As Filed with the
Commission on January 30, 1996
Registration No. 2-77986
SEC File No. 811-3486
Securities and Exchange Commission
Washington, D.C.
FORM N-1A
Registration Statement Under the Securities Act of 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 19 X
Registration Statement Under the Investment Company Act
of 1940 X
Amendment No. 21
GIT Tax-Free Trust
(Exact Name of Registrant as Specified in Charter)
1655 Fort Myer Drive, Arlington, Virginia 22209
Registrant's Telephone Number: (703) 528-3600
W. Richard Mason, Assistant Secretary
GIT Tax-Free Trust
1655 Fort Myer Drive
Arlington, Virginia 22209
(Name and Address of Agent for Service)
Copy to:
John A. Dudley, Esquire
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
__X__ on February 1, 1996 pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)(1)
_____ on ________________ pursuant to Rule 485(a)(1)
_____ 75 days after filing pursuant to Rule 485(a)(2)
_____ on ________________ pursuant to Rule 485(a)(2)
The Registrant has registered an indefinite number of its
shares pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Registrant's Notice under Rule 24f-2 for the
fiscal year ended September 30, 1994 was filed on November 28,
1994.
<PAGE>
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Prospectus
February 1, 1996
GIT
GIT Investment Funds
<PAGE>
Table of Contents
Features 2
Expense Summary 2
Financial Highlights 3
About Tax-Free Trust 5
Investment Objective 5
Investment Policies 5
Mangement of the Trust 8
The Trust and Its Shares 9
Dividends 10
Performance Information 10
Taxes 10
Net Asset Value 11
How to Purchase and Redeem Shares 11
Office
1700 North Moore Street
Arlington, VA 22209-1903
Custodian
Star Bank, N.A.
Cincinnati, OH 45202
Independent Auditors
Ernst & Young LLP
<PAGE>
Prospectus/February 1, 1996
1655 Fort Myer Drive, Arlington, Virginia 22209-3108
GIT Tax-Free Trust
Arizona Portfolio
Missouri Portfolio
National Portfolio
Maryland Portfolio
Virginia Portfolio
Money Market Portfolio
GIT Tax-Free Trust is a mutual fund whose goal is to provide
its investors dividend income free of income tax. The Trust
seeks to achieve its objectives through investment in tax-
free municipal securities.
The Arizona, Maryland, Missouri and Virginia Portfolios.
For long-term investing to obtain dividend income free of
both federal and state income tax for those who purchase
shares in the portfolio of their home state. Value per share
may increase or decrease due to fluctuations in the market
value of portfolio securities.
The National Portfolio. For long-term investing to obtain
higher yields free of federal income tax; the portfolio may
include lower-rated securities. Value per share may increase
or decrease due to fluctuations in the market value of
portfolio securities.
The Money Market Portfolio. For short-term investing to
obtain high income free of federal income tax with liquidity
and relative safety of principal. Yield varies daily. The
portfolio is managed for a stable $1.00 per share price,
although there is no assurance that this price per share can
be maintained on a continuous basis. Investments in the
Trust are neither insured nor guaranteed by the United
States government.
This Prospectus is intended to be a concise statement of
information which investors should know before investing.
After reading the Prospectus, it should be retained for
future reference. A paper copy of the prospectus is
available to investors who received an electronic prospectus
without charge by calling or writing the Trust.
A Statement of Additional Information concerning the Trust
bearing the same date as this prospectus has been filed with
the Securities and Exchange Commission and is incorporated
herein by reference. It is available without charge by
calling or writing the Trust.
Shares of the Trust are not deposits or obligations of, or
guaranteed or endorsed by, any bank. Shares are not
federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Bankers Finance Investment Management Corp.
Investment Adviser
<PAGE>
Features
*No commissions or sales charges
*No "12b-1" fees
*Tax-free dividends from day of investment
to day of withdrawal
*Invest or withdraw funds by mail,
wire, transfer, or in person
*Check-writing privileges
*Telephone exchange and redemption
$2500 minimum investment
Expense Summary
The following table describes certain expenses attributable
to the Trust and to a hypothetical investment in each
portfolio.
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Shareholder Transaction Expenses
Maximum Sales Load Imposed
on Purchases None None None
Maximum Sales Load Imposed
on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees 0.625% 0.625% 0.625%
12b-1 Fees None None None
Other Expenses 0.689% 0.872% 0.688%
Total Fund Operating
Expenses 1.314% 1.497% 1.313%
Example:
You would pay the following
expenses on a $1,000 investment,
assuming (1) five percent annual
return and (2) redemption at
the end of each time period.
1 year $13 $15 $13
3 years $42 $47 $42
5 years $72 $82 $72
10 years $158 $179 $158
Money
Virgina National Market
Portfolio Portfolio Portfolio
Shareholder Transaction Expenses
Maximum Sales Load Imposed
on Purchases None None None
Maximum Sales Load Imposed
on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees 0.625% 0.625% 0.500%
12b-1 Fees None None None
Other Expenses 0.518% 0.551% 0.307%
Total Fund Operating
Expenses 1.143% 1.176% 0.807%
Example:
You would pay the following
expenses on a $1,000 investment,
assuming (1) five percent annual
return and (2) redemption at the
end of each time period.
1 year $12 $12 $8
3 years $36 $37 $26
5 years $63 $65 $45
10 years $139 $143 $100
*After expense reimbursements.
The purpose of this table is to assist investors in
understanding the various costs and expenses that an
investor will bear directly or indirectly in connection with
an investment in a Portfolio (see also "Management of the
Trust").
<PAGE>
The "Annual Fund Operating Expenses" shown for the Money
Market Portfolio was reduced because the Adviser currently
waives the billing of certain reimbursable expenses. Had
such costs been incurred by the Money Market Portfolio, its
"Other Expenses" would have been 0.572%, which would have
made its "Total Fund Operating Expenses" 1.072%.
The "Annual Fund Operating Expenses" shown for the Maryland
Portfolio represent the amounts that would have been payable
to the Adviser, absent a fee reduction by the Adviser. The
Adviser has waived its management fees, however, and has
assumed responsibility for making payments to offset certain
operating expenses otherwise payable by the portfolio.
With this reduction, management fees were waived and total
operating expenses represented 0.872% of the average net
assets of the fund for the fiscal year ending September 30,
1995.
The hypothetical example shown above is based on the
restated expense levels listed under the caption "Annual
Fund Operating Expenses" and is intended to provide the
investor with an understanding of the level of expenses that
might be incurred in the future. The five percent return
used in the example is arbitrary and is for illustrative
purposes only; it should not be considered representative of
the Trust's past or future performance, nor should the
expenses in the example be considered representative of
future expenses, which may actually be greater or less than
those shown.
Financial Highlights
The financial highlights data for a share outstanding and
other performance information for the fiscal year ended
September 30, 1995 appearing below is derived from the
financial statements audited by Ernst & Young LLP,
independent auditors, whose report appears in the Annual
Report to Shareholders. This report is incorporated by
reference in the Statement of Additional Information and is
available by calling or writing the Trust. The per share
information for the fiscal years ended September 30, 1986,
1987, 1988, 1989, 1990, 1991, 1992, 1993 and 1994 has been
derived from the financial statements audited by Ernst &
Young LLP.
1990* 1991 1992 1993 1994 1995
Arizona Portfolio
Net asset value
beginning of
period $10.000 $9.703 $10.187 $10.568 $11.208 $9.706
Net investment
income $ 0.590 $0.569 $0.528 $ 0.490 $ 0.436 $0.440
Net realized &
unrealized
gains
(losses) on
securities $(0.297) $0.484 $0.434 $0.786 $(1.102) $0.407
Total from
investment
operations $ 0.293 $1.053 $0.962 $1.276 $(0.666) $0.847
Distributions
from net
investment
income $(0.590)$(0.569)$(0.528)$(0.490)$(0.436)$(0.440)
Distributions
from capital
gains -- -- $(0.053)$(0.146)$(0.400) --
Total
distribu-
tions $(0.590) $(0.569)$(0.581)$(0.636)$0.836)$(0.440)
Net asset
value end
of period $9.703 $10.187 $10.568 $11.208 $9.706 $10.113
Total return 3.25%^ 11.11% 9.74% 12.57% (6.20)% 8.95%
Net assets end
of period
(thousands) $3,831 $8,061 $11,911 $15,471 11,815 $10,009
Ratio of
expenses
to average
net assets -- 0.47% 1.15% 1.23% 1.29% 1.31%
Ratio of net
investment
income to
average net
assets 6.59%^ 5.61% 5.14% 5.54% 4.23% 4.48%
Portfolio
turnover 14% 57% 23% 63% 67% 24%
*For the period from October 13, 1989 (inception) to
September 30, 1990
Maryland Portfolio
1993* 1994 1995
Net asset value
beginning of
period $10.000 $10.441 $9.323
Net investment
income $0.274 $0.455 $.0418
Net realized &
unrealized
gains
(losses) on
securities $0.441 $(1.102) $0.415
Total from
investment
operations $0.715 $(0.647) $0.833
Distributions
from net
investment
income $(0.274) $(0.455) $(0.418)
Distributions
from capital
gains -- $(0.016) --
Total
distribu-
tions $(0.274) $(0.471) $(0.418)
Net asset
value end
of period $10.441 $9.323 $9.738
Total return 11.91%^ (6.33)% 9.17%
Net assets end
of period
(thousands) $3,377 $3,083 $2,880
Ratio of
expenses
to average
net assets 0.20%^ 0.64% 0.87%
Ratio of net
investment
income to
average net
assets 4.72%<F2> 4.60% 4.42%
Portfolio
turnover 35% 78% 9%
*For the period from February 10, 1993 (inception) to
September 30, 1993
Missouri Portfolio
1990* 1991 1992 1993 1994 1995
Net asset value
beginning of
period $10.000 $9.684 $10.117 $10.468 $11.173 $9.728
Net investment
income $0.580 $0.585 $0.514 $.0494 $0.437 $0.436
Net realized &
unrealized
gains
(losses) on
securities $(0.316) $0.433 $0.377 $0.726 $(1.058) $0.405
Total from
investment
operations $0.264 $1.018 $0.891 $1.220 $(0.621) $0.841
Distributions
from net
investment
income $(0.580)$(0.585)$(0.514)$(0.494)$(0.437)$(0.436)
Distributions
from capital
gains -- -- $(0.026) $(0.021)$(0.387) --
Total
distribu-
tions $(0.580) $(0.585)$(0.540) $(0.515) $0.824)$(0.436)
Net asset
value end
of period $9.684 $10.117 $10.468 $11.173 $9.728 $10.133
Total return 2.94%^ 10.80% 9.06% 11.98% (5.80)% 8.87%
Net assets end
of period
(thousands) $4,079 $7,227 $11,023 $14,001 $11,490 $11,394
Ratio of
expenses
to average
net assets -- 0.45% 1.18% 1.23% 1.29% 1.31%
Ratio of net
investment
income to
average net
assets 6.56%^ 5.85% 5.05% 4.59% 4.23% 4.43%
Portfolio
turnover 3% 33% 8% 65% 52% 16%
*For the period from October 12, 1989 (inception) to
September 30, 1990
Virginia Portfolio
1988* 1989 1990
Net asset value
beginning of
period $10.000 $11.051 $10.891
Net investment
income $0.714 $0.625 $.0624
Net realized &
unrealized
gains
(losses) on
securities $1.051 $(0.023) $(0.059)
Total from
investment
operations $1.765 $0.602 $0.565
Distributions
from net
investment
income $(0.714) $(0.625) $(0.624)
Distributions
from capital
gains -- $(0.137) --
Total
distribu-
tions $(0.714) $(0.762) $(0.624)
Net asset
value end
of period $11.051 $10.891 $10.832
Total return 19.23%^ 5.61% 5.28%
Net assets end
of period
(thousands) $18,622 $20,471 $24,607
Ratio of
expenses
to average
net assets 0.72%^ 1.22% 1.25%
Ratio of net
investment
income to
average net
assets 6.41%^ 5.71% 5.69%
Portfolio
turnover 58% 34% 11%
Virginia Portfolio
1991 1992 1993 1994 1995
Net asset value
beginning of
period $10.832 $11.351 $11.621 $12.372 $10.631
Net investment
income $0.609 $0.592 $0.569 $0.479 $0.503
Net realized &
unrealized
gains
(losses) on
securities $0.519 $0.387 $0.871 $(1.146) $0.484
Total from
investment
operations $1.128 $0.979 $1.440 $(0.667) $0.987
Distributions
from net
investment
income $(0.609) $(0.592) $(0.569) $(0.479) $(0.503)
Distributions
from capital
gains -- $(0.117) $(0.120) $(0.595) --
Total
distribu-
tions $(0.609) $(0.709) $(0.689) $1.074) $(0.503)
Net asset
value end
of period $11.351 $11.621 $12.372 $10.631 $11.115
Total return 10.66% 8.92% 12.85% (5.67)% 9.54%
Net assets end
of period
(thousands) $30,696 $37,421 $44,092 $35,550 $33,822
Ratio of
expenses
to average
net assets 1.18% 1.13% 1.10% 1.18% 1.14%
Ratio of net
investment
income to
average net
assets 5.47% 5.20% 4.80% 4.23% 4.68%
Portfolio
turnover 73% 74% 80% 104% 55%
*For the period from October 13, 1987 to September 30, 1993
National Portfolio*
1986 1987 1988 1989 1990
Net asset value
beginning of
period $10.486 $11.204 $10.376 $10.757 $10.597
Net investment
income $0.860 $0.743 $0.758 $0.728 $0.693
Net realized &
unrealized
gains
(losses) on
securities $1.530 $(0.748) $0.381 $(0.160) $(0.233)
Total from
investment
operations $2.390 $(0.005) $1.139 $0.568 $0.460
Distributions
from net
investment
income $(0.860) $(0.743) $(0.758) $(0.728) $(0.693)
Distributions
from capital
gains $(0.812) $(0.080) -- -- --
Total
distribu-
tions $(1.672) $(0.823) $(0.758) $(0.728) $(0.693)
Net asset
value end
of period $11.204 $10.376 $10.757 $10.597 $10.364
Total return 23.72% 0.25% 11.31% 5.44% 4.38%
Net assets end
of period
(thousands) $43,188 $44,704 $39,833 $41,051 $40,360
Ratio of
expenses
to average
net assets 1.16% 0.99% 1.16% 1.19% 1.24%
Ratio of net
investment
income to
average net
assets 7.60% 7.18% 7.15% 6.78% 6.54%
Portfolio
turnover 117% 66% 77% 58% 41
National Portfolio*
1991 1992 1993 1994 1995
Net asset value
beginning of
period $10.364 $10.794 $11.329 $11.910 $9.851
Net investment
income $0.632 $0.605 $0.550 $0.420 $0.446
Net realized &
unrealized
gains
(losses) on
securities $0.430 $0.535 $0.793 $(1.122) $0.360
Total from
investment
operations $1.062 $1.140 $1.343 $(0.702) $0.806
Distributions
from net
investment
income $(0.632) $(0.605) $(0.550) $(0.420) $(0.446)
Distributions
from capital
gains -- -- $(0.212) $(0.937) --
Total
distribu-
tions $(0.632) $(0.605) $(0.762) $(1.357) $(0.446)
Net asset
value end
of period $10.794 $11.329 $11.910 $9.851 $10.211
Total return 10.50% 10.83% 12.44% (6.25)% 8.40%
Net assets end
of period
(thousands) $40,352 $41,273 $42,483 $34,072 $32,734
Ratio of
expenses
to average
net assets 1.24% 1.17% 1.10% 1.23% 1.18%
Ratio of net
investment
income to
average net
assets 5.95% 5.47% 4.83% 3.98% 4.49%
Portfolio
turnover 91% 114% 212% 175% 56%
*Known as the High Yield Portfolio prior to February 1, 1994
Money Market Portfolio
1986 1987 1988 1989 1990
Net asset value
beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00
Net investment
income $0.04 $0.04 $0.04 $0.05 $0.05
Net realized &
unrealized
gains
(losses) on
securities -- -- -- -- --
Total from
investment
operations $0.04 $0.04 $0.04 $0.05 $0.05
Distributions
from net
investment
income $(0.04) $(0.04) $(0.04) $(0.05) $(0.05)
Distributions
from capital
gains -- -- -- -- --
Total
distribu-
tions $(0.04) $(0.04) $(0.04) $(0.05) $(0.05)
Net asset
value end
of period $1.00 $1.00 $1.00 $1.00 $1.00
Total return 4.42% 3.83% 4.26% 4.26% 5.36%
Net assets end
of period
(thousands) $21,362 $28,636 $22,256 $24,965 $23,463
Ratio of
expenses
to average
net assets 0.84% 0.83% 0.84% 0.82% 0.81%
Ratio of net
investment
income to
average net
assets 4.31% 3.79% 4.35% 5.51% 5.22%
Portfolio
turnover -- -- -- -- --
Money Market Portfolio
1991 1992 1993 1994 1995
Net asset value
beginning of
period $1.000 $1.000 $1.000 $1.000 $1.000
Net investment
income $0.04 $0.03 $0.02 $0.015 $0.028
Net realized &
unrealized
gains
(losses) on
securities -- -- -- -- --
Total from
investment
operations $0.040 $0.030 $0.020 $0.015 $0.028
Distributions
from net
investment
income $(0.040) $(0.030) $(0.020) $(0.015) $(0.028)
Distributions
from capital
gains -- -- -- -- --
Total
distribu-
tions $(0.040) $(0.030) $(0.020) $0.015) $(0.028)
Net asset
value end
of period $1.000 $1.000 $1.000 $1.000 $1.000
Total return 4.13% 2.57% 1.53% 1.56% 2.87%
Net assets end
of period
(thousands) $17,844 $14,861 $13,391 $8,916 $8,454
Ratio of
expenses
to average
net assets 0.81% 0.83% 0.81% 0.81% 0.81%
Ratio of net
investment
income to
average net
assets 4.12% 2.55% 1.52% 1.52% 2.83%
Portfolio
turnover -- -- -- -- --
^Annualized
<PAGE>
During the years ended September 30, 1995, 1994, 1993, 1992
and 1991, the Adviser waived the billing of certain
reimbursable expenses with respect to the Money Market
Portfolio. Had the Adviser not waived such expenses during
these periods for the Money Market Portfolio, the ratio of
expenses to average net assets would have been 1.07%, 1.02%,
1.03%, 1.02% and 1.01%, respectively, and the ratio of net
investment income to average net assets would have been
2.56%, 1.31%, 1.30%, 2.36% and 3.91%, respectively. For the
years ended September 30, 1995 and 1994 and for the period
from February 10, 1993 to September 30, 1993, the Adviser
deferred the billing of certain reimbursable expenses and
waived the advisory fee with respect to the Maryland
Portfolio. Had the Adviser not waived or deferred such
expenses, the Maryland Portfolio's annualized ratio of
expenses to average net assets, for the years ended
September 30, 1995 and 1994 and for the period from February
10, 1993 to September 30, 1993, would have been 1.50%, 1.34%
and 1.74%, respectively, and the annualized ratio of net
investment income to average net assets would have been
3.80%, 3.90% and 3.18%, respectively.
About Tax-Free Trust
GIT Tax-Free Trust ("the Trust") is a diversified open-end
management investment company, commonly known as a "mutual
fund." GIT Tax-Free Trust was organized as a Massachusetts
business trust under a Declaration of Trust dated June 8,
1982. The Trust is managed by Bankers Finance Investment
Management Corp. (the "Adviser") of the same address as the
Trust.
Only shares in the Trust's Arizona Portfolio, Maryland
Portfolio, Missouri Portfolio, Virginia Portfolio, National
Portfolio and Money Market Portfolio are offered by this
prospectus. (References hereinafter to the "portfolios" or
each "portfolio" pertain only to these six portfolios,
unless specifically stated otherwise.) The Trust may offer
additional portfolios which are managed independently.
Currently, there are no such additional portfolios.
Investment Objective
The objective of each portfolio is to receive income from
municipal securities and to distribute that income to its
investors as tax-free dividends. Dividends from the Arizona,
Maryland, Missouri and Virginia Portfolios are intended to
be exempt from state as well as federal income taxes for
those who invest in the portfolio of their home state. There
can be no assurance that the objective of any portfolio will
be achieved.
Each portfolio seeks to achieve its objective consistent
with the quality rating guidelines described in this
prospectus and with the intention to maintain shareholder
liquidity. Although the investment objective of any
portfolio may be changed without shareholder approval,
shareholders will be notified in writing prior to any
material change.
Investment Policies
Each portfolio seeks to achieve its objective through
diversified investment in municipal securities. For the
Arizona, Maryland, Missouri and Virginia Portfolios, such
securities, in the opinion of counsel to the issuer, are
exempt from federal and state income tax for residents of
the state of issue. For the National and Money Market
Portfolios, such securities, in the opinion of counsel to
the issuer, are exempt from federal income tax. These
securities may be issued by state governments, their
political subdivisions, municipalities and public
authorities. Investment may also be made in securities that
pay interest which, under Federal law, is exempt from
federal and state income taxation, such as securities issued
by the District of Columbia, Puerto Rico, the Virgin Islands
and Guam.
As a fundamental policy that cannot be changed without
shareholder approval, the Arizona, Maryland, Missouri and
Virginia Portfolios each will seek to maintain its tax
exempt status by meeting the requirement that 80% of the
portfolio's assets be invested in securities whose income is
exempt from both federal and its respective state income
tax, while the National
<PAGE>
and Money Market Portfolios each will seek to maintain its
tax exempt status by meeting the requirement that 80% of
assets be invested in securities whose income is exempt from
federal tax. Under normal circumstances, it is expected
that 100% of each portfolio will be invested in such tax-
exempt securities.
In order to ensure diversification, the Trust's fundamental
policies stipulate certain restrictions. No more than 5% of
each portfolio's assets may be invested in the securities of
one issuer (excluding U.S. Government securities and certain
instruments issued by domestic banks). No more than 25% of
each portfolio's assets may be invested in issuers in a
single industry. No more than 10% of any portfolio's assets
may be invested in illiquid securities, including restricted
securities, repurchase agreements that cannot be terminated
within seven days, privately arranged loans (to the extent
these are considered illiquid) and securities for which
market quotations are not readily available. No portfolio
may borrow, except as a temporary measure for extraordinary
purposes, and then only in amounts not exceeding 5% of its
net assets. These fundamental policies cannot be changed
without a shareholder vote.
The Trust may invest more than 5% of the net assets of any
portfolio in municipal lease obligations which are
determined, based on guidelines adopted by the Trustees for
making such determinations, to be liquid for purposes of the
Trust's 10% limitation on investments in illiquid
securities. These guidelines require consideration of the
frequency of trades, nature of and number of dealers in the
market for such obligations and assurance that their
marketability will be maintained throughout the time the
instrument is held.
Although the portfolios do not intend to engage in short-
term trading, the Adviser is free to alter the composition
of any portfolio with regard to quality and maturity, and it
may sell securities prior to maturity. Turnover for each
portfolio is generally not expected to exceed 100% (except
for the Money Market Portfolio for which turnover statistics
are inappropriate). Sales of portfolio securities may result
in realized gains and losses which are not exempt from
taxation.
Each portfolio other than the Money Market Portfolio invests
in long-term securities, which normally provide a higher
return than comparably rated shorter-term securities, but
have a greater tendency to fluctuate in value as interest
rates change. Any of these portfolios may have an average
maturity of 20 years or more. Average maturities of 15 to
20 years may be more typical, and an average maturity of 10
years or less may be appropriate in some market conditions.
Arizona, Maryland, Missouri and Virginia Portfolios. The
lowest grade securities in which any portfolio will make an
investment are Medium Grade securities. (BBB or greater, as
such quality rating term is defined in the Statement of
Additional Information.)
National Portfolio. The Adviser intends to invest the
majority of the National Portfolio in Medium Grade
securities, with the remainder of the portfolio in High and
Low Grade securities.
Money Market Portfolio. The Money Market Portfolio invests
in High Grade municipal securities having a maximum
effective maturity of 13 months. It will not purchase any
investment which at the time of purchase would cause the
average effective maturity of the portfolio to exceed 90
days. The Adviser intends to manage the portfolio in
accordance with current regulations of the Securities and
Exchange Commission applicable to funds seeking to maintain
a constant price per share of $1.00. There is no assurance
that the portfolio will be able to maintain a constant share
price of $1.00.
Investment Considerations
The value of shares purchased in each portfolio other than
the Money Market Portfolio will fluctuate due to changes in
the value of securities held by such portfolio. At the time
an investor redeems shares, they may be worth more or less
than their original cost. While dividend income is expected
to be tax-free, gains and losses incurred when shares are
sold will have tax consequences for the investor.
The Money Market Portfolio is intended to maintain a
constant share price of $1.00. This $1.00 share price
<PAGE>
has been maintained since inception, but there can be no
assurance that this price will be maintained in the future.
Municipal securities tend to increase in value when
prevailing interest rates fall, and to decrease in value
when prevailing interest rates rise. Longer maturities
increase the magnitude of these changes. Investments with
the highest yields may have longer maturities or lower
quality ratings than other investments, increasing the
possibility of fluctuations in value per share. Municipal
securities may be subject to call features which could
affect yield.
Each portfolio other than the Money Market Portfolio may
invest in Medium Grade securities. For these securities,
factors giving security to principal and interest are
considered adequate for the present, but certain protective
elements may be lacking or may be unreliable over the long
run. These securities may have speculative characteristics.
If any issuer of securities held by a portfolio is unable to
meet its financial obligations, that portfolio's income,
ability to preserve capital and liquidity may be adversely
affected.
Tax-exempt securities generally are subject to credit risks,
such as possible default, and the marketability of such
securities may be generally limited, making it difficult to
dispose of large investments advantageously.
The tax-exempt status of municipal securities could be
affected by future changes in the tax laws or by the errors
and omissions of issuers or their counsel. Under certain
extraordinary conditions, the Adviser may find it advisable
to make investments that result in income subject to federal
or state taxation.
Portfolio-Specific Considerations
Arizona, Maryland, Missouri and Virginia Portfolios. Since
each portfolio will invest primarily in securities issued by
one state, each portfolio is susceptible to changes in value
due to political and economic factors affecting its state. A
municipal bond fund which is not concentrated in one state
would be less susceptible to such risks.
Arizona Portfolio. Arizona's economy is based primarily on
tourism, government, retail trade, construction and
manufacturing. The state has experienced a significant
reduction in defense contractor employment in recent years
while the retail and construction sectors have begun to
experience labor shortages. It is not possible to predict
whether these difficulties might affect the state's finances
in the future. The State of Arizona does not issue general
obligation bonds.
Maryland Portfolio. In recent years, the federal and local
government and the information technology and life sciences
industries (including health services) have become
increasingly important to maintaining the employment base in
Maryland.
Government spending reductions, including defense-related
spending cuts, increasing competition concomitant with the
maturation of the information technologies industry and
pressures on health services providers to reduce costs could
adversely affect the Maryland economy to a greater degree
than that of other areas. Maryland's general obligation
bonds are characterized by AAA and Aaa ratings by Standard &
Poor's and Moody's, respectively.
Missouri Portfolio. Missouri has a well-diversified economy
based on manufacturing, commerce, trade, agriculture and
mining. Its general obligation bonds are rated AAA by
Standard & Poor's, and Aaa by Moody's. While service and
trade gains have offset recent losses in manufacturing
sector employment, the state's somewhat larger than average
dependence on manufacturing leaves its industry vulnerable
to possible cutbacks in defense spending.
Virginia Portfolio. The Virginia economy is based primarily
on manufacturing, government, agriculture, transportation,
mining and tourism. Because of its proximity to Washington,
DC, Virginia's economy may be more sensitive than other states
to Federal spending reductions. The Virginia state Constitution
mandates a balanced budget and contains certain restrictions
on the creation of debt. As of the date of this prospectus,
bonds representing general obligations of the Commonwealth
of Virginia carry ratings of AAA by Standard & Poor's and
Aaa by Moody's, which are the highest ratings assigned by
these agencies.
<PAGE>
National Portfolio. The portfolio may invest in securities
with lower quality ratings to increase yields. The lowest-
rated securities in which the portfolio may invest are those
rated "B," however, the portfolio held no securities rated
lower than BBB as of September 30, 1995, and the Adviser
does not anticipate investing in securities rated lower than
BBB. In general, securities rated BB or lower are high risk
and are commonly referred to as "junk" bonds.
If any issuer of securities held by any portfolio is unable
to meet its financial obligations, that portfolio's income
and ability to preserve capital and liquidity may be
adversely affected.
Specialized Investment Techniques
To achieve its objectives, each portfolio may use certain
specialized investment techniques, including investment in
securities with variable interest rates, "when-issued"
securities and securities with "put" rights. The Trust may
also invest in privately arranged loans and participations,
loans of portfolio securities, financial futures contracts
and repurchase agreements. These techniques may involve
certain risks, which are summarized below and are discussed
further in the Statement of Additional Information.
Variable rate securities periodically adjust their rates in
a fixed relationship to a recognized base rate. These
securities may offer higher yields than shorter-term
securities and less risk of market fluctuations than longer-
term securities with fixed interest rates. Variable rate
securities may not be rated as to investment quality and may
not have a readily available secondary market, and therefore
it could be difficult to sell them advantageously.
"When-issued" securities are purchased with payment and
delivery scheduled to take place at a future time.
Securities purchased for future delivery may cause changes
in the value of a portfolio, and they do not accrue interest
prior to the settlement date. The yield on such securities
may be less than that available from other securities at the
time of settlement. When engaging in a "when-issued"
transaction, the Trust relies on the other party to complete
the transaction and if the other party fails to do so, the
Trust might lose a more advantageous investment opportunity.
Securities with "put" rights give the Trust the right to
resell securities at a given price within a given time
period. If the party issuing the "put" or a third party
acting as guarantor were to fail in its obligation, the
Trust would own securities which would be worth less than
the price at which they were to have been sold with the
"put." Because the cost of a security with "put" rights is
higher than a comparable security without such rights, a
portfolio's investment in securities with "put" rights
decreases a portfolio's yield.
Management of the Trust
The Trustees. Under the terms of the Declaration of Trust,
which is governed by the laws of the Commonwealth of
Massachusetts, the Trustees are ultimately responsible for
the conduct of the Trust's affairs. They serve indefinite
terms of unlimited duration and they appoint their own
successors, provided that always at least two-thirds of the
Trustees have been elected by shareholders. The Declaration
of Trust provides that a Trustee may be removed at any
special meeting of shareholders by a vote of two-thirds of
the Trust's outstanding shares.
The Adviser. Bankers Finance Investment Management Corp.
administers approximately $250 million in assets and manages
the GIT family of mutual funds which includes stock, bond
and money market portfolios. The Adviser is also responsible
for the day-to-day administration of the Trust's activities.
The Adviser's sole stockholders are A. Bruce Cleveland,
currently a Trustee, and Michael D. Goth. The Adviser is a
successor to a corporation founded in 1975. The Adviser has
the same address as the Trust.
T. Daniel Gillespie, portfolio manager, has been responsible
for management of the Trust's portfolios since July 13,
1994. From 1991 until he joined the Adviser, Mr. Gillespie
managed municipal bond funds
<PAGE>
for the Rushmore Group of Funds. Prior to his work for
Rushmore, Mr. Gillespie gained experience with Wheat First
Securities. Charles J. Tennes, executive vice president,
who has been associated with the Adviser since 1985, has
been involved with the operation of the Trust's portfolios
since 1993.
Compensation. For its services under its Investment Advisory
Agreement with the Trust, the Adviser receives a fee,
payable monthly, calculated as 5/8 percent per annum of the
average daily net assets of each portfolio other than the
Money Market Portfolio and 1/2 percent per annum of the
average daily net assets of the Money Market Portfolio.
Distributor. GIT Investment Services, Inc. of the same
address as the Trust acts as the Trust's Distributor. The
Distributor is wholly owned by A. Bruce Cleveland.
Services Agreement. Under a separate Services Agreement with
the Trust, the Adviser provides operational and other
support services for which it is reimbursed at cost.
Transfer Agent and Dividend Paying Agent. The Trust acts as
its own transfer agent and dividend paying agent.
Expenses. The Trust is responsible for all of its expenses
not assumed by the Adviser, including the costs of the
following: shareholder services; legal, custodian and audit
fees; trade association memberships; accounting; certain
Trustees' fees and expenses; fees for registering the
Trust's shares; the preparation of prospectuses, proxy
materials and reports to shareholders; and the expense of
holding shareholder meetings. For the fiscal year ending
September 30, 1995 the expenses paid by each portfolio,
including advisory fees and reimbursable expenses paid to
the Adviser, were as follows: for the Arizona Portfolio,
$136,751; for the Maryland Portfolio, $25,840; for the
Missouri Portfolio, $146,184; for the Virginia Portfolio,
$381,385; for the National Portfolio, $382,804; and for the
Money Market Portfolio, $73,031.
The Trust and Its Shares
Under the terms of the Declaration of Trust, the Trustees
may issue an unlimited number of whole and fractional shares
of beneficial interest without par value for each series of
shares authorized by the Trustees. All shares issued will be
fully paid and nonassessable and will have no preemptive or
conversion rights. Under Massachusetts law, shareholders
may, under certain circumstances, be held personally liable
for the Trust's obligations. The Declaration of Trust,
however, provides indemnification out of Trust property for
any shareholder held personally liable for obligations of
the Trust.
Shares in six portfolios are currently authorized by the
Trustees: Arizona Tax-Free Portfolio, Maryland Tax-Free
Portfolio, Missouri Tax-Free Portfolio, Virginia Tax-Free
Portfolio, Tax-Free National Portfolio and Tax-Free Money
Market Portfolio. Shares of each portfolio are of a single
class, each representing an equal proportionate share in the
assets, liabilities, income and expense of its portfolio and
each having the same rights as any other share within the
series.
Each share has one vote, and fractional shares have
fractional votes. Except as otherwise required by applicable
regulations, any matter submitted to a vote will be voted on
by all shareholders without regard to series or class. For
matters where the interests of separate series or classes
are not identical, the question will be voted on separately
by each affected series or class. Voting is not cumulative.
The Trust does not intend to have regular shareholder
meetings. Shareholder inquiries can be made to the offices
of the Trust at the address on the cover of this
<PAGE>
Dividends
Each portfolio's net income is declared as dividends each
business day. Dividends are paid in the form of additional
shares credited to investor accounts at the end of each
calendar month, unless a shareholder elects in writing to
receive a monthly dividend check. Any net realized capital
gains will be distributed at least annually.
Performance Information
From time to time the Trust advertises its yield, tax
equivalent yield and total return. Such figures are based on
historical data and are not intended to indicate future
performance.
For advertising purposes the yield is calculated according
to a standard formula prescribed by the Securities and
Exchange Commission. For each portfolio other than the Money
Market portfolio, the formula divides the theoretical net
income per share during a 30-day period by the share price
on the last day of the period.
For the Money Market Portfolio, the prescribed formula
divides the net income earned on one share during a given
seven-day period by the initial value of that share
(normally $1.00), and expresses the result as an annualized
percentage. The Money Market Portfolio's "effective yield"
is calculated in a similar manner, except that the net
income earned during a seven-day period is assumed to be
reinvested at the same rate over a full year. This
calculation results in a slightly higher yield figure which
shows the effect of compounding.
While yield calculations ignore changes in share price,
total return calculations take such changes into account,
assuming that dividends and other distributions are
reinvested when paid.
In addition to average annual total returns, the Trust may
quote total returns over various periods and may quote the
aggregate total return for a period. The Trust may also cite
the ranking or performance of a portfolio as reported in the
public media or by independent performance measurement
firms.
Further information on the methods used to calculate each
portfolio's yield and total return may be found in the
Trust's Statement of Additional Information. The Trust's
Annual Report contains additional performance information. A
copy of the Annual Report may be obtained without charge by
calling or writing the Trust at the telephone number and
address on the cover of this prospectus.
Taxes
Federal Tax Considerations
For federal income tax purposes, the Trust intends to
maintain its status under Subchapter M of the Internal
Revenue Code as a regulated investment company by
distributing to shareholders 100% of its net income and net
capital gains for each portfolio. The Internal Revenue Code also
requires each portfolio to distribute at least 98% of net income
and capital gains realized from the sale of
investments by calendar year end in order to avoid a four
percent excise tax. The capital gain distribution is
determined as of October 31 each year. Capital gain
distributions, if any, are taxable to the shareholder. The
Trust will send shareholders an annual notice of dividends
and other distributions paid during the prior year. While
dividends will normally be exempt from income tax, capital
gain distributions are subject to taxation.
Because the share price fluctuates for each portfolio except
the Money Market Portfolio, redemption of shares by the
investor in such portfolios creates a capital gain or loss
which has tax consequences. It is the shareholder's
responsibility to calculate the cost basis of shares
purchased. Investors are advised to retain all statements
received from the Trust and to maintain accurate records of
their investments.
Investors who fail to provide a valid social security or tax
identification number may be subject to federal withholding
at a rate of 31% of dividends and any capital gain
distributions. Any fine assessed against the Trust
<PAGE>
which results from the investor's failure to provide a valid
social security or tax identification number will be charged
against the investor's account.
The Trust may purchase certain "private activity" bonds the
interest on which could become subject to alternative
minimum tax ("AMT"). Shareholders should add any income
attributable to these bonds (as reported by the Trust
annually) to other tax preference items and applicable
income adjustments to determine possible liability for AMT.
State Tax Considerations
Under existing laws of Arizona, Maryland, Missouri and
Virginia, dividends derived from their own obligations or
from the obligations of their political subdivisions are
exempt from state income tax for their own residents. Should
any portfolio fail to qualify as a separate "regulated
investment company," this exemption could be unavailable or
substantially limited.
While dividends from these four portfolios will normally be
exempt from income tax in their respective states, capital
gain distributions are subject to applicable state taxation
in Arizona, Missouri and Virginia. In Maryland, capital gain
derived from Maryland obligations is exempt from Maryland
state tax.
Normally, the percentage of the National or Money Market
Portfolio invested in the shareholder's home state becomes
the percentage of total dividend income exempt from state
taxes. Because tax laws vary from state to state,
shareholders should consult their tax advisers concerning
the impact of mutual fund ownership in their own
jurisdictions.
Net Asset Value
The net asset value per share of each portfolio is
calculated each day the New York Stock Exchange is open. Net
asset value calculations are made as of 4 p.m., Washington,
DC time, for each portfolio other than the Money Market
Portfolio, which is 1 p.m. The net asset value of the Trust
will not be determined on those days the New York Stock
Exchange is closed for trading. The net asset value per
share of each portfolio is determined by adding the value of
all its securities and other assets, subtracting liabilities
and dividing the result by the total number of outstanding
shares for the portfolio.
For purposes of calculating net asset value, securities for
which current market quotations are readily available are
valued at the mean between their bid and asked prices.
Securities having a remaining effective maturity of 60 days
or less are valued at amortized cost, subject to the
Trustees' determination that this method reflects their fair
value. The Trustees may use an independent pricing service
for determination of security values. The Money Market
Portfolio is priced according to the "penny rounding"
method, whereby the share price is rounded to the nearest
cent to maintain a stablke share price of $1.00.
How to Purchase and Redeem Shares
Account Transactions
Transactions into or out of the Trust are entered in the
investor's account and recorded in shares. The number of
shares in the account is maintained to an accuracy of
1/1000th of a share. Unless an investor specifically
requests in writing, certificates will not be issued to
represent shares in the Trust.
The Trust will provide a sub-accounting report for
institutions needing to maintain separate information on
accounts under their supervision.
Telephone Transactions
The option to initiate inter-fund exchanges and redemptions
and to obtain account balance information by telephone is
available automatically to all shareholders. The Trust will
employ reasonable security procedures to confirm that
instructions communicated by telephone are genuine; if it
does not, it may be liable
<PAGE>
for any losses due to unauthorized or fraudulent
transactions. These security procedures may include, among
others, requiring one or more forms of personal
identification prior to acting upon telephone instructions,
providing written confirmations and recording all telephone
transactions. Certain transactions, including account
registration or address changes, must be authorized in
writing.
Purchasing Shares
Shareholder purchases are priced at the net asset value per
share next determined after the purchase order is received
by the Trust in proper form and funds are received by the
Trust's Custodian. This is normally one or two business days
after an investment is received at the Trust.
