Bascom Hill BALANCED Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
800-767-0300
May 1, 1997
Dear Shareholder:
We are pleased to announce the most important change made
for the shareholders of Bascom Hill BALANCED Fund, Inc.
since our founding. It has been our desire to further the
growth of the fund, give wider exposure to our investment
record, offer more services and hopefully to reduce
operating costs. Madison Investment Advisors, Inc.
(actually, its subsidiary, Bankers Finance Advisors, LLC)
has been named as the investment
advisor to a "family of funds" including a fund with similar
investment goals and strategies as your fund, previously
called the GIT Equity Trust Equity Income Portfolio. In
order to accomplish these goals, the management and
Direcgtors of your fund, and the Trustees of GIT Equity Trust
all recommend that these two funds be "merged" and renamed.
The important enclosed Prospectus/Proxy Statement requires
your immediate attention.
The management of your fund will not change! The persons
now responsible for the day-to-day management of the fund
under the direction of Madison's investment committee
will continue to be responsible for the merged fund. The
investment philosophy will remain the same. Both
funds hold similar and complementary portfolios at this time,
thus requiring little portfolio changes or sales. The
merged fund will be larger, offer more shareholder services,
be available for sale in many more states and have reduced
management fees!
The Advantages
o The merged fund will be larger, with a greater number of
shareholders, hopefully leading to a national newspaper
listing.
o The merged fund's investment advisory fee will be reduced
from .85% to .75%.
o You will have the ability to "switch" to two money
market funds as well as other equity funds, bond funds and
tax-free income funds.
o You will now enjoy our own customer service staff and new
services, such as 24-hour telephone access to account
information and other state of the art account service
features.
New Fund and Family Name
There is good news and bad news. The good news is that we
will adopt a new name for your fund appropriate for a fund
of its caliber in a full service mutual fund family. The
bad news: Like you, we've been attached to the Bascom Hill
name for over a decade. But, we're in agreement with the
University of Wisconsin Foundation that our enlarged family
of funds would suffer ongoing name confusion with their
"Bascom Hill Society". Again, a mere name change doesn't
signal any change in philosophy or management!
Annual Meeting & Questions
Naturally, we're excited about the changes facing our fund
and the numerous new services we'll be able to offer. We
are always available to discuss the merger and its
implications. Please plan on attending our Annual Meeting
on May 28, 1997. Or, please call us with any questions if
you're unable to attend.
PLEASE REVIEW THE ENCLOSED PROSPECTUS/PROXY STATEMENT AND
SEND US YOUR VOTED PROXY AS SOON AS POSSIBLE.
Thank you.
Sincerely,
(signature)
Frank E. Burgess
President, Bascom Hill BALANCED Fund, Inc.
and Madison Investment Advisors, Inc.
Sincerely.
(signature)
Katherine L. Frank
President, GIT Equity Trust
<PAGE>
Bascom Hill BALANCED Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 28, 1997
Notice is hereby given the Annual Meeting of
Shareholders (the "Meeting") of the Bascom Hill BALANCED
Fund, Inc. (the "Bascom Hill Fund") will be held at the
Radisson Inn, 517 Grand Canyon Drive, Madison, Wisconsin, on
Wednesday, May 28, 1997, at 4:00 p.m. for the following
purposes:
1. To consider and act upon the Agreement and Plan of
Merger (the "Plan") dated March 21, 1997
providing for the acquisition of substantially all of the
assets of the Bascom Hill Fund by GIT Equity Trust Equity
Income Portfolio (the "GIT Fund"), an existing
series of GIT Equity Trust, in exchange for shares of
the GIT Fund and the assumption by the
GIT Fund of certain identified liabilities
of the Bascom Hill Fund, and for distribution of such
shares of the GIT Fund to shareholders of the Bascom Hill
Fund.
2. To elect four (4) directors to serve until the
next Annual Meeting of Shareholders, or until their
successors are duly elected and qualified or
the Bascom Hill Fund's earlier Merger; and
3. To approve or disapprove the continuation of the
Investment Advisory Agreement between the Bascom Hill
Fund and Madison Investment Advisors, Inc.; and
4 . To ratify or reject the selection of Williams,
Young & Associates, LLC as auditors of the Madison
Fund for the fiscal year ending December 31, 1997
or its earlier Merger; and
5. To transact any other business as may properly
come before the meeting or any adjournments thereof.
