0.50) | (0.48) | (0.49) | (0.50) |
Net asset value, end of period | $11.98 | $12.06 | $12.16 | $11.70 | $11.14 |
Total return (%) | 2.22 | 3.35 | 8.22 | 9.62 | 4.78 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $28,896 | $29,681 | $30,080 | $29,747 | $28,526 |
mRatio of expenses to average net assets (%)1 | 1.02 | 1.01 | 1.01 | 1.01 | 1.02 |
mRatio of net investment income to average net assets (%)1 | 3.40 | 3.72 | 4.05 | 4.26 | 4.60 |
mPortfolio turnover (%) | 5 | 31 | 27 | 38 | 24 |
NATIONAL FUND
Period Ended March 31, | Year Ended September 30, | ||||
2004* | 2003 | 2002 | 2001 | 2000 | |
Net asset value, beginning of period | $11.45 | $11.53 | $10.97 | $10.43 | $10.30 |
Investment operations: | |||||
mNet investment income | 0.19 | 0.38 | 0.41 | 0.49 | 0.42 |
mNet realized and unrealized gain (loss) on investments | (0.00) | (0.08) | 0.56 | 0.54 | 0.13 |
Total from investment operations | 0.19 | 0.30 | 0.97 | 1.03 | 0.55 |
Less distribution from net investment income | (0.19) | (0.38) | (0.41) | (0.49) | (0.42) |
Net asset value, end of period | $11.45 | $11.45 | $11.53 | $10.97 | $10.43 |
Total return (%) | 1.65 | 2.72 | 9.08 | 10.03 | 5.53 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $23,348 | $23,489 | $24,274 | $24,417 | $21,951 |
mRatio of expenses to average net assets (%)1 | 1.06 | 1.07 | 1.07 | 1.06 | 1.07 |
mRatio of net investment income to average net assets (%)1 | 3.26 | 3.37 | 3.70 | 4.48 | 4.15 |
mPortfolio turnover (%) | 16 | 21 | 56 | 53 | 78 |
*Unaudited
1Annualized
For the period ended March 31, 2004
1. Summary of Significant Accounting Policies. Mosaic Tax-Free Trust (the "Trust") is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 as an open-end, diversified investment management company. The Trust maintains four separate funds (described in the following sentences and defined as the "Funds") which invest principally in securities exempt from federal income taxes, commonly known as "municipal" securities. The Arizona, Missouri and Virginia Funds (the "State Funds") invest solely in securities exempt from both federal and state income taxes in their respective states. The National Fund invests in securities exempt from federal taxes. The National Fund and the State Funds invest in intermediate and long-term securities. Because the Trust is 100% no-load, the shares of each fund are offered and redeemed at the net asset value per share.
Securities Valuation: The State and National Funds value securities having maturities of 60 days or less at amortized cost, which approximates market value. Securities having longer maturities, for which market quotations are readily available are valued at the mean between their bid and ask prices. Securities for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures approved by the Board of Trustees.
Investment Transactions: Investment transactions are recorded on a trade date basis. The cost of investments sold is determined on the identified cost basis for financial statement and federal income tax purposes.
Investment Income: Interest income is recorded on an accrual basis. Bond premium is amortized and original issue discount and market discount are accreted over the expected life of each applicable security using the effective interest method.
Distribution of Income and Gains: Net invest-ment income, determined as gross invest--ment income less total expenses, is declared as a regular dividend monthly for the State and National Funds. Dividends are distributed to share-holders or reinvested in additional shares as of the close of business at the end of each month. Capital gain distributions, if any, are declared and paid annually at year-end. Additional distributions may be made if necessary. Distributions paid during the years ended September 30, 2003 and 2002 were identical for book purposes and tax purposes.
Income Tax: No provision is made for Federal income taxes since it is the intention of the Funds to comply with the provisions of the Internal Revenue Code available to investment companies and to make the requisite distribu-tion to shareholders of taxable income which will be sufficient to relieve it from all or substantially all Federal Income Taxes. As of September 30, 2003, capital loss carryovers available to offset future capital gains for federal income tax purposes and the years they expire are as follows:
Expiration Date | Arizona Fund |
September 30, 2008 | $22,638 |
September 30, 2011 | 1,504 |
Expiration Date | Missouri Fund |
September 30, 2008 | $71,053 |
Expiration Date | National Fund |
September 30, 2008 | $160,551 |
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under generally accepted accounting principles and federal income tax purposes, permanent differences between financial and tax basis reporting for the 2003 fiscal year have been identified and appropriately reclassified. In the Tax-Free Arizona Fund and Tax-Free National Fund, permanent differences relating to expired capital loss carryovers totaling $202,304 and $618,019, respectively were reclassified from accumulated undistributed net realized losses to paid in capital.
