OMB APPROVAL
OMB Number: 3235-0570
Expires: August 31, 2010
Estimated average burden hours per response...18.9
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 811-3616
Madison Mosaic Income Trust
(Exact name of registrant as specified in charter)
550 Science Drive, Madison, WI 53711
(Address of principal executive offices)(Zip code)
W. Richard Mason
Madison/Mosaic Legal and Compliance Department
8777 N. Gainey Center Drive, Suite 220
Scottsdale, AZ 85258
(Name and address of agent for service)
Registrant's telephone number, including area code: 608-274-0300
Date of fiscal year end: December 31
Date of reporting period: June 30, 2009
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.
SEMI-ANNUAL REPORT
(Unaudited)
June 30, 2008
Madison Mosaic Income Trust
Government Fund
Core Bond Fund
Madison Mosaic Funds
www.mosaicfunds.com
Contents
Portfolio Manager Review | |
Period in Review | 1 |
Outlook | 1 |
Fund Overview | 2 |
Portfolio of Investments | |
Government Fund | 4 |
Core Bond Fund | 6 |
Statements of Assets and Liabilities | 9 |
Statements of Operations | 10 |
Statements of Changes in Net Assets | 11 |
Financial Highlights | 12 |
Notes to Financial Statements | 13 |
Fund Expenses | 17 |
Madison Mosaic Income Trust June 30, 2009
Portfolio Manager Review
Period in Review
The six-month period ended June 30, 2009 produced few start-to-finish changes in the valuations of Madison Mosaic Government Fund and Madison Mosaic Core Bond Fund. These relative static returns belie a period of unusual economic and market dislocation and volatility. The economic woes of 2008 seemed only to intensify during the first quarter of 2009 and investors continued to seek the safest investments possible. By the beginning of March talk about another depression and the collapse of the global financial system was widespread and the broad stock indices were down close to 25% on top of the record-setting losses of 2008. Then sentiment shifted and money began to flow into stocks and riskier bonds. To get a sense of the gyrations, the S&P 500, considered a proxy for the overall stock market, rose 15.9% in the second quarter, but when combined with first-quarter losses, was up only 3.2% for the first half of the year. The Lipper High Yield Bond Index, which tracks funds that specialize in junk bonds, was up 19.9% in the second quarter alone, while once-favored government bonds actually fell in value, as seen by the Lipper Intermediate U.S. Government Index, which dropped -0.8% for the second quarter and -0.2% for the first half of the year.
The bond and stock markets were buffeted by unprecedented financial woes, the subsequent massive governmental stimulus and wide swings of investor psychology. In the fall of 2008 the collapse of Lehman Brothers and the subsequent massive interventions from the Federal government raised hopes that the worst was behind us. But as we entered the first months of 2009 a new wave of uncertainty gripped the market. The new administration’s announcements of dramatic and sizable support initiatives were not enough to overcome the continuing negative economic and corporate news. The economy, as measured by GDP, was dropping at an annualized 6% rate, and employment fell at a record-setting pace. The crisis in the housing market showed no sign of abating and the domestic automobile business was in freefall. It was no wonder that consumer sentiment hit a new low while investor sentiment could be summed up in one word: fearful.
But following the stock market lows of March 9th, riskier assets began to rise strongly. This rebound was not so much driven by positive news as it was by diminishing worry. In other words, investors who were once worried about the collapse of the global financial system and another great depression were beginning to believe the economic problems were deep, but not fathomless. By the later part of the period, some of the important economic indicators showed signs of bottoming and other problem areas showed decreasing losses. These signs, however modest, were eagerly noted by investors looking for hints of recovery and as we entered the quarter, the market sentiment shifted from fear to hope.
Outlook
We are investing in the belief that it is too soon to declare the end of the recession. While we are getting early economic data and leading indicators suggesting improvement, they are improving from extremely low levels. We acknowledge inflation expectations are moving higher, but the expectations currently being built into the market are a mere 1.75%. We are quite concerned that we could eventually hit an inflationary problem that develops directly
Madison Mosaic Income Trust 1
Portfolio Manager Review (continued)
from current monetary and fiscal policy, although we don’t see this as an immediate threat. From a portfolio standpoint, we still remain cautiously positioned. In our Core Bond portfolio we remain overweighted in corporate bonds, but we are no longer adding to this asset class and want our shareholders to realize that the easy money in this sector has probably been already made.
The biggest risks we see right now are associated with the economy. Despite all the chatter about the improving economic data, we remain concerned that small improvements from a level of deep trouble may produce undeserved optimism. Risky assets are clearly priced for solid and significant economic improvement and this strikes us as a time to be diligent in researching credit. We are also very concerned about the budget deficit and the decreasing foreign flows at a time when the Treasury supply is projected to increase over the coming years. In order to attract foreign investors, it may become necessary to raise rates. Higher rates would be a major headwind for consumer spending, with lending by banks and credit card companies already tight, and with the American consumer still highly leveraged. A rise in longer–term rates could really dampen the prospects for recovery in 2010.
Fund Overview
Madison Mosaic Government Fund
Madison Mosaic Government Fund returned -0.11% for the semi-annual period ended June 30, 2009. This return was in line with the fund’s peers, as the Lipper Intermediate Government Fund Index dropped -0.17%. This return reflects the broad results of a shift in investor emphasis away from low-yielding government issuance to higher-yielding, riskier bonds. The fund’s 30-day SEC yield at period end was 1.66%, with an effective duration of 3.18 years.
Mosaic Government began the period with 39.3% in Treasuries and 42.9% in government agency notes, with the remainder in mortgage-backed securities and short-term notes. Over the course of the six months, management trimmed the Treasury position to 30.5% and increased the agency position to 47.3%. We also found value in high-quality, mortgage-backed securities, increasing our exposure from 9.8% of the fund to 18.9%. The fund’s largest positions during this six-month period were short to intermediate duration bonds issued by the U.S. Treasury, Fannie Mae and Freddie Mac.
TOP TEN HOLDINGS AS OF JUNE 30, 2009
FOR MADISON MOSAIC GOVERNMENT FUND
% of net assets | |
US Treasury Note, 4.75%, 5/31/12 | 7.74% |
Freddie Mac, 5.5%, 9/15/11 | 7.73% |
US Treasury Note, 4%, 11/15/12 | 6.34% |
US Treasury Note, 5%, 6/30/11 | 5.48% |
Fannie Mae, 4.625%, 10/15/13 | 5.11% |
US Treasury Note, 3.75%, 11/15/18 | 4.81% |
FNMA MBS #745147, 4.5%, 2/1/35 | 4.73% |
Freddie Mac, 5%, 10/18/10 | 3.86% |
US Treasury Note, 4.25%, 8/15/14 | 3.83% |
Freddie Mac, 4.5%, 7/15/13 | 3.82% |
2 Semi-annual Report • June 30, 2009
Portfolio Manager Review (concluded)
Mosaic CORE BOND Fund
Mosaic Core Bond Fund rose 0.84% for the six months ended June 30, 2009. Over the same period, the Lipper Intermediate Investment Grade Index rose 6.04%. Almost all this performance gap occurred in the second half of the period, when investors began a massive shift from low-yielding treasuries to high-yielding corporate bonds. The top-rated AAA category of bonds rated by Moody’s lost -0.8% for the six months, while bonds rated Baa rallied 15.1% and BA bonds rose 24.1%. Core Bond had a relatively light 7.7% exposure to Baa bonds, and held no BA bonds. Other funds in the Lipper universe were likely to hold higher allocations of both, as well as some potential exposure to junk bonds, which were up by as much as the 50.7% year-to-date returns of bonds rated C-D. While our high-quality holdings were a relative performance negative for the period, they provide what we feel is a sensible balance of risk to return.
TOP TEN HOLDINGS AS OF JUNE 30, 2009
FOR MADISON MOSAIC CORE BOND FUND
% of net assets | |
US Treasury Note, 4.25%, 8/15/14 | 4.23% |
US Treasury Note, 5.125%, 6/30/11 | 3.76% |
US Treasury Note, 3.75%, 11/15/18 | 3.55% |
US Treasury Note, 1.875%, 2/28/14 | 3.39% |
GNMA MBS #698089, 4%, 4/15/39 | 3.14% |
FNMA MBS #889260, 5%, 4/1/38 | 3.07% |
FNMA MBS #745355, 5%, 3/1/36 | 2.55% |
FHLMC MBS #J07302, 4.5%, 4/1/23 | 2.50% |
US Treasury Note, 3.875%, 5/15/18 | 2.38% |
Freddie Mac, 5%, 2/16/17 | 2.37% |
Madison Mosaic Income Trust 3
Madison Mosaic Income Trust June 30, 2009
Government Fund • Portfolio of Investments (unaudited)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
US GOVERNMENT & AGENCY OBLIGATIONS: 96.7% of net assets | ||||
US GOVERNMENT AGENCY NOTES: 47.3% | ||||
Aaa | AAA | Fannie Mae, 6.625%, 11/15/10 | $105,000 | $113,372 |
Aaa | AAA | Fannie Mae, 6%, 5/15/11 | 100,000 | 108,735 |
Aaa | AAA | Fannie Mae, 6.125%, 3/15/12 | 100,000 | 111,798 |
Aaa | AAA | Fannie Mae, 4.875%, 5/18/12 | 100,000 | 108,764 |
Aaa | AAA | Fannie Mae, 3.625%, 2/12/13 | 150,000 | 157,848 |
Aaa | AAA | Fannie Mae, 4.75%, 2/21/13 | 150,000 | 161,400 |
Aaa | AAA | Fannie Mae, 4.375%, 7/17/13 | 150,000 | 160,303 |
Aaa | AAA | Fannie Mae, 4.625%, 10/15/13 | 200,000 | 216,127 |
Aaa | AAA | Federal Home Loan Bank, 4%, 9/6/13 | 150,000 | 157,962 |
Aaa | AAA | Freddie Mac, 5%, 10/18/10 | 155,000 | 163,177 |
Aaa | AAA | Freddie Mac, 3.125%, 10/25/10 | 50,000 | 51,570 |
Aaa | AAA | Freddie Mac, 5.5%, 9/15/11 | 300,000 | 327,033 |
Aaa | AAA | Freddie Mac, 4.5%, 7/15/13 | 150,000 | 161,612 |
US TREASURY NOTES: 30.5% | ||||
Aaa | AAA | US Treasury Note, 5.125%, 6/30/11 | 215,000 | 231,982 |
Aaa | AAA | US Treasury Note, 4.75%, 5/31/12 | 300,000 | 327,188 |
Aaa | AAA | US Treasury Note, 4%, 11/15/12 | 250,000 | 268,027 |
Aaa | AAA | US Treasury Note, 4.25%, 8/15/14 | 150,000 | 161,813 |
Aaa | AAA | US Treasury Note, 4.5%, 5/15/17 | 90,000 | 97,151 |
Aaa | AAA | US Treasury Note, 3.75%, 11/15/18 | 200,000 | 203,517 |
MORTGAGE BACKED SECURITIES: 18.9% | ||||
Aaa | AAA | Fannie Mae, Mortgage Pool #555345, 5.5%, 2/1/18 | 39,733 | 41,934 |
Aaa | AAA | Fannie Mae, Mortgage Pool #555545, 5%, 6/1/18 | 72,480 | 75,907 |
Aaa | AAA | Fannie Mae, Mortgage Pool #636758, 6.5%, 5/1/32 | 15,336 | 16,479 |
Aaa | AAA | Fannie Mae, Mortgage Pool #254346, 6.5%, 6/1/32 | 16,160 | 17,365 |
Aaa | AAA | Fannie Mae, Mortgage Pool #254405, 6%, 8/1/32 | 31,810 | 33,546 |
Aaa | AAA | Fannie Mae, Mortgage Pool #745147, 4.5%, 12/1/35 | 199,518 | 199,859 |
Aaa | AAA | Fannie Mae, Mortgage Pool #953589, 5.5%, 1/1/38 | 72,928 | 75,400 |
Aaa | AAA | Freddie Mac, Mortgage Pool #E90778, 5.5%, 8/1/17 | 31,564 | 33,352 |
Aaa | AAA | Freddie Mac, Mortgage Pool #G13342, 4.5%, 11/1/23 | 89,074 | 91,000 |
Aaa | AAA | Freddie Mac, Mortgage Pool #C01364, 6.5%, 6/1/32 | 18,406 | 19,732 |
Aaa | AAA | Ginnie Mae, Mortgage Pool #2483, 7%, 9/20/27 | 9,771 | 10,622 |
Aaa | AAA | Ginnie Mae, Mortgage Pool #676516, 6%, 2/15/38 | 85,735 | 89,428 |
Aaa | AAA | Ginnie Mae, Mortgage Pool #698089, 4%, 4/15/39 | 99,699 | 96,230 |
TOTAL US GOVERNMENT & AGENCY OBLIGATIONS (Cost $3,984,864) | $4,090,233 | |||
The Notes to Financial Statements are an integral part of these statements.
