GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Annual Report
September 30, 1996/Audited
GIT
GIT Investment Funds
<PAGE>
Management's Discussion of Fund Performance
November 15, 1996
Dear Shareholder:
The one-year period covered by this report was a relatively quiet one
for the bond markets. The 30-year U.S. Treasury bond, considered an
indicator of investors' level of concern with inflation, started the
period with a yield of 6.5% on September 29, 1995 and ended at 6.91% one
year later, having moved only between 7.19% and 5.95% in the interim.
Despite this stability, fund managers, investors and government
officials were no less obsessed with economic data than they had been in
previous years. The Federal Reserve Board lowered interest rates in
December and January in response to a sluggish economy. The economy
began to work up a head of steam late in the last quarter, and second
quarter growth in Gross Domestic Product was clocked at 4.7%. The third
quarter proved tamer, and the Fed determined that the threat of
inflation was not sufficient to warrant a rate increase.
Our response to this stable environment was to make only minimal changes
in our Tax-Free Trust portfolios. We continue to purchase high-quality
bonds, and average maturities of the long-term portfolios (all except
the Tax-Free Money Market Portfolio) have decreased slightly to between
16 and 18 years, to take advantage of higher yields available at that
point on the yield curve. In addition to monitoring interest rate trends
and credit quality, we are keeping a close eye on tax-reform proposals
which could have an impact on the municipal bond markets.
National Portfolio
Data shows that the domestic economy is growing at a moderate pace with
inflation in check. The plains and mountain states continue to outpace
the nation, but there are signs of a slowing of momentum. The economies
of Texas and other south central states continue to flourish, and growth
seems to be accelerating in the Northeast. In keeping with our
conservative investment policy for all the GIT Tax-Free Trust
portfolios, holdings in the National Portfolio maintained an average
rating of AA, and the fund's total return for the year was 5.17%.
Arizona Portfolio
Most of this portfolio's holdings are in the central Arizona corridor,
which includes Flagstaff, Phoenix and Tucson, an area which continues to
support a well-diversified service economy. The Arizona Portfolio has an
average credit rating of AA and a total return of 4.85% for the fiscal
year. The State of Arizona has no general obligation debt.
Missouri Portfolio
Missouri has a broad-based and diversified economy that is service-
sector dominated. Despite reductions in defense spending, employment
growth has been steady and unemployment low. Missouri has a long record
of responsible and conservative financial operations, as reflected by
the AA rating of its general obligation debt. The Missouri Portfolio
has an average credit rating of AA and a total return of 5.24% for the
fiscal year.
Maryland Portfolio
The state of Maryland has a diverse and balanced economic base, with a
lower-than-average dependence on manufacturing. The two shutdowns of the
federal government at the end of 1995 thwarted employment growth, and
the state was also hurt by declines in manufacturing and retailing.
Credit trends throughout the state are stable, and the State of
Maryland's general obligation debt is rated AAA. The portfolio's average
credit rating is AA, and its total return for the period was 3.96%.
Virginia Portfolio
The Commonwealth of Virginia has a broad and diverse economy. Although
the government shutdowns also hurt employment growth here as well,
Virginia's economic growth is expected to exceed that of the nation as a
whole. Conservative fiscal operations in most Virginia municipalities
have maintained low debt ratios, and the state's general obligation
bonds carry AAA rating. The average credit rating for our portfolio is
AA, and the total return was 5.5% for the fiscal year.
Money Market Portfolio
The portfolio continues to provide a high degree of liquidity and
safety. As of September 30, 1996, the fund's seven-day yield was 2.87%,
which is equivalent to a taxable yield of 4.49% for an investor in the
highest federal tax bracket. We continue to work to lower further the
Fund's overall expenses in an effort to increase realized yields.
We appreciate your confidence in GIT Investment Funds and reaffirm our
commitment to provide you with competitive returns to meet your
investment objectives.
Sincerely,
(signature)
Christopher C. Berberet
Vice President
Comparison of Changes in the Value of a $10,000 Investment and
the Lehman Municipal Bond Index
Depicted herein is a graphic presentation consisting of five charts
comparing the values of a $10,000 investment made to each of the portfolios
against the Lehman Municipal Bond Index. Through the use of line graphs,
the following information is presented:
Value (as of Sept. 30, 1996) of a $10,000 investment made on:
Sept. 30, 1985 in the National Portfolio: $18,075 compared to
$21,368 from the index. Average annual total return: 1 year -
5.17 percent; 5 years - 5.90 percent; 10 years - 6.10 percent.
October 31, 1989 in the Arizona Portfolio: $15,240 compared to
$17,106 from the index. Average annual total return: 1 year - 4.85
percent; 5 years - 5.77 percent; since inception Oct.13, 1989 - 6.15 percent.
February 28, 1993 in the Maryland Portfolio: $11,317 compared to
$12,151 from the index. Average annual total return: 1 year - 3.96
percent; since inception February 10, 1993 - 3.68 percent.
October 31, 1989 in the Missouri Portfolio: $15,097 compared to $17,106
from the index. Average annual total return: 1 year - 5.24 percent;
five years 5.68 percent; since inception October 12, 1989 - 6.00 percent.
October 31, 1987 in the Virginia Portfolio: $18,356 compared to $21,184
from the index. Average annual total retrun: 1 year - 5.50 percent;
5 years - 6.03 percent; since inception October 13, 1987 - 7.70 percent.
Past performance is not predictive of future performance.
Figures as of September 30, unless otherwise noted.