Use of Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. Such estimates affect the reported amounts of assets and liabilities and reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Investment Advisory Fees and Other Transactions with Affiliates. The investment advisor to the Trust, Madison Mosaic, LLC, a wholly owned subsidiary of Madison Investment Advisors, Inc. ("the Advisor"), earns an advisory fee equal to 0.625% per annum of the average net assets of the State and National Funds. The fee is accrued daily and paid monthly.
3. Service Agreement Fees. Under a separate Services Agreement, the Advisor will provide or arrange for each Fund to have all other necessary operational and support services for a fee based on a percentage of average net assets. As of the date of this Report, this percentage was 0.48% for the Arizona Fund, 0.46% for the Missouri Fund, 0.39% for the Virginia Fund and 0.44% for the National Fund. The fee is accrued daily and paid monthly.
The Advisor is also responsible for the fees and expenses of Trustees who are affiliated with the Advisor and for certain promotional expenses.
4. Aggregate Cost and Unrealized Appreciation. The aggregate cost for federal income tax purposes and the net unrealized appreciation (depreciation) are stated as follows as of March 31, 2004:
Arizona Fund | Missouri Fund | Virginia Fund | National Fund | |
Aggregate Cost | $5,966,818 | $6,916,502 | $26,512,007 | $20,981,140 |
Gross unrealized appreciation | 543,774 | 697,540 | 1,802,524 | 1,890,291 |
Gross unrealized depreciation | --) | -- | (7,394) | (30,261) |
Net unrealized appreciation | $543,774) | $697,540 | $1,795,130 | $1,860,030 |
5. Net Assets. At March 31, 2004, net assets included the following:
Arizona Fund | Missouri Fund | Virginia Fund | National Fund | |
Paid in capital | $6,081,634 | $7,448,105 | $27,057,955 | $21,491,617 |
Accumulated net realized losses | (8,655) | (62,779) | 43,145 | (3,377) |
Net unrealized appreciation on investments | 543,774 | 697,540 | 1,795,130 | 1,860,030 |
mTotal Net Assets | $6,616,753 | $8,082,866 | $28,896,230 | $23,348,270 |
6. Investment Transactions. Purchases and sales of securities (excluding short-term securities) for the six-months ended March 31, 2004, were as follows:
Purchases | Sales | |
Arizona Fund | $m152,900 | $m392,013 |
Missouri Fund | 149,381 | 153,000 |
Virginia Fund | 1,398,858 | 2,382,607 |
National Fund | 3,589,164 | 3,683,902 |
7. Capital Share Transactions. An unlimited number of capital shares, without par value, are authorized. Transactions in capital shares were as follows:
Arizona Fund | Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 |
In Dollars | ||
Shares sold | $ 119,601 | $ 441,441 |
Shares issued in reinvestment of dividends | 80,698 | 162,775 |
Total shares issued | 200,299 | 604,216 |
Shares redeemed | (200,851) | (768,848) |
Net decrease | $mm(552) | $ (164,632) |
In Shares | ||
Shares sold | 10,889 | 40,876 |
Shares issued in reinvestment of dividends | 7,364 | 14,975 |
Total shares issued | 18,253 | 55,851 |
Shares redeemed | (18,120) | (71,281) |
Net increase (decrease) | 133 | (15,430) |
Missouri Fund | Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 |
In Dollars | ||
Shares sold | $ 146,916 | $ 183,604 |
Shares issued in reinvestment of dividends | 108,502 | 223,156 |
Total shares issued | 255,418 | 406,760 |
Shares redeemed | (59,851) | (1,009,711) |
Net increase (decrease) | $ 195,567 | $ (602,951) |
In Shares | ||
Shares sold | 13,091 | 16,654 |
Shares issued in reinvestment of dividends | 9,772 | 20,316 |
Total shares issued | 22,863 | 36,970 |
Shares redeemed | (5,339) | (92,033) |
Net increase (decrease) | 17,524 | (55,063) |
Virginia Fund | Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 |
In Dollars | ||
Shares sold | $ 674,757 | $3,139,443 |
Shares issued in reinvestment of dividends | 760,625 | 1,121,658 |
Total shares issued | 1,435,382 | 4,261,101 |
Shares redeemed | 2,023,376 | (4,431,125) |
Net decrease | $ (587,994) | $ (170,024) |
In Shares | ||
Shares sold | 56,023 | 261,8642 |
Shares issued in reinvestment of dividends | 63,523 | 93,984 |
Total shares issued | 119,546 | 355,848 |
Shares redeemed | 168,344 | (369,794) |
Net decrease | (48,798) | (13,946) |
National Fund | Period Ended March 31, 2004* | Year Ended Sept. 30, 2003 |
In Dollars | ||
Shares sold | $2,081,295 | $4,033,258 |
Shares issued in reinvestment of dividends | 348,232 | 717,333 |
Total shares issued | 2,429,527 | 4,750,591 |
Shares redeemed | (2,576,930) | (5,356,871) |
Net decrease | $ (147,403) | $ (606,280) |
In Shares | ||
Shares sold | 182,022 | 355,713 |
Shares issued in reinvestment of dividends | 30,472 | 63,288 |
Total shares issued | 212,494 | 419,001 |
Shares redeemed | (224,442) | (472,860) |
Net decrease | (11,948) | (53,859) |
*Unaudited
8. Special Vote Information. On December 9, 2003, a Special Meeting of the shareholders of Mosaic Tax-Free Money Market Fund was held in Madison, Wisconsin. The shareholders were asked to approve the liquidation of the Tax-Free Money Market series of shares of the Trust in accordance with the proxy statement dated November 1, 2003. Of the 4,766,663 outstanding shares of the fund, 2,444,080 were represented in person or by proxy (51%), of which 2,191,505 (90%) voted in favor of the liquidation. The fund was liquidated on December 18, 2003.