4 Semi-annual Report • June 30, 2009
Government Fund • Portfolio of Investments • June 30, 2009 (concluded)
PRINCIPAL AMOUNT | VALUE | |||
REPURCHASE AGREEMENT: 2.6% of net assets | ||||
With U.S. Bank National Association issued 6/30/09 at 0.01%, due 7/1/09, collateralized by $111,382 in Fannie Mae MBS #729590 due 7/1/18. Proceeds at maturity are $109,195 (Cost $109,195) | $ 109,195 | |||
TOTAL INVESTMENTS: 99.3% of net assets (Cost $4,094,059) | $4,199,428 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 0.7% of net assets | 30,391 | |||
NET ASSETS: 100% | $4,229,819 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 5
Madison Mosaic Income Trust June 30, 2009
Core Bond Fund • Portfolio of Investments (unaudited)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
CORPORATE DEBT SECURITIES: 36.1% of net assets | ||||
BANKS: 1.7% | ||||
A2 | A | Bank of America, 4.875%, 9/15/12 | $100,000 | $ 98,971 |
A2 | A+ | Wells Fargo & Co., 4.95%, 10/16/13 | 100,000 | 99,685 |
CHEMICALS: 0.9% | ||||
A2 | A | DuPont, 4.75%, 11/15/12 | 100,000 | 105,954 |
COMPUTERS & PERIPHERAL: 1.8% | ||||
A2 | A | Hewlett-Packard Co., 5.5%, 3/1/18 | 100,000 | 105,300 |
A1 | A+ | IBM Corp, 4.75%, 11/29/12 | 100,000 | 107,310 |
CONSUMER DISCRETIONARY: 3.7% | ||||
A2 | A | Costco Wholesale Corp., 5.5%, 3/15/17 | 100,000 | 106,033 |
A3 | A | McDonald’s Corp., 5.35%, 3/1/18 | 100,000 | 105,700 |
A2 | A+ | Target Corp., 5.875%, 3/1/12 | 100,000 | 108,140 |
Aa2 | AA | Wal-Mart Stores, Inc., 4.75%, 8/15/10 | 100,000 | 103,224 |
CONSUMER STAPLES: 4.6% | ||||
Aa2 | A+ | Bottling Group LLC, 4.625%, 11/15/12 | 100,000 | 106,481 |
A3 | BBB+ | Kellogg Co., 6.6%, 4/1/11 | 100,000 | 107,190 |
Baa2 | BBB+ | Kraft Foods Inc., 5.625%, 11/1/11 | 100,000 | 106,305 |
A1 | A+ | Sysco Corp., 5.25%, 2/12/18 | 100,000 | 101,787 |
A2 | A+ | Walgreen Co., 4.875%, 8/01/13 | 100,000 | 106,204 |
ENERGY: 1.9% | ||||
A1 | A | Conoco Funding Corp., 6.35%, 10/15/11 | 100,000 | 109,196 |
Baa2 | BBB | Valero Energy Corp., 6.875%, 4/15/12 | 100,000 | 106,408 |
FINANCIALS: 6.8% | ||||
A2 | BBB+ | American Express Co., 5.875%, 5/2/13 | 100,000 | 99,381 |
Aa1 | AA | BP Capital Markets PLC., 3.875%, 3/10/15 | 100,000 | 100,288 |
Aa2 | AA+ | General Electric Capital Corp., 4.8%, 5/1/13 | 100,000 | 100,195 |
A1 | A | Goldman Sachs, 5.75%, 10/1/16 | 100,000 | 98,058 |
A3 | A | HSBC Finance Corp., 5.5%, 1/19/16 | 100,000 | 94,204 |
Baa2 | BBB+ | International Lease Finance, 4.875%, 9/1/10 | 100,000 | 89,661 |
A1 | A | JP Morgan Chase, 5.25%, 5/1/15 | 100,000 | 96,272 |
Aa3 | A+ | US Bancorp, 4.2%, 5/15/14 | 100,000 | 101,241 |
HEALTH CARE: 2.7% | ||||
A1 | AA | Abbott Laboratories, 5.6%, 11/30/17 | 100,000 | 107,294 |
A1 | AA | Eli Lilly & Co., 4.2%, 3/6/14 | 100,000 | 103,065 |
Baa1 | A- | UnitedHealth Group, 5%, 8/15/14 | 100,000 | 97,381 |
INDUSTRIAL: 1.6% | ||||
Baa2 | BBB- | Lubrizol Corp., 4.625%, 10/1/09 | 75,000 | 75,407 |
Aa3 | AA- | United Parcel, 5.5%, 1/15/18 | 100,000 | 106,686 |
The Notes to Financial Statements are an integral part of these statements.
6 Semi-annual Report • June 30, 2009
Core Bond Fund • Portfolio of Investments • June 30, 2009 (continued)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
INSURANCE: 2.5% | ||||
A3 | A- | Allstate Corp., 6.2%, 5/16/14 | $100,000 | $104,997 |
Aa2 | AAA | Berkshire Hathaway Inc., 4.85% , 1/15/15 | 100,000 | 104,207 |
Baa2 | BBB | Markel Corp., 6.8%, 2/15/13 | 75,000 | 74,257 |
LEISURE & TOURISM: 1.0% | ||||
A2 | A | Walt Disney Co., 6.375%, 3/1/12 | 100,000 | 109,891 |
OIL: 0.9% | ||||
Baa1 | BBB+ | Marathon Oil Corp., 6.5%, 2/15/14 | 100,000 | 107,012 |
PHARMACEUTICALS: 0.9% | ||||
Aa2 | AAA | Pfizer, Inc., 5.35%, 3/15/15 | 100,000 | 107,592 |
TECHNOLOGY: 1.9% | ||||
A1 | A+ | Cisco Systems, Inc., 5.5%, 2/22/16 | 100,000 | 106,086 |
A2 | A | Oracle Corp., 4.95%, 4/15/13 | 100,000 | 104,806 |
TELECOMMUNICATIONS: 1.4% | ||||
Baa1 | BBB+ | AT&T Broadband, 8.375%, 3/15/13 | 75,000 | 85,570 |
Baa2 | A | Verizon New England, 6.5%, 9/15/11 | 75,000 | 79,872 |
UTILITIES: 1.8% | ||||
Baa2 | A- | Dominion Resources Inc., 5.7%, 9/17/12 | 75,000 | 79,836 |
A1 | A+ | National Rural Utilities, 4.75%, 3/1/14 | 100,000 | 103,009 |
A2 | A- | Wisconsin Power & Light, 7.625%, 3/1/10 | 25,000 | 25,857 |
TOTAL CORPORATE DEBT SECURITIES (Cost $4,085,868) | $4,146,013 | |||
U.S. GOVERNMENT AGENCY NOTES: 6.8% of net assets | ||||
Aaa | AAA | Freddie Mac, 5%, 10/18/10 | $150,000 | 157,913 |
Aaa | AAA | Freddie Mac, 5.5%, 9/15/11 | 235,000 | 256,176 |
Aaa | AAA | Freddie Mac, 5.5%, 9/15/12 | 250,000 | 272,342 |
Aaa | AAA | Freddie Mac, 2.5%, 4/8/13 | 100,000 | 99,826 |
TOTAL U.S. GOVERNMENT AGENCY NOTES (Cost $761,274) | $ 786,257 | |||
U.S. TREASURY NOTES: 19.8% of net assets | ||||
Aaa | AAA | U.S. Treasury Note, 5.125%, 6/30/11 | 400,000 | 431,594 |
Aaa | AAA | U.S. Treasury Note, 1.875%, 2/28/14 | 400,000 | 389,781 |
Aaa | AAA | U.S. Treasury Note, 4.25%, 8/15/14 | 450,000 | 485,438 |
Aaa | AAA | U.S. Treasury Note, 4.25%, 11/15/17 | 100,000 | 106,094 |
Aaa | AAA | U.S. Treasury Note, 3.875%, 5/15/18 | 265,000 | 273,137 |
Aaa | AAA | U.S. Treasury Note, 3.75%, 11/15/18 | 400,000 | 407,033 |
Aaa | AAA | U.S. Treasury Note, 5.375%, 2/15/31 | 150,000 | 172,219 |
TOTAL U.S. TREASURY NOTES (Cost $2,266,290) | $2,265,296 | |||
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 7
Core Bond Fund • Portfolio of Investments • June 30, 2009 (concluded)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
MORTGAGE BACKED SECURITIES: 31.4% of net assets | ||||
Aaa | AAA | Fannie Mae, Mortgage Pool #725341, 5%, 2/1/19 | $ 57,784 | $ 60,516 |
Aaa | AAA | Fannie Mae, Mortgage Pool #745406, 6%, 3/1/21 | 89,900 | 95,808 |
Aaa | AAA | Fannie Mae, Mortgage Pool #837199, 5.5%, 3/1/21 | 102,298 | 107,295 |
Aaa | AAA | Fannie Mae, Mortgage Pool #636758, 6.5%, 5/1/32 | 20,448 | 21,972 |
Aaa | AAA | Fannie Mae, Mortgage Pool #745147, 4.5%, 12/1/35 | 199,519 | 199,859 |
Aaa | AAA | Fannie Mae, Mortgage Pool #745275, 5%, 2/1/36 | 215,768 | 220,480 |
Aaa | AAA | Fannie Mae, Mortgage Pool #745355, 5%, 3/1/36 | 286,843 | 293,107 |
Aaa | AAA | Fannie Mae, Mortgage Pool #745516, 5.5%, 5/1/36 | 100,603 | 104,248 |
Aaa | AAA | Fannie Mae, Mortgage Pool #256514, 6%, 12/1/36 | 131,644 | 137,921 |
Aaa | AAA | Fannie Mae, Mortgage Pool #902070, 6%, 12/1/36 | 101,322 | 106,153 |
Aaa | AAA | Fannie Mae, Mortgage Pool #903002, 6%, 12/1/36 | 108,844 | 114,033 |
Aaa | AAA | Fannie Mae, Mortgage Pool #905805, 6%, 12/1/36 | 186,153 | 192,579 |
Aaa | AAA | Fannie Mae, Mortgage Pool #953589, 5.5%, 1/1/38 | 72,928 | 75,400 |
Aaa | AAA | Fannie Mae, Mortgage Pool #965649, 6%, 1/1/38 | 82,967 | 86,845 |
Aaa | AAA | Fannie Mae, Mortgage Pool #889260, 5%, 4/1/38 | 345,731 | 352,632 |
