OMB APPROVAL
OMB Number: 3235-0570
Expires: January 31, 2014
Estimated average burden hours per response...20.6
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
Madison 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)
Pamela M. Krill
Madison/Mosaic Legal and Compliance Department
550 Science Drive
Madison, WI 53711
(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, 2012
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, 100 F Street, NE, 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
March 31, 2012
Madison Mosaic
Tax-Free Trust
Virginia Tax-Free Fund
Tax-Free National Fund
Madison Mosaic(R) Funds
www.mosaicfunds.com
Madison Mosaic Tax-Free Trust
Contents
Letter to Shareholders | |
Economic Overview | 1 |
Outlook | 2 |
Portfolio of Investments | |
Virginia Tax-Free Fund | 4 |
Tax-Free National Fund | 6 |
Statements of Assets and Liabilities | 8 |
Statements of Operations | 9 |
Statements of Changes in Net Assets | 9 |
Financial Highlights | 10 |
Notes to Financial Statements | 11 |
Other Information | 15 |
Madison Mosaic Tax-Free Trust
Letter to Shareholders
(photo of Michael J. Peters)
The semi-annual period ended March 31, 2012 saw positive total returns for Virginia Tax-Free and Tax-Free National. Six-month total returns were: 2.11% for Virginia Tax-Free and 2.86% for Tax-Free National. Over the six-month period of this report, Tax-Free National’s peer group, Morningstar Municipal National Long Category, was up 5.07%. The Morningstar Municipal Single State Long Category, the peer group for Virginia Tax-Free, rose 4.59% this period. As is typical, our portfolios were focused on high-quality issuance. Some indication of the manner in which quality influenced returns over this period can be seen by looking at the Morningstar High Yield Municipal Category, which led other municipal bond categories with a six-month return of 6.48%. As always, your Madison Mosaic Funds have very little if any exposure to lower-rated bonds, which is not necessarily true for their peers. Another factor for our underperformance compared to the index was the relative performance of municipal bonds based on their maturity. Bonds at the border between intermediate and long, where we have been positioned for some time, had particularly weak performance over this period. Each fund’s higher-quality bias and duration position were behind their relative underperformance for the period.
The 30-day SEC yield for Virginia Tax-Free saw a reduction across the period from 1.82% to 1.52% while Tax-Free National fell from 1.65% to 1.08%, a reflection of the extremely low interest rate environment in which we have been living for some time. Not only has the Federal Reserve kept short-term rates at record lows, it has committed to keeping them low through 2013 and into 2014.
ECONOMIC OVERVIEW
The global economic backdrop appeared bleak as we entered this six-month period in October 2011. Ongoing turmoil in the Eurozone remained heavy on the market’s mind along with continued fears that U.S. economic growth would disappoint. Renewed forecasts of imminent recession in the U.S. were widespread and risk assets such as stocks were again avoided in favor of the perceived safety and liquidity of U.S. dollar-based government bonds. This flight-to-safety pushed intermediate and long-term Treasury yields into record territory, with the yield on the 10-Year Treasury Bond hitting a period low of 1.76% on October 3, 2011, close to its all-time bottom. Along with the declining interest rates came low mortgage rates, for those who qualified, with 30-year fixed mortgages pricing below 4% for the first time ever.
However, early into the six-month period, the U.S. economic picture brightened. Capital spending picked up, labor markets showed signs of improvement and consumer spending was reported to be better than expected. From fears of recession at the outset of the fourth quarter, consensus growth expectations changed to an annualized fourth quarter growth rate of approximately 2.8%. This shift could be seen in the rapid rise of the yield on the 10-Year Treasury, which spiked from its period low of 1.76% in early October to the period high of 2.40% on October 27, 2011.
Against this backdrop of exceeding the modest economic expectations at home, the Federal Reserve retained its commitment to very low short-term interest rates and supported the long end of the bond market with open market purchases of long-dated maturities (Operation Twist) leading to further yield curve flattening. The Fed also hinted at adding purchases of mortgage-backed securities to its stimulus arsenal, contributing to the decline in mortgage rates to a level below 4%.
This optimism continued as we entered 2012, with signs of sustainable U.S. economic growth building upon positive momentum from late 2011. Improvements in both employment and manufacturing seemed destined to boost the economy and assist the housing market out of its prolonged downturn. Eurozone concerns abated during the first months of 2012 and market participants began to refocus on fundamental economic factors. The resulting confidence led investors to prefer higher risk investments, continuing the trend which began in the fourth quarter of 2011.
Semi-annual Report | March 31, 2012 | 1
Madison Mosaic Tax-Free Trust | Letter to Shareholders | continued | March 31, 2012
Greece successfully renegotiated its sovereign debt and other European countries undertook austerity measures to bolster their own well being. As Greek creditors agreed to new debt terms, the market responded by reversing the flight-to-quality trade. In the U.S., the Fed lengthened its commitment towards accommodative rates to 2014, although this forecast was made contingent upon economic conditions. Additionally, the Fed provided detailed estimates for GDP, unemployment and inflation – all pointing to modest economic growth. As expected, the Fed continued its purchase of longer-dated Treasuries and investments into mortgage-backed securities. Importantly, the Fed remained relatively silent in regard to another round of quantitative easing. At this point, the Fed is unlikely to institute another round of quantitative easing given an improving labor market, modest economic growth and tolerable inflation.
OUTLOOK
Housing, high unemployment and the threat of Eurozone contagion continue to be the primary risks confronting the U.S. economy. Housing remains in the doldrums despite low mortgage rates, lower home prices and an improved jobs picture. Corporations continue to report good earnings, but many have lowered their earnings outlook and are unlikely to invest without evidence of increasing economic activity.
Investors seeking yield have been frustrated for some time. The pressure to move into higher risk, higher yielding securities has enticed many. However, for those looking at the multiple risks that remain domestically, and even more prominently overseas, holding a portion of assets in high-quality municipal bonds continues to have an appeal. While we take the Fed at its word regarding the likelihood that rates will remain low for the remainder of 2012 and 2013, we also take note of its careful wording that this is contingent upon economic conditions. Trying investors’ patience appears part of the Federal Reserve policy. As investment managers, we can only wait for the time when interest rate policy returns to a more normal position and investors in municipal bonds begin to once again earn more attractive yields on their tax-free bond portfolios.