New Accounts. A minimum of $2,500 is required to open an
account. Each investor is given an account with a balance
denominated in shares. When a new account is opened by
telephone for funds wired to the Trust, the investor will be
required to submit a signed application promptly thereafter.
Payment of redemption proceeds is not permitted until a
signed application is on file with the Trust.
New accounts may be opened by completing an application and
forwarding it with a check for the initial investment to:
GIT Tax-Free Trust
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
Subsequent investments. Subsequent investments may be made
in any amount, but the Trust reserves the right to return
investments of less than $50.00. See "Redeeming Shares" for
an explanation of the Trust's policies regarding the 10-day
hold on invested checks.
Subsequent investments should be sent to:
GIT Tax-Free Trust
P.O. Box 640393
Cincinnati, OH 45264-0393
Please include an investment deposit slip or a clear
indication of the account to be credited. Checks should be
payable to GIT Tax-Free Trust.
In person. Accounts may be opened and subsequent deposits
made at any office of the Trust.
By wire. Federal funds wires should be sent to Star Bank,
N.A., Cinti/Trust, ABA No. 0420-0001-3, for credit as
follows:
GIT Account No. 48038-8883
(Investor name and account number)
Please call before or shortly after funds are wired to
ensure proper credit. The Trust must be notified by 1 p.m.
Washington, DC time, to credit the shareholder's account the
same day. There is a charge of $6.00 for processing incoming
wires of less than $2,500.
When an account is opened with wired funds, the investor
should call the Trust to ensure proper credit, and then
promptly submit a signed application. Payment of redemption
proceeds is not permitted until a signed application is on
file.
By inter-fund exchange. Investors may redeem shares from one
GIT account and concurrently invest the proceeds in another
GIT account by telephone when the account registration
remains the same. There is no charge for this service. When
a new account is opened by exchange, a new account
application is required if the account registration will
differ from that on the application for the original
account. Exchanges may only be made into funds that are
available for investment in the investor's state of
residence.
By automatic monthly investment. Regular monthly investments
in any fixed amount of $100 or more can be made
automatically by Electronic Funds Transfer from accounts at
banks or savings and loan associations which have the
required transfer capabilities or by automatic deposit from
employer payroll. The investor can change the amount of this
automatic investment or discontinue the service at any time
by writing the Trust.
<PAGE>
Redeeming Shares
Redemptions are processed on any day the New York Stock
Exchange is open and are effected at the net asset value per
share next determined after the redemption request is
received in proper form. Redemptions may be made by wire
transfer, by mail, in person or pursuant to standing
instructions. The Trust does not distribute currency or
coin.
By wire. Wire transfers permit funds to be credited to a
shareholder's bank account, usually the same day. Wires may
only be sent to the investor's bank account as designated on
the account application. Wires to third parties are normally
not permitted.
Redemptions of $10,000 or more will be paid by wire to U.S.
domestic banks without charge; wires for lesser amounts
will be paid after deducting a $10.00 service charge. Wires
to foreign banks require a service charge of $30 or the cost
of the wire, if greater.
Payment of proceeds of wire requests received after 12:30
p.m. and requests exceeding 80% of the value of the
shareholder's account will normally be processed the next
business day. Wires can be arranged by calling the
telephone numbers on the cover of this prospectus.
By mail. Upon written or telephone request, redemptions may
be sent to the shareholder of record by official check of
the Trust. Redemption requests received by mail are normally
processed within one business day.
In person. Redemptions may be requested in person at the
branch office of the Trust. Payment of proceeds of same day
redemptions in excess of $10,000 are not permitted.
By check. An investor who has requested check-writing
privileges and submitted a signature card may write checks
in any amount payable to any person. Checks of $500 or more
are processed free of charge. There is a charge of $5.00 for
checks written under $500 against a portfolio account other
than the Money Market Portfolio and a charge of $0.15 for
shareholder checks written for under $500 against a Money
Market Portfolio account. An initial supply of preprinted
checks will be sent free of charge. The cost of check
reorders and of printing special checks will be charged to
the investor's account.
A confirmation statement showing the amount and number of
each check written is sent to the investor quarterly. The
Trust does not return canceled checks, but will provide
copies of specifically requested checks. A fee of $1.00 per
copy is charged for more than one check copy per year.
Uncollected funds. To protect shareholders against loss or
dilution resulting from deposit items that are returned
unpaid, the delivery of the proceeds of any redemption of
shares may be delayed 10 days or more until it can be
determined that the check used for purchase of the shares
has cleared. In the case of Money Market Portfolio
redemptions, shares will remain invested until that time.
Such deposit items are considered "uncollected," unless the
Trust has determined that they have actually been paid by
the bank on which they were drawn.
If a written request in proper form is submitted directly to
the Trust to redeem shares that were purchased by check or
by Automatic Monthly Investment within the past 10 days, the
redemption will be processed at the next determined net
asset value, and the proceeds will be forwarded promptly
upon clearance of the deposit item, which may take 10 days
or more.
Shares purchased by cash, federal funds wires or U.S.
Treasury checks are considered collected when received. All
deposit items earn dividends from the day of credit to a
shareholder's account, even while not collected.
Stop payments. The Trust will honor stop payment requests on
unpaid checks written by shareholders for a fee of $5.00.
Oral stop payment requests are effective for 14 calendar
days, at which time they will be canceled unless confirmed
in writing. Written stop payment orders are effective for
six months and may be extended by written request for
another six months.
<PAGE>
There is a charge of $28.00, or the cost of the stop
payment, if greater, for stop payment requests on "official
checks" issued by the Trust on behalf of shareholders.
Certain documents may be needed before such a request can be
processed.
Periodic withdrawals. Investors may request automatic
monthly withdrawals of a fixed or readily determinable sum,
or of the actual dividends earned during the past month.
Such payments will be sent to the investor or to any other
single payee authorized in writing by the account holder
including direct deposit to the investor's bank account.
There is no charge for this service, but the Trust reserves
the right to impose such a charge or to impose a minimum
amount for periodic withdrawal.
Additional Charges
In addition to charges described elsewhere in this
prospectus, an account will be charged (by redemption of
shares) $3.00 per month for any account whose month-end
balance is below $1,000 for the Money Market Portfolio and
below $700 for other portfolios. Investors who own shares in
any portfolio with an account balance that falls below these
amounts should carefully consider the impact of the $3.00
charge on their investment. The charge may be greater than
the investment return and may deplete a shareholder's
investment over time. The Trust will contact each investor
prior to charging the account and inform the investor of the
option to increase the account balance or close the account
within 30 days to avoid such fee.
Accounts will be charged (by redemption of shares) $10.00
for invested items returned for any reason. The Trust
charges $5.00 to process each bearer bond coupon deposited.
The Trust reserves the right to impose additional charges,
upon 30 days' written notice, to cover the costs of unusual
transactions. Services for which charges could be imposed
include but are not limited to processing items sent for
special collection, transfers to accounts at the Trust's
custodial bank and issuance of multiple share certificates.
Closing an Account
An investor who wishes to close an account should request
that the account be closed, rather than withdrawing the
amount believed to be the account balance. When an account
is closed, shares will be redeemed at the next determined
net asset value.
The Trust reserves the right to involuntarily redeem
accounts with balances of less than $700 as a result of
prior investor redemptions in each portfolio other than the
Money Market Portfolio and of less than $1,000 in the Money
Market Portfolio. Prior to closing any such account, the
investor will be given 30 days' written notice, during which
time the investor may increase his or her balance to avoid
having the account closed.
<PAGE>
Telephone Numbers
Shareholder Service
Washington, DC area: 703/528-6500
Toll-free nationwide: 800/336-3063
24-Hour ACCESS
Toll-free nationwide: 800/448-4422
The GIT Family of Mutual Funds
GIT Equity Trust
Special Growth Portfolio
Select Growth Portfolio
Equity Income Portfolio
Worldwide Growth Portfolio
GIT Income Trust
Maximum Income Portfolio
Government Portfolio
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Government Investors Trust
For more complete information on any GIT Investment Fund,
including charges and expenses, request a prospectus by
calling the numbers above. Read it carefully before you
invest or send money. This prospectus does not constitute an
offering by the distributor in any jurisdiction in which
such offering may not be lawfully made.
GIT
GIT Investment Funds
1655 Fort Myer Drive
Arlington, Virginia 22209
http://www.gitfunds.com
<PAGE>
Statement of Additional Information
Dated February 1, 1996
For use with the prospectus of the GIT Tax-Free Trust dated
February 1, 1996.
GIT Tax-Free Trust
1655 Fort Myer Drive
Arlington, VA 22209-3108
(800) 336-3063
(703) 528-6500
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the prospectus of GIT Tax-Free
Trust bearing the date indicated above (the "prospectus"). A copy
of the prospectus may be obtained from the Trust at the address
and telephone numbers shown.
Table of Contents
Introductory Information
("About GIT Tax-Free Trust") 2
Supplemental Investment Policies
("Investment Objectives" and "Investment Policies") 2
Municipal Securities
("Investment Policies") 6
Special Considerations Regarding State Portfolios
("Investment Policies") 7
Investment Limitations
("Investment Policies") 9
The Investment Adviser
("Management of the Trust") 10
Organization of the Trust
("The Trust and Its Shares") 11
Trustees and Officers
("Management of the Trust") 12
Administrative and Other Expenses
("Management of the Trust") 13
Portfolio Transactions
("Management of the Trust") 14
Share Purchases
("How to Purchase and Redeem Shares") 14
Share Redemptions
("How to Purchase and Redeem Shares") 15
Declaration of Dividends
("Dividends") 16
Determination of Net Asset Value
("Net Asset Value") 17
Additional Tax Matters
("Taxes") 17
Yield and Total Return Calculations
("Performance Information") 18
Custodians and Special Custodians 20
Legal Matters & Independent Auditors
("Financial Highlights") 21
Additional Information 21
Financial Statements and Independent Auditors' Report 21
Appendix - Quality Ratings
("Investment Policies") 21
Note: The items appearing in parentheses above are cross
references to sections in the prospectus which correspond to the
sections of this Statement of Additional Information.
<PAGE>
Introductory Information
GIT Tax-Free Trust (the "Trust") issues six series of shares:
Arizona Tax-Free Portfolio shares, Maryland Tax-Free Portfolio
shares, Missouri Tax-Free Portfolio shares, Virginia Tax-Free
Portfolio shares, Tax-Free National Portfolio shares (known as
Tax-Free High Yield Portfolio shares prior to February 1, 1994)
and Tax-Free Money Market Portfolio shares. Shares in each of
the four state tax-free portfolios represent interest in a
portfolio principally composed of long-term tax-free bonds from
issuers in the state named (the "Arizona Portfolio," the
"Maryland Portfolio," the "Missouri Portfolio" and the "Virginia
Portfolio," or collectively the "State Portfolios"). Tax-Free National
Portfolio shares represent interests in a portfolio
principally composed of long-term, tax-free bonds (the "National
Portfolio"). Tax-Free Money Market Portfolio shares represent
interests in a portfolio principally composed of short-term, tax-
free "money market" securities (the "Money Market Portfolio").
These portfolios are described more fully below (see
"Supplemental Investment Policies").
Supplemental Investment Policies
The investment objectives of each portfolio are described in the
prospectus (see "Investment Objective"). Reference should also be
made to the prospectus for general information concerning the
Trust's investment policies (see "Investment Policies"). The
Trust seeks to achieve its investment objectives through
diversified investment in those tax-exempt securities commonly
called "municipal" securities, issued by states and local
governments, and by the separate agencies, authorities and
instrumentalities of those jurisdictions (see "Municipal
Securities").
Securities have been separated by the Trust into quality rating
classifications of "High Grade," "Medium Grade" and "Low Grade."
As used in this Statement of Additional Information (and in the
prospectuses), "High Grade" securities include U.S. Government
securities and those municipal securities which are rated AAA,
AA, A-1; SP-1 by Standard & Poor's Corporation; Aaa, Aa, P-1,
MIG-1, MIG-2, VMIG-1; or VMIG-2 by Moody's Investors Service,
Inc. "Medium Grade" municipal securities are those rated A, BBB,
A-2, A-3, SP-2 or SP-3 by Standard & Poor's; A, Baa, P-2, P-3,
MIG-3; or VMIG-3 by Moody's. "Low Grade" securities are those
rated BB or B by Standard & Poor's and Ba or B by Moody's.
For unrated municipal securities the Adviser may make its own
determinations of those investments it classifies as "High
Grade," "Medium Grade" and "Low Grade," as a part of the exercise
of its investment discretion on behalf of the Trust. However,
such determinations will be made by reference to the rating
criteria followed by recognized rating agencies (see "Quality
Ratings"), and the Adviser's quality classification procedures
will be subject to review by the Trustees.
Each of the Trust's portfolios will be subject to the same
investment policies, however, the maturities, quality ratings and
issuing jurisdictions of the municipal securities purchased will
normally differ among the six portfolios. The specific types of
municipal securities that may be purchased for each portfolio are
described in the prospectus (see "Investment Policies").
The lowest rated securities in which the State Portfolios may
invest are those rated BBB or Baa. These are considered Medium
Grade obligations. They are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present, but certain protective elements may be lacking
or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
The lowest rated securities in which the National Portfolio may
invest are those rated B. B-rated and BB-rated ("Low Grade")
securities may have speculative characteristics and may lack
desirable investment characteristics and assurance of interest
and principal payments or maintenance of other terms of the
investment over extended periods of time may be small.
It is expected that the preponderance of the State Portfolios
will be in High Grade securities with a portion of each portfolio
in Medium Grade securities to improve yields. It is expected
that the preponderance of the National Portfolio will be in
Medium Grade securities and that the remainder of the portfolio
will be in High Grade securities. Within the established quality
parameters, however, the Adviser will be free to select
investments for these portfolios in any quality rating mix it
deems appropriate, based on the Adviser's evaluation of the
desirability of each investment in light of its relative yield
and credit characteristics.
To the extent the investments selected have higher yields than
alternative investments, they may be less liquid, have lower
quality ratings and entail more risk that their value could fall
than comparable investments with lower yields. To the extent
lower-rated investments are purchased, the average credit quality
of the National Portfolio will be reduced. (See "Quality
Ratings" for the investment characteristics of lower rated
securities.)
Other Policies. The Trust reserves the right to maintain a
portion of its assets in uninvested cash or in the short-term
taxable investments described below. The Trust may invest up to
20% of its assets in taxable investments (as described below),
including obligations that are subject to Alternative Minimum Tax
("AMT"). As a matter of policy, each of the Trust's portfolios
will be at least 80% invested in securities whose income is
exempt from Federal income tax, and the State Portfolios will be
at least 80% invested in securities whose income is exempt from
Federal and state income taxes for residents of their respective
states; however, if the Adviser determines that extraordinary
conditions exist (such as tax law changes or a need to adopt a
defensive investment position) which make it advisable to invest
a larger portion of assets in taxable investments, more than 20%
and even as much as 100% of a portfolio's assets could be
invested in securities whose income is taxable on the federal or
state level.
The Trust has not adopted any restrictions limiting the extent to
which the securities purchased may be concentrated in the same
state or in similar types of issuers (for example, industrial
development bond issuers). Accordingly, if a particular state or
type of issuer generally declined in credit standing, then the
Trust could be more adversely affected than if its investments
were more diversified. This risk is greatest in the State
Portfolios, which are
<PAGE>
each expected to be invested principally in the securities of one
state.
Specialized Investment Techniques. In order to achieve each
portfolio's investment objective, the Trust may use certain
specialized investment techniques. Such specialized investment
techniques principally include those identified in the prospectus
(see "Investment Policies"), which are described more fully
below:
1. Securities with Variable Interest Rates. Some securities
purchased by the Trust may carry variable interest rates.
Municipal securities with variable interest rates are adjusted
periodically to pay a fixed percentage of some base rate, such as
the current rate on Treasury bills or the "prime" rate of a
specified bank. Rate adjustments may be specified to occur on
fixed dates, such as the beginning of each calendar month, or to
occur whenever the base rate changes. Certain of these variable
rate municipal securities may be payable upon demand by the
holder, generally within seven days; others may have a fixed
stated maturity with no demand feature.
Variable rate securities may offer higher yields than are
available from shorter term securities but less risk of market
value fluctuations than longer term securities with fixed
interest rates. When interest rates are generally falling, yields
of variable rate securities will tend to fall. When rates are
generally rising, variable rate yields will tend to rise.
Variable rate securities may not be rated and may not have a
readily available secondary market. To the extent these
securities are illiquid, they will be subject to the Trust's 10%
limitation on investments in illiquid securities (see "Investment
Limitations"). The Trust's ability to obtain payment after the
exercise of demand rights could be adversely affected by
subsequent events prior to repayment of the investment at par. On
an ongoing basis, the Adviser will monitor the revenues and
liquidity of issuers of variable rate securities and the ability
of issuers to pay principal and interest pursuant to any demand
feature.
2. When-Issued Securities. The Trust may purchase and sell
securities on a when-issued or delayed delivery basis. When-
issued and delayed delivery transactions arise when securities
are bought or sold with payment for and delivery of the
securities scheduled to take place at a future time. When newly
issued municipal securities are purchased, payment and delivery
may not take place for 15 to 45 days after the Trust commits to
the purchase. Fluctuations in the value of securities contracted
for future settlement may increase changes in portfolio value,
since they must be added to changes in the values of those
securities actually held in the portfolio during the same period.
When engaging in when-issued or delayed delivery transactions,
the Trust must rely on the buyer or seller to complete the
transaction at the scheduled time; if the other party fails to do
so, the Trust might lose an opportunity for a more advantageous
purchase or sale. If the transaction is completed, intervening
changes in market conditions or the issuer's financial condition
could make it less advantageous than investment alternatives
available at the time of settlement.
While the Trust will only commit to security purchases it intends
to complete, it reserves the right to sell any securities
purchase contracts before settlement of the transaction, in which
case the Trust could realize a gain or loss despite the fact that
the original transaction was never completed. When fixed yield
contracts are made for the purchase of when-issued securities,
the Trust will maintain in a separate account designated
investments which are liquid or mature prior to the scheduled
settlement and cash sufficient in aggregate value to provide
adequate funds for completion of the scheduled purchase.
3. Privately Arranged Loans and Participations. The Trust may
make or acquire participations in privately negotiated loans to
municipal borrowers. Frequently such loans have variable interest
rates and may be backed by a bank letter of credit; in other
cases they may be unsecured. The Trust will rely on the opinion
of tax or bond counsel to the borrower as to the tax status of
these loans. Such transactions may provide an opportunity to
achieve higher tax-free yields than would be available from
municipal securities offered and sold to the general public.
Privately arranged loans, however, will generally not be rated by
a credit rating agency and will normally be liquid, if at all,
only through a provision requiring repayment following demand by
the lender. Such loans made by the Trust will normally have a
demand provision permitting the Trust to require repayment within
seven days. Participations in such loans, however, may not have
such a demand provision and may not be otherwise marketable. To
the extent these securities are illiquid, they will be subject to
the Trust's 10% limitation on investments in illiquid securities
(see "Investment Limitations"). Recovery of an investment in any
such loan that is illiquid and payable on demand may be dependent
on the ability of the municipal borrower to meet an obligation
for full repayment of principal and payment of accrued interest
within the demand period, normally seven days or less (unless the
Trust determines that a particular loan issue, unlike most such
loans, has a readily available market). As it deems appropriate,
the Adviser will establish procedures to monitor the credit
standing of each such municipal borrower, including its ability
to honor contractual payment obligations.
4. Securities with Put Rights. In certain cases the Trust may
acquire securities and in the same or a related transaction
acquire the right to resell the same securities at a fixed price
during a specified period of time. Such puts may be considered
standby commitments. The combined cost of the securities
purchased and the related put rights may exceed the price at
which the securities could be purchased alone, in which case the
effective yield on the transaction would be lower than that
available from the security itself. The advantage of such a
combined transaction is that the put rights insulate the Trust
from the risk that the price at which the securities can be
resold may fall; thus, the combined transaction produces an
investment that may be terminated prior to the maturity of the
securities while providing a known minimum yield.
Generally, puts are expected to be non-assignable and to
terminate if the related securities are sold by the Trust. Since
the Trust may only acquire puts in connection with portfolio
securities (see "Investment Limitations") and such puts may not
be assignable, puts acquired by the Trust will normally be
without value except in conjunction with specific portfolio
investments. Accordingly, the Trust intends to value any such
puts at zero as separate securities but
<PAGE>
to value any related investments at their fair value as
determined in good faith by the Trustees, after consideration of
the value of the investment unit represented by the specific
securities and the related put together, or at the value of such
related investments alone, if higher.
A put is subject to the ability of the issuer to actually make
payment for the securities if the investor exercises his put
rights. In the event the issuer of the put is unable to make such
payment, the Trust will be left with securities which would
probably be worth less than the price at which they were to have
been resold by means of the put. The Trust may acquire puts
issued by issuers of the related securities or by financial
institutions, including securities dealers, but the Trust will
only acquire puts issued by institutions it deems to be
substantial.
5. Loans of Portfolio Securities. The Trust, in certain
circumstances, may be able to earn additional income by loaning
portfolio securities to a broker-dealer or financial institution.
The Trust may make such loans only if cash or U.S. Government
securities, equal in value to 100% of the market value of the
securities loaned, are delivered to the Trust by the borrower and
maintained in a segregated account at full market value each
business day. During the term of any securities loan, the
borrower will pay to the Trust all dividend and interest income
earned on the loaned securities; at the same time the Trust will
also be able to invest any cash portion of the collateral or
otherwise will charge a fee for making the loan, thereby
increasing its overall potential return. It is the Trust's
policy that it shall have the option to terminate any loan of
portfolio securities at any time upon seven days' notice to the
borrower. In making a loan of securities, the Trust would be
exposed to the possibility that the borrower of the securities
might be unable to return them when required, which would leave
the Trust with the collateral maintained against the loan; if the
collateral were of insufficient value, the Trust could suffer a
loss. The Trust may pay fees for the placement, administration
and custody of securities loans, as it deems appropriate.
6. Financial Futures Contracts. The Trust may use financial
futures contracts, including contracts traded on a regulated
commodity market or exchange, to purchase or sell securities
which the Trust would be permitted to purchase or sell by other
means. A futures contract on a security is a binding contractual
commitment which, if held to maturity, will result in an
obligation to make or accept delivery, during a particular month,
of securities having a standardized face value and rate of
return. By purchasing a futures contract, the Trust will legally
obligate itself to make delivery of the security against payment
of the agreed price. The Trust will use financial futures
contracts only where it intends to take or make the required
delivery of securities; however, if it is economically more
advantageous to do so, the Trust may acquire or sell the same
securities in the open market prior to the time the purchase or
sale would otherwise take place according to the contract and
concurrently liquidate the corresponding futures position by
entering into another futures transaction that precisely offsets
the original futures position.
A financial futures contract for a purchase of securities is
called a "long" position, while a financial futures contract for
a sale of securities is called a "short" position. Short futures
contracts may be used as a hedge against a decline in the value
of an investment by locking in a future sale price for the
securities specified for delivery against the contract. Long
futures contracts may be used to protect against a possible
decline in interest rates. Hedges may be implemented by futures
transactions for either the securities held or for comparable
securities that are expected to parallel the price movements of
the securities being hedged. Customarily, most futures contracts
are liquidated prior to the required settlement date by disposing
of the contract; such transactions may result in either a gain or
loss, which when part of a hedging transaction, would be expected
to offset corresponding losses or gains on the hedged securities.
The Trust intends to use financial futures contracts as a
defense, or hedge, against anticipated interest rate changes and
not for speculation. A futures contract sale is intended to
protect against an expected increase in interest rates and a
futures contract purchase is intended to offset the impact of an
interest rate decline. By means of futures transactions, the
Trust may arrange a future purchase or sale of securities under
terms fixed at the time the futures contract is made. A
portfolio of the Trust may not purchase or sell futures contracts
if immediately thereafter the sum of the amount of margin
deposits of the portfolio's existing futures positions and
premiums paid for related options would exceed five percent of
the market value of the portfolio's total assets.
The Trust will incur brokerage fees in connection with its
futures transactions, and it will be required to deposit and
maintain cash or U.S. Government securities with brokers as
margin to guarantee performance of its futures obligations. When
purchasing securities by means of futures contracts the Trust
will maintain in separate accounts (including brokerage accounts
used to maintain the margin required by the contracts) High Grade
investments which are liquid or which mature prior to the
scheduled purchase and cash sufficient in aggregate value to
provide adequate funds for completion of the purchase. While
futures will be utilized to reduce the risks of interest rate
fluctuations, futures trading itself entails certain other risks.
Thus, while the Trust may benefit from the use of financial
futures contracts, unanticipated changes in interest rates may
result in a poorer overall performance than if the Trust had not
entered into any such contracts.
7. Repurchase Agreement Transactions. A repurchase agreement
involves the acquisition of securities from a financial
institution, such as a bank or securities dealer, with the right
to resell the same securities to the financial institution on a
future date at a fixed price. Repurchase agreements are a highly
flexible medium of investment, in that they may be for very short
periods, including frequently maturities of only one day. Under
the Investment Company Act of 1940, repurchase agreements are
considered loans and the securities involved may be viewed as
collateral. It if the Trust's policy to limit the financial
institutions with which it engages in repurchase agreements to
banks, savings and loan associations and securities dealers
meeting financial responsibility standards prescribed in
guidelines adopted by the Trustees.
When investing in repurchase agreements, the Trust could be
subject to the risk that the other party may not complete the
scheduled repurchase and the Trust would then be left holding
securities it did not expect to retain. If those securities
decline in
<PAGE>
price to a value of less than the amount due at the scheduled
time of repurchase, then the Trust could suffer a loss of
principal or interest. The Adviser will follow procedures
designed to ensure that repurchase agreements acquired by the
Trust are always at least 100% collateralized as to principal and
interest. It is the Trust's policy to require delivery of
repurchase agreement collateral to its Custodian or (in the case
of book-entry securities held by the Federal Reserve System) that
such collateral is registered in the Custodian's name or in
negotiable form. In the event of insolvency or bankruptcy of the
other party to a repurchase agreement, the Trust could encounter
restrictions on the exercise of its rights under the repurchase
agreement.
To the extent the Trust requires cash to meet redemption requests
and determines that it would not be advantageous to sell
portfolio securities to meet those requests, then it may sell its
portfolio securities to another investor with a simultaneous
agreement to repurchase them. Such a transaction is commonly
called a "reverse repurchase agreement." It would have the
practical effect of constituting a loan to the Trust, the
proceeds of which would be used to meet cash requirements for
redemption requests. During the period of any reverse repurchase
agreement, the Trust would recognize fluctuations in value of the
underlying securities to the same extent as if those securities
were held by the Trust outright. If the Trust engages in reverse
repurchase agreement transactions, it will maintain in a separate
account designated securities which are liquid or mature prior to
the scheduled repurchase and cash sufficient in aggregate value
to provide adequate funds for completion of the repurchase. It
is the Trust's current operating policy not to engage in reverse
repurchase agreements for any purpose, if as a result reverse
repurchase agreements in the aggregate would exceed five percent
of a portfolio's total assets.
Taxable Investments. The Trust does not intend to invest in any
taxable securities under normal circumstances. The Adviser may
decide, however, that extraordinary conditions require the
purchase of taxable investments. The "Taxable Investments" in
which the Trust may invest are limited to the following U.S.
dollar denominated investments: (1) U.S. Government securities;
(2) obligations of banks having total assets of $750 million or
more; (3) commercial paper and other corporate debt securities of
High Grade (see "Quality Ratings"); and (4) repurchase agreements
involving any of the foregoing securities or municipal
securities.
For the State and the National Portfolios, maturities of Taxable
Investments may exceed one year in extraordinary circumstances
when the Trust has determined to invest more than 20% of its
assets in taxable securities. For the Money Market Portfolio, the
Trust's Taxable Investments may not have an effective maturity
exceeding thirteen months.
"U.S. Government securities" are obligations issued or guaranteed
by the United States Government, its agencies and
instrumentalities. U.S. Government securities include direct
obligations issued by the U.S. Treasury, such as Treasury bills,
notes and bonds. Also included are obligations of the various
federal agencies and instrumentalities, such as the Government
National Mortgage Association, the Federal Farm Credit System,
the Federal Home Loan Mortgage Corporation and the Federal Home
Loan Banks, and deposits fully insured as to principal by federal
deposit insurance. Except for Treasury securities, which are full
faith and credit obligations, U.S. Government securities may
either be backed by the full faith and credit of the United
States or only by the credit of the particular federal agency or
instrumentality which issues them; some such agencies have
borrowing authority from the U.S. Treasury, others do not.
Bank obligations eligible as Taxable Investments are certificates
of deposit ("CDs"), bankers acceptances ("BAs") and
other obligations of banks having assets of $750 million or more
(including assets of affiliates). CDs are generally short-term
interest-bearing negotiable certificates issued by banks against
funds deposited with the issuing bank for a specified period of
time. Such CDs may be marketable or may be redeemable upon demand
of the holder. BAs are time drafts drawn against a business,
often an importer, and "accepted" by a bank, which agrees
unconditionally to pay the draft on its maturity date. BAs are
negotiable and trade in the secondary market.
"Commercial paper" describes unsecured promissory notes issued by
major corporations to finance short-term credit needs. Commercial
paper is issued in maturities of nine months or less usually on a
discount basis. The Trust may purchase taxable commercial paper
rated A-1 or P-1 (see "Quality Ratings"). The Trust may also
purchase other non-convertible corporate debt securities (e.g.,
notes, bonds and debentures) of the appropriate remaining
maturities.
Maturities. As used in this Statement of Additional Information
and the prospectuses, the term "effective maturity" means either
the actual stated maturity of the investment, the time between
its scheduled interest rate adjustment dates (for variable rate
securities), or the time between its purchase settlement and
scheduled future resale settlement pursuant to a resale or
optional resale under fixed terms arranged in connection with the
purchase, whichever period is shorter. However, for purposes of
the Trust's "penny rounding" exemptive order (see "Determination
of Net Asset Value") in the case of a variable rate security, the
"effective maturity" will be the longer of the notice period
required before the Trust is entitled to repayment under the
terms of the security or the period remaining until its next
interest rate adjustment. A "stated maturity" means the time
scheduled for final repayment of the entire principal amount of
the investment under its terms. "Short-term" means a maturity of
one year or less while "long-term" means longer than one year.
Policy Review. If, in the judgment of a majority of the Trustees,
unanticipated future circumstances make inadvisable continuation
of the Trust's policy of seeking tax exempt income or
continuation of the more specific policies of each portfolio,
then the Trustees may change any such policies without
shareholder approval, subject to the limitations provided
elsewhere in this Statement of Additional Information (see
"Investment Limitations"), and after giving 30 days' written
notice to shareholders affected by the change. In the event of a
permanent change, a larger portion, and possibly all, of the
portfolios could be invested in Taxable Investments. Regulatory
guidelines may require a change in the Trust's name in such an
event.
<PAGE>
Except for the fundamental investment limitations placed upon the
Trust's activities, the Trustees reserve the right to review and
change the other investment policies and techniques employed by
the Trust, from time to time, as they deem appropriate, in
response to market conditions and other factors. Reference should
be made to "Investment Limitations" for a description of those
fundamental investment policies which may not be changed without
shareholder approval. There can be no assurance that the Trust's
present objectives will be achieved.
Municipal Securities
As used in this Statement of Additional Information and in the
prospectuses, the terms "tax-free" and "tax-exempt" refer to
interest or dividend income which is exempt from federal income
taxes, and in the case of the State Portfolios, refer also to
income exempt from state income taxes in their respective states.
The term "municipal securities" refers to securities having tax-
free income, in the opinion of counsel to the issuer.
The term "municipal securities" includes a variety of debt
obligations issued for public purposes by or on behalf of states,
territories and possessions of the United States, their political
subdivisions, the District of Columbia, Guam, Puerto Rico and
other territories and the duly constituted authorities, agencies,
public corporations and other instrumentalities of these
jurisdictions.
Municipal securities may be used for many public purposes,
including construction of public facilities such as airports,
bridges, highways, housing, hospitals, mass transportation,
schools, streets, water and sewer works and gas and electric
utilities. Municipal securities may also be used to refund
outstanding obligations, to obtain funds to lend to other public
institutions and certain private borrowers, or for general
operating expenses. Municipal securities are usually classified
as either "general obligation," "revenue" or "industrial
development."
General Obligation securities are the obligations of an issuer
with taxing power and are payable from the issuer's general
unrestricted revenues. These securities are backed by the full
faith, credit and taxing power of the issuer for the payment of
principal and interest. They are not limited to repayment from
any particular fund or revenue source.
Revenue securities are repayable only from revenues derived from
a particular facility, local agency, special tax, facility user
or other specific revenue source. Certain revenue issues may also
be backed by a reserve fund or specific collateral.
Industrial development securities are revenue obligations backed
only by the agreement of a specific private sector entity to make
regular payments to the public authority in whose name they were
issued. Collateral may be pledged. Industrial development
securities are generally issued by a state or local authority on
behalf of private organizations for the purpose of attracting or
assisting local industry. These securities usually have no credit
backing from any public body.
Municipal securities may be classified according to maturity as
"notes" if up to about two years in term, or as "bonds" if longer
in term.
Bonds are classified according to their credit backing and
purpose as "general obligation," "revenue," "industrial revenue"
or "pollution and environmental control revenue"; the latter two
are industrial development securities.
Callable municipal bonds are municipal bonds which contain a
provision in the bond indenture permitting the issuer to redeem
bonds prior to maturity. Call bonds are generally subject to call
during periods of declining interest rates. If the proceeds of a
called bond under such circumstances are reinvested, the result
may be a lower overall yield due to lower interest rates. If the
purchase of such bond included a premium related to the
appreciated value of the bonds, some or all of that premium may
not be recovered, depending on the call price.
Ordinary revenue bonds are used to finance income producing
projects such as public housing, toll roads and bridges. The
investor bears the risk that the project will produce
insufficient revenue and have insufficient reserves to cover debt
service on the bonds. Industrial revenue bonds are used to
finance privately-operated facilities for business,
manufacturing, housing, sports and other purposes and are limited
to $10 million per issuer, except when used for certain exempted
purposes. Pollution and environmental control revenue bonds are
used to finance air and water pollution control facilities
required by private users. Repayment of revenue bonds issued to
finance privately used or operated facilities is usually
dependent entirely on the ability of the private beneficiary to
meet its obligations and on the value of any collateral pledged.
Notes are generally used to meet short-term financing needs and
include the following specific types:
1. Tax Anticipation Notes, normally general obligation issues,
are sold to meet cash needs prior to collection of taxes and
generally are payable from specific future tax revenues.
2. Bond Anticipation Notes, also normally general obligation
issues, are sold to provide interim financing in anticipation of
sales of long-term bonds and generally are payable from the
proceeds of a specific proposed bond issue.
3. Revenue Anticipation Notes may be general obligation issues
and are sold to provide cash prior to receipt of expected non-tax
revenues from a specific source, such as scheduled payments due
from the federal government.
4. Project Notes are issued by local authorities to finance
various local redevelopment and housing projects conducted under
sponsorship of the federal government. Project notes are
guaranteed and backed by the full faith and credit of the United
States.
5. Construction Loan Notes are sold to provide interim financing
for construction projects. They are frequently issued in
connection with federally insured or guaranteed mortgage
financing and may also be insured or guaranteed by the federal
government.
6. Tax-Exempt Commercial Paper (sometimes also called "municipal
paper") is similar to conventional commercial paper, but tax-
free. Municipal paper may be either a general obligation or a
revenue issue, although the latter is more common. These issues
may provide greater flexibility in scheduling maturities than
other municipal notes.
<PAGE>
Municipal Lease Obligations are issued by municipalities to
finance their obligation to pay rent on buildings or equipment
they use. The Trust intends to limit its investments in such
obligations to those which the Adviser determines, based on
guidelines established by the Trustees, represent liquid
securities for purposes of a portfolio's 10% limitation on
investments in illiquid securities (see "Investment
Limitations"). Determinations concerning the liquidity and
appropriate valuation of each such obligation shall be made on a
daily basis and based on all relevant facts including the
frequency of trades and quotes for the obligation, the number of
dealers willing to purchase or sell the security and the number
of other potential buyers, the willingness of dealers to
undertake to make a market in the security, and the nature of the
marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers and the mechanics of
the transfer. A municipal lease obligation will not be
considered liquid unless, in the opinion of the Adviser, there is
reasonable assurance that its marketability will be maintained
throughout the time the instrument is held by the Trust and the
Adviser reasonably concludes that the obligation is liquid
considering: whether the lease can be cancelled; what assurance
there is that the assets represented by the lease can be sold;
the strength of the lessee's general credit; the likelihood that
the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed
essential to the operations of the municipality; and the legal
recourse in the event of failure to appropriate.
The market for municipal securities is diverse and constantly
changing. The foregoing is therefore not necessarily a complete
description of all types of municipal securities the Trust may
purchase.
In the interpretation of its investment policies and limitations,
the Trust will be required from time to time to make
determinations as to the identity of the issuer of particular
municipal securities. These determinations will be made by the
Adviser, and in the case of securities that are not general
obligation issues or securities that have guarantors, such
determinations will include judgments by the Adviser as to the
assets and revenue principally backing the issue and the most
significant source of repayment of principal and interest for the
issue. If the specific securities are backed by assets and
revenues that are independent or separate from the assets and
revenues of the jurisdiction or agency in whose name they were
issued, then those securities will normally be deemed to have a
separate issuer.
Municipal securities generally are subject to possible default,
bankruptcy or insolvency of the issuer. Repayment of principal
and interest may be affected by federal, state and local
legislation, referendums, judicial decisions, and executive acts.
The tax-exempt status of municipal securities may be affected by
future changes in the tax laws, litigation involving the tax
status of the securities, and errors and omissions by issuers and
their counsel. The Trust will not attempt to make an independent
determination of the present or future tax-exempt status of
municipal securities acquired by it.
While most municipal securities have a readily available market,
a variety of factors, including the multiplicity of issues and
the fact that tax-free investments are inappropriate for
significant numbers of investors, limit the depth of the market
for these securities. Accordingly, it may be more difficult for
the Trust to sell large blocks of municipal securities
advantageously than would be the case with comparable taxable
securities.
Special Considerations Regarding State Portfolios.
The following is a general discussion of the factors that might
influence the ability of the issuers in the various states to
repay principal and interest due on the obligations contained in
their respective State Portfolios. Such information is derived
from sources generally available to investors, but has not been
independently verified and may not be complete.
1. Arizona. Arizona has been one of the fastest growing states
in the nation since World War II. Its growth has been due, in
part, to its favorable climate and affordable housing generally
associated with the states in the Southwest. In the late 1980s,
the state's rapid growth was sharply curtailed by an overbuilding
of office space which led to a slower rate of new construction
and financial difficulties in the banking and savings and loan
industries. This was compounded by reduced defense spending
which adversely affected many defense-related electronics firms.
The economy has also seen a noticeable shift away from
manufacturing toward services, evidenced in part by the
attraction of major credit card processing centers. These and
other trends have resulted in a shift to lower paying jobs. The
state's economy is improving and Arizona has had some success in
attracting business from California, which is seen as having a
less favorable regulatory environment. Arizona has seen a
rapid influx of new residents in 1995, and the workforce has
tended to expand more rapidly than available jobs. An exception
has been in construction and retail, where labor shortages were
reported in late 1995.
Many new companies have established operations in Arizona because
of its proximity to Mexico, so that they can take better
advantage of the North American Free Trade Agreement. The state
also lowered its corporate income tax rate to 9.0% in 1994, down
from 9.3% in 1993. The corporate tax rate was 10.5% in 1989.
Although the state economy is generally strong, Arizona's
financial flexibility has been eroded recently due to slow
revenue growth in recent years together with a substantial
increase in expenditures for prisons and health and welfare
programs. The state is required by law to maintain a balanced
budget and has managed recurring budget shortfalls since 1985
with a combination of internal borrowing, acceleration of tax
payments, onetime adjustments and program cuts. As projected
budget shortfalls increase, the state legislature may be required
to take additional actions, including budget reductions and tax
increases, to close such deficits.