Aaa | AAA | Freddie Mac, Mortgage Pool #G11911, 5%, 2/1/21 | 142,429 | 148,228 |
Aaa | AAA | Freddie Mac, Mortgage Pool #J07302, 4.5%, 4/1/23 | 281,459 | 287,544 |
Aaa | AAA | Freddie Mac, Mortgage Pool #G13342, 4.5%, 11/1/23 | 178,148 | 182,000 |
Aaa | AAA | Freddie Mac, Mortgage Pool #A51727, 6%, 8/1/36 | 148,209 | 154,998 |
Aaa | AAA | Freddie Mac, Mortgage Pool #C02660, 6.5%, 11/1/36 | 106,938 | 113,808 |
Aaa | AAA | Freddie Mac, Mortgage Pool #G04815, 5%, 9/1/38 | 184,294 | 187,732 |
Aaa | AAA | Ginnie Mae, Mortgage Pool #698089, 4%, 4/15/39 | 373,872 | 360,861 |
TOTAL MORTGAGE BACKED SECURITIES (Cost $3,555,634) | $ 3,604,019 | |||
REPURCHASE AGREEMENT: 2.2% of net assets | ||||
With U.S. Bank National Association issued 6/30/09 at 0.01%, due | 257,472 | |||
TOTAL INVESTMENTS: 96.3% of net assets (Cost $10,926,538) | $11,059,057 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 3.7% of net assets | 422,018 | |||
NET ASSETS: 100% | $11,481,075 |
Notes to the Portfolio of Investments:
* – Unaudited; Moody’s – Moody’s Investor Services, Inc.; S&P – Standard & Poor’s Corporation
The Notes to Financial Statements are an integral part of these statements.
8 Semi-annual Report • June 30, 2009
Madison Mosaic Income Trust June 30, 2009
Statements of Assets and Liabilities (unaudited)
Government Fund | Core Bond Fund | |
ASSETS | ||
Investments, at value (Notes 1 and 2) | ||
Investment securities | $4,090,233 | $10,801,585 |
Repurchase agreements | 109,195 | 257,472 |
Total investments* | 4,199,428 | 11,059,057 |
Receivables | ||
Interest | 35,130 | 102,578 |
Capital shares sold | -- | 331,035 |
Total assets | 4,234,558 | 11,492,670 |
LIABILITIES | ||
Payables | ||
Dividends | 430 | 1,473 |
Capital shares redeemed | 484 | 4,872 |
Service agreement fees | 1,825 | 2,750 |
Auditor fees | 1,750 | 2,250 |
Independent trustee fees | 250 | 250 |
Total liabilities | 4,739 | 11,595 |
NET ASSETS | $4,229,819 | $11,481,075 |
Net assets consists of: | ||
Paid in capital | $4,110,384 | $11,649,756 |
Accumulated net realized gains (losses) | 14,066 | (301,200) |
Net unrealized appreciation on investments | 105,369 | 132,519 |
Net Assets | $4,229,819 | $11,481,075 |
CAPITAL SHARES OUTSTANDING | ||
An unlimited number of capital shares, without par value, are authorized. (Note 7) | 396,795 | 1,715,002 |
NET ASSET VALUE PER SHARE | $10.66 | $6.69 |
*INVESTMENT SECURITIES, AT COST | $4,094,059 | $10,926,538 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 9
Madison Mosaic Income Trust
Statements of Operations (unaudited)
For the six-months ended June 30, 2009
Government Fund | Core Bond Fund | |
INVESTMENT INCOME (Note 1) | ||
Interest income | $ 75,566 | $172,199 |
EXPENSES (Notes 3 and 5) | ||
Investment advisory fees | 9,272 | 16,962 |
Other expenses: | ||
Service agreement fees | 4,241 | 9,971 |
Auditor fees | 1,750 | 2,250 |
Independent trustee fees | 500 | 500 |
Total other expenses | 6,491 | 12,721 |
Total expenses | 15,763 | 29,683 |
NET INVESTMENT INCOME | 59,803 | 142,516 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||
Net realized gain (loss) on investments | 29,650 | (2,091) |
Change in net unrealized depreciation of investments | (97,975) | (29,470) |
NET LOSS ON INVESTMENTS | (68,325) | (31,561) |
TOTAL INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ (8,522) | $110,955 |
The Notes to Financial Statements are an integral part of these statements.
10 Semi-annual Report • June 30, 2009
Madison Mosaic Income Trust
Statements of Changes in Net Assets
For the period indicated
Government Fund | Core Bond Fund | |||
(unaudited) Six-Months Ended | Year Ended December 31, | (unaudited) Six-Months Ended | Year Ended December 31, | |
2009 | 2008 | 2009 | 2008 | |
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | ||||
Net investment income | $ 59,803 | $ 110,824 | $ 142,516 | $ 190,251 |
Net realized gain (loss) on investments | 29,650 | 39,402 | (2,091) | 30,122 |
Net unrealized appreciation (depreciation) on investments | (97,975) | 140,133 | (29,470) | 80,212 |
Total increase (decrease) in net assets resulting from operations | (8,522) | 290,359 | 110,955 | 300,585 |
DISTRIBUTION TO SHAREHOLDERS | (59,803) | (110,824) | (142,516) | (190,251) |
CAPITAL SHARE TRANSACTIONS (Note 7) | (773,187) | 1,905,512 | 6,325,099 | 554,376 |
TOTAL INCREASE (DECREASE) IN NET ASSETS | (841,512) | 2,085,047 | 6,293,538 | 664,710 |
NET ASSETS | ||||
Beginning of period | $5,071,331 | $2,986,284 | $ 5,187,537 | $4,522,827 |
End of period | $4,229,819 | $5,071,331 | $11,481,075 | $5,187,537 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 11
Madison Mosaic Income Trust
Financial Highlights
Selected data for a share outstanding for the periods indicated
GOVERNMENT FUND
(unaudited) | Year Ended December 31, | ||||
2009 | 2008 | 2007 | 2006 | 2005 | |
Net asset value, beginning of period | $10.81 | $10.30 | $9.94 | $9.95 | $10.16 |
Investment operations: | |||||
Net investment income | 0.14 | 0.32 | 0.33 | 0.31 | 0.28 |
Net realized and unrealized gain (loss) on investments | (0.15) | 0.51 | 0.36 | (0.01) | (0.21) |
Total from investment operations | (0.01) | 0.83 | 0.69 | 0.30 | 0.07 |
Less distributions from net investment income | (0.14) | (0.32) | (0.33) | (0.31) | (0.28) |
Net asset value, end of period | $10.66 | $10.81 | $10.30 | $9.94 | $9.95 |
Total return (%) | (0.11) | 8.17 | 7.10 | 3.07 | 0.69 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $4,230 | $5,071 | $2,986 | $3,055 | $3,248 |
Ratio of expenses to average net assets (%) | 0.671 | 0.78 | 1.15 | 1.19 | 1.19 |
Ratio of net investment income to average net assets (%) | 2.561 | 3.00 | 3.30 | 3.11 | 2.75 |
Portfolio turnover (%) | 21 | 67 | 18 | 41 | 43 |
CORE BOND FUND
(unaudited) | Year Ended December 31, | ||||
2009 | 2008 | 2007 | 2006 | 2005 | |
Net asset value, beginning of period | $6.74 | $6.58 | $6.44 | $6.46 | $6.64 |
Investment operations: | |||||
Net investment income | 0.11 | 0.27 | 0.26 | 0.24 | 0.23 |
Net realized and unrealized gain (loss) on investments | (0.05) | 0.16 | 0.14 | (0.02) | (0.18) |
Total from investment operations | 0.06 | 0.43 | 0.40 | 0.22 | 0.05 |
Less distributions from net investment income | (0.11) | (0.27) | (0.26) | (0.24) | (0.23) |
Net asset value, end of period | $6.69 | $6.74 | $6.58 | $6.44 | $6.46 |
Total return (%) | 0.84 | 6.80 | 6.41 | 3.48 | 0.77 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $11,481 | $5,188 | $4,523 | $4,610 | $5,602 |
Ratio of expenses to average net assets (%) | 0.691 | 0.80 | 1.12 | 1.10 | 1.08 |
Ratio of net investment income to average net assets (%) | 3.321 | 4.18 | 4.05 | 3.70 | 3.49 |
Portfolio turnover (%) | 5 | 36 | 41 | 60 | 60 |
1Annualized
The Notes to Financial Statements are an integral part of these statements.