<PAGE>
Report of Ernst & Young LLP
Independent Auditors
To the Board of Trustees and Shareholders
of GIT Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the GIT Tax-Free Trust
(comprising, respectively, the Arizona, Maryland, Missouri, Virginia,
National and Money Market Portfolios) as of September 30, 1996, and the
related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1996, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios constituting the
GIT Tax-Free Trust at September 30, 1996, the results of their
operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and their financial
highlights for each of the periods presented therein, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
(signature)
Washington, DC
November 7, 1996
<PAGE>
Arizona Portfolio
Portfolio of Investments - September 30, 1996
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 97.2% of Net Assets
AIRPORT: 10.2%
Aa AA+ Phoenix Civic Improvement Corporation,
Airport Revenue, 6%, 7/1/07 $400,000 $422,000
Aaa AAA Tucson Airport Authority, Airport Revenue
(MBIA Insured), 5.7%, 6/1/13 500,000 501,250
EDUCATION: 4.7%
A nr Arizona Educational Loan Marketing Corporation,
Student Loan Revenue
(AMT), 7%, 3/1/03 400,000 426,500
ELECTRIC: 5.6%
Aa AA Salt River Project Agricultural Improvements
and Power District, Electric Revenue,
6%, 1/1/16 500,000 506,875
GENERAL OBLIGATION: 27.9%
Aaa AAA Chandler (FGIC Insured), 7%,
7/1/12 300,000 329,625
Aaa AAA Maricopa County School District (FGIC Insured),
6.25%, 7/1/11 500,000 539,374
Aaa AAA Maricopa County School District (FGIC Insured),
6.7%, 7/1/11 300,000 325,500
Aaa AAA Navajo County School District, (FSA Insured),
6%, 7/1/09 500,000 513,750
Aa1 AA+ Phoenix, 5.3%, 7/1/06 100,000 101,500
#Aaa AA+ Scottsdale, 6.9%, 7/1/07 100,000 110,000
Aa1 AA+ Scottsdale, 5.5%, 7/1/09 200,000 203,250
Aa AA Tucson, 5.6%, 7/1/16 400,000 402,000
HOSPITAL: 5.2%
Aaa AAA Arizona Health Facilities Authority, Hospital Revenue
(Samaritan Health Services) (MBIA Insured),
6.25%, 12/1/06 250,000 264,063
Aaa AAA Arizona Health Facilities Authority, Hospital Revenue
(Phoenix Baptist Hospital) (MBIA Insured),
6.25%, 9/1/11 200,000 210,750
HOUSING: 11.3%
nr AAA Phoenix Industrial Development Authority, Mortgage Revenue
(Chris Ridge) (FHA), 6.75%,
11/1/12 500,000 518,125
nr AAA Pima County Industrial Development Authority, Single-Family
Mortgage Revenue (GNMA Collateralized) (AMT),
6.2%, 5/1/27 500,000 503,125
INDUSTRIAL DEVELOPMENT: 3.6%
nr AA+ Mojave County Industrial Development Authority, Industrial
Development Revenue (Citizens Utilities),
7.05%, 8/1/20 300,000 325,875
LEASING: 3.5%
Aaa AAA Scottsdale Municipal Property Corporation, Lease Revenue (FGIC
Insured), 6.25%, 11/1/14 300,000 312,375
TRANSPORTATION: 15.7%
Aa AA Arizona State Transportation Board, Highway Revenue, 6%,
7/1/08 400,000 430,000
Aaa AAA Flagstaff, Street and Highway User Revenue (FGIC Insured),
5.9%, 7/1/10 500,000 518,750
Baa1 A Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue, 6.375%, 7/1/08 450,000 478,125
WATER AND SEWER: 9.6%
Aaa AAA Arizona State Wastewater Management Authority, Revenue (AMBAC
Insured), 5.95%, 7/1/12 200,000 203,750
Aaa AAA Chandler, Water and Sewer Revenue (FGIC Insured),
6.75%, 7/1/06 250,000 269,375
Aa AA- Phoenix Civic Improvement Corporation, Water Revenue, 5.6%,
7/1/18 400,000 398,000
TOTAL INVESTMENTS (Cost $8,485,874)= $8,813,937
See Notes to Portfolios of Investments.
<PAGE>
Maryland Portfolio
Portfolio of Investments - September 30, 1996
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 96.4% of Net Assets
EDUCATION: 10.1%
Aa AA- Maryland State Health and Higher Educational Facilities
Authority, University Revenue (Johns Hopkins University),
7.5%, 7/1/20 $100,000 $106,500
Aaa AAA Saint Mary's College, University Revenue (MBIA
Insured), 5.55%, 9/1/23 100,000 100,250
ELECTRIC: 5.0%
Baa1 BBB+ Puerto Rico Electric Power Authority, Power Revenue, 6%,
7/1/14 100,000 101,125
GENERAL OBLIGATION: 20.3%
Aa AA+ Anne Arundel County (AMT), 5.5%,
9/1/16 100,000 98,875
Aaa AAA Baltimore (AMBAC Insured), 6%,
10/15/04 100,000 107,125
#Aaa AAA Harford County, 5.75%, 9/1/08 25,000 26,719
Aa AA- Harford County, 5.75%, 9/1/08 25,000 25,656
Aaa AA+ Howard County, 6%, 5/15/13 150,000 155,250
HOSPITAL: 4.8%
Baa nr Prince George's County Hospital, Hospital Revenue (Greater
Southeast Healthcare System), 6.2%,
1/1/08 100,000 99,000
HOUSING: 4.9%
Aa nr Maryland State Community Development Administration, Single-
Family Housing Revenue (AMT), 6.2%,
4/1/17 100,000 100,500
LEASING: 11.6%
Aa AA- Maryland State Stadium Authority, Sports Facilities Lease
Revenue (AMT), 7.5%, 12/15/10 125,000 136,719
nr AA Montgomery County, Lease Revenue (Human Services Headquarters
Project), 5.6%, 8/1/14 100,000 99,750
POLLUTION CONTROL: 11.4%
A2 A Anne Arundel County, Pollution Control Revenue (Baltimore Gas
and Electric Company), 6%,
4/1/24 100,000 101,375
A1 A Prince George's County, Pollution Control Revenue (Potomac
Electric), 6.375%, 1/15/23 125,000 131,875
PUBLIC FACILITIES: 12.6%
Aaa AAA Baltimore, Convention Center Revenue (FGIC Insured), 6.1%,
9/1/14 150,000 154,312
Aa AA- Howard County, Recreational Revenue, 5.95%,
2/15/10 100,000 103,375
TRANSPORTATION: 10.8%
Aa3 AA- Baltimore, Port Facilities Revenue (Consolidated Coal Sales),
6.5%, 10/1/11 100,000 108,000
#Aaa AAA Maryland State Transportation Authority, Transportation
Revenue, 6.8%, 7/1/16 100,000 111,625
WASTE: 4.9%
A nr Northeast Waste Disposal Authority, Waste Revenue (Montgomery
County) (AMT),6.3%, 7/1/16 100,000 100,750
TOTAL INVESTMENTS (Cost $1,930,259)= $1,968,781
See Notes to Portfolios of Investments.