2. Maryland. Maryland has been one of the wealthiest states in
the nation. It experienced rapid growth during the 1980s with
both total personal income and per capita income outperforming
national averages. Maryland ranked fifth among states as
measured by per capita personal income in 1995. However, annual
percentage gains in personal income have been lagging national
gains during the 1990s. The economy is well diversified
with services,
<PAGE>
trade and government accounting for the majority of total
employment. Although the manufacturing sector saw an overall
loss of jobs between 1975 and 1990, the non-manufacturing sector
added 31 jobs for each manufacturing job lost during this period.
By 1992, health services accounted for one in ten Maryland jobs.
In addition, earnings per worker are growing faster in Maryland
than in the nation due, in part, to above-average education
levels and rising self-employment and proprietor's income.
Since Maryland is adjacent to Washington, DC, Federal government
employment plays an important role in the economy and has served
to insulate the economy somewhat from more volatile economic
swings. For this reason, Maryland's unemployment rate had
historically been below the national average. The significant
federal presence in Maryland is now having a negative effect as
agency employment reductions and defense cutbacks take place.
The state suffered through thousands of job cuts in 1995.
Economic growth continues to be slow.
Maryland has recently practiced restraint in borrowing after
having generally been one of the most heavily indebted of the
states. As resources have expanded, the state's debt ratios have
fallen. At June 30, 1996, a general fund surplus of $34 million
is anticipated, and the reserve accounts are set at $571.6
million, including $517.9 million, or 7% of revenues, in the
revenue stabilization account. In addition, $26 million of 1994-
95 surplus, which represents the overage above anticipated
surplus, is expected to be transferred to reserves in either
1995-96 or 1996-97. The reserve position may also vary pursuant
to legislation passed in 1995 which authorizes a transfer to $190
million from the stabilization account to a newly created citizen
tax reduction and fiscal reserve account and $50 million from the
dedicated purpose account of the reserve to the revenue
stabilization account. The tax reduction and fiscal reserve
account is designed to provide either tax relief or
protection against federal aid reduction, and transfers to it are
not mandatory. Debt service has been a manageable expenditure
despite the rapid, 15-year amortization schedule required by the
Maryland constitution.
The state's main sources of revenue are its sales tax, income
tax, property tax and the state lottery. The state is required
by law to maintain a balanced budget and has been required to
reduce revenue estimates and implement budget cuts to reduce
budget gaps.
3. Missouri. Missouri's economic structure closely resembles
that of the U.S., with a somewhat larger dependence on
manufacturing. The state's economic base is broad and diverse,
with transportation equipment, machinery, and chemicals the
leading sectors. The service sector now is the principal source
of both employment and personal income, providing about 25% of
each. Growth in the service industries has provided compensatory
offset to the continuing manufacturing losses. Such gains have
been aided by the state's significant increase in tourism, with
the City of Branson's development as a music and entertainment
center, now ranking as one of the nation's major tourist
attractions.
Employment for the eleven months ended November 30, 1995 rose
4.6%, compared with an increase of 5% for the same period in
1994. Unemployment rates continue to decline relative to the
U.S., a trend that has characterized the state since late 1985.
Unemployment rates, now in the 4% range, are at a 15-year low.
Missouri ranks about in the middle of the states as to wealth and
resources, and while growth generally has been below average over
the past decade, some relative gains have been registered in the
past two years. In 1994, per capita income was $20,562, rising at
a rate equal to 95% of the U.S. average, compared to 94% in 1993.
With McDonnell Douglas Corp. as the state's largest employer at
more than 30,000 employees, down from peak levels, some of its
industry remains vulnerable to ongoing cutbacks in defense
spending.
With regard to debt position, the state's cautious use of debt
and the strong security provisions, including the constitutional
requirement that debt service payments are a first appropriation
and are transferred to the sinking fund one year in advance, are
the foremost credit considerations supporting the state's 'AAA'
rating.
The state maintains balanced operations, acting quickly to reduce
expenditures to stay within available resources. Liquidity is
ensured from a fully funded cash reserve that may be used during
the year but must be repaid by May 15. While the floods of 1993
caused $2.7 billion of damage statewide, most costs were covered
by insurance proceeds or funded by the Federal Emergency
Management Authority. This does not include costs for mitigation
efforts and improvements to avoid future flooding.
4. Virginia. Virginia has always maintained a conservative
approach to debt, with attention to keeping a level that is low
in relation to its substantial resources. General obligation
debt is strictly limited, giving rise to greater use of
appropriation obligations. Virginia's debt ratios are low by all
standards, although the level of debt and diversity of
instruments have increased substantially over the past
decade. All debt is closely controlled and recognized as tax-
supported debt of the commonwealth. Debt policy calls for
maintenance of debt ratios at below-average levels, and the
commonwealth has adopted debt affordability and long-range
capital planning.
Conservative policies also dominate financial operations, with
the general fund maintaining budgetary surplus positions. Tax
dependence rests heavily on the personal income tax, supplemented
by the sales tax and other levies. The budget for 1994-96 is
balanced. A settlement of the liability incurred due to tax
treatment of federal pensions is underway. Its success will
remove a major financial uncertainty.
Virginia has a broad and diverse economy with several distinct
regions. Over the past decade, the economy has grown in size and
in wealth. The economy has recovered from the recession but
subdued growth is expected if defense reductions continue. The
Northern Virginia economy will be particularly affected by
Federal government spending reductions as a result of its
proximity to Washington, DC. Balancing this is the
announcement that IBM and Toshiba Corp. will establish a
semiconductor plant in Manassas.
Virginia is embarking on an ambitious corrections program of
about $1.1 billion through 2005. Public Building Authority debt
<PAGE>
of $367 million is anticipated and approval for general
obligations may also be sought.
Virginia's employment profile differs from the nation's, with
more dependence on government and construction and less on
manufacturing. This difference is even more evident when applied
to derivation of earnings; the commonwealth derives 25% of
earnings from government, compared to 16% for the United States.
The unemployment rate has been consistently below that of the
United States, but job growth is beginning to slow amid an
expected loss of government jobs. Cutbacks in defense spending
will exert considerable influence on this trend. By 2000, 44,000
jobs or 12% of total military employment is expected to be lost.
This loss equals about 1.5% percent of total employment. Private
sector employment job loss related to defense is expected to
decline by 26,600 jobs over the same period, about 1% of
employment.
Investment Limitations
The Trust has adopted as fundamental policies the following
limitations on its investment activities, which apply to each of
its portfolios; these fundamental policies may not be changed
without a majority vote (see "Organization of the Trust") of the
Trust's shareholders.
1. Permissible Investments. The Trust may not purchase securities
other than securities which at the time of purchase provide
income through interest or dividend payments (or equivalent
income through a purchase price discount from par); but the Trust
may purchase or acquire put options related to any such
securities held, and any such securities may be purchased
pursuant to repurchase agreements with financial institutions or
securities dealers or may be purchased from any person, under
terms and arrangements determined by the Trust, for future
delivery. Any of these securities may have limited markets and
may be purchased with restrictions on transfer; however, the
Trust may not make any investment (including repurchase
agreements and privately arranged loan transactions) for which
there is no readily available market and which may not be
redeemed, terminated or otherwise converted to cash within seven
days, unless after making the investment not more than 10% of a
portfolio's total assets would be so invested.
2. Restricted Investments. Not more than five percent of the
value of the total assets of a portfolio of the Trust may be
invested in the securities of any one issuer (other than
securities issued or guaranteed by the United States Government
or any of its agencies or instrumentalities and excluding bank
deposits); nor may securities be purchased when as a result more
than 10% of the voting securities of the issuer would be held by
a portfolio. For purposes of these restrictions, the issuer is
deemed to be the specific legal entity having ultimate
responsibility for payment of the obligations evidenced by the
security and whose assets and revenues principally back the
security. Any security that does not have a government
jurisdiction or instrumentality ultimately responsible for its
repayment may not be purchased by the Trust when the entity
responsible for such repayment has been in operation for less
than three years, if the purchase would result in more than five
percent of the assets of the portfolio of the Trust being
invested in such securities.
To the extent the Trust purchases securities for the Tax-Free
Money Market Portfolio other than obligations issued or
guaranteed by the United States Government or its agencies and
instrumentalities, obligations which provide income exempt from
Federal income taxes, and short-term obligations of domestic
banks, their branches, and other domestic depository
institutions, the Trust will limit such investments so that not
more than 25% of the assets of the portfolio is invested in any
one industry. Domestic banks and their branches may include the
domestic branches of foreign banks, to the extent such domestic
branches are subject to the same regulation as United States
banks; but they will not include the foreign branches of domestic
banks, unless such obligations of such foreign branches are
unconditionally guaranteed by the domestic parent. In purchasing
securities for the Tax-Free National and the State Portfolios
(other than obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, or obligations
which provide income exempt from Federal income taxes), the Trust
will limit such investments so that not more than 25% of the
assets of each portfolio is invested in any one industry. For
purposes of the foregoing limitation on investments in any one
industry, the general obligations of governmental units will not
be considered related to any industry, but revenue obligations
backed by particular types of projects, (roads, hospitals, etc.)
will be considered related to the industry classifications of the
associated projects and industrial revenue obligations will be
classified by the industry of the private user or users.
The Trust may not purchase the securities of other investment
companies, except for shares of unit investment trusts holding
securities of the type purchased by the Trust itself and then
only if the value of such shares of any one investment company
does not exceed five percent of the value of the total assets of
the Trust's portfolio in which the shares are included and the
aggregate value of all such shares does not exceed 10% of the
value of such total assets, or except in connection with an
investment company merger, consolidation, acquisition or
reorganization. The Trust may not purchase any security for
purposes of exercising management control of the issuer, except
in connection with a merger, consolidation, acquisition or
reorganization of an investment company. The Trust may not
purchase or retain the securities of any issuer if, to the
knowledge of the Trust's management, the holdings of those of the
Trust's officers, Trustees and officers of its Adviser who
beneficially hold one-half percent or more of such securities,
together exceed five percent of such outstanding securities.
3. Borrowing and Lending. The Trust may not borrow money
(including the proceeds of reverse repurchase transactions)
except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount not exceeding five percent
of the value of a portfolio's net assets at the time of
borrowing. The Trust may not otherwise issue senior securities
representing indebtedness. The Trust may not pledge, mortgage or
hypothecate any assets to secure bank loans, except in amounts
not exceeding 15% of a portfolio's net assets taken at cost. The
Trust may loan its portfolio securities in an amount not in
excess of one-third of the value of a portfolio's gross assets,
provided collateral satisfactory to the Trust's Adviser is
continuously maintained in amounts not less than the value of the
securities loaned. The Trust may lend money only to
<PAGE>
governmental jurisdictions and instrumentalities, but is not
precluded from entering into repurchase agreements or purchasing
debt securities.
4. Other Activities. The Trust may not act as an underwriter
(except for activities in connection with the acquisition or
disposition of securities intended for or held by one of the
Trust's portfolios), make short sales or maintain a short
position (unless the applicable portfolio owns at least an equal
amount of such securities, or securities convertible or
exchangeable into such securities, and not more than 25% of a
portfolio's net assets is held as collateral for such sales).
Nor may the Trust purchase securities on margin (except for
customary credit used in transaction clearance), invest in
commodities, purchase interests in real estate or invest in oil,
gas or other mineral exploration or development programs.
However, the Trust may purchase securities secured by real estate
or interests therein and may use financial futures contracts,
including contracts traded on a regulated commodity market or
exchange, to purchase or sell securities which the Trust would be
permitted to purchase or sell by other means and where the Trust
intends to take or make the required delivery. The Trust may
acquire put options in conjunction with a purchase of portfolio
securities; it may also purchase put options and write call
options covered by securities held in the respective portfolio
(and purchase offsetting call options in closing purchase
transactions), provided that the put option purchased or call
option written at all times remains covered by portfolio
securities, whether directly or by conversion or exchange rights;
but it may not otherwise invest in or write puts and calls or
combinations thereof.
Except as otherwise specifically provided, the foregoing
percentage limitations need only be met when the investment is
made or other relevant action is taken. The Trust will not borrow
for the purpose of making investments and, as a matter of
operating policy to comply with certain applicable state
restrictions but not as a fundamental policy, will not pledge,
mortgage or hypothecate more than 10% of a portfolio's total
assets taken at market value. Although permitted to do so by its
fundamental policies, it is the Trust's current policy not to
write call options, not to acquire put options except in
conjunction with a purchase of portfolio securities, not to lend
portfolio securities, and not to use financial futures contracts.
Should the Trust alter such policy, it will notify shareholders
of the policy revision at least 30 days prior to its
implementation and describe the new investment techniques to be
employed.
The Investment Adviser
Bankers Finance Investment Management Corp., 1655 Fort Myer
Drive, Arlington, Virginia 22209-3108, is the investment adviser
to the Trust and is called the "Adviser" throughout this
Statement of Additional Information and the prospectus. The
Adviser is responsible for the investment management of the Trust
and has the authority to handle portfolio transactions, to select
the methods and firms with which such transactions are executed,
to oversee the Trust's operations, and otherwise to administer
the affairs of the Trust as it deems advisable. In the execution
of these responsibilities, the Adviser is subject to the
investment policies and limitations of the Trust described in the
prospectuses and this Statement of Additional Information, to the
terms of the Declaration of Trust and the Trust's Bylaws, and to
written directions given from time to time by the Trustees.
The Investment Advisory Agreement is subject to annual review and
approval by the Trustees, including a majority of those who are
not "interested persons," as defined in the Investment Company
Act of 1940. The Investment Advisory Agreement was approved by
shareholders of the Money Market Portfolio, National Portfolio,
Arizona Portfolio, Maryland Portfolio, Missouri Portfolio and
Virginia Portfolio at the first annual meetings held following
the commencement of offering of their respective shares.
The Investment Advisory Agreement may be terminated at any time
without penalty by the Trustees, or with respect to any series or
class of the Trust's shares, by the vote of a majority of the
outstanding voting securities of that series or class (see
"Organization of the Trust"), or by the Adviser upon sixty days'
written notice to the other party. The Investment Advisory
Agreement may not be assigned by the Adviser, and will
automatically terminate upon any assignment.
Background of the Adviser. The Adviser was formed in January 1979
for the purpose of providing investment management services to
Government Investors Trust, a money market fund which invests
solely in U.S. Government securities. The Adviser also serves as
the investment adviser to GIT Income Trust and GIT Equity Trust.
The Adviser is a former subsidiary of and successor to Bankers
Finance Corporation which was formed in 1975.
Management. A. Bruce Cleveland is President of the Adviser; he
and Michael D. Goth are its sole stockholders. Mr. Cleveland is
also Chairman of the Trustees, President and Treasurer of the
Trust. Mr. Cleveland holds the same positions with Government
Investors Trust, GIT Income Trust, and GIT Equity Trust.
Advisory Fee and Expense Limitations. For its services under the
Investment Advisory Agreement, the Adviser receives a fee,
payable monthly, calculated as 1/2 percent per annum of the
average daily net assets of the Trust's Money Market Portfolio
and 5/8 percent per annum of the average daily net assets of the
other portfolios. Such fees do not decrease as net assets
increase. The Adviser may waive or reduce such fee during any
period. The Adviser may also reduce such fee on a permanent
basis, without any requirement for consent by the Trust or its
shareholders, under such terms as it may determine, by written
notice thereof to the Trust.
The Adviser has also agreed to reimburse the Trust for all of its
expenses, including any management fees paid to the Adviser but
excluding securities transaction commissions and expenses, taxes,
interest, share distribution expenses, and other extraordinary
and nonrecurring expenses, which during any fiscal year exceed
the applicable expense limitation in any state or other
jurisdiction in which the Trust, during the fiscal year, becomes
subject to regulation by qualification or sale of its shares. As
of the date of this Statement of Additional Information, the
Trust believes this applicable annual expense limitation to be
equivalent to two and one-half percent of each Portfolio's
aggregate daily average net assets up to $30 million; two percent
of an amount of such net assets exceeding $30 million,
<PAGE>
but not exceeding $100 million; and one and one-half percent of
the amount, if any, by which such net assets exceed $100 million.
In addition, the Adviser has agreed, in any event, to be
responsible for the fees and expenses of the Trustees and
officers of the Trust who are affiliated with the Adviser, the
rent expenses of the Trust's principal executive office premises,
and its various promotional expenses (including the distribution
of prospectuses to potential shareholders). Other than investment
management and the related expenses and the foregoing items, the
Adviser is not obligated to provide or pay for any other services
to the Trust, although it may elect to do so. The Investment
Advisory Agreement permits the Adviser to make payments out of
its fee to other persons.
The Arizona Portfolio paid aggregate advisory fees for the fiscal
years ended September 30, 1992, 1993, 1994 and 1995 in the
amounts of $61,602, $84,951, $86,146 and $64,823, respectively.
The Missouri Portfolio paid aggregate advisory fees for the
fiscal years ended September 30, 1992, 1993, 1994 and 1995 in the
amounts of $55,902, $76,300, $81,307 and $69,391, respectively.
The Adviser waived $9,460 in advisory fees in connection with the
Maryland Portfolio for the period from February 10, 1993
(inception) to September 30, 1993 and waived $20,607 and $18,524
in advisory fees for the fiscal years ending September 30, 1994
and 1995, respectively.
The Virginia Portfolio paid aggregate advisory fees to the
Adviser for the period October 13, 1987, through September 30,
1988, and for the fiscal years ended September 30, 1989, 1990,
1991, 1992, 1993, 1994 and 1995 in the amount of $72,123,
$117,791, $142,774, $172,966, $214,486, $254,204, $251,858 and
$207,900, respectively.
During the fiscal years ending September 30, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995 the Adviser received
aggregate advisory fees in connection with the Trust's National
Portfolio of $314,504, $248,341, $251,380, $254,998, $250,654,
$254,528, $257,734, $238,703 and $202,743, respectively, and
aggregate advisory fees of $116,154, $111,535, $113,931,
$118,603, $100,865, $79,866, $72,803, $58,333 and $45,081,
respectively, in connection with the Trust's Money Market
Portfolio.
Organization of the Trust
The Declaration of Trust, dated June 8, 1982, has been filed with
the Secretary of State of the Commonwealth of Massachusetts and
the Clerk of the City of Boston, Massachusetts. The prospectus
contains general information concerning the Trust's form of
organization and its shares (see "The Trust and Its Shares"),
including the series of shares currently authorized.
Series and Classes of Shares. At any time the Trustees may
authorize the creation of additional series of shares (the
proceeds of which would be invested in separate, independently
managed Portfolios) and additional classes of shares within any
series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by
future regulations, methods of share distribution or other
unforeseen circumstances) with such preferences, privileges,
limitations, and voting and dividend rights as the Trustees may
determine. All consideration received by the Trust for shares of
any additional series or class, and all assets in which such
consideration is invested, would belong to that series or class
(but classes may represent proportionate undivided interests in a
series), and would be subject to the liabilities related thereto.
For any such additional series or class, any adoption of an
investment advisory contract or changes in fundamental investment
policies related to the series or class must be submitted for
shareholder approval, as required by the Investment Company Act
of l940.
The Trustees may divide or combine the shares of any series into
a greater or lesser number of shares without thereby changing the
proportionate interests in the series. In the event of unforeseen
gains or losses, the Trustees might use this authority to
maintain the price of Money Market Portfolio shares at $1.00. Any
assets, income and expenses of the Trust not readily identifiable
as belonging to a particular series are allocated by or under the
direction of the Trustees in such a manner as they deem fair and
equitable. Upon any liquidation of the Trust or of a series of
its shares, the shareholders are entitled to share pro-rata in
the liquidation proceeds available for distribution. Shareholders
of each series have an interest only in the assets allocated to
that series.
Voting Rights. The voting rights of shareholders are not
cumulative, so that holders of more than 50% of the shares voting
can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any
Trustees. As of January 3, 1996, the shareholders which held five
percent or more of the Trust were: for the Arizona Portfolio --
none; for the Maryland Portfolio -- the Patricia McCauley Trust,
3600 Tarkington Lane, Silver Spring, MD (8%); for the Missouri
Portfolio -- Blueridge & Co., 4240 Blue Ridge Blvd., Kansas City,
MO (27%); for the Virginia Portfolio -- none; for the National
Portfolio -- none; and for the Money Market Portfolio -- K.L. Norris,
4637 Randolph Drive, Annandale, VA (5%).
Shareholder votes relating to the election of Trustees, approval
of the Trust's selection of independent public auditors and
any contract with a principal underwriter, as well as any other
matter in which the interests of all shareholders are
substantially identical, will be voted on without regard to
series or classes of shares. Matters that affect a particular
series or class of shares will not be voted upon by the
unaffected shareholders. Holders of an entity such as the Trust,
under certain circumstances in which the interests of more than
one series or class of shares are affected, but where such
interests are not substantially identical, will be voted on
separately by each series or class affected and will require a
majority vote of each such series or class to be approved.
In particular, required shareholder approval of the Investment
Advisory Agreement, the Services Agreement and any change in the
Trust's fundamental investment policies (see "Investment
Limitations") will be submitted to a separate vote by each series
and class of shares. When a matter is voted upon separately by
more than one series or class of shares, it may be approved with
respect to a series or class even if it fails to receive a
majority vote of any other series or class or fails to receive a
majority vote of all shares entitled to vote on the matter.
<PAGE>
Because there is no requirement for annual elections of Trustees,
the Trust does not anticipate having regular annual shareholder
meetings; shareholder meetings will be called as necessary to
consider questions requiring a shareholder vote. The selection of
the Trust's independent auditors will be submitted to a vote of
ratification by the shareholders at any annual meeting held by
the Trust. Any change in the Declaration of Trust, in the
Investment Advisory Agreement (except for reductions of the
Adviser's fee), in the Services Agreement or in fundamental
investment policies must be approved by a majority of the
affected shareholders before it can become effective. For this
purpose, a "majority" of the shares of the Trust means either the
vote, at an annual or special meeting of the shareholders, of 67
percent or more of the shares present at such meeting if the
holders of more than 50 percent of the outstanding shares of the
Trust are present or represented by proxy or the vote of 50
percent of the outstanding shares of the Trust, whichever is
less.
The Declaration of Trust provides that two-thirds of the holders
of record of the Trust's shares may remove a Trustee from office
by votes cast in person or by proxy at a meeting called for the
purpose. A Trustee may also be removed from office provided two-
thirds of the holders of record of the Trust's shares file
declarations in writing with the Custodian. The Trustees are
required to promptly call a meeting of shareholders for the
purpose of voting on removal of a Trustee if requested to do so
in writing by the record holders of at least 10% of the Trust's
outstanding shares. Ten or more persons who have been
shareholders for at least six months and who hold shares with a
total value of at least $25,000 (or 1% of the Trust's net assets,
if less) may require the Trust to assist a shareholder
solicitation with the purpose of calling a shareholder meeting.
Such assistance could include providing a shareholder mailing
list or an estimate of the number of shareholders and approximate
cost of the shareholder mailing, in which latter case, unless the
Securities and Exchange Commission determines otherwise, the
shareholders desiring the solicitation may require the Trustees
to undertake the mailing if those shareholders provide the
materials to be mailed and assume the cost of the mailing.
Shareholder Liability. Under Massachusetts law, the shareholders
of an entity such as the Trust may, under certain circumstances,
be held personally liable for its obligations. The Declaration of
Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust, and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument, entered into or executed by the Trust or Trustees.
The Declaration of Trust provides for indemnification out of
Trust property of any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of
the Trust and satisfy any judgment thereof. Thus the risk of a
shareholder incurring financial loss on account of status as a
shareholder is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
Liability of Trustees and Others. The Declaration of Trust
provides that the officers and Trustees of the Trust will not be
liable for any neglect, wrongdoing, errors of judgment, or
mistakes of fact or law, except that they shall not be protected
from liability arising out of willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties to the
Trust. Similar protection is provided to the Adviser under the
terms of the Investment Advisory Agreement and the Services
Agreement. In addition, protection from personal liability for
the obligations of the Trust itself, similar to that provided to
shareholders, is provided to all Trustees, officers, employees
and agents of the Trust.
Trustees and Officers
The Trustees and executive officers of the Trust and their
principal occupations during the past five years are shown below:
A. Bruce Cleveland*
1655 Fort Myer Drive
Arlington, VA 22209
Chairman of Trustees, President and Treasurer
Founder and President of GIT Investment Funds and of Bankers
Finance Corporation and President of its successor, Bankers
Finance Investment Management Corp.; President of Presidential
Savings Bank, FSB; President of GIT Investment Services, Inc.;
formerly special Assistant for SBIC Industry Development, U.S.
Small Business Administration and member of the Corporate Finance
Dept. of the investment firm of Drexel, Burnham & Co., Inc. A
graduate of Harvard College and Harvard Business School. b. 5/25/43
Thomas S. Kleppe=
7100 Darby Road
Bethesda, MD 20817
Trustee
Private Investor; formerly Visiting Professor at the University
of Wyoming, Secretary of the U.S. Department of the Interior,
Administrator of the U.S. Small Business Administration, U.S.
Congressman from North Dakota, Vice President and Director of
Dain, Kalman & Quail, investment bankers, and President of Gold
Seal Co., manufacturers of household cleaning products. Attended
Valley City State College of North Dakota. b. 7/1/19
John D. Reilly=
5335 Wisconsin Avenue, NW
Washington, DC 20015
Trustee
Executive Director (formerly Chairman, President and Chief
Executive Officer) of Reilly Mortgage Group, Inc., Vienna, Va., a
commercial mortgage banking company which he founded in 1976. A
graduate of the University of Notre Dame and Harvard Business
School. b. 8/29/42
Smith T. Wood=
9014 Old Dominion Drive
McLean, VA 22102
Trustee
President of FaxGuard Systems Corporation, providers of secure
facsimile services. An adjunct professor at Georgetown University
and director of Allied Capital Corporation II and Seneca
Corporation. Formerly an executive of Barrister Informa-
<PAGE>
tion Systems Corp., Barrister Micro Systems Corp. and Chelsea
Systems, Inc. A graduate of Massachusetts Institute of Technology
and Harvard Business School. b. 9/14/47
Charles J. Tennes
1655 Fort Myer Drive
Arlington, VA 22209
Secretary
Secretary of GIT Investment Funds, Executive Vice President of
Bankers Finance Investment Management Corp. and GIT Investment
Services, Inc.; formerly Vice President of Ferris & Company, Inc.
(now Ferris, Baker Watts). A Certified Financial Planner and
graduate of the University of Washington.
* Trustees deemed to be "interested persons" of the Trust as the
term is defined in the Investment Company Act of 1940. Only those
persons named in the table of Trustees and officers who are not
interested persons of the Trust are eligible to be compensated by
the Trust under the terms of the Investment Advisory Agreement.
The compensation of each Trustee who may be compensated by the
Trust has been fixed at $4000 per year, to be prorated according
to the number of regularly scheduled meetings each year. Four
Trustees' meetings are currently scheduled to take place each
year. In addition to such compensation, those Trustees who may be
compensated by the Trust shall be reimbursed for any out-of-
pocket expenses incurred by them in connection with the affairs
of the Trust. Each such compensated Trustee currently receives
annual compensation from the Trust and from the other investment
companies managed by the Adviser (see "The Investment Adviser")
totalling $15,000. Due to the resignation of Michael D. Goth,
there is currently a vacancy on the Board of Trustees.
During the last fiscal year of the Trust, the Directors were
compensated as follows:
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Portfolios
Compensa- Accrued as Annual and Fund
tion part of Benefits Complex
from Portfolios Upon Paid to
Portfolios Expense Retirement Directors(a)
A. Bruce Cleveland 0 0 0 0
Thomas S. Kleppe 4,000 0 0 15,000
John D. Reilly 4,000 0 0 15,000
Smith T. Wood 4,000 0 0 15,000
(a) Complex is comprised of 4 trusts and two corporations with a total
of 13 funds and/or series.
= Member of the Audit Committee of the Trust. The Audit Committee
is responsible for reviewing the results of each audit of the
Trust by its independent auditors and for recommending the
selection of independent auditors for the coming year.
Under the Declaration of Trust, the Trustees are entitled to be
indemnified by the Trust to the fullest extent permitted by law
against all liabilities and expenses reasonably incurred by them
in connection with any claim, suit or judgment or other liability
or obligation of any kind in which they become involved by virtue
of their service as Trustees of the Trust, except liabilities
incurred by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of their office.
As of December 30, 1995, the Trustees and officers of the Trust
directly or indirectly owned as a group less than 1% of the
shares in the Money Market and National Portfolios, and no shares
in the Arizona, Maryland, Missouri and Virginia Portfolios.
Administrative and Other Expenses
Except for certain expenses assumed by the Adviser (see "The
Investment Adviser"), the Trust is responsible for payment from
its assets of all of its expenses. These expenses can include any
of the business or other expenses of organizing, maintaining and
operating the Trust. Certain expense items which may represent
significant costs to the Trust include the payment of the
Adviser's fee; the expense of shareholder accounting, customer
services, and calculation of net asset value; the fees of the
Custodian, of the Trust`s independent auditors, and of legal
counsel to the Trust; the expense of registering the Trust and
its shares, of printing and distributing prospectuses to current
shareholders, and of trade association membership; the expense of
preparing shareholder reports, proxy materials and of holding
shareholder meetings of the Trust.
Services Agreement. The Trust does not have any officers or
employees who are paid directly by the Trust. The Trust has
entered into a Services Agreement with the Adviser for the
provision of operational and other services required by the
Trust. Such services may include the functions of shareholder
servicing agent and transfer agent, bookkeeping and portfolio
accounting services, the handling of telephone inquiries, cash
withdrawals and other customer service functions including
monitoring wire transfers, and providing to the Trust appropriate
supplies, equipment and ancillary services necessary to the
conduct of its affairs. The Trust is registered with the
Securities and Exchange Commission as the transfer agent for its
shares and acts as its own dividend-paying agent; while transfer
agent personnel and facilities are included among those provided
to the Trust under the Services Agreement, the Trust itself is
solely responsible for its transfer agent and dividend payment
functions and for the supervision of those functions by its
officers.
All services provided by the Adviser are rendered at cost. The
term "cost" includes both direct expenditures and the related
overhead costs, such as depreciation, employee supervision, rent
and the like. Reimbursements to the Adviser pursuant to the
Services Agreement are in addition to and independent of payments
made pursuant to the Investment Advisory Agreement. The Trust
believes that contracting for the previously described services
may permit them to be provided on a relatively efficient basis,
whereby many separate specialized functions are performed by
personnel and equipment not required to be devoted full time to
serving the Trust. Accordingly, certain of the "costs"
attributable to services provided to the Trust may require
allocation of expenses, such as employee salaries, occupancy
expense, telephone service, computer service and equipment costs,
depreciation, interest, and supervisory expenses. Items of income
and expense which apply solely to one portfolio are wholly
allocated to that portfolio; items which are not clearly
applicable to one portfolio are prorated among the portfolios
<PAGE>
on the basis of their net assets or other basis as the Trustees
determine equitable. To the extent that costs must be allocated
between the Trust and other activities of the Adviser, such
allocations may be made on the basis of reasonable approximations
calculated by the Adviser and periodically reviewed by the
Trustees.
Distribution Agreement. GIT Investment Services, Inc. acts as the
Trust's Distributor and principal underwriter pursuant to a
Distribution Agreement dated November 18, 1982. This Agreement
has an initial term of two years and may thereafter continue in
effect only if approved annually by the Trustees, including a
majority of those who are not "interested persons" as defined in
the Investment Company Act of 1940. The Agreement provides for
distribution of the Trust's shares without a sales charge to the
investor. The Distributor may act as the Trust's agent for any
sales of its shares. The Trust may also sell its shares directly
to any party. The Distributor makes the Trust's shares
continuously available to the general public in those states
where it has qualified to do so, but has assumed no obligation to
purchase any of the Trust's shares. The Distributor is wholly
owned by A. Bruce Cleveland.
Portfolio Transactions
Decisions as to the purchase and sale of securities and decisions
as to the execution of these transactions, including selection of
market, broker or dealer and the negotiation of commissions, are
to be made by the Adviser, subject to review by the officers and
Trustees.
In the purchase and sale of portfolio securities the Trust seeks
to obtain prompt and reliable execution of orders at the most
favorable price or yield. In determining the best price and
execution, the Adviser may take into account a dealer's
operational and financial capabilities, the type of transaction
involved, the dealer's general relationship with the Adviser, and
any statistical, research or other services provided by the
dealer to the Adviser. To the extent such non-price factors are
taken into account, the execution price paid may be increased,
but only in reasonable relation to the benefit of such non-price
factors to the Trust as determined in good faith by the Adviser.
In selecting brokers and dealers with which to execute
transactions, the Adviser gives consideration to whether a dealer
has previously given research information concerning the
particular securities being purchased. Such broker-dealer
selections, however, are not made as a result of agreements with
the firms involved and the Adviser does not maintain an
allocation system for dealing with broker-dealers. Brokers or
dealers who execute transactions for the Trust may also sell its
shares; however, any such sales will be neither a qualifying nor
a disqualifying factor in the selection. The Trust did not
purchase any securities issued by broker-dealers during the
fiscal year ended September 30, 1995. During its three most
recent fiscal years, the Trust purchased all of its investments
in principal transactions and paid no brokerage commissions.
Owing to the nature of the market for municipal securities, the
Trust expects that most portfolio transactions are made directly
with an underwriter or dealer acting as a principal, and thus do
not involve direct payments of commissions, although purchases
from an underwriter involve payments of fees and concessions by
the issuer to the underwriting group. The Trust also reserves the
right to purchase portfolio securities through an affiliated
broker, when deemed in the Trust's best interests by the Adviser,
provided that: (1) the transaction is in the ordinary course of
the broker's business; (2) the transaction does not involve a
purchase from another broker or dealer; (3) compensation to the
broker in connection with the transaction is not in excess of one
percent of the cost of the securities purchased; and (4) the
terms to the Trust for purchasing the securities, including the
cost of any commissions, are not less favorable to the Trust than
terms concurrently available from other sources. Any compensation
paid in connection with such a purchase will be in addition to
fees payable to the Adviser under the Investment Advisory
Agreement. The Trust does not anticipate that any such purchases
through affiliates will represent a significant portion of its
total activity; no such transactions took place during the
Trust's three most recent fiscal years.
The Trust does not expect to engage in short-term trading for its
State or National Portfolios, but securities may be purchased and
sold in anticipation of market interest rate changes, as well as
for other reasons. The Trust anticipates that annual portfolio
turnover for these portfolios will generally not exceed 100%, but
actual turnover rate will not be a limiting factor if the Trust
deems it desirable to make purchases or sales. Portfolio
turnover rates for the portfolios for fiscal years 1994 and 1995
have been, respectively, for the Arizona Portfolio 67% and 24%,
for the Maryland Portfolio 78% and 9%, for the Missouri Portfolio
52% and 16%, for the Virginia Portfolio 104% and 55%, and for the
National Portfolio 175% and 56%. Turnover rates in excess of
100% resulted from portfolio adjustments required by the rapid
interest rate fluctuations occurring in the fixed income
securities markets in 1994.
Although the Trust intends normally to hold securities in its
Money Market Portfolio to maturity, the short maturities of these
investments are expected to result in a relatively high rate of
Portfolio turnover.
Share Purchases
The prospectus describes the basic procedures for investing in
the Trust (see "How to Purchase and Redeem Shares"). The
following information concerning other investment procedures is
presented to supplement the information contained in the
prospectus.
Shareholder Service Policies. The Trust's policies concerning
shareholder services are subject to change from time to time. The
Trust reserves the right to change the minimum account size below
which an account is subject to a monthly service charge or to
involuntary closing by the Trust and reserves the right to
increase its minimum initial investment amount at any time. The
Trust may also institute a minimum amount for subsequent
investments by 30 days' written notice to shareholders. The Trust
further reserves the right, after 30 days' written notice, to
impose special service charges for services that are not
regularly afforded to shareholders; such service charges may
include fees for stop payment orders and returned checks. The
Trust's standard service charges are also subject to adjustment
from time to time.
<PAGE>
Those who invest through a securities broker may be charged a
commission for the handling of the transaction if the broker so
elects; however, any investor is free to deal directly with the
Trust in any transaction.
Share Certificates. Share certificates will not be issued unless
an investor specifically requests certificates in a signed
instruction. Share certificates will never be issued until
payment for the shares has become "collected funds," as described
in the prospectus (see "How to Purchase and Redeem Shares").
In the event share certificates are issued, the certificate must
be returned to the Trust properly endorsed before any redemption
request can be honored. The Trust may further require that the
shareholder's signature be guaranteed by a bank or by a member
firm of the New York Stock Exchange. The Trust reserves the right
to decline to open any account for which the issuance of share
certificates is or has been requested, if it deems such action
would be in the Trust's best interests.
Sub-accounting Services. The Trust offers sub-accounting services
to institutions. The Trustees reserve the right to determine from
time to time guidelines to govern the level of sub-accounting
service that can be provided institutions in differing
circumstances. Normally, the Trust's minimum initial investment
to open an account will not apply to sub-accounts; however, the
Trust reserves the right to impose the same minimum initial
investment requirement that would apply to regular accounts if it
deems that the cost of carrying a particular sub-account or group
of sub-accounts is likely to be excessive. The Trust may provide
and charge for sub-accounting services which it determines exceed
those services which can be provided without charge; the
availability and cost of such additional services will be
determined in each case by negotiation between the Trust and the
parties requesting the additional services. The Trust is not
currently aware of any such services for which a charge will be
imposed.
Crediting of Investments. In order to obtain the highest yields
available within the limitations of its investment policies, the
Trust has a policy of being as fully invested as reasonably
practicable at all times (although a portfolio may retain
uninvested cash if deemed appropriate; see "Supplemental
Investment Policies"). Items submitted to the Trust for
investment are accepted only when submitted in proper form. They
are credited to shareholder accounts one or two business days
following receipt. Normally items received prior to 1 p.m.
Washington, DC time will be converted into shares at the net
asset value determined at the end of the following business day.
Items received after 1 p.m. Washington, DC time will be converted
into shares of the Trust at the net asset value determined at the
end of the second business day after receipt. Funds received by
wire are normally converted into shares of the Trust at the net
asset value next determined, provided the Trust is notified of
the wire by 1 p.m., Washington, DC time. If the Trust is not
notified by such time, the investment by wire will be converted
into shares of the Trust at the net asset value determined at the
end of the following business day.
After investments have been converted into shares in the Trust,
they begin to accrue dividends immediately. The Trust reserves
the right to delay credit for investments if it determines to do
so for operational reasons or if local banking practice makes
earlier crediting impractical; however, no such delay will affect
the net asset value per share used to determine the number of
shares purchased.
Checks drawn on foreign banks will not be considered received in
federal funds until the Trust has actual receipt of payment in
immediately available U.S. dollars after submission of the check
for collection; collection of such checks through the
international banking system may require 30 days or more.
The Trust reserves the right to reject any investment for any
reason, and may at any time suspend all new investment in the
Trust. The Trust may also, at its discretion or at the instance
of the Adviser, decline to give recognition as an investment to
funds wired for credit to State or National Portfolio accounts
until such funds are actually received by the Trust. Under
present federal regulatory guidelines, the Adviser may be
responsible for any losses resulting from changes in the Trust's
net asset values which are a result of failure to receive funds
from an investor to whom recognition for investment was given in
advance of receipt of payment.
If shares purchased are to be paid for by wire and the wire is
not received or if shares are purchased by check which, after
deposit, is returned unpaid or proves uncollectible, the share
purchase may be canceled immediately or the purchased shares may
be immediately redeemed. The investor who gave notice of the
intended wire or submitted the check will be held fully
responsible for any losses so incurred by the Trust, the Adviser
or the Distributor. As a condition of the Trust's public
offering, to which the investor will be deemed to have agreed by
submitting an order for the purchase of the Trust's shares, the
Distributor shall have the investor's power of attorney coupled
with an interest. This power of attorney shall authorize the
Distributor to redeem sufficient shares from any fund for which
it acts as a principal underwriter or distributor, or to
liquidate sufficient other assets held in any brokerage account
of the investor with the Distributor, and to apply the proceeds
thereof to the payment of any amounts due to the Trust from the
investor arising from any such losses. Any such redemptions or
liquidations will be limited to the amount of the actual loss
incurred by the Trust at the time the share purchase is canceled
and will be preceded by notice to the investor and an opportunity
for the investor to make restitution of the amount of the loss.
The Trust will retain any profits resulting from such
cancellations or redemptions, and if the purchase payment was by
a check actually received, will absorb any such losses unless
they prove recoverable.
