Mosaic Tax-Free Trust
550 Science Drive
Madison, Wisconsin 53711
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 27, 2006
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of Mosaic Tax-Free Trust's Tax-Free Arizona series and Tax-Free Missouri series (each a "State Fund" and together referred to as the "State Funds") will be held at the offices of the State Funds at 550 Science Drive, Madison, Wisconsin 53711, on Thursday, April 27, 2006, at 12:00 noon for the following purposes:
1. To consider and act upon the Agreement and Plans of Merger (the "Plans") dated February 2, 2006 providing for:
- the acquisition of substantially all of the assets of each State Fund by an existing series of Mosaic Tax-Free Trust named Mosaic Tax-Free National Fund (the "National Fund"), in exchange for shares of the National Fund;
- the assumption by the National Fund of the liabilities of each State Fund; and
- distribution of such shares of the National Fund to shareholders of each State Fund.
2. To transact any other business as may properly come before the meeting or any of its adjournments.
The Trustees fixed the close of business on February 21, 2006 as the record date for the determination of shareholders of each State Fund entitled to notice of and to vote at this Meeting or any adjournment thereof.
IMPORTANT
Your vote is important and all Shareholders are asked to be present in person or by proxy. If you are unable to attend the meeting in person, we urge you to complete, sign, date and return the enclosed proxy as soon as possible using the enclosed stamped envelope. Sending the proxy will not prevent you from personally voting your shares at the Meeting since you may revoke your proxy by advising the Secretary of Mosaic Tax-Free Trust in writing (by subsequent proxy or otherwise) of such revocation at anytime before it is voted.
By order of the Board of Trustees
(signature)
W. Richard Mason
Secretary
March 13, 2006
Mosaic Funds
550 Science Drive
Madison, Wisconsin 53711
800-368-3195
March 13, 2006
Dear Shareholder:
The attached proxy materials seek your approval to merge Mosaic Tax-Free Trust's Arizona and Missouri Funds (each, a "State Fund" and together the "State Funds") into the Tax-Free National Fund. Your approval is requested only for the State Fund you owned as of the Record Date.
What are we proposing?
- Upon approval by each State Fund's shareholders, the respective State Fund series of Mosaic Tax-Free Trust will merge into the National Fund series of the Trust effective May 1, 2006.
- Former State Fund shareholders will receive shares of the National Fund in exchange for their State Fund shares.
This merger represents a logical step in the progressive restructuring of the Mosaic family of funds to best utilize management expertise and provide shareholder value.
Your board of trustees unanimously recommends a vote FOR this proposal. If the merger is approved, you will still own shares in a bond fund with the objective of providing monthly income and distributing that income as dividends. Your dividends will remain tax-free for Federal income tax purposes, but none or only a small percentage of your dividends will be free of state income taxes.
Why merge these funds?
- A merger will result in a larger pool of assets and allow for more efficient management. Efficiency of management will allow total expenses to remain competitive and, in fact, be reduced. The relatively small size of the fund would likely lead to higher expenses without the proposed merger.
- With increased assets, management expects to be able to purchase securities at more favorable prices that can often be obtained when trading in larger blocks of securities.
Please review the enclosed prospectus and send us your voted proxy as soon as possible.
Thank you. Call us if you have any questions.
Sincerely,
(signature) (signature)
Katherine L. Frank Frank E. Burgess
President, Mosaic Tax-Free Trust President, Madison Investment Advisors
Prospectus Dated March 13, 2006
Mosaic Tax-Free Trust
550 Science Drive
Madison, Wisconsin 53711
800-368-3195
Acquisition of the Assets of
Tax-Free Arizona and Missouri series of Mosaic Tax-Free Trust ("the "Trust")
by and in exchange for shares of
Tax-Free National Fund series of the Trust
This prospectus explains that the Trustees of Mosaic Tax-Free Trust are soliciting the proxies of shareholders of the Arizona and Missouri Funds in connection with the following transaction:
- Merging the Tax-Free Arizona and Missouri Fund series of the Trust (each a "State Fund" and together the “State Funds”) into the Tax-Free National Fund series of the Trust (“National Fund”) effective May 1, 2006.
- Distributing to former State Fund shareholders shares of the National Fund in exchange for their State Fund shares.
If approved, you will receive shares in the National Fund equal in value to your current investment in the State Fund you currently own. The proposed merger is designed to be a tax-free reorganization so that you will not recognize any income as a result of the merger and your tax basis in the State Fund will carry over to the shares of the National Fund. The National Fund shares a common objective with the State Funds of receiving income from municipal bonds and distributing that income to investors as dividends free from federal income tax (but, unlike the State Funds, not free from state income tax).
This prospectus sets forth concisely the information about the National Fund series that a prospective investor ought to know before investing. You should retain this prospectus for future reference.
Additional information about Mosaic Tax-Free Trust (including a Statement of Additional Information that is incorporated by reference into and dated the same day as this prospectus) was filed with the Securities and Exchange Commission and is available upon oral or written request and without charge. Contact Mosaic Funds at the address and phone number above.
Although your Trustees are soliciting your proxy vote, when this prospectus speaks about "we" or "us," it refers to your fund's manager, Madison Mosaic and Madison Investment Advisors.
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Table of Contents
Fee Table, Synopsis Information and Risk Factors
This table describes the fees and expenses that you may pay if you buy and hold shares of the National Fund and compares them with current expenses for the State Funds (as of the most recent fiscal year end, September 30, 2005).
Shareholder Fees (fees paid directly from your investment)
Arizona Fund | Missouri Fund | National Fund | Combined National Fund (Pro forma, only Arizona merged) | Combined National Fund (Pro forma, only Missouri merged) | Combined National Fund (Pro forma, both Arizona and Missouri merged) | |
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | None | None | None | None | None | None |
Maximum Deferred Sales Charge (Load) (as a percentage of offering price) | None | None | None | None | None | None |
Redemption Fee | None | None | None | None | None | None |
Exchange Fee | None | None | None | None | None | None |
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Arizona Fund | Missouri Fund | National Fund | Combined National Fund (Pro forma, only Arizona merged) | Combined National Fund (Pro forma, only Missouri merged) | Combined National Fund (Pro forma both Arizona and Missouri merged) | |
Management Fees | 0.63% | 0.63% | 0.63% | 0.63% | 0.63% | 0.63% |
Distribution (12b-1) Fees | None | None | None | None | None | None |
Other Expenses | 0.48% | 0.45% | 0.44% | 0.43% | 0.43% | 0.42% |
Total Annual Fund Operating Expenses | 1.11% | 1.08% | 1.07% | 1.06%* | 1.06%* | 1.05%* |
Example:
This example is intended to help you compare the cost of investing in the State Funds, the National Fund and in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Arizona Fund | Missouri Fund | National Fund | National Fund (pro forma, only Arizona merged) | National Fund (pro forma, only Missouri merged) | National Fund (pro forma, both Arizona and Missouri merged)* | |
1 year | $113 | $110 | $109 | $108 | $108 | $107 |
3 years | $353 | $343 | $340 | $337 | $337 | $334 |
5 years | $612 | $595 | $590 | $585 | $585 | $579 |
10 years | $1,352 | $1,317 | $1,306 | $1,294 | $1,294 | $1,283 |
*National Fund (pro forma) Total Annual Fund Operation Expenses are shown without regard to the new, lower tiered administrative expense schedule proposed to be adopted upon consummation of the mergers described in this document. The lower fees are discussed below in the section entitled, "Comparison of Differences Between Your Fund and the National Fund." If the assets of either or both the Arizona and Missouri Funds had been included with the assets of the National Fund and the tiered expense schedule had been in effect for the fiscal year ended September 30, 2005, the expenses for the National Fund (pro forma, all three scenarios) would have been lower.
Your Trustees determined that it will be in the best interests of the shareholders of each State Fund and the current shareholders of the National Fund to merge your fund's assets into the National Fund.
Why did the Trustees reach these decisions?
Consolidation of Funds within Mosaic.
Since the launch of Mosaic funds in June 1997, the funds' advisor has sought to utilize management expertise and maximize shareholder value across the fund family. The realignment and merger of funds has been a natural consequence of this effort.
Small size of your fund.
The State Funds are among the smallest of all the Mosaic funds (with approximately $5.5 million in assets in the Arizona Fund and 7.5 million in assets in the Missouri Fund). In light of the higher fees that your fund will likely have to bear at its current small size, it will become more difficult to achieve your fund's investment objectives. The Merger will be to a much larger fund that benefits from certain economies of scale and will eliminate various expense-related duplications.
Limitations on investment opportunities for your fund.
The small size of your fund also prevents us from purchasing or selling securities for the fund at the more favorable prices that can sometimes be obtained when trading in larger blocks of securities.
The independent Trustees retained independent counsel to advise them with respect to their fiduciary duties in connection with approval of the proposed Merger.
In light of these unique circumstances, your trustees decided to combine your fund with the National Fund.
Who is paying the costs of the proposed reorganization?
We are bearing all expenses of the proposed Mergers. Neither the State Funds, the National Fund nor their shareholders will pay any costs incurred in connection with the proposed Mergers.
Comparison of Differences Between Your Fund and the National Fund
The National Fund is a series of Mosaic Tax-Free Trust. As a result, like all Mosaic Tax-Free Trust funds, we will continue to seek to provide you monthly dividends by investing in tax-free municipal bonds. However, the National Fund differs from your current fund in two ways:
(1) Its dividend income is not free of state income tax for shareholders of the Arizona Fund who reside in Arizona or shareholders of the Missouri Fund who reside in Missouri; and
(2) Its total expenses are lower.
All other matters (investment advisor, distributor, investment and redemption procedures, exchange and checking privileges, pricing methods and all shareholder services) will be identical to those you have now.
1. Investment Objectives/Goals
Objectives
The State Funds' primary objective is to provide dividend income free from both federal and state income tax for shareholders of the applicable state (Arizona or Missouri).
The objective of the National Fund is to provide dividend income free from federal income tax for residents of any state.
What is the difference? The National Fund will not invest solely in bonds that are exempt from state income tax. As a result, most or, in the long term, all of the fund’s dividends may be taxable for state income tax purposes.
2. Fees and Expenses
Total Expense Ratio
As of the end of your fund's most recent fiscal year, the total annual expense ratio of the Arizona Fund 1.11% and the total expense ratio of the Missouri Fund as 1.08%. The National Fund's total annual expense ratio was 1.07%. The advisory fee for both funds is the same, but the operational and administrative expenses ("other expenses") of the National Fund are lower than your fund because its larger size can support that lower fee. Furthermore, upon consummation of the proposed merger, the National Fund will adopt a tiered administrative expense schedule that will result in a total expense ratio lower than 1.07% as long as the National Fund has assets greater than $25 million. Currently, the National Fund pays an annual fee for all administrative and operating expenses, as a percentage of average net assets, equal to 0.40% (in addition to direct expenses for Trustee fees and annual audit by the fund's independent registered public accountants). Upon consummation of either merger, for National Fund assets in excess of $25 million, this fee will be reduced to 0.36%.