Virginia Fund
The Commonwealth of Virginia maintains a Standard & Poor’s AAA general obligation bond rating based on a well-diversified economy that emphasizes services and government. The fund had a total return of 2.11% for the semi-annual period and the 30-day SEC yield was 1.52% as of March 31, 2012. The duration of the portfolio was 6.82 years while the average maturity was 11.50 years. In terms of quality of holdings, approximately 21.4% of the portfolio was rated by at least one agency at the highest level (AAA for Standard and Poor’s), 55.1% was the equivalent of S&P’s AA, 18.3% A, while 5.2% was BBB or not currently rated. Recently purchased securities included Puerto Rico Highway & Transportation Authority revenue bonds and Virginia State Resources Authority-Clean Water revenue bonds. .
INDUSTRY ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF 3/31/12 | |
Airport | 0.5% |
Development | 5.5% |
Education | 9.6% |
Facilities | 13.3% |
General | 7.5% |
General Obligation | 14.2% |
Medical | 11.0% |
Multifamily Housing | 8.4% |
Power | 3.9% |
Transportation | 3.2% |
Utilities | 3.9% |
Water | 16.5% |
Cash & Other | 2.5% |
National Fund
The National Fund had a total return of 2.86% for the semi-annual period and the 30-day SEC yield was 1.08% as of March 31, 2012. The duration of the portfolio was 6.81 years and the average maturity was 11.65 years. In terms of quality holdings, approximately 19.6% of the portfolio was rated by at least one agency at the highest level (AAA for Standard and Poor’s), 69.2% was the equivalent of S&P’s AA, 8.9% A, and 2.3% BBB. Recently purchased securities included El Paso County, Colorado Detention Center and Beaumont, Texas Independent School District guaranteed by the Texas Permanent School Fund.
2 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust | Letter to Shareholders | concluded | March 31, 2012
STATE ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF 3/31/12 | |
Alabama | 2.5% |
Arizona | 3.1% |
Arkansas | 1.7% |
Colorado | 1.4% |
Florida | 10.7% |
Georgia | 7.4% |
Illinois | 6.0% |
Indiana | 5.4% |
Iowa | 0.7% |
Kentucky | 0.4% |
Maryland | 4.3% |
Massachusetts | 2.2% |
Michigan | 5.1% |
Mississippi | 2.7% |
Missouri | 3.1% |
New Jersey | 3.3% |
New York | 3.6% |
North Carolina | 6.3% |
Ohio | 1.7% |
Pennsylvania | 2.6% |
South Carolina | 1.6% |
Texas | 14.9% |
Virginia | 4.6% |
Washington | 2.0% |
Wisconsin | 0.7% |
Cash & Other | 2.0% |
We appreciate your confidence in Madison Mosaic Funds and reaffirm our commitment to provide you with competitive returns to meet your investment objectives.
Sincerely,
(signature)
Michael J. Peters, CFA
Vice President, Madison Investment Advisors, LLC
and Portfolio Manager
Semi-annual Report | March 31, 2012 | 3
Madison Mosaic Tax-Free Trust | March 31, 2012
Virginia Fund Portfolio of Investments (unaudited)
Par Value | Value (Note 1) | |
LONG TERM MUNICIPAL BONDS - 97.5% | ||
Airport - 0.5% | ||
Capital Region Airport Commission, (AGM) 5%, 7/1/20 | $ 125,000 | $ 135,440 |
Development - 5.5% | ||
Loudoun County Industrial Development Authority, 5%, 6/1/31 | 500,000 | 552,945 |
Prince William County Industrial Development Authority, 5.25%, 2/1/18 | 675,000 | 797,891 |
1,350,836 | ||
Education - 9.6% | ||
Lexington Industrial Development Authority, 4.25%, 12/1/20 | 150,000 | 173,734 |
Prince William County Industrial Development Authority, 5%, 10/1/18 | 150,000 | 157,015 |
University of Virginia, 5%, 6/1/40 | 255,000 | 279,715 |
Virginia College Building Authority, 5%, 4/1/16 | 100,000 | 110,563 |
Virginia College Building Authority, 5%, 9/1/26 | 140,000 | 158,652 |
Virginia College Building Authority, (ST APPROP) 5%, 2/1/29 | 375,000 | 426,915 |
Virginia College Building Authority, (ST APPROP) 5%, 2/1/23 | 500,000 | 614,690 |
Virginia Public School Authority, 5%, 8/1/27 | 350,000 | 395,202 |
Virginia Public School Authority, 5%, 12/1/18 | 100,000 | 114,058 |
2,430,544 | ||
Facilities - 13.3% | ||
Gloucester County Industrial Development Authority, (NATL-RE) 4.375%, 11/1/25 | 500,000 | 518,660 |
Henrico County Economic Development Authority, 5%, 10/1/18 | 170,000 | 204,923 |
Newport News Economic Development Authority, 5%, 7/1/25 | 745,000 | 812,899 |
Northwestern Regional Jail Authority, (NATL-RE) 5%, 7/1/19 | 50,000 | 54,520 |
Prince William County Park Authority, 4%, 4/15/24 | 320,000 | 341,402 |
Roanoke County Economic Development Authority, (ASSURED GTY) 5%, 10/15/16 | 400,000 | 462,236 |
Stafford County & Staunton Industrial Development Authority, (NATL-RE) 4.5%, 8/1/25 | 700,000 | 722,428 |
Virginia Public Building Authority, 5.25%, 8/1/23 | 200,000 | 234,410 |
3,351,478 | ||
General - 7.5% | ||
Fairfax County Economic Development Authority, (NATL-RE) 5.25%, 9/1/19 | 500,000 | 501,165 |
Par Value | Value (Note 1) | |
Fairfax County Economic Development Authority, 4.25%, 8/1/29 | $ 340,000 | $ 359,271 |
County of Prince William VA, Certificate Participation (AMBAC) 5%, 6/1/22 | 750,000 | 810,375 |
Puerto Rico Public Finance Corp, (Escrowed To Maturity) (AMBAC) 5.5%, 8/1/27 | 100,000 | 130,673 |
Virgin Islands Public Finance Authority, (NATL-RE FGIC) 5%, 10/1/23 | 100,000 | 104,450 |
1,905,934 | ||
General Obligation - 14.2% | ||
City of Alexandria VA, General Obligation 5%, 1/1/16 | 200,000 | 230,740 |
County of Arlington VA, General Obligation (Prerefunded 1/15/17 @ 100) 5%, 1/15/25 | 175,000 | 208,226 |
County of Henrico VA, General Obligation (Prerefunded 12/01/18 @ 100) 5%, 12/1/24 | 200,000 | 246,762 |
County of Henrico VA, General Obligation 5%, 7/15/25 | 150,000 | 177,149 |
City of Hopewell VA, General Obligation 5.875%, 7/15/34 | 500,000 | 562,710 |
Town of Leesburg VA, General Obligation 5%, 1/15/41 | 135,000 | 150,079 |
County of Loudoun VA, General Obligation (Prerefunded 12/01/17 @ 100) 5%, 12/1/18 | 165,000 | 200,104 |
County of Prince George VA, General Obligation (ASSURED GTY ) 5%, 2/1/20 | 200,000 | 230,808 |
City of Richmond VA, General Obligation (AGM) 5%, 7/15/23 | 750,000 | 799,890 |
City of Roanoke VA, General Obligation 5%, 2/1/25 | 230,000 | 266,906 |
Commonwealth of Virginia, General Obligation 5%, 6/1/26 | 300,000 | 344,028 |
Commonwealth of Virginia, General Obligation 5%, 6/1/27 | 150,000 | 174,328 |
3,591,730 | ||
Medical - 11.0% | ||
Augusta County Industrial Development Authority, 5.25%, 9/1/20 | 1,000,000 | 1,147,670 |
Charlotte County Industrial Development Authority/VA, 5%, 9/1/16 | 335,000 | 365,793 |
Harrisonburg Industrial Development Authority, (AMBAC) 4%, 8/15/16 | 200,000 | 219,000 |
Harrisonburg Industrial Development Authority, (AMBAC) 5%, 8/15/46 | 180,000 | 185,027 |
Henrico County Economic Development Authority, (NATL-RE) 6%, 8/15/16 | 260,000 | 276,760 |
Roanoke Economic Development Authority, (Escrowed To Maturity) (NATL-RE) 6.125%, 7/1/17 | 500,000 | 578,545 |
2,772,795 |
See accompanying Notes to Financial Statements.
