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OMB APPROVAL UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED Investment Company Act file number 811-2910 Madison Mosaic Government Money Market Trust 550 Science Drive, Madison, WI 53711 W. Richard Mason Registrant's telephone number, including area code: 608-274-0300 Date of fiscal year end: September 30 Date of reporting period: September 30, 2008 Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to stockholders
of any report that is required to be transmitted to stockholders under Rule 30e-1 under
the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the
information provided on Form N-CSR in its regulatory, disclosure review, inspoection, and
policymaking roles. A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information collection
burden estimate and any suggestions for reducing the burden to Secretary, Securities and
Exchange Commission, 100 F Street, NE, Washington, DC 20549-0609. The OMB has
reviewed this collection of information under the clearance requirements of 44 U.S.C. s
3507. Item 1. Report to Shareholders. ANNUAL REPORT September 30, 2008 Madison Mosaic Government Money Market
OMB Number: 3235-0570
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Washington, DC 20549
MANAGEMENT INVESTMENT COMPANIES
(Exact name of registrant as specified in charter)
(Address of principal executive offices)(Zip code)
Madison/Mosaic Legal and Compliance Department
8777 N. Gainey Center Drive, Suite 220
Scottsdale, AZ 85258
(Name and address of agent for service)
(Madison Mosaic logo)
Madison Mosaic Funds
www.mosaicfunds.com
Contents
Letter to Shareholders |
1 |
Report of Independent Registered Public Accounting Firm |
3 |
Portfolio of Investments |
4 |
Statement of Assets and Liabilities |
5 |
Statement of Operations |
6 |
Statements of Changes in Net Assets |
6 |
Financial Highlights |
7 |
Notes to Financial Statements |
8 |
Fund Expenses |
10 |
Management Information |
12 |
Madison Mosaic Government Money Market September 30, 2008
Letter to Shareholders
(photograph of Christopher Nisbet)
The one-year period ended September 30, 2008 saw the seven-day yield of Government Money Market dip in the midst of a massive financial crisis, as the stock market suffered one of its worse declines since the Great Depression. The Federal Reserve Board cut its Fed Funds Target Rate from 4.75% at the beginning of the period six times to a period-ending 2.00%. Rate cuts were just one of many government and Federal Reserve Board interventions designed to inject liquidity and produce confidence in the struggling debt markets.
Money markets, generally a sleepy corner of the investment world, were actually in the headlines towards the end of the period as a number of prominent money market funds revealed serious problems with troubled or defaulting short-term notes. These issues were never a factor in the management of Madison Mosaic Government Money Market, since the problem securities which were disrupting these funds were corporate issuances, to which your fund has no exposure. However, the resulting concerns over the safety of money markets caused the Treasury to create, in the final weeks of the annual period, a temporary guarantee program for money market funds. (This program was not originally conceived for funds like yours, which only owns securities issued by the government and its agencies and we determined that it would be an unnecessary expense for shareholders so did not participate in the program.) All of these concerns and dislocations during this period inspired a massive flight to the safest securities, primarily short-term government notes. This trend in a troubled time was a reminder that investors in Madison Mosaic Government Money Market selected an investment that provided excellent shelter even in one of the worst financial storms of our lifetimes.
Economic Overview
The period of this report will be one that will be studied by students of economics for generations to come. The period began with some optimism that the worst of the subprime credit crisis might be behind us, with the major stock market indices reaching record highs in the fall of 2007. But by September 30, 2008, the end of this reporting period, we were in the midst of a worldwide financial crisis that was creating sell-offs in virtually every asset class, other than the most secure assets issued or insured by the federal government. Several large and highly regarded institutions failed or required government-sponsored bailouts. Banks were unwilling to lend to each other and the general market mood was characterized by fear. In early September, the Treasury Department announced it would effectively take over Fannie Mae and Freddie Mac, the government-sponsored mortgage companies. This confirmed our belief that the investments in these two companies held in your fund would not suffer from the general financial crisis. It is our belief, one supported by market activity, that this takeover increased the security of these bonds, as the governments role moved from indirect to direct support for bondholders. Meanwhile, fearing a meltdown of the U.S. financial system, Congress rushed to put together a massive bailout legislation package in an attempt to aid banking balance sheets and get credit flowing again.
Madison Mosaic Government Money Market 1
Letter to Shareholders (concluded)
In terms of investment trends, we saw a massive flight to quality, as investors sold off holdings in the stock and corporate bond markets and bid up the prices of Treasuries. This put further pressure on Treasury yields, which were already being dampened by the Federal Reserve rate cuts. In other words, a wide range of investors were demonstrating a distinct preference for the sorts of investments already held by shareholders of Madison Mosaic Government Money Market.