How Will the Transaction Be Accomplished?
The Trustees approved an Agreement and Plan of Merger (the "Plan") that describes the technical details of how the funds will merge. There is a separate Plan applicable to each of the State Funds. (You can receive a copy of the Plan at no cost by calling us at 800-368-3195.) The Plan provides for substantially all of the assets and liabilities of your fund to be acquired by the National Fund in exchange for shares of the National Fund (the transaction is referred to as the "Merger"). Following the Merger, shares of the National Fund will be distributed to the then-existing shareholders of your fund. The shareholders of each State Fund must approve the Merger of with respect to their fund. Approval or rejection of the Merger by either State Fund's shareholders will have no effect on approval or rejection of the Merger by the shareholders of the other State Fund.
The Merger is being structured as a tax-free reorganization for federal income tax purposes. This means that if the Merger is approved by the shareholders of your State Fund, you should not incur any tax consequences from the transaction. Your tax basis in your State Fund shares should carryover to your National Fund shares.
The principal risk factors of investing in the National Fund will be generally the same as those of your fund. Specifically, the risks are:
Interest Rate Risk: When interest rates or general demand for fixed-income securities change, the value of these bonds change. Bonds can lose value when there is a rise in interest rates.
Call Risk: If a bond issuer "calls" a bond (pays it off at a specified price before it matures), the affected fund would have to reinvest the proceeds at a lower interest rate. It may also experience loss if the bond is called at a price lower than what we paid for it.
Tax-Related Risks: You can receive a taxable distribution of capital gain. You may also owe taxes if you sell your shares at a price that is higher than the price you paid for them. And, of course, dividends from the National Fund are generally not exempt from state income tax.
Legislative Risk: If the tax-free status of municipal bonds is changed or eliminated by act of Congress or any state legislature, the value of the affected bonds will fall..
Other Risk and Reward Considerations
One risk particular to each State Fund is not applicable to the National Fund: Because the National Fund is diversified geographically, the risk associated with each State Fund’s lack of geographic diversification is not a consideration when investing in the National Fund.
Information About the Transaction
Summary of Terms of the Plan
You are asked to approve the transfer of substantially all of the assets and liabilities of your State Fund in exchange for shares of the National Fund, an existing series of the Trust. The Plan also calls for the Trust to distribute shares of the National Fund series to the shareholders of your fund. (The transaction is referred to in this document as the "Merger.")
As provided in the Plan, shareholders will not pay any of the expenses involved in accomplishing the Merger. The advisors to the Trust will pay any expenses.
Prior to the Merger, the Plan provides that your fund will declare a dividend and distribution. This distribution, together with all previous distributions, will have the effect of distributing to your fund's shareholders: (1) all of the fund's investment company taxable income for the taxable year ending on or prior to the day of the Merger; and (2) all of its net capital gains realized in all taxable years ending on or prior to that day (after reductions for any capital loss carryforward).
The consummation of the Merger for each State Fund is subject to the conditions set forth in each Plan, including approval by your fund's shareholders and receipt of an opinion of counsel regarding the Federal income tax consequences of the Merger. Each Plan can be terminated at any time prior to the Merger.
If the Merger is not approved by your fund's shareholders, the Trustees will continue to operate your fund under its existing arrangements. However, due to its small size, if the Merger is not approved, the level of expenses your fund must pay are likely to increase upon expiration of the Trust's current services agreement in July 2006.
Description of Securities to be Issued
As a result of the Merger, each shareholder of record of the State Funds will become the record holder of that number of full and fractional shares of the National Fund having an aggregate net asset value equal to the aggregate net asset value of the shareholder's shares of your fund. These calculations are made in accordance with each Plan as of the close of business on the date that applicable State Fund assets are exchanged for shares of the National Fund.
Since both your fund and the National Fund are series of Mosaic Tax-Free Trust, there are no material differences between the rights of shareholders of your fund and the rights of shareholders of the National Fund.
Reasons for the Merger
Your trustees, including the trustees who are not "interested persons," as that term is defined in the Investment Company Act of 1940, as amended (the "1940 Act"), have concluded that it is in the best interests of both funds for the Merger to take place. The Trustees have concluded that the interests of the Trust's shareholders will not be diluted as a result of the transactions contemplated by the Merger. Therefore, they have submitted the Merger for the approval by you.
Why have your trustees reached these conclusions?
Consolidation of Funds within Mosaic. Since the launch of Mosaic funds in June 1997, the funds' advisor has sought to utilize management expertise and maximize shareholder value across the fund family. The realignment and merger of funds has been a natural consequence of this effort.
Small size of your fund. The State Funds are the smallest of all the funds offered by Mosaic Tax-Free Trust, with each State Fund well under $10 million in assets (compared to the National Fund with approximately $21 million). As a result, the Trustees recognized that its transfer agent, administrative and other expenses must increase substantially at the expiration of the current services agreement in July 2006. In light of the higher fees that your fund will likely have to bear at its current small size, it will become more difficult to achieve your fund's investment objectives. The Merger should increase the size of the National Fund, thereby accomplishing certain economies of scale while at the same time eliminating duplicative administrative expenses that are incurred with the operation of multiple funds.
Limitations on investment opportunities for your fund. The small size of your fund also prevents us from purchasing or selling securities for the fund at the more favorable prices that can sometimes be obtained when trading in larger blocks of securities. As each State Fund continues to diminish in size, this limitation will also adversely affect your fund's ability to achieve its investment objectives.
The independent Trustees retained independent counsel to advise them with respect to their fiduciary duties in connection with approval of the proposed Merger.
Tax Consequences.
Before the Merger happens, the Trust will receive an opinion of counsel that the Merger has been structured so that no gain or loss will be recognized by your fund or it shareholders for federal income tax purposes as a result of the receipt of shares of the National Fund in the Merger. The holding period and aggregate tax basis of shares of the National Fund that are received by the your fund's shareholders will be the same as the holding period and aggregate tax basis of shares of your fund previously held by your fund's shareholders (provided, of course, that shares of your fund are held as capital assets). In addition, the holding period and tax basis of the assets of your fund in the hands of the National Fund as a result of the Merger will be the same as in the hands of your fund immediately prior to the Merger.
The Merger is being structured to meet the requirements of Internal Revenue Code Section 368(a)(1)(C) for tax-free exchanges.
Capitalization
The following table shows the capitalization as of September 30, 2005 of the State Funds and the National Fund individually and on a pro forma combined basis as of that date, giving effect to the proposed acquisition of each State Fund's net assets at market value. Each State Fund is considered a "target fund" for purposes of the proposed Merger, and the National Fund, as the "acquiring fund," will be both the legal and accounting survivor in all transaction scenarios.
Arizona Fund | National Fund | Adjustment | National Fund (Pro Forma, only Arizona approves Merger) | |
Net Assets (in thousands) | $5,782 | $21,576 | $27,358 | |
Net Asset Value per share | $10.57 | $11.11 | $11.11 | |
Shares outstanding | 546,922 | 1,942,590 | (26,339) | 2,463,173 |
Missouri Fund | National Fund | Adjustment | National Fund (Pro Forma, only Missouri approves Merger) | |
Net Assets (in thousands) | $7,606 | $21,576 | $29,182 | |
Net Asset Value per share | $10.84 | $11.11 | $11.11 | |
Shares outstanding | 701,413 | 1,942,590 | (16,629) | 2,627,374 |
Arizona Fund | Missouri Fund | National Fund | Adjustment | National Fund (Pro Forma, both Arizona and Missouri approve Merger) | |
Net Assets (in thousands) | $5,782 | $7,606 | $21,576 | $34,964 | |
Net Asset Value per share | $10.57 | $10.84 | $11.11 | $11.11 | |
Shares outstanding | 546,922 | 701,413 | 1,942,590 | (42,968) | 3,147,957 |
Portfolio Realignment Consequences
The entire investment portfolio of each State Fund represents appropriate investments for the National Fund. As a result, we do not believe that we will need to immediately restructure or otherwise make significant changes to the investment portfolio of (1) either State Fund before the Merger or (2) the National Fund after the Merger if either or both of the Mergers are approved. However, it is likely that we will reduce the percentage of securities received from either State Fund after the merger so that there is no unusual concentration of securities in the National Fund from Arizona or Missouri. As a practical matter, we will accomplish this by selling State Fund securities in order to raise any cash necessary to pay the proceeds of shareholder redemption requests before and after the proposed Mergers. To the extent any of the securities sold have appreciated in value from the date they were purchased for the applicable State Fund, the National Fund will recognize capital gains if the securities are sold after the consummation of the Merger. As of the date of this document, we do not believe that any such gains will be significant, but they could result in a small taxable distribution at the end of 2006 to shareholders of the merged fund. It could also result in a small distribution to shareholders of each State Fund on the date either Merger is consummated.
Information About the National Fund
A complete copy of Mosaic Tax-Free Trust's prospectus dated February 1, 2006 is enclosed with this document for your review. It is incorporated by reference into this document. Please refer to it for information regarding the National Fund.
A complete copy of Mosaic Tax-Free Trust's prospectus dated February 1, 2006 is enclosed with this document for your review. It is incorporated by reference into this document. Please refer to it for information regarding each of the State Funds.
Who is requesting your proxy?
This document is furnished in connection with a solicitation of proxies by the Board of Trustees of Mosaic Tax-Free Trust with respect to your fund, the Mosaic Arizona or Missouri Fund series of the Trust, as applicable. The proxies will be used at the Special Meeting of Shareholders of your fund, to be held at our offices at 550 Science Drive, Madison, Wisconsin, on Thursday, April 27, 2006, at 12:00 noon and at any adjournments of the meeting.
Although your Trustees are soliciting your proxy vote, when the prospectus speaks about "we" or "us", it refers to your fund's manager, Madison Mosaic.
Who will receive this solicitation?
This document, along with a Notice of the Meeting and a proxy card, will be mailed to shareholders on or about March 2, 2006. (We may send follow-up copies by overnight delivery or facsimile.) Only shareholders of record of the applicable State Fund as of the close of business on the Record Date will be entitled to notice of, and to vote at, the Meeting or any of its adjournments. The holders of a majority of the shares outstanding at the close of business on the Record Date present in person or represented by proxy will constitute a quorum for the Meeting.
How will your proxy be voted?
If the enclosed form of proxy is properly executed and returned in time to be voted at the Meeting, the named proxies will vote the shares represented by the proxy in accordance with the instructions marked.
Unmarked proxies will be voted FOR the proposed Merger and FOR any other matters deemed appropriate. Proxies that reflect abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or the persons entitled to vote or (ii) the broker or nominee does not have discretionary voting power on a particular matter) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Since shares represented by "broker non-votes" are considered outstanding shares, a "broker non-vote" has the same effect as a vote against the Merger.
Can a proxy be revoked?