4 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust | Virginia Fund Portfolio of Investments | concluded | March 31, 2012
Par Value | Value (Note 1) | |
Multifamily Housing - 8.4% | ||
Fairfax County Redevelopment & Housing Authority, 4.75%, 10/1/36 | $ 725,000 | $ 775,880 |
Fairfax County Redevelopment & Housing Authority, 5%, 10/1/39 | 300,000 | 325,518 |
Suffolk Redevelopment & Housing Authority, 5.6%, 2/1/33 | 750,000 | 756,578 |
Virginia Housing Development Authority, 4.8%, 10/1/39 | 250,000 | 262,093 |
2,120,069 | ||
Power - 3.9% | ||
Chesterfield County Economic Development Authority, 5%, 5/1/23 | 565,000 | 638,077 |
Puerto Rico Electric Power Authority, (BHAC-CR MBIA-RE FGIC) 5.25%, 7/1/24 | 290,000 | 335,463 |
973,540 | ||
Transportation - 3.2% | ||
Puerto Rico Highway & Transportation Authority, (NATL-RE) 5.25%, 7/1/32 | 445,000 | 464,820 |
Puerto Rico Highway & Transportation Authority, (ASSURED GTY) 5.25%, 7/1/34 | 100,000 | 111,518 |
Richmond Metropolitan Authority, (Escrowed To Maturity) (NATL-RE FGIC) 5.25%, 7/15/22 | 60,000 | 74,189 |
Richmond Metropolitan Authority, (NATL-RE FGIC) 5.25%, 7/15/22 | 140,000 | 161,391 |
811,918 | ||
Utilities - 3.9% | ||
City of Richmond VA, (AGM) 4.5%, 1/15/33 | 940,000 | 987,348 |
Water - 16.5% | ||
Fairfax County Water Authority, 5.25%, 4/1/23 | 180,000 | 228,109 |
Par Value | Value (Note 1) | |
Frederick-Winchester Service Authority, (AMBAC) 5%, 10/1/15 | $ 570,000 | $ 639,067 |
Hampton Roads Sanitation District, 5%, 4/1/33 | 250,000 | 272,932 |
Henry County Public Service Authority, (AGM) 5.25%, 11/15/13 | 700,000 | 748,202 |
Henry County Public Service Authority, (AGM) 5.25%, 11/15/15 | 150,000 | 169,374 |
City of Norfolk VA Water Revenue, (NATL-RE) 5.9%, 11/1/25 | 210,000 | 210,626 |
Upper Occoquan Sewage Authority, (NATL-RE) 5.15%, 7/1/20 | 1,000,000 | 1,231,390 |
Virginia Resources Authority, 5%, 10/1/27 | 300,000 | 350,727 |
Virginia Resources Authority, 4.5%, 10/1/28 | 160,000 | 178,955 |
Virginia Resources Authority, 5%, 11/1/31 | 160,000 | 174,438 |
4,203,820 | ||
TOTAL INVESTMENTS - 97.5% (Cost $23,148,998) | 24,635,452 | |
NET OTHER ASSETS AND LIABILITIES - 2.5% | 629,399 | |
TOTAL ASSETS - 100.0% | $25,264,851 |
AGM | Assured Guaranty Municipal Corp. |
AMBAC | AMBAC Indemnity Corp. |
ASSURED GTY | Assured Guaranty |
BHAC-CR | Berkshire Hathaway Assuranty Corp. |
FGIC | Financial Guaranty Insurance Co. |
MBIA-RE | MBIA Insurance Corp. |
NATL-RE | National Public Finance Guarantee Corp. |
ST APPROP | State Appropriations |
See accompanying Notes to Financial Statements.