The Directors of the Bascom Hill Fund have fixed the close
of business on March 31, 1997 as the record date for the
determination of shareholders of the Bascom Hill Fund
entitled to notice of and to vote at this Meeting or any
adjournment thereof.
IMPORTANT
Your vote is important and all Shareholders are asked to be
present in person or by proxy. If you are unable to attend
the meeting in person, we urge you to complete, sign, date
and return the enclosed proxy as soon as possible using the
enclosed stamped envelope. Sending the proxy will not
prevent you from personally voting your shares at the
Meeting since you may revoke your proxy by advising the
Secretary of the Bascom Hill Fund in writing (by subsequent
proxy or otherwise) of such revocation at anytime before it
is voted.
By order of the Board of Directors
(signature)
Katherine L. Frank
Secretary
May 1, 1997
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED MAY 1, 1997
Acquisition of Assets of
Bascom Hill BALANCED Fund, Inc.
6411 Mineral Point Road
MADISON, WISCONSIN 53705
1-800-767-0300
By and in Exchange for Shares of
The Equity Income Portfolio
of
GIT Equity Trust
1655 Ft. Myer Drive, Suite 1000
ARLINGTON, VIRGINIA 22209
1-800-336-3063
This Prospectus/Proxy Statement is being furnished to
shareholders of the Bascom Hill BALANCED Fund (the "Bascom
Hill Fund") in connection with a proposed Agreement and Plan
of Merger (the "Plan"), to be submitted to shareholders of
the Bascom Hill Fund for consideration at the Annual
Meeting of Shareholders to be held at the Radisson Inn, 517
Grand Canyon Drive, Madison, Wisconsin, on Wednesday, May 28,
1997, at 4:00 p.m., and any adjournments thereof (the
"Meeting"). The Plan provides for substantially all of
the assets of the Bascom Hill Fund to be acquired by the
Equity Income Portfolio, a series of GIT Equity Trust (the
"GIT Fund"), in exchange for shares of the GIT Fund and the
assumption by the GIT Fund of certain identified liabilities
of the Bascom Hill Fund (hereinafter referred to as the
"Merger"). Following the Merger, shares of the GIT Fund
will be distributed to shareholders of the Bascom Hill Fund.
For economic purposes, the Bascom Hill Fund will continue as
the GIT Fund in light of the similarities in management,
investment policies and other factors. As a legal, entity,
however, the Bascom Hill Fund will not continue after the
Merger. As a result of the proposed Merger, each
shareholder of the Bascom Hill Fund will receive that number
of shares of the GIT Fund having an aggregate net asset
value equal to the aggregate net asset value of such
shareholder's shares of the Bascom Hill Fund, calculated as
set forth in the Plan. The Merger is being structured as a
tax-free reorganization for federal income tax purposes.
The GIT Investment Fund family is expected to be
renamed "Mosaic Funds" prior to the Merger. The merged
fund is expected to be known as Mosaic Equity Trust,
Balanced Fund.
GIT Equity Trust is an open-end diversified management
investment company currently comprised of four publicly
offered series, one of which, the GIT Fund, is a party to
the Merger.
As of the date of the proposed Merger, the GIT Fund
and the Bascom Hill Fund will have substantially similar
investment objectives, policies and investment
restrictions. Both Funds are balanced portfolios with two
primary investment objectives: (1) Production of
current income and (2) long-term growth of capital and
income. To achieve their objectives, both Funds will
diversify among equity securities and government and
corporate bonds having potential to realize both long-term
growth and income, and in short-term money market
instruments. Both Funds are designed for investors who can
assume moderate investment risks in search of income and
long-term growth.