A proxy may be revoked at any time before the Meeting by written notice to the Secretary of the Trust, 550 Science Drive, Madison, Wisconsin 53711 or by appearing at the meeting in person. Unless revoked, all valid proxies will be voted as specified by you or, if you do not make any specifications, for approval of the Plan and the Merger. If you have any questions about how to vote or revoke your proxy, call us at 800-368-3195.
Will anyone solicit proxies?
As the meeting date nears, our representatives may contact you by telephone to encourage you to complete and return your proxy or to determine if you will be attending the Meeting. No one will be compensated for doing so.
Who is paying for this proxy solicitation?
We are bearing all expenses of this proxy solicitation. Neither the Trust nor its shareholders will pay any proxy solicitation costs.
What vote is required to approve the Merger?
Approval of the Merger will require the affirmative vote of more than 50% of the outstanding voting securities of your fund. Fractional shares outstanding are entitled to a proportionate share of one vote.
In the event that sufficient votes to approve either Plan are not received by April 27, 2006, the persons named as proxies may propose one or more adjournments of the Meeting to permit further solicitation of proxies. The meeting may be adjourned only with respect to one of the State Funds in the event sufficient votes to approve one Plan is received but insufficient votes are received to approve the other Plan. In determining whether to adjourn the Meeting, the following factors may be considered: the percentage of votes actually cast, the percentage of negative votes actually cast, the nature of any further solicitation and the information to be provided to shareholders with respect to the reasons for the solicitation. Any such adjournment will require an affirmative vote by the holders of a majority of the shares present in person or by proxy and entitled to vote at the Meeting. The persons named as proxies will vote upon such adjournment after consideration of all circumstances that may bear upon a decision to adjourn the Meeting. However, the persons named as proxies will vote those proxies they are entitled to vote FOR the proposal in favor of any adjournment and will vote those proxies required to be voted AGAINST the proposal against any adjournment.
The inspector of election will treat abstentions and "broker non-votes" (i.e., shares held by brokers or nominees, typically in "street name," as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have discretionary voting power on a particular matter) as present for purposes of determining a quorum. Failure of a quorum to be present at the meeting will necessitate adjournment of the meeting.
The Board knows of no other matters to be brought before the Meeting. However, if any other matters properly come before the Meeting, it is the Board's intention that proxies will be voted on such matters based on the judgment of the persons named as proxies.
A shareholder who objects to the proposed transaction will not be entitled under either Massachusetts law or the Declaration of Trust to demand payment for, or an appraisal of, his or her shares. However, you should be aware that the Merger as proposed is not expected to result in recognition of gain or loss to shareholders for federal income tax purposes. If the Merger is consummated, you will be free to redeem the shares of the National Fund that you receive in the transaction at their then-current net asset value. Shares of your fund may be redeemed at any time prior to the consummation of the Merger. You may wish to consult your tax advisor as to any differing consequences of redeeming your fund shares prior to the Merger or exchanging such shares in the Merger.
Notice to Banks, Broker-Dealers and Voting Trustees and Their Nominees
Please advise the Trust whether other persons are beneficial owners of shares for which proxies are being solicited and, if so, the number of copies of this Prospectus/Proxy Statement needed to supply copies to the beneficial owners of the respective shares.
The votes of any current shareholders of the National Fund are not being solicited and are not required to carry out the Merger.
The Board of Trustees, including the "non-interested" Trustees, recommends approval of the Merger, and any unmarked proxies without instructions to the contrary will be voted in favor of approval of the merger.
What is the record date and number of outstanding shares?
As of February 21, 2006, (the "Record Date"), there were 530,915.784 outstanding shares of beneficial interest of Mosaic Tax-Free Trust's Arizona Fund series and 702,372.257 outstanding shares of beneficial interest of the Missouri Fund series.
Controlling Shareholders, Large Shareholders and Holdings of Trustees and Officers of the Trust
No one entity is considered to control either State Fund or the National Fund.
No one owns 5% or more of the National Fund as of the Record Date.
As of December 31, 2005, the shareholders of record that held five percent or more of the State Funds were: For the Arizona Fund -- Charles Schwab & Co., 101 Montgomery Street, San Francisco, CA (16.36%); for the Missouri Fund - -- J&V Rys, 4423 Blue Ridge Blvd, Kansas City, MO (18.30%), E. & M. Idstrom, 1007 Westover Rd., Kansas City, MO (5.59%) and W&J Rys, 4423 Blue Ridge Blvd, Kansas City, MO (5.33%);.
As of the Record Date, the officers and Trustees of the Trust beneficially owned as a group less than 1% of the outstanding shares of the either State Fund or the National Fund.
Deadline for Submitting Shareholder Proposals at Next Special Meeting
Mosaic Tax-Free Trust does not hold annual shareholder meetings. The deadline for submitting shareholder proposals for inclusion in the proxy statement and form of proxy for the next special meeting of shareholders of Mosaic Tax-Free Trust is a reasonable time before Mosaic Tax-Free Trust begins to print and mail its proxy materials. Other than the meeting described in this document, no special meetings are currently being contemplated.
March 13, 2006
Mosaic Tax-Free Trust - Proxy Card
Special Meeting of Shareholders – April 27, 2006
This proxy is solicited on behalf of the Trustees of Mosaic Tax-Free Trust with respect to its Tax-Free Arizona and Missouri Fund series of shares. The undersigned hereby appoints Katherine L. Frank and Greg Hoppe, and each of them separately, proxies, with full power of substitution, and hereby authorizes them to represent and to vote, as designated below at the Special Meeting of Shareholders of the above referenced fund (each, a "State Fund" and together the "State Funds") to be held on Thursday, April 27, 2006 at 550 Science Drive, Madison, Wisconsin 53711 at 12:00 noon Central time, and at any adjournments thereof (the "Meeting"), all of the shares of either State Fund which the undersigned would be entitled to vote if the undersigned were personally present.
Every shareholder's vote is important! Vote this Proxy Card today!
This proxy, when properly executed, will be voted in the manner directed herein by the shareholder whose name is signed herein. If you sign, date and return this proxy card but give no voting instructions, your shares will be voted for each proposal.
To vote, mark blocks below in blue or black ink as follows [x]
1. To approve the proposed Agreement and Plan of Merger into Mosaic Tax-Free Trust's National Fund.
[ ] YES [ ] NO [ ] ABSTAIN
This item is discussed in greater detail in the attached Prospectus. The Board of Directors of Mosaic Tax-Free Trust (Arizona and Missouri Fund series) fixed the close of business on February 21, 2006, as the record date for the determination of shareholders entitled to notice of and to vote at the meeting.
If you attend the meeting, you may vote your shares in person. Please complete, sign, date and return this proxy card in the enclosed envelope, which needs no postage if mailed in the United States, if you do not expect to attend the meeting.
Note : Please sign exactly as name appears on this card. All joint owners should sign. When signing as an executor, administrator, attorney, trustee, guardian or custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in partnership name.
_____________________________________ Date: March ______, 2006
Signature
Record date shares #######.###>
Account Number ###-###########
Registration #############################, ##############################,
############################, ############################################
STATEMENT OF ADDITIONAL INFORMATION
Dated March 13, 2006
Acquisition of the Assets of
Mosaic Tax-Free Trust Tax-Free Arizona and Missouri Funds
By and in Exchange for Shares of
Mosaic Tax-Free Trust Tax-Free National Fund
550 Science Drive
Madison, Wisconsin 53711
1-800-368-3195
This Statement of Additional Information, relating specifically to the proposed transfer of the assets of the Tax-Free Arizona Fund and Missouri Fund series of Mosaic Tax-Free Trust in exchange for shares of the Tax-Free National Fund series of the Trust (the "Merger") is not a prospectus. A Prospectus dated March 13, 2006 relating to the above-referenced matter may be obtained from Mosaic Tax-Free Trust at the address and phone number above. This Statement of Additional Information relates to and should be read in conjunction with such Prospectus.
This Statement of Additional Information incorporates by reference the following documents, a copy of each of which accompanies this Statement of Additional Information:
1. The Prospectus of Mosaic Tax-Free Trust dated February 1, 2006.
2. The Statement of Additional Information of Mosaic Tax-Free Trust dated February 1, 2006.
3. The Annual Report of Mosaic Tax-Free Trust dated September 30, 2005.
Pro Forma Financial Statements
September 30, 2005 (unaudited)
Introduction
These pro forma financial statements are intended to reflect the proposed mergers of the Mosaic Tax-Free Trust's Arizona Tax-Free Fund ("Arizona" or "Arizona Fund") and Missouri Tax-Free Fund ("Missouri" or "Missouri Fund") into the larger Tax-Free National Fund ("National" or "National Fund"). The National, Arizona and Missouri Funds each represent a single class of shares of Mosaic Tax-Free Trust, an open-end, diverisifed investment company registered under the Investment Company Act of 1940, as amended. The Arizona and Missouri Funds, individually and together, are considered "target funds" for purposes of the proposed merger, and the National Fund, as the "acquiring fund," is contemplated to be both the legal and accounting survivor in all merger transaction scenarios.
Because the proposed mergers of Arizona into National and Missouri into National may occur without the approval of the other, the following financial statements reflect three possible scenarios: (1) merger only of Arizona into National; (2) merger only of Missouri into National; and (3) merger of both Arizona and Missouri into National. The financial statements are presented as of Mosaic Tax-Free Trust's most recent fiscal year end, September 30, 2005, as if each possible merger had been consummated at that date.