Semi-annual Report | March 31, 2012 | 5
Madison Mosaic Tax-Free Trust | March 31, 2012
National Fund Portfolio of Investments (unaudited)
Par Value | Value (Note 1) | |
LONG TERM MUNICIPAL BONDS - 98.0% | ||
Alabama - 2.5% | ||
Troy University, (ASSURED GTY) 4.125%, 11/1/23 | $ 420,000 | $ 442,184 |
Tuscaloosa Public Educational Building Authority, (ASSURED GTY) 6.375%, 7/1/28 | 295,000 | 342,524 |
784,708 | ||
Arizona - 3.1% | ||
City of Tempe AZ, 5%, 7/1/20 | 225,000 | 248,616 |
Glendale Western Loop 101 Public Facilities Corp, 6%, 7/1/24 | 525,000 | 564,506 |
Northern Arizona University, Certificate Participation (AMBAC) 5%, 9/1/23 | 150,000 | 157,806 |
970,928 | ||
Arkansas - 1.7% | ||
City of Fort Smith AR Water & Sewer Revenue, (AGM) 5%, 10/1/21 | 175,000 | 203,686 |
Lake Hamilton School District No. 5 of Garland County, General Obligation Ltd 3%, 4/1/21 | 320,000 | 329,232 |
532,918 | ||
Colorado - 1.4% | ||
El Paso County Facilities Corp, Certificate Participation 5%, 12/1/27 | 400,000 | 447,184 |
Florida - 10.7% | ||
Emerald Coast Utilities Authority, (NATL-RE FGIC) 5%, 1/1/25 | 1,010,000 | 1,041,896 |
Highlands County Health Facilities Authority, 5%, 11/15/20 | 455,000 | 503,526 |
Lee County Industrial Development Authority/FL, 5%, 11/1/28 | 500,000 | 521,585 |
Peace River/Manasota Regional Water Supply Authority, (AGM) 5%, 10/1/23 | 750,000 | 800,910 |
State of Florida, General Obligation (ST GTD) 4.75%, 6/1/35 | 500,000 | 522,690 |
3,390,607 | ||
Georgia - 7.4% | ||
Augusta-Richmond County Coliseum Authority, (CNTY GTD) 5%, 10/1/23 | 890,000 | 1,053,306 |
City of Atlanta GA Water & Wastewater Revenue, (AGM) 5.75%, 11/1/30 | 300,000 | 384,909 |
Emanuel County Hospital Authority, (AMBAC CNTY GTD) 4.3%, 7/1/17 | 250,000 | 264,125 |
Georgia State Road & Tollway Authority, 5%, 6/1/21 | 90,000 | 106,407 |
Gwinnett County Development Authority, Certificate Participation (NATL-RE) 5.25%, 1/1/18 | 225,000 | 267,158 |
Gwinnett County Development Authority, Certificate Participation (NATL-RE) 5.25%, 1/1/21 | 100,000 | 121,997 |
Par Value | Value (Note 1) | |
Private Colleges & Universities Authority, 5%, 9/1/38 | $ 130,000 | $ 140,716 |
2,338,618 | ||
Illinois - 6.0% | ||
County of Winnebago IL, General Obligation (NATL-RE) 5%, 12/30/24 | 1,000,000 | 1,068,590 |
Metropolitan Water Reclamation District of Greater Chicago, General Obligation Ltd 3%, 12/1/21 | 495,000 | 513,954 |
Regional Transportation Authority, (AMBAC GO OF AUTH) 7.2%, 11/1/20 | 260,000 | 310,398 |
1,892,942 | ||
Indiana - 5.4% | ||
Indianapolis Local Public Improvement Bond Bank, (ASSURED GTY) 5.5%, 1/1/38 | 475,000 | 519,351 |
Western Boone Multi-School Building Corp, General Obligation (AGM ) 5%, 1/10/20 | 1,015,000 | 1,205,688 |
1,725,039 | ||
Iowa - 0.7% | ||
City of Bettendorf IA, General Obligation 5%, 6/1/30 | 210,000 | 235,343 |
Kentucky - 0.4% | ||
Laurel County School District Finance Corp, (AGM SEEK) 4%, 6/1/16 | 110,000 | 121,185 |
Maryland - 4.3% | ||
Maryland Health & Higher Educational Facilities Authority, (AGM) 5.25%, 8/15/38 | 535,000 | 606,417 |
Maryland State Transportation Authority, (Escrowed To Maturity) 6.8%, 7/1/16 | 60,000 | 68,234 |
Montgomery County Revenue Authority, 5%, 5/1/31 | 600,000 | 681,936 |
1,356,587 | ||
Massachusetts - 2.2% | ||
Massachusetts School Building Authority, (AGM) 5%, 8/15/23 | 635,000 | 711,632 |
Michigan - 5.1% | ||
Charles Stewart Mott Community College, General Obligation (NATL-RE) 5%, 5/1/18 | 720,000 | 782,971 |
Detroit City School District, General Obligation (FGIC Q-SBLF) 6%, 5/1/20 | 300,000 | 365,310 |
Redford Unified School District No. 1, General Obligation (AMBAC Q-SBLF) 5%, 5/1/22 | 410,000 | 467,810 |
1,616,091 | ||
Mississippi - 2.7% | ||
Harrison County Wastewater Management District, (Escrowed To Maturity) (FGIC) 7.75%, 2/1/14 | 500,000 | 566,360 |
Harrison County Wastewater Management District, (Escrowed To Maturity) (FGIC) 8.5%, 2/1/13 | 260,000 | 277,529 |
843,889 |
See accompanying Notes to Financial Statements.
6 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust | National Fund Portfolio of Investments | concluded | March 31, 2012
Par Value | Value (Note 1) | |
Missouri - 3.1% | ||
City of O’Fallon MO, Certificate Participation (NATL-RE) 5.25%, 11/1/16 | $ 100,000 | $ 112,323 |
County of St Louis MO, (Escrowed To Maturity) 5.65%, 2/1/20 | 500,000 | 624,995 |
St Louis Industrial Development Authority, 6.65%, 5/1/16 | 200,000 | 238,378 |
975,696 | ||
New Jersey - 3.3% | ||
New Jersey State Turnpike Authority, (BHAC-CR FSA) 5.25%, 1/1/28 | 250,000 | 310,165 |
New Jersey State Turnpike Authority, (Escrowed To Maturity) (NATL-RE-IBC) 6.5%, 1/1/16 | 655,000 | 749,019 |
1,059,184 | ||
New York - 3.6% | ||
City of North Tonawanda NY, General Obligation 4%, 4/1/21 | 240,000 | 259,423 |
New York State Dormitory Authority, (BHAC-CR AMBAC) 5.5%, 7/1/31 | 250,000 | 319,567 |
Port Authority of New York & New Jersey, (GO OF AUTH) 5.375%, 3/1/28 | 455,000 | 551,906 |
1,130,896 | ||
North Carolina - 6.3% | ||
City of Raleigh NC, Certificate Participation 4.75%, 6/1/25 | 590,000 | 619,229 |
County of Dare NC, Certificate Participation (Prerefunded 12/01/12 @ 100) (AMBAC) 5%, 6/1/23 | 600,000 | 619,056 |
North Carolina Medical Care Commission, (HUD SECT 8) 5.5%, 10/1/24 | 500,000 | 522,145 |
State of North Carolina, (ST APPROP) 4.5%, 5/1/27 | 200,000 | 220,198 |
1,980,628 | ||
Ohio - 1.7% | ||
County of Allen OH, 4.75%, 9/1/27 | 530,000 | 551,979 |
Pennsylvania - 2.6% | ||
Lehigh County General Purpose Authority, (NATL-RE GO OF HOSP) 7%, 7/1/16 | 760,000 | 832,086 |
South Carolina - 1.6% | ||
York County School District No.1, SC, General Obligation (SCSDE) 5%, 3/1/27 | 440,000 | 498,340 |
Texas - 14.9% | ||
Beaumont Independent School District, General Obligation (PSF-GTD) 4.75%, 2/15/38 | 300,000 | 323,607 |