Forward-Looking Statement Disclosure. One of our most important responsibilities as mutual fund managers is to communicate with shareholders in an open and direct manner. Some of our comments in our letters to shareholders are based on current management expectations and are considered "forward-looking statements." Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statements by words such as "estimate," "may," "will," "expect," "believe," "plan" and other similar terms. We cannot promise future returns. Our opinions are a reflection of our best judgment at the time this report is compiled, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events, or otherwise.
Proxy Voting Information. The Trust adopted policies that provide guidance and set forth parameters for the voting of proxies relating to securities held in the Fund’s portfolios. These policies are available to you upon request and free of charge by writing to Mosaic Funds, 550 Science Drive, Madison, WI 53711 or by calling toll-free at 1-800-368-3195. Beginning later this year, the Trust’s proxy voting policies may also be obtained by visiting the Securities and Exchange Commission web site at www.sec.gov. The Trust will respond to shareholder requests for copies of our policies within two business days of request by first-class mail or other means designed to ensure prompt delivery.
Change of Independent Auditors. In October 2003, the Board of Trustees decided that, effective for the fiscal year beginning October 1, 2003, for matters relating to such fiscal years, the firm of Grant Thornton, LLP shall serve as the certifying accountant for the Trust, replacing Deloitte & Touche LLP at the conclusion of its engagement certifying the financial statements for the Trust’s fiscal year ended September 30, 2003 and attendant matters related to fiscal years ended prior to September 30, 2004. For the Trust’s last two fiscal years, Deloitte & Touche LLP has not issued to the Trust an adverse opinion or a disclaimer of opinion, or qualified or modified an opinion as to uncertainty, audit scope, or accounting principles. There has been no disagreement with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused it to make reference to the subject matter of the disagreement in connection with its report. There have been no events listed in paragraphs (a)(1)(v)(A) through (D) of 17 CFR 229.304(a)(1).
The Mosaic Family of Mutual Funds
Mosaic Equity Trust
Mosaic Investors Fund
Mosaic Balanced Fund
Mosaic Mid-Cap Fund
Mosaic Foresight Fund
Mosaic Income Trust
Mosaic Government Fund
Mosaic Intermediate Income Fund
Mosaic Institutional Bond Fund
Mosaic Tax-Free Trust
Mosaic Arizona Tax-Free Fund
Mosaic Missouri Tax-Free Fund
Mosaic Virginia Tax-Free Fund
Mosaic Tax-Free National Fund
Mosaic Government Money Market
For more complete information on any Mosaic fund, including charges and expenses, request a prospectus by calling 1-800-368-3195. Read it carefully before you invest or send money. This document does not constitute an offering by the distributor in any jurisdiction in which such offering may not be lawfully made. Mosaic Funds Distributor, LLC.
TRANSER AGENT
Mosaic Funds
c/o US Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
TELEPHONE NUMBERS
Shareholder Service
Toll-free nationwide: 888-670-3600
Mosaic Tiles (24 hour automated information)
Toll-free nationwide: 800-336-3600
550 Science Drive
Madison, Wisconsin 53711
Mosaic Funds
www.mosaicfunds.com
SEC File Number 811-3486
Item 2. Code of Ethics.
Not applicable in semi-annual report.
Item 3. Audit Committee Financial Expert.
Not applicable in semi-annual report.
Item 4. Principal Accountant Fees and Services.
Not applicable in semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments
Included in report to shareholders above.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
No changes.
Item 10. Controls and Procedures.
(a) The Trust’s principal executive officer and principal financial officer determined that the Trust’s disclosure controls and procedures are effective, based on their evaluation of these controls and procedures within 90 days of the date of this report. There were no significant changes in the Trust’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. The officers identified no significant deficiencies or material weaknesses.
(b) There have been no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that has materially affectd, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) Code of ethics referred to in Item 2.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Mosaic Tax-Free Trust
By: (signature)
W. Richard Mason, Secretary
Date: May 21, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: (signature)
Katherine L. Frank, Chief Executive Officer
Date: May 21, 2004
By: (signature)
Greg Hoppe, Chief Financial Officer
Date: May 21, 2004