<PAGE>
Missouri Portfolio
Portfolio of Investments - September 30, 1996
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 93.9% of Net Assets
AIRPORT: 4.5%
Aaa AAA St. Louis, Airport Revenue, Lambert-St. Louis International
(FGIC Insured) (AMT), 6.125%,
7/1/12 $500,000 $516,250
EDUCATION: 5.7%
A nr Missouri Higher Education Loan Authority, Student Loan
Revenue (AMT), 5.9%, 2/15/08 500,000 488,125
Aaa AAA Missouri State Health and Educational Facilities Authority,
University Revenue (St. Louis University) (AMBAC Insured),
6.5%, 8/1/16 150,000 161,625
ELECTRIC: 9.8%
nr AAA Puerto Rico Electric Power Authority, Power Revenue, 8%,
7/1/08 175,000 189,875
Aaa AAA Sikeston, Electric Revenue (MBIA Insured), 6%,
6/1/14 400,000 424,000
nr A University Development Foundation, Lease Revenue (Missouri
Power), 5.75%, 5/1/13 500,000 501,250
GENERAL OBLIGATION: 32.7%
Aa nr Clayton School District, 5.65%,
2/1/14 500,000 500,625
Aaa AAA Farmington School District (FSA Insured), 6.35%,
3/1/12 400,000 414,500
Aa nr Jefferson City School District, 6.7%,
3/1/11 200,000 225,250
Aaa AAA Missouri State, Correctional Facilities Improvements, 5.5%,
4/1/20 500,000 496,250
Aaa AAA Missouri State (Fourth State Building), 5.75%,
8/1/19 400,000 405,500
Aaa AAA St. Charles County, Francis Howell School District (FGIC
Insured), 6.5%, 3/1/05 250,000 270,312
Aa1 nr St. Louis County, 6.3%, 2/1/11 400,000 418,000
Aa nr St. Louis County School District, 5.5%,
2/15/12 500,000 498,125
Aa nr St. Louis County School District, 5.5%,
2/15/13 500,000 498,125
HOSPITAL: 12.9%
Aaa AAA Missouri State Health and Educational Facilities Authority,
Health Facilities Revenue (SSM Health Care) (MBIA Insured),
6.25%, 6/1/16 250,000 260,625
Aaa AAA Missouri State Health and Educational Facilities Authority,
Health Facilities Revenue (Heartland Health System) (AMBAC Insured),
6.35%, 11/15/17 500,000 525,625
nr nr Missouri State Health and Educational Facilities Authority, Health
Facilities Revenue, 7.625%, 7/1/18 95,000 105,450
nr nr Missouri State Health and Educational Facilities Authority,
Health Facilities Revenue, 7.625%, 7/1/18 45,000 55,688
Aaa AAA Missouri State Health and Educational Facilities Authority,
Health Facilities Revenue (Health Midwest) (MBIA Insured),
6.25%, 2/15/22 500,000 518,750
HOUSING: 6.8%
nr AAA Missouri State Housing Development Commission, Single-Family
Mortgage Revenue (GNMA Collaterized) (FHA) (AMT), 7.75%,
6/1/22 75,000 79,125
nr AAA Missouri State Housing Development Commission, Single-Family
Mortgage Revenue (GNMA Collaterized) (FHA) (AMT), 7.375%,
8/1/23 190,000 201,875
nr AAA St. Louis County, Mortgage Revenue (Certificates of Receipt)
(AMT), 5.65%, 2/1/20 500,000 490,625
LEASING: 9.5%
#Aaa AAA Kansas City Municipal Assistance Corporation, Lease Revenue
(H. Roe Bartle) (AMBAC Insured), 6%,
4/15/20 500,000 529,375
Aa AA Missouri State Board of Public Buildings, Lease Revenue
(State Office Building), 6.4%,
12/1/08 300,000 318,750
A1 A+ Missouri State Regional Convention and Sports Complex
Authority, 5.5%, 8/15/13 250,000 238,438
WASTE: 1.9%
A1 AA- St. Louis Industrial Development Authority, Pollution Control
Revenue (Anheuser Busch Company), 6.65%,
5/1/16 200,000 220,500
WATER: 9.9%
A1 AA Columbia, Water Revenue, 6.125%,
10/1/12 400,000 414,500
Aa AA Kansas City, Water Revenue, 5%,
12/1/05 400,000 399,000
Aaa AAA Liberty, Water Revenue (MBIA Insured),
6.3%, 10/1/12 300,000 315,750
TOTAL LONG-TERM MUNICIPAL BONDS (Cost $10,377,027)=10,681,888
SHORT-TERM MUNICIPAL BONDS: 3.5% of Net Assets
HOSPITAL: 3.5%
nr A-1+ Missouri State Health and Educational Facilities Authority,
Hospital Revenue (St. Francis Medical Center) (LOC - Credit
Local de France), 4%, 6/1/26^ 400,000 400,000
TOTAL SHORT-TERM MUNICIPAL BONDS (Cost $400,000)= 400,000
TOTAL INVESTMENTS (Cost $10,777,027)= $11,081,888
<PAGE>
Virginia Portfolio
Portfolio of Investments - September 30, 1996
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 96.3% of Net Assets
AIRPORT: 4.7%
Aaa AAA Capital Regional Airport Commission, Airport Revenue (AMBAC
Insured), 5.625%, 7/1/15 $500,000 $496,875
Aaa AAA Metropolitan Washington D.C. Airports Authority, Airport
Revenue (MBIA Insured) (AMT), 6.625%,
10/1/12 500,000 536,250
Aaa AAA Metropolitan Washington D.C. Airports Authority, Airport
Revenue (FGIC Insured) (AMT), 7%,
10/1/18 500,000 541,250
EDUCATION: 13.7%
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%,
7/1/22 350,000 370,563
Aa AA Virginia College Building Authority, Facilities Revenue
(Washington and Lee University), 6.4%,
1/1/12 500,000 525,000
Aa AA Virginia College Building Authority, Facilities Revenue
(Washington and Lee University),
5.75%, 1/1/14 555,000 556,387
Aa AA Virginia State Public School Authority, Revenue, 6.25%,
8/1/10 500,000 526,250
Aa AA Virginia State Public School Authority, Revenue, 6.2%,
8/1/13 500,000 528,125
Aa AA Virginia State Public School Authority, Revenue, 6.5%,
8/1/15 500,000 539,375
Aa AA Virginia State Public School Authority, Special Obligation
(York County), 5.9%, 7/15/13 500,000 513,125
A1 AA- Virginia State Universities, University Revenue (Virginia
Commonwealth University), 5.75%,
5/1/15 500,000 505,000
ELECTRICAL: 3.0%
Aaa AAA Halifax County Industrial Development Authority, Power
Revenue (Old Dominion Electric) (MBIA Insured) (AMT), 6%,
12/1/22 1,000,000 1,016,250
WATER: 9.1%
Aa AA- Fairfax County Water Authority, Water Revenue, 6%,
4/1/22 1,500,000 1,528,125
Aaa AAA Frederick-Winchester Service Authority, Sewer Revenue (AMBAC
Insured), 5.75%, 10/1/15 1,000,000 1,007,500
Aaa AAA Norfolk, Water Revenue (MBIA Insured), 5.75%,
11/1/12 500,000 506,250
TOTAL LONG-TERM MUNICIPAL BONDS (Cost $31,101,020)=32,104,575
SHORT-TERM MUNICIPAL BONDS: 1.8% of Net Assets
AIRPORT: 0.9%
VMIG1 A-1+ Capital Regional Airport Commission, Airport Revenue (AMBAC
Insured) (LOC - Credit Local de France), 3.65%,
7/1/25 ^ 300,000 300,000
INDUSTRIAL DEVELOPMENT: 0.9%
VMIG1 nr Henrico County Industrial Development Authority, Hospital
Revenue (Hermitage Project) (LOC - Nationsbank of Virginia),
4.1%, 5/1/24 ^ 300,000 300,000
TOTAL SHORT-TERM MUNICIPAL BONDS (Cost $600,000)= 600,000
TOTAL INVESTMENTS (Cost $31,701,020)= $32,704,575
See notes to portfolio of investments.