Schedules of Investments (unaudited, September 30, 2005)
Pro Forma Financial Statements | ||||||||
September 30, 2005 (unaudited) | ||||||||
Both Arizona & Missouri merged | ||||||||
Schedule of Investments | ||||||||
Arizona Fund | Missouri Fund | National Fund | National Fund Pro Forma (Combined) | |||||
Principal | Market | Principal | Market | Principal | Market | Principal | Market | |
Amount | Value | Amount | Value | Amount | Value | Amount | Value | |
LONG TERM MUNICIPAL BONDS: 98.15% | ||||||||
ARIZONA: 19.75% | ||||||||
Maricopa County Unified School District #210 (Phoenix), 5.375%, 7/1/13 | 200,000 | 205,630 | 200,000 | 205,630 | ||||
Maricopa County Unified School District #41 (Gilbert), 5.8%, 7/1/14 | 250,000 | 288,073 | 250,000 | 288,073 | ||||
Maricopa County, Unified School District #090 Saddle Mountain, 5%, 7/1/14 | 75,000 | 76,935 | 75,000 | 76,935 | ||||
Mohave County Elementary School District #16 (Mohave Valley) (MBIA Insured), 5.375%, 7/1/13 | 100,000 | 104,128 | 100,000 | 104,128 | ||||
Mohave County Elementary School District #1 (Lake Havasu) (FGIC Insured), 5.9%, 7/1/15 | 150,000 | 154,794 | 150,000 | 154,794 | ||||
Pima County Unified School District #10 (Amphitheater), (FGIC Insured), 5.1%, 7/1/11 | 190,000 | 202,962 | 190,000 | 202,962 | ||||
Pima County, Arizona School District, (MBIA Insured), 5%, 7/1/09 | 125,000 | 128,179 | 125,000 | 128,179 | ||||
University of Arizona, (AMBAC Insured) 5%, 6/1/17 | 125,000 | 132,685 | 125,000 | 132,685 | ||||
University of Arizona Board of Regents, (FGIC Insured) 5.8%, 6/1/24 | 275,000 | 302,714 | 275,000 | 302,714 | ||||
Tucson Recreational Facility Improvements, 5.25%, 7/1/19 | 250,000 | 267,912 | 250,000 | 267,912 | ||||
Arizona Health Facilities Authority, Hospital Revenue (Phoenix Baptist Hospital) (MBIA Insured), 6.25%, 9/1/11 | 155,000 | 162,744 | 155,000 | 162,744 | ||||
Pima County Industrial Development Authority Revenue (Refunding Bonds), 5.625%, 4/1/14 | 250,000 | 262,950 | 250,000 | 262,950 | ||||
Maricopa County Industrial Development Authority, Single Family Mortgage Revenue, 4.3%, 12/1/06 | 35,000 | 35,034 | 35,000 | 35,034 | ||||
Phoenix Civic Improvement Corp. Excise Tax, 4.5%, 7/1/08 | 100,000 | 103,565 | 100,000 | 103,565 | ||||
Arizona Board of Regents Certificate Participation, (AMBAC Insured), 5.5%, 6/1/13 | 320,000 | 351,360 | 320,000 | 351,360 | ||||
Arizona Tourism & Sports Authority Tax Revenue Bond, 5%, 7/1/16 | 100,000 | 101,661 | 100,000 | 101,661 | ||||
Greater Arizona Development Authority Infrastructure Revenue Bond, 4.85%, 8/1/20 | 300,000 | 309,237 | 300,000 | 309,237 | ||||
Maricopa County Public Corp. Lease Revenue Bond, (AMBAC Insured), 5.5%, 7/1/10 | 280,000 | 306,032 | 280,000 | 306,032 | ||||
Maricopa County Stadium Revenue Bond, (AMBAC Insured), 5.25%, 6/1/12 | 250,000 | 274,830 | 250,000 | 274,830 | ||||
Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 125,000 | 129,290 | 125,000 | 129,290 | ||||
Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | 135,000 | 146,993 | 135,000 | 146,993 | ||||
Flagstaff Street and Highway User Revenue, Junior Lien (FGIC Insured), 5.9%, 7/1/10 | 500,000 | 556,340 | 500,000 | 556,340 | ||||
Mesa Street and Highway Revenue Bond, (FSA Insured), 4%, 7/1/14 | 130,000 | 131,992 | 130,000 | 131,992 | ||||
Phoenix Street and Highway User Revenue Bond (FGIC Insured), 5.25%, 7/1/10 | 50,000 | 54,220 | 50,000 | 54,220 | ||||
Buckeye Water and Sewer Improvements, 5.45%, 1/1/10 | 235,000 | 251,553 | 235,000 | 251,553 | ||||
Mesa Recreational, Water and Sewer Improvements (FGIC Insured), 6.5%, 7/1/10 | 250,000 | 284,697 | 250,000 | 284,697 | ||||
Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | 100,000 | 108,884 | 100,000 | 108,884 | ||||
Maricopa County Unified School District #48 Scottsdale, (FSA), 5%, 7/1/15 | 300,000 | 329,058 | 300,000 | 329,058 | ||||
Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 1,000,000 | 1,034,320 | 1,000,000 | 1,034,320 | ||||
Tucson Recreational, (Prerefunded 7/1/09 @ 100), 5.25%. 7/1/18 | 100,000 | 107,165 | 100,000 | 107,165 | ||||
COLORADO: 3.12% | ||||||||
El Paso County School District #020, 5%, 12/15/16 | 1,005,000 | 1,091,289 | 1,005,000 | 1,091,289 | ||||
FLORIDA: 6.77% | ||||||||
First Florida Government Community Revenue Bond, (AMBAC Insured), 5.5%, 7/1/16 | 1,000,000 | 1,141,110 | 1,000,000 | 1,141,110 | ||||
Palm Beach County Solid Waste Authority Revenue Bond, (AMBAC Insured), 6%, 10/1/10 | 1,100,000 | 1,225,411 | 1,100,000 | 1,225,411 | ||||
ILLINOIS: 6.47% | ||||||||
Grundy County School District #054, General Obligation, (AMBAC Insured), 8.35%, 12/1/07 | 720,000 | 793,894 | 720,000 | 793,894 | ||||
Regional Illinois Transportation Authority, Transit Revenue (AMBAC Insured), 7.2%, 11/1/20 | 300,000 | 378,444 | 300,000 | 378,444 | ||||
University of Illinois Certificates, Utility Infrastructure Projects (MBIA Insured), 5.75%, 8/15/09 | 1,000,000 | 1,089,990 | 1,000,000 | 1,089,990 | ||||
KANSAS: 1.59% | ||||||||
Kansas State Department of Transportation, Hwy Revenue, 6.125%, 9/1/09 | 500,000 | 554,245 | 500,000 | 554,245 | ||||
MARYLAND: 0.60% | ||||||||
Anne Arundel County, Solid Waste Projects (AMT), 5.5%, 9/1/16 | 100,000 | 102,914 | 100,000 | 102,914 | ||||
Maryland State Transportation Authority Transportation Facilities Project Revenue, 6.8%, 7/1/16 | 90,000 | 105,300 | 90,000 | 105,300 | ||||
MASSACHUSETTS: 3.45% | ||||||||
Massachusetts Bay Transportation Authority, Transit Revenue, 7%, 3/1/14 | 1,000,000 | 1,204,880 | 1,000,000 | 1,204,880 | ||||
MICHIGAN: 1.29% | ||||||||
Redford United School District, (AMBAC Insured), 5%, 5/1/22 | 410,000 | 451,451 | 410,000 | 451,451 | ||||
MINNESOTA: 0.22% | ||||||||
Minnesota State Housing Finance Agency, Housing Revenue (Single-Family Mortgage) (AMT), 6.25%, 7/1/26 | 75,000 | 76,430 | 75,000 | 76,430 | ||||
MISSISSIPPI: 3.67% | ||||||||
Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 7.75%, 2/1/14 | 500,000 | 636,050 | 500,000 | 636,050 | ||||
Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 8.5%, 2/1/13 | 500,000 | 649,310 | 500,000 | 649,310 | ||||
MISSOURI: 22.16% | ||||||||
Jackson County Reorg School District #7, Lees Summit, (FSA Insured), 5.25%, 3/1/14 | 300,000 | 327,186 | 300,000 | 327,186 | ||||
Jefferson County School District, 6.7%, 3/1/11 | 200,000 | 221,864 | 200,000 | 221,864 | ||||
Mehlville School District R-9, Certificate Participation, (FSA Insured), 5%, 9/1/19 | 300,000 | 317,379 | 300,000 | 317,379 | ||||
Normandy School District General Obligation, 5.4%, 3/1/18 | 325,000 | 341,110 | 325,000 | 341,110 | ||||
North Kansas City School District, 4.25%, 3/1/16 | 300,000 | 307,659 | 300,000 | 307,659 | ||||
Platte County School District Park Hill, 5.5%, 3/1/14 | 300,000 | 309,651 | 300,000 | 309,651 | ||||
Polk County School District R-1 Bolivar, 5%, 3/1/21 | 110,000 | 118,108 | 110,000 | 118,108 | ||||
St. Louis Board of Education, 5.5%, 4/1/10 | 275,000 | 300,289 | 275,000 | 300,289 | ||||
Lees Summit, 4.7%, 4/1/21 | 325,000 | 335,348 | 325,000 | 335,348 | ||||
Missouri State Certificate Participation, Rehabilitation Center, 6%, 11/1/15 | 115,000 | 115,276 | 115,000 | 115,276 | ||||
Missouri State Health & Educational Facilities Revenue, (MBIA Insured) 6.4%, 6/1/10 | 165,000 | 185,912 | 165,000 | 185,912 | ||||
St. Louis County Mortgage Revenue (AMT), 5.65%, 2/1/20 | 500,000 | 569,285 | 500,000 | 569,285 | ||||
Greene County Certificate Participation, 5.25%, 7/1/11 | 300,000 | 322,047 | 300,000 | 322,047 | ||||
Jackson County Missouri, Public Building Corp. Leasehold Revenue, 5.1%, 11/1/12 | 200,000 | 212,784 | 200,000 | 212,784 | ||||
Missouri Development Financial Board Cultural Facilities Revenue Bond, (MBIA Insured), 5.25%, 12/1/17 | 350,000 | 378,402 | 350,000 | 378,402 | ||||
Missouri Development Financial Board Infrastructure Facilities Revenue Bond, 4.3%, 12/1/12 | 225,000 | 222,804 | 225,000 | 222,804 | ||||
Missouri State Board Public Buildings, 4.0%, 12/1/10 | 75,000 | 77,324 | 75,000 | 77,324 | ||||
Springfield Public Building Corp. Leasehold Revenue Bond, 5.8%, 6/1/13 | 275,000 | 302,561 | 275,000 | 302,561 | ||||
Springfield Public Building Corp. Leasehold Revenue Bond, 4.7%, 5/1/12 | 175,000 | 183,195 | 175,000 | 183,195 | ||||
St Louis Municipal Finance Corporation, Leasehold Revenue Bond (AMBAC Insured), 5.75%, 2/15/17 | 300,000 | 332,991 | 300,000 | 332,991 | ||||
St Louis Parking Facilities Revenue (MBIA Insured), 5.375%, 12/15/06 | 375,000 | 391,868 | 375,000 | 391,868 | ||||
St Louis Industrial Development Authority Pollution Control Revenue, 6.65%, 5/1/16 | 200,000 | 247,860 | 200,000 | 247,860 | ||||
Missouri State Highway & Transportation, Street & Road Revenue, 5.25%, 2/1/20 | 250,000 | 268,928 | 250,000 | 268,928 | ||||
Platte County Industrial Development Authority, Zona Rosa Retail Project, 3.75%, 12/1/13 | 150,000 | 147,817 | 150,000 | 147,817 | ||||
Jefferson County Public Water Supply District Number C-1 (AMBAC Insured), 5.25%, 12/1/16 | 130,000 | 142,474 | 130,000 | 142,474 | ||||
Missouri State Health & Educational Facilities Authority Revenue Bond, 5%, 11/1/09 | 1,000,000 | 1,069,370 | 1,000,000 | 1,069,370 | ||||