Share Redemptions
The value of shares redeemed to meet redemption requests will be
determined according to the share net asset value calculated next
after the request has been received in proper form. (See
"Determination of Net Asset Value") Thus, any such request
received in proper form prior to 1 p.m. (for the Money Market
Portfolio) or 4 p.m. (for the National Portfolio and State
Portfolios) Washington, DC time on any business day will reflect
the net asset value calculated at that time; later redemption
requests will be processed to reflect the share net asset value
calculated on the next day the calculation is made. Net asset
value is calculated each day the New York Stock Exchange is open
for trading.
<PAGE>
Net asset value determinations will apply as of the day the
redemption order is submitted in proper form. A redemption
request may not be deemed to be in proper form unless a signed
account application has been properly submitted to the Trust by
the investor or such an application is submitted with the
redemption request. A shareholder draft check drawn against an
account will not be considered in proper form unless sufficient
collected funds (as described above) are available in the account
on the day the check is presented for payment. The "day of
redemption" for share redemptions refers to the day on which
corresponding funds are paid out by the Trust, whether by wire
transfer, exchange between accounts, official check prepared, or
debit of the investor's account to cover shareholder checks
presented for payment. Investors should be aware that it is
possible, should the share net asset value of the National or any
State Portfolio fall as a result of normal market value changes,
or if the Trust does not succeed in avoiding realized or
unrealized losses on its Money Market Portfolio (see
"Determination of Net Asset Value"), that amounts available for
redemption could be less than the amount originally invested. All
redemptions will be effected by the redemption of the appropriate
number of whole and fractional shares having a net asset value
equal to the amount withdrawn. In cases where investors are paid
immediately in cash for redemptions from National or any State
Portfolio accounts not exceeding 80% of the most recent account
value, the number of shares redeemed to cover the payment will
nevertheless be determined according to the net asset value per
share next determined after receipt of the redemption request.
The Trust will use its best efforts to handle redemptions within
the times previously given. It may, however, for any reason
postpone payment for shares in the Trust for any period up to
seven days. The Trust's sole responsibility with regard to
redemptions shall be to process, within the aforementioned time
period, redemption requests in proper form. Neither the Trust,
its affiliates, nor the Custodian can accept responsibility for
any act or event which has the effect of delaying or preventing
timely transfers of payment to or from shareholders. By law,
payment for shares in the Trust may be suspended or delayed for
more than seven days only during a period when the New York Stock
Exchange is closed, other than customary weekend and holiday
closings; when trading on such exchange is restricted as
determined by the Securities and Exchange Commission; or during
any period when the Securities and Exchange Commission has by
order permitted such suspension.
Unless the shareholder's current address is on file with the
Trust on the original account application or by subsequent
written notice signed by all the authorized signers on the
account, the Trust may require signed written instructions to
process redemptions and account closings. In response to verbal
requests, however, redemption proceeds may normally be mailed to
the investor at the address shown on the Trust's records,
provided an original signed application has been received.
Payment of redemption proceeds may normally be wired in response
to verbal requests by any party in accordance with preauthorized
written wire instructions.
When an account is closed and dividends have been declared but
not yet paid, the Trust reserves the right to pay the final
dividends by check on the same day such dividends are paid to
other shareholders.
Funds exchanged between investor accounts will earn dividends
from the account being credited, beginning with the day the
exchange is made. Same-day exchanges can only be made in
circumstances that would permit same-day wire redemptions from the
account being debited. All exchanges will be effected at the
net asset value per share of the respective accounts next
determined after the exchange request is received in proper form.
If an exchange is to be made between investor accounts that are
not held in the same name or do not have the same mailing address
or signatories, the Trust may require any transfer between them
to be made by making a redemption from one account and a
corresponding investment in the other, using the same procedures
that would apply to any other redemption or investment.
The Trust reserves the right, when it deems such action necessary
to protect the interests of its shareholders, to refuse to honor
redemption requests made by anyone whose identity has not been
established to the satisfaction of the Trust, or made by anyone
purporting to act with the authority of another person or on
behalf of a corporation or other legal entity. Each such
individual must provide a corporate resolution or other
appropriate evidence of his or her authority or identity
satisfactory to the Trust.
If, in the opinion of the Trustees, extraordinary conditions
exist which make cash payments undesirable, payments for any
shares redeemed may be made in whole or in part in securities and
other property of the Trust. The Trust has elected, however,
pursuant to rules of the Securities and Exchange Commission, to
permit any shareholder of record to make redemptions wholly in
cash to the extent the shareholder's redemptions in any 90-day
period do not exceed the lesser of 1% of the aggregate net assets
of the Trust or $250,000. Any property of the Trust distributed
to shareholders will be valued at its net asset value. In
disposing of any such property received from the Trust, an
investor might incur commission costs or other transaction costs;
there is no assurance that an investor attempting to dispose of
any such property would actually receive the full net asset value
for it. Except as described herein, however, the Trust intends to
pay for all share redemptions in cash.
Declaration of Dividends
Substantially all of each portfolio's accumulated net income is
declared as dividends each business day. Calculation of
accumulated net income for each of the Trust's portfolios is made
just prior to calculation of the portfolio's net asset value (see
"Determination of Net Asset Value"). The amount of such net
income reflects interest income (plus any original discount
earned less premium amortized) and expenses accrued by the
portfolio since the previously declared dividends.
Realized capital gains and losses and unrealized appreciation and
depreciation are reflected as changes in net asset value per
share of the Trust's portfolios. Premium on securities purchased
is amortized daily as a charge against income. Original issue
discount on municipal bonds is considered tax-exempt and an
amortization of the remaining unearned portion of such discount
will be included in the Trust's daily income.
<PAGE>
Dividends are payable to shareholders of record at the time they
are determined. Dividends are paid in the form of additional
shares credited to the respective investor account at the end of
each calendar month (or normally when the account is closed, if
sooner), unless the shareholder makes a written election to
receive dividends in cash.
Notice of payment of dividends will be mailed to each shareholder
quarterly. For tax purposes each shareholder will also receive an
annual summary of dividends paid by the Trust and the extent, if
any, to which they constitute "exempt-interest dividends" (see
"Additional Tax Matters"). Any investor purchasing shares in an
account of the Trust as of a particular net asset value
determination (at 1 p.m. or 4 p.m., Washington, DC time, as the
case may be) on a given day will be considered a shareholder of
record for the corresponding dividend declaration made that day;
but an investor withdrawing as of such determination will not be
considered a shareholder of record with respect to the shares
withdrawn. A "business day" is any day the New York Stock
Exchange is open for trading.
Net realized capital gains, if any, will be distributed to
shareholders at least annually as capital gains dividends. Since
the Money Market Portfolio does not hold securities having an
effective maturity longer than one year, capital gains in this
portfolio are unlikely; however, to the extent any capital gains
are realized in this portfolio, they will be distributed to
shareholders at least once a year.
Determination of Net Asset Value
The net asset value of each portfolio and of individual shares is
calculated each day the New York Stock Exchange is open for
trading. Net asset value is not calculated on New Year's Day, the
observance of Washington's Birthday, Good Friday, the observance
of Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day, and on other days the New York Stock Exchange
is closed for trading. The net asset value calculation for each
of the Trust's portfolios is made as of a specific time of day,
as described in the prospectuses.
Net asset value per share of each portfolio is determined by
adding the value of all its securities and other assets,
subtracting its liabilities and dividing the result by the total
number of outstanding shares that represent an interest in the
portfolio. These calculations are performed by the Trust and for
its account, pursuant to the Services Agreement (see
"Administrative and Other Expenses"). The Trust does not charge a
"sales load," and accordingly its shares are both offered and
redeemed at net asset value. Securities for which current market
quotations are readily available are valued at the mean between
their bid and asked prices; securities for which current market
quotations are not readily available are valued at their fair
value as determined in good faith by the Trustees. Securities
having a remaining effective maturity of 60 days or less are
valued at amortized cost, subject to the Trustees' determination
that this method reflects their fair value. The Trustees may
authorize reliance upon an independent pricing service for the
determination of security values. The market for many municipal
issues is not active and transactions in such issues may occur
infrequently. Accordingly, the independent pricing service may
price securities with reference to market transactions in
comparable securities and to historical relationships among the
prices of comparable securities; such prices may also reflect an
allowance for the impact upon prices of the larger transactions
typical of trading by institutions.
Shares in the State and National Portfolios are priced by
rounding to the nearest one-tenth of one percent. Net asset value
of these shares is expected to fluctuate daily, and the Trust
will make no attempt to stabilize the value of any such portfolio
shares.
To the extent reasonably practicable in light of current market
conditions, the Trustees intend to assure that the Money Market
Portfolio's net asset value per share will not deviate from
$1.00. In accordance with this objective, the Trustees intend to
price shares according to the "penny rounding" method, whereby
the share price will be rounded to the nearest cent. This pricing
method will be followed pursuant to an exemptive order of the
Securities and Exchange Commission, which requires the Money
Market Portfolio to limit its investments to dollar-denominated
high grade instruments deemed to represent minimal credit risks
(see "Quality Ratings"), to limit maturities to those appropriate
to the objective of maintaining a stable share price, and in any
event to the maturity restrictions provided in the Trust's
investment policies (see "Investment Policies"), and to invest in
a manner which the Trustees determine will, to the extent
reasonably practicable taking into account current market
conditions, assure that the portfolio's net asset value per share
will not deviate from $1.00. The Trust reserves the right to use
the "penny rounding" valuation method pursuant to any applicable
rules adopted by the Securities and Exchange Commission, even if
the terms of such rules differ from the terms of the Trust's
exemptive order.
Despite these considerations, there can be no absolute assurance
that the Money Market Portfolio will always maintain a $1.00
share price. The "penny rounding" pricing method, in fact,
requires that if the net asset value per share deviates one-half
percent or more from $1.00, the share price must be rounded
upward or downward accordingly.
Additional Tax Matters
Federal Income Tax. Each portfolio of the Trust intends to
continue to qualify for the special treatment afforded regulated
investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"). If it so qualifies, each portfolio will
not be subject to Federal income tax on the amounts distributed
to shareholders. Furthermore, the Code permits regulated
investment companies with at least 50 percent of the value of
their assets invested in tax-exempt securities as of the close of
each fiscal quarter to "flow through" to shareholders the tax-
exempt character of the interest paid. The Trust intends to
qualify under this provision so that dividends paid to
shareholders will be treated as "exempt-interest dividends" in
the same proportion as the Trust's annual net investment income
is derived from tax-exempt sources. Thus, to the extent a
portfolio's dividends are exempt-interest dividends, they may be
treated by shareholders for Federal income tax purposes as if
they were interest excluded from gross income. To qualify as
exempt-interest dividends, distributions must be designated as
such in a written notice mailed to shareholders within sixty
days of the close of the Trust's taxable year.
<PAGE>
Shareholders who fail to comply with the interest and dividends
"backup" withholding provisions of the Code (by filing Form W-9
or its equivalent when required) or who have been determined by
the Internal Revenue Service to have failed to properly report
dividend or interest income, may be subject to a 31% withholding
requirement on transactions with the Trust.
Under provisions of the Code, interest received on certain
otherwise tax-exempt securities is subject to an alternative
minimum tax ("AMT"). AMT will apply to interest received on
"private activity" bonds issued after August 7, 1986 which are
used to finance activities other than those generally performed
by governmental units (for example, bonds issued to finance
commercial enterprises or reduced interest rate home mortgage
loans). Interest income received on such bonds will be a "tax
preference item" which may make shareholders liable for payment
of AMT. Deductions and preference items such as state and local
taxes, excess depletion and excess intangible drilling costs (in
addition to interest on AMT bonds) are among the items which are
added to taxable income to determine whether AMT is due in place
of ordinary income tax. Corporations which have accounts with
the Trust may be subject to AMT based in part on certain
differences between their taxable income adjusted for other tax
preference items and their "adjusted current earnings." The Trust
may purchase bonds on which the interest received may be subject
to AMT.
Pursuant to the Omnibus Reconciliation Act of 1993, if a security
is purchased by a portfolio at a "market discount", the amount of
gain earned by the portfolio upon disposition of the security may
be considered ordinary taxable income. Such income earned as a
result of "market discount" will be distributed to shareholders
and will not qualify as tax-exempt. For the Trust's fiscal year
ended September 30, 1995, no portfolio experienced any
recognizable gain due to "market discount."
The Code requires that each portfolio of the Trust distribute
100% of its net income and net capital gains in order to avoid
all regular corporate tax. The Code also requires the distribution
of at least 98% of net income and capital gains
determined as of October 31 each year before the following
calendar year-end in order to avoid a 4% excise tax, but the
excise tax will not apply to a portfolio's tax-exempt income. The
Trust intends to distribute any taxable income to the extent such
income is realized and avoid imposition of the excise tax.
Shareholders will, however, be subject to federal income tax on
any dividends paid out of taxable ordinary net income of a
portfolio or out of long-term or short-term capital gains. Such
dividends are taxable to shareholders whether distributed in cash
or reinvested in additional shares. The Trust has reserved
freedom to sell any securities held by it or which it has
committed to purchase. Since profits realized from such sales
are classified as capital gains, they would be subject to capital
gains taxes, even if the securities sold are otherwise tax-
exempt. For shareholders who receive exempt-interest dividends
on shares held for less than six months, any loss on the sale or
exchange of such shares will, to the extent of such dividends, be
disallowed. Any such loss to the extent not disallowed by the
preceding sentence will be treated as a long-term capital loss to
the extent of any capital gain dividends received by the
shareholder.
State and Local Taxes. Exemption from federal income tax of
dividends derived from municipal securities does not necessarily
result in an exemption under the tax laws of any state or local
taxing authority. Shareholders may be exempt from state and local
taxes on dividends derived from municipal securities issued by
entities located within their state of residence, but may be
subject to state or local tax on dividends derived from other
obligations. A breakdown of dividends by state is provided to
shareholders on an annual basis for the National and Money Market
Portfolios. Shareholders should consult their tax advisers about
the status of distributions from the Trust in their own tax
jurisdictions.
Yield and Total Return Calculations
In order to provide a basis for comparisons of the Trust's
portfolios with similar funds, with comparable market indexes,
and with investments such as savings accounts, savings
certificates, taxable and tax-free bonds, taxable money market
funds and money market instruments, the Trust calculates yields
for all of its portfolios and total returns for the National
Portfolio and the State Portfolios.
Standardized Yield. For advertising purposes, the yields of each
of the Trust's portfolios will be calculated according to
standardized formulas prescribed by the Securities and Exchange
Commission.
The State and National Portfolios. The standardized yields of the
State Portfolios and of the National Portfolio are calculated by
adding one to the respective portfolio's total daily theoretical
net income per share during a given 30-day period divided by the
portfolio's maximum offering price per share on the last day of
the period, raising the result to the sixth power, subtracting
one, and multiplying the result by two. Such standardized yields
may be calculated daily; weekly, as of each Friday; and monthly,
as of the last business day of each month.
For purposes of such yield calculations, the daily theoretical
gross income of each obligation in a portfolio is determined as
1/360 of the obligation's yield to maturity (or put or call date
in certain cases), based upon its current value (defined as the
obligation's closing market value that day, plus any accrued
interest), multiplied by such current value. For tax-exempt
securities having a current value discount which exceeds any
unamortized original issue discount, such securities are valued
at the unamortized original issue discount, or if there is none,
at par. A portfolio's daily theoretical gross income is the sum
of the daily theoretical gross income amounts computed for each
of the obligations in the portfolio. A portfolio's total daily
theoretical net income per share during a given 30-day period is
the portfolio's daily theoretical gross income, less daily
expenses accrued (as reduced by any expenses waived or reimbursed
by the Adviser), totalled for each day in the period and divided
by the average number of shares outstanding during the period.
Money Market Portfolio. The standardized yield of the Money
Market Portfolio is calculated by dividing the net income
(including the benefit of any expenses waived or reimbursed by
the Adviser) earned on one share during a given seven-day period,
exclusive of any capital changes, by the initial value of that
share (normally $1.00), and expressing the result (called the "base
period return")
<PAGE>
as an annualized percentage. The base period return is annualized
by multiplying it by 365 and dividing the product by seven.
The Money Market Portfolio's "effective yield" is calculated in a
similar manner, except that the net income earned during a seven-
day period is assumed to be reinvested at the same rate over a
full year, thereby generating additional earnings from
compounding interest. The effective yield is computed by adding
one to the base period return, raising the result to the power
equal to 365 divided by seven, and subtracting one from the
result, which is then expressed as a percentage.
Taxable Equivalent Yield. The Trust may also compute taxable
equivalent yields for each of its portfolios. The taxable
equivalent yield of a portfolio is equal to the portion of its
yield representing tax-exempt income, divided by one minus a
stated income tax rate (expressed as a fraction), plus any
portion of the portfolio's yield which is not tax-exempt.
Total Return. For the State Portfolios and National Portfolio,
average annual total return is calculated by finding the
compounded annual rate of return over a given period that would
be required to equate an assumed initial investment in the
portfolio to the ending redeemable value the investment would
have had at the end of the period, taking into account the effect
of the changes in the portfolio's share price during the period
and any recurring fees charged to shareholder accounts, and
assuming the reinvestment of all dividends and other
distributions at the applicable share price when they were paid.
Non-annualized aggregate total returns may also be calculated by
computing the simple percentage change in value that equates an
assumed initial investment in the portfolio with its redeemable
value at the end of a given period, determined in the same manner
as for average annual total return calculations.
Representative Yield and Total Return Quotations. As of September
30, 1995, the standardized 30-day yield of the Arizona Portfolio
was 4.14% per annum and the corresponding taxable equivalent
yield as of such date was 7.19%. The taxable equivalent yield is
based on the combined highest Arizona and 36% federal income tax
rate of 40.48% for the Arizona Portfolio (determined after giving
effect to the deductibility of Arizona income tax payments for
federal tax purposes). For the fiscal year ended September 30,
1995, the average annual total return of the Arizona Portfolio
was 8.95%. For the five years ended September 30, 1995, the
average annual total return of the Arizona Portfolio was 7.00%
and the aggregate total return was 40.28%. For the period from
October 13, 1989 (commencement date of public offering) through
September 30, 1995, the average annual total return of the
Arizona Portfolio was 6.37% and its aggregate total return was
44.52%. The average annual total return since inception would
have been 5.79% for the Arizona Portfolio, and the aggregate
total return would have been 39.86% had the Adviser not waived a
portion of its management fee or paid certain expenses during
this period.
As of September 30, 1995, the standardized 30-day yield of the
Maryland Portfolio was 4.16% per annum and the corresponding
taxable equivalent yield as of such date was 7.19%. The taxable
equivalent yield is based on the combined highest Maryland,
highest county and 36% federal income tax of 42.14% (determined
after giving effect to the deductibility of local income tax
payments for federal tax purposes). For the fiscal year ended
September 30, 1995, the average annual total return of the
Maryland Portfolio was 9.17%. For the period from February 10,
1993 (inception) through September 30, 1995, the average annual
total return of the Maryland Portfolio was 3.57%, and its
aggregate total return was 9.68%. Had the adviser not waived a
portion of its management fees or paid certain expenses, the 30-
day yield as of September 30, 1995 would have been 3.53%; for the
fiscal year ended September 30, 1995, the average annual total
return would have been 8.49%; for the period from February 10,
1993 (inception) through September 30, 1995, the average annual
total return and aggregate total return would have been 2.93% and
7.91%, respectively.
As of September 30, 1995, the standardized 30-day yield of the
Missouri Portfolio was 4.14% per annum and the corresponding
taxable equivalent yield as of such date was 6.88%. The taxable
equivalent yield is based on the combined highest Missouri and
36% federal income tax rate of 39.84% for the Missouri Portfolio
(determined after giving effect to the deductibility of Missouri
income tax payments for federal tax purposes). For the fiscal
year ended September 30, 1995, the average annual total return of
the Missouri Portfolio was 8.87%. For the five years ended
September 30, 1995, the average annual total return of the
Missouri Portfolio was 6.77%, and the aggregate total return was
38.77%. For the period from October 12, 1989 (commencement date
of public offering) through September 30, 1995, the average
annual total return of the Missouri Portfolio was 6.13% and its
aggregate total return was 42.59%. The average annual total
return since inception would have been 5.55% for the Missouri
Portfolio, and the aggregate total return would have been 38.04%
had the Adviser not waived a portion of its management fee or
paid certain expenses during this period.
As of September 30, 1995, the standardized 30-day yield of the
Virginia Portfolio was 4.76% per annum and the corresponding
taxable equivalent yield as of such date was 7.89%. The taxable
equivalent yield is based on the combined highest Virginia and
36% federal income tax rate of 39.68% for the Virginia Portfolio
(determined after giving effect to the deductibility of Virginia
income tax payments for federal tax purposes). For the fiscal
year ended September 30, 1995, the average annual total return of
the Virginia Portfolio was 9.54%. For the five years ended
September 30, 1995 the average annual total return of the
Virginia Portfolio was 7.04% and the aggregate total return was
40.55%. For the period from October 13, 1987 (commencement date
of public offering), through September 30, 1995, the average
annual total return of the Virginia Portfolio was 7.98% and its
aggregate total return was 84.28%. The average annual total
return since inception would have been 7.89% for the Virginia
Portfolio, and the aggregate total return would have been 83.10%
had the Adviser not waived a portion of its management fee or
paid certain expenses.
As of September 30, 1995, the standardized 30-day yield of the
National Portfolio was 4.62% per annum and the corresponding
taxable equivalent yield as of such date was 7.22%. The taxable
equivalent yield is based on the federal income tax rate of 36%
for the National Portfolio. For the fiscal year ended September
30, 1995, the average annual total return of the National
Portfolio was 8.40%. For the five years ended September 30, 1995,
the average
<PAGE>
annual total return of the National Portfolio was 6.95% and its
aggregate total return was 39.93%. For the ten years ended
September 30, 1995, the average annual total return of the
National Portfolio was 7.84% and its aggregate total return was
112.64%. For the period from November 16, 1982 (inception),
through September 30, 1995, the average annual total return was
8.51% and the aggregate total return was 183.17%
As of September 30, 1995, the standardized 7-day yield of the
Money Market Portfolio was 3.34%, amounting to an effective
annual yield of 3.40% per annum. The corresponding taxable
equivalent yield as of such date was 5.22%. The taxable
equivalent yield is based on the federal income tax rate of 36%
for the Money Market Portfolio.
Performance Comparisons. From time to time, in advertisements or
in reports to shareholders and others, the Trust may compare the
performance of its portfolios to that of recognized market
indexes or may cite the ranking or performance of its portfolios
as reported in recognized national periodicals, financial
newsletters, reference publications, radio and television news
broadcasts, or by independent performance measurement firms.
Market indexes which may be used include those compiled by major
securities firms, such as Salomon Brothers, Shearson Lehman
Hutton, the First Boston Corporation, and Merrill Lynch; other
indexes compiled by securities rating or valuation services, such
as Ryan Financial Corporation and Standard and Poor's
Corporation, may also be used. The national financial periodicals
which report market averages and indexes, performance
information, and/or rankings may include: the Wall Street
Journal, Investors Business Daily, the New York Times, the
Washington Post, Barron's, Financial World Magazine, Forbes
Magazine, Money Magazine, Personal Investor Magazine, Sylvia
Porter's Money Management Magazine, and the Bank Rate Monitor.
Independent performance measurement firms include Lipper
Analytical Services, Inc., Frank Russel Company, SCI, CDA
Investment Technologies, and Morningstar, Inc.
In addition, a variety of newsletters and reference publications
provide information on the performance of mutual funds, such as
the Donoghue's Money Fund Report, No-Load Fund Investor,
Wiesenberger Investment Companies Service, the Mutual Fund Source
Book, the Mutual Fund Director, the Switch Fund Advisory, Mutual
Fund Investing, the Mutual Fund Observer, and the Bond Fund
Survey. Financial news is broadcast by the Financial News
Network, Cable News Network, Public Broadcasting System, and
major television networks, as well as by numerous independent
radio and television stations.
In advertisements and elsewhere the Trust may cite the ranking of
any of its portfolios, as determined by Lipper Analytical
Services, Inc. ("Lipper") for any period, in comparison to all
mutual funds, or in comparison to a specific category of mutual
funds in which the portfolio is ranked by Lipper among funds
having similar investment objectives. As of the date of this
Statement of Additional Information, the Virginia Portfolio is
ranked by Lipper in the category of "Virginia Municipal Debt
Funds," the Arizona Portfolio is ranked in the Lipper category of
"Arizona Municipal Debt Funds", the Maryland Portfolio is ranked
in the Lipper category of "Maryland Municipal Debt Funds," and
the Missouri Portfolio is ranked in the Lipper category of
"Missouri Municipal Debt Funds." Similarly, the Money Market
Portfolio is ranked by Lipper in the category of "Tax-Exempt
Money Market Funds," and the National Portfolio is ranked by
Lipper in the category of "General Municipal Debt Funds." In the
event Lipper changes the category in which a portfolio is ranked,
then the revised category will be used by the Trust when rankings
are cited.
The Trust may also disclose the contents of each of its
portfolios as frequently as daily in advertisements and elsewhere.
Average Maturities. The Trust also calculates average maturity
for each portfolio. The "average maturity" of a portfolio on any
day is determined by multiplying the number of days remaining to
the effective maturity (see "Supplemental Investment Policies")
of each investment in the portfolio by the value of that
investment, summing the results and dividing the total by the
aggregate value of the portfolio that day (determined as of 1
p.m. or 4 p.m., as the case may be). Thus, the average maturity
represents a dollar-weighted average of the effective maturities
of the portfolio investments. The "mean average maturity" of a
portfolio over some period, such as seven days, a month or a
year, represents the arithmetic mean (i.e., simple average) of
the daily average maturity figures for the portfolio during the
period.
The yield of none of the portfolios is fixed. In fact, since
yields fluctuate daily, annualized rates of return should not be
considered representative of what an investment may earn in the
future. Since the average maturities of the National and the
State Portfolios are expected to be longer than the average
maturity of the Money Market Portfolio, the actual monthly
dividend income from an investment in the National or in any
State Portfolio is expected to change more slowly over time than
the monthly dividend income from a comparable Money Market
account.
For all portfolios, actual dividends will tend to reflect changes
in money market and bond interest rates, and will also depend
upon the level of the Trust's expenses, any realized or
unrealized investment gains and losses, and the relative results
of the Trust's investment policies. Thus, future yields may be
higher or lower than past yields, and there is no assurance that
any historical yield level will continue.
Custodians and Special Custodians
Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
Custodian for the cash and securities of the Trust. The Custodian
maintains custody of the Trust's cash and securities, handles its
securities settlements and performs transaction processing for
cash receipts and disbursements in connection with the purchase
and sale of the Trust's shares.
From time to time, the Trust may appoint a special custodian from
among certain banks, trust companies, and firms which are members
of the New York Stock Exchange and trade for their own accounts
in the types of securities purchased by the Trust. Such special
custodians will be used by the Trust only for the purpose of
providing custody and safekeeping services of relatively short
duration for designated types of securities which, in the opinion
of the Trustees or the Adviser, would most suitably be held by
such a special custodian rather than the Custodian. In the event a special
<PAGE>
custodian is used, it shall serve only in accordance with a
written agreement meeting the requirements of the Securities and
Exchange Commission, approved and reviewed at least annually by
the Trustees. If the special custodian is a securities dealer, it
must deliver to the Custodian its receipt for the safekeeping of
each lot of securities prior to payment by the Trust for such
securities.
The Trust may also maintain deposit accounts for the handling of
cash balances of relatively short duration with various banks, as
the Trustees or officers of the Trust deem appropriate, to the
extent permitted by the Investment Company Act of 1940.
Legal Matters & Independent Auditors
Sullivan & Worcester LLP, Washington, DC, serves as legal counsel to
the Trust.
Ernst & Young LLP, 1225 Connecticut Avenue, NW, Washington, DC
20036 serves as independent auditors to the Trust.
From time to time the Trust may be or become involved in
litigation in the ordinary conduct of its business. Material
items of litigation having consequences of possible or
unspecified damages are disclosed in the notes to the Trust's
financial statements (see "Financial Statements and Report of
Independent Auditors").
Additional Information
The Trust issues semi-annual and annual reports to its
shareholders and may issue other reports, such as quarterly
reports, as it deems appropriate. Annual reports are audited by
the Trust's independent auditors.
Statements contained in this Statement of Additional Information
and in the prospectus as to the content of contracts and other
documents are not necessarily complete. Investors should refer to
the documents themselves for definitive information as to their
detailed provisions. The Trust will supply copies of its
Declaration of Trust and Bylaws to interested persons upon
request.
The Trust and shares in the Trust have been registered with the
Securities and Exchange Commission in Washington, DC, by the
filing of a Registration Statement. The Registration Statement
contains certain information not included in the prospectus or in
this Statement of Additional Information, and is available for
public inspection and copying at the offices of the Commission.
Financial Statements and Independent Auditors' Report
Audited Financial Statements for the Trust, together with the
Report of Independent Auditors thereon, appear in the Trust's
Annual Report to Shareholders for the year ended September 30,
1995 and are incorporated herein by reference. The Trust's
audited financial statements together with the Reports of the
Independent Auditors therein appear in the Trust's Annual Reports
to Shareholders for the years ended September 30, 1992, 1993 and
1994 and were previously incorporated by reference in the Trust's
registration statement. The Trust's audited financial statements
for the National and Money Market Portfolios for the fiscal years
ended September 30, 1985, 1986, 1987, 1988, 1989, 1990 and 1991
have also been audited by Ernst & Young LLP and were previously
incorporated by reference in the Trust's Registration Statement.
The audited financial statements for the State Portfolios from
inception to September 30, 1991 have also been audited by Ernst &
Young LLP and have been previously incorporated by reference in
the Trust's Registration Statement.
Excluded from such incorporation by reference are the Trust's
letters to shareholders appearing in each Semi-Annual Report.
Such Reports to Shareholders have been filed with the Securities
and Exchange Commission and the most current report is furnished
to investors with this Statement of Additional Information.
Additional copies of such Reports are available upon request at
no charge by writing or calling the Trust at the address and
telephone number shown on the cover page above.
Appendix - Quality Ratings
Any investment made by the Trust will have a "quality rating"
determined principally by ratings assigned by recognized credit
rating agencies, or otherwise according to comparable standards
applied by the Adviser when there is no published rating or when
published ratings differ or are considered obsolete. Quality
ratings will normally be determined by referring to the ratings
assigned by the two major private organizations which rate
municipal securities: Moody's Investors Service, Inc.
("Moody's") and Standard and Poor's Corporation ("S&P"). In cases
where both Moody's and S&P rate an issue, it will be graded
according to whichever assigned rating the Adviser deems
appropriate; in cases where neither organization rates an issue,
it will be graded by the Adviser following standards which, in
its judgment, are comparable to those followed by Moody's and
S&P. For the Money Market Portfolio, in cases where neither
organization rates an issue, it will be graded according to
procedures established by the Trust's Board of Trustees. Moody's
has separate rating schemes for municipal bonds and municipal
notes; S&P rates only municipal bonds. Both services also rate
commercial paper, some of which may be tax-exempt.
Municipal Bonds. For municipal bonds, Moody's uses ratings Aaa,
Aa, A, Baa, Ba, B, Caa, Ca and C; S&P uses ratings AAA, AA, A,
BBB, BB, B, CCC, CC and C. Municipal bonds rated Aaa or AAA are
judged to be of the best quality; interest and principal are
secure and prices respond only to market rate fluctuations. Bonds
rated Aa or AA are also judged to be of high quality, but margins
of protection for interest and principal may not be quite as good
as for the highest rated securities.
Municipal bonds rated A are considered upper medium grade by each
organization. Protection for interest and principal is deemed
adequate but susceptible to future impairment, and market prices
of such obligations, while moving primarily with market rate
fluctuations, also may respond to economic conditions and issuer
credit factors.
Bonds rated Baa or BBB are considered medium grade obligations.
Protection for interest and principal is adequate over the short
term, but these bonds may have speculative characteristics over
the long term and therefore may be more susceptible to changing
economic conditions and issuer credit factors than they are to
market rate fluctuations.
<PAGE>
Municipal bonds rated Ba or BB are considered to have immediate
speculative elements and their future can not be considered well
assured; protection of interest and principal may be only
moderate and not secure over the long term; the position of these
bonds is characterized as uncertain. Bonds rated B or lower are
generally deemed to lack desirable investment characteristics;
there may be only small assurance of payment of interest and
principal or adherence to the original terms of issue over any
long period. The Trust does not invest in issues rated Caa or CCC
and below or equivalent unrated issues. Obligations rated Baa or
above by Moody's or rated BBB or above by S&P are considered
"investment grade" securities, whereas lower rated obligations
are considered "speculative grade" securities.
Municipal Notes. Moody's rates shorter term municipal issues
with "Moody's Investment Grade" or "MIG" designations, MIG-1,
MIG-2 and MIG-3; it assigns separate "VMIG" ratings, VMIG-1,
VMIG-2 and VMIG-3, to variable rate demand obligations for which
the issuer or a third-party financial institution guarantees to
repurchase the obligation upon demand from the holder. MIG-1 and
VMIG-1 notes are of the best quality, enjoying strong protection
from established cash flows for debt service or well established
and broadly based access to the market for refinancing. MIG-2 and
VMIG-2 notes are of high quality, with ample margins of
protection, but not as well protected as the highest rated
issues. MIG-3 and VMIG-3 notes are of favorable quality, having
all major elements of security, but lacking the undeniable
strength of the higher rated issues and having less certain
access to the market for refinancing. Moody's also assign the
"S.G." rating for speculative grade short-term debt instruments
when the credit quality of the issue depends upon a guarantee
from a third-party financial institution.
S&P assigns the ratings, SP-1, SP-2, and SP-3, to shorter term
municipal issues, which are comparable to Moody's MIG-1, MIG-2
and MIG-3 ratings, respectively.
Commercial Paper. Commercial paper, only some of which may be
tax-exempt, is rated by Moody's with "Prime" or "P" designations,
as P-1, P-2 or P-3, all of which are considered investment
grades. In assigning its rating, Moody's considers a number of
credit characteristics of the issuer, including: (1) industry
position; (2) rates of return; (3) capital structure; (4) access
to financial markets; and (5) backing by affiliated companies. P-
1 issuers have superior repayment capacity and credit
characteristics; P-2 issuers have strong repayment capacity but
more variable credit characteristics; P-3 issuers have acceptable
repayment capacity, but highly variable credit characteristics
and may be highly leveraged.
S&P rates commercial paper as A-1, A-2 or A-3. To receive a
rating from S&P the issuer must have adequate liquidity to meet
cash requirements, long-term senior debt rated A or better
(except for occasional situations in which a BBB rating is
permitted), and at least two additional channels of borrowing.
The issuer's basic earnings and cash flow must have an upward
trend (except for unusual circumstances), and typically, the
issuer's has a strong position in a well-established industry.
S&P assigns the individual ratings A-1, A-2 and A-3 based on its
assessment of the issuer's relative strengths and weakness within
the group of ratable companies.
<PAGE>
Part C
February 1, 1996
GIT Tax-Free Trust
Cross Reference Sheet
Pursuant To Rule 495(a)
24(a) Financial Statements
Included in Part A: Financial Highlights
Included in Part B: Filed with the Securities and Exchange
Commission pursuant to Section 30 of the Investment Company
Act of 1940 on December 8, 1995, and incorporated herein by
reference is the Trust's Annual Report to Shareholders for the
fiscal year ended September 30, 1995.
Included in such Annual Report to Shareholders are: Statement
of Assets and Liabilities, Statement of Operations, Statement
of Changes in Net Assets, Financial Highlights, Portfolio of
Investments, Notes to Financial Statements and Report of Ernst
& Young LLP, Independent Auditors.
Included in Part C: Consent of Independent Auditors
24(b) Exhibits
Exhibit No. Description of Exhibit
1 Declaration of Trust*
2 By-Laws*
3 Not applicable
4 Specimen Share Certificate*
5 Investment Advisory Agreement**
6 Distribution Agreement**
7 Not applicable
8 Custodian Agreement with Fee Schedule**
9 Services Agreement**
10 Consent of Counsel*
11 Consent of Independent Auditors (filed
herewith)
12 Not applicable
13 Agreements Relating to Initial Capital*
14 Not applicable
15 Plan of Distribution and Share Sales
Agreement*
16 Computation of Performance Data*
17 Power of Attorney*
* Previously filed by GIT Tax-Free Trust.
** Previously filed in hard-copy format. Filed herewith in
EDGAR format. There have been no changes to this document.
<PAGE>Part C
Item No.
25. Persons Controlled by or Under Common Control with Registrant.
None
26. Number of Holders of Securities.
The number of holders of record of securities of the
Registrant as of January 9, 1996 is as follows:
Title of Class Number of Holders of Record
Shares of Beneficial Interest 2,935
27. Indemnification
Previously filed
28. Business and Other Connections of Investment Adviser
Name Position with Other Business
Adviser
Bruce Cleveland President and President and Director of
Director Presidential Savings Bank
FSB, and Presidential
Service Corporation, 4600
East-West Highway,
Bethesda, MD 20814;
President and Director of
Seneca Mortgage Corp., 6101
Executive Blvd, Rockville,
MD 20852; President and
Director of GIT Investment
Services, Inc., of the same
address as the Trust; and
Director of Biospherics,
Inc., 12051 Indian Creek
Court, Beltsville, MD
21403.
Edward J. Karpowicz Treasurer Treasurer of Bankers
Finance Corporation and GIT
Investment Services, Inc.,
both of the same address as
the Trust.
Charles J. Tennes Executive Director of Presidential
Vice President Savings Bank, FSB, and
Presidential Service
Corporation, 4600 East-West
Highway, Bethesda, MD
20814; Executive Vice
President of GIT Investment
Services, Inc. of the same
address as the Trust.
W. Richard Mason Secretary Secretary of Bankers
Finance Corporation and GIT
Investment Services, Inc.
of the same address as the
Trust; Secretary of
Presidential Savings Bank,
FSB, 4600 East-West
Highway, Bethesda, MD 20814
Julia W. Nelson Vice President Vice President of GIT
Investment Services, Inc.,
of the same address as the
Trust
29. Principal Underwriters
(a) GIT Investment Services, Inc., the principal underwriter
of the Trust, also acts as principal underwriter to Government
Investors Trust, GIT Equity Trust and GIT Income Trust.
(b)
Name and Principal Position and Offices Position and Offices
Business Address with Underwriters with Registrant
A. Bruce Cleveland Chairman, President Chairman, President
1655 Ft. Myer Dr. and Treasurer
Arlington, VA 22209
W. Richard Mason Secretary Asst. Secretary
1655 Ft. Myer Dr.
Arlington, VA 22209
Charles J. Tennes Executive Vice Secretary
1655 Ft. Myer Dr. President
Arlington, VA 22209
Edward J. Karpowicz Treasurer None
1655 Ft. Myer Dr.
Arlington, VA 22209
Julia W. Nelson Vice President None
1655 Ft. Myer Dr.
Arlington, VA 22209
(c) Not Applicable
30. Location of Accounts and Records
The books, records and accounts of the Registrant will
be maintained at 1655 Ft. Myer Drive, Arlington, VA 22209,
at which address are located the offices of the Registrant
and of Bankers Finance Investment Management Corp.
Additional records and documents relating to the affairs of
the Registrant are maintained by the Star Bank, N.A. of
Cincinnati, OH, the Registrant's Custodian, at the
Custodian's offices located at 425 Walnut Street,
Cincinnati, OH 45202. Pursuant to the Custodian Agreement
(see Article IX, Section 12), such materials will remain the
property of the Registrant and will be available for
inspection by the Registrant's officers and other duly
authorized persons.
31. Management Services
Previously filed
32. Undertakings
(a) Not applicable
(b) Not applicable
(c) The Registrant shall furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest
annual report to shareholders upon such person's request and
without charge.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has
duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the County of
Arlington, Commonwealth of Virginia, on the 29 day of January,
1996.
GIT Tax-Free Trust
By: (signature)
A. Bruce Cleveland
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement
has been signed below by the following persons in the
capacities and on the date indicated.