National Portfolio
Portfolio of Investments - September 30, 1996
Credit Rating* Principal
Moodys S&P Amount Value
LONG-TERM MUNICIPAL BONDS: 96.2% of Net Assets
ARIZONA: 3.7%
Aa AA Arizona State Transportation Board, Highway Revenue, 6%,
7/1/08 $1,000,000 $1,075,000
DISTRICT OF COLUMBIA: 3.7%
Aaa AAA Metropolitan Washington D.C. Airports Authority, Airport
Revenue (MBIA Insured) (AMT), 6.625%,
10/1/19 1,000,000 1,070,000
HAWAII: 5.6%
Aaa AAA Hawaii, Airport Revenue (FGIC Insured) (AMT), 7%,
7/1/20 1,500,000 1,638,750
ILLINOIS: 4.6%
Aaa AAA Illinois State, General Obligation (FGIC Insured), 5.375%,
9/1/07 1,000,000 1,007,500
Aaa AAA Regional Transportation Authority, Transit Revenue (AMBAC
Insured), 7.2%, 11/1/20 300,000 352,500
IOWA: 3.7%
Aaa AAA Mason City, Hospital Revenue (Sisters of Mercy) (FSA
Insured), 7%, 8/15/14 1,000,000 1,090,000
KANSAS: 1.8%
Aa AA Kansas State Department of Transportation, Highway Revenue,
6.125%, 9/1/09 500,000 536,250
LOUISIANA: 5.4%
Aaa AAA Louisiana, General Obligation (MBIA Insured), 6%,
5/15/15 500,000 514,375
Aaa AAA Louisiana State Energy and Power Authority, Power Revenue
(Rodemacher Unit Number Two) (FGIC Insured), 6.75%,
1/1/08 1,000,000 1,067,500
MAINE: 1.8%
Aaa AAA Maine State Turnpike Authority, Highway Revenue (MBIA
Insured), 6%, 7/1/18 500,000 513,750
MASSACHUSETTS: 9.2%
A1 A+ Massachusetts Bay Transportation Authority, Transit Revenue,
7%, 3/1/14 1,000,000 1,160,000
Aaa AAA Massachusetts State, General Obligation (MBIA Insured),
5.25%, 9/1/07 1,000,000 998,750
Aa AA- Massachusetts, State Water Pollution Abatement, 6.25%,
2/1/11 500,000 522,500
MICHIGAN: 2.2%
nr AA+ Michigan State Housing Development Authority, Housing
Revenue (AMT), 7.75%, 12/1/19 640,000 656,000
MINNESOTA: 1.7%
Aa AA+ Minnesota State Housing Finance Agency, Housing Revenue
(Single-Family Mortgage) (AMT),
6.25%, 7/1/26 500,000 500,625
MISSISSIPPI: 4.4%
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%,
2/1/14 500,000 626,875
NEVADA: 3.7%
Aa AA Nevada State, General Obligation, 5.7%,
5/15/10 200,000 201,500
Aa AA Nevada State, General Obligation, 6.05%,
5/15/16 350,000 360,500
Aaa AAA Washoe County, Gas and Water Facilities Revenue (AMBAC
Insured), 6.3%, 12/1/14 500,000 521,250
NEW YORK: 1.6%
Baa1 BBB+ New York, General Obligation, 6%,
2/15/15 500,000 482,500
PENNSYLVANIA: 9.3%
Aaa AAA Lehigh County, Hospital Revenue (Lehigh Valley Hospital) (MBIA
Insured), 7%, 7/1/16 1,000,000 1,150,000
Aaa AAA Pennsylvania State Higher Educational Facilities Authority,
University Revenue (Duquesne University) (MBIA Insured),
6.75%, 4/1/20 500,000 532,500
Aaa AAA Pennsylvania State Industrial Development Authority, Economic
Development Revenue (AMBAC Insured), 6%,
1/1/12 1,000,000 1,028,750
RHODE ISLAND: 1.8%
Aa1 AA Rhode Island State Health and Higher Educational Facilities,
University Revenue (Brown University), 6.75%,
9/1/16 500,000 521,875
SOUTH CAROLINA: 3.8%
Aaa AAA Piedmont Municipal Power Agency, Electric Revenue (FGIC
Insured), 6.5%, 1/1/16 1,000,000 1,105,000
TEXAS: 14.1%
Aaa AAA Conroe Independent School District, General Obligation (PSFG
Insured), 6.4%, 8/1/10 475,000 498,750
Aa AA Harris County, General Obligation, 6.5%,
8/15/15 1,000,000 1,085,000
Aaa AAA Lower Colorado River Authority, Electric Revenue (FSA
Insured), 6%, 1/1/16 250,000 258,125
Aaa AAA Texas Public Building Authority, Building Revenue (MBIA
Insured), 7.125%, 8/1/11 1,000,000 1,152,500
Aaa AAA United Independent School District, General Obligation (PSFG
Insured), 7%, 8/15/05 1,000,000 1,141,250
VIRGINIA: 5.1%
nr A- Prince William County Park Authority, Revenue, 6.875%,
10/15/16 500,000 533,125
#AAA AA Richmond, General Obligation, 6.25%,
1/15/21 500,000 540,000
Aa AA+ Virginia State Housing Development Authority, Multifamily
Housing Revenue, 6.65%, 11/1/13 400,000 419,000
WASHINGTON: 7.3%
A1 AA- Port Seattle, Revenue (AMBAC Insured) (AMT), 7.6%,
12/1/09 500,000 557,500
A1 A+ Snohomish County Public Utility District, Electric Revenue,
7%, 1/1/16 1,000,000 1,060,000
Aa AA Washington, General Obligation, 6%,
9/1/20 500,000 510,625
WYOMING: 1.8%
Aaa AAA Wyoming Municipal Power Agency Authority, Electric Revenue
(MBIA Insured), 6.125%, 1/1/16 500,000 516,250
TOTAL LONG-TERM MUNICIPAL BONDS (Cost $27,366,882)= 28,175,125
SHORT-TERM MUNICIPAL BONDS: 3.8% of Net Assets
FLORIDA: 1.7%
nr A-1+ Volusia County Health Facilities Authority, Nursing Home
Revenue (Alliance Community) (LOC - Rabobank Nederland), 4%,
9/1/20 ^ 500,000 500,000
MISSOURI: 2.0%
VMIG 1 A-1 Kansas City Industrial Development Authority, Hospital
Revenue (Research Health Services Systems) (MBIA Insured),
3.85%, 10/15/14 ^ 100,000 100,000
nr A-1+ Missouri State Health and Educational Facilities Authority,
Hospital Revenue (St. Francis Medical Center) (LOC - Credit
Local de France), 4%, 6/1/26 ^ 500,000 500,000
TOTAL SHORT-TERM MUNICIPAL BONDS (Cost $1,100,000)= 1,100,000
TOTAL INVESTMENTS (Cost $28,466,882)= $29,275,125
See Note to Portfolio of Investments.