NEW JERSEY: 6.14% | ||||||||
New Jersey State Transportation Transit Fund Authority, 5.5%, 12/15/17 | 1,000,000 | 1,140,460 | 1,000,000 | 1,140,460 | ||||
New Jersey State Turnpike Authority Revenue, 6.5%, 1/1/16 | 850,000 | 1,007,225 | 850,000 | 1,007,225 | ||||
NORTH CAROLINA: 3.30% | ||||||||
Macon County, 5%, 6/1/13 | 500,000 | 546,800 | 500,000 | 546,800 | ||||
Raleigh, Certificate Participation, Leasing Revenue, 4.75%, 6/1/25 | 590,000 | 607,700 | 590,000 | 607,700 | ||||
NORTH DAKOTA: 1.60% | ||||||||
Grand Forks Health Care Systems Revenue Bond, 7.125%, 8/15/24 | 500,000 | 560,725 | 500,000 | 560,725 | ||||
PENNSYLVANIA: 3.57% | ||||||||
Lehigh County General Obligation (Lehigh Valley Hospital) (MBIA Insured), 7%, 7/1/16 | 1,000,000 | 1,249,790 | 1,000,000 | 1,249,790 | ||||
PUERTO RICO: 4.04% | ||||||||
Puerto Rico Commonwealth, 6.5%, 7/1/14 | 320,000 | 378,486 | 480,000 | 567,730 | 85,000 | 100,535 | 885,000 | 1,046,751 |
Puerto Rico Housing Finance Authority, 4.5%, 12/1/09 | 150,000 | 156,279 | 200,000 | 208,372 | 350,000 | 364,651 | ||
TEXAS: 4.43% | ||||||||
Lower Colorado River Authority, Utility Revenue, (AMBAC Insured), 6.0%, 1/1/17 | 305,000 | 361,895 | 305,000 | 361,895 | ||||
North Forest Independent School District, 6%, 8/15/11 | 1,050,000 | 1,186,174 | 1,050,000 | 1,186,174 | ||||
VIRGINIA: 3.14% | ||||||||
Hanover County Industrial Development Authority Hospital (Bon Secours Health Systems) (MBIA Insured), 6%, 8/15/10 | 500,000 | 558,245 | 500,000 | 558,245 | ||||
Riverside Regional Jail Authority Revenue, 5%, 7/1/16 | 500,000 | 540,115 | 500,000 | 540,115 | ||||
WASHINGTON: 2.84% | ||||||||
Grays Harbor County Public Utility #001, Electric Revenue Bond, 5.25%, 7/1/24 | 605,000 | 651,295 | 605,000 | 651,295 | ||||
King County School District #415 Kent, (FSA Insured) 5.5%, 6/1/16 | 300,000 | 340,107 | 300,000 | 340,107 | ||||
TOTAL INVESTMENTS* | 5,704,996 | 7,404,131 | 21,208,953 | 34,318,080 | ||||
CASH AND RECEIVABLES LESS LIABILITIES: 1.85% | 77,096 | 201,728 | 367,290 | 646,114 | ||||
NET ASSETS: 100% | 5,782,092 | 7,605,859 | 21,576,243 | 34,964,194 | ||||
CAPITAL SHARES OUTSTANDING | 546,922 | 701,413 | 1,942,590 | 3,147,957** | ||||
NET ASSET VALUE PER SHARE | 10.57 | 10.84 | 11.11 | 11.11 | ||||
* INVESTMENT SECURITIES, AT COST | 5,417,090 | 6,954,152 | 20,099,864 | 32,471,106 | ||||
** Reflects National Fund's original 1,942,590 shares plus an additional 520,583 and 684,784 shares of Arizona and Missouri, respectively that would have been issued at merger. |
Pro Forma Financial Statements | ||||||
September 30, 2005 (unaudited) | ||||||
Just Arizona merged | ||||||
Schedule of Investments | ||||||
Arizona Fund | National Fund | National Fund Pro Forma (Combined) | ||||
Principal | Market | Principal | Market | Principal | Market | |
Amount | Value | Amount | Value | Amount | Value | |
LONG TERM MUNICIPAL BONDS: 98.38% | ||||||
ARIZONA: 25.24% | ||||||
Maricopa County Unified School District #210 (Phoenix), 5.375%, 7/1/13 | 200,000 | 205,630 | 200,000 | 205,630 | ||
Maricopa County Unified School District #41 (Gilbert), 5.8%, 7/1/14 | 250,000 | 288,073 | 250,000 | 288,073 | ||
Maricopa County, Unified School District #090 Saddle Mountain, 5%, 7/1/14 | 75,000 | 76,935 | 75,000 | 76,935 | ||
Mohave County Elementary School District #16 (Mohave Valley) (MBIA Insured), 5.375%, 7/1/13 | 100,000 | 104,128 | 100,000 | 104,128 | ||
Mohave County Elementary School District #1 (Lake Havasu) (FGIC Insured), 5.9%, 7/1/15 | 150,000 | 154,794 | 150,000 | 154,794 | ||
Pima County Unified School District #10 (Amphitheater), (FGIC Insured), 5.1%, 7/1/11 | 190,000 | 202,962 | 190,000 | 202,962 | ||
Pima County, Arizona School District, (MBIA Insured), 5%, 7/1/09 | 125,000 | 128,179 | 125,000 | 128,179 | ||
University of Arizona, (AMBAC Insured) 5%, 6/1/17 | 125,000 | 132,685 | 125,000 | 132,685 | ||
University of Arizona Board of Regents, (FGIC Insured) 5.8%, 6/1/24 | 275,000 | 302,714 | 275,000 | 302,714 | ||
Tucson Recreational Facility Improvements, 5.25%, 7/1/19 | 250,000 | 267,912 | 250,000 | 267,912 | ||
Arizona Health Facilities Authority, Hospital Revenue (Phoenix Baptist Hospital) (MBIA Insured), 6.25%, 9/1/11 | 155,000 | 162,744 | 155,000 | 162,744 | ||
Pima County Industrial Development Authority Revenue (Refunding Bonds), 5.625%, 4/1/14 | 250,000 | 262,950 | 250,000 | 262,950 | ||
Maricopa County Industrial Development Authority, Single Family Mortgage Revenue, 4.3%, 12/1/06 | 35,000 | 35,034 | 35,000 | 35,034 | ||
Phoenix Civic Improvement Corp. Excise Tax, 4.5%, 7/1/08 | 100,000 | 103,565 | 100,000 | 103,565 | ||
Arizona Board of Regents Certificate Participation, (AMBAC Insured), 5.5%, 6/1/13 | 320,000 | 351,360 | 320,000 | 351,360 | ||
Arizona Tourism & Sports Authority Tax Revenue Bond, 5%, 7/1/16 | 100,000 | 101,661 | 100,000 | 101,661 | ||
Greater Arizona Development Authority Infrastructure Revenue Bond, 4.85%, 8/1/20 | 300,000 | 309,237 | 300,000 | 309,237 | ||
Maricopa County Public Corp. Lease Revenue Bond, (AMBAC Insured), 5.5%, 7/1/10 | 280,000 | 306,032 | 280,000 | 306,032 | ||
Maricopa County Stadium Revenue Bond, (AMBAC Insured), 5.25%, 6/1/12 | 250,000 | 274,830 | 250,000 | 274,830 | ||
Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 125,000 | 129,290 | 125,000 | 129,290 | ||
Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | 135,000 | 146,993 | 135,000 | 146,993 | ||
Flagstaff Street and Highway User Revenue, Junior Lien (FGIC Insured), 5.9%, 7/1/10 | 500,000 | 556,340 | 500,000 | 556,340 | ||
Mesa Street and Highway Revenue Bond, (FSA Insured), 4%, 7/1/14 | 130,000 | 131,992 | 130,000 | 131,992 | ||
Phoenix Street and Highway User Revenue Bond (FGIC Insured), 5.25%, 7/1/10 | 50,000 | 54,220 | 50,000 | 54,220 | ||
Buckeye Water and Sewer Improvements, 5.45%, 1/1/10 | 235,000 | 251,553 | 235,000 | 251,553 | ||
Mesa Recreational, Water and Sewer Improvements (FGIC Insured), 6.5%, 7/1/10 | 250,000 | 284,697 | 250,000 | 284,697 | ||
Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | 100,000 | 108,884 | 100,000 | 108,884 | ||
Maricopa County Unified School District #48 Scottsdale, (FSA), 5%, 7/1/15 | 300,000 | 329,058 | 300,000 | 329,058 | ||
Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 1,000,000 | 1,034,320 | 1,000,000 | 1,034,320 | ||
Tucson Recreational, (Prerefunded 7/1/09 @ 100), 5.25%. 7/1/18 | 100,000 | 107,165 | 100,000 | 107,165 | ||
COLORADO: 3.99% | ||||||
El Paso County School District #020, 5%, 12/15/16 | 1,005,000 | 1,091,289 | 1,005,000 | 1,091,289 | ||
FLORIDA: 8.65% | ||||||
First Florida Government Community Revenue Bond, (AMBAC Insured), 5.5%, 7/1/16 | 1,000,000 | 1,141,110 | 1,000,000 | 1,141,110 | ||
Palm Beach County Solid Waste Authority Revenue Bond, (AMBAC Insured), 6%, 10/1/10 | 1,100,000 | 1,225,411 | 1,100,000 | 1,225,411 | ||
ILLINOIS: 8.28% | ||||||
Grundy County School District #054, General Obligation, (AMBAC Insured), 8.35%, 12/1/07 | 720,000 | 793,894 | 720,000 | 793,894 | ||
Regional Illinois Transportation Authority, Transit Revenue (AMBAC Insured), 7.2%, 11/1/20 | 300,000 | 378,444 | 300,000 | 378,444 | ||
University of Illinois Certificates, Utility Infrastructure Projects (MBIA Insured), 5.75%, 8/15/09 | 1,000,000 | 1,089,990 | 1,000,000 | 1,089,990 | ||
KANSAS: 2.03% | ||||||
Kansas State Department of Transportation, Hwy Revenue, 6.125%, 9/1/09 | 500,000 | 554,245 | 500,000 | 554,245 | ||
MARYLAND: 0.76% | ||||||
Anne Arundel County, Solid Waste Projects (AMT), 5.5%, 9/1/16 | 100,000 | 102,914 | 100,000 | 102,914 | ||
Maryland State Transportation Authority Transportation Facilities Project Revenue, 6.8%, 7/1/16 | 90,000 | 105,300 | 90,000 | 105,300 | ||
MASSACHUSETTS: 4.40% | ||||||
Massachusetts Bay Transportation Authority, Transit Revenue, 7%, 3/1/14 | 1,000,000 | 1,204,880 | 1,000,000 | 1,204,880 | ||
MICHIGAN: 1.65% | ||||||
Redford United School District, (AMBAC Insured), 5%, 5/1/22 | 410,000 | 451,451 | 410,000 | 451,451 | ||
MINNESOTA: 0.28% | ||||||
Minnesota State Housing Finance Agency, Housing Revenue (Single-Family Mortgage) (AMT), 6.25%, 7/1/26 | 75,000 | 76,430 | 75,000 | 76,430 | ||
MISSISSIPPI: 4.70% | ||||||
Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 7.75%, 2/1/14 | 500,000 | 636,050 | 500,000 | 636,050 | ||
Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 8.5%, 2/1/13 | 500,000 | 649,310 | 500,000 | 649,310 | ||
MISSOURI: 3.91% | ||||||
Missouri State Health & Educational Facilities Authority Revenue Bond, 5%, 11/1/09 | 1,000,000 | 1,069,370 | 1,000,000 | 1,069,370 | ||
NEW JERSEY: 7.85% | ||||||
New Jersey State Transportation Transit Fund Authority, 5.5%, 12/15/17 | 1,000,000 | 1,140,460 | 1,000,000 | 1,140,460 | ||
New Jersey State Turnpike Authority Revenue, 6.5%, 1/1/16 | 850,000 | 1,007,225 | 850,000 | 1,007,225 | ||
NORTH CAROLINA: 4.22% | ||||||
Macon County, 5%, 6/1/13 | 500,000 | 546,800 | 500,000 | 546,800 | ||
Raleigh, Certificate Participation, Leasing Revenue, 4.75%, 6/1/25 | 590,000 | 607,700 | 590,000 | 607,700 | ||
NORTH DAKOTA: 2.05% | ||||||
Grand Forks Health Care Systems Revenue Bond, 7.125%, 8/15/24 | 500,000 | 560,725 | 500,000 | 560,725 | ||