This Prospectus/Proxy Statement, which should be
retained for future reference, sets forth concisely the
information about the GIT Fund that shareholders of the
Bascom Hill Fund should know before voting on the Merger
or investing in the GIT Fund. Certain relevant documents
listed below, which have been filed with the Securities and
Exchange Commission ("SEC"), are incorporated in whole
or in part by reference. A Statement of Additional
Information dated May 1, 1997, relating to this
Prospectus/Proxy Statement and the Merger, incorporating
by reference the financial statements of the Bascom Hill
Fund dated December 31, 1996, has been filed with the
SEC and is incorporated by reference in its entirety into this
Prospectus/Proxy Statement. A copy of such Statement of
Additional Information is available upon request and without
charge by writing to GIT Equity Trust at the address listed
on the cover page of this Prospectus/Proxy Statement or by
calling 608-274-0300 or toll-free 800-767-0300.
The Prospectus of the Bascom Hill Fund dated February 28,
1997 is incorporated herein in its entirety by reference. A copy of
the Prospectus, a Statement of Additional Information dated the
same date and the Annual Report for the fiscal year ended
December 31, 1996 are available upon request without
charge by writing the Bascom Hill Fund at the address listed on
the cover page of this Prospectus/Proxy Statement or by calling
608-274-0300 or toll-free 800-767-0300.
Also accompanying this Prospectus/Proxy Statement as Exhibit
A is a copy of the Plan for the proposed Merger.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY............................................ 4
Proposed Merger................................... 4
Comparison of Expenses............................ 5
Tax Consequences.................................. 6
Investment Objectives and Policies................ 7
Total Return Performances of the Funds............ 7
Management; Advisory Fees and Expense Ratios...... 7
Distribution; Sales Charges....................... 7
Purchase and Redemption Procedures................ 8
Exchange Privileges............................... 8
Dividend Policy................................... 8
RISKS.............................................. 8
MANAGEMENT OF THE FUNDS............................ 9
MATERIAL PROVISIONS OF THE PROPOSED TRANSACTION.... 9
INFORMATION ABOUT THE MERGER....................... 9
Plan of Merger.................................... 9
Capitalization.................................... 9
REASONS FOR THE MERGER PLAN........................11
DESCRIPTION OF SHARES OF THE GIT
FUND AND THE BASCOM HILL FUND......................12
FEDERAL INCOME TAX CONSEQUENCES....................12
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS....13
Form of Organization..............................13
Capitalization and Shareholder Liability..........13
Shareholder Meetings and Voting Rights............14
Liquidation or Dissolution........................14
ADDITIONAL INFORMATION.............................15
Bascom Hill Fund..................................15
GIT Fund..........................................15
About GIT Equity Trust..........................15
Financial Highlights............................15
Investment Objective............................16
Specialized Investment Techniques...............17
Investment Policies.............................17
Management of the Trust.........................18
The Trust and Its Shares........................19
Dividends.......................................20
Performance Information.........................20
Taxes...........................................20
Net Asset Value.................................21
How to Purchase and Redeem Shares...............22
AVAILABILITY OF PROXY MATERIALS....................25
OTHER BUSINESS.....................................25
Election of Directors.............................28
Approval of Advisory Agreement....................28
Ratification of Auditors..........................29
VOTING INFORMATION.................................30
Notice to Banks, Broker-Dealers and Voting
Trustees and Their Nominees.......................31
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/PROXY STATEMENT (INCLUDING THE DOCUMENTS
INCORPORATED THEREIN BY REFERENCE), AND TO THE EXTENT NOT
INCONSISTENT WITH SUCH ADDITIONAL INFORMATION, THE
PROSPECTUS OF THE BASCOM HILL BALANCED FUND DATED FEBRUARY
28, 1997, AND THE PLAN, A COPY OF WHICH IS ATTACHED TO THIS
PROSPECTUS/PROXY STATEMENT AS EXHIBIT A.
Proposed Merger. The Plan provides for the transfer
of substantially all of the assets of the Bascom Hill
BALANCED Fund, Inc. ("the Bascom Hill Fund"), in exchange
for shares of the Equity Income Portfolio ("the GIT Fund"),
an existing series of GIT Equity Trust, and the assumption
by the GIT Fund of certain identified liabilities of the
Bascom Hill Fund. The Plan also calls for the distribution
of shares of the GIT Fund to the Bascom Hill Fund
shareholders. (The transaction is referred to in this Prospectus/
Proxy Statement as the "Merger.") As a result of the
Merger, each shareholder of record of the Bascom
Hill Fund will become the record holder of that number of
full and fractional shares of the GIT Fund having an
aggregate net asset value equal to the aggregate net asset
value of the shareholder's shares of the Bascom Hill Fund,
calculated as set forth in the Plan, as of the close of
business on the date that the Bascom Hill Fund's assets are
exchanged for Shares of the GIT Fund. See "Information About
the Merger."