(Signature), Trustee, President 1/29/96
A. Bruce Cleveland and Treasurer
(Principal Executive
Officer, Principal
Financial Officer)
**, Trustee
John D. Reilly (Date)
**, Trustee
Thomas S. Kleppe (Date)
**, Trustee
Smith T. Wood (Date)
(Signature), **Attorney-In- 1/29/96
John A. Dudley, Esquire Fact
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 1
<NAME> TAX-FREE MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 8,298,551
<INVESTMENTS-AT-VALUE> 8,297,991
<RECEIVABLES> 165,260
<ASSETS-OTHER> 208,284
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,671,535
<PAYABLE-FOR-SECURITIES> 101,020
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 116,271
<TOTAL-LIABILITIES> 217,291
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,454,813
<SHARES-COMMON-STOCK> 8,454,870
<SHARES-COMMON-PRIOR> 8,919,382
<ACCUMULATED-NII-CURRENT> 105
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (114)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (560)
<NET-ASSETS> 8,454,244
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 328,774
<OTHER-INCOME> 0
<EXPENSES-NET> 73,031
<NET-INVESTMENT-INCOME> 255,743
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 2,310
<NET-CHANGE-FROM-OPS> 2,310
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 255,638
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,322,074
<NUMBER-OF-SHARES-REDEEMED> 9,031,111
<SHARES-REINVESTED> 244,526
<NET-CHANGE-IN-ASSETS> (464,511)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (171)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45,081
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73,031
<AVERAGE-NET-ASSETS> 9,049,930
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.807
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions
"Financial Highlights" in the Prospectus and "Legal Matters
and Independent Auditors" and "Financial Statements and
Report of Independent Auditors" in the Statement of
Additional Information and to the incorporation by reference
in this Post-Effective Amendment Number 19 to Registration
Statement Number 2-77986 (Form N-1A) of our report dated
November 3, 1995 on the financial statements and financial
highlights of GIT Tax-Free Trust (comprising the Arizona, Maryland,
Missouri, Virginia, National and Money Market Portfolios)
for the year ended September 30, 1995, included
in the 1995 Annual Report to Shareholders.
(signature)
Ernst & Young LLP
Washington, DC
January 29, 1996
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Annual Report
September 30, 1995/Audited
GIT
GIT Investment Funds
<PAGE>
Management's Discussion of Fund Performance
November 11, 1995
Dear Shareholder:
A national economic slowdown reemerged at the end of 1994, led by
a sudden slide in consumer spending followed by falling home
sales and a ripple down effect on other sectors. This caused
real GDP growth to fall from 5.1% in the fourth quarter of 1994
to just .5% in the second quarter of 1995. This slowdown, along
with an inflation rate that has been inching lower, ignited a
bond market rally that saw the Treasury bond yield fall from a
high yield of 7.88% in September 1994 to a low of 6.50% in
September 1995. The municipal market took part in this rally,
but did not keep pace with the Treasury bond, as improved
prospects for tax reform became a constraint. Looking to the
future, as the diminishing amount of new issuance causes reduced
supply, this should cause the municipal market to perform well in
the coming months.
During the past year, we followed a conservative investment
policy for the GIT Tax-Free Trust portfolios, holding general
obligation and revenue issues weighted according to the
fundamentals of each sector. We intend to continue to follow
this policy. In the near term we are likely to maintain average
maturity in the 15-year to 20-year range as we seek the best
value on the yield curve.
NATIONAL PORTFOLIO
Unlike recent recessions, the current slowdown has been
remarkably even across regions. The southern and mountain states
experienced the greatest declines in job growth and construction.
Midwestern manufacturing fared better than the other regions that
suffered from lower exports and weakening demand for manufactured
goods. The west and northeast regions experienced slow growth,
but not nearly as severe as their sharp downturns of 1989. Lower
market interest rates and inflation, possibly with a boost from
further easing by the Fed, should stimulate economic growth going
into 1996. The credit trend for the National Portfolio remains
stable with an average rating of AA for the fund. Total return
for the year ended September 30, 1995 was 8.40%.
ARIZONA PORTFOLIO
In Arizona, most indicators of economic activity remained
positive as the state continues to add jobs despite defense
cutbacks. The majority of new jobs in Arizona appeared in the
service sector and the thriving semiconductor and advanced
electronics industry. Arizona has no general obligation debt,
and the credit trends are generally stable among the municipal
issuers throughout the state. The Arizona portfolio has an
average credit rating of AA and posted a total return of 8.95%
for the year ended September 30, 1995.
MARYLAND PORTFOLIO
Economic growth in the State of Maryland continues to be under
pressure from the recent recession, but it has an economic base
that is both diverse and balanced, with a lower-than-average
dependence on manufacturing. Cutbacks in defense spending and
federal government jobs have hurt the economy. Most of the job
creation is in the high tech and services sectors. Maryland is
ranked fifth among states in per capita personal
Management's Discussion of Fund Performance (continued)
<PAGE>
income. The credit trends of the municipalities throughout the
state are stable and the general obligation debt of the state is
rated AAA. The average credit rating of the portfolio is AA, and
its total return for the year ended September 30, 1995 was 9.17%.
MISSOURI PORTFOLIO
Missouri has a broad-based and diversified economy that is
dominated by the service sector. Growth has been slow, but
consistent with national rates. Missouri's manufacturing sector
is led by transportation equipment, machinery, and chemicals.
With McDonnell Douglas Corp. as the largest employer in the
state, some of Missouri's industry has been adversely affected by
cutbacks in defense spending. The city of Branson, on the other
hand, has become a major tourist attraction as a music and
entertainment center.
Missouri ranks about in the middle of the nation when measuring
wealth and resources. The state has long record of responsible
and conservative financial operations, low debt, and a broad and
diverse economy as reflected by the AAA rating of its general
obligation debt. The average credit rating of the Missouri
Portfolio is AA, and the total return for the year ended
September 30, 1995 was 8.87%.
VIRGINIA PORTFOLIO
The Commonwealth of Virginia has a broad and diverse economy
spread over three main regions, each of which depends on a
different economic base. Northern Virginia is part of the
Washington, D.C. metropolitan area, with a high concentration in
the government and service sectors. The Tidewater area is more
related to defense, particularly to the U.S. Navy and
shipbuilding. The western part of the state depends on
manufacturing and agriculture.
Growth in population has been rapid over the past two decades,
and unemployment continues to be well below the national
averages. Defense reductions and cutbacks in U.S. Government
employment, however, will continue as a drag on the
commonwealth's economic progress. Conservative fiscal policies
characteristic of the municipalities in Virginia have maintained
low debt ratios with prudent long-range capital planning.
Virginia's general obligation bonds maintain a AAA credit rating,
and the credit trend is considered stable. The average credit
rating for our Virginia portfolio is AA. The total return of the
fund for the year ended September 30, 1995 was 9.54%.
MONEY MARKET PORTFOLIO
The Tax-Free Money Market Portfolio continues to provide a high
degree of liquidity and stability. As of September 30, 1995 the
seven-day yield of the fund was 3.34%, which is the taxable
equivalent of 5.22% to an investor in the 36% federal tax
bracket.
Sincerely,
(signature)
A. Bruce Cleveland
President
<PAGE>
Management's Discussion of Fund Performance (continued)
Comparison of Changes in the Value of a $10,000 Investment and
the Lehman Municipal Bond Index
[depicted here is a graphic presentation of the above caption for each
portfolio except the Money Market Portfolio]
[FN]
<F1>October 13, 1989
<F2>February 10, 1993
<F3>October 12, 1989
<F4>October 13, 1987
Past performance is not predictive of future performance.
Figures as of September 30, unless otherwise noted.
<PAGE>
Report of Ernst & Young LLP
Independent Auditors
To the Board of Trustees and Shareholders, the Arizona Portfolio,
Maryland Portfolio, Missouri Portfolio, Virginia Portfolio,
National Portfolio (formerly known as the High Yield Portfolio)
and Money Market Portfolio, GIT Tax-Free Trust:
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of the GIT
Tax-Free Trust (comprising, respectively, the Arizona, Maryland,
Missouri, Virginia, National and Money Market Portfolios) as of
September 30, 1995, and the related statements of operations for
the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, the financial
highlights of the Maryland Portfolio for each of the two years in
the period then ended and for the period from inception (February
10, 1993) to September 30, 1993, and the financial highlights of
the Arizona, Missouri, Virginia, National and Money Market
Portfolios for each of the five years in the period then ended.
These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of September 30, 1995, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. 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 each of the respective portfolios
constituting the GIT Tax-Free Trust at September 30, 1995, the
results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then
ended, and their financial highlights for the periods referred to
above, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Washington, DC
November 3, 1995
<PAGE>
Arizona Portfolio
Portfolio of Investments - September 30, 1995
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 95.6% of Net Assets
AIRPORT: 5.0%
Aaa AAA Tucson Airport Authority,
Income Revenue
(MBIA Insured), 5.7%,
6/1/13 $500,000 $497,500
EDUCATION: 4.3%
A nr Arizona Educational Loan
Marketing Corporation,
Student Loan Revenue (AMT),
7%, 3/1/03 400,000 429,000
ELECTRIC: 7.0%
Baa1 A- Puerto Rico Electric Power
Authority, Electric Power
Revenue, 6.375%, 7/1/24 190,000 195,462
Aa AA Salt River Project
Agricultural Improvements
and Power District, Electric
Systems Revenue, 6%, 1/1/16 500,000 505,625
GENERAL OBLIGATION: 30.3%
Aaa AAA Chandler (FGIC Insured), 7%,
7/1/12 300,000 327,000
Aaa AAA Maricopa County School
District (FGIC Insured),
6.25%, 7/1/11 500,000 540,000
Aaa AAA Maricopa County School District
(FGIC Insured), 6.7%, 7/1/11 300,000 331,125
Aaa AAA Navajo County School District,
(CGIC Insured), 6%, 7/1/09 500,000 513,750
Aa AA+ Phoenix, 6%, 7/1/13 500,000 510,625
Aa AA+ Phoenix, 5.3%, 7/1/06 100,000 102,750
#Aaa AA+ Scottsdale, 6.9%, 7/1/07 100,000 112,000
Aa1 AA+ Scottsdale, 5.5%, 7/1/09 200,000 202,000
A1 AA- Tucson, 5.6%, 7/1/16 400,000 393,000
HOSPITAL: 4.7%
Aaa AAA Arizona Health Facilities
Authority, Hospital Revenue
(Samaritan Health Services)
(MBIA Insured), 6.25%,
12/1/06 250,000 265,625
Aaa AAA Arizona Health Facilities
Authority, Hospital Revenue
(Phoenix Baptist Hospital)
(MBIA Insured), 6.25%,
9/1/11 200,000 206,750
HOUSING: 10.2%
nr AAA Phoenix Industrial Development
Authority, Mortgage Revenue
(Chris Ridge) (FHA Insured),
6.75%, 11/1/12 500,000 515,000
nr AAA Pima County Industrial
Development Authority,
Single-Family Mortgage Revenue
(GNMA Collateralized) (AMT),
6.2%, 5/1/27 500,000 510,625
INDUSTRIAL DEVELOPMENT: 3.2%
nr AAA Mohave County Industrial
Development Authority,
Industrial Development Revenue
(Citizens Utilities), 7.05%,
8/1/20 300,000 324,375
LEASING: 3.1%
Aaa AAA Scottsdale Municipal Property
Corporation, Lease Revenue
(FGIC Insured), 6.25%,
11/1/14 300,000 308,250
TRANSPORTATION: 19.1%
Aa AA Arizona State Transportation
Board, Highway Revenue, 6%,
7/1/08 400,000 426,000
Aaa AAA Flagstaff, Street And Highway
User Revenue (FGIC Insured),
5.9%, 7/1/10 500,000 520,000
Baa1 A Puerto Rico Commonwealth Highway
and Transportation Authority,
Highway Revenue, 6.375%,
7/1/08 450,000 475,875
A1 A+ Tucson, Street and Highway User
Revenue, 5.5%, 7/1/09 500,000 487,500
WATER AND SEWER: 8.7%
Aaa AAA Arizona State Wastewater
Manangement Authority, Revenue
(AMBAC Insured), 5.95%,
7/1/12 200,000 203,500
Aaa AAA Chandler, Water and Sewer
Revenue (FGIC Insured), 6.75%,
7/1/06 250,000 271,250
A1 A+ Tucson, Water Revenue (AMBAC
Insured), 5.75%, 7/1/18 400,000 393,000
TOTAL INVESTMENTS (Cost $9,218,605)<F1> $9,567,587
See Notes to Portfolio of Investments.
<PAGE>
Maryland Portfolio
Portfolio of Investments - September 30, 1995
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 94.8% of Net Assets
EDUCATION: 8.9%
Aa1 AA- Maryland State Health and
Higher Educational Facilities
Authority, University Revenue
(Johns Hopkins University),
7.5%, 7/1/20 $100,000 $108,250
Aaa AAA Saint Mary's College, College
Revenue (MBIA Insured),
5.55%, 9/1/23 100,000 98,750
Aa AA+ University of Maryland,
Auxiliary Facilities and
Tuition Revenue, 5.5%,
4/1/13 50,000 49,438
ELECTRIC: 6.3%
Baa1 A- Puerto Rico Electric Power
Authority, Power Revenue, 6%,
7/1/14 100,000 99,250
Baa1 A- Puerto Rico Electric Power
Authority, Power Revenue,
6.25%, 7/1/17 80,000 81,300
GENERAL OBLIGATION: 14.7%
Aaa AAA Baltimore (AMBAC Insured), 6%,
10/15/04 100,000 108,250
#Aaa AAA Harford County, 5.75%, 9/1/08 25,000 26,969
Aa AA- Harford County, 5.75%, 9/1/08 25,000 25,750
Aa1 AA+ Howard County, 6%, 5/15/13 150,000 153,750
Aaa AAA Ocean City (MBIA Insured), 6.3%,
11/1/09 50,000 55,375
Aa1 AA Washington Suburban Sanitary
District, 5.875%, 6/1/08 50,000 52,563
HOSPITAL: 10.5%
Aaa AAA Maryland State Health and Higher
Educational Facilities Authority,
Hospital Revenue (North Arundel
Hospital) (BIGI Insured), 7.875%,
7/1/21 100,000 111,000
A A Maryland State Health and Higher
Educational Facilities Authority,
Hospital Revenue (Good Samaritan
Hospital), 5.75%, 7/1/19 100,000 94,625
Baa nr Prince George's County Hospital,
Hospital Revenue (Greater
Southeast Healthcare System),
6.2%, 1/1/08 100,000 98,500
HOUSING: 16.0%
nr AAA Anne Arundel County, Mortgage
Revenue (Westwinds Apartments) (FHA),
6%, 12/1/26 50,000 49,688
nr AAA Baltimore County, Mortgage Revenue
(Olde Forge Townhouses) (FHA),
6%, 1/1/10 80,000 79,200
Aa nr Maryland State Community Development
Administration, Multifamily
Housing Revenue (GNMA Collaterized)
(FHA), 5.95%, 5/15/13 80,000 79,300
Aa nr Maryland State Community Development
Administration, Single-Family
Revenue (AMT), 6.2%, 4/1/17 100,000 100,000
nr AAA Prince George's County Housing
Authority, Single-Family Mortgage
Revenue (GNMA/FNMA Collaterized)
(AMT), 6.5%, 12/1/15 150,000 153,562
LEASING: 4.8%
Aa AA- Maryland State Stadium Authority,
Sports Facilities Lease Revenue
(AMT), 7.5%, 12/15/10 125,000 138,594
POLLUTION CONTROL: 8.0%
A2 A Anne Arundel County, Pollution
Control Revenue (Baltimore Gas
and Electric Company), 6%,
4/1/24 100,000 100,500
A1 A Prince George's County, Pollution
Control Revenue (Potomac Electric),
6.375%, 1/15/23 125,000 130,937
PUBLIC FACILITIES: 8.9%
Aaa AAA Baltimore, Convention Center Revenue
(FGIC Insured), 6.1%, 9/1/14 150,000 153,937
Aa AA- Howard County, Special Facilities
Revenue, 5.95%, 2/15/10 100,000 103,375
TRANSPORTATION: 7.4%
Aa3 A-1+ Baltimore, Port Facilities Revenue
(Consolidated Coal Sales),
6.5%, 10/1/11 100,000 107,375
#Aaa AAA Maryland State Department of
Transportation, Revenue, 6.7%,
7/1/98 100,000 105,000
See Notes to Portfolios of Investments.
<PAGE>
Maryland Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
UTILITY: 2.0%
A A+ Puerto Rico Telephone Authority,
Telecommunications Revenue, 5.5%,
1/1/22 $60,000 $56,475
WASTE: 3.7%
#Aaa nr Worcester County (Sanitation),
7.5%, 8/15/06 100,000 107,875
WATER: 3.5%
Aaa AAA Baltimore, Water Revenue (MBIA
Insured), 5.5%, 7/1/08 100,000 100,750
TOTAL INVESTMENTS (Cost $2,694,391)<F1> $2,730,338
Missouri Portfolio
Portfolio of Investments - September 30, 1995
LONG-TERM MUNICIPAL BONDS: 94.4% of Net Assets
AIRPORT: 4.5%
Aaa AAA St. Louis, Airport Revenue,
Lambert-St. Louis International
(FGIC Insured) (AMT), 6.125%,
7/1/12 $500,000 $511,875
EDUCATION: 10.0%
A nrn Missouri Higher Education Loan
Authority, Student Loan Revenue
(AMT), 5.9%, 2/15/08 500,000 485,625
Aaa AAA Missouri State Health and
Educational Facilities Authority,
University Revenue (St. Louis
University) (AMBAC Insured),
6.5%, 8/1/16 150,000 156,375
Aa nr St. Louis County School District,
Property Tax Revenue, 5.5%,
2/15/12 500,000 498,125
ELECTRIC: 10.6%
nr AAA Puerto Rico Electric Power
Authority, Power Revenue, 8%,
7/1/08 175,000 195,344
Aaa AAA Sikeston, Electric Revenue
(MBIA Insured), 6.25%, 6/1/22 500,000 513,750
nr A University Development Foundation,
Lease Revenue (Missouri Power),
5.75%, 5/1/13 500,000 498,750
GENERAL OBLIGATION: 22.9%
Aa nr Clayton School District, 5.65%,
2/1/14 500,000 498,125
Aaa AAA Farmington School District (CGIC
Insured), 6.35%, 3/1/12 400,000 415,000
Aa nr Jefferson City School District,
6.7%, 3/1/11 200,000 226,500
nr AAA Puerto Rico Commonwealth, 7.75%,
7/1/17 250,000 283,125
Aaa AAA St. Charles County, Francis Howell
School District (FGIC Insured),
6.5%, 3/1/05 250,000 274,375
Aa1 nr St. Louis County, 6.3%, 2/1/11 400,000 418,500
Aa nr St. Louis County School District,
5.5%, 2/15/13 500,000 495,625
HOSPITAL: 12.7%
Aaa AAA Missouri State Health and
Educational Facilities
Authority, Health Facilities
Revenue (SSM Health Care)
(MBIA Insured), 6.25%,
6/1/16 250,000 256,562
Aaa AAA Missouri State Health and
Educational Facilities
Authority, Health
Facilities Revenue (Heartland
Health System) (AMBAC Insured),
6.35%, 11/15/17 500,000 518,125
nr nr Missouri State Health and
Educational Facilities
Authority, Health Facilities
Revenue (Missouri Baptist
Medical Center), 7.625%,
7/1/18 95,000 107,944
nr nr Missouri State Health and
Educational Facilities
Authority, Health Facilities
Revenue (Missouri Baptist
Medical Center), 7.625% ,
7/1/18 45,000 55,294
Aaa AAA Missouri State Health and
Educational Facilities
Authority, Health Facilities
Revenue (Health Midwest)
(MBIA Insured), 6.25%,
2/15/22 500,000 511,250
See Notes to Portfolio of Investments.
<PAGE>
Missouri Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
HOUSING: 9.5%
Aa AA Missouri State Board of Public
Buildings, State Office Building
Revenue, 6.4%, 12/1/08 $300,000 $318,375
nr AAA Missouri State Housing Development
Commission, Single-Family
Mortgage Revenue (GNMA Collaterized)
(AMT), 7.75%, 6/1/22 75,000 78,469
nr AAA Missouri State Housing Development
Commission, Single-Family Mortgage
Revenue (GNMA Collaterized) (AMT),
7.375%, 8/1/23 190,000 200,687
nr AAA St. Louis County, Mortgage Revenue
(Certificates of Receipt) (AMT),
5.65%, 2/1/20 500,000 483,750
LEASING: 4.4%
Aaa AAA Kansas City Municipal Assistance
Corporation, Lease Revenue (H.
Roe Bartle) (AMBAC Insured),
6%, 4/15/20 500,000 506,875
TRANSPORTATION: 3.5%
Baa1 A Puerto Rico Commonwealth Highway
Authority, Highway Revenue,
6%, 7/1/20 405,000 400,444
WASTE: 6.2%
Aa nr Missouri State Environmental
Improvement and Energy
Resources Authority, Water
Pollution Control Revenue,
5.4%, 7/1/15 500,000 472,500
A1 AA- St. Louis Industrial Development
Authority, Pollution Control
Revenue (Anheuser Busch
Company), 6.65%, 5/1/16 200,000 228,750
WATER: 10.0%
Aaa AAA Cape Girardeau, Waterworks
Revenue (FGIC Insured),
6.4%, 3/1/12 400,000 418,000
A1 AA Columbia, Water and Electric
Revenue, 6.125%, 10/1/12 400,000 412,500
Aaa AAA Liberty, Water Revenue (MBIA
Insured), 6.3%, 10/1/12 300,000 314,250
TOTAL INVESTMENTS (Cost $10,491,408)<F1> $10,754,869
Virginia Portfolio
Portfolio of Investments - Septmeber 30, 1995
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 97.7% of Net Assets
AIRPORT: 3.1%
Aaa AAA Metropolitan Washington D.C. Airports
Authority, Airport Revenue (MBIA
Insured) (AMT), 6.625%,
10/1/12 $500,000 $521,875
Aaa AAA Metropolitan Washington D.C.
Airports Authority, Airport
Revenue (FGIC Insured) (AMT),
7%, 10/1/18 500,000 540,625
EDUCATION: 14.3%
A1 nr Loudoun County Industrial
Development Authority,
Facilities Revenue (George
Washington University),
6.25%, 5/15/22 500,000 507,500
nr BBB- Virginia College Building
Authority, Facilities
Revenue (Marymount University),
7%, 7/1/22 350,000 365,750
Aa AA Virginia College Building
Authority, Facilities Revenue
(Washington and Lee University),
5.75%, 1/1/14 605,000 608,781
Aa AA Virginia College Building Authority,
Facilities Revenue (Washington
and Lee University), 5.8%,
1/1/24 500,000 501,250
Aa AA Virginia State Public School
Authority, Revenue, 6.25%,
8/1/10 500,000 526,875
Aa AA Virginia State Public School
Authority, Revenue, 6.2%,
8/1/13 500,000 519,375
Aa AA Virginia State Public School
Authority, Revenue, 6.5%,
8/1/15 500,000 533,125
Aa AA Virginia State Public School
Authority, Revenue, 5.625%,
8/1/09 250,000 256,250
Aa AA Virginia State Public School
Authority, Special Obligation
(York County), 5.9%, 7/15/13 500,000 509,375
A1 AA- Virginia State University,
University Revenue, 5.75%,
5/1/15 500,000 495,000
See Notes to Portfolio of Investments.
<PAGE>
Virginia Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
ELECTRIC: 4.4%
Aaa AAA Hailifax County Industrial
Development Authority, Power
Revenue (Old Dominion Electric)
(MBIA Insured) (AMT), 6%,
12/1/22 $1,000,000 $1,000,000
Baa1 A- Puerto Rico Electric Power
Authority, Power Revenue, 6%,
7/1/14 500,000 496,250
GENERAL OBLIGATION: 24.2%
Aaa AAA Arlington County (Recreational
Facilities Improvements), 6%,
8/1/12 500,000 521,250
Aaa AAA Fairfax County (Public Improvement),
5.625%, 6/1/13 500,000 499,375
Aa A+ Falls Church (School Improvements),
5.5%, 8/1/13 500,000 488,750
Aaa AAA Franklin County (Capital Improvements)
(FGIC Insured), 6.5%, 7/15/12 300,000 316,875
Aa AA- Hampton (Sewer Improvements), 6%,
1/15/08 500,000 533,750
A A Henry County (Public Improvements),
6%, 7/15/14 500,000 506,875
Aaa AAA Newport News (MBIA Insured),
5.5%, 7/1/10 500,000 505,000
Aa AA Norfolk (Public Improvements),
5.5%, 2/1/10 500,000 500,625
Aaa AAA Norfolk (MBIA Insured), 5.75%,
6/1/13 500,000 501,875
Baa1 A Puerto Rico Commonwealth, 6.3%,
7/1/09 1,000,000 1,060,000
A1 AA Richmond (Public Improvements),
6.25%, 1/15/21 875,000 884,844
Aa AA Virginia Beach (Public
Improvements), 6.2%, 9/1/13 500,000 521,250
Aa AA Virginia Beach (Public
Improvements), 5.85%, 11/1/13 350,000 353,500
Aa AA Winchester (Water Utility
Improvements), 5.5%,
1/15/14 1,000,000 976,250
HOSPITAL: 6.2%
Aaa AAA Danville Industrial Development
Authority, Hospital Revenue
(Danville Regional Medical
Center) (FGIC Insured),
6.375%, 10/1/14 500,000 523,125
Aa AA Norfolk Industrial Development
Authority, Hospital Revenue
(Sentara Hospital), 6.5%,
11/1/13 1,000,000 1,061,250
Aaa AAA Roanoke Industrial Development
Authority, Hospital Revenue
(Roanoke Memorial Hospitals)
(MBIA Insured), 6.125%,
7/1/17 500,000 516,250
HOUSING: 3.5%
Aaa AAA Puerto Rico Housing Finance
Corporation, Single-Family
Mortgage Revenue (GNMA
Collateralized), 7.8%,
10/15/21 150,000 156,938
Aa1 AA+ Virginia State Housing Development
Authority, Mortgage Revenue
(AMT), 6.95%, 1/1/10 1,000,000 1,040,000
INDUSTRIAL DEVELOPMENT: 4.7%
Baa3 BBB- Peninsula Ports Authority, Coal
Terminal Revenue, 7.375%,
6/1/20 1,000,000 1,063,750
A1 A Puerto Rico Industrial, Medical,
& Environmental Revenue
(Pepsico, Inc.),
6.25%, 11/15/13 500,000 533,125
OTHER FACILITIES: 9.8%
nr BBB Fairfax County Park Authority,
Facilities Revenue, 6.625%,
7/15/14 500,000 509,375
nr A- Prince William County Park
Authority, Revenue, 6.875%,
10/15/16 500,000 530,625
A nr Prince William County Park
Authority, Revenue, 7.5%,
7/15/20 450,000 513,562
Aaa AAA Riverside Regional Jail
Authority, Jail Facilities
Revenue (MBIA Insured), 6%,
7/1/25 250,000 249,687
nr A+ Roanoke Valley, Resource
Recovery Revenue, 5.75%,
9/1/12 770,000 746,900
Aaa AAA Virginia State Peninsula Regional
Jail Authority, Jail Facilities
Revenue (MBIA Insured), 5.5%,
10/1/14 250,000 241,563
Aa AA Virginia State Public Building
Authority, Building Revenue,
6.25%, 8/1/12 500,000 523,750
TRANSPORTATION: 12.2%
Aaa AAA Chesapeake Bay Bridge and Tunnel,
Highway Revenue (MBIA Insured),
6.375%, 7/1/22 500,000 511,250
Aaa AAA Richmond Metropolitan Authority,
Expressway Revenue (FGIC
Insured), 6.375%, 7/15/16 1,000,000 1,035,000
Aa AA Virginia State Transportation
Board, Revenue (Route 28),
6%, 4/1/10 1,000,000 1,030,000
Aa AA Virginia State Transportation
Board, Revenue (Route 58),
5.625%, 5/15/13 500,000 490,000
Aaa AAA Washington D.C. Metropolitan
Area Transportation Authority,
Transit Revenue (FGIC Insured),
6%, 7/1/07 1,000,000 1,073,750
See Notes to Portfolio of Investments.
<PAGE>
Virginia Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
WASTE: 5.4%
A1 A+ Fairfax County Economic
Development Authority,
Revenue (Ogden Martin
Systems) (AMT),
7.75%, 2/1/11 $500,000 $548,125
A1 AA- Henrico County, Water and Sewer
Revenue, 6.25%, 5/1/13 500,000 510,625
Aaa AAA Loudoun County Sanitation Authority,
Water and Sewer Revenue (FGIC
Insured), 6.25%, 1/1/16 500,000 514,375
Baa3 BBB West Point Industrial Development
Authority, Waste Revenue
(Chesapeake Corporation),
6.25%, 3/1/19 250,000 251,250
WATER: 9.8%
Aa AA- Fairfax County Water Authority,
Water Revenue, 6%, 4/1/22 1,500,000 1,503,750
Aaa AAA Frederick-Winchester Service
Authority, Sewer Revenue
(AMBAC Insured), 5.75%,
10/1/15 1,000,000 993,750
Aaa AAA Norfolk, Water Revenue (MBIA
Insured), 5.9%, 11/1/25 325,000 320,531
Aaa AAA Norfolk, Water Revenue (MBIA
Insured), 5.75%, 11/1/12 500,000 497,500
TOTAL INVESTMENTS (Cost $31,910,362)<F1> $33,042,056
Credit Rating* Principal
Moodys S&P Amount Value
National Portfolio
Portfolio of Investments - September 30, 1995
LONG-TERM MUNICIPAL BONDS: 95.2% of Net Assets
ARIZONA: 4.8%
Aa AA Arizona State Transportation Board,
Highway Revenue, 6%,
7/1/08 $1,000,000 $1,065,000
Aa AA Salt River Agricultural
Improvements and Power District,
Electric Revenue, 6.2%,
1/1/12 500,000 516,875
CALIFORNIA: 3.2%
Aaa AAA San Jose Redevelopment Agency,
Tax Allocation (MBIA Insured),
6%, 8/1/09 1,000,000 1,058,750
DISTRICT OF COLUMBIA: 3.2%
Aaa AAA Metropolitan Washington D.C.
Airports Authority, Airport
Revenue (MBIA Insured) (AMT),
6.625%, 10/1/19 1,000,000 1,040,000
FLORIDA: 1.5%
Aa AA Florida State Board of
Educational Authority,
General Obligation, 5.85%,
6/1/18 500,000 495,000
HAWAII: 5.0%
Aaa AAA Hawaii State Airports Systems
Revenue (FGIC Insured) (AMT),
7%, 7/1/20 1,500,000 1,629,375
ILLINOIS: 1.1%
Aaa AAA Regional Transit Authority,
Revenue (AMBAC Insured),
7.2%, 11/1/20 300,000 346,500
IOWA: 4.9%
Aaa AAA Mason City, Hospital Facilities
Revenue (Sisters of Mercy)
(FSA Insured), 7%, 8/15/14 1,500,000 1,603,125
KANSAS: 1.6%
Aa AA Kansas State Department of
Transportation, Highway
Revenue, 6.125%, 9/1/09 500,000 534,375
LOUISIANA: 4.9%
Aaa AAA Louisiana, General Obligation
(MBIA Insured), 6%, 5/15/15 500,000 509,375
Aaa AAA Louisiana State Energy and Power
Authority, Power Revenue
(Rodemacher Unit Number Two)
(FGIC Insured), 6.75%,
1/1/08 1,000,000 1,082,500
See Notes to Portfolios of Investments.
<PAGE>
National Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
MAINE: 1.5%
Aaa AAA Maine State Turnpike Authority,
Turnpike Revenue (MBIA
Insured), 6%, 7/1/18 $500,000 $501,875
MARYLAND: 3.6%
Aa1 AA+ Howard County, General Obligation,
6%, 8/15/19 500,000 506,250
Aa nr Montgomery County, Single-Family
Mortgage Revenue, 6.65%,
7/1/17 500,000 516,250
nr AAA Prince George's County Housing
Authority, Single-Family
Mortgage Revenue (GNMA/FNMA
Collateralized) (AMT), 6.5%,
12/1/15 150,000 153,562
MASSACHUSETTS: 6.7%
A1 A+ Massachusetts Bay Transportation
Authority, Transit Revenue, 7%,
3/1/14 1,000,000 1,152,500
A1 A+ Massachusetts, General
Obligation, 6%, 8/1/14 500,000 507,500
Aa AA- Massachusetts, Revenue (Sewer
Improvements), 6.25%, 2/1/11 500,000 521,875
MICHIGAN: 2.5%
nr AA+ Michigan State Housing
Development Authority,
Single-Family Mortgage
Revenue (AMT), 7.75%,
12/1/19 790,000 827,525
MISSISSIPPI: 3.9%
Aaa AAA Harrison County Wastewater
Management District, Sewer
Revenue (Wastewater
Treatment Facilities) (FGIC
Insured), 8.5%, 2/1/13 500,000 663,125
Aaa AAA Harrison County Wastewater
Management District, Sewer
Revenue (Wastewater Treatment
Facilities) (FGIC Insured),
7.75%, 2/1/14 500,000 616,875
MISSOURI: 1.6%
Aaa AAA Sikeston, Electric Revenue (MBIA
Insured), 6.25%, 6/1/22 500,000 513,750
NEVADA: 1.6%
Aaa AAA Washoe County, Gas and Water
Facilities Revenue (AMBAC
Insured), 6.3%, 12/1/14 500,000 510,000
NEW JERSEY: 1.7%
A A New Jersey State Turnpike
Authority, Highway Revenue,
6.5%, 1/1/16 500,000 540,625
NORTH CAROLINA: 1.5%
Aa AA- Pitt County, Hospital Revenue
(Pitt County Memorial
Hospital), 5.5%, 12/1/15 500,000 477,500
PENNSYLVANIA: 8.2%
Aaa AAA Lehigh County, Hospital Revenue
(Lehigh Valley Hospital)
(MBIA Insured), 7%,
7/1/16 1,000,000 1,132,500
Aaa AAA Pennsylvania State Higher
Educational Facilities
Authority, University
Revenue (Duquesne
University) (MBIA
Insured), 6.75%, 4/1/20 500,000 531,250
Aaa AAA Pennsylvania State Industrial
Development Authority, Economic
Development Revenue (AMBAC
Insured), 6%, 1/1/12 1,000,000 1,015,000
RHODE ISLAND: 1.6%
Aa1 AA Rhode Island State Health and
Higher Educational Facilities,
University Revenue (Brown
University), 6.75%, 9/1/16 500,000 526,250
SOUTH CAROLINA: 3.3%
Aaa AAA Piedmont Municipal Power Agency,
Electric Revenue (FGIC Insured),
6.5%, 1/1/16 1,000,000 1,090,000
TEXAS: 10.4%
Aaa AAA Lower Colorado River Authority,
Electric Revenue (FSA Insured),
6%, 1/1/16 500,000 502,500
Aaa AAA Texas Public Building Authority,
Building Revenue (MBIA Insured),
7.125%, 8/1/11 1,500,000 1,728,750
Aaa AAA United Independent School District,
General Obligation, 7%,
8/15/05 1,000,000 1,157,500
See Notest to Portfolios of Investments.
<PAGE>
National Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
VIRGINIA: 7.5%
Aaa AAA Chesapeake Bay Bridge and Tunnel,
Highway Revenue (MBIA Insured)
6.375%, 7/1/22 $475,000 $485,688
nr A- Prince William County Park
Authority, Revenue, 6.875%,
10/15/16 500,000 530,625
A1 AA Richmond, General Obligation
(Public Improvements), 6.25%,
1/15/21 500,000 505,625
Aa AA Virginia Beach, General
Obligation, 6.2%, 9/1/13 500,000 521,250
Aa AA+ Virginia State Housing
Development Authority,
Multifamily Revenue, 6.65%,
11/1/13 400,000 415,500
WASHINGTON: 8.0%
A1 AA- Port Seattle, Revenue (AMBAC
Insured) (AMT), 7.6%, 12/1/09 500,000 564,375
A1 A+ Snohomish County Public Utility
District Number One, Electric
Revenue, 7%, 1/1/16 1,000,000 1,061,250
Aa AA Washington, General Obligation,
6%, 9/1/20 500,000 501,875
Aa AA Washington State Public Power
Supply System, Power Revenue
(Nuclear Project Number
Three), 6.5%, 7/1/18 500,000 507,500
WYOMING: 1.5%
Aaa AAA Wyoming Municipal Power Agency
Authority, Electric Revenue
(MBIA Insured), 6.125%,
1/1/16 500,000 506,250
TOTAL LONG-TERM MUNICIPAL BONDS
(Cost $30,471,658)<F1> $31,173,775
SHORT-TERM MUNICIPAL BONDS: 1.2% of Net Assets
LOUISIANA: 0.9%
Aa3 A-1+ West Feliciana Parish, Pollution
Control Revenue (Gulf States
Utilities) (LOC - Canadian
Imperial Bank), 4.5%,
12/1/15^ 300,000 300,000
MISSOURI: 0.3%
VMIG 1A-1 Kansas City Industrial Development
Authority, Hospital Revenue
(Research Health Services
Systems), 4.5%, 10/15/14^ 100,000 100,000
TOTAL SHORT-TERM MUNICIPAL BONDS (Cost $400,000)<F1> 400,000
TOTAL INVESTMENTS (Cost $30,871,658)<F1> $31,573,775
Money Market Portfolio
Portfolio of Investments - September 30, 1995
Credit Rating* Principal
Moodys S&P Amount Value
SHORT-TERM MUNICIPAL SECURITIES: 98.2% of Net Assets
CALIFORNIA: 7.1%
MIG 1 SP-1+ California School Cash Reserve
Program Authority, Property
Tax Revenue (LOC - Industrial
Bank of Japan), 4.75%,
7/3/96$ 400,000 $402,172
P-1 nr Los Angeles Regional Airports,
Lease Revenue (American Airlines)
(LOC - Wachovia Bank of Atlanta),
4.75%, 12/1/24 ^ 200,000 200,000
ILLINOIS: 1.8%
#Aaa AAA Illinois State Toll Highway
Authority, Highway Revenue,
9.125%, 1/1/96 150,000 154,875
KANSAS: 4.7%
P-1 A-1+ Burlington, Pollution Control
Revenue (Kansas City Power and
Light) (LOC - Duetsche Bank
A.G.), 3.65%, 10/2/95 400,000 400,000
See Notes to Portfolios of Investments.