PENNSYLVANIA: 4.57% | ||||||
Lehigh County General Obligation (Lehigh Valley Hospital) (MBIA Insured), 7%, 7/1/16 | 1,000,000 | 1,249,790 | 1,000,000 | 1,249,790 | ||
PUERTO RICO: 2.51% | ||||||
Puerto Rico Commonwealth, 6.5%, 7/1/14 | 320,000 | 378,486 | 85,000 | 100,535 | 405,000 | 479,021 |
Puerto Rico Housing Finance Authority, 4.5%, 12/1/09 | 200,000 | 208,372 | 200,000 | 208,372 | ||
TEXAS: 5.66% | ||||||
Lower Colorado River Authority, Utility Revenue, (AMBAC Insured), 6.0%, 1/1/17 | 305,000 | 361,895 | 305,000 | 361,895 | ||
North Forest Independent School District, 6%, 8/15/11 | 1,050,000 | 1,186,174 | 1,050,000 | 1,186,174 | ||
VIRGINIA: 4.01% | ||||||
Hanover County Industrial Development Authority Hospital (Bon Secours Health Systems) (MBIA Insured), 6%, 8/15/10 | 500,000 | 558,245 | 500,000 | 558,245 | ||
Riverside Regional Jail Authority Revenue, 5%, 7/1/16 | 500,000 | 540,115 | 500,000 | 540,115 | ||
WASHINGTON: 3.62% | ||||||
Grays Harbor County Public Utility #001, Electric Revenue Bond, 5.25%, 7/1/24 | 605,000 | 651,295 | 605,000 | 651,295 | ||
King County School District #415 Kent, (FSA Insured) 5.5%, 6/1/16 | 300,000 | 340,107 | 300,000 | 340,107 | ||
TOTAL INVESTMENTS* | 5,704,996 | 21,208,953 | 26,913,949 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 1.62% | 77,096 | 367,290 | 444,386 | |||
NET ASSETS: 100% | 5,782,092 | 21,576,243 | 27,358,335 | |||
CAPITAL SHARES OUTSTANDING | 546,922 | 1,942,590 | 2,463,173** | |||
NET ASSET VALUE PER SHARE | 10.57 | 11.11 | 11.11 | |||
* INVESTMENT SECURITIES, AT COST | 5,417,090 | 20,099,864 | 25,516,954 | |||
** Reflects National Fund's original 1,942,590 shares plus an additional 520,583 shares of Arizona that would have been issued at merger. |
Pro Forma Financial Statements | ||||||
September 30, 2005 (unaudited) | ||||||
Just Missouri merged | ||||||
Schedule of Investments | ||||||
Missouri Fund | National Fund | Pro Forma (Combined) | ||||
Principal | Market | Principal | Market | Principal | Market | |
Amount | Value | Amount | Value | Amount | Value | |
LONG TERM MUNICIPAL BONDS: 98.05% | ||||||
ARIZONA: 5.41% | ||||||
Arizona Transportation Board, Grant Antic, 5%, 7/1/13 | 100,000 | 108,884 | 100,000 | 108,884 | ||
Maricopa County Unified School District #48 Scottsdale, (FSA), 5%, 7/1/15 | 300,000 | 329,058 | 300,000 | 329,058 | ||
Rio Nuevo Multipurpose Facilities, Certificate Participation, (FGIC Insured), 4.5%, 7/1/08 | 1,000,000 | 1,034,320 | 1,000,000 | 1,034,320 | ||
Tucson Recreational, (Prerefunded 7/1/09 @ 100), 5.25%. 7/1/18 | 100,000 | 107,165 | 100,000 | 107,165 | ||
COLORADO: 3.74% | ||||||
El Paso County School District #020, 5%, 12/15/16 | 1,005,000 | 1,091,289 | 1,005,000 | 1,091,289 | ||
FLORIDA: 8.11% | ||||||
First Florida Government Community Revenue Bond, (AMBAC Insured), 5.5%, 7/1/16 | 1,000,000 | 1,141,110 | 1,000,000 | 1,141,110 | ||
Palm Beach County Solid Waste Authority Revenue Bond, (AMBAC Insured), 6%, 10/1/10 | 1,100,000 | 1,225,411 | 1,100,000 | 1,225,411 | ||
ILLINOIS: 7.76% | ||||||
Grundy County School District #054, General Obligation, (AMBAC Insured), 8.35%, 12/1/07 | 720,000 | 793,894 | 720,000 | 793,894 | ||
Regional Illinois Transportation Authority, Transit Revenue (AMBAC Insured), 7.2%, 11/1/20 | 300,000 | 378,444 | 300,000 | 378,444 | ||
University of Illinois Certificates, Utility Infrastructure Projects (MBIA Insured), 5.75%, 8/15/09 | 1,000,000 | 1,089,990 | 1,000,000 | 1,089,990 | ||
KANSAS: 1.90% | ||||||
Kansas State Department of Transportation, Hwy Revenue, 6.125%, 9/1/09 | 500,000 | 554,245 | 500,000 | 554,245 | ||
MARYLAND: 0.71% | ||||||
Anne Arundel County, Solid Waste Projects (AMT), 5.5%, 9/1/16 | 100,000 | 102,914 | 100,000 | 102,914 | ||
Maryland State Transportation Authority Transportation Facilities Project Revenue, 6.8%, 7/1/16 | 90,000 | 105,300 | 90,000 | 105,300 | ||
MASSACHUSETTS: 4.13% | ||||||
Massachusetts Bay Transportation Authority, Transit Revenue, 7%, 3/1/14 | 1,000,000 | 1,204,880 | 1,000,000 | 1,204,880 | ||
MICHIGAN: 1.55% | ||||||
Redford United School District, (AMBAC Insured), 5%, 5/1/22 | 410,000 | 451,451 | 410,000 | 451,451 | ||
MINNESOTA: 0.26% | ||||||
Minnesota State Housing Finance Agency, Housing Revenue (Single-Family Mortgage) (AMT), 6.25%, 7/1/26 | 75,000 | 76,430 | 75,000 | 76,430 | ||
MISSISSIPPI: 4.40% | ||||||
Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 7.75%, 2/1/14 | 500,000 | 636,050 | 500,000 | 636,050 | ||
Harrison County Wastewater Management District, Sewer Revenue, (Wastewater Treatment Facilities) (FGIC Insured), 8.5%, 2/1/13 | 500,000 | 649,310 | 500,000 | 649,310 | ||
MISSOURI: 26.56% | ||||||
Jackson County Reorg School District #7, Lees Summit, (FSA Insured), 5.25%, 3/1/14 | 300,000 | 327,186 | 300,000 | 327,186 | ||
Jefferson County School District, 6.7%, 3/1/11 | 200,000 | 221,864 | 200,000 | 221,864 | ||
Mehlville School District R-9, Certificate Participation, (FSA Insured), 5%, 9/1/19 | 300,000 | 317,379 | 300,000 | 317,379 | ||
Normandy School District General Obligation, 5.4%, 3/1/18 | 325,000 | 341,110 | 325,000 | 341,110 | ||
North Kansas City School District, 4.25%, 3/1/16 | 300,000 | 307,659 | 300,000 | 307,659 | ||
Platte County School District Park Hill, 5.5%, 3/1/14 | 300,000 | 309,651 | 300,000 | 309,651 | ||
Polk County School District R-1 Bolivar, 5%, 3/1/21 | 110,000 | 118,108 | 110,000 | 118,108 | ||
St. Louis Board of Education, 5.5%, 4/1/10 | 275,000 | 300,289 | 275,000 | 300,289 | ||
Lees Summit, 4.7%, 4/1/21 | 325,000 | 335,348 | 325,000 | 335,348 | ||
Missouri State Certificate Participation, Rehabilitation Center, 6%, 11/1/15 | 115,000 | 115,276 | 115,000 | 115,276 | ||
Missouri State Health & Educational Facilities Revenue, (MBIA Insured) 6.4%, 6/1/10 | 165,000 | 185,912 | 165,000 | 185,912 | ||
St. Louis County Mortgage Revenue (AMT), 5.65%, 2/1/20 | 500,000 | 569,285 | 500,000 | 569,285 | ||
Greene County Certificate Participation, 5.25%, 7/1/11 | 300,000 | 322,047 | 300,000 | 322,047 | ||
Jackson County Missouri, Public Building Corp. Leasehold Revenue, 5.1%, 11/1/12 | 200,000 | 212,784 | 200,000 | 212,784 | ||
Missouri Development Financial Board Cultural Facilities Revenue Bond, (MBIA Insured), 5.25%, 12/1/17 | 350,000 | 378,402 | 350,000 | 378,402 | ||
Missouri Development Financial Board Infrastructure Facilities Revenue Bond, 4.3%, 12/1/12 | 225,000 | 222,804 | 225,000 | 222,804 | ||
Missouri State Board Public Buildings, 4.0%, 12/1/10 | 75,000 | 77,324 | 75,000 | 77,324 | ||
Springfield Public Building Corp. Leasehold Revenue Bond, 5.8%, 6/1/13 | 275,000 | 302,561 | 275,000 | 302,561 | ||
Springfield Public Building Corp. Leasehold Revenue Bond, 4.7%, 5/1/12 | 175,000 | 183,195 | 175,000 | 183,195 | ||
St Louis Municipal Finance Corporation, Leasehold Revenue Bond (AMBAC Insured), 5.75%, 2/15/17 | 300,000 | 332,991 | 300,000 | 332,991 | ||
St Louis Parking Facilities Revenue (MBIA Insured), 5.375%, 12/15/06 | 375,000 | 391,868 | 375,000 | 391,868 | ||
St Louis Industrial Development Authority Pollution Control Revenue, 6.65%, 5/1/16 | 200,000 | 247,860 | 200,000 | 247,860 | ||
Missouri State Highway & Transportation, Street & Road Revenue, 5.25%, 2/1/20 | 250,000 | 268,928 | 250,000 | 268,928 | ||
Platte County Industrial Development Authority, Zona Rosa Retail Project, 3.75%, 12/1/13 | 150,000 | 147,817 | 150,000 | 147,817 | ||
Jefferson County Public Water Supply District Number C-1 (AMBAC Insured), 5.25%, 12/1/16 | 130,000 | 142,474 | 130,000 | 142,474 | ||
Missouri State Health & Educational Facilities Authority Revenue Bond, 5%, 11/1/09 | 1,000,000 | 1,069,370 | 1,000,000 | 1,069,370 | ||
NEW JERSEY: 7.36% | ||||||
New Jersey State Transportation Transit Fund Authority, 5.5%, 12/15/17 | 1,000,000 | 1,140,460 | 1,000,000 | 1,140,460 | ||
New Jersey State Turnpike Authority Revenue, 6.5%, 1/1/16 | 850,000 | 1,007,225 | 850,000 | 1,007,225 | ||
NORTH CAROLINA: 3.96% | ||||||
Macon County, 5%, 6/1/13 | 500,000 | 546,800 | 500,000 | 546,800 | ||
Raleigh, Certificate Participation, Leasing Revenue, 4.75%, 6/1/25 | 590,000 | 607,700 | 590,000 | 607,700 | ||
NORTH DAKOTA: 1.92% | ||||||
Grand Forks Health Care Systems Revenue Bond, 7.125%, 8/15/24 | 500,000 | 560,725 | 500,000 | 560,725 | ||
PENNSYLVANIA: 4.28% | ||||||
Lehigh County General Obligation (Lehigh Valley Hospital) (MBIA Insured), 7%, 7/1/16 | 1,000,000 | 1,249,790 | 1,000,000 | 1,249,790 | ||
PUERTO RICO: 3.54% | ||||||
Puerto Rico Commonwealth, 6.5%, 7/1/14 | 480,000 | 567,730 | 85,000 | 100,535 | 565,000 | 668,265 |
Puerto Rico Housing Finance Authority, 4.5%, 12/1/09 | 150,000 | 156,279 | 200,000 | 208,372 | 350,000 | 364,651 |
TEXAS: 5.30% | ||||||
Lower Colorado River Authority, Utility Revenue, (AMBAC Insured), 6.0%, 1/1/17 | 305,000 | 361,895 | 305,000 | 361,895 | ||
North Forest Independent School District, 6%, 8/15/11 | 1,050,000 | 1,186,174 | 1,050,000 | 1,186,174 | ||
VIRGINIA: 3.76% | ||||||
Hanover County Industrial Development Authority Hospital (Bon Secours Health Systems) (MBIA Insured), 6%, 8/15/10 | 500,000 | 558,245 | 500,000 | 558,245 | ||
Riverside Regional Jail Authority Revenue, 5%, 7/1/16 | 500,000 | 540,115 | 500,000 | 540,115 | ||
