As Filed with the
Commission on June 14, 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. 20 X
Registration Statement Under the Investment Company Act
of 1940 X
Amendment No. 22
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)
_____ on ________________ pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)(1)
_____ on __July 31, 1996_ 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, 1995 was filed on November 21,
1995.
<PAGE>
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Prospectus
July 31, 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/July 31, 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 Advisors, LLC.
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% 0.000% 0.625%
12b-1 Fees None None None
Other Expenses* 0.723% 1.308% 0.726%
Total Fund Operating
Expenses* 1.348% 1.308% 1.351%
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 $14 $13 $14
3 years $43 $42 $43
5 years $74 $72 $74
10 years $163 $158 $163
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* 0.606% 0.638% 0.369%**
Total Fund Operating
Expenses* 1.231% 1.263% 0.869%
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 $13 $9
3 years $39 $40 $28
5 years $68 $69 $48
10 years $149 $153 $107
*Reflects custodian fees paid indirectly.
**After expense reimbursements and cu.
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 0.677%, which would have
made its "Total Fund Operating Expenses" 1.177%.
The "Annual Fund Operating Expenses" shown for the
Maryland Portfolio was reduced because the Adviser
currently waives its management fees with regard to this Portfolio.
Had the Adviser not waived its management fee
of 0.625%, the total fund operating expenses would have been
1.93%. The Adviser may end this waiver in whole or in part
in the future.
The hypothetical example shown above is based on the
restated expense levels, annualized for the six-months
ended March 31, 1996, 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 six-months ended
March 31, 1996 is derived from the unaudited Semi-Annual
Report to Shareholders, incorporated by reference in
the Statement of Additional Information and available by
calling or writing the Trust. 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
also 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.
<TABLE>
<CAPTION>
Arizona Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990*
Net asset
value
beginning
of period $10.113 9.706 11.208 10.568 10.187 9.703 10.000
Net
investment
income $0.223 0.440 0.436 0.490 0.528 0.569 0.590
Net
realized &
unrealized
gains
(losses) on
securities $0.053 0.407 (1.102) 0.786 0.434 0.484 (0.297)
Total from
investment
operations $0.276 0.847 (0.666) 1.276 0.962 1.053 0.293
Distributions
from net
investment
income $(0.223)(0.440)(0.436)(0.490)(0.528)(0.569)(0.590)
Distributions
from capital
gains $ -- -- (0.400)(0.146)(0.053) -- --
Total
Distributions$(0.223)(0.440)(0.836)(0.636)(0.581)(0.569)(0.590)
Net asset
value end
of period $10.166 10.113 9.706 11.208 10.568 10.187 9.703
Total
Return 5.45%** 8.95% (6.20)%12.57% 9.74% 11.11% 3.25%**
Net assets
at end of
period
(thousands) $ 9,335 10,009 11,815 15,471 11,911 8,061 3,831
Ratio of
expenses to
average net
assets*** 1.35%**1.31% 1.29% 1.23% 1.15% 0.47% --
Net
investment
income to
average
net assets 4.34%**4.48% 4.23% 4.54% 5.14% 5.61% 6.59%**
Portfolio
turnover -- 24% 67% 63% 23% 57% 14%
* For the period from October 13, 1989
(inception) to September 30, 1990.
Maryland Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C>
1996 1995 1994 1993*
Net asset
value
beginning
of period $ 9.738 9.323 10.441 10.000
Net
investment
income $ 0.197 0.418 0.455 0.274
Net
realized &
unrealized
gains
(losses) on
securities $(0.012) 0.415 (1.102) 0.441
Total from
investment
operations $0.185 0.833 (0.647) 0.715
Distributions
from net
investment
income $(0.197)(0.418)(0.455)(0.274)
Distributions
from capital
gains $ -- -- (0.016) --
Total
Distributions$(0.197)(0.418)(0.471)(0.274)
Net asset
value end
of period $ 9.726 9.738 9.323 10.441
Total
Return 3.76%** 9.17% (6.33)%11.91%**
Net assets
at end of
period
(thousands) $2,747 2,880 3,083 3,377
Ratio of
expenses to
average net
assets*** 1.31%**0.87% 0.64% 0.20%**
Net
investment
income to
average
net assets 3.99%** 4.42% 4.60% 4.72%**
Portfolio
turnover 15% 9% 78% 35%
* For the period from February 10, 1993 (inception)
to September 30, 1993.
Missouri Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990*
Net asset
value
beginning
of period $10.113 9.728 11.173 10.468 10.117 9.684 10.000
Net
investment
income $0.217 0.436 0.437 0.494 0.514 0.585 0.580
Net
realized &
unrealized
gains
(losses) on
securities $0.078 0.405 (1.058) 0.726 0.377 0.433 (0.316)
Total from
investment
operations $0.295 0.841 (0.621) 1.220 0.891 1.018 0.264
Distributions
from net
investment
income $(0.217)(0.436)(0.437)(0.494)(0.514)(0.585)(0.580)
Distributions
from capital
gains $ -- -- (0.387)(0.021)(0.026) -- --
Total
Distributions$(0.217)(0.436)(0.824)(0.515)(0.540)(0.585)(0.580)
Net asset
value end
of period $10.211 10.133 9.728 11.173 10.468 10.117 9.684
Total
Return 5.80%** 8.87% (5.80)%11.98% 9.06% 10.80% 2.94%**
Net assets
at end of
period
(thousands) $11,331 11,394 11,490 14,001 11,023 7,227 4,079
Ratio of
expenses to
average net
assets*** 1.35%**1.31% 1.29% 1.23% 1.18% 0.45% --
Net
investment
income to
average
net assets 4.19%**4.43% 4.23% 4.59% 5.05% 5.85% 6.56%**
Portfolio
turnover 9% 16% 52% 65% 8% 33% 3%
* For the period from October 12, 1989 (inception)
to September 30, 1990.
Virginia Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988*
Net asset
value
beginning
of period $11.115 10.631 12.372 11.621 11.351 10.832 10.891 11.051 10.000
Net
investment
income $ 0.252 0.503 0.479 0.569 0.592 0.609 0.624 0.625 0.714
Net
realized &
unrealized
gains
(losses) on
securities $0.054 0.484 (1.146) 0.871 0.387 0.519 (0.059)(0.023) 1.051
Total from
investment
operations $0.306 0.987 (0.667) 1.440 0.979 1.128 0.565 0.602 1.765
Distributions
from net
investment
income $(0.252)(0.503)(0.479)(0.569)(0.592)(0.609)(0.624)(0.625)(0.714)
Distributions
from capital
gains $ -- -- (0.595)(0.120)(0.117) -- -- (0.137) --
Total
Distributions$(0.252)(0.503)(1.074)(0.689)(0.709)(0.609)(0.624)(0.762)(0.714)
Net asset
value end
of period $11.169 11.115 10.631 12.372 11.621 11.351 10.832 10.891 11.051
Total
Return 5.46%** 9.54% (5.67)%12.85% 8.92% 10.66% 5.28% 5.61% 19.23%**
Net assets
at end of
period
(thousands) $34,595 33,822 35,550 44,092 37,421 30,696 24,607 20,471 18,622
Ratio of
expenses to
average net
assets*** 1.23%**1.14% 1.18% 1.10% 1.13% 1.18% 1.25% 1.22% 0.72%**
Net
investment
income to
average
net assets 4.44%** 4.68% 4.23% 4.80% 5.20% 5.47% 5.69% 5.71% 6.41%**
Portfolio
turnover 16% 55% 104% 80% 74% 73% 11% 34% 58%
* For the period from October 13, 1987 (inception
to September 30, 1988.
National Portfolio*
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Net asset
value
beginning
of period $10.211 9.851 11.910 11.329 10.794 10.364 10.597 10.757 10.376 11.204 10.486
Net
investment
income $ 0.219 0.446 0.420 0.550 0.605 0.632 0.693 0.728 0.758 0.743 0.860
Net
realized &
unrealized
gains
(losses) on
securities $0.059 0.360 (1.122) 0.793 0.535 0.430 (0.233)(0.160) 0.381 (0.748) 1.530
Total from
investment
operations $0.278 0.806 (0.702) 1.343 1.140 1.062 0.460 0.568 1.139 (0.005) 2.390
Distributions
from net
investment
income $(0.219)(0.446)(0.420)(0.550)(0.605)(0.632)(0.693)(0.728)(0.758)(0.743)(0.860)
Distributions
from capital
gains $ -- -- (0.937)(0.212) -- -- -- -- -- (0.080)(0.812)
Total
Distributions$(0.219)(0.446)(1.357)(0.762)(0.605)(0.632)(0.693)(0.728)(0.758)(0.823)(1.672)
Net asset
value end
of period $10.270 10.211 9.851 11.910 11.329 10.794 10.364 10.597 10.757 10.376 11.204
Total
Return 5.43%** 8.40% (6.25)%12.44% 10.83% 10.50% 4.38% 5.44% 11.31% 0.25% 23.72
Net assets
at end of
period
(thousands) $30,810 32,734 34,072 42,483 41,273 40,352 40,360 41,051 39,833 44,704 43,188
Ratio of
expenses to
average net
assets*** 1.26%**1.18% 1.23% 1.10% 1.17% 1.24% 1.24% 1.19% 1.16% 0.99% 1.16%
Net
investment
income to
average
net assets 4.21%** 4.49% 3.98% 4.83% 5.47% 5.95% 6.54% 6.78% 7.15% 7.18% 7.60%
Portfolio
turnover 24% 56% 175% 212% 114% 91% 41% 58% 77% 66% 117%
* Known as the High Yield Portfolio prior to February 1, 1994.
Money Market Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Net asset
value
beginning
of period $ 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Net
investment
income $ 0.013 0.028 0.015 0.020 0.030 0.040 0.050 0.050 0.040 0.040 0.040
Net
realized &
unrealized
gains
(losses) on
securities $ -- -- -- -- -- -- -- -- -- -- --
Total from
investment
operations $ 0.013 0.028 0.015 0.020 0.030 0.040 0.050 0.050 0.040 0.040 0.040
Distributions
from net
investment
income $(0.013)(0.028)(0.015)(0.020)(0.030)(0.040)(0.050)(0.050)(0.040)(0.040)(0.040)
Distributions
from capital
gains $ -- -- -- -- -- -- -- -- -- -- --
Total
distributions$(0.013)(0.028)(0.015)(0.020)(0.030)(0.040)(0.050)(0.050)(0.040)(0.040)(0.040)
Net asset
value end
of period $ 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Total
Return 2.66%**2.87% 1.56% 1.53% 2.57% 4.13% 5.36% 4.26% 4.26% 3.83% 4.42%
Net assets
at end of
period
(thousands) $8,821 8,454 8,916 13,391 14,861 17,844 23,463 24,965 22,256 28,636 21,362
Ratio of
expenses to
average net
assets*** 0.87%**0.81% 0.81% 0.81% 0.83% 0.81% 0.81% 0.82% 0.84% 0.83% 0.84%
Net
investment
income to
average
net assets 2.65%** 2.83% 1.52% 1.52% 2.55% 4.12% 5.22% 5.51% 4.35% 3.79% 4.31%
Portfolio
turnover -- -- -- -- -- -- -- -- -- -- --
**Annualized
***For the six months ended March 31, 1996, ratio reflects
custodian fees paid indirectly.
</TABLE>
<PAGE>
For the six months ended March 31, 1996 (annualized) and
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 1.18%,* 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 2.34%
2.56%, 1.31%, 1.30%, 2.36% and 3.91%, respectively. For the
six months ended March 31, 1996, 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 six months ended
March 31, 1996 (annualized), for the years ended
September 30, 1995 and 1994 and for the period from February
10, 1993 to September 30, 1993, would have been 1.93%,*1.50%,
1.34% and 1.74%, respectively, and the annualized ratio of net
investment income to average net assets would have been
3.36%, 3.80%, 3.90% and 3.18%, respectively.
*Reflects custodian fees paid indirectly.
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 Advisors,
LLC. (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 May 31, 1996, 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 Advisors, LLC is a division of Madison
Investment Advisors, Inc., 6411 Mineral Point Road, Madison,
Wisconsin ("Madison"). Bankers Finance Advisors, LLC
administers approximately $200 million in assets and manages the
GIT family of mutual funds, which includes stock, bond and money
market portfolios. Madison, a licensed investment advisory firm for
over 22 years, provides professional portfolio management services
to a number of clients, including stock and bond mutual funds, and
has approximately $2.5 billion under management.
The Adviser is responsible for the day-
to-day administration of the Trust's activities. Investment
decisions regarding each of the Trust's portfolios can be
influenced in various manners by a number of individuals. The
individuals primarily responsible for the management of the
Trust's Portfolios are T. Daniel Gillespie and Chris Berberet.
<PAGE>
T. Daniel Gillespie, portfolio manager, has been responsible
for management of the Trust's portfolios since July 13,
1994. From 1991 until he joined Bankers Finance Investment
Management Corp., the Trust's previous Adviser, Mr. Gillespie
managed municipal bond funds
for the Rushmore Group of Funds. Prior to his work for
Rushmore, Mr. Gillespie gained experience with Wheat First
Securities. Mr. Berberet, vice president, has served as vice president
of Madison since 1992. Prior to joining Madison, he was the
Director of Fixed Income Management for the ELCA Board of
Pensions in Minneapolis, Minnesota. Mr. Berberet began managing
the Trust's portfolios after July 31, 1996.