<PAGE>
Money Market Portfolio
Portfolio of Investments - September 30, 1995 (continued)
Credit Rating* Principal
Moodys S&P Amount Value
LOUISIANA: 9.5%
VMIG 1AAA Louisiana Public Facilities
Authority, Hospital Revenue
(Willis-Knighton Medical Project)
(AMBAC Insured), 4.4%,
9/1/23^ $300,000 $300,000
VMIG 1A-1+ New Orleans Aviation Board,
Airport Revenue (MBIA
Insured), 4.4%, 8/1/16^ 400,000 400,000
Aa3 A-1+ West Feliciana Parish, Pollution
Control Revenue (Gulf States
Utilities) (LOC - Canadian
Imperial Bank), 4.5%,
12/1/15^ 100,000 100,000
MINNESOTA: 9.6%
nr A- 1+ St. Paul Housing and Redevelopment
Authority, Cooling Revenue
(Series G) (LOC - Credit Local
de France), 4.3%, 6/1/15^ 400,000 400,000
#Aaa AAA Southern Minnesota Municipal
Power Agency, Power Supply
Revenue (Series C), 7.125%
1/1/96 400,000 411,000
MISSOURI: 4.7%
nr A-1+ Independence Industrial
Development Authority,
Industrial Revenue
(Resthaven Project) (LOC -
Credit Local de France),
4.3%, 2/1/25^ 400,000 400,000
NEBRASKA: 4.7%
VMIG 1AAA Nebraska Higher Education Loan
Program, Student Loan Revenue
(MBIA Insured), 4.35%,
12/1/15^ 400,000 400,000
NEW YORK: 4.7%
VMIG 1AAA Triborough Bridge and Tunnel
Authority, Highway Revenue
(MBIA Insured), 4.4%,
1/1/04^ 400,000 400,000
NORTH CAROLINA: 12.4%
VMIG 1A-1+ North Carolina Medical Care
Commission, Hospital Revenue
(Pooled Equipment Financing
Project) (MBIA Insured),
4.2%, 12/1/25^ 300,000 300,000
VMIG 1nr University of North Carolina,
University Revenue (Kenan
Memorial Stadium) (LOC -
Wachovia Bank and Trust),
4.3%, 11/1/07^ 250,000 250,000
nr A-1+ Winston-Salem, Risk Acceptance
Management Corporation (Certificates
of Participation), 4.35%,
7/1/09^ 500,000 500,000
SOUTH CAROLINA: 4.9%
#Aaa AAA Piedmont Municipal Power Agency,
Electric Revenue (AMBAC Insured),
9.25%, 1/1/96 400,000 417,000
TEXAS: 12.0%
#Aaa AAA Lower Colorado River Authority,
Power Revenue, 9%, 1/1/96 400,000 413,000
VMIG 1A-1+ Port Development Corporation,
Marine Terminal Revenue (Stolt
Terminals) (LOC - Credit Suisse),
4.3%, 1/15/14^ 600,000 600,000
UTAH: 4.7%
VMIG 1A-1+ Salt Lake City, Airport Revenue
(LOC - Credit Suisse) (AMT),
4.45%, 6/1/98^ 400,000 400,000
VIRGINIA: 8.3%
VMIG 1nr Harrisonburg Redevelopment and
Housing Authority, Multifamily
Housing Revenue (Rolling Brook
Village) (LOC - Guardian),
5.1%, 2/1/96 400,000 400,000
VMIG 1nr Henrico County Industrial
Development Authority, Revenue
(Hermitage Project) (LOC -
Nationsbank of Virginia), 4.8%,
5/1/24^ 200,000 200,000
Aaa AAA Virginia State, General Obligation
(Public Facilities), 3.2%,
12/1/95 100,000 99,944
WASHINGTON: 4.1%
nr A-1+ Port Kalama, Port Facilities
Revenue (Conagra) (LOC -
Morgan Guaranty Trust), 4.2%,
1/1/04^ 50,000 50,000
nr A-1+ Washington State Housing Finance
Commission, Multifamily Mortgage
Revenue (LOC - Pacific First
Federal), 4.4%, 7/1/20^ 300,000 300,000
WYOMING: 4.7%
Aaa A-1+ Lincoln County, Pollution Control
Revenue (Exxon Project)
(Series A) (AMT), 4.65%,
07/1/17^ 400,000 400,000
TOTAL INVESTMENTS (Cost $8,298,551)<F1> $8,297,991
See Notes to Portfolio of Investments.
<PAGE>
GIT Tax-Free Trust
Notes to Portfolios of Investments
September 30, 1995
[FN]
<F1>Aggregate cost and net unrealized appreciation (depreciation)
of investments for federal income tax purposes is as follows:
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Aggregate cost $9,218,605 $2,694,391 $10,491,408
Gross unrealized
appreciation $361,042 $43,659 $322,877
Gross unrealized
depreciation 12,060 7,712 59,416
Net unralized
appreciation
(depreciation $348,982 $35,947 $263,461
Money
Virginia National Market
Portfolio Portfolio Portfolio
Aggregate cost $31,910,362 $30,871,658 $8,298,551
Gross unrealized
appreciation $1,172,985 $833,278 $215
Gross unrealized
depreciation 41,291 131,161 775
Net unralized
appreciation
(depreciation $1,131,694 $702,117 $(560)
* Unaudited
^ Security has a variable coupon rate and is putable before
final maturity. Coupon rate as of September 30, 1995
#Aaa Refunded Bonds
AMBAC American Municipal Bond Assurance Corporation
AMT Subject to Alternative Minimum Tax
BIGI Bond Investors Guaranty Insurance Company
CGIC Capital Guaranty Insurance Company
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Federal Security Assistance
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
Moody's Moody's Investors Service, Inc.
nr Not rated
S&P Standard & Poor's Corporation
The Notes to Financial Statements are an integral part of these
statements.
<PAGE>
Statements of Assets and Liabilities
September 30, 1995
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
ASSETS
Investments, at cost $9,218,605 $2,694,391 $10,491,408
Investments, at value
(Note 1) $9,567,587 $2,730,338 $10,754,869
Cash 352,451 130,370 480,665
Receivables
Interest 158,786 46,937 164,530
Share subscriptions
receivable (Note 1) 15,000 -- --
Other Assets -- -- --
Total assets 10,093,824 2,907,645 11,400,064
LIABILITIES
Payables
Investment securities
purchased -- -- --
Dividends 10,725 697 6,395
Capital shares redeemed 59,371 26,813 --
Shares reserved for
subscription (Note 1) 15,000 -- --
Other liabilities 3 14 3
Total liabilities 85,099 27,524 6,398
NET ASSETS (Note 4) $10,008,725 $2,880,121 $11,393,666
CAPITAL SHARES
OUTSTANDING 989,647 295,749 1,124,394
NET ASSET VALUE PER SHARE $10.113 $9.738 $10.133
Money
Virginia National Market
Portfolio Portfolio Portfolio
ASSETS
Investments, at cost $31,910,362 $30,871,658 $8,298,551
Investments, at value
(Note 1) $33,042,056 $31,573,775 $8,297,991
Cash 536,611 1,195,934 208,284
Receivables
Interest 585,460 472,208 62,266
Share subscriptions
receivable (Note 1) -- -- 102,994
Other Assets 195 -- --
Total assets 34,164,322 33,241,917 8,671,535
LIABILITIES
Payables
Investment securities
purchased 322,980 485,407 101,020
Dividends 18,936 13,021 822
Capital shares redeemed 5 9,000 12,420
Shares reserved for
subscription (Note 1 -- -- 102,994
Other liabilities 48 96 35
Total liabilities 341,969 507,524 217,291
NET ASSETS (Note 4) $33,822,353 $32,734,393 $8,454,244
CAPITAL SHARES
OUTSTANDING 3,043,054 3,205,840 8,454,870
NET ASSET VALUE PER SHARE $11.115 $10.211 $1.000
Statements of Operations
For the Year Ended September 30, 1995
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
INVESTMENT INCOME
(Note 1)
Interest income $602,433 $156,979 $639,080
EXPENSES (Notes 3 and 4)
Investment advisory
fee 64,823 18,524 69,391
Custodian fees 3,774 1,033 4,106
Professional fees 7,188 2,177 6,847
Salaries and related
expenses 33,086 9,101 37,509
Securities registration
and blue sky expenses 481 1,695 286
Telephone expense 2,148 592 2,454
Data processing and office
equipment expenses 15,742 8,772 15,718
Office and miscellaneous
expenses 8,500 2,193 8,727
Depreciation and
amortization 1,009 277 1,146
Expenses incurred and
paid by investment
adviser -- (18,524) --
Total expenses 136,751 25,840 146,184
NET INVESTMENT INCOME 465,682 131,139 492,896
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized loss on
investments (270,014) (30,774) (116,168)
Net unrealized
appreciation of
investments 636,688 153,130 537,355
NET GAIN ON INVESTMENTS 366,674 122,356 421,187
TOTAL INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $832,356 $253,495 $914,083
Money
Virginia National Market
Portfolio Portfolio Portfolio
INVESTMENT INCOME
(Note 1)
Interest income $1,941,393 $1,843,025 $328,774
EXPENSES (Notes 3 and 4)
Investment advisory fee 207,900 202,743 45,081
Custodian fees 9,748 9,942 2,564
Professional fees 16,566 16,597 5,331
Salaries and related
expenses 85,637 87,517 22,520
Securities registration
and blue sky expenses 975 7,365 4,435
Telephone expense 5,560 5,700 1,467
Data processing and
office equipment
expenses 32,727 31,319 7,706
Office and
miscellaneous expenses 19,666 18,957 7,208
Depreciation and
amortization 2,606 2,664 686
Expenses incurred
and paid by investment -- -- (23,967)
Total expenses 381,385 382,804 73,031
NET INVESTMENT INCOME 1,560,008 1,460,221 255,743
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized loss
on investments (335,404) (565,552) --
Net unrealized
appreciation
of investments 1,732,461 1,689,690 2,310
NET GAIN ON INVESTMENTS 1,397,057 1,124,138 2,310
TOTAL INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $2,957,065 $2,584,359 $258,053
The Notes to Financial Statements are an integral part of these
statements.
<PAGE>
Statements of Changes in Net Assets
For the Years Ended September 30
Arizona Portfolio
1995 1994
INCREASE (DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS
Net investment income $465,682 $579,256
Net realized loss on investments (270,014) (240,762)
Net unrealized appreciation
(depreciation) of investments 636,688 (1,248,861)
Total increase (decrease) in net
assets resulting from operations 832,356 (910,367)
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (465,682) (579,256)
From net capital gains -- (551,882)
CAPITAL SHARE TRANSACTIONS
(Note 6) (2,172,806) (1,614,268)
TOTAL DECREASE IN NET ASSETS (1,806,132) (3,655,773)
NET ASSETS
Beginning of period 11,814,857 15,470,630
End of period $10,008,725 $11,814,857
Maryland Portfolio
1995 1994
INCREASE (DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS
Net investment income $131,139 $151,708
Net realized loss on investments (30,774) (145,563)
Net unrealized appreciation
(depreciation) of investments 153,130 (240,115)
Total increase (decrease) in net
assets resulting from operations 253,495 (233,970)
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (131,139) (151,708)
From net capital gains -- (5,406)
CAPITAL SHARE TRANSACTIONS
(Note 6) (324,850) 96,826
TOTAL DECREASE IN NET ASSETS (202,494) (294,258)
NET ASSETS
Beginning of period 3,082,615 3,376,873
End of period $2,880,121 $3,082,615
Missouri Portfolio
1995 1994
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS
Net investment income $492,896 $546,716
Net realized loss on) (116,168) (209,620)
Net unrealized appreciation
(depreciation) of investments 537,355 (1,117,560)
Total increase (decrease) in net
assets resulting from operations 914,083 (780,464)
DISTRIBUTIONS TO SHAREHOLDERS
From net investment (492,896) (546,716)
From net capital gains -- (482,349)
CAPITAL SHARE TRANSACTIONS
(Note 6) (517,675) (701,239)
TOTAL DECREASE IN NET ASSETS (96,488) (2,510,768)
NET ASSETS
Beginning of period 11,490,154 14,000,922
End of period $11,393,666 $11,490,154
Virginia Portfolio
1995 1994
INCREASE (DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS
Net investment income $1,560,008 $1,696,068
Net realized loss on investments (335,404) (765,109)
Net unrealized appreciation
(depreciation) of investments 1,732,461 (3,383,279)
Total increase (decrease) in
net assets resulting
from operations 2,957,065 (2,452,320)
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (1,560,008) (1,696,068)
From net capital gains -- (2,140,949)
CAPITAL SHARE TRANSACTIONS
(Note 6) (3,124,224) (2,253,071)
TOTAL DECREASE IN NET ASSETS (1,727,167) (8,542,408)
NET ASSETS
Beginning of period 35,549,520 44,091,928
End of period $33,822,353 $35,549,520
National Portfolio
1995 1994
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS
Net investment income $1,460,221 $1,513,647
Net realized loss on investments (565,552) (1,469,332)
Net unrealized appreciation
(depreciation) of investments 1,689,690 (2,561,790)
Total increase (decrease) in net
assets resulting from operations 2,584,359 (2,517,475)
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (1,460,221) (1,513,647)
From net capital gains -- (3,338,545)
CAPITAL SHARE TRANSACTIONS
(Note 6) (2,461,944) (1,040,794)
TOTAL DECREASE IN NET ASSETS (1,337,806) (8,410,461)
NET ASSETS
Beginning of period 34,072,199 42,482,660
End of period $32,734,393 $34,072,199
Money Market Portfolio
1995 1994
INCREASE (DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS
Net investment income $255,743 $175,951
Net realized loss on -- --
Net unrealized appreciation
(depreciation) of investments 2,310 494
Total increase (decrease) in
net assets resulting
from operations 258,053 176,445
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (255,638) (175,951)
From net capital gains -- --
CAPITAL SHARE TRANSACTIONS
(Note 6) (464,511) (4,475,527)
TOTAL DECREASE IN NET ASSETS (462,096) (4,475,033)
NET ASSETS
Beginning of period 8,916,340 13,391,373
End of period $8,454,244 $8,916,340
The Notes to Financial Statements are an integral part of these
statements.
Financial Highlights
Selected data for a share outstanding thoughout each year:
1991 1992 1993 1994 1995
Arizona Portfolio
Net asset value
beginning of
period $9.703 $10.187 $10.568 $11.208 $9.706
Net investment
income $0.569 $0.528 $0.490 $0.436 $0.440
Net realized &
unrealized
gains
(losses) on
securities $0.484 $0.434 $0.786 $(1.102) $0.407
Total from
investment
operations $1.053 $0.962 $1.276 $(0.666) $0.847
Distributions
from net
investment
income $(0.569) $(0.528) $(0.490) $(0.436) $(0.440)
Distributions
from capital
gains -- $(0.053) $(0.146) $(0.400) --
Total
distribu-
tions $(0.569) $(0.581) $(0.636) $0.836) $(0.440)
Net asset
value end
of period $10.187 $10.568 $11.208 $9.706 $10.113
Total return 11.11% 9.74% 12.57% (6.20)% 8.95%
Net assets end
of period
(thousands) $8,061 $11,911 $15,471 $11,815 $10,009
Ratio of
expenses
to average
net assets 0.47% 1.15% 1.23% 1.29% 1.31%
Ratio of net
investment
income to
average net
assets 5.61% 5.14% 5.54% 4.23% 4.48%
Portfolio
turnover 57% 23% 63% 67% 24%
Maryland Portfolio
1993<F1> 1994 1995
Net asset value
beginning of
period $10.000 $10.441 $9.323
Net investment
income $0.274 $0.455 $.0418
Net realized &
unrealized
gains
(losses) on
securities $0.441 $(1.102) $0.415
Total from
investment
operations $0.715 $(0.647) $0.833
Distributions
from net
investment
income $(0.274) $(0.455) $(0.418)
Distributions
from capital
gains -- $(0.016) --
Total
distribu-
tions $(0.274) $(0.471) $(0.418)
Net asset
value end
of period $10.441 $9.323 $9.738
Total return 11.91%<F2> (6.33)% 9.17%
Net assets end
of period
(thousands) $3,377 $3,083 $2,880
Ratio of
expenses
to average
net assets 0.20%<F2> 0.64% 0.87%
Ratio of net
investment
income to
average net
assets 4.72%<F2> 4.60% 4.42%
Portfolio
turnover 35% 78% 9%
Missouri Portfolio
1991 1992 1993 1994 1995
Net asset value
beginning of
period $9.684 $10.117 $10.468 $11.173 $9.728
Net investment
income $0.585 $0.514 $.0494 $0.437 $0.436
Net realized &
unrealized
gains
(losses) on
securities $0.433 $0.377 $0.726 $(1.058) $0.405
Total from
investment
operations $1.018 $0.891 $1.220 $(0.621) $0.841
Distributions
from net
investment
income $(0.585) $(0.514) $(0.494) $(0.437) $(0.436)
Distributions
from capital
gains -- $(0.026) $(0.021) $(0.387) --
Total
distribu-
tions $(0.585) $(0.540) $(0.515) $0.824) $(0.436)
Net asset
value end
of period $10.117 $10.468 $11.173 $9.728 $10.133
Total return 10.80% 9.06% 11.98% (5.80)% 8.87%
Net assets end
of period
(thousands) $7,227 $11,023 $14,001 $11,490 $11,394
Ratio of
expenses
to average
net assets 0.45% 1.18% 1.23% 1.29% 1.31%
Ratio of net
investment
income to
average net
assets 5.85% 5.05% 4.59% 4.23% 4.43%
Portfolio
turnover 33% 8% 65% 52% 16%
Virginia Portfolio
1991 1992 1993 1994 1995
Net asset value
beginning of
period $10.832 $11.351 $11.621 $12.372 $10.631
Net investment
income $0.609 $0.592 $0.569 $0.479 $0.503
Net realized &
unrealized
gains
(losses) on
securities $0.519 $0.387 $0.871 $(1.146) $0.484
Total from
investment
operations $1.128 $0.979 $1.440 $(0.667) $0.987
Distributions
from net
investment
income $(0.609) $(0.592) $(0.569) $(0.479) $(0.503)
Distributions
from capital
gains -- $(0.117) $(0.120) $(0.595) --
Total
distribu-
tions $(0.609) $(0.709) $(0.689) $1.074) $(0.503)
Net asset
value end
of period $11.351 $11.621 $12.372 $10.631 $11.115
Total return 10.66% 8.92% 12.85% (5.67)% 9.54%
Net assets end
of period
(thousands) $30,696 $37,421 $44,092 $35,550 $33,822
Ratio of
expenses
to average
net assets 1.18% 1.13% 1.10% 1.18% 1.14%
Ratio of net
investment
income to
average net
assets 5.47% 5.20% 4.80% 4.23% 4.68%
Portfolio
turnover 73% 74% 80% 104% 55%
National Portfolio
1991 1992 1993 1994 1995
Net asset value
beginning of
period $10.364 $10.794 $11.329 $11.910 $9.851
Net investment
income $0.632 $0.605 $0.550 $0.420 $0.446
Net realized &
unrealized
gains
(losses) on
securities $0.430 $0.535 $0.793 $(1.122) $0.360
Total from
investment
operations $1.062 $1.140 $1.343 $(0.702) $0.806
Distributions
from net
investment
income $(0.632) $(0.605) $(0.550) $(0.420) $(0.446)
Distributions
from capital
gains -- -- $(0.212) $(0.937) --
Total
distribu-
tions $(0.632) $(0.605) $(0.762) $(1.357) $(0.446)
Net asset
value end
of period $10.794 $11.329 $11.910 $9.851 $10.211
Total return 10.50% 10.83% 12.44% (6.25)% 8.40%
Net assets end
of period
(thousands) $40,352 $41,273 $42,483 $34,072 $32,734
Ratio of
expenses
to average
net assets 1.24% 1.17% 1.10% 1.23% 1.18%
Ratio of net
investment
income to
average net
assets 5.95% 5.47% 4.83% 3.98% 4.49%
Portfolio
turnover 91% 114% 212% 175% 56%
Money Market Portfolio
1991 1992 1993 1994 1995
Net asset value
beginning of
period $1.000 $1.000 $1.000 $1.000 $1.000
Net investment
income $0.04 $0.03 $0.02 $0.015 $0.028
Net realized &
unrealized
gains
(losses) on
securities -- -- -- -- --
Total from
investment
operations $0.040 $0.030 $0.020 $0.015 $0.028
Distributions
from net
investment
income $(0.040) $(0.030) $(0.020) $(0.015) $(0.028)
Distributions
from capital
gains -- -- -- -- --
Total
distribu-
tions $(0.040) $(0.030) $(0.020) $0.015) $(0.028)
Net asset
value end
of period $1.000 $1.000 $1.000 $1.000 $1.000
Total return 4.13% 2.57% 1.53% 1.56% 2.87%
Net assets end
of period
(thousands) $17,844 $14,861 $13,391 $8,916 $8,454
Ratio of
expenses
to average
net assets 0.81% 0.83% 0.81% 0.81% 0.81%
Ratio of net
investment
income to
average net
assets 4.12% 2.55% 1.52% 1.52% 2.83%
Portfolio
turnover -- -- -- -- --
[FN]
<F1>For the period from February 10, 1993 (inception) to
September 30, 1993
<F2>Annualized
The Notest to Financial Statements are an integral part of these
statements.
<PAGE>
GIT Tax-Free Trust
Notes to Financial Statements
September 30, 1995
1. Summary of Significant Accounting Policies. GIT Tax-Free 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
maintains six separate portfolios which invest principally in
securities exempt from federal income taxes, commonly known as
"municipal" securities. The Arizona, Maryland, Missouri and
Virginia Portfolios (the "State Portfolios") invest solely in
securities exempt from both federal and state income taxes in
their respective states. The National Portfolio (High Yield
Portfolio prior to February 1, 1993) seeks higher yields and
invests in long-term securities. The Money Market Portfolio
invests in short-term securities and is priced according to the
"penny rounding" method whereby the share price is rounded to the
nearest cent to maintain a stable share price of $1.00. The
State and National Portfolios' price per share fluctuates as the
market value of the respective underlying portfolio of securities
fluctuates.
Securities Valuation: 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 bid and asked prices. Securities for which market
quotations are not readily available are valued at their fair
value as determined in good faith by the trustees. Investment
transactions are recorded on the trade date. The cost of
investments sold is determined on the identified cost basis for
financial statement and federal income tax purposes.
Investment Income: Interest income, net of amortization of
premium and original issue discount, and other income (if any) is
accrued as earned.
Dividends and Income Tax: Net investment income, determined as
gross investment income less expenses, is declared as a regular
dividend each business day. Declared dividends are distributed
to shareholders or reinvested in additional shares as of the
close of business at the end of each month. For the National and
State Portfolios, realized gains and losses and unrealized
appreciation and depreciation are reflected as changes in net
asset value per share and do not affect regular dividends paid.
Capital gain dividends, reflecting net realized capital gains of
each portfolio (if any) are declared and paid at least once per
year. In accordance with the provisions of Subchapter M of the
Internal Revenue Code applicable to regulated investment
companies, all taxable income of each portfolio (if any) is
distributed to its shareholders, and therefore, no federal income
tax provision is required.
Share Subscriptions: Shares purchased by check or otherwise not
paid for in immediately available funds are accounted for as
share subscriptions receivable and shares reserved for
subscriptions.
2. Investment Advisory Fees and Other Transactions with
Affiliates. The investment adviser to the Trust, Bankers Finance
Investment Management Corp. ("BFIMC"), earns an advisory fee
equal to 0.625% per annum of the average net assets of the State
and National Portfolios and 0.5% per annum of the average net
assets of the Money Market Portfolio; the fees accrue daily and
are payable monthly. For the year ended September 30, 1995, BFIMC
waived $18,524 of such fees for the Maryland Portfolio. In order
to meet the securities registration requirements of certain
states, BFIMC has undertaken to reimburse the Trust by the
amount, if any, by which the total expenses of the Trust (less
certain excepted expenses) exceed the applicable expense
limitation in any state or other jurisdiction in which the Trust
is subject to regulation during the fiscal year. The Trust
believes the current applicable expense limitation is 2.5% per
annum of the average net assets of the Trust up to $30 million,
2% of any amount of such net assets exceeding $30 million but not
exceeding $100 million, and 1.5% per annum of such amount in
excess of $100 million. BFIMC is responsible for the fees and
expenses of trustees who are affiliated with BFIMC, the rent
expense of the Trust's principal executive office premises and
certain promotional expenses. For the year ended September 30,
1995, outside trustee fees were
<PAGE>
Notes to Financial Statements (continued)
$1,100 for the Arizona, Missouri,
Virginia, National and Money Market Portfolios and $500 for the
Maryland Portfolio, respectively. As of September 30, 1995,
certain officers, trustees, companies and individuals affiliated
with the Trust had investments aggregating 0.2%, 0.2% and 1.0% of
the National, Arizona and Money Market Portfolios' shares
outstanding, respectively. As of September 30, 1995, no
outstanding shares of the Maryland, Missouri or Virginia
Portfolios were owned by any officer, trustee, affiliated company
or affiliated individual.
3. Other Expenses. With the exception of certain expenses of
the Trust payable by it directly, all support services are
provided to the Trust under a services agreement between the
Trust and BFIMC, pursuant to which, such services are to be
provided for amounts not exceeding the cost to BFIMC of the
support provided. Common expenses incurred by the Trust are
allocated among the portfolios based on the ratio of net assets
of each portfolio to the combined net assets. For the year
ended September 30, 1995, expenses of $71,928 for the Arizona
Portfolio; $25,840 for the Maryland Portfolio; $76,793 for the
Missouri Portfolio; $173,485 for the Virginia Portfolio; $180,061
for the National Portfolio; and $27,950 for the Money Market
Portfolio have been reimbursed to BFIMC under the Services
Agreement. As of September 30, 1995, expenses of $18,752 for
the Arizona Portfolio; $10,398 for the Maryland Portfolio; and
$10,623 for the Missouri Portfolio have been incurred by BFIMC on
behalf of the portfolios, the billings of which have been
deferred. For the year ended September 30, 1995, BFIMC incurred
expenses of $23,967 on behalf of the Money Market Portfolio, the
billing of which has been waived.
Had BFIMC not waived the billing of advisory fees and/or expenses
for the Arizona Portfolio, Maryland Portfolio, Missouri
Portfolio, and Money Market Portfolio, the ratios of expenses and
net investment income to average net assets would have been:
Ratio of Ratio of
to net
expense investment
Year average income to
ended net average net
Sept. 30 assets assets
Arizona Portfolio 1991 1.20% 4.88
Maryland Portfolio<F3> 1995 1.50% 3.80%
1994 1.34 3.90
1993<F2> 1.74<F1> 3.18<F1>
Missouri Portfolio 1991 1.28% 5.02%
Money Market Portfolio 1995 1.07% 2.56%
1994 1.02 1.31
1993 1.03 1.30
1992 1.02 2.36
1991 1.01 3.91
[FN]
<F1>Annualized
<F2>For the period from February 10, 1993 (inception) to
September 30, 1993
<F3> For the periods ended September 30, 1994 and 1993, ratios
include expenses of which the billing has been deferred.
<PAGE>
Notes to Financial Statements (continued)
4. Net Assets. At September 30, 1995, net assets include the
following:
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Net paid in capital shares
of beneficial interest $10,244,173 $3,028,240 $11,471,005
Accumulated net
realized losses (584,430) (184,066) (340,800)
Undistributed net
investment income -- -- --
Net unrealized appreciation
(depreciation) of
investments 348,982 35,947 263,461
Total net assets $10,008,725 $2,880,121 $11,393,666
Market
Virginia National Market
Portfolio Portfolio Portfolio
Net paid in capital shares
of beneficial interest $34,149,450 $34,288,780 $8,454,813
Accumulated net
realized losses (1,458,791) (2,256,504) (114)
Undistributed net
investment income -- -- 105
Net unrealized appreciation
(depreciation) of
investments 1,131,694 702,117 (560)
Total net assets $33,822,353 $32,734,393 $8,454,244
5. Investment Transactions. Purchases and sales of securities
other than short-term securities, for the year ended September
30, 1995, were as follows:
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Purchases $2,384,276 $247,524 $1,715,342
Sales 4,357,948 376,535 2,119,659
Virginia National
Portfolio Portfolio
Purchases $17,809,372 $17,299,675
Sales 19,238,261 19,376,834
As of September 30, 1995 capital loss carryover available which
may offset future capital gains, for federal income tax purposes
was $584,430 for the Arizona Portfolio; $184,066 for the Maryland
Portfolio; $340,800 for the Missouri Portfolio; $1,458,791 for
the Virginia Portfolio; and $2,256,504 for the National
Portfolio. The preceding carryover expires September 30, 2003.
As of September 30, 1995 capital loss carryover available for the
Money Market Portfolio is $114, which expires September 30, 1998.
<PAGE>
Notes to Financial Statements (continued)
6. Capital Share Transactions. An unlimited number of capital
shares, without par value, are authorized. Transactions in
capital shares for the years ended September 30 were as follows:
Arizona Portfolio
1994 1995
In Dollars
Shares sold $1,043,837 $3,038,623
Shares issued in reinvestment
of dividends 325,705 877,776
Total shares issued 1,369,542 3,916,399
Shares redeemed (3,542,348) (5,530,667)
Net increase (decrease) $(2,172,806) $(1,614,268)
In Shares
Shares sold 105,634 289,230
Shares issued in reinvestment
of dividends 33,184 84,476
Total shares issued 138,818 373,706
Shares redeemed (366,427) (536,785)
Net increase (decrease) (227,609) (163,079)
Maryland Portfolio
1994 1995
In Dollars
Shares sold $839,221 $1,952,141
Shares issued in reinvestment
of dividends 122,234 148,732
Total shares issued 961,455 2,100,873
Shares redeemed (1,286,305) (2,004,047)
Net increase (decrease) $(324,850) $96,826
In Shares
Shares sold 89,232 195,700
Shares issued in reinvestment
of dividends 12,957 15,137
Total shares issued 102,189 210,837
Shares redeemed (137,100) (203,611)
Net increase (decrease) (34,911) 7,226
Missouri Portfolio
1994 1995
In Dollars
Shares sold $1,645,931 $2,517,679
Shares issued in reinvestment
of dividends 408,754 874,712
Total shares issued 2,054,685 3,392,391
Shares redeemed (2,572,360) (4,093,630)
Net increase (decrease) $(517,675) $(701,239)
In Shares
Shares sold 166,322 242,656
Shares issued in reinvestment
of dividends 41,558 84,374
Total shares issued 207,880 327,030
Shares redeemed (264,672) (398,901)
Net increase (decrease) (56,792) (71,871)
Virginia Portfolio
1994 1995
In Dollars
Shares sold $4,967,609 $6,960,403
Shares issued in reinvestment
of dividends 1,335,773 3,454,038
Total shares issued 6,303,382 10,414,441
Shares redeemed (9,427,606) (12,667,512)
Net decrease $(3,124,224) $(2,253,071)
In Shares
Shares sold 463,732 606,350
Shares issued in reinvestment
of dividends 124,012 304,237
Total shares issued 587,744 910,587
Shares redeemed (888,537) (1,130,528)
Net decrease (300,793) (219,941)
National Portfolio
1994 1995
In Dollars
Shares sold $3,422,847 $8,477,033
Shares issued in reinvestment
of dividends 1,307,981 4,516,906
Total shares issued 4,730,828 12,993,939
Shares redeemed (7,192,772) (14,034,733)
Net decrease $(2,461,944) $(1,040,794)
In Shares
Shares sold 344,542 803,610
Shares issued in reinvestment
of dividends 131,677 429,466
Total shares issued 476,219 1,233,076
Shares redeemed (729,127) (1,341,342)
Net decrease (252,908) (108,266)
Missouri Portfolio
1994 1995
In Dollars
Shares sold $8,322,074 $8,291,730
Shares issued in reinvestment
of dividends 244,526 167,837
Total shares issued 8,566,600 8,459,567
Shares redeemed (9,031,111) (12,935,094)
Net decrease $(464,511) $(4,475,527)
In Shares
Shares sold 8,322,074 8,291,730
Shares issued in reinvestment
of dividends 244,526 167,837
Total shares issued 8,566,600 8,459,567
Shares redeemed (9,031,111) (12,935,094)
Net decrease (464,511) (4,475,527)
<PAGE>
GIT Tax-Free Trust
Special Tax Information
September 30, 1995
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code of 1986
$465,682 for the Arizona Portfolio; $131,139 for the Maryland
Portfolio; $492,896 for the Missouri Portfolio; $1,560,008 for
the Virginia Portfolio; $1,460,221 for the National Portfolio;
and $255,638 for the Tax-Free Money Market Portfolio is
designated as tax-exempt dividends.
In January 1996, shareholders of the Tax-Free Trust will receive
Federal income tax information on all distributions paid to their
accounts in calendar year 1995, including any distributions paid
between September 30, 1995 and December 31, 1995.
<PAGE>
This page was left blank intentionally.
<PAGE>
Telephone Numbers
Shareholder Service
Washington, DC area: 703/528-6500
Toll-free nationwide: 800/336-3063
24-Hour ACCESS
Toll-free nationwide: 800/448-4422
The GIT Family of Mutual Funds
GIT Equity Trust
Special Growth Portfolio
Select Growth Portfolio
Equity Income Portfolio
Worldwide Growth Portfolio
GIT Income Trust
Maximum Income Portfolio
Government Portfolio
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Government Investors Trust
For more complete information on any GIT Investment Fund,
including charges and expenses, request a prospectus by
calling the numbers above. Read it carefully before you
invest or send money. This prospectus does not constitute an
offering by the distributor in any jurisdiction in which such
offering may not be lawfully made.
GIT
GIT INVESTMENT FUNDS
1655 Fort Myer Drive
Arlington Virginia 22209
http://www.gitfunds.com
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 3
<NAME> TAX-FREE VIRGINIA PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 31,910,362
<INVESTMENTS-AT-VALUE> 33,042,056
<RECEIVABLES> 585,460
<ASSETS-OTHER> 536,611
<OTHER-ITEMS-ASSETS> 195
<TOTAL-ASSETS> 34,164,322
<PAYABLE-FOR-SECURITIES> 322,980
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,989
<TOTAL-LIABILITIES> 341,969
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,149,450
<SHARES-COMMON-STOCK> 3,043,054
<SHARES-COMMON-PRIOR> 3,343,847
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,458,791)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,131,694
<NET-ASSETS> 33,822,353
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,941,393
<OTHER-INCOME> 0
<EXPENSES-NET> 381,385
<NET-INVESTMENT-INCOME> 1,560,008
<REALIZED-GAINS-CURRENT> (335,404)
<APPREC-INCREASE-CURRENT> 1,732,461
<NET-CHANGE-FROM-OPS> 1,397,057
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,560,008
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,967,609
<NUMBER-OF-SHARES-REDEEMED> 9,427,606
<SHARES-REINVESTED> 1,335,773
<NET-CHANGE-IN-ASSETS> (3,124,224)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,123,386)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 207,900
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 381,385
<AVERAGE-NET-ASSETS> 33,365,755
<PER-SHARE-NAV-BEGIN> 10.631
<PER-SHARE-NII> 0.503
<PER-SHARE-GAIN-APPREC> 0.484
<PER-SHARE-DIVIDEND> (0.503)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.115
<EXPENSE-RATIO> 1.143
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 2
<NAME> TAX-FREE NATIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 30,871,658
<INVESTMENTS-AT-VALUE> 31,573,775
<RECEIVABLES> 472,208
<ASSETS-OTHER> 1,195,934
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,241,917
<PAYABLE-FOR-SECURITIES> 485,407
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,117
<TOTAL-LIABILITIES> 507,524
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,288,780
<SHARES-COMMON-STOCK> 3,205,840
<SHARES-COMMON-PRIOR> 3,458,748
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,256,504)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 702,117
<NET-ASSETS> 32,734,393
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,843,025
<OTHER-INCOME> 0
<EXPENSES-NET> 382,804
<NET-INVESTMENT-INCOME> 1,460,221
<REALIZED-GAINS-CURRENT> (565,552)
<APPREC-INCREASE-CURRENT> 1,689,690
<NET-CHANGE-FROM-OPS> 1,124,138
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,460,221
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,422,847
<NUMBER-OF-SHARES-REDEEMED> 7,192,772
<SHARES-REINVESTED> 1,307,981
<NET-CHANGE-IN-ASSETS> (2,461,944)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,690,952)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 202,743
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 382,804
<AVERAGE-NET-ASSETS> 32,537,685
<PER-SHARE-NAV-BEGIN> 9.851
<PER-SHARE-NII> 0.446
<PER-SHARE-GAIN-APPREC> 0.360
<PER-SHARE-DIVIDEND> (0.446)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.211
<EXPENSE-RATIO> 1.176
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 6
<NAME> TAX-FREE MARYLAND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 2,694,391
<INVESTMENTS-AT-VALUE> 2,730,338
<RECEIVABLES> 46,937
<ASSETS-OTHER> 130,370
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,907,645
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,524
<TOTAL-LIABILITIES> 27,524
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,028,240
<SHARES-COMMON-STOCK> 295,749
<SHARES-COMMON-PRIOR> 330,661
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (184,066)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 35,947
<NET-ASSETS> 2,880,121
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 156,979
<OTHER-INCOME> 0
<EXPENSES-NET> 25,840
<NET-INVESTMENT-INCOME> 131,139
<REALIZED-GAINS-CURRENT> (30,774)
<APPREC-INCREASE-CURRENT> 153,130
<NET-CHANGE-FROM-OPS> 122,356
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 131,139
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 839,221
<NUMBER-OF-SHARES-REDEEMED> 1,286,305
<SHARES-REINVESTED> 122,234
<NET-CHANGE-IN-ASSETS> (324,850)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (153,293)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,524
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,840
<AVERAGE-NET-ASSETS> 2,964,318
<PER-SHARE-NAV-BEGIN> 9.323
<PER-SHARE-NII> 0.418
<PER-SHARE-GAIN-APPREC> 0.415
<PER-SHARE-DIVIDEND> (0.418)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.738
<EXPENSE-RATIO> 0.872
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 4
<NAME> TAX-FREE ARIZONA PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 9,218,605
<INVESTMENTS-AT-VALUE> 9,567,587
<RECEIVABLES> 173,786
<ASSETS-OTHER> 352,451
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,093,824
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,099
<TOTAL-LIABILITIES> 85,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,244,173
<SHARES-COMMON-STOCK> 989,647
<SHARES-COMMON-PRIOR> 1,217,256
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (584,430)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 348,982
<NET-ASSETS> 10,008,725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 602,433
<OTHER-INCOME> 0
<EXPENSES-NET> 136,751
<NET-INVESTMENT-INCOME> 465,682
<REALIZED-GAINS-CURRENT> (270,014)
<APPREC-INCREASE-CURRENT> 636,688
<NET-CHANGE-FROM-OPS> 366,674
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 465,682
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,043,837
<NUMBER-OF-SHARES-REDEEMED> 3,542,348
<SHARES-REINVESTED> 325,705
<NET-CHANGE-IN-ASSETS> (2,172,806)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (314,416)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 64,823
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 136,751
<AVERAGE-NET-ASSETS> 10,404,162
<PER-SHARE-NAV-BEGIN> 9.706
<PER-SHARE-NII> 0.440
<PER-SHARE-GAIN-APPREC> 0.407
<PER-SHARE-DIVIDEND> (0.440)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.113
<EXPENSE-RATIO> 1.314
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 5
<NAME> TAX-FREE MISSOURI PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 10,491,408
<INVESTMENTS-AT-VALUE> 10,754,869
<RECEIVABLES> 164,530
<ASSETS-OTHER> 480,665
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,400,064
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,398
<TOTAL-LIABILITIES> 6,398
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,471,005
<SHARES-COMMON-STOCK> 1,124,394
<SHARES-COMMON-PRIOR> 1,181,186
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (340,800)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 263,461
<NET-ASSETS> 11,393,666
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 639,080
<OTHER-INCOME> 0
<EXPENSES-NET> 146,184
<NET-INVESTMENT-INCOME> 492,896
<REALIZED-GAINS-CURRENT> (116,168)
<APPREC-INCREASE-CURRENT> 537,355
<NET-CHANGE-FROM-OPS> 421,187
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 492,896
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,645,931
<NUMBER-OF-SHARES-REDEEMED> 2,572,360
<SHARES-REINVESTED> 408,754
<NET-CHANGE-IN-ASSETS> (517,675)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (224,632)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69,391
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 146,184
<AVERAGE-NET-ASSETS> 11,132,249
<PER-SHARE-NAV-BEGIN> 9,728
<PER-SHARE-NII> 0.436
<PER-SHARE-GAIN-APPREC> 0.405
<PER-SHARE-DIVIDEND> (0.436)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.133
<EXPENSE-RATIO> 1.313
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Distribution Agreement
This Agreement is made by and between GIT Investment
Services, Inc., a Virginia corporation having its principal
place of business in Arlington, Virginia (the
"Distributor"), and GIT Tax-Free Trust, a Massachusetts
business trust created pursuant to a Declaration of Trust
filed with the Clerk of the City of Boston, Massachusetts
(the "Trust").
In consideration of the mutual covenants contained herein
and for other good and valuable consideration, the parties
hereto, intending so to be legally bound, agree with each
other as follows:
1. Appointment of Distributor. Except as otherwise provided
herein, the Trust hereby appoints the Distributor its
exclusive agent to sell and distribute shares of the Trust
at the public offering price thereof described and set forth
in the Trust's current prospectus. The Distributor hereby
accepts such appointment. The Distributor shall have no
obligation to sell, distribute or redeem any specific amount
of the Trust's shares.
<PAGE>
2. Scope of Authority. The Distributor is authorized act as
the Trust's agent to make sales of the Trust's shares
directly to the public or distribute such shares to the
public through securities brokers, dealers or other
intermediaries. The Distributor is also authorized to act
as an agent of the Trust in connection with any redemption
of the Trust's shares, either directly or through securities
brokers, dealers or other intermediaries. In the
performance of its activities hereunder, the Distributor
shall be authorized to take such action not inconsistent
with the express provisions hereof as it deems advisable.
The Distributor agrees that in offering, selling or
redeeming shares of the Trust it will duly conform to all
applicable State and Federal laws and the rules and
regulations of any self-regulatory organization established
pursuant to Federal law to which the Distributor may belong.