The Board of Directors of the Bascom Hill and the Board of
Trustees of the GIT Fund, including the Directors and
Trustees who are not "interested persons," as that term is
defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), have concluded that it is in the best
interests of both Funds for the Merger to take place. The
Directors of the Bascom Hill Fund have concluded that the
interests of the existing shareholders of the Bascom Hill
Fund will not be diluted as a result of the transactions
contemplated by the Merger, and therefore has submitted the
Plan for the approval by the Bascom Hill Fund's
shareholders.
The Board of Directors recommends approval of the Plan effecting
the Merger. The Board of Trustees of GIT Equity Trust has
approved the Plan, and accordingly, the GIT Fund's participation in
the Merger.
Approval of the Merger on the part of the Bascom Hill
Fund will require the affirmative vote of more than 50% of its
outstanding voting securities. See "Voting Information."
If the shareholders of the Bascom Hill Fund do not vote to
approve the Merger, Madison Investment Advisors,
Inc. and the Bascom Hill Fund's Directors will continue to
operate the Bascom Hill Fund under its existing
arrangements.
Bankers Finance Advisors, LLC ("BFA"), the investment advisor
to the GIT Fund, will bear all the expenses of the GIT Fund in connection
with the Merger and Madison Investment Advisors, Inc.
(the investment advisor to the Bascom Hill Fund) will bear all of the
expeses of the Bascom Hill Fund in connection with the Merger.
Comparison of Expenses:
The following tables show for the Bascom Hill Fund and the GIT
Fund the anticipated shareholder transaction costs associated with
an investment in the GIT Fund and the shares of the Bascom Hill
Fund. Also presented is the estimated expenses of the resulting combined
fund. The expenses of the GIT Fund represent those incurred during
periods when its investment objective and policies resulted in a
portfolio primarily of equity securities only while the Bascom Hill
Fund's expenses were incurred while the fund was invested in a
combination of equity and bond securities. In addition, the GIT
Fund's total net assets were approximately half those of the
Bascom Hill Fund during the periods presented.
Bascom Hill
GIT Fund Fund Combined Fund
Shareholder
Transaction Expenses
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price) None None None
Maximum Sales Load
Imposed on Reinvested
Dividends (as a percentage
of offering price) None None None
Contingent Deferred
Sales Charge None None None
Exchange Fee None None None
Redemption Fees None None None
Annual Fund Operating Expenses
(as a percentage of average
daily net assets)
Management Fees .75% .85% .75%
12b-1 Fees None None None
Other Expenses 1.17% .57% .55%
Total Fund Operating
Expenses 1.92% 1.42% 1.30%
The foregoing and following tables show for each Fund the
annual operating expenses (as a percentage of average net
assets) attributable to the the GIT Fund, the Bascom Hill
Fund and the resulting combined fund, together with examples
of the cumulative effect of such expenses on a $1,000
investment in such shares for the periods specified,
assuming (i) a 5% annual return, and (ii) redemption at the
end of such period.
GIT Fund Bascom Hill Fund Combined Fund
After 1 year $ 20 $ 14 $13
After 3 years $ 60 $ 45 $41
After 5 years $ 104 $78 $71
After 10 years $ 224 $170 $157
The purpose of the foregoing tables is to assist a Bascom
Hill Fund shareholder in understanding the various costs and
expenses that an investor in the GIT Fund will bear directly
and indirectly, as compared with the various direct and
indirect expenses that would be borne by a Bascom Hill Fund
shareholder and a shareholder in the combined fund. The
amounts set forth in the foregoing tables and in the
examples with respect to the Bascom Hill Fund are based on
the expenses of shares of the Bascom Hill Fund for the
fiscal year ended December 31, 1996 and, with respect to the
GIT Fund, are based on the expenses of shares for its fiscal
year ended March 31, 1996 and, with respect to the combined
fund, based on the estimated expenses following the Merger.