<PAGE>
Money Market Portfolio
Portfolio of Investments - September 30, 1996
Credit Rating* Principal
Moodys S&P Amount Value
SHORT-TERM MUNICIPAL SECURITIES: 96.7% of Net Assets
FLORIDA: 5.3%
VMIG1 nr Atlantic Beach, Hospital Revenue (Fleet Landing) (LOC -
Barnett Bank), 4.1%, 10/1/24 ^$200,000 $200,000
nr A-1+ Volusia County Health Facilities Authority, Nursing Home
Revenue (Alliance Community) (LOC - Rabobank Nederland), 4%,
9/1/20 ^ 200,000 200,000
GEORGIA: 9.4%
Aaa AA+ Georgia State, General Obligation, 7.7%,
4/1/97 300,000 306,177
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
LOUISIANA: 13.5%
VMIG1 AAA Louisiana Public Facilities Authority, Hospital Revenue
(Willis-Knighton) (AMBAC Insured), 3.8%,
9/1/23 ^ 300,000 300,000
#AAA A- Louisiana State, General Obligation, 7%,
8/1/97 300,000 313,416
VMIG1 A-1+ New Orleans Aviation Board, Airport Revenue (LOC - Credit
Local de France)(MBIA Insured), 3.7%,
8/1/16 ^ 400,000 400,000
MINNESOTA: 2.7%
VMIG1 A-1+ Minneapolis and St. Paul Housing and Redevelopment Authority,
Health Care Revenue (Childrens Health Care) (FSA Insured),
4.05%, 8/15/25 ^ 200,000 200,000
MISSOURI: 8.1%
VMIG1 nr Columbia Special Obligation (LOC - Toronto Dominion Bank),
3.85%, 6/1/08 ^ 300,000 300,000
Aaa AAA Missouri State, General Obligation (Third State Building),
6.3%, 8/1/97 300,000 306,369
NEBRASKA: 5.3%
VMIG1 AAA Nebraska Higher Education Loan Program, Student Loan Revenue
(MBIA Insured), 3.9%, 12/1/15 ^ 400,000 400,000
NEW MEXICO: 5.3%
VMIG1 nr Santa Fe, Single-Family Mortgage Revenue (GNMA/FNMA
Collateralized), 4%, 11/15/96 400,000 400,140
NORTH CAROLINA: 11.3%
VMIG1 A-1+ Greensboro, General Obligation (LOC - Wachovia Bank), 3.8%,
4/1/07 ^ 300,000 300,000
VMIG1 A-2 North Carolina Medical Care Commission, Hospital Revenue
(MBIA Insured), 3.9%, 12/1/25 ^300,000 300,000
VMIG1 nr University of North Carolina, University Revenue (Kenan
Memorial Stadium) (LOC - Wachovia Bank and Trust), 3.65%,
11/1/07 ^ 250,000 250,000
SOUTH CAROLINA: 5.4%
Aaa AAA South Carolina, General Obligation, 6.5%,
2/1/97 400,000 403,908
TEXAS: 14.7%
Aaa AAA El Paso Independent School District, General Obligation (AMBAC
Insured), 9.25%, 7/1/97 115,000 119,420
Aaa AAA Irving, General Obligation, 4%,
3/15/97 180,000 180,311
VMIG1 A-1+ Port Development Corporation, Marine Terminal Revenue (Stolt
Terminals) (LOC - Credit Suisse, N.Y.), 3.8%,
1/15/14 ^ 400,000 400,000
nr A-1+ San Antonio Housing Finance Corporation (Cape Cod Apartments)
(LOC - Landesbank Hessen, N.Y.) (AMT), 3.9%,
6/1/20 ^ 400,000 400,000
UTAH: 5.3%
VMIG1 A-1+ Salt Lake City, Airport Revenue (LOC - Credit Suisse, N.Y.)
(AMT), 3.9%, 6/1/98 ^ 400,000 400,000
VIRGINIA: 5.7%
Aaa AAA Fairfax County, General Obligation, 6.3%,
11/1/96 125,000 125,278
VMIG1 nr Henrico County, Industrial Development Revenue (Hermitage
Project) (LOC - Nationsbank of Virginia), 4.1%,
5/1/24 ^ 300,000 300,000
WASHINGTON: 4.6%
nr A-1+ Port Kalama, Port Facilities Revenue (Conagra) (LOC - Morgan
Guaranty Trust), 3.8%, 1/1/04 ^ 45,000 45,000
nr A-1+ Washington State Housing Finance Commission, Multifamily
Mortgage Revenue (LOC - Pacific First Federal Savings), 3.9%,
7/1/20 ^ 300,000 300,000
TOTAL INVESTMENTS (Cost $7,250,165)= 7,250,019
* Unaudited
= Aggregate cost and net unrealized appreciation (depreciation) of
investments for federal income tax purposes is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Money
Arizona Maryland Missouri Virginia National Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Aggregate cost $8,485,874 $1,930,259 $10,777,027 $31,701,020 $28,466,882 $7,250,165
Gross unrealized
appreciation 409,745 42,181 342,094 1,092,065 925,445 315
Gross unrealized
depreciation 81,682 3,659 37,233 88,510 117,202 461
Net unrealized
appreciation
(depreciation) 328,063 38,522 304,861 1,003,555 808,243 (146)
</TABLE>
^ Security has a variable coupon rate and is subject to a demand feature
before final maturity. Coupon rate as of September 30, 1996
#Aaa Refunded Bonds
AMBAC American Municipal Bond Assurance Corporation
AMT Subject to Alternative Minimum Tax
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
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
Statements of Assets and Liabilities
September 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Money
Arizona Maryland Missouri Virginia National Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
ASSETS
Investments, at
cost $8,485,874 1,930,259 10,777,027 31,701,020 28,466,882 7,250,165
Investments, at
value (Note 1) $8,813,937 1,968,781 11,081,888 32,704,575 29,275,125 7,250,019
Cash 120,021 42,176 145,689 90,609 101,087 192,570
Receivables
Investment
securities sold -- -- -- 510,000 527,933 5,000
Interest 141,109 31,781 159,246 583,463 388,688 53,171
Capital shares
sold -- -- -- -- 7,006 15
Share subscriptions
receivable (Note 1) -- -- -- 14,828 2,948 11,074
Other assets -- -- -- 196 -- --
Total assets 9,075,067 2,042,738 11,386,823 33,903,671 30,302,787 7,511,849
LIABILITIES
Payables
Investment securities
purchased -- -- -- 527,933 1,004,375 --
Dividends 9,136 797 5,710 16,711 9,129 597
Capital shares
redeemed -- -- -- 4,195 120 887
Shares reserved for
subscription (Note 1) -- -- -- 14,828 2,948 11,074
Other liabilities -- -- 6 56 78 23
Total liabilities 9,136 797 5,716 563,723 1,016,650 12,581
NET ASSETS
(Note 4) $9,065,931 $2,041,941 $11,381,107 $33,339,948 $29,286,137 $7,499,268
CAPITAL SHARES
OUTSTANDING 892,965 210,199 1,113,597 2,974,270 2,847,239 7,499,585
NET ASSET VALUE
PER SHARE $10.153 $9.714 $10.220 $11.209 $10.286 $1.000