The Distributor is authorized by the Trust only to give
information or make representations regarding the Trust's
shares to the extent such information or representations are
contained in the Trust's current prospectus or in its
registration statement filed with the Securities and
Exchange Commission or in supplemental information to such
prospectus approved by the Trust. The Distributor agrees
that any other such information or representations it
provides shall be given entirely without liability or
recourse to the Trust.
<PAGE>
3. Discretion of the Trust. Notwithstanding any other
provision hereof and in its sole discretion with or without
prior notice thereof to the Distributor, the Trust may
distribute its own shares directly to any person, may
suspend any or all sales of its shares, and may decline to
make any particular sale of its shares By notice thereof to
the Distributor, the Trust may appoint additional non-
exclusive agents for the sale and distribution of its
shares, but in the absence of such notice the Distributor
shall remain the Trust's exclusive agent for such sales.
4. Other Activities of the Distributor. The Distributor and
any of its affiliates shall be free to engage in any other
lawful activity, including the rendering to others of
services similar to those to be rendered to the Trust
hereunder; and the Distributor or any interested person
thereof shall be free to invest in the Trust as a
shareholder, to become an officer or Trustee thereof if
properly elected, or to enter into any other relationship
with the Trust approved by the Trustees and in accordance
with law.
5. Compensation to the Distributor. Unless a current
prospectus of the Trust provides for compensation to
underwriters or to persons who distribute its shares, the
Distributor shall receive no direct compensation in
connection with the activities authorized hereby. Except to
any extent specifically otherwise authorized by the terms of
a current prospectus of the Trust, the Distributor shall
sell and redeem shares of the Trust at their current net
asset value.
<PAGE>
The Trust shall reimburse to the Distributor
monthly for any reimbursable costs incurred by the
Distributor in connection with the affairs of the Trust.
Such "reimbursable cost" shall be limited to the reasonable
costs incurred by the Distributor in connection with
services rendered to the Trust's existing shareholders
approved by the Trustees of the Trust or in connection with
registration under State or Federal securities laws, taxes
or other out-of-pocket charges incurred by reason of sales
or are redemptions of the Trust's shares, but only to the
extent the Distributor is not otherwise directly compensated
for such services, sales or redemptions.
The "costs" which are reimbursable hereunder shall be deemed
to include both the relevant direct expenditures by the
Distributor (including the cost of goods and services
obtained from other) and the related overhead costs, such as
depreciation, interest, employee supervision, rent and like
costs. Where only a portion of a specific expenditure by
the Distributor is related to reimbursable costs hereunder,
then the Distributor may allocate such amount between the
Trust and other activities of the Distributor on a
reasonable basis, which may involve the use of assumptions
and approximations not subject to precise verification
without undue cost, provided that majority of the Trustees,
including a majority of the Trustees who are not interested
persons of the Trust, approve the basis upon which such
allocations are made. The Distributor may, in its
discretion, defer billing to and payment by the Trust of any
reimbursable costs hereunder, and no such deferment shall
affect the right of the Distributor to receive reimbursement
from the Trust when the <PAGE> reimbursable costs are billed.
6. Relationship to Investment Adviser. It is understood by
the parties hereto that concurrently with the execution of
Agreement or previously, the Trust has also entered into an
Investment Advisory Agreement with Bankers Finance
Investment Management Corp., as the investment adviser to
the Trust (the "Adviser"), pursuant to which the Adviser
will provide management services to the Trust and administer
its affairs. The voting securities of the Adviser and of
the Distributor has entered into this Agreement to perform
certain services partially in consideration of the Trust's
ongoing employment of the Adviser as aforesaid. If at any
time the Adviser ceases to act as investment adviser to the
Trust under terms substantially those of the Investment
Advisory Agreement or if at any time the Adviser ceases to
be an entity at least 50% (in terms of voting rights) under
common control with the Distributor, then this Agreement
shall immediately terminate as of a date 30 days from the
date of such event, unless within such 30-day period the
Distributor gives written notice to the Trust that it waives
such termination. The Trust specifically acknowledges and
accepts the relationship between the Distributor hereunder
and the Adviser.
7. Limitation of the Distributor's Liability
The Distributor shall not be liable for any loss incurred in
connection with any of its activities hereunder, nor for any
action taken, suffered or omitted and believed by it to be
advisable or within the scope of its authority or
discretion, except for acts or omissions involving willful
misfeasance, bad faith, gross negligence or reckless
disregard of the responsibilities <PAGE> assumed by it under this Agreement.
8. Limitation of Trust's Liability. The Distributor
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Declaration of Trust. The Distributor agrees that the
Trust; obligations hereunder in any case shall be limited to
the Trust and to its assets and that the Distributor shall
not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trustee, officer,
employee or agent of the Trust.
9. Term of Agreement. This Agreement shall continue in
effect for two years from the date of its execution; and it
shall continue in force thereafter (but subject to the
termination provisions below), provided that it is
specifically approved at least annually by the Trustees of
the Trust or by a majority vote of the outstanding
securities of the Trust (without regard to series or classes
of shares), and in either case by the vote of a majority of
the Trustees who are not interested persons of the Trust,
cast in person at a meeting called for that purpose.
10. Termination by Notice. Notwithstanding any provision of
this Agreement, it may be terminated at any time, without
penalty, by the Trustees of the Trust or by the Distributor,
upon 30 day's written notice to the other party.
<PAGE>
11. Termination Upon Assignment. This Agreement may not be
assigned by the Distributor and shall automatically
terminate immediately upon any assignment. Noting herein
shall prevent the Distributor from employing any other
persons or agents, as its own expense, to assist it in the
performance of its duties hereunder.
12 Amendments. This Agreement may be amended at any time by
mutual agreement in writing by the parties hereto, provided
that such amendment is approved by Trustees of the Trust,
including a majority of the Trustees who are not interested
persons of the Trust, cast in person at a meeting called for
that purpose.
13. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth
of Virginia.
14. Use of Terms. The terms "interested person," assignment
and "majority of the outstanding voting securities," as used
herein, shall have the same meanings as in the Investment
Company Act of 1940 and any applicable regulations
thereunder.
<PAGE>
In Witness Whereof, the parties have caused this amended and
restated Agreement to be signed on their behalf by their
respective officers duly authorized and their respective
seals to be affixed hereto, this 18th day of November, 1982
GIT Investment Services, Inc.
[Seal]
(signature)
By A. Bruce Cleveland, President
(signature)
Attest: Fredda E. Mays, Assistant Secretary
GIT Tax-Free Trust
[Seal]
(signature)
By A. Bruce Cleveland, Trustee
(signature)
By Michael D. Goth, Trustee
(signature)
By Robert W. Dudley, Trustee
(signature)
By Thomas S. Kleppe, Trustee
(signature)
By Gerald W. Nensel, Trustee
(signature)
Attest: Thomas C. Miller, Secretary
.
Investment Advisory Agreement
This Agreement is made by and between Bankers Finance
Investment Management corp., a Virginia corporation having
its principal place of business in Arlington, (the Adviser),
and GIT Tax-Free Trust, a Massachusetts business trust
created pursuant to a Declaration of Trust filed with the
Clerk of the City of Boston, Massachusetts (the "Trust).
The parties hereto, intending so to be legally bound, agree
with each other as follows:
1. Appointment and Acceptance. The Trust hereby appoints
the Adviser to manage the investment of its assets and to
administer its affairs; and the Adviser hereby accepts such
appointment. The Adviser shall employ its best efforts to
supervise the investment management of the Trust.
2. Discretion of the Adviser. In the performance of its
duties hereunder the Adviser shall have full authority to
act as it deems advisable, except that it shall be bound by
the terms of the declaration of trust and by-law of the
Trust, and by any written direction given by the Trustees of
the Trust not inconsistent with this Agreement; and it
<PAGE> shall be guided by the investment policies of the
Trust from time to time duly in effect. subject only to the
foregoing, the Adviser shall have full authority to purchase
and sell securities for the Trust; the Adviser may determine
the persons with whom such securities transactions are to be
made and the terms thereof.
3. Other Activities of the Adviser. the Adviser and any of
its affiliates shall be free to engage in any other lawful
activity, including the rendering to others of services
similar to those rendered to the Trust hereunder; and the
Adviser or any interested person thereof shall be free to
invest in the Trust as a shareholder, to become an officer
or Trustee of the Trust if properly elected, or to enter
into any other relationship with the Trust approved by the
Trustees and in accordance with law.
The Adviser agrees that it will not deal with itself or with
any affiliated person or promoter or principal underwriter
of the Trust (or any affiliated person of the foregoing)
acting as a principal, in effecting securities transactions
for the account of the Trust. It is further agreed that in
effecting any such transaction with such a person acting as
a broker or agent, compensation to such person shall be
permitted, provided that the transaction is in the ordinary
course of such person's business and the amount of such
compensation does not exceed one percent of the purchase or
sale price of the securities involved.
If the Adviser or any affiliate thereof provides any other
goods or services which otherwise would be paid for by the
Trust pursuant to this Agreement, then the Trust shall pay
the Adviser or such affiliate the <PAGE> cost reasonably allocated
by the Adviser or affiliate to such goods or services.
4. Expenses of the Trust. The Trust shall pay all of its
expenses not expressly assumed by the Adviser herein.
without limitation, the expenses of the Trust, assumed by
the Trust hereby, shall include the following:
a. expenses related to the continued existence of the Trust.
b. fees and expenses of the Trustees (except those
affiliated with the Adviser), the officers and the
administrative employees of the Trust.
c. fees paid to the Adviser hereunder.
d. fees and expenses of preparing, printing and
distributing official filings, reports, prospectuses and
documents required pursuant to applicable state and federal
securities law and expenses of reports to shareholders.
e. fees and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents,
registrars, and similar agents.
f. expenses related to the issuance, registration,
<PAGE>
repurchase, exchange and redemption of shares and
certificates representing shares.
g. auditing, accounting, legal, insurance, portfolio
administration, association membership, printing, postage
and other administrative expenses.
h. expenses relating to qualification or licensing of the
Trust, shares in the Trust, or officers, employees and
agents of the Trust under applicable state and federal
securities law.
i. expenses related to shareholder meetings and proxy
solicitations and materials.
j. interest expense, taxes and franchise fees, and all
brokerage commissions and other costs related to purchase
and sales of portfolio securities.
k. expenses assumed by the Trust in accordance with a plan
of distribution adopted pursuant to rule 12b-1 under the
investment company act 1940, or in accordance with any
related agreements.
in addition, the Trust shall assume all losses and
liabilities incurred in the administration of the Trust and
of its investment portfolio; and it shall pay such non-
recurring expenses as may arise through litigation,
administrative proceedings, claims against the Trust, the
indemnification of Trustees, officers, employees,
shareholders and agents, or otherwise.
<PAGE>
5. Compensation to the Adviser. For its services
hereunder, the Trust shall pay to the Adviser a management
fee equal to: one-half (1/2) percent per annum of the
average daily net assets of any portfolio of the Trust
having an investment policy limiting portfolio investments
to debt securities with maturities (however defined for
purposes of the investment policy) of 13 months or less;
plus, five-eights (5/8) percent per annum of the average
daily net assets of any other portfolio of the Trust. As
of the execution of this Agreement the management fee
payable hereunder with respect to the Tax-free Money Market
Fund Shares will be one-half percent per annum, and with
respect to the Tax-Free High Yield Fund Shares will be one
percent per annum, of the average daily net assets of the
corresponding portfolio. Such fee shall be payable monthly
as of the last day of the month and shall be the sum of the
daily fees calculated as one-three hundred sixty-fifth
(1/365), except in leap years one-three hundred sixty -sixth
(1/366), of the annual fee based upon each portfolio net
assets calculated for the day.
With respect to any portfolio of the Trust authorized by the
Trustee subsequent to their initial approval of this
Agreement, the management fee provided herein may be revised
upward or downward by mutual agreement between the parties
at the time the additional portfolio is authorized, provided
such revision is approved by the Trustees, including the
vote of a majority of those Trustees who are not interested
persons of the Trust, cast in person at a meeting called for
that purpose. The Adviser shall have the right to waive any
portion of its management fee during any period, and it may
permanently reduce the amount of the fee <PAGE> under such
terms as it may determine by written notice thereof to the
Trust. The Adviser shall have the right to share its
management fee with others or make payments out of its
management fee to others, as it solely determines.
6. Limitation of Expenses of the Trust. In addition to
investment management expenses related to the Trust, the
Adviser shall pay the fees and expenses of any Trustees and
officers of the Trust affiliated with the Adviser, all
promotional expenses of the Trust to the extent not paid for
by the Trust pursuant to a plan of distribution, the rent
expense of the Trust's principal executive office premises,
and the expenses of formation of the Trust.
The Adviser shall further reimburse the Trust for all of its
expenses, excluding securities transaction commissions and
expenses, taxes, interest, share distribution expenses, and
extra-ordinary and non-recurring expenses, which exceed
during any fiscal year the applicable expense limitation in
any state or other jurisdiction in which the Trust, during
the fiscal year, becomes subject to regulation by
qualification or sale of its shares. Any such required
reimbursement shall be made within a reasonable period
following the close of the fiscal year to which it relates;
and the Adviser may elect to pay all or a portion of any
such reimbursement it anticipates will be required at any
time or from time to time during the fiscal year to which
the reimbursement relates.
7. Limitation of Adviser's Liability. The Adviser shall
not be liable for any loss incurred in connection with its
duties hereunder, nor for any action taken, suffered or
omitted and believed by it to be <PAGE> advisable or within
the scope of its authority or discretion, except for acts or
omissions involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties assumed by it
under this Agreement.
8. Limitation of Trust's Liability. The Adviser
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
declaration of Trust. The Adviser agrees that the Trust's
obligations hereunder in any case shall be limited to the
Trust and to its assets and that the Adviser shall not seek
satisfaction of any such obligation from the shareholders of
the Trust nor from any Trustee, officer, employee or agent
of the Trust.
9. Term of Agreement. This Agreement shall continue in
effect for two year from the date of its execution; and it
shall continue in force thereafter (but subject to the
termination provisions below), provided that it is
specifically approved at least annually by the Trustees of
the Trust or by a majority vote of the outstanding
securities of each series and class of the Trust's shares
with respect to which it is to continue in effect, and in
either case by the vote of a majority of the Trustees who
are not interested persons of the Trust, cast in person at
meeting called for that purpose.
10. Termination by Notice. Notwithstanding any provision
of this Agreement, it may be terminated at any time, without
penalty, by the Trustees of the Trust or, with respect to
any series or class of the Trust's shares, by the vote of a
majority of the outstanding voting <PAGE> securities of each
series or class, or by the Adviser, upon sixty days written
notice to the other party.
11. Termination upon Assignment. This Agreement may not be
assigned by the Adviser and shall automatically terminate
immediately upon any assignment. Nothing herein shall
prevent the Adviser from employing any other persons or
agents, as its own expense, to assist it in the performance
of its duties hereunder.
12. Name of the Trust. In consideration of its formation
of the Trust and the related expenses, the Adviser has
retained the rights to the name "GIT Tax-Free Trust" (and any
similar name), which rights the Trust hereby acknowledges.
the Trust, however, shall have the exclusive right to the
use of the name "GIT Tax-Free Trust" (although its rights to
the "GIT" portion of such name shall be non-exclusive) so
long as this contract shall remain in force, except that the
Adviser may withdraw such rights from the Trust at any time,
effective immediately or at a time specified, upon written
notice to the Trust. In the event of such notice, the Trust
agrees that it will cause the question of continuation of
this Agreement to be put to a vote of the shareholders of
the Trust as soon as practicable after such notice has been
given.
13. Use of Terms. Tthe terms "affiliated person",
"interested person", "assignment", "broker", and "majority
of the outstanding voting securities" as used herein, shall
have the same meanings as in the investment company act of
1940.
<PAGE>
In Witness Whereof, the parties have caused this
Agreement to be signed in their behalf by their respective
officers duly authorized and their respective seals to be
affixed hereto, this 14th day of September, 1982.
(seal)
Bankers Finance Investment Management Corp.
(signature)
by A. Bruce Cleveland, President
(signature)
Attest: Fredda E. Mays, Secretary
GIT Tax-Free Trust
(Seal)
(signature)
by A. Bruce Cleveland, Trustee
(signature)
by Michael D. Goth, Trustee
(signature)
by Robert W. Dudley, Trustee
(signature)
by Thomas S. Kleppe, Trustee
(signature)
by Gerald W. Nensel, Trustee
(signature)
Attest: Thomas C. Miller, Secretary
Services Agreement
This Agreement is made by and between Bankers Finance Investment
Management Corp., a Virginia corporation having its principal
place of business in Arlington, Virginia ("BFIMC"), and GIT Tax-
Free Trust, a Massachusetts business trust created pursuant to a
Declaration of Trust filed with the Clerk of the City of Boston,
Massachusetts (the "Trust").
The parties hereto, intending so to be legally bound, agree with
each other as follows:
1. Provision of Services. BFIMC hereby undertakes to provide the
Trust with such operational support services as it may require in
the conduct of its business, to extent which BFIMC (or any other
person), acting as the Trust's investment adviser, has not
undertaken to provide such services. Such services may include
the functions of shareholder servicing agent and transfer agent,
bookkeeping and portfolio accounting services, the handling of
telephone inquires, cash withdrawals and other customer service
functions (including processing and monitoring wire transfers),
and providing to the Trust appropriate supplies, equipment and
ancillary services necessary to the conduct of its affairs. Such
services may also include providing or arranging for and making
<PAGE>
reimbursable expenditures with respect to any activities intended
to be financed by the Trust pursuant to its Plan of Distribution.
The Trust hereby engages BFIMC to provide with such services.
2. Scope of Authority. BFIMC shall be at all times, in the
performance of its functions hereunder, subject to any direction
and control of the Trustees of the Trust and of its officers, and
to the terms of its Declaration of Trust and By-Laws, except only
that it shall have no obligation to provide to the Trust any
services that are clearly outside the scope of those contemplated
in this Agreement. In the performance of its duties hereunder,
BFIMC shall be authorized to take such action not inconsistent
with the express provisions hereof as it deems advisable. It may
contract with other persons to provide to the Trust any of the
services contemplated herein under such terms as it deems
reasonable and shall have the authority to direct the activities
of such other persons in the manner it deems appropriate.
3. Other Activities of BFIMC. BFIMC and any of its affiliates
shall be free to engage in any other lawful activity, including
the rendering to others services similar to those to be rendered
to the Trust hereunder; and BFIMC or any interested person
thereof shall be free to invest in the Trust as a shareholder, to
become an officer or Trustee thereof if properly elected, or to
enter into any other relationship with the Trust approved by the
Trustee and in accordance with law.
BFIMC agrees that it will not deal with the Trust in any
transaction in which BFIMC acts as a principal, except to the
extent as may be permitted by the terms of this Agreement.
<PAGE>
4. Compensation to BFIMC. BFIMC shall have no responsibility
hereunder to bear at its own expense any costs or expenses of the
Trust. The Trust shall reimburse to BFIMC monthly all of BFIMC's
costs involved in the provision of services to the Trust
hereunder, as the term "cost" is more fully described herein.
The "cost" of services provided to the Trust hereunder shall be
deemed to include both the relevant direct expenditures by BFIMC
(including the cost of goods and services obtained from others)
and the related overhead costs, such as depreciation, interest,
employee supervision, rent and like cost. Where only a portion
of a specific expenditure by BFIMC is related to services
provided to the Trust hereunder, then BFIMC may allocate such
amount between the Trust and the other activities of BFIMC on a
reasonable basis, which may involve the use of assumptions and
approximations not subject to precise verification without undue
cost, provided that a majority of the Trustees, including a
majority of the Trustees who are not interested persons of the
Trust approve the basis upon which such allocations are made.
BFIMC may, in its discretion, defer billing to and payment by the
Trust of any costs which are reimbursable to it hereunder, and no
such deferment shall affect the right of BFIMC to receive
reimbursement from the Trust when the cost are billed.
5. Relationship to Investment Adviser. It is understood by the
parties hereto that concurrently with the execution of this
Agreement, the
Trust has entered into an Investment Advisory Agreement with Bankers
Finance Investment Management Corp. in its separate capacity as the
investment adviser to the Trust (the "Adviser") pursuant to which the
<PAGE>
Adviser will provide management services to the Trust and
administer its affairs. BFIMC has entered into this Agreement to
perform certain services at its cost in consideration of the
Trust's employment of it as the Adviser as aforesaid. If at any
time the Adviser ceases to act as investment adviser to the Trust
under terms substantially those of the Investment Advisory
Agreement or if at any time the Adviser ceases to be a subsidiary
owned at least 50% (in terms of voting rights) under common
control with BFIMC, then this Agreement shall immediately
terminate as of a date 30 days from the date of such event,
unless within such 30-day period BFIMC gives written notice to
the Trust that it waives such termination. The Trust
specifically acknowledges and accepts the relationship between
separate capacities of BFIMC hereunder and as the Adviser.
6. Limitation of BFIMC's Liability. BFIMC shall not be liable
for any loss incurred in connection with any of its services
hereunder, nor for any action taken, suffered or omitted and
believed by it to be advisable or within the scope of its
authority of discretion, except for acts or omissions involving
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties assumed by it under this Agreement.
7. Force Majeure. It is specifically agreed by the parties that
if BFIMC is delayed in the performance of any of the services to be
performed by it hereunder or prevented entirely or in part from performing
such services due to causes or events beyond its control, then such delay
or non-performance may either be excused and the reasonable time for
performance thereby extended as necessary, or if such delay or
non-performance continues for 30 days then the Trust may cancel this
<PAGE>
Agreement immediately thereafter or at any time prior to the
cessation of delay or resumption of performance by BFIMC; but
BFIMC shall not otherwise be liable for and the Trust shall
otherwise hold it harmless from any such delay or non-
performance. "Causes or events beyond control" shall include,
without limitation, the following: Acts of God; interruption of
power or other utility, transportation or communications
services; malfunction of computer equipment; acts of civil or
military authority; sabotage national emergencies, war,
explosion, flood, accident, earthquake, fire, or other
catastrophe; strike or other labor problem; shortage of suitable
parts, material, labor or transportation; or present or future
law, governmental order, rule, regulations or official policy.
8. Limitation of Trust's Liability. BFIMC acknowledges that it
has received notice of and accepts the limitations upon the
Trust's liability set forth in its Declaration of Trust. BFIMC
agrees that the Trust's obligations hereunder in any case shall
be limited to the Trust and to its assets and that BFIMC shall
not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trustee, officer, employee
or agent of the Trust.
9. Term of Agreement. This Agreement shall continue in effect
for two years from the date of its execution; and it shall continue in
force thereafter (but subject to the termination provisions below),
provided that it is specifically approved at least annually by the
Trustees of the Trust or a majority vote of the outstanding securities
of each series and class of the Trust's shares with respect to which it is
to continue in effect, and in either case by either case by the vote of
a majority of the
<PAGE>
Trustees who are not interested persons of the Trust, cast in
person at a meeting called for that purpose.
10. Termination by Notice. Notwithstanding any provision of this
Agreement, it may be terminated at any time without penalty, by
the Trustees of the Trust or, with respect to any series or class
of the Trust's shares, by the vote of the majority of the
outstanding voting securities of such series or class, or by
BFIMC, upon thirty days written notice to the other party.
11. Termination upon Assignment. This Agreement may not be
assigned by BFIMC and shall automatically terminate upon any such
assignment; except that BFIMC may assign or transfer its interest
herein to a wholly-owned subsidiary of BFIMC, or to another
entity operated substantially under common control with BFIMC,
provided BFIMC represents to the Trust that substantial
continuity of management, personnel and services previously
available to the Trust will be maintained following such
assignment or transfer and that the Trustees of the Trust
(including a majority of the Trustees who are not interested
persons of the Trust) accept such representation. Nothing herein
shall limit the right of BFIMC to obtain goods and services from
other persons as described in Section 2 above.
12. Use of Term. The terms "affiliated person," "interested
persons," "assignment," and "majority of the outstanding voting
securities," as used herein, shall have the same meanings as in
the Investment Company Act of 1940 and any applicable regulations
thereunder.
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be
signed in their behalf by their respective officers duly
authorized and their respective seals to affixed hereto, this
14th day of September, 1982
Bankers Finance Investment Management Corp.
(seal)
by (signature) Bruce Cleveland, President
Attest: (signature) Fredda E. Mays, Secretary
Seal
GIT Tax-Free Trust
(seal)
by (signature) Bruce Cleveland Trustee
by (signature) Robert W. Dudley Trustee
by (signature) Gerald W. Nensel Trustee
by (signature) Michael D. Goth Trustee
by (signature) Thomas S. Kleppe Trustee
Attest: (signature) Thomas C. Miller, Secretary
<PAGE>
GIT Tax-Free Trust
1800 North Kent Street
Arlington, Virginia 22209
September 23, 1982
Mr. A. Bruce Cleveland
President
Bankers Finance Corporation
1800 North Kent Street
Arlington, Virginia 22209
Dear Mr. Cleveland:
This letter is written to clarify a point with respect to
the Services Agreement ("the Agreement") dated September 14, 1992
between GIT Tax-Free Trust ("the Trust") and Bankers Finance
Investment Management Corp. ("BFIMC") under which BFIMC provides
the Trust certain recordkeeping services. Rule 31a-3 of the
Investment Company Act of 1940 states that any person serving in
the capacity outlined in the Services Agreement for a registered
investment company must agree that the records it maintains are
the property of the Trust and will be surrendered promptly on
request. Accordingly, we ask that you sign and return the
enclosed copy of this letter, thereby acknowledging that the
records BFIMC maintains on behalf of the Trust are the sole
property of the Trust and will be surrendered promptly to the
Trust upon its request.
Sincerely,
(signature)
Thomas C. Miller
Executive Vice President
Acknowledged and Accepted:
Bankers Finance Investment Management Corporation
By: (signature) Bruce A. Cleveland
Date: 9/23/82
<PAGE>
Custody Agreement
Agreement made as of the 8th day of September 1993,
between Government Investors Trust, GIT Equity Trust, GIT Income
Trust and GIT Tax-Free Trust (the "Trusts"), business trusts
organized under the laws of Massachusetts and having their office
at 1655 Fort Myer Drive, Arlington, Virginia 22209, acting for
and on behalf of all mutual fund portfolios as are currently
authorized and issued by the Trusts or may be authorized and
issued by any of the Trusts subsequent to the date of this
Agreement (the "Funds"), which are operated and maintained by
their respective Trusts for the benefit of the holders of shares
of the Funds, and Star Bank, N.A. (the "Custodian"), a national
banking association having its principal office and place of
business at Star Bank Center, 425 Walnut Street, Cincinnati, Ohio
45202, which Agreement provides for the furnishing of custodian
services to the Funds.
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Trusts, on behalf of the Funds, and the Custodian
agree as follows:
Article I
Definitions
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Person" shall be deemed to include the
Chairman, President, Secretary, Treasurer, and the Executive Vice
<PAGE>
President, or any other person, whether or not any such person is
an officer or employee of the Trusts, duly authorized by the
Board of Trustees of the Trusts to give Oral Instructions and
Written Instructions on behalf of the Funds and listed in the
Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to
time, subject in each case to any limitations on the authority of
such person as set forth in Appendix A or any such Certificate.
Authorized Persons shall also include the President, Executive
Vice President, Secretary and such other officers employed by
Bankers Finance Investment Management Corp. (the "Adviser") as
are designated in writing by the Adviser pursuant to the terms of
the services agreements between the Trusts and the Adviser
regarding day-to-day management of the Funds.
2. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees, provided the Custodian has received a certified copy of
a resolution of Board of Trustees of the Trusts specifically
approving deposits in the Book-Entry System.
3. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is signed on behalf
of the Funds by an Officer of the Trusts and is actually received
by the Custodian.
4. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
<PAGE>
Exchange Commission, its successor or successors and its nominee
or nominees. The term "Depository" shall further mean and include
any other person or clearing agency authorized to act as a
depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, provided
that the Custodian has received a certified copy of a resolution
of the Board of Trustees of the Trusts specifically approving
such other person or clearing agency as a depository.
5. "Dividend and Transfer Agent" shall mean the dividend
and transfer agent active, from time to time, in such capacity
pursuant to a written agreement with the Funds, changes in which
the Trusts shall immediately report to the Custodian in writing.
6. "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States
or agencies or instrumentalities thereof, commercial paper,
obligations (including certificates of deposit, bankers'
acceptances, repurchase and reverse repurchase agreements with
respect to the same) and bank time deposits of domestic banks
that are members of Federal Deposit Insurance Trust, and short-
term corporate obligations where the purchase and sale of such
securities normally require settlement in federal funds or their
equivalent on the same day as such purchase or sale.
7. "Officers" shall be deemed to include the Chairman, the
President, the Secretary, the Treasurer, and Executive Vice
President of the Trusts listed in the Certificate annexed hereto
<PAGE>
as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
8. "Oral Instructions" shall mean oral instructions
actually received by the Custodian from an Authorized Person (or
from a person which the Custodian reasonably believes in good
faith to be an Authorized Person) and confirmed by Written
Instructions from Authorized Persons in such manner so that such
Written Instructions are received by the Custodian on the next
business day.
9. "Prospectus" or "Prospectuses" shall mean the Funds'
currently effective prospectuses and statements of additional
information.
10. "Security or Securities" shall mean Money Market
Securities, common or preferred stocks, options, bonds,
debentures, corporate debt securities, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe
for the same, or evidencing or representing any other rights or
interest therein, or any property or assets.
11. "Written Instructions" shall mean communication
actually received by the Custodian from one Authorized Person or
from one person which the Custodian reasonably believes in good
faith to be an Authorized Person in writing, telex or any other
data transmission system whereby the receiver of such
communication is able to verify by codes or otherwise with a
reasonable degree of certainty the authenticity of the senders of
such communication.
<PAGE>
Article II
Appointment of Custodian
1. The Trusts, acting for and on behalf of their respective
Funds, hereby constitute and appoint the Custodian as custodian
of Securities and monies owned by the Funds during the period of
this Agreement ("Fund Assets").
2. The Custodian hereby accepts appointment as such
Custodian and agrees to perform the duties thereof as hereinafter
set forth.
Article III
Documents to be Furnished by the Trust
Each Trust hereby agrees to furnish to the Custodian the
following documents within a reasonable time after the effective
date of this Agreement:
1. A copy of its Declaration of Trust (the "Declaration of
Trust") certified by its Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. Copies of the most recent Prospectuses of the Trust.
4. A Certificate of the President and Secretary setting
forth the names and signatures of the present Officers of the
Trust.
<PAGE>
Article IV
Custody of Cash and Securities
1. Each Trust will deliver or cause to be delivered to the
Custodian Fund Assets, including cash received for the issuance
of its shares. The Custodian will not be responsible for such
Fund Assets until actually received by it. Upon such receipt, the
Custodian shall hold in safekeeping and physically segregate at
all times from the property of any other persons, firms or
corporations all Fund Assets received by it from or for the
accounts of the Funds. The Custodian will be entitled to reverse
any credits made on the Funds' behalf where such credits have
been previously made and monies are not finally collected within
90 days of the making of such credits. The Custodian is hereby
authorized by the Trusts, acting on behalf of the Funds, to
actually deposit any Fund Assets in the Book-Entry System or in a
Depository, provided, however, that the Custodian shall always be
accountable to the Trusts for the Fund Assets so deposited. Funds
Assets deposited in the Book-Entry System or the Depository will
be represented in accounts which include only assets held by the
Custodian for customers, including but not limited to accounts in
which the Custodian acts in a fiduciary or representative
capacity.
2. The Custodian shall credit to a separate account or
accounts in the name of each respective Fund all monies received
by it for the account of such Fund, and shall disburse the same
only:
<PAGE>
(a) In payment for Securities purchased for the account of such
Fund, as provided in Article V;
(b) In payment of dividends or distributions, as provided in
Article VI hereof;
(c) In payment of original issue or other taxes, as provided
in Article VII hereof;
(d) In payment for shares of such Fund redeemed by it, as
provided in Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and setting
forth the name and address of the person to whom the payment is
to be made, the amount of such payment and the purpose for which
payment is to be made (the Custodian not being required to
question such direction) or (ii) if reserve requirements are
established for a Fund by law or by valid regulation, directing
the Custodian to deposit a specified amount of collected funds in
the form of U. S. dollars at a specified Federal Reserve Bank and
state the purpose of such deposit; or
(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IX hereof.
3. Promptly after the close of business on each day the
Funds are open and valuing their portfolios, the Custodian shall
furnish the respective Trusts with a detailed statement of monies
held for the Funds under this Agreement and with confirmations
and a summary of all transfers to or from the account of the
Funds during said day. Where Securities are transferred to the
account of the Funds without physical delivery, the Custodian
shall also identify as belonging to the Funds a quantity of
<PAGE>
Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian
shall furnish the Trusts with a detailed statement of the
Securities held for the Funds under this Agreement.
4. All Securities held for the Funds, which are issued or
issuable only in bearer form, except such Securities as are held
in the Book-Entry System, shall be held by the Custodian in that
form; all other Securities held for the Funds may be registered
in the name of the Funds, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System
or the Depository or their successor or successors, or their
nominee or nominees. Each Trust agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry
System or the Depository, any Securities which it may hold for
the account of the Funds and which may from time to time be
registered in the name of the Funds. The Custodian shall hold all
such Securities which are not held in the Book-Entry System by
the Depository or a Sub-Custodian in a separate account or
accounts in the name of the Funds segregated at all times from
those of any other fund maintained and operated by the Trust and
from those of any other person or persons.
<PAGE>
5. Unless otherwise instructed to the contrary by a
Certificate, the Custodian shall with respect to all
Securities held for the Funds in accordance with this
Agreement:
(a) Collect all income due or payable to the Funds with
respect to each Fund's Assets;
(b) Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed,
or retired, or otherwise become payable;
(c) Surrender Securities in temporary form for definitive
Securities;
(d) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws
or the laws or regulations of any other taxing authority,
including any foreign taxing authority, now or hereafter in
effect; and
(e) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited,
for the account of the Funds all rights and similar
securities issued with respect to any Securities held by the
Custodian hereunder.
6. Upon receipt of Written Instructions and not
otherwise, the Custodian directly or through the use of the
Book-Entry System or the Depository shall:
(a) Execute and deliver to such persons as may be
designated in such Written Instructions proxies, consents,
authorizations, and any other instruments whereby the
authority of the Funds as owner of any Securities may be
exercised;
(b) Deliver any Securities held for the Funds in exchange
for other Securities or cash issued or paid in connection
<PAGE>
with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(c) Deliver any Securities held for the account of the
Funds to any protective committee, reorganization committee
or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale
of assets of any corporation, and receive and hold under the
terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery; and
(d) Make such transfers or exchanges of the assets of the
Funds and take such other steps as shall be stated in a
Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Funds.
7. The Custodian shall promptly deliver to each
respective Trust all notices, proxy material and executed
but unvoted proxies pertaining to shareholder meetings of
Securities held by the Funds. The Custodian shall not vote
or authorize the voting of any Securities or give any
consent, waiver or approval with respect thereto unless so
directed by a Certificate or Written Instruction.
8. The Custodian shall promptly deliver to the Trusts
all material and notices received by the Custodian and
pertaining to Securities held by the Funds with respect to
tender or exchange offers, calls for redemption or purchase,
expiration of rights, <PAGE>name changes, stock splits and stock
dividends, or any other activity involving ownership rights
in such Securities.
9. The Custodian shall conduct such periodic physical
inspection of Securities held by it under this Agreement as
it deems advisable to verify the accuracy of its inventory.
The Custodian shall promptly report to the Trusts any
discrepancies or shortages revealed by such inspections and
shall make every effort promptly to remedy such
discrepancies or shortages.
Article V
Purchase and Sale of Investments of the Funds
1. Promptly after each purchase of Securities by the
Funds, the respective Trust shall deliver to the Custodian
(i) with respect to each purchase of Securities which are
not Money Market Securities, a Certificate or Written
Instructions, and (ii) with respect to each purchase of
Money Market Securities, Written Instructions, a Certificate
or Oral Instructions, specifying with respect to each such
purchase: (a) the name of the issuer and the title of the
Securities, (b) the principal amount purchased and accrued
interest, if any, (c) the date of purchase and settlement,
(d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person
from whom or the broker through whom the purchase was made.
The Custodian shall upon receipt of Securities purchased by
or for the Funds, pay out of the monies held for the account
of the Funds the total amount payable to the person from
whom or the broker through whom the purchase was made,
provided that the same <PAGE>conforms to the total amount
payable as set forth in such Certificate, Written
Instructions or Oral Instructions.
2. Promptly after each sale of Securities by the
respective Trust for the account of the Funds, such Trust shall
deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate
or Written Instructions, and (ii) with respect to each sale of
Money Market Securities, Written Instructions, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a)
the name of the issuer and the title of the Security, (b) the
principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount
payable to the Funds upon such sale and (f) the name of the
broker through whom or the person to whom the sale was made. The
Custodian shall deliver the Securities upon receipt of the total
amount payable to the Funds upon such sale, provided that the
same conforms to the total amount payable as set forth in such
Certificate, Written Instructions or Oral Instructions. Subject
to the foregoing, the Custodian may accept payment in such form
as shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing
among dealers in Securities.
3. Promptly after the time as of which a Trust, on behalf
of a Fund, either -
(a) writes an option on Securities or writes a covered put
option in respect of a Security, or
<PAGE>
(b) notifies the Custodian that its obligations in respect
of any put or call option, as described in such Trust's
Prospectus, require that the Fund deposit Securities or
additional Securities with the Custodian, specifying the type and
value of Securities required to be so deposited, or
(c) notifies the Custodian that its obligations in respect
of any other Security, as described in each Fund's respective
Prospectus, require that the Fund deposit Securities or
additional Securities with the Custodian, specifying the type and
value of Securities required to be so deposited, the Custodian
will cause to be segregated or identified as deposited, pursuant
to the Fund's obligations as set forth in such Prospectus,
Securities of such kinds and having such aggregate values as are
required to meet the Fund's obligations in respect thereof.
The Trust will provide to the Custodian, as of the end of
each trading day, the market value of each Fund's option
liability, if any, and the market value of its portfolio of
common stocks.
4. On contractual settlement date, the account of each
respective Fund will be charged for all purchases settling on
that day, regardless of whether or not delivery is made. On
contractual settlement date, sale proceeds will likewise be
credited to the account of such Fund irrespective of delivery.
In the case of "sale fails", the Custodian may request the
assistance of the Trusts in making delivery of the failed
Security.
<PAGE>
Article VI
Payment of Dividends or Distributions
1. Each Trust shall furnish to the Custodian Written
Instructions to release or otherwise apply cash insofar as
available for the payment of dividends or other distributions to
Fund shareholders entitled to payment as determined by the
Dividend and Transfer Agent of the Funds. The Custodian may rely
on any such Written Instructions so received, and shall be
indemnified by the Trust providing such instructions for such
reliance.
2. Upon the payment date specified in such Written
Instructions, the Custodian shall arrange for such payments to be
made by the Dividend and Transfer Agent out of monies held for
the accounts of the Funds.
Article VII
Sale and Redemption of Shares of the Funds
1. The Custodian shall receive and credit to the account
of each Fund such payments for shares of such Fund issued or sold
from time to time as are received from the distributor for the
Fund's shares, from the Dividend and Transfer Agent of the Fund,
or from the Trust.
2. Upon receipt of Written Instructions, the Custodian
shall arrange for payment of redemption proceeds to be made by
the Dividend and Transfer Agent out of the monies held for the
account of the respective Funds in the total amount specified in
the Written Instructions.
<PAGE>
3. Notwithstanding the above provisions regarding the
redemption of any shares of the Funds, whenever shares of the
Funds are redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Funds, the
Custodian, unless otherwise subsequently instructed by Written
Instructions shall, upon receipt of any Written Instructions
setting forth that the redemption is in good form for redemption
in accordance with the check redemption procedure, or pursuant to
preauthorized Written Instructions or procedures established with
regard thereto, honor the check presented as part of such check
redemption privilege out of the money held in the account of the
Funds for such purposes.