City of San Antonio TX Water System Revenue, 5.125%, 5/15/29 | 500,000 | 567,790 |
City of Sugar Land TX, General Obligation Ltd 5%, 2/15/28 | 350,000 | 394,184 |
County of Bexar TX, General Obligation Ltd 4%, 6/15/32 | 450,000 | 462,658 |
County of Harris TX, General Obligation Ltd (Prerefunded 10/01/18 @ 100) 5.75%, 10/1/24 | 250,000 | 317,970 |
Par Value | Value (Note 1) | |
Liberty Hill Independent School District, General Obligation (PSF-GTD) 5%, 8/1/26 | $ 410,000 | $ 472,865 |
Lower Colorado River Authority, (Escrowed To Maturity) (AMBAC) 6%, 1/1/17 | 305,000 | 372,591 |
Mueller Local Government Corp, 5%, 9/1/25 | 1,280,000 | 1,422,938 |
State of Texas, General Obligation 5%, 8/1/27 | 330,000 | 384,176 |
4,718,779 | ||
Virginia - 4.6% | ||
City of Hopewell VA, General Obligation 5.875%, 7/15/34 | 500,000 | 562,710 |
Commonwealth of Virginia, General Obligation 5%, 6/1/27 | 150,000 | 174,329 |
Fairfax County Redevelopment & Housing Authority, 5%, 10/1/39 | 265,000 | 287,541 |
Henry County Public Service Authority, (AGM) 5.25%, 11/15/15 | 150,000 | 169,374 |
Virginia Housing Development Authority, 4.8%, 10/1/39 | 250,000 | 262,092 |
1,456,046 | ||
Washington - 2.0% | ||
Grays Harbor County Public Utility District No. 1, (AGM) 5.25%, 7/1/24 | 605,000 | 644,791 |
Wisconsin - 0.7% | ||
Wisconsin Health & Educational Facilities Authority, 5.25%, 10/1/21 | 200,000 | 209,348 |
TOTAL INVESTMENTS - 98.0% (Cost $29,198,903) | 31,025,444 | |
NET OTHER ASSETS AND LIABILITIES - 2.0% | 637,111 | |
TOTAL ASSETS - 100.0% | $31,662,555 |
AGM | Assured Guaranty Municipal Corp. |
AMBAC | AMBAC Indemnity Corp. |
ASSURED GTY | Assured Guaranty |
BHAC-CR | Berkshire Hathaway Assuranty Corp. |
CNTY GTD | County Guaranteed |
FGIC | Financial Guaranty Insurance Co. |
FSA | Financial Security Assurance |
GO of AUTH | General Obligation of the Authority |
GO of HOSP | General Obligation of the Hospital District |
HUD SECTION 8 | HUD Insured Multifamily Housing |
IBC | Insured Bond Certificate |
NATL-RE | National Public Finance Guarantee Corp. |
PSF GTD | Permanent School Fund Guaranteed |
Q-SBLF | Qualified School Board Loan Fund |
SCSDE | South Carolina School District-Enhanced (State of SC’s Intercept program) |
SEEK | Support Education Excellence in Kentucky (State of KY’s school district enhancement program for low income communities) |
ST APPROP | State Appropriations |
ST GTD | State Guaranteed |
See accompanying Notes to Financial Statements.
Semi-annual Report | March 31, 2012 | 7
Madison Mosaic Tax-Free Trust | March 31, 2012
Statements of Assets and Liabilities (unaudited)
Virginia Fund | National Fund | |
ASSETS | ||
Investment securities, at value* (Note 1) | $24,635,452 | $31,025,444 |
Cash | 329,610 | 219,829 |
Receivables | ||
Interest | 307,833 | 424,942 |
Capital shares sold | 155 | 18,195 |
Total assets | 25,273,050 | 31,688,410 |
LIABILITIES | ||
Payables | ||
Dividends | 3,262 | 20,264 |
Capital shares redeemed | 687 | 1,341 |
Independent trustee fees | 750 | 750 |
Auditor fees | 3,500 | 3,500 |
Total liabilities | 8,199 | 25,855 |
NET ASSETS | $25,264,851 | $31,662,555 |
Net assets consists of: | ||
Paid in capital | 23,645,705 | 29,739,212 |
Accumulated net realized gains | 132,692 | 96,802 |
Net unrealized appreciation on investments | 1,486,454 | 1,826,541 |
Net assets | $25,264,851 | $31,662,555 |
CAPITAL SHARES OUTSTANDING | ||
An unlimited number of capital shares, without par value, are authorized (Note 6) | 2,106,815 | 2,836,326 |
NET ASSET VALUE PER SHARE | $ 11.99 | $ 11.16 |
* INVESTMENT SECURITIES, AT COST | $23,148,998 | $29,198,903 |
See accompanying Notes to Financial Statements.
8 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust | March 31, 2012
Statements of Operations (unaudited)
For the six-months ended March 31, 2012
Virginia Fund | National Fund | |
INVESTMENT INCOME (Note 1) | ||
Interest income | $ 492,447 | $ 634,059 |
EXPENSES (Notes 2, 3 and 7) | ||
Investment advisory fees | 78,873 | 98,531 |
Other expenses | 45,479 | 63,059 |
Independent trustee fees | 1,500 | 1,500 |
Auditor fees | 3,500 | 3,500 |
Line of credit interest and fees | 250 | 250 |
Total expenses | 129,602 | 166,840 |
NET INVESTMENT INCOME | 362,845 | 467,219 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||
Net realized gain on investments | 132,692 | 98,736 |
Change in net unrealized appreciation of investments | 35,890 | 320,535 |
NET GAINS ON INVESTMENTS | 168,582 | 419,271 |
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ 531,427 | $ 886,490 |
Statements of Changes in Net Assets
Virginia Fund | National Fund | |||
(unaudited) Six-Months Ended March 31, | Year Ended September 30, | (unaudited) Six-Months Ended March 31, | Year Ended September 30, | |
2012 | 2011 | 2012 | 2011 | |
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | ||||
Net investment income | $ 362,845 | $ 757,802 | $ 467,219 | $ 871,821 |
Net realized gain on investments | 132,692 | 17,310 | 98,736 | 115,824 |
Change in net unrealized appreciation (depreciation) on investments | 35,890 | (65,073) | 320,535 | (182,718) |
Total increase in net assets resulting from operations | 531,427 | 710,039 | 886,490 | 804,927 |
DISTRIBUTION TO SHAREHOLDERS | ||||
From net investment income | (362,845) | (757,802) | (467,219) | (871,821) |
From net capital gains | (17,310) | (126,808) | (108,327) | (232,291) |
Total distributions | (380,155) | (884,610) | (575,546) | (1,104,112) |
CAPITAL SHARE TRANSACTIONS (Note 6) | 104,861 | (986,964) | 32,999 | 2,271,245 |
NET INCREASE (DECREASE) IN NET ASSETS | 256,133 | (1,161,535) | 343,943 | 1,972,060 |
NET ASSETS | ||||
Beginning of period | $25,008,718 | $26,170,253 | $31,318,612 | $29,346,552 |
End of period | $25,264,851 | $25,008,718 | $31,662,555 | $31,318,612 |
See accompanying Notes to Financial Statements.