These examples should not be considered a representation of
future expenses or past or future annual return. Actual annual
return and future expenses may be greater or less than those
shown. Additional fees and transaction charges described
elsewhere in this Prospectus/Proxy Statement ("How to
Purchase and Redeem Shares" below), if applicable,
will increase the level of expenses that can be incurred.
The GIT Fund's investment portfolio permits investments up
to 35 percent of its assets in bonds and other non-equity
investments. In anticipation of the Merger, the GIT Fund's
portfolio was adjusted prior to the end of its fiscal year ended
March 31, 1997 so that it more closely resembled the mix of
equity and bond investments characterizing the Bascom Hill
Fund. As a result, no unusual expenses or tax-related
costs are expected to be incurred by the GIT Fund following the
Merger as a result of the Merger and the change in the GIT
Fund's investment objective to match that of the Bascom
Hill Fund's investment objective.
The Trust has entered into a services agreement with Bankers
Finance Advisors, LLC (see Management; Advisory Fees
and Expense Ratios, below) for the provision of certain
transfer agency, shareholder service and administrative functions
on behalf of its existing portfolios. Such services are currently
provided at cost. The Trust is expected to establish a flat fee
prior to the date of the Merger by which such functions are
provided to the GIT Fund at a rate not to exceed 0.55% of
average daily net assets and which fee shall be reviewed annually
by the Trustees.
Tax Consequences. Prior to or at the completion of the
Merger, the Bascom Hill Fund will have received an
opinion of counsel that the Merger
has been structured so that no gain or loss will be
recognized by the Bascom Hill Fund or its shareholders for
federal income tax purposes as a result of the receipt
of shares of the GIT Fund in the Merger. The holding
period and aggregate tax basis of shares of the GIT Fund that
are received by the Bascom Hill Fund shareholders will be
the same as the holding period and aggregate tax basis of
shares of the Bascom Hill Fund previously held by such
shareholders, provided that shares of the Bascom Hill Fund
are held as capital assets. In addition, the holding period
and tax basis of the assets of the Bascom Hill Fund in
the hands of the GIT Fund as a result of the Merger
will be the same as in the hands of the Bascom Hill Fund
immediately prior to the Merger.
Investment Objectives and Policies. Both Funds seek
production of current income and long-term growth of capital
and income through investment in a diversified portfolio of
stocks, bonds and short-term money market instruments. There
is no assurance the investment objective of either Fund will
be achieved.
Management; Advisory Fees and Expense Ratios. Madison
Investment Advisors, Inc. ("Madison") serves as the
investment advisor for the Bascom Hill Fund for an annual
fee of .85% of average daily net assets. Bankers Finance
Advisors, LLC, a subsidiary of Madison ("BFA") serves as the
investment advisor to the GIT Fund for an annual fee of .75%
of average daily net assets, which fee will remain in place
after the Merger. The advisory fee for the Bascom
Hill Fund's average daily net assets in excess of $100 million
also would be .75%.
BFA assumed management of the GIT Fund effective July 31,
1996. Madison shares its portfolio management personnel
with BFA. Although the Bascom Hill Fund is managed
by Madison's investment policy committee, the persons on such
committee who have become primarily responsible for the
management of the Bascom Hill Fund are the same persons
who are currently primarily responsible for the management
of the GIT Fund. In light of the similarity in both management and
investment objectives (discussed above), Bascom Hill Fund shareholders
are not expected to experience any change in the quality,
style or manner of management of their investment after
the Merger.
The business affairs of the Bascom Hill Fund are managed by
the Board of Directors of the Bascom Hill Fund and the
business affairs of the GIT Fund are managed by the Board of
Trustees of GIT Equity Trust. For the fiscal year
ended December 31, 1996, the Bascom Hill Fund's ratio
of expenses to average daily net assets was 1.42%. For the
fiscal year ended March 31, 1996, the GIT Fund's ratio of
expenses to average daily net assets was 1.92%.