The Adviser is controlled by Madison. The Adviser purchased
the investment management assets of Bankers Finance Investment
Management Corp., the Trust's previous investment adviser,
effective July 31, 1996. The Adviser has the
same address as the Trust.
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 six months ended
March 31, 1996 and 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,
$65,132 and $136,751, respectively; for the Maryland Portfolio,
$16,981 and $25,840, respectively; for the
Missouri Portfolio, $75,246 and $146,184, respectively; for the
Virginia Portfolio, $209,753 and
$381,385, respectively; for the National Portfolio, $199,502 and
$382,804, respectively ; and for the Money Market Portfolio, $34,979
and $73,031, respectively.
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 hold 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 stable 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.
Investors who purchase or redeem shares through a securities broker
may be charged a transaction fee by the broker for the handling of the
transaction if the broker so elects. Such charges are retained by the
broker and not transmitted to the Trust. However, investors may
engage in any transaction directly with the Trust to avoid such charges.
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 July 31, 1996
For use with the prospectus of the GIT Tax-Free Trust dated
July 31, 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 Report of Independent Auditors 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").
Unless described herein or in the Prospectus, the Trust will not invest
in "derivative" securities.
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
Effective July 31, 1996, Bankers Finance Advisors, LLC, 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 is authorized to execute the Trust's 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 Prospectus and this Statement of
Additional Information, to the terms of the Declaration of Trust
and the Trust's By-Laws, and to written directions given from
time to time by the Trustees.
The Adviser is a division of Madison Investment Advisors, Inc.
("Madison"), 6411 Mineral Point Road, Madison, Wisconsin.
Madison is a registered investment adviser and has numerous
advisory clients of its own. Madison also manages the following
investment companies: Bascom Hill Investors, Inc., Bascom
Hill BALANCED Fund, Inc. and Madison Bond Fund, Inc.
Madison was founded in 1973 and has never been controlled
or affiliated with any other business entity or person.
The investment advisory agreement between the Trust, on behalf
of the portfolios, and the Adviser, is subject to annual review
and approval by the Trustees, including a majority of those Trustees
who are not "interested persons," as defined in the Investment
Company Act of 1940. The investment advisory agreement was
approved by shareholders for an initial two year term at a special
meeting of each portfolio's shareholders held in July 1996.
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 1996 by
Madison for the purpose of providing investment management
services to the GIT family of mutual funds, including the Trust.
The Adviser purchased the investment management assets of the
former adviser to the Trust, Bankers Finance Investment
Management Corp., on July 31, 1996. For periods prior to July 31,
1996, references in this Statement of Additional Information and in the
Prospectus to the "Adviser" refer to Bankers Finance Investment Management
Corp. The Adviser also serves as the investment adviser to
Government Investors Trust, GIT Income Trust and GIT Equity
Trust.
Management. Frank E. Burgess is President, Treasurer and
Director of Madison and Vice President of the Adviser.
Mr. Burgess owns a majority of the controlling interest of Madison,
which, in turn, owns 100% of the Adviser. Mr. Burgess is also a
Trustee and Vice President of the Trust. Mr. Burgess holds the same
positions with GIT Equity Trust, GIT Income Trust and Government
Investors Trust. Katherine L. Frank is President and Treasurer
of the Adviser and Vice President of Madison. Ms. Frank 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 and
for the six months ended March 31, 1996 in the
amounts of $61,602, $84,951, $86,146, $64,823, and $30,722 respectively.
The Missouri Portfolio paid aggregate advisory fees for the
fiscal years ended September 30, 1992, 1993, 1994 and 1995 and
for the six months ended March 31, 1996 in the
amounts of $55,902, $76,300, $81,307, $69,391 and $36,037,
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 Adviser waived $8,902 in advisory fees
for the six months ended March 31, 1996 in connection with this Portfolio.
The Virginia Portfolio paid aggregate advisory fees to the
Adviser for the period October 13, 1987, through September 30,
1988, for the fiscal years ended September 30, 1989, 1990,
1991, 1992, 1993, 1994, 1995 and for the six months ended
March 31, 1996 in the amounts of $72,123,
$117,791, $142,774, $172,966, $214,486, $254,204, $251,858,
$207,900 and $108,117, respectively.
During the fiscal years ending September 30, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995 and for the six months
ended March 31, 1996, 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, $202,743 and $100,364, respectively,
and aggregate advisory fees of $116,154, $111,535, $113,931,
$118,603, $100,865, $79,866, $72,803, $58,333, $45,081, and
$21,592, 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 May 20, 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 (29%); 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%), Vincent Walker Trust, 9908
Julliard Drive, Bethesda, MD (5%) and S & C Schaub, 1924 Gaither St.,
Temple Hills, MD (5%).
Shareholder votes relating to the election of Trustees, approval
of the Trust's selection of independent public accountants 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) 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
As of July 31, 1996, the Trustees and executive officers of the
Trust and their principal occupations during the past five years
are shown below:
Frank E. Burgess <F1>
6411 Mineral Point Road, Madison, WI 53705
Trustee and Vice President
President and Director of Madison Investment
Advisors, Inc., the entity which controls the Adviser. Prior to
forming Madison in 1973, he was Assistant Vice President and
Trust Officer of M&I Bank of Madison, Wisconsin. Mr. Burgess
received his BS from Iowa State University and his law degree
from the University of Wisconsin. He is a member of the State
Bar of Wisconsin. b. 8/4/42.
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.
James R. Imhoff, Jr.=
429 Gammon Place, Madison, WI 53719
Trustee
President of First Weber Group, Inc. of Madison, Wisconsin. b. 5/20/44.
b.
Lorence D. Wheeler=
P.O. Box 431, Madison, WI 53701
Trustee
President of Credit Union Benefits Services, Inc.
b. 1/31/38.
Katherine L. Frank
6411 Mineral Point Road, Madison, WI 53705
President
President of GIT Investment Funds, Vice President
of Madison Investment Advisors, Inc. A graduate
of Macalester College, St. Paul, Minnesota.
Charles J. Tennes
1655 Fort Myer Drive, Arlington, VA 22209-3108
Vice President
Vice President of GIT Investment Funds and Executive
Vice President of GIT Investment Services, Inc.;
Director of Presidential Savings Bank, FSB and
Presidential Service Corp.; formerly Vice President
of Ferris & Company, Inc. (now Ferris, Baker Watts). A Certified
Financial Planner and graduate of the University of Washington.
Jay R. Sekelsky
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of GIT Investment Funds and of
Madison Investment Advisors, Inc. Formerly Vice President
of Wellington Management Group of Boston, MA.
Mr. Sekelsky holds a BBA in Accounting and an MBA in
Finance from the University of Wisconsin.
Christopher C. Berberet
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of GIT Investment Funds and of
Madison Investment Advisors, Inc. Formerly the
Director of Fixed Income Management for the
ELCA Board of Pensions, Minneapolis, MN. A
graduate of the University of Wisconsin.
W. Richard Mason
1655 Ft. Myer Drive, Arlington, VA 22209
Secretary
Secretary of GIT Investment Funds, GIT Investment
Services, Inc., Presidential Savings Bank, FSB and
Presidential Service Corporation. Formerly Assistant
General Counsel for the Investment Company
Institute. Mr. Mason holds a BS in Foreign Service
from Georgetown University and received his law
degree from The George Washington University. He is
a member of the District of Columbia and Texas bars.
[FN]
<F1>
Trustee deemed to be an "interested person" 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.The compensation of each non-interested Trustee
has been fixed at $4,000 per year, to be pro-rated
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. Mr. Kleppe will receive annual compensation
from the Trust and from the other investment companies managed
by the Adviser or Madison (see "the Investment Adviser") totalling
$15,000. Mr. Imhoff and Mr. Wheeler will receive annual
compensation from the Trust and from other investment companies
managed by the Adviser or Madison totalling $18,000.
During the last fiscal year of the Trust, the Trustees 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 Trustees(a)
Frank E. Burgess 0 0 0 0
Thomas S. Kleppe 4,000 0 0 15,000
James R. Imhoff, Jr.(b) 0 0 0 3,000
Lorence D. Wheeler(b) 0 0 0 3,000
(a) Complex is comprised of 4 trusts and three corporations with
a total of 16 funds and/or series.
(b) Messrs. Imhoff and Wheeler joined the Board of Trustees on
July 31, 1996. Their expected annual compensation is decribed
above.
= 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 May 20, 1996, 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 or for the six months
ended March 31, 1996. 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. Reference should
be made to the Propsectus for actual rates of Portfolio
turnover (see "Financial Highlights").
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 (President's Day), 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 prospectus.
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 thirty
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 the fiscal year
in which it is earned in order to avoid all regular corporate
tax. The Code also requires the distribution of at least 98% of
undistributed net income and undistributed 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 March
29, 1996, the standardized 30-day yield of the Arizona Portfolio
was 4.15% per annum and the corresponding taxable equivalent
yield as of such date was 6.97%. 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 year ended March 31,
1996, the average annual total return of the Arizona Portfolio
was 6.70%. For the five years ended March 31, 1996, the
average annual total return of the Arizona Portfolio was 6.41%
and the aggregate total return was 36.42%. For the period from
October 13, 1989 (commencement date of public offering) through
March 31, 1996, the average annual total return of the
Arizona Portfolio was 6.30% and its aggregate total return was
48.46%. The average annual total return since inception would
have been 5.77% for the Arizona Portfolio, and the aggregate
total return would have been 43.66% had the Adviser not waived a
portion of its management fee or paid certain expenses during
this period.
As of March 29, 1996, the standardized 30-day yield of the
Maryland Portfolio was 4.18% per annum and the corresponding
taxable equivalent yield as of such date was 7.22%. 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 year ended
March 31, 1996, the average annual total return of the
Maryland Portfolio was 5.88%. For the period from February 10,
1993 (inception) through March 31, 1996, the average annual
total return of the Maryland Portfolio was 3.61%, and its
aggregate total return was 11.74%. Had the adviser not waived a
portion of its management fees or paid certain expenses, the 30-
day yield as of March 31, 1996 would have been 3.53%; for the
year ended March 31, 1996, the average annual total
return would have been 5.21%; for the period from February 10,
1993 (inception) through March 31, 1996, the average annual
total return and aggregate total return would have been 2.97% and
9.59%, respectively.
As of March 29, 1996, the standardized 30-day yield of the
Missouri Portfolio was 3.97% per annum and the corresponding
taxable equivalent yield as of such date was 6.60%. 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
year ended March 31, 1996, the average annual total return of
the Missouri Portfolio was 6.56%. For the five years ended
March 31, 1996, the average annual total return of the
Missouri Portfolio was 6.28%, and the aggregate total return was
35.59%. For the period from October 12, 1989 (commencement date
of public offering) through March 31, 1996, the average
annual total return of the Missouri Portfolio was 6.11% and its
aggregate total return was 46.72%. The average annual total
return since inception would have been 5.58% for the Missouri
Portfolio, and the aggregate total return would have been 42.04%
had the Adviser not waived a portion of its management fee or
paid certain expenses during this period.
As of March 29, 1996, the standardized 30-day yield of the
Virginia Portfolio was 4.35% per annum and the corresponding
taxable equivalent yield as of such date was 7.21%. 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
year ended March 31, 1996, the average annual total return of
the Virginia Portfolio was 7.05%. For the five years ended
March 31, 1996 the average annual total return of the
Virginia Portfolio was 6.50% and the aggregate total return was
36.98%. For the period from October 13, 1987 (commencement date
of public offering), through March 31, 1996, the average
annual total return of the Virginia Portfolio was 7.83% and its
aggregate total return was 89.32%. The average annual total
return since inception would have been 7.75% for the Virginia
Portfolio, and the aggregate total return would have been 88.11%
had the Adviser not waived a portion of its management fee or
paid certain expenses.
As of March 29, 1996, the standardized 30-day yield of the
National Portfolio was 4.16% per annum and the corresponding
taxable equivalent yield as of such date was 6.50%. The taxable
equivalent yield is based on the federal income tax rate of 36%
for the National Portfolio. For the year ended March 31,
1996, the average annual total return of the National
Portfolio was 6.73%. For the five years ended March 31, 1996,
the average
<PAGE>
annual total return of the National Portfolio was 6.40% and its
aggregate total return was 36.40%. For the ten years ended
March 31, 1996, the average annual total return of the
National Portfolio was 6.26% and its aggregate total return was
83.64%. For the period from November 16, 1982 (inception),
through March 31, 1996, the average annual total return was
8.39% and the aggregate total return was 190.84%
As of March 29, 1996, the standardized 7-day yield of the
Money Market Portfolio was 2.37%, amounting to an effective
annual yield of 2.40% per annum. The corresponding taxable
equivalent yield as of such date was 3.71%. 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, 1025 Connecticut Avenue, NW,
Washington, DC, 20036, 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 Report of Independent Auditors
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, 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
July 31, 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. Also incorporated herein
by reference is the Trust's Semi-Annual Report to Sharholders
for the six months ended March 31, 1996, filed with the Commission
on May 31, 1996.