12 Semi-annual Report • June 30, 2009
Madison Mosaic Income Trust
Notes to Financial Statements
1. Summary of Significant Accounting Policies. Madison Mosaic Income Trust (the "Trust") is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 as an open-end, diversified investment management company. This report contains information about two separate funds (the "Funds") each of whose objective is to receive and distribute bond income. The Government Fund invests in securities of the U.S. Government and its agencies. The Core Bond Fund invests in investment grade corporate, government and government agency fixed income securities. The Core Bond Fund may also invest a portion of its assets in securities rated as low as "B" by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation. Two additional Trust portfolios present their financial information in a separate report.
Securities Valuation: Repurchase agreements and other securities having maturities of 60 days or less are valued 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 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.
The Funds adopted Financial Accounting Standards Board Statement No. 157, Fair Value Measurements (FAS 157) effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. FAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes.
Various inputs as noted above are used in determining the value of the Funds’ investments and other financial instruments. These inputs are summarized in the three broad levels listed below.
Level 1: Quoted prices in active markets for identical securities
Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3: Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased.
The following table represents the Funds’ investments carried on the Statement of Assets and Liabilities by caption and by level within the fair value hierarchy as of June 30, 2009 (unaudited):
Fund | Level 1 | Level 2 | Level 3 | Value at 6/30/2009 |
Government | ||||
U.S. Government Agency Notes | $ -- | $ 1,999,701 | $ -- | $ 1,999,701 |
U.S. Treasury Notes | -- | 1,289,678 | -- | 1,289,678 |
Mortgage Backed Securities | -- | 800,854 | -- | 800,854 |
Repurchase Agreement | -- | 109,195 | -- | 109,195 |
Total | $ -- | $ 4,199,428 | $ -- | $ 4,199,428 |
Madison Mosaic Income Trust 13
Notes to Financial Statements (continued)
Fund | Level 1 | Level 2 | Level 3 | Value at 6/30/2009 |
Core Bond | ||||
Corporate Debt Securities | $ -- | $ 4,146,013 | $ -- | $ 4,146,013 |
U.S. Government Agency Notes | -- | 786,257 | -- | 786,257 |
U.S. Treasury Notes | -- | 2,265,296 | -- | 2,265,296 |
Mortgage Backed Securities | -- | 3,604,019 | -- | 3,604,019 |
Repurchase Agreement | -- | 257,472 | -- | 257,472 |
Total | $ -- | $11,059,057 | $ -- | $11,059,057 |
At June 30, 2009 and for the six-months then ended, the Funds held no Level 3 securities. Please see the Portfolio of Investments for each respective Fund for a listing of all securities within each caption. |
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. Other income is accrued as earned.
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 year-end.
The tax character of distributions paid during 2008 and 2007 were as follows:
2008 | 2007 | |
Government Fund: | ||
Distributions paid from ordinary income | $110,824 | $98,925 |
Core Bond Fund: | ||
Distributions paid from ordinary income | $190,251 | $183,286 |
As of June 30, 2009, the components of distributable earnings on a tax basis were as follows:
Government Fund: | |
Accumulated net realized gains | $ 14,066 |
Net unrealized appreciation on investments | 105,369 |
$119,435 | |
Core Bond Fund: | |
Accumulated net realized losses | $(301,200) |
Net unrealized appreciation on investments | 132,519 |
$(168,681) |
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 Trust to comply with the provisions of Subchapter M 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.
The Funds adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes." The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net asset value of the funds.
As of and during the year ended December 31, 2008, 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.
As of December 31, 2008, the Funds had available for federal income tax purposes the following unused capital loss carryovers:
Expiration Date | Government | Core Bond |
December 31, 2009 | -- | 12,901 |
December 31, 2010 | -- | 243,364 |
December 31, 2013 | -- | 20,428 |
December 31, 2014 | 15,301 | 22,383 |
December 31, 2015 | 104 | -- |
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
14 Semi-annual Report • June 30, 2009
Notes to Financial Statements (continued)
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. Investments in Repurchase Agreements. When the Trust purchases securities under agreements to resell, the securities are held for safekeeping by the Trust’s custodian bank as collateral. Should the market value of the securities purchased under such an agreement decrease below the principal amount to be received at the termination of the agreement plus accrued interest, the counterparty is required to place an equivalent amount of additional securities in safekeeping with the Trust’s custodian bank. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Trust, along with other registered investment companies having Advisory and Services Agreements with the same advisor, transfers uninvested cash balances into a joint trading account. The aggregate balance in this joint trading account is invested in one or more consolidated repurchase agreements whose underlying securities are U.S. Treasury or federal agency obligations. As of June 30, 2009, the Government Fund had a 0.9% interest and the Core Bond Fund had a 2.1% interest in the consolidated repurchase agreement of $12,184,689 collateralized by $12,428,737 in Fannie Mae Mortgaged Backed Security Notes. Proceeds at maturity were $12,184,693.
3. Investment Advisory Fees and Other Transactions with Affiliates. The investment advisor to the Trust, Madison Mosaic, LLC, a wholly owned subsidiary of Madison Investment Advisors, Inc. (collectively "the Advisor"), earned an advisory fee equal to 0.40% per annum of the average net assets of the Funds. The fees are accrued daily and are paid monthly.
4. Investment Transactions. Purchases and sales of securities (excluding short-term securities) for the six-months ended June 30, 2009 were as follows (unaudited):
Purchases | Sales | |
Government Fund: | ||
U.S. Gov’t securities | $894,909 | $1,383,522 |
Other | -- | -- |
Core Bond Fund: | ||
U.S. Gov’t securities | $4,088,980 | $352,853 |
Other | 2,487,943 | -- |
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 ("SFAS No. 161"), "Disclosures about Derivative Instructions and Hedging Activities." This standard is intended to enhance financial statement disclosures for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivative instruments, b) how derivative instruments and related hedge fund items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Fund adopted SFAS No. 161 effective January 1, 2009. As of June 30, 2009 and for the six-months then ended, the Funds did not hold any derivative instruments nor engage in any hedging activities.
5. Other Expenses. Under a separate Services Agreement, the Advisor will provide or arrange for each Fund to have all other necessary operational and support services for a fee based on a percentage of average net assets. These fees are accrued daily and paid monthly. This percentage was 0.28% for the Government Fund and 0.30% for the Core Bond Fund, respectively. The direct expenses paid by the Funds and referenced below come out of this fee.
The Funds pay the expenses of the Funds’ Independent Trustees and auditors directly. For the six-months ended June 30, 2009, these fees amounted to $500 and $1,750, respectively for the Government Fund and $500 and $2,250, respectively for the Core Bond Fund.
6. Aggregate Cost and Unrealized Appreciation (Depreciation). The aggregate cost for federal income tax purposes and the net unrealized appreciation (depreciation) are stated as follows as of June 30, 2009:
Government Fund | Core Bond Fund | ||||||
Aggregate Cost | $ | 4,094,059 | $ | 10,926,538 | |||
Gross unrealized appreciation | 125,324 | 221,872 | |||||
Gross unrealized depreciation | (19,955) |
| (89,353) |
| |||
Net unrealized appreciation | $ | 105,369 | $ | 132,519 |
Madison Mosaic Income Trust 15
Notes to Financial Statements (concluded)
7. Capital Share Transactions. An unlimited number of capital shares, without par value, are authorized. Transactions in capital shares for the following periods were:
(unaudited) | Year Ended December 31, | |
Government Fund | 2009 | 2008 |
In Dollars | ||
Shares sold | $1,188,366 | $4,267,608 |
Shares issued in reinvestment | 57,289 | 101,420 |
Total shares issued | 1,245,655 | 4,369,028 |
Shares redeemed | (2,018,842) | (2,463,516) |
Net increase (decrease) | $ (773,187) | $1,905,512 |
In Shares | ||
Shares sold | 110,275 | 405,160 |
Shares issued in reinvestment | 5,342 | 9,693 |
Total shares issued | 115,617 | 414,853 |
Shares redeemed | (187,894) | (235,724) |
Net increase (decrease) | (72,277) | 179,129 |
(unaudited) | Year Ended December 31, | |
Core Bond Fund | 2009 | 2008 |
In Dollars | ||
Shares sold | $7,543,113 | $1,090,514 |
Shares issued in reinvestment | 133,881 | 170,361 |
Total shares issued | 7,676,994 | 1,260,875 |
Shares redeemed | (1,351,895) | (706,499) |
Net increase | $6,325,099 | $ 554,376 |
In Shares | ||
Shares sold | 1,127,312 | 166,397 |
Shares issued in reinvestment | 20,031 | 23,720 |
Total shares issued | 1,147,343 | 190,117 |
Shares redeemed | (202,377) | (107,709) |
Net increase | 944,966 | 82,408 |
8. Line of Credit. The Government Fund has a $1 million and the Core Bond Fund has a $1.25 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 1/2%. During the six-months ended June 30, 2009, neither Fund borrowed on their respective lines of credit.
9. Subsequent Events. Management has evaluated subsequent events through August 27, the date the financial statements were issued.
16 Semi-annual Report • June 30, 2009
Fund Expenses (unaudited)
Example: As a shareholder of the Funds, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including Investment advisory fees and Other expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. See Notes 3 and 5 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 January 1, 2009 and held for the six-months ended June 30, 2009.
Actual Expenses
The table below 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 | ||||
Beginning | Ending | Annualized | Expenses Paid | |
Government Fund | $1,000.00 | $ 998.94 | 0.67% | $3.34 |
Core Bond Fund | $1,000.00 | $1,008.37 | 0.69% | $3.43 |
1For the six-months ended June 30, 2009. 2Expenses are equal to each Funds’ 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 on the next page 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 neither 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 either Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the applicable Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Based on Hypothetical Total Return1 | ||||
Beginning | Ending | Annualized | Expenses Paid | |
Government Fund | $1,000.00 | $1,025.05 | 0.67% | $3.39 |
Core Bond Fund | $1,000.00 | $1,025.05 | 0.69% | $3.47 |
1For the six-months ended June 30, 2009. | ||||
2Expenses are equal to each Funds’ 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. |
Madison Mosaic Income Trust 17
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. Additionally, information regarding how the Trust voted proxies related to portfolio securities for the one-year period ended June 30, 2009 is available. These policies and voting information 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 and voting information may also be obtained by visiting the Securities and Exchange Commission web site at www.sec.gov. The Trust will respond to shareholder requests for copies of our policies and voting information 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 U.S. Securities and Exchange Commission (the "Commission") for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Forms N-Q are available on the Commission’s website. The Trust’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-551-8090. Form N-Q and other information about the Trust are available on the EDGAR Database on the Commission’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 Commission’s Public Reference Section, Washington, DC 20549-0102. Finally, you may call Madison Mosaic at 800-368-3195 if you would like a copy of Form N-Q and we will mail one to you at no charge.
18 Semi-annual Report • June 30, 2009
This page was left blank intentionally.