Outlook
We see signs of economic hope in the various government sponsored initiatives, but there are still many systemic problems in our financial system and economy, many of which go back to a fundamental cause of the crisis: falling home prices. Until home prices stabilize, we will not be completely out of the woods. We see the U.S. economy experiencing at least a mild recession, but not the kind of financial disaster that seems to be widely feared. As painful as this period has been, we believe some good will come of it in the long run. Leverage in the U.S. economy will be reduced to more rational and manageable levels. Credit will be extended only to those with the capacity to repay. Risk will be placed on equal footing with reward and be priced at an appropriate level. In the meantime, investors seeking security of principal and predictable yield will be well served with an allocation to the short-term government and government agency notes held in Madison Mosaic Government Money Market. We thank you for your continued confidence in our management.
Sincerely,
(signature)
Christopher Nisbet, CFA
Vice President and Portfolio Manager
2 Annual Report September 30, 2008
Madison Mosaic Government Money Market September 30, 2008
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF MADISON MOSAIC GOVERNMENT MONEY MARKET
We have audited the accompanying statement of assets and liabilities of the Madison Mosaic Government Money Market (the Fund) as of September 30, 2008 and the related statements of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2008 by correspondence with the Funds custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Madison Mosaic Government Money Market as of September 30, 2008, and the results of its operations for the year then ended and the changes in its net assets for each of the two years in the period then ended and financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Grant Thornton LLP
(signature)
Chicago, Illinois
November 14, 2008
Madison Mosaic Government Money Market 3
Madison Mosaic Government Money Market September 30, 2008
Portfolio of Investments
PRINCIPAL AMOUNT |
VALUE |
|
US GOVERNMENT AGENCY OBLIGATIONS: 97.9% of net assets |
||
Federal Home Loan Bank, 2.33%, 10/3/08 |
$750,000 |
$749,903 |
Federal Home Loan Bank, 2.3%, 10/6/09 |
750,000 |
749,760 |
Federal Home Loan Bank, 2.31%, 10/10/08 |
1,000,000 |
999,422 |
Federal Home Loan Bank, 2.43%, 10/22/08 |
1,000,000 |
998,579 |
Federal Home Loan Bank, 2.35%, 10/29/08 |
1,750,000 |
1,746,725 |
Federal Home Loan Bank, 2.38%, 11/7/08 |
750,000 |
748,162 |
Federal Home Loan Bank, 2.25%, 11/21/08 |
1,000,000 |
996,800 |
Federal Home Loan Bank, 2.51%, 11/24/08 |
1,250,000 |
1,245,287 |
Federal Home Loan Bank, 2.5%, 12/2/08 |
1,250,000 |
1,244,610 |
Federal Home Loan Bank, 2.6%, 12/3/08 |
750,000 |
746,583 |
Federal Home Loan Bank, 2.54%, 12/9/08 |
1,750,000 |
1,742,078 |
Federal Home Loan Bank, 2.1%, 12/12/08 |
1,000,000 |
995,798 |
Freddie Mac, 2.31%, 10/14/08 |
1,000,000 |
999,160 |
Freddie Mac, 2.37%, 10/28/08 |
1,000,000 |
998,214 |
Freddie Mac, 2.23%, 10/31/08 |
750,000 |
748,601 |
Freddie Mac, 2.4%, 11/3/08 |
1,000,000 |
997,793 |
Freddie Mac, 2.58%, 12/15/08 |
1,900,000 |
1,890,793 |
Freddie Mac, 2.7%, 12/29/08 |
750,000 |
744,993 |
Freddie Mac, 2.5%, 01/5/09 |
1,750,000 |
1,738,529 |
Fannie Mae, 2.35%, 10/15/08 |
1,000,000 |
999,083 |
Fannie Mae, 2.38%, 10/22/08 |
1,000,000 |
998,609 |
Fannie Mae, 2.54%, 11/19/08 |
1,000,000 |
996,523 |
Fannie Mae, 2.65%, 12/22/08 |
2,000,000 |
1,987,891 |
Fannie Mae, 2.63%, 12/24/08 |
1,000,000 |
993,856 |
Fannie Mae, 2.24%, 01/7/09 |
2,040,000 |
2,027,623 |
Fannie Mae, 2.85%, 01/28/09 |
750,000 |
742,934 |
Fannie Mae, 2.81%, 02/27/09 |
500,000 |
494,183 |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $30,322,492) |
$30,322,492 |
|
REPURCHASE AGREEMENT: 2.1% of net assets |
||
With U.S. Bank National Association issued 9/30/08 at 0.5%, due 10/1/08, collateralized by $674,998 in United States Treasury Notes due 9/1/18. Proceeds at maturity are $661,756 (Cost $661,747). |
661,747 |
|
TOTAL INVESTMENTS: (Cost $30,984,239) |
$30,984,239 |
|
LIABILITIES LESS CASH AND RECEIVABLES: 0%* of net assets |
(9,461) |
|
NET ASSETS: 100% |
$30,974,778 |
+ Aggregate cost for federal income tax purposes as of September 30,
2008
*Less than 0.1% but greater than 0%.
The Notes to Financial Statements are an integral part of these statements.