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 (Filed herewith)**
6 Distribution Agreement*
7 Not Applicable
8 Custodian Agreement with Fee Schedule*
9 Services Agreement (Filed herewith)**
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.
** Current agreement previously filed. Agreement effective July 31, 1996
filed herewith.
25. Persons Controlled by or Under Common Control with Registrant.
None
<PAGE>
26. Number of Holders of Securities.
The number of holders of record of securities of the
Registrant as of May 24, 1996 is as follows:
Title of Class Number of Holders of Record
Shares of Beneficial Interest 3,110
27. Indemnification
Previously Filed
28. Business and Other Connections of Investment Adviser effective
July 31, 1996.
Name Position with Other Business
Adviser
Frank E. Burgess Director President and Director of
Madison Investment Advisors,
Inc., 6411 Mineral Point
Road, Madison, WI 53705
Katherine L. Frank President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
Charles J. Tennes Vice President Director of Presidential
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.
<PAGE>
Jay R. Sekelsky Vice President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
Chris Berberet Vice President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
W. Richard Mason Secretary Secretary of Presidential
Savings Bank, FSB and
Presidential Service
Corporation, 4600 East-West
Highway, Bethesda, MD
20814; Secretary of GIT
Investment Services, Inc.
of the same
address as the Trust.
Julia M. 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 None
1655 Ft. Myer Dr.
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 and discussed in Parts A and B See item 28 above.
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 14 day of June,
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 6/14/96
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- 6/14/96
John A. Dudley, Esquire Fact
Investment Advisory Agreement
This Agreement is made by and Bankers Finance Advisors,
LLC, a Wisconsin limited liability company having its
principal place of business in Arlington, Virginia (the
"Advisor"), 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 Advisor to manage the investment of its assets
and to administer its affairs; and the Advisor hereby
accepts such appointment. The Advisor shall employ its best
efforts to supervise the investment management of the Trust.
2. Discretion of the Advisor. In the performance of
its duties hereunder the Advisor 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-Laws of the
Trust, and by any written direction given by the Trustees of
the Trust not inconsistent with this Agreement; and it shall
be guided by the investment policies of the Trust from time
to time duly in effect. Subject only to the foregoing, the
Advisor shall have full authority to purchase and sell
securities for the Trust; the Advisor may determine the
persons with whom such securities transactions are to be
made and the terms thereof.
3. Other Activities of the Advisor. The Advisor 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 Advisor 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 Advisor 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 Advisor 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 Advisor or such affiliate the cost reasonably
allocated by the Advisor or affiliate to such goods or
services.
4. Investment by Advisor. The Advisor shall not take,
and shall not permit any of its shareholders, officers,
directors or employees to take long or short positions in
the shares of the Trust, except for the purchase of shares
of the Trust for investment purposes at the same price as
<PAGE>
that available to the public at the time of purchase, or in
connection with the original capitalization of the Trust.
In connection with purchases or sales of portfolio
securities for the account of the Trust neither the Advisor
nor any officer, director or employee of the Advisor shall
act as a principal or receive any commission therefor.
5. Expenses of the Trust. The Trust shall pay all of
its expenses not expressly assumed by the Advisor 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 Advisor), the officers and the
administrative employees of the Trust.
c. Fees paid to the Advisor 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,
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.
In addition, the Trust shall assume all losses and
liabilities incurred in the administration to 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.
6. Compensation to the Advisor. For its services
hereunder, the Trust shall pay to the Advisor 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-eighths (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
<PAGE>
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 National Fund Shares, Tax-Free Arizona Fund
Shares, Tax-Free Maryland Fund Shares, Tax-Free Missouri
Fund Shares and Tax-Free Virginia Fund Shares shall be five-
eighths 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's
net assets calculated for the day.
With respect to any portfolio of the Trust subsequently
authorized by the Trustees, 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 Advisor 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 under such terms as it may determine by written
notice thereof to the Trust. The Advisor 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.
7. Limitation of Expenses of the Trust. In addition
to investment management expenses related to the Trust, the
Advisor shall pay the fees and expenses of any Trustees and
officers of the Trust affiliated with the Advisor, 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 Advisor 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 Advisor 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.
8. Limitation of Advisor's Liability. The Advisor
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 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.
9. Limitation of Trust's Liability. The Advisor
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder in any case shall be limited to the
Trust and to its assets and that the Advisor 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.
10. 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 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 a
meeting called for that purpose.
11. 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 securities of
such series or class, or by the Advisor, upon sixty days
written notice to the other party.
12. 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 Advisor from employing any other persons
or agents, including Madison Investment Advisors, Inc., at
its own expense, to assist it in the performance of its
duties hereunder.
13. Name of the Trust. In consideration of its
formation of the Trust and the related expenses, the Advisor
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 Advisor 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.
14. Use of Terms. The 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 and any applicable regulations thereunder.
15. Control of Advisor. Bankers Finance Advisors, LLC
is controlled by Madison Investment Advisors, Inc. a
registered investment advisor located in Madison, Wisconsin.
As such, it is expected that Bankers Finance Advisors, LLC
and Madison Investment Advisors, Inc. will work closely
together in the management of the portfolios including but
not limited to portfolio management, research, securities
trading, and other investment management responsibilities.
<PAGE>
In witness whereof, the parties have caused this
Agreement to be signed on their behalf by their respective
officers duly authorized and their respective seals to be
affixed hereto, this day of 1996.
Bankers Finance Advisors, LLC
By
Katherine L. Frank, President
Attest:
___________________, Vice President
GIT Tax-Free Trust
By
By
By
By
Attest:
Services Agreement
This Agreement is made by and between Bankers Finance
Advisors, LLC, a Wisconsin limited liability company
having its principal place of business in Arlington, Virginia
("BFA"), 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. BFA hereby undertakes to provide
the Trust with such operational support services as it may
require in the conduct of its business, to extent which BFA
(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 reimbursable expenditures with respect to any
activities intended to be financed by the Trust pursuant to
its Plan of Distribution. The Trust hereby engages BFA to
provide it with such services.
2. Scope of Authority. BFA 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, BFA 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 BFA. BFA 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 BFA 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.
BFA agrees that it will not deal with the Trust in any
transaction in which BFA acts as a principal, except to the
extent as may be permitted by the terms of this Agreement.
The records BFA maintains on behalf of the Trust are the
sole property of the Trust and will be surrendered promptly
to the Trust upon its request pursuant to Rule 31a-3 of the
Investment Company Act of 1940.
4. Compensation to BFA. BFA shall have no responsibility
hereunder to bear at its own expense any costs or expenses
of the Trust. The Trust shall reimburse to BFA monthly all
of BFA'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 BFA (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 BFA is related to services provided to the
Trust hereunder, then BFA may allocate such amount between
the Trust and the other activities of BFA 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. BFA 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 BFA 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 Advisors, LLC,
in its separate capacity 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. BFA 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 BFA, then this
Agreement shall immediately terminate as of a date 30 days
from the date of such event, unless within such 30-day
period BFA gives written notice to the Trust that it waives
such termination. The Trust specifically acknowledges and
accepts the relationship between separate capacities of BFA
hereunder and as the Adviser.
6. Limitation of BFA's Liability. BFA 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 BFA 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 Agreement immediately thereafter or at
any time prior to the cessation of delay or resumption of
performance by BFA; but BFA 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. BFA acknowledges that
it has received notice of and accepts the limitations upon
the Trust's liability set forth in its Declaration of Trust.
BFA agrees that the Trust's obligations hereunder in any
case shall be limited to the Trust and to its assets and
that BFA 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 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 BFA, upon thirty days written notice
to the other party.
11. Termination upon Assignment. This Agreement may not be
assigned by BFA and shall automatically terminate upon any
such assignment; except that BFA may assign or transfer its
interest herein to a wholly-owned subsidiary of BFA, or to
another entity operated substantially under common control
with BFA, provided BFA 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 BFA
to obtain goods and services from other persons as described
in Section 2 above.
12. Use of Terms. 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. 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 ____ day of
___________, 1996
Bankers Finance Advisors LLC
by _________________________
GIT Tax-Free Trust
by _________________________
4
4
3
3
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 20 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
June 11, 1996
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Semi-Annual Report
March 31, 1996/Unaudited
GIT
GIT Investment Funds
<PAGE>
Letter to Shareholders
May 23, 1996
Dear Shareholder:
The six-months covered by this report began with interest
rate declines and ended with rates headed upward. By
December 1995, the yield of the 30 year treasury bond fell
below 6%, and then rose to 6.63% on April 1, 1996.
The Federal Reserve Board has since left rates unchanged,
and during the March 26, 1996 Federal Open Market Committee
meeting, Chairman Greenspan assured the bond markets that
the economy is "moving forward with inflation in check."
In this more stable environment, the performance of
municipals relative to other bonds will depend on the
perceived likelihood of tax reform, and on the financial
condition of state and local municipalities -- matters which
do not appear to be of great concern at this time. New
issuance of municipal bonds was its lowest in five years for
1995, and this more limited supply should support bond
prices in 1996.
We maintain a conservative stance in each of the GIT Tax-
Free Trust portfolios, holding general obligation and
revenue bonds weighted according to the fundamentals of each
sector. In the near term, we expect to maintain average
maturities in the 15 to 20 year range, where we now see the
best value.
NATIONAL PORTFOLIO
Economic results show the plains and mountain states
outpacing the rest of the country, and the South Central
states and Texas continuing their above average growth.
Growth in the Northeast has been trailing the rest of the
nation, leaving this region the most exposed to recession if
the national economy declines.
The National Portfolio's holdings are diversified throughout
the country, with an average credit rating of AA . Total
return for the year ending March 31, 1996 was 6.73%.
ARIZONA PORTFOLIO
Arizona's work force continued to grow faster than available
jobs in 1995 but there are signs that the trend is
reversing. Service industry employers have been expanding
,and two major construction projects, a $1.5 billion Intel
Corp. factory and $250 million stadium in the Phoenix area,
have been soaking up skilled workers. Expansion by several
national retail chains, including Circuit City and Best
Buys, has caused labor shortages and driven retail wages up
by more than 10%.
Arizona has no general obligation debt and credit trends are
generally stable among the municipal issuers. The Arizona
portfolio has an average credit rating of AA, and posted a
total return of 6.70% for the year ended March 31, 1996.
MISSOURI PORTFOLIO
Missouri has a broad based and diversified economy. Although
the state has been losing federal jobs, job growth
accelerated during the last quarter of 1995, helped by the
re-opening of a General Motors plant near St. Louis and a
jump in jobs in the business services sector.
Missouri has long record of responsible financial operations
as indicated by the AAA Rating of its general obligation
debt. The Missouri Portfolio has an average credit rating of
AA and a total return for the year ended March 31, 1996 of
6.56%
MARYLAND PORTFOLIO
Maryland's economic base is both diverse and balanced, with
a lower than average dependence on manufacturing. Federal
government shutdowns in November and December thwarted
employment growth, which was also hurt by cutbacks in
manufacturing and retailing. Municipal credit trends 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 March 31, 1996 was
5.88%.
VIRGINIA PORTFOLIO
Although the federal government shutdowns in November and
December hurt employment numbers in Virginia, the state's
economic growth is expected to exceed that of the nation as
a whole in the near term. The state's general obligation
bonds have maintained a AAA credit rating and the credit
trend is considered stable. The average credit rating for
the Virginia portfolio is AA. The total return of the fund
for the year ended March 31, 1996 was 7.05%
MONEY MARKET PORTFOLIO
This portfolio continues to provide a high degree of
liquidity and share price stability. As of March 31, 1996,
the fund's seven day yield was 2.37%, the equivalent of
3.70% from a taxable bond for an investor in the highest
federal tax bracket.
We appreciate your confidence in GIT Investment Funds, and
hope you will look closely at all thirteen of our no-load
mutual fund portfolios.