Statements of Operations
For the Year Ended September 30, 1996
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Money
Arizona Maryland Missouri Virginia National Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
INVESTMENT INCOME (Note 1)
Interest income $538,291 $138,941 $632,521 $1,950,978 $1,695,926 $282,893
EXPENSES (Notes 2 and 3)
Investment advisory fees59,352 16,332 71,065 213,357 192,643 41,488
Investment advisory fees
waived by advisor -- (15,118) -- -- -- --
Custodian fees 3,009 828 3,574 10,739 9,698 2,627
Professional fees 8,159 3,781 8,691 22,233 20,564 7,352
Salaries and related
expenses 28,026 7,832 33,404 100,190 88,091 24,653
Securities registration
and blue sky expenses 614 784 933 431 5,067 3,499
Telephone expense 1,879 523 2,243 6,698 5,858 1,642
Data processing and office
equipment expenses 12,614 7,025 13,464 36,993 30,852 8,417
Office and miscellaneous
expenses 5,969 2,196 7,433 18,472 15,726 5,322
Depreciation and
amortization 757 213 898 2,677 2,359 660
Reimbursement to previous
advisor of expenses
incurred in prior years 7,846 8,962 10,623 -- -- --
Fees paid indirectly (3,890) (1,950) (5,811) (9,211) (8,318) (5,654)
Expenses incurred and
paid by advisor -- -- -- -- -- (22,795)
Total expenses 124,335 31,408 146,517 402,579 362,540 67,211
NET INVESTMENT INCOME 413,956 107,533 486,004 1,548,399 1,333,386 215,682
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain
(loss) on investments 67,565 (13,070) 60,309 394,667 139,533 --
Net unrealized appreciation
(depreciation) of
investments (20,919) 2,576 41,399 (128,139) 106,127 414
NET GAIN (LOSS) ON
INVESTMENTS 46,646 (10,494) 101,708 266,528 245,660 414
TOTAL INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS $460,602 $97,039 $587,712 $1,814,927 $1,579,046 $216,096
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
Statements of Changes in Net Assets
For the Years Ended September 30
<TABLE>
<CAPTION>
Arizona Portfolio Maryland Portfolio Missouri Portfolio
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment
income 413,956 465,682 107,533 131,139 486,004 492,896
Net realized gain
(loss) on
investments 67,565 (270,014) (13,070) (30,774) 60,309 (116,168)
Net unrealized appreciation
(depreciation) of
investments (20,919) 636,688 2,576 153,130 41,399 537,355
Total increase in net assets resulting
from operations 460,602 832,356 97,039 253,495 587,712 914,083
DISTRIBUTIONS TO SHAREHOLDERS
Net investment
income (413,956) (465,682) (107,533) (131,139) (486,004) (492,896)
CAPITAL SHARE TRANSACTIONS
(Note 6) (989,440) (2,172,806) (827,686) (324,850) (114,267) (517,675)
TOTAL DECREASE IN
NET ASSETS (942,794) (1,806,132) (838,180) (202,494) (12,559) (96,488)
NET ASSETS
Beginning of
period 10,008,725 11,814,857 2,880,121 3,082,615 11,393,666 11,490,154
End of period 9,065,931 10,008,725 2,041,941 2,880,121 11,381,107 11,393,666
</TABLE>
<TABLE>
<CAPTION>
Virginia Portfolio National Portfolio Money Market Portfolio
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment
income 1,548,399 1,560,008 1,333,386 1,460,221 215,682 255,743
Net realized gain (loss)
on investments 394,667 (335,404) 139,533 (565,552) -- --
Net unrealized appreciation
(depreciation) of
investments (128,139) 1,732,461 106,127 1,689,690 414 2,310
Total increase in net assets resulting
from operations 1,814,927 2,957,065 1,579,046 2,584,359 216,096 258,053
DISTRIBUTIONS TO SHAREHOLDERS
Net investment
income (1,548,399) (1,560,008) (1,333,386) (1,460,221) (215,787) (255,638)
CAPITAL SHARE TRANSACTIONS
(Note 6) (748,933) (3,124,224) (3,693,916) (2,461,944) (955,285) (464,511)
TOTAL DECREASE IN
NET ASSETS (482,405) (1,727,167) (3,448,256) (1,337,806) (954,976) (462,096)
NET ASSETS
Beginning of
period 33,822,353 35,549,520 32,734,393 34,072,199 8,454,244 8,916,340
End of period 33,339,948 33,822,353 29,286,137 32,734,393 7,499,268 8,454,244
</TABLE>
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
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 $0.444 0.440 0.436 0.490 0.528 0.569
Net
realized &
unrealized
gains
(losses) on
securities $0.040 0.407 (1.102) 0.786 0.434 0.484
Total from
investment
operations $0.484 0.847 (0.666) 1.276 0.962 1.053
Distributions
from net
investment
income $(0.444)(0.440)(0.436)(0.490)(0.528)(0.569)
Distributions
from capital
gains $ -- -- (0.400)(0.146)(0.053) --
Total
Distributions$(0.444)(0.440)(0.836)(0.636)(0.581)(0.569)
Net asset
value end
of period $10.153 10.113 9.706 11.208 10.568 10.187
Total
Return 4.85% 8.95% (6.20)%12.57% 9.74% 11.11%
Net assets
at end of
period
(thousands) $ 9,066 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 4.35% 4.48% 4.23% 4.54% 5.14% 5.61%
Portfolio
turnover 9% 24% 67% 63% 23% 57%
Maryland Portfolio
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 $ 0.405 0.418 0.455 0.274
Net
realized &
unrealized
gains
(losses) on
securities $(0.024) 0.415 (1.102) 0.441
Total from
investment
operations $0.381 0.833 (0.647) 0.715
Distributions
from net
investment
income $(0.405)(0.418)(0.455)(0.274)
Distributions
from capital
gains $ -- -- (0.016) --
Total
Distributions$(0.405)(0.418)(0.471)(0.274)
Net asset
value end
of period $ 9.714 9.738 9.323 10.441
Total
Return 3.96% 9.17% (6.33)%11.91%**
Net assets
at end of
period
(thousands) $2,042 2,880 3,083 3,377
Ratio of
expenses to
average net
assets*** 1.28% 0.87% 0.64% 0.20%**
Net
investment
income to
average
net assets 4.12% 4.42% 4.60% 4.72%**
Portfolio
turnover 21% 9% 78% 35%
* For the period from February 10, 1993 (inception)
to September 30, 1993.