4 Annual Report September 30, 2008
Madison Mosaic Government Money Market September 30, 2008
Statement of Assets and Liabilities
ASSETS |
|
Investment, at value (Note 1) |
|
Total government agency obligations |
$30,322,492 |
Repurchase agreement |
661,747 |
Total investments (Cost $30,984,239) |
30,984,239 |
Capital Shares Sold |
899 |
Interest Receivable |
9 |
Total assets |
$30,985,147 |
LIABILITIES |
|
Payables |
|
Dividends |
798 |
Capital shares redeemed |
3,071 |
Independent trustee fees |
1,500 |
Auditor fees |
5,000 |
Total liabilities |
10,369 |
NET ASSETS |
$30,974,778 |
Net assets consists of: |
|
Paid in capital |
30,972,667 |
Accumulated net realized gains |
2,111 |
Net Assets |
$30,974,778 |
CAPITAL SHARES OUTSTANDING An unlimited number of capital shares, without par value, are authorized (Note 5) |
30,972,751 |
NET ASSETS VALUE PER SHARE |
$1.00 |
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Government Money Market 5
Madison Mosaic Government Money Market
Statement of Operations
For the year ended September 30, 2008
INVESTMENT INCOME (Note 1) |
|
Interest income |
$1,142,454 |
EXPENSES (Notes 3, 4 and 6) |
|
Investment advisory fees |
170,280 |
Service agreement fees |
119,196 |
Independent trustee fees |
6,000 |
Auditor fees |
5,000 |
Line of credit interest and fees |
261 |
Expenses waived |
(85,140) |
Total expenses |
215,597 |
NET INVESTMENT INCOME |
$926,857 |
NET REALIZED GAIN ON INVESTMENTS |
3,639 |
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$930,496 |
Madison Mosaic Government Money Market
Statements of Changes in Net Assets
Year Ended September 30, |
||
2008 |
2007 |
|
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
||
Net investment income |
$926,857 |
$1,669,102 |
Net realized gain on investments |
3,639 |
74 |
Total increase in net assets resulting from operations |
930,496 |
1,669,176 |
DISTRIBUTION TO SHAREHOLDERS |
||
From net investment income |
(926,857) |
(1,669,102) |
CAPITAL SHARE TRANSACTIONS (Note 5) |
(4,888,388) |
(986,190) |
TOTAL DECREASE IN NET ASSETS |
(4,884,749) |
(986,116) |
NET ASSETS |
||
Beginning of year |
$35,859,527 |
$36,845,643 |
End of year |
$30,974,778 |
$35,859,527 |
The Notes to Financial Statements are an integral part of these statements.
6 Annual Report September 30, 2008
Madison Mosaic Government Money Market
Financial Highlights
Selected data for a share outstanding for the periods indicated.
Year Ended September 30, |
|||||
2008 |
2007 |
2006 |
2005 |
2004 |
|
Net asset value, beginning of period |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
Net investment income |
0.03 |
0.05 |
0.04 |
0.02 |
0.01 |
Less distributions from net investment income |
(0.03) |
(0.05) |
(0.04) |
(0.02) |
(0.01) |
Net asset value, end of period |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
Total return (%) |
2.73 |
4.70 |
4.05 |
2.08 |
0.52 |
Ratios and supplemental data |
|||||
Net assets, end of period (thousands) |
$30,975 |
$35,860 |
$36,846 |
$41,884 |
$37,687 |
Ratio of expenses to average net assets before fee waiver (%) |
0.88 |
0.88 |
0.88 |
0.88 |
0.88 |
Ratio of expenses to average net assets after fee waiver1 (%) |
0.63 |
0.63 |
0.63 |
0.63 |
0.63 |
Ratio of net investment income to average net assets before fee waiver (%) |
2.47 |
4.35 |
3.69 |
1.84 |
0.27 |
Ratio of net investment income to average net assets after fee waiver1 (%) |
2.72 |
4.60 |
3.94 |
2.09 |
0.52 |
1-See Note 3 to the Financial Statements.
The Notes to Financial Statements are an integral part of these statements.
Madison Mosaic Government Money Market 7
Madison Mosaic Government Money Market
Notes to Financial Statements
1. Summary of Significant Accounting Policies. Madison Mosaic Government Money Market (the Fund) is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 as an open-end, diversified investment management company. The Fund invests solely in securities issued by the U.S. Government or any of its agencies or instrumentalities or in repurchase agreements backed by such securities. Because the Fund is 100% no-load, its shares are offered and redeemed at the net asset value per share.
Securities Valuation: Portfolio securities are valued at acquisition cost as adjusted for amortization of premium or accretion of discount, which approximates fair market value.
Investment Transactions: Investment transactions are recorded on a trade date basis. The cost of investments sold is determined on the identified cost basis for financial statement and Federal income tax purposes.
Investment Income: Interest income is recorded on an accrual basis. Bond premium is amortized and original issue discount and market discount are accreted over the expected life of each applicable security using the effective interest method.