Sincerely,
A. Bruce Cleveland
President
<PAGE>
Arizona Portfolio
Portfolio of Investments - March 31, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS:
97.7% of Net Assets
AIRPORT: 5.4%
Aaa AAA Tucson Airport Authority,
Airport Revenue
(MBIA Insured), 5.7%, 6/1/13 $500,000 $502,500
EDUCATION: 4.6%
A nr Arizona Educational Loan
Marketing Corporation,
Student Loan Revenue (AMT),
7%, 3/1/03 400,000 427,000
ELECTRIC: 7.5%
Baa1 A- Puerto Rico Electric Power
Authority, Electric Power
Revenue, 6.375%, 7/1/24 190,000 194,988
Aa AA Salt River Project Agricultural
Improvements and Power District,
Electric Systems Revenue,
6%, 1/1/16 500,000 505,625
GENERAL OBLIGATION: 32.7%
Aaa AAA Chandler (FGIC Insured), 7%,
7/1/12 300,000 330,375
Aaa AAA Maricopa County School District
(FGIC Insured), 6.25%, 7/1/11 500,000 539,375
Aaa AAA Maricopa County School District
(FGIC Insured), 6.7%, 7/1/11 300,000 328,125
Aaa AAA Navajo County School District,
(FSA Insured), 6%, 7/1/09 500,000 515,000
#Aaa AA+ Phoenix, 6%, 7/1/13 500,000 529,375
Aa1 AA+ Phoenix, 5.3%, 7/1/06 100,000 102,500
#Aaa AA+ Scottsdale, 6.9%, 7/1/07 100,000 111,000
Aa1 AA+ Scottsdale, 5.5%, 7/1/09 200,000 204,500
A1 AA- Tucson, 5.6%, 7/1/16 400,000 392,500
HOSPITAL: 5.1%
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%, 9/1/11 200,000 210,250
HOUSING: 10.9%
nr AAA Phoenix Industrial Development
Authority, Mortgage Revenue
(Chris Ridge) (FHA), 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%, 5/1/27 500,000 499,375
INDUSTRIAL DEVELOPMENT: 3.5%
nr A-1+ Mohave County Industrial Development
Authority, Industrial Development
Revenue (Citizens Utilities), 7.05,
8/1/20 300,000 324,750
LEASING: 3.3%
Aaa AAA Scottsdale Municipal Property
Corporation, Lease Revenue (FGIC
Insured), 6.25%, 11/1/14 300,000 309,750
TRANSPORTATION: 15.4%
Aa AA Arizona State Transportation Board,
Highway Revenue, 6%, 7/1/08 400,000 433,000
Aaa AAA Flagstaff, Street and Highway User
Revenue (FGIC Insured), 5.9%,
7/1/10 500,000 524,375
Baa1 A Puerto Rico Commonwealth Highway
and Transportation Authority,
Highway Revenue, 6.375%,
7/1/08 450,000 478,687
WATER AND SEWER: 9.3%
Aaa AAA Arizona State Wastewater Management
Authority, Revenue (AMBAC Insured),
5.95%, 7/1/12 200,000 204,000
Aaa AAA Chandler, Water and Sewer Revenue
(FGIC Insured), 6.75%, 7/1/06 250,000 271,563
A1 A+ Tucson, Water Revenue (AMBAC Insured),
5.75%, 7/1/18 400,000 398,000
TOTAL INVESTMENTS (Cost $8,729,341)+ $9,117,238
See Notes to Portfolios of Investments.
<PAGE>
Maryland Portfolio
Portfolio of Investments - March 31, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS:
94.0% of Net Assets
EDUCATION: 9.3%
Aa1 AA- Maryland State Health and Higher
Educational Facilities Authority,
University Revenue (Johns Hopkins
University), 7.5%, 7/1/20 $100,000 $107,750
Aaa AAA Saint Mary's College, College
Revenue (MBIA Insured), 5.55%,
9/1/23 100,000 99,625
Aa AA+ University of Maryland, Auxiliary
Facilities and Tuition Revenue,
5.5%, 4/1/13 50,000 49,187
ELECTRIC: 3.7%
Baa1 A- Puerto Rico Electric Power Authority,
Power Revenue, 6%, 7/1/14 100,000 100,625
GENERAL OBLIGATION: 22.3%
Aa AA+ Anne Arundel County (AMT), 5.5%,
9/1/16 100,000 97,375
Aaa AAA Baltimore (AMBAC Insured), 6%,
10/15/04 100,000 108,125
#Aaa AAA Harford County, 5.75%, 9/1/08 25,000 26,813
Aa AA- Harford County, 5.75%, 9/1/08 25,000 25,875
Aaa AA+ Howard County, 6%, 5/15/13 150,000 154,125
Aaa AAA Maryland State, 4.6%, 2/15/09 100,000 93,875
Aaa AAA Ocean City (MBIA Insured), 6.3%,
11/1/09 50,000 54,938
Aa1 AA Washington Suburban Sanitary District,
5.875%, 6/1/08 50,000 52,312
HOSPITAL: 7.1%
A1 A Maryland State Health and Higher
Educational Facilities Authority,
Hospital Revenue (Good Samaritan
Hospital), 5.75%, 7/1/19 100,000 97,750
Baa nr Prince George's County Hospital,
Hospital Revenue (Greater
Southeast Healthcare System),
6.2%, 1/1/08 100,000 98,000
HOUSING: 11.3%
nr AAA Anne Arundel County, Mortgage
Revenue (Westwinds Apartments)
(FHA), 6%, 12/1/26 50,000 50,063
nr AA Baltimore County, Mortgage Revenue
(Olde Forge Townhouses) (FHA),
6%, 1/1/10 80,000 79,700
Aa nr Maryland State Community Development
Administration, Multifamily
Housing Revenue (GNMA Collateralized)
(FHA), 5.95%, 5/15/13 80,000 79,800
Aa nr Maryland State Community Development
Administration, Single-Family
Housing Revenue (AMT), 6.2%,
4/1/17 100,000 100,500
LEASING: 5.0%
Aa AA- Maryland State Stadium Authority,
Sports Facilities Lease Revenue
(AMT), 7.5%, 12/15/10 125,000 138,281
POLLUTION CONTROL: 8.5%
A2 A Anne Arundel County, Pollution
Control Revenue (Baltimore Gas
and Electric Company), 6%,
4/1/24 100,000 101,000
A1 A Prince George's County, Pollution
Control Revenue (Potomac Electric),
6.375%, 1/15/23 125,000 131,094
PUBLIC FACILITIES: 9.4%
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%, 2/15/10 100,000 104,375
TRANSPORTATION: 8.0%
Aa3 AA- Baltimore, Port Facilities Revenue
(Consolidated Coal Sales), 6.5%,
10/1/11 100,000 107,500
#Aaa AAA Maryland State Transportation
Authority, Transportation Revenue,
6.8%, 7/1/16 100,000 111,250
See Notes to Portfolios of Investments.
<PAGE>
Maryland Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
UTILITY: 2.0%
A A+ Puerto Rico Telephone Authority,
Telecommunications Revenue,
5.5%, 1/1/22 $60,000 $55,800
WASTE: 3.7%
A nr Northeast Waste Disposal Authority,
Waste Revenue (Montgomery County),
6.3%, 7/1/16 100,000 100,625
WATER: 3.7%
Aaa AAA Baltimore, Water Revenue (MBIA
Insured), 5.5%, 7/1/08 100,000 102,750
TOTAL INVESTMENTS (Cost $2,551,551)+ $2,583,050
Missouri Portfolio
Portfolio of Investments - March 31, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS:
97.0% of Net Assets
AIRPORT: 4.6%
Aaa AAA St. Louis, Airport Revenue,
Lambert-St. Louis
International (FGIC Insured)
(AMT), 6.125%, 7/1/12 $500,000 $515,000
EDUCATION: 5.7%
A nr 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%, 8/1/16 150,000 160,875
ELECTRIC: 9.3%
nr AAA Puerto Rico Electric Power Authority,
Power Revenue, 8%, 7/1/08 175,000 192,937
Aaa AAA Sikeston, Electric Revenue (MBIA
Insured), 5%, 6/1/22 400,000 355,500
nr A University Development Foundation,
Lease Revenue (Missouri Power),
5.75%, 5/1/13 500,000 501,250
GENERAL OBLIGATION: 31.7%
Aa nr Clayton School District, 5.65%,
2/1/14 500,000 496,875
Aaa AAA Farmington School District (FSA
Insured), 6.35%, 3/1/12 400,000 413,500
Aa nr Jefferson City School District,
6.7%, 3/1/11 200,000 226,250
Aaa AAA Missouri State, Correctional
Facilities Improvements, 5.5%,
4/1/20 500,000 486,250
nr AAA Puerto Rico Commonwealth, 7.75%,
7/1/17 250,000 280,312
Aaa AAA St. Charles County, Francis Howell
School District (FGIC Insured),
6.5%, 3/1/05 250,000 272,500
Aa1 nr St. Louis County, 6.3%, 2/1/11 400,000 418,000
Aa nr St. Louis County School District,
5.5%, 2/15/12 500,000 500,000
Aa nr St. Louis County School District,
5.5%, 2/15/13 500,000 497,500
HOSPITAL: 12.9%
Aaa AAA Missouri State Health and
Educational Facilities Authority,
Health Facilities Revenue
(SSM Health Care) (MBIA Insured),
6.25%, 6/1/16 250,000 259,063
Aaa AAA Missouri State Health and Educational
Facilities Authority, Health
Facilities Revenue (Heartland
Health System) (AMBAC Insured),
6.35%, 11/15/17 500,000 522,500
nr nr Missouri State Health and Educational
Facilities Authority, Health
Facilities Revenue (Missouri
Baptist Medical Center),
7.625%, 7/1/18 95,000 106,756
nr nr Missouri State Health and Educational
Facilities Authority, Health
Facilities Revenue (Missouri
Baptist Medical Center), 7.625%,
7/1/18 45,000 56,194
Aaa AAA Missouri State Health and Educational
Facilities Authority, Health
Facilities Revenue (Health Midwest)
(MBIA Insured), 6.25%,
2/15/22 500,000 517,500
See Notes to Portfolios of Investments.
<PAGE>
Missouri Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
HOUSING: 6.8%
nr AAA Missouri State Housing
Development Commission,
Single-Family Mortgage Revenue
(GNMA Collateralized) (FHA)
(AMT), 7.75%, 6/1/22 $75,000 $79,219
nr AAA Missouri State Housing Development
Commission, Single-Family
Mortgage Revenue (GNMA
Collateralized) (FHA) (AMT),
7.375%, 8/1/23 190,000 201,875
nr AAA St. Louis County, Mortgage Revenue
(Certificates of Receipt) (AMT),
5.65%, 2/1/20 500,000 493,750
LEASING: 9.6%
#Aaa AAA Kansas City Municipal Assistance
Corporation, Lease Revenue (H.
Roe Bartle) (AMBAC Insured),
6%, 4/15/20 500,000 533,125
Aa AA Missouri State Board of Public
Buildings, Lease Revenue,
6.4%, 12/1/08 300,000 322,125
A1 A+ Missouri State Regional Convention
and Sports Complex Authority,
Lease Revenue, 5.5%, 8/15/13 250,000 237,188
WASTE: 6.1%
Aa nr Missouri State Environmental
Improvement and Energy Resources
Authority, Water Pollution
Control Revenue, 5.4%, 7/1/15 500,000 475,000
A1 AA- St. Louis Industrial Development
Authority, Pollution Control Revenue
(Anheuser Busch Company), 6.65%,
5/1/16 200,000 217,250
WATER: 10.3%
Aaa AAA Cape Girardeau, Waterworks Revenue
(FGIC Insured), 6.4%,
3/1/12 400,000 437,000
A1 AA Columbia, Water and Electric
Revenue, 6.125%, 10/1/12 400,000 416,000
Aaa AAA Liberty, Water Revenue (MBIA
Insured), 6.3%, 10/1/12 300,000 315,375
TOTAL INVESTMENTS (Cost $10,703,072)+ $10,992,294
Virginia Portfolio
Portfolio of Investments - March 31, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS:
97.9% of Net Assets
AIRPORT: 4.5%
Aaa AAA Capital Regional Airport Commission,
Airport Revenue (Richmond
International Airport) (AMBAC
Insured), 5.625%, 7/1/15 $500,000 $490,625
Aaa AAA Metropolitan Washington D.C.
Airports Authority, Airport Revenue
(MBIA Insured) (AMT), 6.625%,
10/1/12 500,000 531,250
Aaa AAA Metropolitan Washington D.C.
Airports Authority, Airport
Revenue (FGIC Insured) (AMT),
7%, 10/1/18 500,000 540,625
EDUCATION: 13.2%
A1 nr Loudoun County Industrial Development
Authority, Facilities Revenue
(George Washington University),
6.25%, 5/15/22 500,000 509,375
nr BBB- Virginia College Building Authority,
Facilities Revenue (Marymount
University), 7%, 7/1/22 350,000 369,688
Aa AA Virginia College Building
Authority, Facilities Revenue
(Washington and Lee University),
6.4%, 1/1/12 500,000 526,875
Aa AA Virginia College Building Authority,
Facilities Revenue (Washington
and Lee University), 5.75%,
1/1/14 555,000 552,225
Aa AA Virginia State Public School
Authority, Revenue, 6.25%,
8/1/10 500,000 525,000
Aa AA Virginia State Public School
Authority, Revenue, 6.2%,
8/1/13 500,000 523,750
Aa AA Virginia State Public School
Authority, Revenue, 6.5%,
8/1/15 500,000 533,125
Aa AA Virginia State Public School
Authority, Special Obligation
(York County), 5.9%, 7/15/13 500,000 508,125
A1 AA- Virginia State Universities,
University Revenue (Virginia
Commonwealth University),
5.75%, 5/1/15 500,000 504,375
See Notes to Portfolios of Investments.