Missouri Portfolio
Years ended September 30,
<C> <C> <C> <C> <C> <C>
1996# 1995 1994 1993 1992 1991
Net asset
value
beginning
of period $10.113 9.728 11.173 10.468 10.117 9.684
Net
investment
income $0.438 0.436 0.437 0.494 0.514 0.585
Net
realized &
unrealized
gains
(losses) on
securities $0.087 0.405 (1.058) 0.726 0.377 0.433
Total from
investment
operations $0.525 0.841 (0.621) 1.220 0.891 1.018
Distributions
from net
investment
income $(0.438)(0.436)(0.437)(0.494)(0.514)(0.585)
Distributions
from capital
gains $ -- -- (0.387)(0.021)(0.026) --
Total
Distributions$(0.438)(0.436)(0.824)(0.515)(0.540)(0.585)
Net asset
value end
of period $10.220 10.133 9.728 11.173 10.468 10.117
Total
Return 5.24% 8.87% (5.80)%11.98% 9.06% 10.80%
Net assets
at end of
period
(thousands) $11,381 11,394 11,490 14,001 11,023 7,227
Ratio of
expenses to
average net
assets*** 1.34% 1.31% 1.29% 1.23% 1.18% 0.45%
Net
investment
income to
average
net assets 4.27% 4.43% 4.23% 4.59% 5.05% 5.85%
Portfolio
turnover 21% 16% 52% 65% 8% 33%
Virginia Portfolio
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 $ 0.508 0.503 0.479 0.569 0.592 0.609
Net
realized &
unrealized
gains
(losses) on
securities $0.094 0.484 (1.146) 0.871 0.387 0.519
Total from
investment
operations $0.602 0.987 (0.667) 1.440 0.979 1.128
Distributions
from net
investment
income $(0.508)(0.503)(0.479)(0.569)(0.592)(0.609)
Distributions
from capital
gains $ -- -- (0.595)(0.120)(0.117) --
Total
Distributions$(0.508)(0.503)(1.074)(0.689)(0.709)(0.609)
Net asset
value end
of period $11.209 11.115 10.631 12.372 11.621 11.351
Total
Return 5.50% 9.54% (5.67)%12.85% 8.92% 10.66%
Net assets
at end of
period
(thousands) $33,340 33,822 35,550 44,092 37,421 30,696
Ratio of
expenses to
average net
assets*** 1.20% 1.14% 1.18% 1.10% 1.13% 1.18%
Net
investment
income to
average
net assets 4.53% 4.68% 4.23% 4.80% 5.20% 5.47%
Portfolio
turnover 28% 55% 104% 80% 74% 73%
National Portfolio*
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 $ 0.446 0.446 0.420 0.550 0.605 0.632
Net
realized &
unrealized
gains
(losses) on
securities $0.075 0.360 (1.122) 0.793 0.535 0.430
Total from
investment
operations $0.521 0.806 (0.702) 1.343 1.140 1.062
Distributions
from net
investment
income $(0.446)(0.446)(0.420)(0.550)(0.605)(0.632)(0.693)(0.728)
Distributions
from capital
gains $ -- -- (0.937)(0.212) -- --
Total
Distributions$(0.446)(0.446)(1.357)(0.762)(0.605)(0.632)
Net asset
value end
of period $10.286 10.211 9.851 11.910 11.329 10.794
Total
Return 5.17% 8.40% (6.25)%12.44% 10.83% 10.50%
Net assets
at end of
period
(thousands) $29,286 32,734 34,072 42,483 41,273 40,352
Ratio of
expenses to
average net
assets*** 1.20% 1.18% 1.23% 1.10% 1.17% 1.24%
Net
investment
income to
average
net assets 4.32% 4.49% 3.98% 4.83% 5.47% 5.95%
Portfolio
turnover 39% 56% 175% 212% 114% 91%
Money Market Portfolio
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 $ 0.026 0.028 0.015 0.020 0.030 0.040
Net
realized &
unrealized
gains
(losses) on
securities $ -- -- -- -- -- --
Total from
investment
operations $ 0.026 0.028 0.015 0.020 0.030 0.040
Distributions
from net
investment
income $(0.026)(0.028)(0.015)(0.020)(0.030)(0.040)(0.050)(0.050)
Distributions
from capital
gains $ -- -- -- -- -- --
Total
distributions$(0.026)(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 2.63% 2.87% 1.56% 1.53% 2.57% 4.13%
Net assets
at end of
period
(thousands) $7,499 8,454 8,916 13,391 14,861 17,844
Ratio of
expenses to
average net
assets*** 0.88% 0.81% 0.81% 0.81% 0.83% 0.81%
Net
investment
income to
average
net assets 2.59% 2.83% 1.52% 1.52% 2.55% 4.12%
Portfolio
turnover -- -- -- -- -- --
**Annualized
***For the year ended September 30, 1996, ratio reflects fees paid
indirectly (Note 3).
# Effective July 31, 1996, the investment advisory services transferred
to Bankers Finance Advisors, LLC from Bankers Finance Investment
Management Corp. (See Note 2).
The Notes to Financial Statements are an integral part of these
statements.
<PAGE>
GIT Tax-Free Trust
Notes to Financial Statements
September 30, 1996
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 with the market value of the respective underlying
portfolio of securities.
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.
Dividends are distributed to shareholders or reinvested in additional
shares as of the close of business at the end of each month. Capital
gain dividends, if any, are declared and paid annually in December.
Additional distributions may 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, if any, of each portfolio is distributed to its
shareholders, and therefore, no federal income tax provision is
required. As of September 30, 1996, capital loss carryovers available
to offset future capital gains for federal income tax purposes were
$516,865 for the Arizona Portfolio; $197,137 for the Maryland Portfolio;
$280,491 for the Missouri Portfolio; $1,064,123 for the Virginia
Portfolio; and $2,116,971 for the National Portfolio. The preceding
carryovers expire from September 30, 2003 through September 30, 2004.
As of September 30, 1996, the 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 advisor to the Trust, Bankers Finance Advisors, LLC ("the
Advisor"), earns an advisory fee equal to 0.625% per annum of the
average net assets of the State and National Portfolios and 0.5% per
annum of the average net assets of the Money Market Portfolio; the fees
are accrued daily and are paid monthly. The Advisory Agreement between
each Trust's portfolio and the Advisor was approved at the special
meeting of the Trust's shareholders on July 29, 1996. The Advisor
purchased the investment management assets of Bankers Finance Investment
Management Corp. ("BFIMC"), the Trust's previous investment advisor,
effective July 31, 1996. For the year ended September 30, 1996, the
Advisor and BFIMC waived $15,118 of advisory fees for the Maryland
Portfolio.
The Advisor is responsible for the fees and expenses of trustees who are
affiliated with the Advisor, the rent expense of the Trust's principal
executive office premises and certain promotional expenses. For the year
ended September 30, 1996, outside trustee fees were $2,000 for each
portfolio.