Distribution of Income: Net investment income, determined as gross investment income less total expenses, is declared as a dividend each business day. Dividends are distributed to shareholders or reinvested in additional shares as of the close of business at the end of each month. Distributions paid during the years ended September 30, 2008 and 2007 were $926,857 and $1,669,102, respectively. All distributions were paid from ordinary income and were identical for book purposes and tax purposes. As of September 30, 2008, the Fund had $2,111 of accumulated net realized gains as the only component of distributable earnings on a tax basis.
Income Tax: No provision is made for Federal income taxes since it is the intention of the Fund to comply with the provisions of the Internal Revenue Code available to investment companies and to make the requisite distribution to shareholders of taxable income which will be sufficient to relieve it from all or substantially all Federal income taxes. As of September 30, 2008, capital loss carryovers available to offset future capital gains for Federal income tax purposes was $1,528 expiring September 30, 2014.
The Funds adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, on June 29, 2007. 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 fund.
As of and during the year ended September 30, 2008, the Funds did not have a liability for any unrecognized tax benefits. The fund recognizes 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.
8 Annual Report September 30, 2008
Notes to Financial Statements (continued)
Actual results could differ from those estimates.
2. Investment in Repurchase Agreements. When the Fund purchases securities under agreements to resell, the securities are held in 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 Funds custodian bank. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, 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. The Fund has approximately a 5.0% interest or $661,747 in the consolidated repurchase agreement of $13,202,814 collateralized by $13,467,203 in United States Treasury Notes. Proceeds at maturity are $13,202,998.
3. Investment Advisory Fee and Other Transactions with Affiliates. The Investment Advisor to the Fund, Madison Mosaic, LLC, a wholly owned subsidiary of Madison Investment Advisors, Inc. (the Advisor), earns an advisory fee equal to 0.5% per annum of the average net assets of the Fund. The fee is accrued daily and paid monthly. Since December 9, 2002, the Advisor has been irrevocably waiving 0.25% of this fee for the Fund. For the year ended September 30, 2008, the waived amount was $85,140. This waiver may end at any time.
The Advisor will reimburse the Fund for the amount of any expenses of the Fund (less certain expenses) that exceed 1.5% per annum of the average net assets of the Fund up to $40 million and 1% per annum of such amount in excess of $40 million. No amounts were reimbursed to the Fund by the Advisor for the year ended September 30, 2008.
4. Other Expenses. Under a separate Services Agreement, the Advisor will provide or arrange for the Fund to have all other necessary operational and support services for a fee based on a percentage of average net assets, other than the expenses of the Funds Independent Trustees and auditor (Independent Service Providers) which are paid directly based on cost and any costs associated with the Line of Credit described in Note 6. For the year ended September 30, 2008, this services fee was 0.35%. The Fund paid $11,000 directly for Independent Service Providers fees for the year ended September 30, 2008. The Fund uses US Bancorp Fund Services, LLC as its transfer agent and US Bank as its custodian. The transfer agent and custodian fees are paid by the Advisor and allocated to the Fund pursuant to a services agreement and are included in other expenses.
5. Accounting Pronouncements. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. As of September 30, 2008, the Adviser does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported on the Statement of Operations for a fiscal period.
Madison Mosaic Government Money Market 9
Notes to Financial Statements (concluded)
On March 19, 2008, Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (FAS 161). FAS 161 requires qualitative disclosures about objectives an strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The application of FAS 161 is required for fiscal years and interim periods beginning after November 15, 2008. At tis time, management is evaluating the implications of FAS 161 and its impact on the financial statements has not yet been determined.
6. Capital Share Transactions. An unlimited number of capital shares, without par value, are authorized. Transactions in capital shares (in dollars) were as follows:
Year Ended September 30, |
||
2008 |
2007 |
|
Shares sold |
$16,212,597 |
$15,024,196 |
Shares issued in reinvestment of dividends |
909,089 |
1,630,009 |
Total shares issued |
17,121,686 |
16,654,205 |
Shares redeemed |
(22,010,074) |
(17,640,395) |
Net decrease |
$ (4,888,388) |
$(986,190) |
7. Line of Credit. The Fund has a $10 million revolving credit facility with a bank for temporary emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The interest rate on the outstanding principal amount is equal to the prime rate less 0.5% (effective rate of 4.5% at September 30, 2008). The line of credit contains loan covenants with respect to certain financial ratios and operating matters. The Fund was in compliance with these covenants as of September 30, 2008 and 2007. During the year ended September 30, 2008, the Fund drew $18,000 with interest paid on the draw and renewal fees of $261. The Fund had repaid in full its line of credit as of September 30, 2008.
Fund Expenses (unaudited).
Example: This Example is intended to help you understand your costs (in dollars) of investing in the Fund and to compare these costs with the costs of investing in other mutual funds. See footnotes 3 and 4 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 April 1, 2008 and held for the six-months ended September 30, 2008.
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.
10 Annual Report September 30, 2008
Fund Expenses (concluded)
Based on Actual Total Return-1 |
|||||
Actual |
Beginning |
Ending |
Annualized |
Expenses Paid |
|
Government Money Market |
0.88% |
$1,000.00 |
$1,008.78 |
0.63% |
$3.18 |
1-For the six months ended September 30, 2008. 2-Assumes reinvestment of all dividends and capital gains distributions, if any, at net asset value. 3-Expenses (net of voluntary waiver) are equal to the 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 366. |
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 not the Funds 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 the 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 Return-1 |
|||||
Hypothetical
Annualized |
Beginning |
Ending |
Annualized |
Expenses Paid |
|
Government Money Market |
5.00% |
$1,000.00 |
$1,025.26 |
0.63% |
$3.21 |
1-For the six months ended September 30, 2008. 2-Expenses (net of voluntary waiver) are equal to the 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 366. |
Madison Mosaic Government Money Market 11
Madison Mosaic Government Money Market
Management Information
Independent Trustees
Name, Address |
Position(s) Held with Fund |
Term of Office and Length of Time Served |
Principal Occupation(s) |
Number of Portfolios in Fund Complex Overseen |
Other Directorships Held |
Philip E. Blake |
Trustee |
Indefinite Term since May 2001 |
Retired investor; formerly Vice President - Publishing, Lee Enterprises, Inc. |
All 12 Madison Mosaic Funds |
Madison Newspapers, Inc. of Madison, WI; Trustee of the Madison Claymore Covered Call and Equity Strategy Fund and Madison Strategic Sector Premium Fund; Nerites Corp. |
James R. Imhoff, Jr. |
Trustee |
Indefinite Term since July 1996 |
Chairman and CEO of First Weber Group, Inc. (real estate brokers) of Madison, WI. |
All 12 Madison Mosaic Funds |
Trustee of the Madison Claymore Covered Call and Equity Strategy Fund and Madison Strategic Sector Premium Fund; Park Bank, FSB; Grand Mountain Bancshares, Inc. |
Lorence D. Wheeler |
Trustee |
Indefinite Term since July 1996 |
Retired investor; formerly Pension Specialist for CUNA Mutual Group (insurance) and President of Credit Union Benefits Services, Inc. (a provider of retirement plans and related services for credit union employees nationwide). |
All 12 Madison Mosaic Funds |
Trustee of the Madison Claymore Covered Call and Equity Strategy Fund and Madison Strategic Sector Premium Fund; Grand Mountain Bank, FSB; Grand Mountain Bancshares, Inc. |
Interested Trustees*
Frank E. Burgess |
Trustee and Vice President |
Indefinite Terms since July 1996 |
Founder, President and Director of Madison Investment Advisors, Inc. |
All 12 Madison Mosaic Funds |
Trustee of the Madison Claymore Covered Call and Equity Strategy Fund and Madison Strategic Sector Premium Fund; Capitol Bank, FSB; Santa Barbara Community Bancorp, Inc. |
Katherine L. Frank |
Trustee and President |
Indefinite Terms President since July 1996, Trustee since May 2001 |
Principal and Vice President of Madison Investment Advisors, Inc. and President of Madison Mosaic, LLC |
President of all 12 Madison Mosaic Funds, Trustee of all Madison Mosaic Funds except Madison Mosaic Equity Trust |
Trustee of Madison Strategic Sector Premium Fund |
12 Annual Report September 30, 2008
Management Information (concluded)
Officers*
Jay R. Sekelsky |
Vice President |
Indefinite Term since July 1996 |
Principal and Vice President of Madison Investment Advisors, Inc. and Vice President of Madison Mosaic, LLC |
All 12 Madison Mosaic Funds |
None |
Christopher Berberet |
Vice President |
Indefinite Term since July 1996 |
Principal and Vice President of Madison Investment Advisors, Inc. and Vice President of Madison Mosaic, LLC |
All 12 Madison Mosaic Funds |
None |
W. Richard Mason |
Secretary, General Counsel and Chief Compliance Officer |
Indefinite Terms since November 1992 |
Principal of Mosaic Funds Distributor, LLC; General Counsel for Madison Investment Advisors, Madison Scottsdale, LC and Madison Mosaic, LLC |
All 12 Madison Mosaic Funds and the Madison Strategic Sector Premium Fund |
None |
Greg Hoppe |
Chief Financial Officer |
Indefinite Term since August 1999 |
Vice President of Madison Mosaic, LLC. |
All 12 Madison Mosaic Funds and the Madison Strategic Sector Premium Fund |
None |
*All interested Trustees and Officers of the Trust are employees and/or owners of Madison Investment Advisors, Inc. Since Madison Investment Advisors, Inc. serves as the investment advisor to the Trust, each of these individuals is considered an interested person of the Trust as the term is defined in the Investment Company Act of 1940.
The Statement of Additional Information contains more information about the Trustees and is available upon request. To request a free copy, call Mosaic Funds at 1-800-368-3195.
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 Fund only invests in non-voting securities. Nevertheless, the Fund adopted policies that provide guidance and set forth parameters for the voting of proxies relating to securities held in the Funds portfolio. These policies are available to you upon request and free of charge by writing to Madison Mosaic Funds, 550 Science Drive, Madison, WI 53711 or by calling toll-free at 1-800-368-3195.
Madison Mosaic Government Money Market 13
The Funds proxy voting policies may also be obtained by visiting the Securities and Exchange Commission web site at www.sec.gov. The Fund will respond to shareholder requests for copies of our policies within two business days of request by first-class mail or other means designed to ensure prompt delivery.
N-Q Disclosure. The Fund 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 Funds Forms N-Q are available on the Commissions website. The Funds Forms N-Q may be reviewed and copied at the Commissions Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-942-8090. Form N-Q and other information about the Fund are available on the EDGAR Database on the Commissions 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 Commissions Public Reference Section, Washington, DC 20549-0102. Finally, you may call us at 800-368-3195 if you would like a copy of Form N-Q and we will mail one to you at no charge.
Discussion of Contract Renewal (Unaudited).
The Trustees considered a number of factors when the Board most recently approved the advisory contract between the Advisor and the Fund in July 2008. Rather than providing you with a list of factors or conclusory statements that explained the Boards decisionmaking process, the following discussion is designed to describe what you would have seen and heard if you had been at the Trusts Board meeting when it most recently approved the advisory contract:
With regard to the nature, extent and quality of the services to be provided by the Advisor, the Board reviewed the biographies and tenure of the personnel involved in fund management. They recognized the wide array of investment professionals employed by the firm. The officers of the investment advisor discussed the firms ongoing investment philosophies and strategies intended to provide superior performance consistent with the Funds investment objectives under various market scenarios. The Trustees also noted their familiarity with the Advisor due to the advisors history of providing advisory services to the Madison Mosaic family.
The Board also discussed the quality of services provided by the transfer agent, US Bancorp Fund Services, LLC. The advisor reported that the transfer agent has routinely ranked at or near the top in customer service surveys for third party transfer agents. The Independent Trustees noted that they had just completed a satisfactory on-site review of the transfer agents facilities and operations, including its main operations in Milwaukee, Wisconsin and its emergency recovery center located in West Allis, Wisconsin.
With regard to the investment performance of the Fund and the investment advisor, the Board reviewed current performance information. They discussed the reasons for both outperformance and underperformance compared with peer groups and applicable indices.
The officers of the Advisor also discussed the Advisors methodology for arriving at the peer groups and indices used for performance comparisons. The Board reviewed both short-term and long-term standardized performance, i.e. one, five and ten year (or since inception) average annual total returns for each fund and comparable funds, as well as standardized yields for fixed income funds.
14 Annual Report September 30, 2008
With regard to the costs of the services to be provided and the profits to be realized by the investment advisor and its affiliates from the relationship with the Fund, the Board reviewed the expense ratios for each Madison Mosaic fund compared with funds with similar investment objectives and of similar size. The Board reviewed such comparisons based on a variety of peer group comparisons from data extracted from industry databases including comparison to funds with similar investment objectives based on their broad asset category and total asset size, as well as from data provided directly by funds that most resembled the Funds asset size and investment objective for the last year. The Advisor discussed the objective manner by which Madison Mosaic fees were compared to fees in the industry.
As in past years, the Trustees recognized that each Madison Mosaic funds fee structure should be reviewed based on total fund expense ratio rather than simply comparing advisory fees to other advisory fees in light of the simple expense structure (i.e. a single advisory and a single services fee, with only the fixed fees of the Independent Trustees and auditors paid separately). As such, the Board focused its attention on the total expense ratios paid by other funds of similar size and category when considering the individual components of the expense ratios. The Board also recognized that investors are often required to pay distribution fees (loads) over and above the amounts identified in the expense ratio comparison reviewed by the Board, whereas no such fees are paid by Madison Mosaic shareholders.
The Trustees sought to ensure that fees were adequate so that the Advisor did not neglect its management responsibilities for the Trusts in favor of more profitable accounts. At the same time, the Trustees sought to ensure that compensation paid to the Advisor was not unreasonably high. The Board reviewed materials demonstrating that although the Advisor is compensated for a variety of the administrative services it provides or arranges to provide pursuant to its Services Agreements, such compensation generally does not cover all costs due to the relatively small size of the funds in the Madison Mosaic family. Administrative, operational, regulatory and compliance fees and costs in excess of the Services Agreement fees are paid by the advisor from its investment advisory fees earned. For these reasons, the Trustees recognized that examination of total expense ratios compared to those of other investment companies was more meaningful than a simple comparison of basic investment management only fee schedules.
In reviewing costs and profits, the Trustees recognized that Madison Mosaic Funds are to a certain extent subsidized by the greater Madison Investment Advisors, Inc. organization because the salaries of all portfolio management personnel, trading desk personnel, corporate accounting personnel and employees of the Advisor who serve as officers of the funds, as well as facility costs (rent), could not be supported by fees received from the funds alone. However, although Madison Mosaic represents only a few hundred million dollars of assets out of the multiple billions of assets managed by the Madison Investment Advisors, Inc. organization in Wisconsin at the time of the meeting, the Madison Mosaic family is profitable to the advisor at the margin because such salaries and fixed costs are proportionately paid from revenue generated by management of the remaining assets. The Trustees reviewed a profitability analysis of the funds and recognized that, as explained above, full salaries of all portfolio managers had not been factored into the analyses. As a result, although the fees paid by each respective Madison Mosaic fund at its present size might not be sufficient to profitably support a stand-alone mutual fund complex, the funds are reasonably profitable to the advisor as part of its larger, diversified organization. The Trustees
Madison Mosaic Government Money Market 15
also recognized that Madison Mosaics reputation benefited the Advisors reputation in attracting separately managed accounts and other investment advisory business. In sum, the Trustees recognized that Madison Mosaic Funds are important to the Advisor, are managed with the attention given to other firm clients and are not treated as loss leaders.
The Board engaged in a general and detailed discussion regarding fees. As part of the Boards review of the costs of services and the profits to be realized by the Advisor, the Board considered the reasonableness and propriety of the securities research and so-called soft dollar benefits, if any, that the advisor receives in connection with brokerage transactions. The Trustees recognized that soft-dollar benefits were not generated by fixed-income transactions.
The Trustees recognized that the advisor continues to waive fees and expenses applicable to the Fund.
With regard to the extent to which economies of scale would be realized as a fund grows, the Trustees recognized that Madison Mosaic Funds, both individually and as a complex, remain small and that economies of scale would likely be addressed after funds see assets grow significantly beyond their current levels. In light of their size, the Trustees noted that at current asset levels, it was premature to discuss additional economies of scale.
Finally, the Board reviewed the role of Mosaic Funds Distributor, LLC. They noted that the Advisor pays all distribution expenses of Madison Mosaic Funds because the funds themselves do not pay distribution fees. Such expenses include FINRA regulatory fees and bluesky fees charged by state governments in order to permit the funds to be offered in the various United States jurisdictions.
Based on all of the material factors explained above, plus a number of other matters that the Trustees are generally required to consider under guidelines developed by the Securities and Exchange Commission, the Trustees concluded that Madisons contract should be renewed for another year.
16 Annual Report September 30, 2008
The Madison Mosaic Family of Mutual Funds
Madison Mosaic Equity Trust
Investors Fund
Balanced Fund
Mid-Cap Fund
Foresight Fund
Madison Institutional Equity Option Fund
Madison Mosaic Income Trust
Government Fund
Intermediate Income Fund
Institutional Bond Fund
Corporate Income Shares (COINS) Fund
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(R)
c/o US Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
TELEPHONE NUMBERS
Shareholder Service
Toll-free nationwide: 888-670-3600
Mosaic Tiles (24 hour automated information)
Toll-free nationwide: 800-336-3600
550 Science Drive
Madison, Wisconsin 53711
(Madison Mosaic logo)
Madsion Mosaic Funds
www.mosaicfunds.com
SEC File Number 811-2910
Item 2. Code of Ethics.
(a) The Trust has adopted a code of ethics that applies to the Trusts principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, regardless of whether these individuals are employed by the Trust or a third party. The code was first adopted during the fiscal year ended September 30, 2003.
(c) The code has not been amended since it was initially adopted.
(d) The Trust granted no waivers from the code during the period covered by this report.
(f) Any person may obtain a complete copy of the code without charge by calling Madison Mosaic Funds at 800-368-3195 and requesting a copy of the Madison Mosaic Funds Sarbanes Oxley Code of Ethics.
Item 3. Audit Committee Financial Expert.
In July 2008, Lorence R. Wheeler, an independent Trustee and a member of the Trusts audit committee, was elected to serve as the Trusts audit committee financial expert among the three Mosaic independent Trustees who so qualify to serve in that capacity. He succeeded Mr. Philip E. Blake who served in that capacity from July 2007 through July 2008.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. Note that fees are accrued pursuant to the Services Agreement, but are paid directly to the accountants. Total audit fees paid (or to be paid) to the registrant's principal accountant for the fiscal years ended September 30, 2008 and 2007, respectively, out of the Services Agreement fees collected from all Madison Mosaic Funds were $88,500 ($113,750 including the Madison Strategic Sector Premium Fund, an affiliated closed-end fund ("MSP")) and $86,500 ($111,500 including MSP). Of these amounts, approximately $5,000 and $5,000, respectively, was or will be attributable to the registrant and the remainder was or will be attributable to audit services provided to other Madison Mosaic Funds registrants.
(b) Audit-Related Fees. Not applicable.
(c) Tax-Fees. Not applicable.
(d) All Other Fees. Not applicable.
(e) (1) Before any accountant is engaged by the registrant to render audit or non-audit services, the engagement must be approved by the audit committee as contemplated by paragraph (c)(7)(i)(A) of Rule 2-01of Regulation S-X.
(2) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments
Schedule included as part of the report to shareholders filed under Item 1 of this Form.
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.
The Trust does not normally hold shareholder meetings. There have been no changes to the Trust's procedures during the period covered by this report.
Item 11. Controls and Procedures.
(a) The Trusts principal executive officer and principal financial officer determined that the Trusts 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 Trusts 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 Government Money Market Trust
By: (signature)
W. Richard Mason, Secretary
Date: November 19, 2008
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: November 19, 2008
By: (signature)
Greg Hoppe, Chief Financial Officer
Date: November 19, 2008
Form N-CSR Certifications
I, Greg Hoppe, certify that:
1. I have reviewed this report on Form N-CSR of Madison Mosaic Government Money Market;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly represent in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting 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 registrants internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 19, 2008
(signature)
Greg Hoppe
Chief Financial Officer
I, Katherine L. Frank, certify that:
1. I have reviewed this report on Form N-CSR of Madison Mosaic Government Money Market;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly represent in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 19, 2008
(signature)
Katherine L. Frank
Chief Executive Officer
Certification under Section 906 of Sarbanes Oxley (18 USC 1350)
Madison Mosaic Government Money Market Trust
Annual Report dated September 30, 2008
The undersigned certify that this periodic report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d) and the information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer.
(signature) (signature)
Katherine L. Frank
Greg Hoppe
Chief Executive Officer
Chief Accounting Officer
Dated this 19th day of November, 2008
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Madison Mosaic Government Money Market Trust and will be retained by Madison Mosaic Government Money Market Trust and furnished to the SEC or its staff upon request.
Mosaic/Madison Funds
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
The following code of ethics is designed to address the disclosure requirements of Item 2 of Form N-CSR, which implements Section 406 of the Sarbanes-Oxley Act of 2002 concerning disclosure of a code of ethics for principal executive and senior financial officers. |
I. Covered Officers/Purpose of the Code
Mosaic Funds code of ethics (this "Code") for the investment companies within the complex (collectively, "Funds" and each "the Company" or "a Company") applies to the Companys Principal Executive Officer and Principal Financial Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting:
- honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
- full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company;
- compliance with applicable laws and governmental rules and regulations;
- the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
- accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest
Overview. A "conflict of interest" occurs when a Covered Officers private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company.
Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The Company's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds Boards of Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company.
Each Covered Officer must:
- not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company;
- not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Company;
- not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions (recognizing that such matters are addressed in the Companys and the Companys investment managers general Code of Ethics and Rules to Prevent Insider Trading); and
- not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith.
There are some conflict of interest situations that should always be discussed with the General Counsel or other senior officer of the Company not otherwise covered by this Code if material. Examples of these include:
- service as a director on the board of any public or private company;
- the receipt of any gifts provided the value of such gifts do not exceed $100 per person per year, but not including the occasional meal, ticket to a sporting event or theater, or comparable entertainment from any company with which the Company or its affiliates has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;
- any ownership interest in, or any consulting or employment relationship with, any of the Companys service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof;
- a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officers employment, such as compensation or equity ownership.
III. Disclosure and Compliance
- Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Company;
- each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Companys directors and auditors, and to governmental regulators and self-regulatory organizations;
- each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and
- it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.
IV. Reporting and Accountability
Each Covered Officer must:
- upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board, or orally confirm such receipt in person before the Board (as reflected in the Companys minutes) that he has received, read, and understands the Code;
- annually thereafter affirm to the Board that he has complied with the requirements of the Code; and
- notify the General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel shall report any such violations to the Audit Committee of the Company.
The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the any of the officers covered by this Code will be considered by the Audit Committee (the "Committee")].
The Funds will follow these procedures in investigating and enforcing this Code:
- the General Counsel will take all appropriate action to investigate any potential violations reported to him;
- if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action;
- any matter that the General Counsel believes is a violation will be reported to the Committee;
- if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to end the Covered Officers association with the Funds;
- the Committee will be responsible for granting waivers, as appropriate; and
- any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.
V. Other Policies and Procedures
This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds and their investment advisers and principal underwriters codes of ethics under Rule 17j-1 under the Investment Company Act and the advisers more detailed policies and procedures set forth in the Madison Investment Advisors, Inc./Madison Scottsdale, LC/Mosaic Funds Compliance and Procedures Manual, including the Code of Ethics applicable to all employees and Policies and Procedures to Prevent Insider Trading, are separate requirements applying to the Covered Officers and others, and are not part of this Code.
VI. Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent trustees.
VII. Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Company, its adviser and the Committee.
VIII. Internal Use
The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion.
Adopted by the Board on July 23, 2003 and by the Board of the Madison Strategic Sector Premium Fund on March 2, 2005.
Exhibit A
Persons Covered by this Code of Ethics
Katherine L. Frank, Chief Executive Officer
Greg Hoppe, Chief Financial Officer
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