<PAGE>
Virginia Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
ELECTRICAL: 2.9%
Aaa AAA Hailifax County Industrial
Development Authority, Power
Revenue (Old Dominion Electric)
(MBIA Insured) (AMT), 7%,
10/1/18 $1,000,000 $1,006,250
GENERAL OBLIGATION: 25.3%
Aaa AAA Arlington County, 6%, 8/1/12 1,000,000 1,036,250
Aaa AAA Fairfax County, 5.625%, 6/1/13 500,000 500,625
Aa A+ Falls Church, 5.5%, 8/1/13 500,000 490,625
Aaa AAA Franklin County (FGIC Insured),
6.5%, 7/15/12 300,000 315,750
Aa AA- Hampton, 6%, 1/15/08 500,000 525,625
A A Henry County, 6%, 7/15/14 500,000 513,750
Aaa AAA Leesburg (AMBAC Insured), 5.6%,
6/1/15 500,000 495,625
Aaa AAA Newport News (MBIA Insured),
5.5%, 7/1/10 500,000 506,250
Aaa AAA Norfolk (MBIA Insured), 5.75%,
6/1/13 500,000 500,625
Baa1 A Puerto Rico Commonwealth, 6.3%,
7/1/09 1,000,000 1,052,500
A1 AA Richmond, 5.5%, 1/15/22 200,000 185,250
A1 AA Richmond, 6.25%, 1/15/18 750,000 767,813
Aa AA Virginia Beach, 6.2%, 9/1/13 500,000 525,625
Aa AA Virginia Beach, 5.85%, 11/1/13 350,000 354,375
Aa AA Winchester, 5.5%, 1/15/14 1,000,000 975,000
HOSPITAL: 6.1%
Aaa AAA Danville Industrial Development
Authority, Hospital Revenue
(Danville Regional Medical
Center) (FGIC Insured),
6.375%, 10/1/14 500,000 524,375
Aa AA Norfolk Industrial Development
Authority, Hospital Revenue
(Sentara Hospital),
6.5%, 11/1/13 1,000,000 1,048,750
Aaa AAA Roanoke Industrial Development
Authority, Hospital Revenue
(Roanoke Memorial Hospitals)
(MBIA Insured), 6.125%,
7/1/17 500,000 523,750
HOUSING: 3.0%
Aa1 AA+ Virginia State Housing Development
Authority, Mortgage Revenue
(AMT), 6.95%, 1/1/10 1,000,000 1,045,000
INDUSTRIAL DEVELOPMENT: 5.1%
A2 A Louisa Industrial Development
Authority, Pollution Control
Revenue, 5.45%, 1/1/24 200,000 184,000
Baa3 BBB-Peninsula Ports Authority, Coal
Terminal Revenue, 7.375%,
6/1/20 1,000,000 1,063,750
A1 A Puerto Rico, Industrial Revenue
(Pepsico, Inc.), 6.25%,
11/15/13 500,000 530,000
LEASING AND OTHER FACILITIES: 9.7%
Aa AA Fairfax County Economic Development
Authority, Lease Revenue, 5.5%,
5/15/18 500,000 477,500
nr BBB Fairfax County Park Authority,
Facilities Revenue, 6.625%,
7/15/14 500,000 510,625
nr A- Prince William County Park
Authority, Revenue, 6.875%,
10/15/16 500,000 531,875
A nr Prince William County Park
Authority, Revenue, 7.5%,
7/15/20 450,000 507,375
Aaa AAA Riverside Regional Jail Authority,
Jail Facilities Revenue (MBIA
Insured), 6%, 7/1/25 250,000 252,187
Aa AA Virginia State Public Building
Authority, Building Revenue,
6%, 8/1/08 500,000 530,625
Aa AA Virginia State Public Building
Authority, Building Revenue,
6.25%, 8/1/12 500,000 545,625
TRANSPORTATION: 11.9%
Aaa AAA Chesapeake Bay Bridge and Tunnel
Commission, Highway Revenue
(MBIA Insured), 5.25%, 7/1/19 500,000 463,125
Aaa AAA Richmond Metropolitan Authority,
Expressway Revenue (FGIC
Insured), 6.375%, 7/15/16 1,000,000 1,040,000
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%, 5/15/13 500,000 495,625
Aaa AAA Washington D.C. Metropolitan
Area Transportation Authority,
Transit Revenue (FGIC Insured),
6%, 7/1/07 1,000,000 1,067,500
See Notes to Portfolios of Investments.
<PAGE>
Virginia Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
WASTE: 7.5%
A1 A+ Fairfax County Economic
Development Authority,
Revenue (Ogden Martin Systems)
(AMT), 7.75%, 2/1/11 $500,000 $543,750
A1 AA- Henrico County, Water and Sewer
Revenue, 6.25%, 5/1/13 500,000 513,750
Aaa AAA Loudoun County Sanitation
Authority, Water and Sewer
Revenue (FGIC Insured),
6.25%, 1/1/16 500,000 525,625
nr A+ Roanoke Valley, Solid Waste
System Revenue, 5.75%, 9/1/12 770,000 760,375
Baa3 BBB West Point Industrial Development
Authority, Waste Revenue
(Chesapeake Corporation),
6.25%, 3/1/19 250,000 252,187
WATER: 8.7%
Aa AA- Fairfax County Water Authority,
Water Revenue, 6%, 4/1/22 1,500,000 1,516,875
Aaa AAA Frederick-Winchester Service
Authority, Sewer Revenue
(AMBAC Insured), 5.75%,
10/1/15 1,000,000 1,001,250
Aaa AAA Norfolk, Water Revenue (MBIA
Insured), 5.75%, 11/1/12 500,000 504,375
TOTAL INVESTMENTS (Cost $32,805,737)+ $33,856,850
National Portfolio
Portfolio of Investments - March 31, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
LONG-TERM MUNICIPAL BONDS:
97.9% of Net Assets
ARIZONA: 3.5%
Aa AA Arizona State Transportation
Board, Highway Revenue,
6%, 7/1/08 $1,000,000 $1,082,500
CALIFORNIA: 3.4%
Aaa AAA San Jose Redevelopment Agency,
Tax Allocation (MBIA Insured),
6%, 8/1/09 1,000,000 1,058,750
DISTRICT OF COLUMBIA: 3.5%
Aaa AAA Metropolitan Washington D.C.
Airports Authority, Airport
Revenue (MBIA Insured) (AMT),
6.625%, 10/1/19 1,000,000 1,062,500
HAWAII: 5.3%
Aaa AAA Hawaii, Airport Revenue (FGIC
Insured) (AMT), 7%, 7/1/20 1,500,000 1,642,500
ILLINOIS: 1.1%
Aaa AAA Regional Transportation
Authority, Transit Revenue
(AMBAC Insured), 7.2%,
11/1/20 300,000 348,375
IOWA: 3.5%
Aaa AAA Mason City, Hospital Facilities
Revenue (Sisters of Mercy)
(FSA Insured), 7%, 8/15/14 1,000,000 1,086,250
KANSAS: 1.7%
Aa AA Kansas State Department of
Transportation, Highway
Revenue, 6.125%, 9/1/09 500,000 533,125
LOUISIANA: 5.1%
Aaa AAA Louisiana, General Obligation
(MBIA Insured), 6%, 5/15/15 500,000 508,125
Aaa AAA Louisiana State Energy and Power
Authority, Power Revenue
(Rodemacher Unit Number Two)
(FGIC Insured), 6.75%,
1/1/08 1,000,000 1,075,000
See Notes to Portfolios of Investments.
<PAGE>
National Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
MAINE: 1.6%
Aaa AAA Maine State Turnpike Authority,
Turnpike Revenue (MBIA
Insured), 6%, 7/1/18 $500,000 $506,250
MARYLAND: 1.7%
Aa nr Montgomery County, Single-Family
Mortgage Revenue, 6.65%,
7/1/17 500,000 516,250
MASSACHUSETTS: 5.4%
A1 A+ Massachusetts Bay Transportation
Authority, Transit Revenue, 7%,
3/1/14 1,000,000 1,148,750
Aa AA- Massachusetts, State Water
Pollution Abatement, 6.25%,
2/1/11 500,000 525,000
MICHIGAN: 2.7%
nr AA+ Michigan State Housing Development
Authority, Single-Family
Mortgage Revenue (AMT),
7.75%, 12/1/19 790,000 822,588
MISSISSIPPI: 4.2%
Aaa AAA Harrison County Wastewater
Management District, Sewer
Revenue (Wastewater Treatment
Facilities) (FGIC Insured),
8.5%, 2/1/13 500,000 668,750
Aaa AAA Harrison County Wastewater
Management District, Sewer
Revenue (Wastewater Treatment
Facilities) (FGIC Insured),
7.75%, 2/1/14 500,000 622,500
NEVADA: 1.7%
Aaa AAA Washoe County, Gas and Water
Facilities Revenue (AMBAC
Insured), 6.3%, 12/1/14 500,000 513,750
NEW JERSEY: 1.7%
Baa1 BBB+New Jersey State Turnpike
Authority, Highway Revenue,
6.5%, 1/1/16 500,000 526,875
NEW YORK: 1.6%
Baa1 BBB+New York, General Obligation,
6%, 2/15/15 500,000 480,625
PENNSYLVANIA: 8.8%
Aaa AAA Lehigh County, Hospital Revenue
(Lehigh Valley Hospital) (MBIA
Insured), 7%, 7/1/16 1,000,000 1,138,750
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 1,022,500
RHODE ISLAND: 1.7%
Aa1 AA Rhode Island State Health and
Higher Educational Facilities,
University Revenue (Brown
University), 6.75%, 9/1/16 500,000 518,750
SOUTH CAROLINA: 3.6%
Aaa AAA Piedmont Municipal Power Agency,
Electric Revenue (FGIC Insured),
6.5%, 1/1/16 1,000,000 1,096,250
TEXAS: 16.2%
Aaa AAA Conroe Independent School
District, General Obligation
(PSFG Insured), 6.4%, 8/1/10 475,000 500,531
Aa AA Harris County, General
Obligation, 6.5%, 8/15/15 1,000,000 1,082,500
Aaa AAA Lower Colorado River Authority,
Electric Revenue (FSA
Insured), 6%, 1/1/16 500,000 511,250
Aaa AAA Texas Public Building Authority,
Building Revenue (MBIA Insured),
7.125%, 8/1/11 1,500,000 1,741,875
Aaa AAA United Independent School
District, General Obligation
(PSFG Insured), 7%, 8/15/05 1,000,000 1,155,000
See Notes to Portfolios of Investments.
<PAGE>
Credit Rating* Principal
Moody's S&P Amount Value
VIRGINIA: 9.6%
Aaa AAA Chesapeake Bay Bridge and
Tunnel Commission, Highway
Revenue (MBIA Insured)
5.25%, 7/1/19 $500,000 $463,125
Aa AA Fairfax County Economic
Development Authority, Lease
Revenue, 5.5%, 5/15/14 500,000 485,000
nr A- Prince William County Park
Authority, Revenue, 6.875%,
10/15/16 500,000 531,875
A1 AA Richmond, General Obligation,
6.25%, 1/15/21 500,000 541,875
Aa AA Virginia Beach, General
Obligation, 6.2%, 9/1/13 500,000 525,625
Aa AA+ Virginia State Housing
Development Authority,
Multifamily Housing Revenue,
6.65%, 11/1/13 400,000 415,500
WASHINGTON: 8.6%
A1 AA- Port Seattle, Revenue (AMBAC
Insured) (AMT), 7.6%, 12/1/09 500,000 562,500
A1 A+ Snohomish County Public Utility
District, Electric Revenue,
7%, 1/1/16 1,000,000 1,061,250
Aa AA Washington, General Obligation,
6%, 9/1/20 500,000 509,375
Aa AA Washington State Public Power
Supply System, Power Revenue
(Nuclear Project Number Three),
6.5%, 7/1/18 500,000 515,625
WYOMING: 1.7%
Aaa AAA Wyoming Municipal Power Agency
Authority, Electric Revenue
(MBIA Insured), 6.125%,
1/1/16 500,000 510,000
TOTAL LONG-TERM MUNICIPAL BONDS
(Cost $29,459,596) $30,148,869
SHORT-TERM MUNICIPAL BONDS:
0.3% of Net Assets
MISSOURI: 0.3%
VMIG1A-1 Kansas City Industrial Development
Authority, Hospital Revenue
(Research Health Services
Systems) (MBIA Insured),
3.9%, 10/15/14^ 100,000 100,000
TOTAL SHORT-TERM MUNICIPAL BONDS (Cost $100,000) 100,000
TOTAL INVESTMENTS (Cost $29,559,596)+ $30,248,869
Money Market Portfolio
Portfolio of Investments - March 31, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
SHORT-TERM MUNICIPAL SECURITIES:
95.7% of Net Assets
CALIFORNIA: 4.5%
MIG1 Sp1+California School Cash Reserve
Program Authority, Property
Tax Revenue (LOC - Industrial
Bank of Japan), 4.75%,
7/3/96 $400,000 $400,824
FLORIDA: 1.5%
#Aaa AA Florida State Board of Education,
General Obligation, 7.25%,
6/1/10 * 125,000 128,240
GEORGIA: 4.5%
VMIG1 nr Marietta Housing Authority,
Multifamily Revenue (Falls
at Bells Ferry) (LOC - Guardian
S&L, Houston), 3.55%,
1/15/09^ 400,000 400,000
See Notes to Portfolios of Investments.