Madison Mosaic Income Trust 19
This page was left blank intentionally.
20 Semi-annual Report • June 30, 2009
The Madison Mosaic Family of Mutual Funds
Madison Mosaic Equity Trust
Investors Fund
Balanced Fund
Mid-Cap Fund
Small/Mid-Cap Fund
Disciplined Equity Fund
Madison Institutional Equity Option Fund
Madison Mosaic Income Trust
Government Fund
Intermediate Income Fund
Institutional Bond Fund
Corporate Income Shares (COINS)
Madison Mosaic Tax-Free Trust
Virginia Tax-Free Fund
Tax-Free National Fund
Madison Mosaic 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.
TRANSER AGENT
Madison Mosaic Funds
c/o US Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Shareholder Service
Toll-free nationwide: 888-670-3600
550 Science Drive
Madison, Wisconsin 53711
Madison Mosaic Funds
www.mosaicfunds.com
SEC File Number 811-03616
SEMI-ANNUAL REPORT
(Unaudited)
June 30, 2009
Madison Mosaic
Income Trust
Institutional Bond Fund
Corporate Income Shares (COINS) Fund
(logo) Madison Mosaic Funds (TM)
www.mosaicfunds.com
Contents
Portfolio Manager Review | |
Period in Review | 1 |
Outlook | 1 |
Fund Overview | 2 |
Portfolio of Investments | |
Institutional Bond Fund | 4 |
Corporate Income Shares (COINS) Fund | 6 |
Statements of Assets and Liabilities | 9 |
Statements of Operations | 10 |
Statements of Changes in Net Assets | 11 |
Financial Highlights | 12 |
Notes to Financial Statements | 13 |
Fund Expenses | 17 |
Madison Mosaic Income Trust June 30, 2009
Portfolio Manager Review
Period in Review
The six-month period ended June 30, 2009 produced positive returns for Madison Mosaic Institutional Bond Fund and Madison Corporate Income Shares. These returns, 1.44% and 5.65% respectively, belie a period of unusual economic and market dislocation and volatility. The economic woes of 2008 seemed only to intensify during the first quarter of 2009 and investors continued to seek the safest investments possible. By the beginning of March talk about another depression and the collapse of the global financial system was widespread and the broad stock indices were down close to 25% on top of the record-setting losses of 2008. Then sentiment shifted and money began to flow into stocks and riskier bonds. To get a sense of the gyrations, the S&P 500, considered a proxy for the overall stock market, rose 15.9% in the second quarter, but when combined with first-quarter losses, was up only 3.1% for the first half of the year. The Lipper High Current Yield Bond Index, which tracks funds that specialize in junk bonds, was up 19.9% in the second quarter alone, while once-favored government bonds actually fell in value, as seen by the Lipper Intermediate U.S. Government Index, which dropped -0.8% for the second quarter and -0.2% for the first half of the year.
The bond and stock markets were buffeted by unprecedented financial woes, the subsequent massive governmental stimulus and wide swings of investor psychology. In the fall of 2008 the collapse of Lehman Brothers and the subsequent massive interventions from the Federal government raised hopes that the worst was behind us. But as we entered the first months of 2009 a new wave of uncertainty gripped the market. The new administration’s announcements of dramatic and sizable support initiatives were not enough to overcome the continuing negative economic and corporate news. The economy, as measured by GDP, was dropping at an annualized 6% rate, and employment fell at a record-setting pace. The crisis in the housing market showed no sign of abating and the domestic automobile business was in freefall. It was no wonder that consumer sentiment hit a new low while investor sentiment could be summed up in one word: fearful.
But following the stock market lows of March 9, riskier assets began to rise strongly. This rebound was not so much driven by positive news as it was by diminishing worry. In other words, investors who were once worried about the collapse of the global financial system and another great depression were beginning to believe that the economic problems were deep, but not fathomless. By the later part of the period, some of the important economic indicators showed signs of bottoming and other problem areas showed decreasing losses. These signs, however modest, were eagerly noted by investors looking for hints of recovery and as we entered the second quarter, the market sentiment shifted from fear to hope.
Outlook
We are getting early economic data and leading indicators suggesting improvement and perhaps an end to the recession however, they are improving from extremely low levels. We acknowledge inflation expectations are moving higher, but the expectations currently being built into the market are a mere 1.75%. We are quite concerned that we could eventually hit an inflationary problem that develops directly from current monetary and fiscal policy, although we don’t see this as an immediate threat. From a portfolio standpoint, we still remain cautiously positioned. In our Core Bond portfolio we remain overweighted corporate bonds, but we are no longer adding to this asset class and want our shareholders to realize that the easy money in this sector has probably been already made.
The biggest risks we see now are associated with the economy. Despite all the chatter about the improving economic data, we remain concerned that small improvements from a level of deep trouble may produce undeserved optimism. Risky assets are clearly priced for solid and significant economic improvement and this strikes us as a
Madison Mosaic Income Trust 1
Portfolio Manager Review (continued)
time to be diligent in researching credit. We are also very concerned about the budget deficit and the decreasing foreign flows at a time when the Treasury supply is projected to increase over the coming years. In order to attract foreign investors, it may become necessary to raise rates. Higher rates would be a major headwind for consumer spending, with lending by banks and credit card companies already tight, and with the American consumer still highly leveraged. A rise in longer–term rates could really dampen the prospects for recovery in 2009.
Fund Overview
Institutional Bond Fund
Madison Mosaic Institutional Bond Fund returned 1.44% for the semi-annual period ended June 30, 2009. This return trailed the fund’s peers, as the Lipper Intermediate Investment Grade Fund Index gained 6.05%. The fund invests in a mix of government, government agency and high-quality corporate bonds. This high quality mandate is the source of this performance gap. As investors rotated from the safest asset classes to riskier, higher-yielding bonds mid-March through June 30, Treasury bonds lost value. For instance, the Lipper Intermediate U.S. Government Index returned -0.17% for the period. Another view of this trend can be seen by examining the six-month returns of the industry benchmark Barclays Capital Indices. Their Treasury Index fell -4.3%, while their Government Agency Index was down -0.2%. This suggests that the Lipper peer group was obtaining most of their return for the year from the category of bonds: corporate issuance. The Barclay’s highest-rated bond categories, AAA and AA, returned -0.8% and 3.0% respectively, well below the Index’s return. However, the lower-quality Baa Index returned 15.1% and the lower yet category of Ba returned 24.1% for the six months.
Institutional Bond has a prospectus restriction precluding the long-term holding of Baa or Ba or lower-rated bonds, and if a bond is downgraded from A to Baa we are obligated to sell it in a timely matter. At the period end, we did hold a slim and temporary 2.1% in Baa rated bonds, but clearly many of our peer funds held a much higher exposure to lower-rated bonds. While this can prove to be a disadvantage when the market is in a more speculative mood, as it was over the latter part of this period, it does reward our shareholders in difficult times, such as we saw in 2008.
At period end Institutional Bond held 51.2% in corporate bonds, 21.7% in Treasuries and 18.3% in government agency issuance. The fund’s 30-day SEC yield at period end was 2.37%, with an effective duration of 3.51 years. The fund’s largest positions during this six-month period were short to intermediate duration bonds issued by the U.S. Treasury, Freddie Mac and Fannie Mae.
TOP TEN HOLDINGS AS OF JUNE 30, 2009
FOR MADISON MOSAIC INSTITUTIONAL BOND FUND
% of net assets | |
Fannie Mae, 4.625%, 10/15/14 | 5.46% |
Freddie Mac 2012, 5.125%, 7/15/12 | 4.62% |
US Treasury Note, 4.25%, 8/15/14 | 4.55% |
US Treasury Note, 4.5%, 2/28/11 | 4.02% |
Fannie Mae, 3.625%, 8/15/11 | 3.98% |
US Treasury Note, 4.875%, 2/15/12 | 3.68% |
Freddie Mac, 4.5%, 7/15/13 | 3.63% |
US Treasury Note, 4%, 11/15/12 | 3.62% |
US Treasury Note, 4.5%, 2/15/16 | 2.74% |
Target Corp., 5.875%, 3/11/12 | 2.28% |
2 Semi-annual Report • June 30, 2009
Portfolio Manager Review (concluded)
Corporate Income Shares (COINS) Fund
COINS is a corporate bond portfolio designed for exclusive use within separately managed accounts. COINS had a return of 5.65% for the six-month period ended June 30, 2009. This compares to the 7.53% return of the Barclay’s Capital Intermediate Investment Grade Index, the Fund’s benchmark over this same six months. This underperformance was largely a matter of quality, as COINS held less exposure to lower-rated bonds than its benchmark. Over this period, lower-rated bonds had a significant performance advantage over the highest-rated categories.
At the end of the period, the portfolio held a diversified portfolio of 50 corporate bonds with a composite quality rating of A2. The portfolio had an effective duration of 3.85 years, with a yield-to-maturity of 4.24%. Eighty-four and one-half percent of the portfolio was rated A or higher by Standard and Poor’s, with approximately 15.5% rated BBB.