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 the Advisor, pursuant
to which such services are provided for amounts not exceeding the cost
to the Advisor. Common expenses incurred by the Trust, Government
Investors Trust, GIT Income Trust and GIT Equity Trust ("the Trusts")
are allocated based on the ratio of net assets of each portfolio to the
combined net assets of the Trusts. For the year ended September 30,
1996, expenses of $64,983 for the Arizona Portfolio; $30,194 for the
Maryland Portfolio; $75,452 for the Missouri Portfolio; $189,222 for the
Virginia Portfolio; $169,897 for the National Portfolio; and $25,723 for
the Money Market Portfolio have been reimbursed under the Services
Agreement. Included in these amounts are expenses incurred by the Trust
prior to September 30, 1995, then reimbursed to BFIMC, the previous
advisor, between September 30, 1995 and July 31, 1996. As of July 31,
1996, the Advisor has discontinued the practice of billing expenses
incurred in prior years. To the extent the Trust had incurred expenses
for which BFIMC was not reimbursed as of July 31, 1996, such expenses
from prior years will not be billed to the Trust by the Advisor. For the
year ended September 30, 1996 the Advisor and BFIMC incurred expenses of
$22,795 on behalf of the Money Market Portfolio, the billing of which
has been waived.
Fees are reduced under an expense offset arrangement with the Trust's
Custodian. The amount of the expense offset for the year ended September
30, 1996 was $3,890 for the Arizona Portfolio; $1,950 for the Maryland
Portfolio; $5,811 for the Missouri Portfolio; $9,211 for the Virginia
Portfolio; $8,318 for the National Portfolio; and $5,654 for the Money
Market Portfolio.
Had the billing of advisory fees or expenses not been waived for the
Maryland 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
Maryland Portfolio*** 1996 1.86% 3.54%
1995 1.50 3.80
1994 1.34 3.90
1993** 1.74* 3.18*
Money Market Portfolio1996 1.15% 2.32%
1995 1.07 2.56
1994 1.02 1.31
1993 1.03 1.30
1992 1.02 2.36
*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 had been deferred.
****For the year ended September 30, 1996, the ratio reflects fees paid
indirectly.
4. Net Assets. At September 30, 1996, net assets included the following:
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Money
Arizona Maryland Missouri Virginia National Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Net paid in capital
on shares of
beneficial interest $9,254,733 $2,200,556 $11,356,737 $33,400,516 $30,594,865 $7,499,528
Accumulated net
realized losses (516,865) (197,137) (280,491) (1,064,123) (2,116,971) (114)
Net unrealized appreciation (depreciation)
of investments 328,063 38,522 304,861 1,003,555 808,243 (146)
Total net assets 9,065,931 2,041,941 11,381,107 33,339,948 29,286,137 7,499,268
</TABLE>
5. Investment Transactions. Purchases and sales of securities other
than short-term securities, for the year ended September 30, 1996, were
as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Arizona Maryland Missouri Virginia National
Portfolio Portfolio Portfolio Portfolio Portfolio
Purchases $814,836 $514,029 $2,326,148 $9,445,069 $11,561,870
Sales 1,612,483 1,256,651 2,489,871 10,625,317 14,676,668
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
6. Capital Share Transactions. An unlimited number of capital shares,
without par value, are authorized. Transactions in capital shares for
the years ended September 30 were as follows:
<TABLE>
<CAPTION>
Arizona Portfolio Maryland Portfolio Missouri Portfolio
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995
In Dollars
Shares sold 757,915 1,043,837 652,771 839,221 1,076,024 1,645,931
Shares issued in reinvestment
of dividends 294,581 325,705 95,818 122,234 410,156 408,754
Total shares
issued 1,052,496 1,369,542 748,589 961,455 1,486,180 2,054,685
Shares
redeemed (2,041,936) (3,542,348)(1,576,275) (1,286,305) (1,600,447) (2,572,360)
Net decrease (989,440) (2,172,806) (827,686) (324,850) (114,267) (517,675)
In Shares
Shares sold 74,043 105,634 66,623 89,232 105,022 166,322
Shares issued in reinvestment
of dividends 28,857 33,184 9,798 12,957 39,955 41,558
Total shares
issued 102,900 138,818 76,421 102,189 144,976 207,880
Shares redeemed (199,582) (366,427) (161,971) (137,100) (155,774) (264,672)
Net decrease (96,682) (227,609) (85,550) (34,911) (10,797) (56,792)
</TABLE>
<TABLE>
<CAPTION>
Virginia Portfolio National Portfolio Money Market Portfolio
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995
In Dollars
Shares sold $4,310,056 $4,967,609 $2,853,531 $3,422,847 $6,433,272 $8,322,074
Shares issued in reinvestment
of dividends 1,325,938 1,335,773 1,210,230 1,307,981 206,235 244,526
Total shares
issued 5,635,994 6,303,382 4,063,761 4,730,828 6,639,507 8,566,600
Shares redeemed (6,384,927) (9,427,606) (7,757,677) (7,192,772) (7,594,792) (9,031,111)
Net decrease (748,933) (3,124,224) (3,693,916) (2,461,944) (955,285) (464,511)
In Shares
Shares sold 383,786 463,732 276,849 344,542 6,433,272 8,322,074
Shares issued in reinvestment
of dividends 118,040 124,012 117,257 131,677 206,235 244,526
Total shares issued 501,826 587,744 394,106 476,219 6,639,507 8,566,600
Shares redeemed (570,610) (888,537) (752,707) (729,127) (7,594,792) (9,031,111)
Net decrease (68,784) (300,793) (358,601) (252,908) (955,285) (464,511)
</TABLE>
<PAGE>
GIT Tax-Free Trust
Special Information
September 30, 1996
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code of 1986, the
following are designated as tax-exempt dividends: $413,956 for the
Arizona Portfolio; $107,533 for the Maryland Portfolio; $486,004 for the
Missouri Portfolio; $1,548,399 for the Virginia Portfolio; $1,333,386
for the National Portfolio; and $215,787 for the Money Market Portfolio.
In January 1997, shareholders of the Tax-Free Trust will receive Federal
income tax information on all distributions paid to their accounts in
calendar year 1996, including any distributions paid between September
30, 1996 and December 31, 1996.
A special meeting of the Trust's shareholders was held on July 29, 1996.
The following shares were voted at the meeting:
1. Approval of an advisory agreement with Bankers
Finance Advisors, LLC/Madison Investment Advisors, Inc.
Shares
Outstanding For Against Abstain
Arizona Portfolio 907,881 596,357 38,463 19,716
Maryland Portfolio 268,539 163,845 522 8,037
Missouri Portfolio 1,099,684 665,410 65,036 24,445
Virginia Portfolio 3,031,822 1,498,903 38,351 46,335
National Portfolio 2,891,976 1,485,864 39,793 48,126
Money Market Portfolio 8,085,497 3,806,092 542,850 783,260
2. Election of Trustees (16,285,399 shares outstanding)
For Withhold Authority
Frank E. Burgess 9,184,315 687,097
James R. Imhoff, Jr. 9,196,614 674,798
Thomas S. Kleppe 9,177,995 693,417
Lorence D. Wheeler 9,199,287 672,125
3. To ratify the selection of Ernst & Young LLP as independent
auditors of the Trust for the year ending September 30, 1996
(16,285,399 shares outstanding): For: 8,896,463
Against: 167,225 Abstain: 807,719
<PAGE>
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<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.
GIT
GIT Investment Funds
1655 Fort Myer Drive
Arlington Virginia 22209
http://www.gitfunds.com