<PAGE>
Money Market Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
KANSAS: 4.5%
P-1 A-1+Burlington, Pollution Control
Revenue (Kansas City Power
and Light) (LOC - Duetsche
Bank A.G.), 3.25%, 10/1/17 ^ $400,000 $400,000
LOUISIANA: 9.1%
VMIG1 AAALouisiana Public Facilities
Authority, Hospital Revenue
(Willis-Knighton) (AMBAC
Insured), 3.5%, 9/1/23 ^ 300,000 300,000
VMIG1A-1+New Orleans Aviation Board,
Airport Revenue (MBIA
Insured), 3.35%, 8/1/16 ^ 400,000 400,000
Aa3 A-1+West Feliciana Parish, Pollution
Control Revenue (Gulf States
Utilities) (LOC - Canadian
Imperial Bank), 3.8%,
12/1/15 ^ 100,000 100,000
MARYLAND: 2.3%
Aaa AAA Gaithersburg, Hospital Revenue
(Shady Grove Adventist) (FSA
Insured), 4%, 9/1/96 200,000 200,406
MINNESOTA: 2.3%
VMIG1 nr Minnesota State Higher Education
(Student Loan Revenue), 3.3%,
12/1/00 ^ 200,000 200,000
MISSOURI: 4.5%
nr A-1+ Independence Industrial Development
Authority, Industrial Revenue
(Resthaven) (LOC - Credit
Local de France), 3.35%,
2/1/25 ^ 400,000 400,000
NEBRASKA: 4.5%
VMIG1 AAANebraska Higher Education Loan
Program, Student Loan Revenue
(MBIA Insured), 3.35%,
12/1/15 ^ 400,000 400,000
NEW MEXICO: 8.2%
Aaa AAA Farmington, Utility Revenue
(FGIC Insured), 9.75%,
5/15/13 * 315,000 322,281
VMIG1 nr Santa Fe, Single-Family Mortgage
Revenue (GNMA/FNMA
Collateralized), 4%, 11/1/28 *400,000 401,168
NEW YORK: 4.5%
VMIG1 AAATriborough Bridge and Tunnel
Authority, Highway Revenue
(MBIA Insured), 2%, 1/1/04 ^ 400,000 400,000
NORTH CAROLINA: 13.0%
VMIG1A-1+North Carolina Medical Care
Commission, Hospital Revenue
(MBIA Insured), 3.35%,
12/1/25 ^ 300,000 300,000
Aaa AAA North Carolina State, General
Obligation, 4.5%, 6/1/96 100,000 100,169
VMIG1 nr University of North Carolina,
University Revenue (Kenan
Memorial Stadium) (LOC -
Wachovia Bank and Trust),
3.3%, 11/1/07 ^ 250,000 250,000
nr A-1+Winston-Salem, Floating Risk
Acceptance Management
Corporation (Certificate of
Participation), 3.4%, 7/1/09 ^500,000 500,000
PENNSYLVANIA: 2.9%
Aaa AAA Pennsylvania Industrial
Development Authority, Economic
Development Revenue (AMBAC Insured),
5%, 7/1/96 250,000 250,603
SOUTH CAROLINA: 4.7%
Aaa AA+ South Carolina, General
Obligation, 6.5%, 2/1/97 400,000 410,212
TENNESSEE: 4.5%
Aaa AA+ Tennessee State, General
Obligation, 4.25%, 6/1/96 400,000 400,504
See Notes to Portfolio of Investments.
<PAGE>
Money Market Portfolio
Portfolio of Investments - March 31, 1996 (continued)
Credit Rating* Principal
Moody's S&P Amount Value
TEXAS: 9.1%
VMIG1A-1+Port Development Corporation,
Marine Terminal Revenue (Stolt
Terminals) (LOC - Credit Suisse,
N.Y.), 3.3%, 1/15/14 ^ $400,000 $400,000
nr A-1+ San Antonio Housing Finance
Corporation (Cape Cod
Apartments) (LOC - Landesbank
Hessen, NY) (AMT), 3.45%,
6/1/20 ^ 400,000 400,000
UTAH: 4.5%
VMIG1A-1+Salt Lake City, Airport Revenue
(LOC - Credit Suisse, N.Y.)
(AMT), 3.4%, 6/1/98 ^ 400,000 400,000
VIRGINIA: 2.6%
Aaa AAA Fairfax County, General
Obligation, 6.3%, 11/1/96 125,000 127,082
Aaa AAA Southeastern Public Service
Authority, Resource Recovery
Revenue (BIG Insured), 6.4%,
7/1/96 100,000 100,715
WASHINGTON: 4.0%
nr A-1+Port Kalama, Port Facilities
Revenue (Conagra) (LOC - Morgan
Guaranty Trust), 3.25%,
1/1/04 ^ 50,000 50,000
nr A-1+Washington State Housing Finance
Commission, Multifamily Mortgage
Revenue (LOC - Pacific First
Federal Savings), 3.5%,
7/1/20 ^ 300,000 300,000
TOTAL INVESTMENTS (Cost $8,442,611)+ $8,442,204
Notes to Portfolio of Investments:
* Putable before final maturity
+ Aggregate cost and net unrealized appreciation
(depreciation) of investments for federal income
tax purposes are as follows:
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Aggregate cost $8,729,341 $2,551,551 $10,703,072
Gross unrealized
appreciation $ 392,196 $ 45,386 $ 371,981
Gross unrealized
depreciation 4,299 13,887 82,759
Net unrealized appreciation
(depreciation) $ 387,897 $ 31,499 $ 289,222
Money
Virginia National Market
Portfolio Portfolio Portfolio
Aggregate cost $32,805,737 $29,559,596 $ 8,442,611
Gross unrealized
appreciation $ 1,190,697 $ 872,079 $ 1,556
Gross unrealized
depreciation 139,584 182,806 1,963
Net unrealized appreciation
(depreciation $ 1,051,113 $ 689,273 $ (407)
^ Security has a variable coupon rate and is putable
before final maturity. Coupon rate as of March 31,
1996
#Aaa Refunded Bonds
AMBAC American Municipal Bond Assurance Corporation
AMT Subject to Alternative Minimum Tax
BIG 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
PSFG Permanent School Fund Guaranty
S&P Standard & Poor's Corporation
<PAGE>
Statements of Assets and Liabilities
March 31, 1996
(Unaudited)
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
ASSETS
Investments, at cost $8,729,341 $2,551,551 $10,703,072
Investments, at value
(Note 1) $9,117,238 $2,583,050 $10,992,294
Cash 83,371 121,912 181,944
Receivables
Investment securities
sold -- -- --
Interest 144,981 42,779 163,443
Capital shares sold -- -- --
Share subscriptions
receivable (Note 1) -- -- --
Other assets -- -- 2
Total assets 9,345,590 2,747,741 11,337,683
LIABILITIES
Payables
Investment securities
purchased -- -- --
Dividends 10,014 711 6,426
Capital shares redeemed 121 500 --
Shares reserved for
subscription (Note 1) -- -- --
Other liabilities 2 20 --
Total liabilities 10,137 1,231 6,426
NET ASSETS (Note 4) $9,335,453 $2,746,510 $11,331,257
CAPITAL SHARES
OUTSTANDING 918,342 282,376 1,109,685
NET ASSET VALUE PER SHARE $10.166 $9.726 $10.211
Money
Virginia National Market
Portfolio Portfolio Portfolio
ASSETS
Investments, at cost $32,805,737 $29,559,596 $8,442,611
Investments, at value
(Note 1) $33,856,850 $30,248,869 $8,442,204
Cash 197,572 132,371 302,740
Receivables
Investment securities
sold 501,487 -- --
Interest 606,945 437,487 76,361
Capital shares sold -- -- 16
Share subscriptions
receivable (Note 1) 1,350 200 1,000
Other assets 196 -- --
Total assets 35,164,400 30,818,927 8,822,321
LIABILITIES
Payables
Investment securities
purchased 537,645 -- --
Dividends 18,242 8,887 636
Capital shares redeemed 12,395 -- --
Shares reserved for
subscription (Note 1) 1,350 200 1,000
Other liabilities 47 100 31
Total liabilities 569,679 9,187 1,667
NET ASSETS (Note 4) $34,594,721 $30,809,740 $8,820,654
CAPITAL SHARES
OUTSTANDING 3,097,299 3,000,109 8,821,232
NET ASSET VALUE PER
SHARE $11.169 $10.270 $1.000
Statements of Operations
For the Six Months Ended March 31, 1996
(Unaudited)
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
INVESTMENT INCOME
(Note 1)
Interest income $279,003 $73,588 $317,915
EXPENSES (Notes 3 and 4)
Investment advisory fee30,722 8,902 36,037
Custodian fees 2,946 2,200 4,865
Professional fees 4,582 2,376 4,920
Salaries and related
expenses 15,935 5,990 18,851
Securities registration
and blue sky expenses 566 1,008 916
Telephone expense 955 359 1,132
Data processing and
office equipment
expense 6,888 4,915 7,451
Office and
miscellaneous expenses 3,419 1,560 3,519
Depreciation and
amortization 445 167 524
Custodian fees paid
indirectly (1,326) (1,594) (2,969)
Expenses incurred and
paid by investment
adviser -- (8,902) --
Total expenses 65,132 16,981 75,246
NET INVESTMENT INCOME 213,871 56,607 242,669
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain
on investments 22,147 3,431 67,446
Net unrealized
appreciation
(depreciation) 38,914 (4,447) 25,762
NET GAIN (LOSS) ON
INVESTMENTS 61,061 (1,016) 93,208
TOTAL INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $274,932 $55,591 $335,877
Money
Virginia National Market
Portfolio Portfolio Portfolio
INVESTMENT INCOME
(Note 1)
Interest income $981,304 $877,366 $149,828
EXPENSES (Notes 3 and 4)
Investment advisory
fee 108,117 100,364 21,592
Custodian fees 9,180 8,846 3,881
Professional fees 11,789 11,399 3,579
Salaries and related
expenses 51,037 47,783 11,530
Securities registration
and blue sky expenses 264 5,000 3,004
Telephone expense 3,067 2,865 694
Data processing and
office equipment
expense 18,830 16,632 3,876
Office and
miscellaneous
expenses 10,072 9,294 2,561
Depreciation and
amortization 1,421 1,333 322
Custodian fees paid
indirectly (4,024) (4,014) (2,719)
Expenses incurred and
paid by investment
adviser -- -- (13,341)
Total expenses 209,753 199,502 34,979
NET INVESTMENT INCOME 771,551 677,864 114,849
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain on
investments 243,017 231,505 --
Net unrealized
appreciation
(depreciation) (80,581) (12,844) 153
NET GAIN (LOSS) ON
INVESTMENTS 162,436 218,661 153
TOTAL INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS $933,987 $896,525 $115,002
The Notes to Financial Statements are an integral part of these statements,
<PAGE>
Statements of Changes in Net Assets
Arizona Portfolio
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) Sept. 30, 1995
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 213,871 $ 465,682
Net realized gain (loss)
on investments 22,147 (270,014)
Net unrealized appreciation
(depreciation)of investments38,914 636,688
Total increase in net assets
resulting from operations 274,932 832,356
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (213,871) (465,682)
CAPITAL SHARE TRANSACTIONS
(Note 6) (734,333) (2,172,806)
TOTAL DECREASE IN NET
ASSETS (673,272) (1,806,132)
NET ASSETS
Beginning of period 10,008,725 11,814,857
End of period $ 9,335,453 $10,008,725
Maryland Portfolio
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) Sept. 30, 1995
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 56,607 $ 131,139
Net realized gain (loss)
on investments 3,431 (30,774)
Net unrealized appreciation
(depreciation) of
investments (4,447) 153,130
Total increase in net assets
resulting from operations 55,591 253,495
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (56,607) (131,139)
CAPITAL SHARE TRANSACTIONS
(Note 6) (132,595) (324,850)
TOTAL DECREASE IN NET
ASSETS (133,611) (202,494)
NET ASSETS
Beginning of period 2,880,121 3,082,615
End of period $2,746,510 $2,880,121
Missouri Portfolio
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) Sept. 30, 1995
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 242,669 $ 492,896
Net realized gain (loss)
on investments 67,446 (116,168)
Net unrealized appreciation
(depreciation) of
investments 25,762 537,355
Total increase in net assets
resulting from operations 335,877 914,083
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (242,669) (492,896)
CAPITAL SHARE TRANSACTIONS
(Note 6) (155,617) (517,675)
TOTAL DECREASE IN NET ASSETS (62,409) (96,488)
NET ASSETS
Beginning of period 11,393,666 11,490,154
End of period $11,331,257 $11,393,666
Virginia Portfolio
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) Sept. 30, 1995
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 771,551 $ 1,560,008
Net realized gain (loss)
on investments 243,017 (335,404)
Net unrealized appreciation
(depreciation) of
investments (80,581) 1,732,461
Total increase in net assets
resulting from operations 933,987 2,957,065
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (771,551) (1,560,008)
CAPITAL SHARE TRANSACTIONS
(Note 6) 609,932 (3,124,224)
TOTAL INCREASE (DECREASE)
IN NET ASSETS 772,368 (1,727,167)
NET ASSETS
Beginning of period 33,822,353 35,549,520
End of period $34,594,721 $33,822,353
National Portfolio
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) Sept. 30, 1995
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 677,864 $ 1,460,221
Net realized gain (loss)
on investments 231,505 (565,552)
Net unrealized appreciation
(depreciation) of
investments (12,844) 1,689,690
Total increase in net assets
resulting from operations 896,525 2,584,359
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (677,864) (1,460,221)
CAPITAL SHARE TRANSACTIONS
(Note 6) (2,143,314) (2,461,944)
TOTAL INCREASE (DECREASE)
IN NET ASSETS (1,924,653) (1,337,806)
NET ASSETS
Beginning of period 32,734,393 34,072,199
End of period $30,809,740 $32,734,393
Money Market Portfolio
Six Months Ended
March 31, 1996 Year Ended
(Unaudited) Sept. 30, 1995
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
Net investment income $ 114,849 $ 255,638
Net realized gain (loss)
on investments -- 105
Net unrealized appreciation
(depreciation) of
investments 153 2,310
Total increase in net assets
resulting from operations 115,002 258,053
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (114,954) (255,638)
CAPITAL SHARE TRANSACTIONS
(Note 6) 366,362 (464,511)
TOTAL INCREASE (DECREASE)
IN NET ASSETS 366,410 (462,096)
NET ASSETS
Beginning of period 8,454,244 8,916,340
End of period $8,820,654 $8,454,244
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each
period:
<TABLE>
<CAPTION>
Arizona Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C>
1996# 1995 1994 1993 1992 1991
Net asset
value
beginning
of period $10.113 9.706 11.208 10.568 10.187 9.703
Net
investment
income $0.223 0.440 0.436 0.490 0.528 0.569
Net
realized &
unrealized
gains
(losses) on
securities $0.053 0.407 (1.102) 0.786 0.434 0.484
Total from
investment
operations $0.276 0.847 (0.666) 1.276 0.962 1.053
Distributions
from net
investment
income $(0.223)(0.440)(0.436)(0.490)(0.528)(0.569)
Distributions
from capital
gains $ -- -- (0.400)(0.146)(0.053) --
Total
Distributions$(0.223)(0.440)(0.836)(0.636)(0.581)(0.569)
Net asset
value end
of period $10.166 10.113 9.706 11.208 10.568 10.187
Total
Return 5.45%** 8.95% (6.20)%12.57% 9.74% 11.11%
Net assets
at end of
period
(thousands) $ 9,335 10,009 11,815 15,471 11,911 8,061
Ratio of
expenses to
average net
assets*** 1.35%***1.31% 1.29% 1.23% 1.15% 0.47%
Net
investment
income to
average
net assets 4.34%**4.48% 4.23% 4.54% 5.14% 5.61%
Portfolio
turnover -- 24% 67% 63% 23% 57%
Maryland Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C>
1996# 1995 1994 1993#
Net asset
value
beginning
of period $ 9.738 9.323 10.441 10.000
Net
investment
income $ 0.197 0.418 0.455 0.274
Net
realized &
unrealized
gains
(losses) on
securities $(0.012) 0.415 (1.102) 0.441
Total from
investment
operations $0.185 0.833 (0.647) 0.715
Distributions
from net
investment
income $(0.197)(0.418)(0.455)(0.274)
Distributions
from capital
gains $ -- -- (0.016) --
Total
Distributions$(0.197)(0.418)(0.471)(0.274)
Net asset
value end
of period $ 9.726 9.738 9.323 10.441
Total
Return 3.76%** 9.17% (6.33)%11.91%**
Net assets
at end of
period
(thousands) $2,747 2,880 3,083 3,377
Ratio of
expenses to
average net
assets*** 1.31%***0.87% 0.64% 0.20%**
Net
investment
income to
average
net assets 3.99%** 4.42% 4.60% 4.72%**
Portfolio
turnover 15% 9% 78% 35%
* For the period from February 10, 1993 (inception)
to September 30, 1993.