Semi-annual Report | March 31, 2012 | 9
Madison Mosaic Tax-Free Trust | March 31, 2012
Financial Highlights
Selected data for a share outstanding for the year indicated.
VIRGINIA FUND | ||||||
(unaudited) Six-Months Ended March 31, | Year Ended September 30, | |||||
2012 | 2011 | 2010 | 2009 | 2008 | 2007 | |
Net asset value, beginning of year | $11.92 | $11.98 | $11.87 | $11.01 | $11.43 | $11.63 |
Investment operations: | ||||||
Net investment income | 0.17 | 0.35 | 0.37 | 0.37 | 0.38 | 0.39 |
Net realized and unrealized gain (loss) on investments | 0.08 | – | 0.16 | 0.91 | (0.39) | (0.15) |
Total from investment operations | 0.25 | 0.35 | 0.53 | 1.28 | (0.01) | 0.24 |
Less distribution from: | ||||||
Net investment income | (0.17) | (0.35) | (0.37) | (0.37) | (0.38) | (0.39) |
Net realized gains | (0.01) | (0.06) | (0.05) | (0.05) | (0.03) | (0.05) |
Total distributions | (0.18) | (0.41) | (0.42) | (0.42) | (0.41) | (0.44) |
Net asset value, end of year | $11.99 | $11.92 | $11.98 | $11.87 | $11.01 | $11.43 |
Total return (%) | 2.11 | 3.10 | 4.54 | 11.87 | (0.11) | 2.13 |
Ratios and supplemental data | ||||||
Net assets, end of year (in thousands) | $25,265 | $25,009 | $26,170 | $25,883 | $22,416 | $23,240 |
Ratio of expenses to average net assets (%) | 1.031 | 1.03 | 1.03 | 1.03 | 1.03 | 1.03 |
Ratio of net investment income to average net assets (%) | 2.871 | 3.03 | 3.10 | 3.26 | 3.31 | 3.37 |
Portfolio turnover (%) | 9 | 7 | 19 | 18 | 7 | 12 |
NATIONAL FUND | ||||||
(unaudited) Six-Months Ended March 31, | Year Ended September 30, | |||||
2012 | 2011 | 2010 | 2009 | 2008 | 2007 | |
Net asset value, beginning of year | $11.05 | $11.16 | $11.09 | $10.34 | $10.75 | $10.95 |
Investment operations: | ||||||
Net investment income | 0.16 | 0.34 | 0.36 | 0.37 | 0.38 | 0.38 |
Net realized and unrealized gain (loss) on investments | 0.15 | (0.02) | 0.12 | 0.82 | (0.38) | (0.15) |
Total from investment operations | 0.31 | 0.32 | 0.48 | 1.19 | 0.00 | 0.23 |
Less distribution from: | ||||||
Net investment income | (0.16) | (0.34) | (0.36) | (0.37) | (0.38) | (0.38) |
Net realized gains | (0.04) | (0.09) | (0.05) | (0.07) | (0.03) | (0.05) |
Total distributions | (0.20) | (0.43) | (0.41) | (0.44) | (0.41) | (0.43) |
Net asset value, end of year | $11.16 | $11.05 | $11.16 | $11.09 | $10.34 | $10.75 |
Total return (%) | 2.86 | 3.02 | 4.43 | 11.73 | (0.13) | 2.14 |
Ratios and supplemental data | ||||||
Net assets, end of year (in thousands) | $31,663 | $31,319 | $29,347 | $29,143 | $26,598 | $28,579 |
Ratio of expenses to average net assets (%) | 1.061 | 1.06 | 1.06 | 1.06 | 1.06 | 1.05 |
Ratio of net investment income to average net assets (%) | 2.961 | 3.11 | 3.26 | 3.44 | 3.47 | 3.52 |
Portfolio turnover (%) | 8 | 13 | 19 | 17 | 13 | 17 |
1Annualized.
See accompanying Notes to Financial Statements.
10 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust | March 31, 2012
Notes to Financial Statements
1. Summary of Significant Accounting Policies. Madison Mosaic Tax-Free Trust (the "Trust") is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940 as an open-end, diversified investment management company. The Trust maintains two separate funds, the Virginia Tax-Free Fund (the "Virginia Fund") and the Tax-Free National Fund (the "National Fund") (together the "Funds"), which invest principally in securities exempt from federal income taxes, commonly known as "municipal" securities. The Virginia Fund invests solely in securities exempt from both federal and Virginia state income taxes. The National Fund invests in securities exempt from federal taxes. Both 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.
Portfolio Valuation: Securities having maturities of 60 days or less are valued at amortized cost, which approximates market value. Securities having longer maturities, for which quotations are readily available, are valued at the mean between their closing 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.
In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures based on valuation technology commonly employed in the market for such investments.
Each Fund has adopted the Financial Accounting Standards Board ("FASB") applicable guidance on fair value measurements. Fair value is defined as the price that each Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data "inputs," minimize the use of unobservable "inputs" and establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk (for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 – unadjusted quoted prices in active markets for identical securities |
Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rate volatilities, prepayment speeds, credit risk, benchmark yields, transactions, bids, offers, new issues, spreads and other relationships observed in the markets among comparable securities, underlying equity of the issuer; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data, etc.) |
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments) |
The valuation techniques used by the Funds to measure fair value for the six-months ended March 31, 2012 maximized the use of observable inputs and minimized the use of unobservable inputs. As of March 31, 2012 and during the six-months then ended, neither of the Funds held securities deemed as a Level 3 and there were no transfers between classification levels..