TOP TEN HOLDINGS AS OF JUNE 30, 2009
FOR COINS FUND
% of net assets | |
Abbott Laboratories, 5.875%, 5/15/16 | 2.90% |
Coca-Cola Co., 5.35%, 11/15/17 | 2.84% |
3M Company, 4.5%, 11/1/11 | 2.82% |
Cisco Systems, Inc., 5.5%, 2/22/16 | 2.81% |
Du Pont, 4.75%, 11/15/12 | 2.81% |
National Rural Utilities, 4.75%, 3/1/14 | 2.73% |
Household Finance Co., 6.375%, 10/15/11 | 2.71% |
Sysco Corp., 5.25%, 2/12/18 | 2.70% |
US Bancorp, 4.2%, 5/15/14 | 2.69% |
American Express Co., 4.875%, 7/15/13 | 2.59% |
Madison Mosaic Income Trust 3
Madison Mosaic Income Trust June 30, 2009
Institutional Bond Fund • Portfolio of Investments (unaudited)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
CORPORATE DEBT SECURITIES: 51.2% of net assets | ||||
BANKS: 0.8% | ||||
A2 | A | Bank of America, 4.875%, 9/15/12 | $50,000 | $49,486 |
COMPUTERS & PERIPHERAL: 4.5% | ||||
A2 | A | Hewlett-Packard Co., 5.25%, 3/1/12 | 125,000 | 133,611 |
A1 | A+ | IBM Corp, 4.75%, 11/29/12 | 125,000 | 134,138 |
CONSUMER DISCRETIONARY: 6.7% | ||||
A3 | A | McDonald’s Corp., 5.35%, 3/1/18 | 125,000 | 132,125 |
A2 | A+ | Target Corp., 5.875%, 3/1/12 | 125,000 | 135,175 |
Aa2 | AA | Wal-Mart Stores, Inc., 4.55%, 5/1/13 | 125,000 | 131,098 |
CONSUMER STAPLES: 8.1% | ||||
Aa3 | A+ | Coca-Cola Co., 4.875%, 3/15/19 | 70,000 | 72,066 |
Aa2 | A+ | Pepsico Inc., 4.65%, 2/15/13 | 125,000 | 131,334 |
A1 | A+ | Sysco Corp., 5.25%, 2/12/18 | 67,000 | 68,197 |
A2 | A+ | Walgreen Co., 4.875%, 8/1/13 | 125,000 | 132,755 |
A2 | A+ | Walgreen Co., 5.25%, 1/15/19 | 65,000 | 67,744 |
ENERGY: 1.3% | ||||
A1 | A | Conoco Funding Co., 6.35%, 10/15/11 | 70,000 | 76,437 |
FINANCIALS: 18.5% | ||||
A3 | BBB+ | American Express Co., 4.875%, 7/15/13 | 125,000 | 122,206 |
Aa1 | AA | BP Capital Markets PLC | 125,000 | 125,360 |
A3 | A | Citigroup Inc., 4.25%, 7/29/09 | 20,000 | 19,987 |
Aa2 | AA+ | General Electric Capital Corp., 4.25%, 6/15/12 | 70,000 | 69,373 |
Aa2 | AA+ | General Electric Capital Corp., 4.8%, 5/1/13 | 125,000 | 125,244 |
A1 | A | Goldman Sachs, 6.6%, 1/15/12 | 125,000 | 133,168 |
A3 | A | Household Finance Co., 6.375%, 10/15/11 | 70,000 | 71,616 |
A1 | A | JP Morgan Chase, 5.25%, 5/1/15 | 55,000 | 52,950 |
A2 | A | Merrill Lynch & Co., Inc., 5.77%, 7/25/11 | 125,000 | 127,267 |
A2 | A | Morgan Stanley & Co., 5.375%, 10/15/15 | 125,000 | 122,642 |
Aa3 | A+ | US Bancorp, 4.2%, 5/15/14 | 125,000 | 126,551 |
HEALTH CARE: 3.4% | ||||
A1 | AA | Abbott Laboratories, 5.6%, 11/30/17 | 70,000 | 75,106 |
A1 | AA | Eli Lilly & Co., 4.2%, 3/6/14 | 125,000 | 128,831 |
INDUSTRIAL: 1.3% | ||||
Aa3 | AA- | United Parcel, 5.5%, 1/15/18 | 70,000 | 74,680 |
The Notes to Financial Statements are an integral part of these statements.
4 Semi-annual Report • June 30, 2009
Institutional Bond Fund Portfolio of Investments (concluded)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
TECHNOLOGY: 4.4% | ||||
A1 | A+ | Cisco Systems, Inc., 5.25%, 2/22/11 | $125,000 | $ 131,857 |
A2 | A | Oracle Corp., 4.95%, 4/15/13 | 125,000 | 131,007 |
UTILITIES: 2.2% | ||||
A1 | A+ | National Rural Utilities, 4.75%, 3/1/14 | 125,000 | 128,760 |
TOTAL CORPORATE DEBT SECURITIES (Cost $2,967,888) | $3,030,771 | |||
U.S. GOVERNMENT AGENCY NOTES: 18.3% of net assets | ||||
Aaa | AAA | Fannie Mae, 4.625%, 12/15/09 | 35,000 | 35,691 |
Aaa | AAA | Fannie Mae, 3.625%, 8/15/11 | 225,000 | 235,756 |
Aaa | AAA | Fannie Mae, 4.625%, 10/15/14 | 300,000 | 323,974 |
Aaa | AAA | Freddie Mac, 5.125%, 7/15/12 | 250,000 | 274,097 |
Aaa | AAA | Freddie Mac, 4.5%, 7/15/13 | 200,000 | 215,483 |
TOTAL U.S. GOVERNMENT AGENCY NOTES (Cost $1,076,105) | $1,085,001 | |||
U.S. TREASURY NOTES: 21.7% of net assets | ||||
Aaa | AAA | U.S. Treasury Note, 3.625%, 1/15/10 | 75,000 | 76,330 |
Aaa | AAA | U.S. Treasury Note, 4.5%, 2/28/11 | 225,000 | 238,597 |
Aaa | AAA | U.S. Treasury Note, 4.875%, 2/15/12 | 200,000 | 218,188 |
Aaa | AAA | U.S. Treasury Note, 4%, 11/15/12 | 200,000 | 214,422 |
Aaa | AAA | U.S. Treasury Note, 4.25%, 8/15/14 | 250,000 | 269,688 |
Aaa | AAA | U.S. Treasury Note, 4.5%, 2/15/16 | 150,000 | 162,715 |
Aaa | AAA | U.S. Treasury Note, 4.5%, 5/15/17 | 100,000 | 107,945 |
TOTAL U.S. TREASURY NOTES (Cost $1,268,623) | $1,287,885 | |||
REPURCHASE AGREEMENT: 8.0% of net assets | ||||
With U.S. Bank National Association issued 6/30/09 at 0.01%, due 7/1/09, collateralized by $485,644 in Fannie Mae MBS #729590 due 7/1/18. Proceeds at maturity are $476,108 (Cost $476,108) | 476,108 | |||
TOTAL INVESTMENTS: 99.2% of net assets (Cost $5,788,724) | $5,879,765 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 0.8% of net assets | 48,462 | |||
NET ASSETS: 100% | $5,928,227 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 5
Madison Mosaic Income Trust June 30, 2009
COINS Fund • Portfolio of Investments (unaudited)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
CORPORATE DEBT SECURITIES: 97.3% of net assets | ||||
BANKS: 5.9% | ||||
A2 | A | Bank of America, 4.875%, 9/15/12 | $20,000 | $19,794 |
A1 | A | Bank One Corp., 7.875%, 8/1/10 | 20,000 | 20,975 |
A2 | AA- | Wells Fargo & Co., 4.95%, 10/16/13 | 15,000 | 14,953 |
CHEMICALS: 2.8% | ||||
A2 | A | DuPont, 4.75%, 11/15/12 | 25,000 | 26,489 |
COMPUTERS & PERIPHERAL: 4.5% | ||||
A2 | A | Hewlett-Packard Co., 5.25%, 3/1/12 | 20,000 | 21,378 |
A1 | A+ | IBM Corp., 4.75%, 11/29/12 | 20,000 | 21,462 |
CONSUMER DISCRETIONARY: 9.6% | ||||
Baa1 | BBB+ | Comcast Cable, 5.9%, 3/15/16 | 15,000 | 15,538 |
A2 | A | Costco Wholesale Corp., 5.3%, 3/15/12 | 20,000 | 21,508 |
A1 | A+ | Lowe’s Companies, Inc., 8.25%, 6/1/10 | 20,000 | 21,252 |
A3 | A | McDonald’s Corp., 5.8%, 10/15/17 | 10,000 | 10,929 |
A2 | A+ | Target Corp., 5.875%, 7/15/16 | 20,000 | 21,683 |
CONSUMER STAPLES: 15.3% | ||||
Aa2 | A+ | Bottling Group LLC, 4.625%, 11/15/12 | 20,000 | 21,296 |
Aa3 | A+ | Coca Cola Co., 5.35%, 11/15/17 | 25,000 | 26,744 |
A3 | A | Coca Cola Enterprises, 7.375%, 3/03/14 | 10,000 | 11,450 |
A3 | BBB+ | Kellogg Co., 6.6%, 4/1/11 | 15,000 | 16,078 |
A2 | A | Kimberly-Clark, 6.125%, 8/1/17 | 10,000 | 10,986 |
Baa2 | BBB+ | Kraft Foods Inc., 6.5%, 8/11/17 | 10,000 | 10,549 |
Aa3 | AA- | Proctor & Gamble Co., 4.95%, 8/15/14 | 20,000 | 21,436 |
A1 | A+ | Sysco Corp., 5.25%, 2/12/18 | 25,000 | 25,447 |
ENERGY: 3.4% | ||||
A1 | A | Conoco Funding Co., 6.35%, 10/15/11 | 20,000 | 21,839 |
Baa2 | BBB | Valero Energy Corp., 6.875%, 4/15/12 | 10,000 | 10,641 |
FINANCIALS: 19.9% | ||||
A3 | BBB+ | American Express, 4.875%, 7/15/13 | 25,000 | 24,441 |
Baa1 | A- | Citigroup Inc., 5.5%, 2/15/17 | 20,000 | 16,321 |
Aa2 | AA+ | General Electric Capital Corp., 5.4%, 2/15/17 | 25,000 | 24,243 |
A1 | A | Goldman Sachs, 5.125%, 1/15/15 | 20,000 | 19,941 |
A3 | A | Household Finance Co., 6.375%, 10/15/11 | 25,000 | 25,577 |
Baa2 | BBB+ | International Lease Finance, 4.875%, 9/1/10 | 20,000 | 17,932 |
A1 | A | JP Morgan Chase, 5.125%, 9/15/14 | 5,000 | 4,982 |
The Notes to Financial Statements are an integral part of these statements.