Missouri Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C> <C>
1996# 1995 1994 1993 1992 1991
Net asset
value
beginning
of period $10.113 9.728 11.173 10.468 10.117 9.684
Net
investment
income $0.217 0.436 0.437 0.494 0.514 0.585
Net
realized &
unrealized
gains
(losses) on
securities $0.078 0.405 (1.058) 0.726 0.377 0.433
Total from
investment
operations $0.295 0.841 (0.621) 1.220 0.891 1.018
Distributions
from net
investment
income $(0.217)(0.436)(0.437)(0.494)(0.514)(0.585)
Distributions
from capital
gains $ -- -- (0.387)(0.021)(0.026) --
Total
Distributions$(0.217)(0.436)(0.824)(0.515)(0.540)(0.585)
Net asset
value end
of period $10.211 10.133 9.728 11.173 10.468 10.117
Total
Return 5.80%** 8.87% (5.80)%11.98% 9.06% 10.80%
Net assets
at end of
period
(thousands) $11,331 11,394 11,490 14,001 11,023 7,227
Ratio of
expenses to
average net
assets*** 1.35%***1.31% 1.29% 1.23% 1.18% 0.45%
Net
investment
income to
average
net assets 4.19%**4.43% 4.23% 4.59% 5.05% 5.85%
Portfolio
turnover 9% 16% 52% 65% 8% 33%
Virginia Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C>
1996# 1995 1994 1993 1992 1991
Net asset
value
beginning
of period $11.115 10.631 12.372 11.621 11.351 10.832
Net
investment
income $ 0.252 0.503 0.479 0.569 0.592 0.609
Net
realized &
unrealized
gains
(losses) on
securities $0.054 0.484 (1.146) 0.871 0.387 0.519
Total from
investment
operations $0.306 0.987 (0.667) 1.440 0.979 1.128
Distributions
from net
investment
income $(0.252)(0.503)(0.479)(0.569)(0.592)(0.609)
Distributions
from capital
gains $ -- -- (0.595)(0.120)(0.117) --
Total
Distributions$(0.252)(0.503)(1.074)(0.689)(0.709)(0.609)
Net asset
value end
of period $11.169 11.115 10.631 12.372 11.621 11.351
Total
Return 5.46%** 9.54% (5.67)%12.85% 8.92% 10.66%
Net assets
at end of
period
(thousands) $34,595 33,822 35,550 44,092 37,421 30,696
Ratio of
expenses to
average net
assets*** 1.23%***1.14% 1.18% 1.10% 1.13% 1.18%
Net
investment
income to
average
net assets 4.44%** 4.68% 4.23% 4.80% 5.20% 5.47%
Portfolio
turnover 16% 55% 104% 80% 74% 73%
National Portfolio*
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C>
1996# 1995 1994 1993 1992 1991
Net asset
value
beginning
of period $10.211 9.851 11.910 11.329 10.794 10.364
Net
investment
income $ 0.219 0.446 0.420 0.550 0.605 0.632
Net
realized &
unrealized
gains
(losses) on
securities $0.059 0.360 (1.122) 0.793 0.535 0.430
Total from
investment
operations $0.278 0.806 (0.702) 1.343 1.140 1.062
Distributions
from net
investment
income $(0.219)(0.446)(0.420)(0.550)(0.605)(0.632)(0.693)(0.728)
Distributions
from capital
gains $ -- -- (0.937)(0.212) -- --
Total
Distributions$(0.219)(0.446)(1.357)(0.762)(0.605)(0.632)
Net asset
value end
of period $10.270 10.211 9.851 11.910 11.329 10.794
Total
Return 5.43%** 8.40% (6.25)%12.44% 10.83% 10.50%
Net assets
at end of
period
(thousands) $30,810 32,734 34,072 42,483 41,273 40,352
Ratio of
expenses to
average net
assets*** 1.26%***1.18% 1.23% 1.10% 1.17% 1.24%
Net
investment
income to
average
net assets 4.21%** 4.49% 3.98% 4.83% 5.47% 5.95%
Portfolio
turnover 24% 56% 175% 212% 114% 91%
Money Market Portfolio
6-Months
Ended
Mar 31 Years ended September 30,
<C> <C> <C> <C> <C> <C>
1996# 1995 1994 1993 1992 1991
Net asset
value
beginning
of period $ 1.000 1.000 1.000 1.000 1.000 1.000
Net
investment
income $ 0.013 0.028 0.015 0.020 0.030 0.040
Net
realized &
unrealized
gains
(losses) on
securities $ -- -- -- -- -- --
Total from
investment
operations $ 0.013 0.028 0.015 0.020 0.030 0.040
Distributions
from net
investment
income $(0.013)(0.028)(0.015)(0.020)(0.030)(0.040)(0.050)(0.050)
Distributions
from capital
gains $ -- -- -- -- -- --
Total
distributions$(0.013)(0.028)(0.015)(0.020)(0.030)(0.040)
Net asset
value end
of period $ 1.000 1.000 1.000 1.000 1.000 1.000
Total
Return 2.66%**2.87% 1.56% 1.53% 2.57% 4.13%
Net assets
at end of
period
(thousands) $8,821 8,454 8,916 13,391 14,861 17,844
Ratio of
expenses to
average net
assets*** 0.87%***0.81% 0.81% 0.81% 0.83% 0.81%
Net
investment
income to
average
net assets 2.65%** 2.83% 1.52% 1.52% 2.55% 4.12%
Portfolio
turnover -- -- -- -- -- --
# For the six months ended March 31, 1996 (unaudited)
## For the period from February 10, 1993 (inception) to
September 30, 1993
** Annualized
*** For the six months ended March 31, 1996, ratio reflects
custodian fees paid indirectly (Note 3).
</TABLE>
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
GIT Tax-Free Trust
Notes to Financial Statements
March 31, 1996
(Unaudited)
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: 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.
Additional distributions will be made if necessary.
Income Tax: 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. 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.
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.
Use of Estimates: The preparation of the financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and reported amounts of increases and decreases
in net assets from operations during the reporting period.
Actual results could differ from those estimates.
2. Investment Advisory Fees 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
<PAGE>
Notes to Financial Statements (continued)
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 six months ended March 31, 1996, BFIMC waived $8,902
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 six months ended March 31, 996, outside
trustee fees were $1,000 for each portfolio. As of March
31, 1996, certain officers, trustees, companies and
individuals affiliated with the Trust had investments
aggregating 0.2%, 0.3% and 0.5% of the National, Arizona and
Money Market Portfolios' shares outstanding, respectively.
As of March 31, 1996, 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 six months ended March 31, 1996, expenses of $34,410 for
the Arizona Portfolio; $16,981 for the Maryland Portfolio;
$39,209 for the Missouri Portfolio; $101,636 for the
Virginia Portfolio; $99,138 for the National Portfolio; and
$13,387 for the Money Market Portfolio have been reimbursed
to BFIMC under the Services Agreement. As of March 31,
1996, expenses of $14,970 for the Arizona Portfolio; $4,470
for the Maryland Portfolio; and $4,509 for the Missouri
Portfolio have been incurred by BFIMC on behalf of the
portfolios, the billings of which have been deferred. For
the six months ended March 31, 1996, BFIMC incurred expenses
of $13,341 on behalf of the Money Market Portfolio, the
billing of which has been waived.
Custodian fees are reduced under an expense offset
arrangement with the Trust's Custodian. The amount of the
expense offset for the year ended March 31, 1996 was $1,326
for the Arizona Portfolio; $1,594 for the Maryland
Portfolio; $2,969 for the Missouri Portfolio; $4,024 for the
Virginia Portfolio; $4,014 for the National Portfolio; and
$2,719 for the Money Market Portfolio.
<PAGE>
Notes to Financial Statements (continued)
Had BFIMC not waived the billing advisory fees 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
expense to net investment
Year ended average net income to average
September 30 assets*** net assets
Arizona Portfolio 1991 1.20% 4.88%
Maryland
Portfolio** 1996## 1.93%* 3.36%*
1995 1.50 3.80
1994 1.34 3.90
1993# 1.74* 3.18*
Missouri Portfolio 1991 1.28% 5.02%
Money Market
Portfolio 1996## 1.18%* 2.34%*
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
* Annualized
# For the period from February 10, 1993 (inception) to
September 30, 1993
** For the periods ended September 30, 1994 and 1993,
ratios include expenses of which the billing has
been deferred.
## For the six months ending March 31, 1996
*** For the six months ended March 31, 1996, the ratio
reflects custodian fees paid indirectly.