Article VIII
Indebtedness
In connection with any borrowings, each Trust, on behalf of
its respective Funds, will cause to be delivered to the Custodian
by a bank or broker (including the Custodian, if the borrowing is
from the Custodian), requiring Securities as collateral for such
borrowings, a notice or undertaking in the form currently
employed by any such bank or broker setting forth the amount
which such bank or broker will loan to the Funds against delivery
of a stated amount of collateral. Each Trust shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the name of the bank or broker, (b) the
amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly
endorsed by the Trust, acting on behalf of a Fund, or other loan
<PAGE>
agreement, (c) the date and time, if known, on which the loan is
to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Fund on the
borrowing date, (f) the market value of Securities
collateralizing the loan, including the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities and (g) a statement that such loan is in
conformance with the Investment Company Act of 1940 and the
Fund's then current Prospectus. The Custodian shall deliver on
the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank or broker of the total amount of the
loan payable provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank or broker, keep such collateral in
its possession, but such collateral shall be subject to all
rights therein given the lending bank or broker, by virtue of any
promissory note or loan agreement. The Custodian shall deliver in
the manner directed by the Trust from time to time such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in
this paragraph. Such Trust shall cause all Securities released
from collateral status to be returned directly to the Custodian
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that a Trust
fails to specify in a Certificate the name of the issuer, the
title and number of shares or the principal amount of any
<PAGE>
particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities. The Custodian may require such reasonable
conditions with respect to such collateral and its dealings with
third-party lenders as it may deem appropriate.
Article IX
Concerning the Custodian
1. Except as otherwise provided herein, the Custodian
shall not be liable for any loss or damage, including counsel
fees, resulting from its action or omission to act or otherwise,
except for any such loss or damage arising out of its own
negligence or willful misconduct. Each Trust, on behalf of its
Funds and only from applicable Fund Assets (or insurance
purchased by a Trust with respect to its liabilities on behalf of
its Funds hereunder), shall defend, indemnify and hold
harmless the Custodian, its officers, employees and agents,
with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to
arise from or relating to each Trust's duties with respect
to its Funds hereunder or any other action or inaction of
the respective Trust or its Trustees, Officers, employees or
agents as to the Funds, except such as may arise from the
negligent action, omission or willful misconduct of the
Custodian, its officers, employees or agents. The Custodian
shall defend, indemnify and hold harmless each Trust and its
Trustees, Officers, employees or agents with respect to any
loss, claim, liability or cost (including reasonable
attorneys' fees) arising or alleged to arise from or relating to
<PAGE>
the Custodian's duties with respect to the Funds hereunder
or any other action or inaction of the Custodian or its
Trustees, Officers, employees, agents, nominees or Sub-
Custodians as to the Funds, except such as may arise from
the negligent action, omission or willful misconduct of the
Trust, its Trustees, Officers, employees or agents. The
Custodian may, with respect to questions of law apply for
and obtain the advice and opinion of counsel to the Trusts
at the expense of the Funds, or of its own counsel at its
own expense, and shall be fully protected with respect to
anything done or omitted by it in good faith in conformity
with the advice or opinion of counsel to the Trusts, and
shall be similarly protected with respect to anything done
or omitted by it in good faith in conformity with the advice
or opinion of its counsel, unless counsel to the Funds
shall, within a reasonable time after being notified of
legal advice received by the Custodian, have a differing
interpretation of such question of law. The Custodian shall
be liable to the Trusts for any proximate loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance
or misconduct on the part of the Custodian or any of its
employees, agents, nominees or Sub-Custodians but not for
any special, incidental, consequential, or punitive damages;
provided, however, that nothing contained herein shall
preclude recovery by a Trust, on behalf of its Funds, of
principal and of interest to the date of recovery on,
Securities incorrectly omitted from or included in a Fund's
<PAGE>
accounts or penalties imposed on the Trusts, in connection
with the Funds, therefrom or for any failures to deliver
Securities.
In any case in which one party hereto may be asked to indemnify the other
or hold the other harmless, the party from
whom indemnification is sought (the "Indemnifying Party") shall
be advised of all pertinent facts concerning the situation in
question, and the party claiming a right to indemnification (the
"Indemnified Party") will use reasonable care to identify and
notify the Indemnifying Party promptly concerning any situation
which presents or appears to present a claim for indemnification
against
the Indemnifying Party. The Indemnifying Party shall have
the option to defend the Indemnified Party against any claim
which may be the subject of the indemnification, and in the event
the Indemnifying Party so elects, such defense shall be conducted
by counsel chosen by the Indemnifying Party and satisfactory to
the Indemnified Party and the Indemnifying Party will so notify
the Indemnified Party and thereupon such Indemnifying Party shall
take over the complete defense of the claim and the Indemnifying
Party shall sustain no further legal or other expenses in such
situation for which indemnification has been sought under this
paragraph, except the expenses of any additional counsel retained
by the Indemnified Party. In no case shall any party claiming the
right to indemnification confess any claim or make any compromise
in any case in which the other party has been asked to indemnify
such party (unless such confession or compromise is made with such
other party's prior written consent).
<PAGE>
The Custodian acknowledges the limitation of liability
provisions of Article XI of each Trust's Declaration of Trust and
agrees that the obligations and liabilities of each Trust under
this Agreement shall be limited by and to the extent of the Trust
and its assets and that the Custodian shall not be entitled to
seek satisfaction of any such obligation or liability from the
Trusts' shareholders, Trustees, Officers, employees or agents.
The obligations of the parties hereto under this
paragraph shall survive the termination of this Agreement.
2. Without limiting the generality of the foregoing,
the Custodian, acting in the capacity of Custodian
hereunder, shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities purchased
by or for the account of the Funds, the legality of the
purchase
thereof, or the propriety of the amount paid therefor;
(b) The legality of the sale of any Securities by or for
the account of the Funds, or the propriety of the amount for
which the same are sold;
(c) The legality of the issue or sale of any shares of the
Funds, or the sufficiency of the amount to be received
therefor;
(d) The legality of the redemption of any shares of the
Funds, or the propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any
dividend by the Trust in respect of shares of the Funds;
(f) The legality of any borrowing by the Trust, on behalf
of the Funds, using Securities as collateral;
<PAGE>
(g) The sufficiency of any deposit made pursuant to a
Certificate described in clause (ii) of paragraph 2(e) of
Article IV hereof.
3. The Custodian shall not be liable for any money or
collected funds in U.S. dollars deposited in a Federal
Reserve Bank other than the Custodian in accordance with a
Certificate described in clause (ii) of paragraph 2(e) of
Article IV hereof, nor be liable for or considered to be the
Custodian of any money, whether or not represented by any
check, draft, or other instrument for the payment of money,
received by it on behalf of the Funds until the Custodian
actually receives and collects such money directly or by the
final crediting of the account representing the Funds'
interest at the Book-Entry System or Depository.
4. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount
due to the Funds from the Dividend and Transfer Agent of the
Funds nor to take any action to effect payment or
distribution by the Dividend and Transfer Agent of the Funds
of any amount paid by the Custodian to the Dividend and
Transfer Agent of the Funds in accordance with this
Agreement.
5. Income due or payable to the Funds with respect to
Funds Assets will be credited to the account of the Funds as
follows:
(a) Dividends will be credited on the first business day
following payable date irrespective of collection.
<PAGE>
(b) Interest on fixed rate municipal bonds and debt
securities issued or guaranteed as to principal and/or
interest by the government of the United States or agencies
or instrumentalities thereof (excluding securities issued by
the Government National Mortgage Association) will be
credited on payable date irrespective of collection.
(c) Interest on fixed rate corporate debt securities will
be credited on the first business day following payable date
irrespective of collection.
(d) Interest on variable and floating rate debt securities
and debt securities issued by the Government National
Mortgage Association will be credited upon the Custodian's
receipt of funds.
(e) Proceeds from options will be credited upon the
Custodian's receipt of funds.
6. Notwithstanding paragraph 5 of this Article IX, the
Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities
upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction
of reimbursement of its costs and expenses in connection
with any such action or, at the Custodian's option,
prepayment.
7. The Custodian may appoint one or more financial or
banking institutions, as Depository or Depositories or as Sub-
Custodian or Sub-Custodians, including, but not limited to,
<PAGE>
banking institutions located in foreign countries, of
Securities and monies at any time owned by the Funds, upon
terms and conditions approved in a Certificate. Current
Depository(s) and Sub-Custodian(s) are noted in Appendix B.
The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the
appointment or activities of such Depositories or Sub-
Custodians.
8. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time
delivered to or held by it for the account of the Funds are
such as properly may be held by the Funds under the
provisions of the Declarations of Trust and the Trusts' By-
Laws.
9. The Custodian shall treat all records and other
information relating to the Trusts, the Funds and the Funds'
Assets as confidential and shall not disclose any such
records or information to any other person unless (a) the
respective Trust shall have consented thereto in writing or
(b) such disclosure is compelled by law.
10. The Custodian shall be entitled to receive and the
Trusts agree to pay to the Custodian such compensation as shall
be determined pursuant to Appendix C attached hereto, or as shall
be determined pursuant to amendments to such Appendix approved by
the Custodian and the Trust, on behalf of the Funds. The
Custodian shall be entitled to charge against any money held by
it for the account of the Funds the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this
<PAGE>
Agreement as determined by agreement of the Custodian and
the applicable Trust or by the final order of any court or
arbitrator having jurisdiction and as to which all rights of
appeal shall have expired. The expenses which the Custodian
may charge against the accounts of the Funds include, but
are not limited to, the expenses of Sub-Custodians incurred
in settling transactions involving the purchase and sale of
Securities of the Funds.
Notwithstanding the above, to the extent such compensation
and expenses of the Custodian are paid to the Custodian by the
Adviser pursuant to the services agreements between the Trusts
and the Adviser, no charges shall be made against the accounts of
the Funds by the Custodian.
11. The Custodian shall be entitled to rely upon any
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or V hereof. Each Trust
agrees to forward to the Custodian Written Instructions from
Authorized Persons confirming Oral Instructions in such manner so
that such Written Instructions are received by the Custodian,
whether by hand delivery, telex or otherwise, on the first
business day following the day on which such Oral Instructions
are given to the Custodian. Each Trust agrees that the fact that
such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Trust. Each Trust agrees that the Custodian shall incur no
<PAGE>
liability to the Funds in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions.
12. The Custodian will (a) set up and maintain proper
books of account and complete records of all transactions in
the accounts maintained by the Custodian hereunder in such
manner as will meet the obligations of the Funds under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31 a-1 and 31 a-2 thereunder,
and (b) preserve for the periods prescribed by applicable
Federal statute or regulation all records required to be so
preserved. The books and records of the Custodian shall be
open to inspection and audit at reasonable times and with
prior notice by officers and auditors employed by the
Trusts.
13. The Custodian and its Sub-Custodians shall
promptly send to the Trusts, for the account of the Funds,
any report received on the systems of internal accounting
control of the Book-Entry System or the Depository and with
such reports on their own systems of internal accounting
control as the Trusts may reasonably request from time to
time.
14. The Custodian performs only the services of a
custodian and shall have no responsibility for the
management, investment or reinvestment of the Securities
from time to time owned by the Funds. The Custodian is not a
selling agent for shares of the Funds and performance of its
duties as a custodial agent shall not be deemed to be a
recommendation to the Custodian's depositors or others of
shares of the Funds as an investment.
<PAGE>
Article X
Termination
1. The Custodian or any of the Trusts may terminate this
Agreement for any reason by giving to the other party a notice in
writing specifying the date of such termination, which shall be
not less than ninety (90) days after the date of giving of such
notice. If such notice is given by any Trust, on behalf of any of
its Funds, it shall state in writing that the Trust is electing
to terminate this Agreement and shall designate a successor
custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. In the event such notice is given
by the Custodian, the Trusts shall, on or before the termination
date, deliver to the Custodian a copy of a resolution of their
Board of Trustees, certified by the Secretary or Assistant
Secretary, designating a successor custodian or custodians to act
on behalf of the Funds. In the absence of such designation by the
Trusts, the Custodian may designate a successor custodian which
shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus, and undivided profits. Upon the date
set forth in such notice this Agreement shall terminate, and the
Custodian, provided that it has received a notice of acceptance
by the successor custodian, shall deliver, on that date, directly
to the successor custodian all Securities and monies then owned
by the Funds and held by it as Custodian. Upon termination of
this Agreement, the Trusts shall pay to the Custodian on behalf
of the Funds such compensation as may be due as of the date of
<PAGE>
such termination. The Trusts agree on behalf of the Funds that
the Custodian shall be reimbursed for its reasonable costs in
connection with the termination of this Agreement.
2. If a successor custodian is not designated by the
Trusts, on behalf of the Funds, or by the Custodian in accordance
with the preceding paragraph, or the designated successor cannot
or will not serve, each Trust shall upon the delivery by the
Custodian to each Trust of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the
Trust) and monies then owned by its Funds, other than monies
deposited with a Federal Reserve Bank pursuant to a Certificate
described in clause (ii) of paragraph 2(e) of Article IV, be
deemed to be the custodian for its Funds, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant
to this Agreement, other than the duty with respect to Securities
held in the Book-Entry System which cannot be delivered to the
Trust to hold such Securities hereunder in accordance with this
Agreement.
Article XI
Miscellaneous
1. Appendix A sets forth the names and the signatures of
all Authorized Persons. Each Trust agrees to furnish to the
Custodian, on behalf of its Funds, a new Appendix A in form
similar to the attached Appendix A, if any present Authorized
Person ceases to be an Authorized Person or if any other or
additional Authorized Persons are elected or appointed. Until
such new Appendix A shall be received, the Custodian shall be
<PAGE>
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered Appendix A.
2. No recourse under any obligation of this Agreement or
for any claim based thereon shall be had against any organizer,
shareholder, Officer, Trustee, past, present or future as such,
of the Trusts or of any predecessor or successor, either directly
or through the Trusts or any such predecessor or successor,
whether by virtue of any constitution, statute or rule of law or
equity, or by the enforcement of any assessment or penalty or
otherwise; it being expressly agreed and understood that this
Agreement and the obligations thereunder are enforceable solely
against Fund Assets, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the organizers,
shareholders, Officers, Trustees of the Trusts or of any
predecessor or successor, or any of them as such, because of the
obligations contained in this Agreement or implied therefrom and
that any and all such liability is hereby expressly waived and
released by the Custodian as a condition of, and as a
consideration for, the execution of this Agreement.
3. The obligations set forth in this Agreement as having
been made by the Trusts have been made by each Trust for and on
behalf of its Funds, pursuant to the authority vested in the
Trusts under the laws of the Commonwealth of Massachusetts, the
Declarations of Trust and the By-Laws of the Trusts. This
Agreement has been executed by Officers of the Trusts as
officers, and not individually, and the obligations contained
<PAGE>
herein are not binding upon any of the Trustees, Officers, Agents
or holders of shares, personally, but bind only the Trusts and
then only to the extent of the respective Trust's Fund Assets.
4. Such provisions of the Prospectuses of the Funds and any
other documents (including advertising material) specifically
mentioning the Custodian (other than merely by name and address)
shall be reviewed with the Custodian by the Trust.
5. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at Star Bank Center, 425 Walnut
Street, M. L. 5127, Cincinnati, Ohio 45202, attention Mutual
Funds Custody Department, or at such other place as the Custodian
may from time to time designate in writing.
6. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to any Trust shall be
sufficiently given if addressed to the Trust and mailed or
delivered to it at its office at 1655 Fort Myer Drive, 10th
Floor, Arlington, Virginia 22209, or at such other place as the
Trusts may from time to time designate in writing.
7. This Agreement with the exception of Appendices A & B
may not be amended or modified in any manner except by a written
agreement executed by all parties provided that no amendment
shall be in contravention of or inconsistent with any federal or
state law or regulation or the Declarations of Trust or By-Laws
of the Trusts.
<PAGE>
8. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Trusts or by the Custodian, and no attempted assignment by
the Trusts or the Custodian shall be effective without the
written consent of the other party hereto.
9. This Agreement shall be construed in accordance with the
laws of the State of Ohio.
10. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
11. Where applicable and required based upon the context
used, the singular of any term used in this Agreement shall
include the plural and the plural may refer to the singular.
In Witness Whereof, the parties hereto have caused this Agreement
to be executed by their respective Officers, thereunto duly
authorized as of the day and year first above written.
Attest: Government Investors Trust
GIT Equity Trust, GIT Income
Trust and GIT Tax-Free Trust
(signature) (signature)
W. Richard Mason By: C.J. Tennes
Attest: Star Bank, N.A.
(signature) (signature)
Stephen J. Black By: Lynette C. Gibson
Senior Trust Officer
<PAGE>
Appendix A
Authorized Persons Specimen Signatures
Fund Officers:
Charles J. Tennes (signature)
W. Richard Mason (signature)
Adviser Employees:
Julia Mailliard (signature)
John Edwards* (signature)
Jason L. Michel* (signature)
T. Daniel Gillespie* (signature)
See Signature Cards for Additional Adviser Employees Authorized To
Sign Checks on Fund Accounts
* Denotes authority restricted to securities trades.
Amendment Dated: February 13, 1995
<PAGE>
Appendix B
The following Depository(s) and Sub-Custodian(s) are employed
currently by Star Bank, N.A. for securities processing and control
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
<PAGE>
Schedule C
Star Bank, N.A. as Custodian, will receive monthly compensation
for services according to the terms of the following Schedule:
I. Portfolio Transaction Fees:
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $10.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security purchase$40.00
(e) For each GNMA/Prin/Int Paydown, GNMA
Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $100.00
(h) For each Disbursement (Fund expenses only)$5.00
A transaction is a purchase/sale of a security, free receipt/
free delivery (excludes initial conversion), maturity, tender
or exchange:
II. Monthly Market Value Fee
Based upon Month-end at a rate of: Million
.0002 (2 Basis Points) on First $50
.0001 (1 Basis Points) on Next $25
.000075 (3/4 Basis Point) on Balance
III. Out-of-Pocket Expenses
The only out-of-pocket expenses charged to your account
will be shipping fees or transfer fees.
IV. IRA Documents
Per Shareholder/year to hold each IRA Document $8.00
V. Earnings Credits
On a monthly basis any earnings credits generated from univested
custody balances will be first applied against any cash management
service fees and then to custody transaction fees (as referenced
in item #1 above). Earnings credits are based on the average yield
on the 91 day U.S. Treasury Bill for the preceding thirteen weeks
less the 10% reserve.
<PAGE>
Amendment To Agreement
This Amendment is made effective the 15th day of November,
1993 to the Custody Agreement made as of September 8, 1993
by and between Government Investors Trust, GIT Equity Trust,
GIT Income Trust and GIT Tax-Free Trust (the "Trust") and
Star Bank, N.A. (the "Custodian") to provide custodian
services to the Funds.
The Trusts and the Custodian agree to amend the Agreement as
follows:
1. This sentence shall be added to the first paragraph:
Custodian agrees to retain custody of U.S. Government
Securities and securities issued and sold primarily in the
United States. Pursuant to Paragraph 7 of Article IX of
this Agreement, Custodian hereby appoints Bankers Trust
Company as Sub-Custodian to retain custody of foreign
securities in accordance with the terms and conditions of
the Agreement dated as November 15, 1993 between Bankers
Trust Company and Star Bank, N.A. attached hereto as
Appendix D (the "Sub-Custodian Agreement"). The Trust
hereby acknowledges such appointment and expressly agrees to
the terms and conditions set forth in the Sub-Custodian
Agreement.
2. A new Paragraph 12 shall be added to Article I,
Definitions as follows.
"Foreign Securities" include securities issued and sold
primarily outside of the United States by a foreign
government, a national of any foreign country or a
corporation or other organization incorporated or organized
under the laws of any foreign country and securities issued
or guaranteed by the Government of the United States or by
any state or any political subdivision thereof or by any
agency thereof by any entity organized under the laws of the
United States or of any state thereof which have been issued
and sold primarily outside the United States.
In Witness Whereof, the parties hereby ratify and affirm the
Agreement in its entirety as amended by this Amendment.
Attest:
(signature) W. Richard Mason
Government Investors Trust,
GIT Equity Trust, GIT Income Trust
and GIT Tax-Free Trust
By: (signature) C. J. Tennes
Attest:
(signature) Stephen J Blackwell, Trust Officer
Star Bank, N.A.
By: (signature) Lynnette C. Gibson, Senior Trust Officer
<PAGE>
Appendix D
Custodian Agreement
Agreement dated as of 11/15, 1993, between Bankers Trust
Company (the "Custodian") and Star Bank, N.A. (the
"Customer"). Customer represents and Custodian acknowledges
that it is entering into this Agreement solely as Custodian
of GIT Equity Trust Worldwide Growth Portfolio, (the
"Portfolio"), its client, with whom Customer has a Custody
Agreement, and, Portfolio is a third party beneficiary of
this Agreement between Customer and Custodian.
1. Employment of Custodian. The Customer hereby employs
the Custodian as custodian of all assets of the Customer
which are delivered to and accepted by the Custodian or any
of its subcustodians (as that term is defined in Section 5)
anywhere in the world (the "Property") pursuant to the terms
and conditions set fort herein. Without limitation, such
Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments
representing same or rights or obligations to received,
purchase, deliver or sell same and other non-cash investment
property of the Customer ("Securities") and cash from
whatever source and in whatever currency ("Cash"). The
Custodian shall not be responsible for any property of the
Customer held or received by the Customer or others and not
delivered to the Custodian or any of its subcustodian.
2. Custody Account. The Custodian agrees to establish and
maintain a custody account in the name of the Customer (the
"Account") for any and all Property from time received and
accepted by the Custodian or nay of its subcustodians for
the account of the Customer. The Customer acknowledges its
responsibility as a principal for all of its obligations to
the Custodian arising under or in connection with this
Agreement, notwithstanding that it may be acting on behalf
of Portfolio and warrants its authority to deposit in the
Account and Property received therefor by the Custodian
shall not be subject to, nor shall its rights and
obligations under this Agreement or with respect to the
Account be affected by, any agreement between the Customer
and other person.
The Custodian shall hold, keep safe and protect as custodian
in the Account, on behalf of the Customer, all Property.
All transactions, including, but not limited to, foreign
exchange transactions, involving the Property shall be
executed or settled solely in accordance with Instructions
(as that term is defied in Section 10), except that until
the Custodian receives Instructions to the contrary, the
Custodian will:
(a) collect all interest and dividends and all other income
payments whether paid in cash or in kind, on the Property,
as the same become payable and credit the same to the
Account;
(b) present for payment all Securities held in the Account
which are called, redeemed or retired or otherwise become
payable and all coupons and other income items which call
for payment upon presentation and hold the cash received in
the Account pursuant to this Agreement;
<PAGE>
(c) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves);
(d) whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock
dividend or stock split is received for the Account and such
rights entitlement or fractional interest bears and
expiration date, if after endeavoring to obtain the
Custodian's Instructions such Instructions are not received
in time for the Custodian to take timely action, sell in the
discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or
fractional interest and credit the Account with the net
proceeds of such sale;
(e) executed in the Customer's name for the Account,
whenever the Custodian deems it appropriate, such ownership
and other certificates as may be required to obtain the
payment of income from the Property; and
(f) pay for the Account, any and all taxes and levies in the
nature of taxes imposed on income on the Property by any
governmental authority. In the event there is insufficient
Cash available in the Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in the Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with
the payment of any such taxes to cooperate with the
Custodian in furnishing information, executing documents or
otherwise.
The Custodian shall deliver, subject to Section 12 below,
and all Property in the Account in accordance with
instructions and in connection therewith, the Customer will
accept delivery of Securities of the same class and
denomination in place of those contained in the Account.
Neither the Custodian nor any subcustodian shall have any
duty or responsibility to see to the application of any
Property withdrawn from the Account upon Instructions.
Except as otherwise may be agreed upon by the parties
hereto, the Custodian shall not be required to comply with
any Instructions to settle the purchase of any Securities
for the Account unless there is sufficient Cash in the
Account at the time or to settle the sale of any Securities
form the Account unless such Securities are in deliverable
form. Notwithstanding the foregoing, if the purchase price
of such Securities exceeds the amount of Cash in the Account
at the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any
such advance shall be deemed a loan from the Custodian to
the Customer payable on demand and bearing interest accruing
from the date such loan is made to but not including the
date such loan is repaid at a rate per annum customarily
charged by the Custodian on similar loans.
3. Records, Ownership of Property and Statements. The
ownership of the Property whether Securities, Cash and/or
other property, and whether held by the Custodian or a
subcustodian or in a securities depository or clearing
agency as hereinafter authorized, shall be clearly recorded
on the
<PAGE>
Custodian's books as belonging to the Account and not for
the Custodian's own interest. The Custodian shall keep
accurate and detailed accounts of all investments, receipts,
disbursements and other transactions for the Account. All
account, books and records of the Custodian relating thereto
shall be open to inspection and audit at all reasonable
times during normal business hours by any person designated
by the Customer. The Custodian will supply to the Customer
from time to time, as mutually agreed upon, a statement in
respect to any Property in the Account held by the Custodian
or by a subcustodian. In the absence of the filing in
writing with the Custodian by the Customer of exceptions or
objections to any such statement within sixty (60) days of
the mailing thereof, the Customer shall be deemed to have
approved such statement; and in such case or upon written
approval of the Customer of any such statement, the
Custodian shall, to the extent permitted by law, be
released, relieved and discharged with respect to all
matters and things set forth in such statement as though
such statement had been settled by the decree of a court of
competent jurisdiction in any action in which the Customer
and all persons having any equity interest in the Customer
were parties.
4. Maintenance of Property Outside of the United States.
Property in the Account may be held in a country or other
jurisdiction outside of the United States; provided that (a)
with respect to Securities, such country or other
jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or
other jurisdiction in which such Securities are to be
presented for payment or acquired for the Account and (b)
with respect to cash, the amount thereof to be maintained in
any country or other jurisdiction shall be an amount which
is deemed necessary to settle transactions relating to
Securities purchased for the Account in such country or
jurisdiction or which is received in connection with the
holding of such Securities in the Account.
5 Subcustodians and Securities Depositories. The Custodian
may employ, directly or in directly, one or more
subcustodians to assist in the performance of its
obligations hereunder; provided however, that the employment
of any such subcustodians (other than any such subcustodian
which is a securities depository or clearing agency) the
Custodian shall only be responsible or liable for loses
arising from such employment caused by the Custodian's own
failure to exercise reasonable care.
The Customer authorizes and instructs the Custodian to hold
the Property in the Account in custody accounts which have
been established by the Custodian with one of its branches,
a branch of another U.S. bank, a foreign bank or trust
company acting as custodian or a securities depository in
which the Custodian participants. Hereinafter, the term
"subcustodian" will refer to any third-party agent referred
to in the first sentence of this paragraph which has entered
into an agreement with the Custodian of the type
contemplated hereunder regarding Securities and/or Cash held
in or to be acquired for the Account. In addition the
Customer also authorizes the Custodian to authorize any
subcustodian to hold the Property in the Account in one or
more accounts with securities depositories or clearing
agencies in which such subcustodian participates subject to
the provisions set forth below. The Custodian shall select
in its sole discretion the entity or entities in the custody
of which any of the Securities may be so maintained or with
which any Cash may be so deposited. Furthermore, any entity
so selected in authorized to hold such Securities or Cash in
its account with any securities depository or clearing
agency in which it participates.
6. Use of Subcustodian. With respect to Securities in the
Account which are maintained by the Custodian in the custody
of a subcustodian pursuant to Section 5,
<PAGE>
(a) The Custodian will identify on its books as belonging to
the Customer any Securities held by such subcustodian.
(b) In the event that a subcustodian permits any of the
Securities placed in its care to be held in a securities
depository or clearing agency, such subcustodian will be
required by its agreement with the Custodian to identify on
its books such Securities as being held for the account of
the Custodian for its customers.
(c) Any Securities in the Account held by a subcustodian
will be subject only to the instructions of the Custodian or
its agents unless specifically otherwise authorized by the
Custodian on an exception basis; and any Securities held in
a securities depository or clearing agency for the account
of the Custodian or a subcustodian will be subject only to
the instructions of the Custodian or such subcustodian, as
the case may be.
(d) Securities deposited with a subcustodian will be
maintained in an account holding only assets for customers
of the Custodian
(e) Any agreement the Custodian shall enter into with a
subcustodian with respect to the holding of securities shall
require that (i) the Securities are not subject to any
right, charge, security interest lien or claim of any kind
in favor of such subcustodian except a claim for payment in
accordance with such agreement for their safe custody or
administration and expenses related thereto and (ii)
beneficial ownership of such Securities be freely
transferable without the payment of money or value other
than for safe custody or administration and expenses related
thereto.
(f) Upon request by the Customer, the Custodian will
identify the name, address and principal place of business
of any subcustodian and the name and address of the
governmental agency or other regulatory authority that
supervises or regulates such subcustodian.
7. Holding of Securities, Nominees, etc. Securities in the
Account which are held by the Custodian or any subcustodian
may be held by such entity in the name of the Customer, in
its own name, in the name of its nominee or in bearer form.
Securities which are held with a subcustodian or are
eligible for deposit in a securities depository as provided
above may be maintained with the subcustodian or depository,
as the case may be, in an account for the Custodian's or
subcustodian's customers. The Custodian or subcustodian, as
the case may be, may combine certificates of the same issue
held by it as fiduciary or as a custodian. In the event
that any Securities in the name of the Custodian or its
nominee or held by one of its subcustodians and registered
in the name of such subcustodian or its nominee are called
for partial redemption by the issuer or such Security, the
Custodian may, subject to the rules or regulations
pertaining to allocation of any securities depository in
which such Securities have been deposited, allot, or cause
to allotted, the called portion to the respective beneficial
holders of such class of security in any manner the
Custodian deems to fair and equitable.
<PAGE>
8. Proxies, etc. With respect to any proxies, notices,
reports other communications relative to any of the
Securities in the Account, the Custodian shall perform such
services relative thereto as may be agreed upon between the
Custodian and the Customer. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of
the Securities in the Account, execute any form of proxy to
vote thereon, or give any consent or take any action (except
as provided in Section 2) with respect the thereto except
upon the receipt of Instructions from the Customer relative
thereto.
9. Settlement Procedures Settlement and payment for
Securities received for the Account and delivery of
Securities maintained for the Account may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the
purchase thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such Securities
from such purchaser or dealer, and in accordance with the
standard operating procedures of the Custodian in effect
from time to time for that jurisdiction or market.
10. Instructions. The term "Instruction" means instructions
from the Customer in respect of any of the Custodian's
duties hereunder which have been received by the Custodian
at its address set forth in Section 15 below in writing or
by tested telex signed or given by such one or more person
or persons as the Customer shall have from time to time
authorized to give the particular class of Instructions in
question and whose name ad (if applicable) signature and
office address have been filed with the Custodian, or upon
receipt of such other form of instructions as the Customer
may from time to time authorized in writing and which the
Custodian agrees to accept. The Custodian shall have the
right to assume in the absence of notice to the contrary
from the Customer that any person whose name is on file with
the Custodian pursuant to this Section 10 has been
authorized by the Customer to give the Instructions in
question and that such authorization has not been revoked.
11. Standard of Care. The Custodian shall be responsible
for the performance of only such duties as are set forth
herein or contained in Instructions given to he Custodian
which are not contrary to the provisions of this Agreement.
The Custodian will use reasonable care with respect to the
safekeeping of Securities in the Account and in carrying out
its obligations under the Agreement. So long as and to the
extent that it has exercised reasonable care, the Custodian
shall not be responsible for the title, validity or
genuineness of any Property or other property or evidence or
title thereto received by it or delivered by it pursuant to
this Agreement and shall be held harmless in acting upon,
and may conclusively rely on, without liability for any loss
resulting therefrom, any notice, request, consent,
certificate or other instrument reasonably believed by it to
be genuine and to be signed or furnished by the proper party
or parties, including, without limitation, Instructions, and
shall be indemnified by the Customer for any losses,
damages, costs and expenses (including, without limitation,
the fees and expenses of counsel) incurred by the Custodian
and arising out of action take or omitted in good faith by
the Custodian hereunder or under any Instructions. The
Custodian shall be liable to the Customer for any loss which
shall occur directly as the result of the failure of a
subcustodian (other than any subcustodian which is a
securities depository or clearing agency the actions or
omissions for which the Custodian's liability and
responsibility is set forth in the last proviso of the first
paragraph of Section 5) to exercise reasonable care with
respect to the safekeeping of such Securities. In the event
of any loss to the Customer by reason of the failure of the
Custodian or its subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent
of the Customer's actual damages at the time such loss was
discovered without reference to any special conditions or
circumstances. In no event shall the
<PAGE>
Custodian be liable for any consequential or special
damages. The Custodian shall be entitled to rely, and may
act, on advice of counsel (who may be counsel for the
Customer) on all matters and shall be without liability for
any action reasonably taken or omitted pursuant to such
advice.
All collections of funds or other property paid or
distributed in respect of Securities in the Account,
including funds involved in third-party foreign exchange
transactions, shall be made at the risk of the Customer.
The Custodian shall have no liability for any loss
accessioned by delay in the actual receipt of notice by the
Custodian or by its subcustodian of any payment, reception
or other transaction regarding Securities in the Accounting
respect of which the Custodian has agreed to take action as
provided in Section 2 hereof. The Custodian shall not be
liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de
jur or de facto), including, without limitation,
nationalization, expropriation, and the imposition of
currency restrictions; acts of war, terrorism, insurrection
or revolution; strikes or work stoppages; the inability of a
local clearing and settlement system to settle transactions
for reasons beyond the control of the Custodian; hurricane,
cyclone, earthquake, volcanic eruption, nuclear fusion,
radioactivity or other acts of God.
The provisions of this Section shall survive termination of
this Agreement.
12. Fees and Expenses. The Customer agrees to pay to the
Custodian such compensation for its services pursuant to
this Agreement as may be mutually agreed upon in writing
from time to time and the Custodian's out-of-pocket or
incidental expenses, including (but not limitation) legal
fees. The Customer hereby agrees to hold the Custodian
harmless from any liability or loss resulting from any taxes
or other governmental charges, and any expense related
thereto, which may be imposed, or assessed with respect to
any Property in the Account and also agrees to hold the
Custodian, its subcustodians, and their respective nominees
harmless from any liability as a record holder of Property
in the Account. The Custodian is authorized to charge any
account of the Customer for such items. The provisions of
this Section shall survive the termination of this
Agreement.
13. Amendment, Modifications, etc. No provisions of this
Agreement may amended, modified or waived except in writing
signed by the parties hereto.
14. Termination. This Agreement may be terminated by the
Customer or the Custodian by ninety (90) days' notice to the
other; provided that notice by the Customer shall specify
the names of the persons to who the Custodian shall deliver
the Securities in the Account and to whom the Cash in the
Account shall be paid. If notice of termination is given by
the Custodian, the Customer shall, within ninety (90) days
following the giving of such notice, deliver to the
Custodian a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities
in the Account and to whom the Cash in the Account shall be
paid. In either case, the Custodian will deliver such
Securities and Cash to the persons so specified, after
deducting therefrom any amounts which the Custodian
determines to be owed to it under Section 12. In addition,
the Custodian may in its discretion withhold from such
delivery such Cash and Securities as may be necessary to
settle transactions pending at the time of such delivery.
If within ninety (90) days following the giving of a notice
of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the
names of the persons to whom the Cash in the Account shall
be paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a ban or trust company doing
business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or may
continue to hold such Securities and Cash until a written
notice as aforesaid is delivered to the Custodian.
<PAGE>
15. Notices. Expect as otherwise provided in this Agreement,
all requests, demands or other communications between the
parties or notices in connection herewith (a) shall be in
writing, had delivered or sent by telex, telegram, facsimile
or cable, addressed, if to the Customer, its address set
forth on the signature page hereof and, if to the Custodian,
to c/o BTNY Services, Inc., 34 Exchange Place, Jersey City,
New Jersey 07302, Attention: Global Securities Services.
(Telex No. 420066 Area 19 Answerback: BANTRUS) (Facsimile
No.201-860-7290), or in either case such other address as
shall have been furnished to the receiving party pursuant to
the provisions hereof and (b) shall be deemed effective when
received, or, in the case of a telex, when sent to the
proper number and acknowledged by a proper answerback.
16. Security for Payment. To secure payment of all fees and
expenses payable to Custodian hereunder, including but not
limited to amounts payable pursuant to indemnification
provisions and to the last paragraph of Section 2, the
Customer hereby grants to Custodian a continuing security
interest in and right to setoff against the Account and all
Property held therein from time to time in the full amount
of such obligations; provided that, if the Account consists
of more than one portfolio and the obligations secured
pursuant to this Section 16 can be allocated to a specific
portfolio, such security interest and right of setoff will
be limited to any amounts owned hereunder, Custodian shall
be entitled to use available Cash in the Account or such
applicable portion thereof held for a specific portfolio, as
the case may be, and to dispose of Securities in the Account
or such applicable portion thereof as is necessary. In the
event Securities in the Account or such applicable portion
thereof are insufficient to discharge such obligations, the
Customer hereby grants Custodian a continuing security
interest in and right of setoff against the balance from
time to time in any non-custodian account of the Customer
(the "Pledged Balances"), and Custodian may, at any time or
from time to time at Custodian's sole option and without
notice appropriate and apply toward the payment of such
obligations, the Pledged Balances. If at any time Property
in the Account or such applicable portion thereof and the
Pledge Balances are insufficient to fully collateralize such
obligations, Customer shall provide to Custodian additional
collateral in form and amount satisfactory to Custodian and
shall grant to Custodian a continuing security interest in
and right of setoff against such collateral. In any such
case and without limiting the foregoing, Custodian shall be
entitled to take such other action(s) or exercise such other
options, powers and rights as Custodian now or hereafter has
a secured creditor under the New York Uniform Commercial
Code or any other applicable law.
17. Governing Law and Successors and Assigns. This
Agreement shall be governed by the law of the State of New
York and shall not be assignable by either party, but shall
bind the successors in interest of the Customer and
Custodian.
18. Publicity Customer shall furnish to Custodian at its
office referred to in Section 15, above, prior to any
distribution thereof, copies of any material prepared for
distribution to any persons who not parties hereto that
refer in any way Custodian. Customer shall not distribute
or permit the distribution of such materials if Custodian
reasonable objects in writing within ten (10) business days
(or such other time as may be mutually agreed) after receipt
thereof. The provisions of this Section shall survive the
termination of this Agreement.
19. Submission to Jurisdiction. To the extent, if any, to
which the Customer or any of its respective properties may
be deemed to have or hereafter to acquire immunity, on the
ground of sovereignty or otherwise, from any judicial
process or proceeding to enforce this Agreement or to collect
<PAGE>
amounts due hereunder (including, without limitation,
attachment proceedings prior to judgment or in aid of
execution) in any jurisdiction, the Customer hereby waives
such immunity and agrees not to claim the same. Any suit,
action or proceedings arising out of this Agreement may be
instituted in any State or Federal court sitting in the City
of New York, State of New York, United States of America,
and the Customer irrevocably submits to the non-exclusive
jurisdiction of any such court in any such suit, action or
proceeding and waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to
laying of venue of such suit, action or proceeding brought
in such a court and any claim that such suit, action or
proceeding brought in an inconvenient forum. The Customer
hereby irrevocably designates, appoints and empowers, as its
authorized agent to receive, for and on behalf of actions or
proceedings may be brought in any of the aforementioned
courts, and such service of process shall be deemed complete
upon the date of delivery thereof to such agent whether or
not such agent gives notice thereof to the Customer or upon
the earliest of any other date permitted by applicable law.
The Customer further irrevocably consents to the service of
process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by
certified air mail, postage prepaid, to the Customer at its
address set forth below or in any other manner permitted by
law, such service to become effective upon the earlier of
(i) the date fifteen (15) days after such mailing or (ii)
any earlier of date permitted by applicable law. The
Customer agrees that it will at all times continuously
maintain an agent to receive service of process in the City
and State of New York on behalf of itself and its properties
with respect to this Agreement and in the event that, for
any reason, the agent named above or its successor shall no
longer serve as agent of the Customer to receive service of
process in the City and State of New York on its behalf, the
Customer shall promptly appoint a successor to so serve and
shall advise the Custodian thereof.
20. Headings. The headings of the paragraphs hereof are
included for convenience of reference only and do not form a
part of this Agreement.
Star Bank, N.A.
By: (signature)
Title:
Address:
Bankers Trust Company
By: (signature)
Title: