Substances excreted by actively growing moss protonema enhance growth of Geosiphon hyphae and stimulate hormogonia formation by Nostoc. Hyphal tips set free a part of the fungal protoplast which incorporates Nostoc material and afterwards is again enclosed by a cell wall. This new "lateral branch" of a hypha becomes a vesicle and forms further hyphae. Only vesicles contain Nostoc material, each vesicle incorporates its own endosymbiont from outside the fungus.