The following is a summary used as of March 31, 2012 in valuing the Funds’ investments carried at fair value:
Semi-annual Report | March 31, 2012 | 11
Madison Mosaic Tax-Free Trust | Notes to Financial Statements | continued
Fund | Level 1 | Level 2 | Level 3 | Value at 3/31/12 |
Virginia Fund | ||||
Long Term Municipal Bonds | $ – | $24,635,452 | $ – | $24,635,452 |
Total | $ – | $24,635,452 | $ – | $24,635,452 |
National Fund | ||||
Long Term Municipal Bonds | $ – | $31,025,444 | $ – | $31,025,444 |
Total | $ – | $31,025,444 | $ – | $31,025,444 |
Please see the Portfolio of Investments for each respective Fund for a listing of all securities within the Long Term Municipal Bond category. |
In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-04, modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board ("IASB") issued International Financial Reporting Standard ("IFRS") 13, Fair Value Measurement. The objective by the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. The effective date of the ASU is for interim and annual periods beginning after December 15, 2011 and therefore is not effective for the current fiscal year. The Funds’ investment adviser is in the process of assessing the impact of the updated standards on the Funds’ financial statements.
Municipal securities are traded via a network among dealers and brokers that connect buyers with sellers. Liquidity in the tax-exempt bond market has been reduced as a result of overall economic conditions and credit tightening. There may be little trading in the secondary market for particular bonds and other debt securities, which may make them more difficult to value or sell.
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. Distributions paid during the years ended September 30, 2011 and 2010 were identical for book purposes and tax purposes.
The tax character of capital gain distributions paid for the Virginia Fund was $7,587 short-term and $119,221 long-term capital gain for the year ended September 30, 2011 and $24,717 short-term and $80,707 long-term capital gain for the year ended September 30, 2010. The tax character of capital gain distributions paid for the National Fund was $232,291 long-term capital gain for the year ended September 30, 2011 and $128,001 long-term capital gain for the year ended September 30, 2010. There were no short-term capital gain distributions for the National Fund for the years ended September 30, 2011 or 2010.
As of March 31, 2012, the components of distributable earnings on a tax basis were as follows:
Virginia Fund:
Accumulated net realized gains | $ 132,692 |
Net unrealized appreciation on investments | 1,486,454 |
$1,619,146 |
National Fund:
Accumulated net realized gains | $ 96,802 |
Net unrealized appreciation on investments | 1,826,541 |
$1,923,343 |
Net realized gains or losses may differ for financial and tax reporting purposes as a result of loss deferrals related to wash sales and post-October transactions.
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
12 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust | Notes to Financial Statements | continued
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 and during the six-months ended March 31, 2012, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the Funds did not incur any interest or penalties.
The Regulated Investment Company ("RIC") Modernization Act of 2010 (the "Modernization Act") modernizes several of the federal income and excise tax provisions related to RICs. The Modernization Act contains simplification provisions effective for taxable years beginning after December 22, 2010, which are aimed at preventing disqualification of a RIC for "inadvertent" failures of the asset diversification and/or qualifying income tests. Additionally, the Modernization Act allows capital losses to be carried forward indefinitely, and retain the character of the original loss, exempts RICs from the preferential dividend rule, and repealed the 60-day designation requirement for certain types of pay-through income and gains.
Tax years open to examination by tax authorities under the statute of limitations include 2008 through 2011.
Cash Concentration: At times, the Funds maintain cash balances at financial institutions in excess of federally insured limits. The Funds monitor this credit risk and have not experienced any losses related to this risk.
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. The investment adviser to the Trust, Madison Investment Advisors, LLC (the "Adviser"), earns an advisory fee equal to 0.625% per annum of the average net assets of the Funds. The fees are accrued daily and are paid monthly. Prior to November 30, 2010, the investment adviser to the Trust was Madison Mosaic, LLC and its parent, Madison Investment Advisors, Inc. On November 30, 2010, Madison Mosaic, LLC changed its name to Madison Investment Advisors, LLC and became the sole Adviser.
3. Other Expenses. Under a separate Services Agreement, the Adviser will provide or arrange for each Fund to have all necessary operational and support services for a fee based on a percentage of each Fund’s average net assets. This fee is 0.40% for the Virginia Fund and 0.44% for the National Fund on assets less than $25 million and 0.40% for all assets greater than $25 million. The direct expenses paid by the Funds and referenced below come out of this fee.
Expenses paid by the Funds and not covered within the Services Agreement referenced above include costs associated with the Line of Credit, fees related to portfolio holdings and extraordinary or nonrecurring fees.
The Funds’ Independent Trustees and independent registered public accountants fees and expenses are paid directly by the Funds, the amounts of which can be found in the Statements of Operations.
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, 2012:
Virginia Fund | National Fund | |
Aggregate Cost | $23,148,998 | $29,198,903 |
Gross unrealized appreciation | 1,501,812 | 1,855,356 |
Gross unrealized depreciation | (15,358) | (28,815) |
Net unrealized appreciation | $ 1,486,454 | $ 1,826,541 |
5. Investment Transactions. Purchases and sales of securities (excluding short-term securities) for the six-months ended March 31, 2012, were as follows:
Purchases | Sales | |
Virginia Fund | $2,120,612 | $2,211,421 |
National Fund | $2,462,758 | $2,488,694 |
Semi-annual Report | March 31, 2012 | 13
Madison Mosaic Tax-Free Trust | Notes to Financial Statements | concluded
6. Capital Share Transactions. An unlimited number of capital shares, without par value, are authorized. Transactions in capital shares were as follows:
(unaudited) Six-Months Ended March 31, | Year Ended September 30, | |
Virginia Fund | 2012 | 2011 |
In Dollars | ||
Shares sold | $ 714,285 | $ 1,432,661 |
Shares issued in reinvestment of dividends | 360,670 | 833,257 |
Total shares issued | 1,074,955 | 2,265,918 |
Shares redeemed | (970,094) | (3,252,882) |
Net increase (decrease) | $ 104,861 | $ (986,964) |
In Shares | ||
Shares sold | 59,240 | 122,360 |
Shares issued in reinvestment of dividends | 30,057 | 71,783 |
Total shares issued | 89,297 | 194,143 |
Shares redeemed | (80,507) | (280,622) |
Net increase (decrease) | 8,790 | (86,479) |
(unaudited) Six-Months Ended March 31, | Year Ended September 30, | |
National Fund | 2012 | 2011 |
In Dollars | ||
Shares sold | $1,168,287 | $ 5,549,958 |
Shares issued in reinvestment of dividends | 431,578 | 927,556 |
Total shares issued | 1,599,865 | 6,477,514 |
Shares redeemed | (1,566,866) | (4,206,269) |
Net increase | $ 32,999 | $ 2,271,245 |
In Shares | ||
Shares sold | 104,243 | 508,517 |
Shares issued in reinvestment of dividends | 38,711 | 86,386 |
Total shares issued | 142,954 | 594,903 |
Shares redeemed | (140,804) | (389,514) |
Net increase | 2,150 | 205,389 |
7. Lines of Credit. The Virginia Fund has a $7.5 million and the National Fund an $8 million revolving credit facility with a bank for temporary emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The interest rate on the outstanding principal amount is equal to the prime rate less 0.5% (effective rate of 2.75% at March 31, 2012). The lines of credit contain loan covenants with respect to certain financial ratios and operating matters. Both Funds were in compliance with these covenants as of March 31, 2012. During the six-months ended March 31, 2012, neither Fund borrowed on their lines of credit.