4. Net Assets. At March 31, 1996, net assets included the following:
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Net paid in capital on
shares of beneficial
interest $9,509,839 $2,895,647 $11,315,388
Accumulated net realized
losses (562,282) (180,636) (273,353)
Net unrealized appreciation
(depreciation)
of investments 387,896 31,499 289,222
Total net assets $9,335,453 $2,746,510 $11,331,257
Money
Virginia National Market
Portfolio Portfolio Portfolio
Net paid in capital on
shares of beneficial
interest $34,759,381 $32,145,467 $8,821,232
Accumulated net realized
losses (1,215,773) (2,024,999) (171)
Net unrealized appreciation
(depreciation)
of investments 1,051,113 689,272 (407)
Total net assets $34,594,721 $30,809,740 $8,820,654
5. Investment Transactions. Purchases and sales of
securities other than short-term securities, for the six
months ended March 31, 1996, were as follows:
Arizona Maryland Missouri
Portfolio Portfolio Portfolio
Purchases -- $414,279 $1,119,056
Sales $510,545 555,319 969,471
Virginia National
Portfolio Portfolio
Purchases $5,954,254 $7,511,626
Sales 5,291,300 8,690,182
<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 were as follows:
Arizona Portfolio
Six Months Ended Year Ended
March 31, 1996 September 30, 1995
In Dollars
Shares sold $ 504,114 $ 1,043,837
Shares issued in
reinvestment
of dividends 152,637 325,705
Total shares issued 656,751 1,369,542
Shares redeemed (1,391,084) (3,542,348)
Net decrease $ (734,333) (2,172,806)
In Shares
Shares sold 48,930 105,634
Shares issued in
reinvestment
of dividends 14,818 33,184
Total shares issued 63,748 138,818
Shares redeemed (135,053) (366,427)
Net decrease (71,305) (227,609)
Maryland Portfolio
Six Months Ended Year Ended
March 31, 1996 September 30, 1995
In Dollars
Shares sold $ 443,611 $ 839,221
Shares issued in
reinvestment
of dividends 122,234 205,051
Total shares issued 961,455 722,643
Shares redeemed (628,396) (1,286,305)
Net decrease $ (132,595) $ (324,850)
In Shares
Shares sold 44,902 89,232
Shares issued in
reinvestment
of dividends 5,277 12,957
Total shares issued 50,179 102,189
Shares redeemed (63,552) (137,100)
Net decrease (13,373) (34,911)
Missouri Portfolio
Six Months Ended Year Ended
March 31, 1996 September 30, 1995
In Dollars
Shares sold $ 517,592 $ 1,645,931
Shares issued in
reinvestment
of dividends 205,051 408,754
Total shares issued 722,643 2,054,685
Shares redeemed (878,260) (2,572,360)
Net decrease $ (155,617) $ (517,675)
In Shares
Shares sold 50,051 166,322
Shares issued in
reinvestment
of dividends 19,760 41,558
Total shares issued 69,811 207,880
Shares redeemed (84,520) (264,672)
Net decrease (14,709) (56,792)
Virginia Portfolio
Six Months Ended Year Ended
March 31, 1996 September 30, 1995
In Dollars
Shares sold $ 2,764,540 $ 4,967,609
Shares issued in
reinvestment
of dividends 661,729 1,335,773
Total shares issued 3,426,269 6,303,382
Shares redeemed (2,816,337) (9,427,606)
Net increase (decrease)$ 609,932 $ (3,124,224)
In Shares
Shares sold 244,372 463,732
Shares issued in
reinvestment
of dividends 58,265 124,012
Total shares issued 302,637 587,744
Shares redeemed (248,392) (888,537)
Net increase (decrease) 54,245 (300,793)
National Portfolio
Six Months Ended Year Ended
March 31, 1996 September 30, 1995
In Dollars
Shares sold $ 1,432,279 $ 3,422,847
Shares issued in
reinvestment
of dividends 615,502 1,307,981
Total shares issued 2,047,781 4,730,828
Shares redeemed (4,191,095) (7,192,772)
Net increase (decrease)$ (2,143,314) $ (2,461,944)
In Shares
Shares sold 137,223 344,542
Shares issued in
reinvestment
of dividends 58,966 131,677
Total shares issued 196,189 476,219
Shares redeemed (401,920) (729,127)
Net increase (decrease) (205,731) (252,908)
Money Market Portfolio
Six Months Ended Year Ended
March 31, 1996 September 30, 1995
In Dollars
Shares sold $ 3,740,570 $ 8,322,074
Shares issued in
reinvestment
of dividends 110,273 244,526
Total shares issued 3,850,843 8,566,600
Shares redeemed (3,484,481) (9,031,111)
Net increase (decrease)$ 366,362 $ (464,511)
In Shares
Shares sold 3,740,570 8,322,074
Shares issued in
reinvestment
of dividends 110,273 244,526
Total shares issued 3,850,843 8,566,600
Shares redeemed (3,484,481) (9,031,111)
Net increase (decrease) 366,362 (464,511)
<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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORMS NSAR, THE REGISTRANT'S ANNUAL REPORT AND ITS PROSPECTUS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SOURCE MATERIALS.
</LEGEND>
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 1
<NAME> TAX-FREE MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 8,882,611
<INVESTMENTS-AT-VALUE> 8,442,204
<RECEIVABLES> 77,377
<ASSETS-OTHER> 302,740
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,822,321
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,667
<TOTAL-LIABILITIES> 1,667
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,821,232
<SHARES-COMMON-STOCK> 8,821,232
<SHARES-COMMON-PRIOR> 8,454,870
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (171)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (407)
<NET-ASSETS> 8,820,654
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 149,828
<OTHER-INCOME> 0
<EXPENSES-NET> 34,979
<NET-INVESTMENT-INCOME> 114,849
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 153
<NET-CHANGE-FROM-OPS> 153
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 114,954
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,740,570
<NUMBER-OF-SHARES-REDEEMED> 3,484,481
<SHARES-REINVESTED> 110,273
<NET-CHANGE-IN-ASSETS> 366,362
<ACCUMULATED-NII-PRIOR> 105
<ACCUMULATED-GAINS-PRIOR> (114)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,592
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,979
<AVERAGE-NET-ASSETS> 8,673,775
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.013
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.013)
<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>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORMS NSAR, THE REGISTRANT'S ANNUAL REPORT AND ITS PROSPECTUS AND IS
QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH SOURCE MATERIALS.
</LEGEND>
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 2
<NAME> TAX-FREE NATIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 29,559,596
<INVESTMENTS-AT-VALUE> 30,248,869
<RECEIVABLES> 437,687
<ASSETS-OTHER> 132,371
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,818,927
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,187
<TOTAL-LIABILITIES> 9,187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,145,467
<SHARES-COMMON-STOCK> 3,000,109
<SHARES-COMMON-PRIOR> 3,205,840
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,024,999)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 689,272
<NET-ASSETS> 30,809,740
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 877,366
<OTHER-INCOME> 0
<EXPENSES-NET> 199,502
<NET-INVESTMENT-INCOME> 677,864
<REALIZED-GAINS-CURRENT> 231,505
<APPREC-INCREASE-CURRENT> (12,844)
<NET-CHANGE-FROM-OPS> 218,661
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 677,864
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,432,279
<NUMBER-OF-SHARES-REDEEMED> 4,191,095
<SHARES-REINVESTED> 615,502
<NET-CHANGE-IN-ASSETS> (2,143,314)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,256,504)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 100,364
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 199,502
<AVERAGE-NET-ASSETS> 32,234,790
<PER-SHARE-NAV-BEGIN> 10.211
<PER-SHARE-NII> 0.219
<PER-SHARE-GAIN-APPREC> 0.059
<PER-SHARE-DIVIDEND> (0.219)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.270
<EXPENSE-RATIO> 1.238
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORMS NSAR, THE REGISTRANT'S SEMI-ANNUAL AND ANNUAL REPORTS, AND ITS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SOURCE
DOCUMENTS.
</LEGEND>
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 3
<NAME> TAX-FREE VIRGINIA PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 32,805,737
<INVESTMENTS-AT-VALUE> 33,856,850
<RECEIVABLES> 1,109,782
<ASSETS-OTHER> 197,572
<OTHER-ITEMS-ASSETS> 196
<TOTAL-ASSETS> 35,164,400
<PAYABLE-FOR-SECURITIES> 537,645
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,034
<TOTAL-LIABILITIES> 569,679
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,759,381
<SHARES-COMMON-STOCK> 3,097,299
<SHARES-COMMON-PRIOR> 3,043,054
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,215,773)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,051,113
<NET-ASSETS> 34,594,721
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 981,304
<OTHER-INCOME> 0
<EXPENSES-NET> 209,753
<NET-INVESTMENT-INCOME> 771,551
<REALIZED-GAINS-CURRENT> 243,017
<APPREC-INCREASE-CURRENT> (80,581)
<NET-CHANGE-FROM-OPS> 162,436
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 771,551
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,764,540
<NUMBER-OF-SHARES-REDEEMED> 2,816,337
<SHARES-REINVESTED> 661,729
<NET-CHANGE-IN-ASSETS> 609,932
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,458,791)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 108,117
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 209,753
<AVERAGE-NET-ASSETS> 34,730,391
<PER-SHARE-NAV-BEGIN> 11.115
<PER-SHARE-NII> 0.252
<PER-SHARE-GAIN-APPREC> 0.054
<PER-SHARE-DIVIDEND> (0.252)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.169
<EXPENSE-RATIO> 1.208
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FROM NSAR, THE REGISTRANT'S SEMI-ANNUAL AND ANNUAL REPORT, AND ITS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
SOURCE DOCUMENTS.
</LEGEND>
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 6
<NAME> TAX-FREE MARYLAND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 2,551,551
<INVESTMENTS-AT-VALUE> 2,583,050
<RECEIVABLES> 42,779
<ASSETS-OTHER> 121,912
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,747,741
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,231
<TOTAL-LIABILITIES> 1,231
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,895,647
<SHARES-COMMON-STOCK> 282,376
<SHARES-COMMON-PRIOR> 295,749
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (180,636)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,499
<NET-ASSETS> 2,746,510
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 73,588
<OTHER-INCOME> 0
<EXPENSES-NET> 16,981
<NET-INVESTMENT-INCOME> 56,607
<REALIZED-GAINS-CURRENT> 3,431
<APPREC-INCREASE-CURRENT> (4,447)
<NET-CHANGE-FROM-OPS> (1,016)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 56,607
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 443,611
<NUMBER-OF-SHARES-REDEEMED> 628,396
<SHARES-REINVESTED> 52,190
<NET-CHANGE-IN-ASSETS> (132,595)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (184,066)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16,981
<AVERAGE-NET-ASSETS> 2,840,975
<PER-SHARE-NAV-BEGIN> 9.738
<PER-SHARE-NII> 0.197
<PER-SHARE-GAIN-APPREC> (0.012)
<PER-SHARE-DIVIDEND> (0.197)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.726
<EXPENSE-RATIO> 1.195
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORMS NSAR, THE REGISTRANT'S SEMI-ANNUAL AND ANNUAL REPORTS AND ITS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
SOURCE DOCUMENTS.
</LEGEND>
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 4
<NAME> TAX-FREE ARIZONA PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 8,729,341
<INVESTMENTS-AT-VALUE> 9,117,238
<RECEIVABLES> 144,981
<ASSETS-OTHER> 83,371
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,245,590
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,137
<TOTAL-LIABILITIES> 10,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,509,839
<SHARES-COMMON-STOCK> 918,342
<SHARES-COMMON-PRIOR> 989,647
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (562,282)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 387,896
<NET-ASSETS> 9,335,453
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 279,003
<OTHER-INCOME> 0
<EXPENSES-NET> 65,132
<NET-INVESTMENT-INCOME> 213,871
<REALIZED-GAINS-CURRENT> 22,147
<APPREC-INCREASE-CURRENT> 38,914
<NET-CHANGE-FROM-OPS> 61,061
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 213,871
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 504,114
<NUMBER-OF-SHARES-REDEEMED> 1,391,084
<SHARES-REINVESTED> 152,637
<NET-CHANGE-IN-ASSETS> (734,333)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (584,430)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30,722
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 65,132
<AVERAGE-NET-ASSETS> 9,863,820
<PER-SHARE-NAV-BEGIN> 10.113
<PER-SHARE-NII> 0.223
<PER-SHARE-GAIN-APPREC> 0.053
<PER-SHARE-DIVIDEND> (0.223)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.166
<EXPENSE-RATIO> 1.321
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORMS
NSAR, THE REGISTRANT'S SEMI-ANNUAL AND ANNUAL REPORTS, AND ITS PROSPECTUS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SOURCE DOCUMENTS.
</LEGEND>
<CIK> 0000703303
<NAME> GIT TAX-FREE TRUST
<SERIES>
<NUMBER> 5
<NAME> TAX-FREE MISSOURI PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 10,703,072
<INVESTMENTS-AT-VALUE> 10,992,294
<RECEIVABLES> 163,443
<ASSETS-OTHER> 181,944
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 11,337,683
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,426
<TOTAL-LIABILITIES> 6,426
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,315,388
<SHARES-COMMON-STOCK> 1,109,685
<SHARES-COMMON-PRIOR> 1,124,394
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (273,353)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 289,222
<NET-ASSETS> 11,331,257
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 317,915
<OTHER-INCOME> 0
<EXPENSES-NET> 75,246
<NET-INVESTMENT-INCOME> 242,669
<REALIZED-GAINS-CURRENT> 67,446
<APPREC-INCREASE-CURRENT> 25,762
<NET-CHANGE-FROM-OPS> 93,208
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 242,669
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 517,592
<NUMBER-OF-SHARES-REDEEMED> 878,260
<SHARES-REINVESTED> 205,051
<NET-CHANGE-IN-ASSETS> (155,617)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (340,800)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36,037
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75,246
<AVERAGE-NET-ASSETS> 11,580,126
<PER-SHARE-NAV-BEGIN> 10.133
<PER-SHARE-NII> 0.217
<PER-SHARE-GAIN-APPREC> 0.078
<PER-SHARE-DIVIDEND> (2.217)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.211
<EXPENSE-RATIO> 1.300
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