6 Semi-annual Report • June 30, 2009
COINS Portfolio of Investments (concluded)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
FINANCIALS (continued) | ||||
A2 | A | Merrill Lynch & Co., Inc., 6.4%, 8/28/17 | $15,000 | $ 13,299 |
A2 | A | Morgan Stanley & Co., 4.25%, 5/15/10 | 15,000 | 15,173 |
Aa3 | A+ | US Bancorp, 4.2%, 5/15/14 | 25,000 | 25,310 |
HEALTH CARE: 7.3% | ||||
A1 | AA | Abbott Laboratories, 5.875%, 5/15/16 | 25,000 | 27,304 |
A1 | AA | Eli Lilly & Co., 6%, 3/15/12 | 15,000 | 16,451 |
Baa1 | A- | UnitedHealth Group, 5%, 8/15/14 | 15,000 | 14,607 |
Baa1 | A- | Wellpoint Inc., 5%, 1/15/11 | 10,000 | 10,257 |
INDUSTRIAL: 5.1% | ||||
Aa2 | AA- | 3M Company, 4.5%, 11/1/11 | 25,000 | 26,593 |
Aa3 | AA- | United Parcel, 5.5%, 1/15/18 | 20,000 | 21,337 |
INSURANCE: 4.4% | ||||
A3 | A- | Allstate Corp., 7.2%, 12/1/09 | 20,000 | 20,316 |
Aa2 | AAA | Berkshire Hathaway Inc., 4.85%, 1/15/15 | 20,000 | 20,841 |
LEISURE & TOURISM: 2.3% | ||||
A2 | A | Walt Disney Co., 5.7%, 7/15/11 | 20,000 | 21,408 |
OIL: 4.0% | ||||
Baa1 | BBB+ | Devon Energy Corp., 5.625%, 1/15/14 | 15,000 | 15,819 |
Baa1 | BBB+ | Marathon Oil Corp., 6.5%, 2/15/14 | 10,000 | 10,701 |
Baa1 | BBB+ | Marathon Oil Corp., 7.5%, 2/15/19 | 10,000 | 10,933 |
TECHNOLOGY: 6.1% | ||||
A1 | A+ | Cisco Systems, Inc., 5.5%, 2/22/16 | 25,000 | 26,522 |
Baa2 | BBB | Intuit Inc., 5.4%, 3/15/12 | 10,000 | 10,104 |
A2 | A | Oracle Corp., 5.75%, 4/15/18 | 20,000 | 21,133 |
TELECOMMUNICATIONS: 2.8% | ||||
A2 | A | Bellsouth Corp., 6%, 10/15/11 | 15,000 | 16,034 |
Baa2 | A | Verizon New England, 6.5%, 9/15/11 | 10,000 | 10,650 |
UTILITIES: 3.9% | ||||
Baa2 | A- | Dominion Resources, 5.7%, 9/17/12 | 10,000 | 10,645 |
A1 | A+ | National Rural Utilities, 4.75%, 3/1/14 | 25,000 | 25,752 |
TOTAL CORPORATE DEBT SECURITIES (Cost $880,974) | $917,053 | |||
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 7
COINS • Portfolio of Investments (concluded)
CREDIT RATING* | PRINCIPAL AMOUNT | VALUE | ||
MOODY’S | S&P | |||
REPURCHASE AGREEMENT: 1.2% of net assets | ||||
With U.S. Bank National Association issued 6/30/09 at 0.01%, due 7/1/09, collateralized by $11,295 in Fannie Mae MBS #729590 due 7/1/18. Proceeds at maturity are $11,073 (Cost $11,073) | $ 11,073 | |||
TOTAL INVESTMENTS: 98.5% of net assets (Cost $892,047) | $928,126 | |||
CASH AND RECEIVABLES LESS LIABILITIES: 1.5% of net assets | 14,404 | |||
NET ASSETS: 100% | $942,530 |
Notes to the Portfolio of Investments:
* – Unaudited; Moody’s – Moody’s Investor Services, Inc.; S&P – Standard & Poor’s Corporation
The Notes to Financial Statements are an integral part of these statements.
8 Semi-annual Report • June 30, 2009
Madison Mosaic Income Trust June 30, 2009
Statements of Assets and Liabilities (unaudited)
Institutional Bond Fund | COINS Fund | |
ASSETS | ||
Investments, at value (Notes 1 and 2) | ||
Investment securities | $5,403,657 | $917,053 |
Repurchase agreements | 476,108 | 11,073 |
Total investments* | 5,879,765 | 928,126 |
Receivables | ||
Interest | 77,055 | 14,404 |
Capital shares sold | 130,147 | -- |
Total assets | 6,086,967 | 942,530 |
LIABILITIES | ||
Payables (Note 5) | ||
Investment securities purchased | 147,237 | -- |
Dividends | 440 | -- |
Capital shares redeemed | 7,946 | -- |
Service agreement fees | 617 | |
Auditor fees | 2,250 | |
Independent trustee fees | 250 | -- |
Total liabilities | 158,740 | -- |
NET ASSETS | $5,928,227 | $942,530 |
Net assets consists of: | ||
Paid in capital | 5,847,023 | 905,940 |
Accumulated net realized gains (losses) | (9,837) | 511 |
Net unrealized appreciation on investments | 91,041 | 36,079 |
Net assets | $5,928,227 | $942,530 |
CAPITAL SHARES OUTSTANDING | 564,901 | 90,219 |
NET ASSET VALUE PER SHARE | $10.49 | $10.45 |
*INVESTMENT SECURITIES, AT COST | $5,788,724 | $892,047 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 9
Madison Mosaic Income Trust
Statements of Operations (unaudited)
For the six-months ended June 30, 2009
Institutional Bond Fund | COINS Fund | |
INVESTMENT INCOME (Note 1) | ||
Interest income | $66,299 | $24,648 |
EXPENSES (Notes 3 and 5) | ||
Investment advisory fees | 5,700 | -- |
Other expenses: | ||
Service agreement fees | 1,140 | -- |
Auditor fees | 2,250 | -- |
Independent trustee fees | 500 | -- |
Total other expenses | 3,890 | -- |
Total expenses | 9,590 | -- |
NET INVESTMENT INCOME | 56,709 | 24,648 |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||
Net realized gain (loss) on investments | (9,837) | 511 |
Change in net unrealized appreciation of investments | 33,966 | 25,214 |
NET GAIN ON INVESTMENTS | 24,129 | 25,725 |
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $80,838 | $50,373 |
The Notes to Financial Statements are an integral part of these statements.
10 Semi-annual Report • June 30, 2009
Madison Mosaic Income Trust
Statements of Changes in Net Assets
For the period indicated
Institutional Bond Fund | COINS Fund | |||
(unaudited) | Year Ended December 31, | (unaudited) | Year Ended December 31, | |
2009 | 2008 | 2009 | 2008 | |
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | ||||
Net investment income | $ 56,709 | $ 122,678 | $ 24,648 | $ 42,472 |
Net realized gain (loss) on investments | (9,837) | 96,337 | 511 | 579 |
Net unrealized appreciation (depreciation) on investments | 33,966 | (108,449) | 25,214 | (3,990) |
Total increase in net assets resulting from operations | 80,838 | 110,566 | 50,373 | 39,061 |
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME | ||||
From net investment income | (56,709) | (122,678) | (24,648) | (42,472) |
From net capital gains | -- | (19,610) | -- | (579) |
Total distributions | (56,709) | (142,288) | (24,648) | (43,051) |
CAPITAL SHARE TRANSACTIONS (Note 7) | 3,749,266 | (4,225,975) | (31,378) | 315,534 |
TOTAL INCREASE (DECREASE) IN NET ASSETS | 3,773,395 | (4,257,697) | (5,653) | 311,544 |
NET ASSETS | ||||
Beginning of period | $2,154,832 | $6,412,529 | $948,183 | $636,639 |
End of period | $5,928,227 | $2,154,832 | $942,530 | $948,183 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Income Trust 11
Madison Mosaic Income Trust
Financial Highlights
Selected data for a share outstanding throughout each period indicated
INSTITUTIONAL BOND FUND
(unaudited) | Year Ended December 31, | ||||
2009 | 2008 | 2007 | 2006 | 2005 | |
Net asset value, beginning of period | $10.47 | $10.41 | $10.08 | $10.11 | $10.34 |
Investment operations: | |||||
Net investment income | 0.13 | 0.48 | 0.44 | 0.41 | 0.36 |
Net realized and unrealized gain (loss) on investments | 0.02 | 0.16 | 0.33 | (0.03) | (0.23) |
Total from investment operations | 0.15 | 0.64 | 0.77 | 0.38 | 0.13 |
Less distributions: | |||||
From net investment income | (0.13) | (0.48) | (0.44) | (0.41) | (0.36) |
From net capital gains | -- | (0.10) | -- | -- | -- |
Total distributions | (0.13) | (0.58) | (0.44) | (0.41) | (0.36) |
Net asset value, end of period | $10.49 | $10.47 | $10.41 | $10.08 | $10.11 |
Total return (%) | 1.44 | 6.30 | 7.77 | 3.93 | 1.24 |
Ratios and supplemental data | |||||
Net assets, end of period (in thousands) | $5,928 | $2,155 | $6,413 | $6,511 | $7,672 |
Ratio of expenses to average net assets (%) | 0.501 | 0.56 | 0.47 | 0.46 | 0.45 |
Ratio of net investment income to average net assets (%) | 2.941 | 3.70 | 4.21 | 3.97 | 3.48 |
Portfolio turnover (%) | 4 | 73 | 42 | 34 | 39 |
coINs fund
(unaudited) | Year Ended | ||
2009 | 2008 | 2007* | |
Net asset value, beginning of period | $10.16 | $10.26 | $10.00 |
Investment operations: | |||
Net investment income | 0.27 | 0.52 | 0.27 |
Net realized and unrealized gain (loss) on investments | 0.29 | (0.09) | 0.26 |
Total from investment operations | 0.56 | 0.43 | 0.53 |
Less distributions: | |||
From net investment income | (0.27) | (0.52) | (0.27) |
From net capital gains | -- | (0.01) | -- |
Total distributions | (0.27) | (0.53) | (0.27) |
Net asset value, end of period | $10.45 | $10.16 | $10.26 |
Total return (%) | 5.65 | 4.29 | 5.37 |
Ratios and supplemental data | |||
Net assets, end of period (in thousands) | $943 | $948 | $637 |
Ratio of expenses to average net assets (%) | -- | -- | -- |
Ratio of net investment income to average net assets (%) | 5.341 | 5.21 | 5.29 |
Portfolio turnover (%) | 11 | 5 | 3 |
1Annualized.
* For the period July 1, 2007 (commencement of operations) through December 31, 2007
The Notes to Financial Statements are an integral part of these statements.
12 Semi-annual Report • June 30, 2009
Madison Mosaic Income Trust
Notes to Financial Statements
1. Summary of Significant Accounting Policies. Madison Mosaic Income Trust (the "Trust") is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 as an open-end, diversified investment management company. The Trust currently offers four portfolios, each of which is a diversified mutual fund. This report contains information about two of these portfolios, the Madison Mosaic Institutional Bond Fund and the Madison Mosaic Corporate Income Shares (COINS) Fund (the "Funds"). Their objectives and strategies are detailed in their prospectus. The remaining Trust portfolios present their financial information in a separate report.
Securities Valuation: Repurchase agreements and other 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 current 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.
The Funds adopted Financial Accounting Standards Board Statement No. 157, Fair Value Measurements (FAS 157) effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. FAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes.
Various inputs as noted above are used in determining the value of the Funds’ investments and other financial instruments. These inputs are summarized in the three broad levels listed below.
Level 1: Quoted prices in active markets for identical securities
Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3: Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased.
The following table represents the Funds’ investments carried on the Statement of Assets and Liabilities by caption and by level within the fair value hierarchy as of June 30, 2009 (unaudited):
Fund | Level 1 | Level 2 | Level 3 | Value at 6/30/2009 |
Institutional Bond | ||||
Corporate Debt Securities | $ -- | $ 3,030,771 | $ -- | $ 3,030,771 |
U.S. Government Agency Notes | -- | 1,085,001 | -- | 1,085,001 |
U.S. Treasury Notes | -- | 1,287,885 | -- | 1,287,885 |
Repurchase Agreement | -- | 476,108 | -- | 476,108 |
Total | $ -- | $ 5,879,765 | $ -- | $ 5,879,765 |
Madison Mosaic Income Trust 13
Notes to Financial Statements (continued)
Fund | Level 1 | Level 2 | Level 3 | Value at 6/30/2009 |
COINS | ||||
Corporate Debt Securities | $ -- | $ 917,053 | $ -- | $ 907,053 |
Repurchase Agreement | -- | 11,073 | -- | 11,073 |
Total | $ -- | $ 928,126 | $ -- | $ 928,126 |
At June 30, 2009 and for the six-months then ended, the Funds held no Level 3 securities. Please see the Portfolio of Investments for each respective fund for a listing of all securities within each caption. |
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. Other income is accrued as earned.
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 quarterly for the Institutional Bond Fund and monthly for the Corporate Income Shares Fund. Capital gain distributions, if any, are declared and paid annually at year-end for both funds.
The tax character of distributions paid during 2008 and 2007 were as follows:
2008 | 2007 | |
Institutional Bond Fund: | ||
Distributions paid from: | ||
Ordinary income | $122,678 | $271,319 |
Long-term capital gains | 19,610 | -- |
COINS Fund: | ||
Distributions paid from: | ||
Ordinary income | $42,472 | $15,978 |
Short-term capital gains | 579 | 108 |
As of June 30, 2009, the components of distributable earnings on a tax basis were as follows (unaudited):
Institutional Bond Fund: | |
Accumulated net realized losses | $ (9,837) |
Net unrealized appreciation on investments | 91,041 |
$81,204 | |
COINS Fund: | |
Accumulated net realized gains | $ 511 |
Net unrealized appreciation on investments | 36,079 |
$36,590 |
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 Trust to comply with the provisions of Subchapter M 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.
The Funds adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes." The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net asset value of the Funds.
As of and during the year ended December 31, 2008, 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.
Use of Estimates: The preparation of 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. Investments in Repurchase Agreements. When the Funds purchase securities under agreements to resell, the securities are
14 Semi-annual Report • June 30, 2009
Notes to Financial Statements (continued)
held for safekeeping by the Funds’ custodian bank as collateral. Should the market value of the securities purchased under such an agreement decrease below the principal amount to be received at the termination of the agreement plus accrued interest, the counterparty is required to place an equivalent amount of additional securities in safekeeping with the Fund’s custodian bank. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Funds, along with other registered investment companies having Advisory and Services Agreements with the same Advisor, transfers uninvested cash balances into a joint trading account. The aggregate balance in this joint trading account is invested in one or more consolidated repurchase agreements whose underlying securities are U.S. Treasury or federal agency obligations. As of June 30, 2009, the Institutional Bond Fund had a 3.9% interest and the COINS Fund had a 0.1% interest in the consolidated repurchase agreement of $12,184,689 collateralized by $12,428,737 in Fannie Mae Mortgage Backed Security Notes. Proceeds at maturity were $12,184,693.
3. Investment Advisory Fees and Other Transactions with Affiliates. The investment advisor to the Funds, Madison Mosaic, LLC, a wholly owned subsidiary of Madison Investment Advisors, Inc., (collectively "the Advisor"), earns an advisory fee equal to 0.30% per annum of the average net assets of the Institutional Bond Fund. This fee is accrued daily and is paid monthly.
The COINS Fund pays no advisory fees. Instead the Advisor is compensated for managing the fund through payments it receives from fees paid on accounts in wrap programs whose clients are permitted to invest in COINS.
4. Investment Transactions. Purchases and sales of securities (excluding short-term securities) for the six-months ended June 30, 2009 were as follows (unaudited):
Purchases | Sales | |
Institutional Fund: | ||
U.S. Gov’t securities | $1,486,238 | $ -- |
Other | 2,150,234 | 80,955 |
COINS Fund: | ||
U.S. Gov’t securities | $ -- | $ -- |
Other | 139,450 | 95,794 |
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 ("SFAS No. 161"), "Disclosures about Derivative Instructions and Hedging Activities." This standard is intended to enhance financial statement disclosures for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivative instruments, b) how derivative instruments and related hedge fund items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Fund adopted SFAS No. 161 effective January 1, 2009. As of June 30, 2009 and for the six-months then ended, the Funds did not hold any derivative instruments nor engage in any hedging activities.
5. Other Expenses. Under a separate Services Agreement, the Advisor will provide or arrange for the Funds to have all other necessary operational and support services for a fee based on a percentage of average net assets. These fees are accrued daily and paid monthly. This percentage is 0.08% for the Institutional Bond Fund.
The Institutional Bond Fund also pays the expenses of its Independent Trustees and auditors directly. For the six-months ended June 30, 2009, the amounts expensed for these fees were $500 and $2,250, respectively. These amounts reduced the amounts paid to the Advisor pursuant to the previous paragraph.
The COINS Fund pays no expenses. Instead, the Advisor is compensated for administering the fund through payments it receives from fees paid on accounts in wrap programs whose clients are permitted to invest in COINS.
6. Aggregate Cost and Unrealized Appreciation (Depreciation). The aggregate cost for federal income tax purposes and the net unrealized appreciation (depreciation) are as follows as of June 30, 2009 (unaudited):
Institutional | COINS Fund | |
Aggregate Cost | $5,788,724 | $892,047 |
Gross unrealized appreciation | 98,536 | 42,536 |
Gross unrealized depreciation | (7,495) | (6,457) |
Net unrealized appreciation | $91,041 | $36,079 |
Madison Mosaic Income Trust 15
Notes to Financial Statements (concluded)
7. Capital Share Transactions. An unlimited number of capital shares, without par value, are authorized. Transactions in capital shares were as follows:
(unaudited) | Year Ended December 31, | |
Institutional Bond Fund | 2009 | 2008 |
In Dollars | ||
Shares sold | $4,167,484 | $2,758,793 |
Shares issued in reinvestment | 56,167 | 141,167 |
Total shares issued | 4,223,651 | 2,899,960 |
Shares redeemed | (474,385) | (7,230,384) |
Net increase (decrease) | $3,749,266 | $(4,330,424) |
Shares sold | 399,193 | 263,160 |
Shares issued in reinvestment | 5,375 | 13,481 |
Total shares issued | 404,568 | 276,641 |
Shares redeemed | (45,441) | (686,741) |
Net increase (decrease) | 359,127 | (410,100) |
(unaudited) | Year Ended December 31, | |
COINS Fund | 2009 | 2008 |
In Dollars | ||
Shares sold | $100,000 | $272,483 |
Shares issued in reinvestment | 24,647 | 43,051 |
Total shares issued | 124,647 | 315,534 |
Shares redeemed | (156,025) | -- |
Net increase (decrease) | $(31,378) | $315,534 |
In Shares | ||
Shares sold | 9,756 | 26,990 |
Shares issued in reinvestment | 2,412 | 4,267 |
Total shares issued | 12,168 | 31,257 |
Shares redeemed | (15,281) | -- |
Net increase (decrease) | (3,113) | 31,257 |
8. Line of Credit. The Institutional Bond Fund has a $345,000 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 1/2%. During the six-months ended June 30, 2009, the Fund did not borrow on its line of credit. The Corporate Income Shares (COINS) Fund currently does not have a line of credit in place.
9. Subsequent Events. Management has evaluated subsequent events through August 27, the date the financial statements were issued.
16 Semi-annual Report • June 30, 2009
Fund Expenses
Example: As a shareholder of the Funds, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including Investment advisory fees and Other expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in your Fund and to compare these costs with the ongoing costs of investing in other mutual funds. See Notes 3 and 5 above for an explanation of the types of costs charged by the Fund.
This Example is based on an investment of $1,000 invested on January 1, 2009 and held for the six-months ended June 30, 2009.
Actual Expenses
The table below 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 | ||||
Beginning | Ending | Annualized | Expenses Paid | |
Institutional Bond Fund | $1,000.00 | $1,014.45 | 0.50% | $2.47 |
COINS Fund | $1,000.00 | $1,056.51 | 0% | $0 |
1For the six-months ended June 30, 2009. 2Expenses are equal to each 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 your 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 your Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Based on Hypothetical Total Return1 | ||||
Beginning | Ending | Annualized | Expenses Paid | |
Institutional Bond Fund | $1,000.00 | $1,025.05 | 0.50% | $2.50 |
COINS Fund | $1,000.00 | $1,025.05 | 0% | $0 |
1For the six-months ended June 30, 2009. 2Expenses are equal to each 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. |
Madison Mosaic Income Trust 17
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. Additionally, information regarding how the Trust voted proxies related to portfolio securities for the one-year period ended June 30, 2009 is available. These policies and voting information 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 and voting information may also be obtained by visiting the Securities and Exchange Commission web site at www.sec.gov. The Trust will respond to shareholder requests for copies of our policies and voting information 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 U.S. Securities and Exchange Commission (the "Commission") for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Forms N-Q are available on the Commission’s website. The Trust’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-551-8090. Form N-Q and other information about the Trust are available on the EDGAR Database on the Commission’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 Commission’s Public Reference Section, Washington, DC 20549-0102. Finally, you may call Madison Mosaic at 800-368-3195 if you would like a copy of Form N-Q and we will mail one to you at no charge.
18 Semi-annual Report • June 30, 2009
This page was left blank intentionally.
Madison Mosaic Income Trust 19
This page was left blank intentionally.
20 Semi-annual Report • June 30, 2009
The Madison Mosaic Family of Mutual Funds
Madison Mosaic Equity Trust
Investors Fund
Balanced Fund
Mid-Cap Fund
Small/Mid-Cap Fund
Disciplined Equity Fund
Madison Institutional Equity Option Fund
Madison Mosaic Income Trust
Government Fund
Intermediate Income Fund
Institutional Bond Fund
Corporate Income Shares (COINS)
Madison Mosaic Tax-Free Trust
Virginia Tax-Free Fund
Tax-Free National Fund
Madison Mosaic 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.
TRANSER AGENT
Madison Mosaic Funds
c/o US Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Shareholder Service
Toll-free nationwide: 888-670-3600
550 Science Drive
Madison, Wisconsin 53711
Madison Mosaic Funds
www.mosaicfunds.com
SEC File Number 811-03616
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 (Item 1) 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. The Trust does not normally hold shareholder meetings.
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 (no change from the previously filed Code).
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Act.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Act.
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 Income Trust
By: (signature)
W. Richard Mason, Secretary
Date: August 27, 2009
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: August 27, 2009
By: (signature)
Greg Hoppe, Chief Financial Officer
Date: August 27, 2009