8. Discussion of Risks. Please see the most current version of the Funds’ prospectus for a discussion of risks associated with investing in the Funds. While investments in stocks and bonds have been keystones in wealth building and management for a hundred years, at times they’ve produced surprises for even the savviest investors. Those who enjoyed growth and income of their investments were rewarded for the risks they took by investing in the markets. When the rare calamity strikes, the word "security" itself seems a misnomer. Although the Adviser seeks to appropriately address and manage the risks identified and disclosed to you in connection with the management of the securities in the Funds, you should understand that the very nature of the securities markets includes the possibility that there are additional risks that we did not contemplate for any number of reasons. We certainly seek to identify all applicable risks and then appropriately address them, take appropriate action to reasonably manage them and, of course, to make you aware of them so you can determine if they exceed your risk tolerance. Nevertheless, the often volatile nature of the securities markets and the global economy in which we work suggests that the risk of the unknown is something you must consider in connection with your investments in securities. Unforeseen events have the potential to upset the best laid plans of man, and could, in a worst-case scenario produce the material loss of the value of some or all of the securities we manage for you.
9. Subsequent Events. Management has evaluated the impact of all subsequent events on the Trust. No events have taken place that meet the definition of a subsequent event that requires adjustment to, or disclosure in the financial statements.
14 | Semi-annual Report | March 31, 2012
Madison Mosaic Tax-Free Trust
Other Information
Fund Expenses (unaudited)
Example
This Example is intended to help you understand your costs (in dollars) of investing in a Fund and to compare these costs with the costs of investing in other mutual funds. See footnotes 2 and 3 above for an explanation of the types of costs charged by the funds.
This Example is based on an investment of $1,000 invested on October 1, 2011 and held for the six-months ended March 31, 2012.
Actual Expenses
The following table titled "Based on Actual Total Return" provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,500 ending account valued divided by $1,000 = 8.5), then multiply the result by the number under the heading entitled "Expenses Paid During the Period."
Based on Actual Total Return1 | |||||
Actual Total Return2 | Beginning Account Value | Ending Account Value | Annualized Expense Ratio3 | Expenses Paid During the Period3 | |
Virginia Fund | 2.11% | $1,000.00 | $1,021.13 | 1.03% | $5.21 |
National Fund | 2.86% | $1,000.00 | $1,028.56 | 1.06% | $5.38 |
1For the six-months ended March 31, 2012. | |||||
2Assumes reinvestment of all dividends and capital gains distributions, if any, at net asset value. | |||||
3Expenses are equal to the respective Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
Hypothetical Example for Comparison Purposes
The table below titled "Based on Hypothetical Total Return" provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not either Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in a Madison Mosaic Tax-Free Trust Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Madison Mosaic Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Based on Hypothetical Total Return1 | |||||
Hypothetical Annualized Total Return | Beginning Account Value | Ending Account Value | Annualized Expense Ratio2 | Expenses Paid During the Period2 | |
Virginia Fund | 5.00% | $1,000.00 | $1,025.26 | 1.03% | $5.20 |
National Fund | 5.00% | $1,000.00 | $1,025.26 | 1.06% | $5.36 |
1For the six-months ended March 31, 2012. | |||||
2Expenses are equal to the respective Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
Semi-annual Report | March 31, 2012 | 15
Madison Mosaic Tax-Free Trust | Other Information | concluded
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 only invests in non-voting securities. Nevertheless, the Trust adopted policies that provide guidance and set forth parameters for the voting of proxies relating to securities held in the Trust’s portfolios. These policies are available to you upon request and free of charge by writing to Madison Mosaic Funds, 550 Science Drive, Madison, WI 53711 or by calling toll-free at 1-800-368-3195. The Trust’s proxy voting policies may also be obtained by visiting the SEC’s 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.
N-Q Disclosure. The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Forms N-Q are available on the SEC’s website. The Trust’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Form N-Q and other information about the Trust are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of this information may also be obtained, upon payment of a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, DC 20549-0102. Finally, you may call us at 800-368-3195 if you would like a copy of Form N-Q and we will mail one to you at no charge.
16 | Semi-annual Report | March 31, 2012
The Madison Mosaic Family of Mutual Funds
Equity Trust
Investors Fund
Mid-Cap Fund
Small/Mid-Cap Fund
Disciplined Equity Fund
Dividend Income Fund
Income Trust
Government Fund
Core Bond Fund
Institutional Bond Fund
Investment Grade Corporate Bond Fund
Tax-Free Trust
Virginia Tax-Free Fund
Tax-Free National Fund
Government Money Market
For more complete information on any Madison 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.
An investment in any Madison Mosaic fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Government Money Market fund seeks to preserve the value of the investment at $1.00 per share, it is possible to lost money by investing in the fund.
TRANSFER AGENT
Madison Mosaic(R) 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: 800-336-3063
SEC File Number 811-2910
(Madison Mosaic Logo)
Madison Mosaic (R) Funds
www.mosaicfunds.com
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. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
No changes.
Item 11. Controls and Procedures.
(a) The Trust's principal executive officer and principal financial officer determined that the Trust's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) are effective, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 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 were no changes in the Trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics referred to in Item 2 (not applicable in semi-annual report).
(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.
Madison Mosaic Tax-Free Trust
By: (signature)
Holly Baggot, Secretary
Date: May 18, 2012
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 18, 2012
By: (signature)
Greg Hoppe, Principal Financial Officer
Date: May 18, 2012