WASHINGTON: 3.40% | ||||||
Grays Harbor County Public Utility #001, Electric Revenue Bond, 5.25%, 7/1/24 | 605,000 | 651,295 | 605,000 | 651,295 | ||
King County School District #415 Kent, (FSA Insured) 5.5%, 6/1/16 | 300,000 | 340,107 | 300,000 | 340,107 | ||
TOTAL INVESTMENTS* | 7,404,131 | 21,208,953 | 28,613,084 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 1.95% | 201,728 | 367,290 | 569,018 | |||
NET ASSETS: 100% | 7,605,859 | 21,576,243 | 29,182,102 | |||
CAPITAL SHARES OUTSTANDING | 701,413 | 1,942,590 | 2,627,374** | |||
NET ASSET VALUE PER SHARE | 10.84 | 11.11 | 11.11 | |||
* INVESTMENT SECURITIES, AT COST | 6,954,152 | 20,099,864 | 27,054,016 | |||
** Reflects National Fund's original 1,942,590 shares plus an additional 684,784 shares of Missouri that would have been issued at merger. |
NOTES TO PORTFOLIOS OF INVESTMENTS:
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
MBIA Municipal Bond Investors Assurance Corporation
See accompanying Notes to Pro Forma Financial Statements
Pro Forma Statements of Assets and Liabilities (unaudited, September 30, 2005)
Pro Forma Statement of Assets and Liabilities | |||||
September 30, 2005 (unaudited) | |||||
Both Arizona & Missouri merged | |||||
Arizona Fund | Missouri Fund | National Fund | Adjustment (Note 4) | Pro Forma National Fund (Combined) | |
ASSETS | |||||
Investments, at value* | 5,704,996 | 7,404,131 | 21,208,953 | 34,318,080 | |
Cash | 10,646 | 119,947 | 100,707 | 231,300 | |
Interest receivable | 77,594 | 91,691 | 280,221 | 449,506 | |
Capital shares sold | 58 | - | - | 58 | |
Total assets | 5,793,294 | 7,615,769 | 21,589,881 | 34,998,944 | |
LIABILITIES | |||||
Dividends payable | 5,126 | 4,667 | 5,179 | 14,972 | |
Capital shares redeemed | 1,201 | 368 | 1,709 | 3,278 | |
Independent trustee and auditor fees | 4,875 | 4,875 | 6,750 | 16,500 | |
Total liabilities | 11,202 | 9,910 | 13,638 | 34,750 | |
NET ASSETS | 5,782,092 | 7,605,859 | 21,576,243 | 34,964,194 | |
Net assets consists of: | |||||
Paid in capital | 5,479,672 | 7,192,652 | 20,399,648 | 33,071,972 | |
Accumulated net realized gains (losses) | 14,514 | (36,772) | 67,506 | 45,248 | |
Net unrealized appreciation on investments | 287,906 | 449,979 | 1,109,089 | 1,846,974 | |
NET ASSETS | 5,782,092 | 7,605,859 | 21,576,243 | 34,964,194 | |
CAPITAL SHARES OUTSTANDING | |||||
An unlimited number of capital shares, | |||||
without par value, are authorized | 546,922 | 701,413 | 1,942,590 | (42,968) | 3,147,957 |
NET ASSET VALUE PER SHARE | 10.57 | 10.84 | 11.11 | 11.11 | |
* INVESTMENT SECURITIES, AT COST | 5,417,090 | 6,954,152 | 20,099,864 | 32,471,106 | |
See accompanying Notes to Pro Forma Financial Statements |
Pro Forma Statement of Assets and Liabilities | ||||
September 30, 2005 (unaudited) | ||||
Just Arizona merged | ||||
Arizona Fund | National Fund | Adjustment (Note 4) | Pro Forma National Fund (Combined) | |
ASSETS | ||||
Investments, at value* | 5,704,996 | 21,208,953 | 26,913,949 | |
Cash | 10,646 | 100,707 | 111,353 | |
Interest receivable | 77,594 | 280,221 | 357,815 | |
Capital shares sold | 58 | - | 58 | |
Total assets | 5,793,294 | 21,589,881 | 27,383,175 | |
LIABILITIES | ||||
Dividends payable | 5,126 | 5,179 | 10,305 | |
Capital shares redeemed | 1,201 | 1,709 | 2,910 | |
Independent trustee and auditor fees | 4,875 | 6,750 | 11,625 | |
Total liabilities | 11,202 | 13,638 | 24,840 | |
NET ASSETS | 5,782,092 | 21,576,243 | 27,358,335 | |
Net assets consists of: | ||||
Paid in capital | 5,479,672 | 20,399,648 | 25,879,320 | |
Accumulated net realized gains (losses) | 14,514 | 67,506 | 82,020 | |
Net unrealized appreciation on investments | 287,906 | 1,109,089 | 1,396,995 | |
NET ASSETS | 5,782,092 | 21,576,243 | 27,358,335 | |
CAPITAL SHARES OUTSTANDING | ||||
An unlimited number of capital shares, | ||||
without par value, are authorized | 546,922 | 1,942,590 | (26,339) | 2,463,173 |
NET ASSET VALUE PER SHARE | 10.57 | 11.11 | 11.11 | |
* INVESTMENT SECURITIES, AT COST | 5,417,090 | 20,099,864 | 25,516,954 | |
See accompanying Notes to Pro Forma Financial Statements |
Pro Forma Statement of Assets and Liabilities | ||||
September 30, 2005 (unaudited) | ||||
Just Missouri merged | ||||
Missouri Fund | National Fund | Adjustment (Note 4) | Pro Forma National Fund (Combined) | |
ASSETS | ||||
Investments, at value* | 7,404,131 | 21,208,953 | 28,613,084 | |
Cash | 119,947 | 100,707 | 220,654 | |
Interest receivable | 91,691 | 280,221 | 371,912 | |
Total assets | 7,615,769 | 21,589,881 | 29,205,650 | |
LIABILITIES | ||||
Dividends payable | 4,667 | 5,179 | 9,846 | |
Capital shares redeemed | 368 | 1,709 | 2,077 | |
Independent trustee and auditor fees | 4,875 | 6,750 | 11,625 | |
Total liabilities | 9,910 | 13,638 | 23,548 | |
NET ASSETS | 7,605,859 | 21,576,243 | 29,182,102 | |
Net assets consists of: | ||||
Paid in capital | 7,192,652 | 20,399,648 | 27,592,300 | |
Accumulated net realized gains (losses) | (36,772) | 67,506 | 30,734 | |
Net unrealized appreciation on investments | 449,979 | 1,109,089 | 1,559,068 | |
NET ASSETS | 7,605,859 | 21,576,243 | 29,182,102 | |
CAPITAL SHARES OUTSTANDING | ||||
An unlimited number of capital shares, | ||||
without par value, are authorized | 701,413 | 1,942,590 | (16,629) | 2,627,374 |
NET ASSET VALUE PER SHARE | 10.84 | 11.11 | 11.11 | |
* INVESTMENT SECURITIES, AT COST | 6,954,152 | 20,099,864 | 27,054,016 | |
See accompanying Notes to Pro Forma Financial Statements |
Pro Forma Statements of Operations (unaudited, for the year ended September 30, 2005)
Pro Forma Statement of Operations | |||||
Year Ended September 30, 2005 (unaudited) | |||||
Both Arizona & Missouri merged | |||||
Arizona Fund | Missouri Fund | National Fund | Adjustments (Note 5) | Pro Forma National Fund (Combined) | |
INVESTMENT INCOME | |||||
Interest income | 273,007 | 366,900 | 972,610 | 1,612,517 | |
EXPENSES | |||||
Investment advisory fees | 37,523 | 50,596 | 139,039 | 227,158 | |
Other expenses | 23,114 | 31,167 | 88,985 | (4,248) | 139,018 |
Independent trustee and auditor fees | 5,992 | 5,992 | 8,983 | (4,500) | 16,467 |
Total expenses | 66,629 | 87,755 | 237,007 | (8,748) | 382,643 |
NET INVESTMENT INCOME | 206,378 | 279,145 | 735,603 | 8,748 | 1,229,874 |
REALIZED AND UNREALIZED GAIN | |||||
(LOSS) ON INVESTMENTS | |||||
Net realized gain (loss) on investments | 14,514 | 26,006 | 107,954 | 148,474 | |
Change in net unrealized appreciation (depreciation) of investments | (161,226) | (179,413) | (573,777) | (914,416) | |
NET GAIN (LOSS) ON INVESTMENTS | (146,712) | (153,407) | (465,823) | (765,942) | |
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | 59,666 | 125,738 | 269,780 | 8,748 | 463,932 |
Pro Forma Statement of Operations | ||||
Year Ended September 30, 2005 (unaudited) | ||||
Just Arizona merged | ||||
Arizona Fund | National Fund | Adjustments (Note 5) | Pro Forma National Fund (Combined) | |
INVESTMENT INCOME | ||||
Interest income | 273,007 | 972,610 | 1,245,617 | |
EXPENSES | ||||
Investment advisory fees | 37,523 | 139,039 | 176,562 | |
Other expenses | 23,114 | 88,985 | (2,697) | 109,402 |
Independent trustee and auditor fees | 5,992 | 8,983 | (2,250) | 12,725 |
Total expenses | 66,629 | 237,007 | (4,947) | 298,689 |
NET INVESTMENT INCOME | 206,378 | 735,603 | 4,947 | 946,928 |
REALIZED AND UNREALIZED GAIN | ||||
(LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on investments | 14,514 | 107,954 | 122,468 | |
Change in net unrealized appreciation | ||||
(depreciation) of investments | (161,226) | (573,777) | (735,003) | |
NET GAIN (LOSS) ON INVESTMENTS | (146,712) | (465,823) | (612,535) | |
TOTAL INCREASE IN NET ASSETS | ||||
RESULTING FROM OPERATIONS | 59,666 | 269,780 | 4,947 | 334,393 |
Pro Forma Statement of Operations | ||||
Year Ended September 30, 2005 (unaudited) | ||||
Just Missouri merged | ||||
Missouri Fund | National Fund | Adjustments (Note 5) | Pro Forma National Fund (Combined) | |
INVESTMENT INCOME | ||||
Interest income | 366,900 | 972,610 | 1,339,510 | |
EXPENSES | ||||
Investment advisory fees | 50,596 | 139,039 | 189,635 | |
Other expenses | 31,167 | 88,985 | (1,551) | 118,601 |
Independent trustee and auditor fees | 5,992 | 8,983 | (2,250) | 12,725 |
Total expenses | 87,755 | 237,007 | (3,801) | 320,961 |
NET INVESTMENT INCOME | 279,145 | 735,603 | 3,801 | 1,018,549 |
REALIZED AND UNREALIZED GAIN | ||||
(LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on investments | 26,006 | 107,954 | 133,960 | |
Change in net unrealized appreciation | ||||
(depreciation) of investments | (179,413) | (573,777) | (753,190) | |
NET GAIN (LOSS) ON INVESTMENTS | (153,407) | (465,823) | (619,230) | |
TOTAL INCREASE IN NET ASSETS | ||||
RESULTING FROM OPERATIONS | 125,738 | 269,780 | 3,801 | 399,319 |
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination
The Pro Forma Statement of Assets and Liabilities reflects the accounts of Mosaic Tax-Free Trust National Fund (the "National Fund"), Tax-Free Arizona Fund (the "Arizona Fund") and Tax-Free Missouri Fund (the "Missouri Fund") as of September 30, 2005 as if the Merger had been consummated at that date. The National, Arizona and Missouri Funds each represent a single class of shares of Mosaic Tax-Free Trust, an open-end, diversified investment company registered under the Investment Company Act of 1940, as amended. The Arizona and Missouri Funds, individually and together, are considered "target funds" for purposes of the proposed merger, and the National Fund, as the "acquiring fund," is contemplated to be both the legal and accounting survivor in all merger transaction scenarios.
The Pro Forma Statement of Operations reflects the accounts of the National Fund, Arizona Fund and Missouri Fund for the year ended September 30, 2005 and assumes that the Merger had been consummated at the beginning of the fiscal year then ended. These statements have been prepared to show the results if both the Arizona Fund and Missouri Fund are merged, just the Arizona Fund is merged and just the Missouri Fund is merged. These statements have been derived from the National Fund's, Arizona Fund’s and Missouri Fund's books and records utilized in calculating daily net asset value as of and for the fiscal year ended September 30, 2005.
The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Arizona Fund and Missouri Fund in exchange for shares of the National Fund under generally accepted accounting principles. The historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the National Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of each fund in carrying out their obligations under the Agreement and Plan of Merger since such expenses will not be borne by any of the funds.
The Pro Forma Statement of Assets and Liabilities and the Pro Forma Statement of Operations should be read in conjunction with the historical financial statements of Mosaic Tax-Free Trust incorporated by reference in the Statement of Additional Information.
2. Shares of Beneficial Interest
The pro forma net asset value per share assumes the issuance of shares of the National Fund that would have been issued at September 30, 2005, in connection with the proposed reorganization(s), had it(they) occurred then. (See Note 6 below.)
3. Pro Forma Operations
(a) The Pro Forma Statement of Operations assumes the same rate of gross investment income for the investments of the National Fund, Arizona Fund and Missouri Fund. Subsequent to the Merger, net assets of the Arizona Fund and Missouri Fund will represent approximately 17% and 21%, respectively of the combined National Fund. Although the National Fund is permitted to invest in the assets held by both the Arizona and Missouri Funds, we anticipate selling securities before or after the proposed mergers in order to meet redemptions and to adjust the securities weightings in the combined fund in order to reduce the risk of being overly concentrated in the securities of any one particular state and increase the diversification of the combined National Fund. However, no securities would be required to be sold for the sole purpose of satisfying the National fund's investment objectives and restrictions. As of September 30, 2005, the Arizona Fund had net unrealized appreciation on investments of $287,906 and the Missouri Fund had net unrealized appreciation on investments of $449,979. If such unrealized appreciation amounts are not reduced by market factors such as rising interest rates or otherwise offset by realized losses, then a substantial portion of this unrealized appreciation may be realized and distributed to shareholders as taxable capital gain.
(b) Assets of the Arizona Fund and Missouri Fund are expected to retain their tax properties after the Merger. As of September 30, 2005, the Missouri Fund had a capital loss carryover of $36,772 due to expire on September 30, 2008. To the extent such losses are not fully offset by gains through such period by the Missouri Fund up to Merger date and by the Combined National Fund subsequent to Merger date, any remaining amounts will be lost. The Arizona Fund and National Fund had realized gains of $14,514 and $67,506, respectively to distribute. These gains were distributed by each respective fund during 2005.
By operation of Internal Revenue Code Section 382, the National Fund's use of the Missouri Fund's unused capital loss carryover may be limited. Furthermore, it is anticipated that, for the fiscal year ending September 30, 2006, the National Fund may be further limited to using the full amount of the available unused capital loss carryover from the Missouri Fund by operation of Internal Revenue Code Section 381.
4. Adjustments to Statements of Assets and Liabilities.
The adjustment reflects that, due to the higher net asset value per share of the National Fund compared with the Arizona and Missouri Funds, fewer shares of the Pro Forma National Fund would be issued to represent the merged assets than issued by the funds prior to the merger.
5. Adjustments to Statements of Operations.
(a) Pro forma operating expenses reflect the service fees approved by the Trustees for the applicable period. As a result, pro forma operating expenses (all expenses other than advisory fees) would be required to be adjusted downward by $4,248 assuming both the Arizona Fund and Missouri Fund were merged, $2,697 assuming just the Arizona Fund was merged and $1,551 assuming just the Missouri Fund was merged. This decrease is reflected in the "adjustment" column in the Pro Forma Statement of Operations. This decrease in expenses is due to the lower expenses paid as a percentage of net assets by the National Fund compared with both the Arizona Fund and Missouri Fund under the services agreement between Mosaic Tax-Free Trust and the investment advisor. The reduction is offset by an adjusting increase in pro forma net investment income.
(b) Pro forma operating expenses also reflect the economies of scale recognized by reduced fees to be incurred by the Trust for payment of Independent Registered Public Accountant expenses. As such, since the Arizona and Missouri Funds each paid fees of approximately $4,500 for the fiscal year presented, operating expenses reflect a reasonable adjustment of half that amount, or $2,250 per fund, although the actual economies of scale recognized may be higher or lower based on renegotiated fees to be approved by the Audit Committee after either or both Mergers are approved.
(c) The adjustments above results in the Pro Forma "other expenses" and "independent trustee and auditor fees" combined expense ratio of 0.43% for each of the Arizona and Missouri seperate mergers, for a total expense ratio of 1.06%, and 0.42%, for a total expense ratio of 1.05% assuming both the Arizona and Missouri Funds merge with the National Fund.
6. Capital Shares.
The pro forma net asset value per share assumes the issuance of shares of the National Fund that would have been issued at September 30, 2005 in connection with the proposed mergers. The number of shares assumed to be issued is equal to the net asset value of the shares of the Arizona and Missouri Funds (individually or together, assuming both funds' shareholders approve the transaction) as of September 30, 2005, divided by the net asset value per share of the shares of the National Fund as of September 30, 2005. The pro forma number of shares outstanding for the Pro Forma Combined National Fund consists of the following at September 30, 2005:
Shares of National Fund Before Merger | Additional Shares Assumed Issued in Merger | Total Outstanding Shares of National Fund Post-Merger | |
Both Arizona and Missouri Funds Approve Merger | 1,942,590 | 1,205,367 | 3,147,957 |
Only Arizona Fund Approves Merger | 1,942,590 | 520,583 | 2,463,173 |
Only Missouri Fund Approves Merger | 1,942,590 | 684,784 | 2,627,374 |
7. Summary of Significant Accounting Policies. Because the Trust is 100% no-load, the shares of each fund are offered and redeemed at the net asset value per share. The National Fund and each target fund, as series of the same Trust, have identical accounting policies as follows:
Securities Valuation: Each fund values 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: Distributions are recorded on the ex-dividend date. Net investment income, determined as gross investment income less total expenses, is declared as a regular dividend and distributed to shareholders monthly. Capital gain distributions, if any, are declared and paid annually at calendar year-end. Additional distributions may be made if necessary.
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.
Income Tax: No provision is made for Federal income taxes since it is the intention of each fund to comply with the provisions of the Internal Revenue Code available to investment companies and to make the requisite distribution to shareholders of taxable income which will be sufficient to relieve it from all or substantially all Federal Income Taxes. As of September 30, 2005, capital loss carryovers available to offset future capital gains for federal income tax purposes were $36,772 for the Missouri Fund expiring September 30, 2008. The tax cost of investments will remain unchanged for the combined fund, although the combined fund's ability to use capital loss carryovers may be limited.