Total Return Performances of the Funds. Total return performances
for the Funds must be compared in light of the differences in the
investment objectives of the Funds. Such returns reflect, for the Bascom
Hill Fund, performance of a mixed portfolio of equity and bond
securities while performance for the GIT Fund reflects primarily
equity securities only. The total return for the
Bascom Hill Fund for the fiscal year ended December 31, 1996 was
17%. The average annual total return for the five and ten fiscal years
ended December 31, 1996 was 10.19% and 8.96%, respectively. BFA
and the Madison portfolio management staff assumed investment
responsibility for the GIT Fund on July 31, 1996. Prior to then,
the GIT Fund was managed by another investment advisor. Except
for the final five months of 1996, the following performance information
reflects the performance of the GIT Fund while managed by the prior
advisor: The total return for the GIT Fund for the year ended December
31, 1996 was 15.78%. The average annual return for the five and ten
years ended December 31, 1996 was 10.23% and 9.84%, respectively.
The calculations of total return assume the reinvestment of all dividends and
capital gains distributions on the reinvestment date and the deduction of all
recurring expenses (including sales charges) that were charged to shareholders'
accounts.
Distribution; Sales Charges. Neither the GIT Fund nor the
Bascom Hill Fund imposes any sales charges or redemption
fees. GIT Investment Services, Inc. of the same address as
the GIT Equity Trust acts as the Trust's Distributor.
Madison acts as distributor of the Bascom Hill Fund's
shares.
Purchase and Redemption Procedures.
The minimum initial purchase requirement for the Bascom
Hill Fund and the GIT Fund is $1,000. The GIT Fund does not
have a minimum for subsequent purchases, but GIT Equity
Trust reserves the right to return investments of
less than $50.00. The minimum subsequent purchase
requirement for the Bascom Hill Fund is $100.
Each Fund provides for mail or wire redemption of shares at
net asset value next determined after receipt of the
redemption request on each day the New York Stock Exchange
is open for business. An additional feature of the GIT Fund is
the ability of shareholders to redeem by telephone.
The GIT Fund may, after prior notice, involuntarily redeem
shareholders' accounts that have less than $700 of invested
funds. There is no comparable provision in the Bascom Hill
Fund.
Exchange Privileges. After the Merger, an option not
currently available to shareholders of the Bascom Hill Fund
will be the ability of shareholders to exchange shares
of the GIT Fund for shares of other funds of
the GIT Investment Funds mutual fund family. There is no
comparable provision in the Bascom Hill Fund. No sales
charge is imposed on an exchange. An exchange which
represents an initial investment in another fund of
the GIT mutual fund family must amount to at least $1,000,
or $500 for an IRA account. Although there is no present
intention to do so, an exchange privilege may be modified or
terminated at any time.
Dividend Policy. Both Funds distribute any net investment
company income quarterly and any net capital
gains at least annually, which distribution schedule will
remain in place after the Merger. Income dividends and capital
gain distributions are automatically reinvested in additional
shares, unless the shareholder has made a written request
for payment in cash. Shareholders of the Bascom Hill
Fund that have elected, as of June 13, 1997, to receive
dividends and/or distributions in cash will continue to do
so after the Merger. After the Merger, former Bascom Hill
Fund shareholders may change their election with respect to
receipt in cash or reinvestment of dividends or
distributions of the GIT Fund.
RISKS
Since the investment objective of each Fund is generally
identical and the policies and investment restrictions of
each Fund are substantially similar, Madison believes that
there is no significant difference in the risks involved in
investing in each Fund's shares. Both funds are subject to
market risk inherent in investment in equities and
bonds. Unlike the Investors Fund, the GIT Fund is
permitted to invest in foreign securities, but BFA, as
advisor to the GIT Fund, has no present intention of so
investing. There is no assurance that investment
performance will be positive and that the funds will
meet their investment objectives. For a more detailed discussion
of the risks of investing in the GIT Fund, see "Investment
Risk Considerations" under Additional Information, GIT Fund,
on page 15 of this Prospectus/Proxy Statement.
MANAGEMENT OF THE FUNDS
Bankers Finance Advisors, LLC provides investment advisory
services to the GIT Fund. The address of BFA is 1655 Ft.
Myer Drive, Arlington, Virginia 22209. BFA is a subsidiary
of Madison, 6411 Mineral Point Road, Madison, Wisconsin,
53705, which provides investment advisory services
to the Bascom Hill. Madison and BFA maintain identical
portfolio management personnel. The persons responsible for
the day-to-day management of the GIT Fund are Frank Burgess
and Jay Sekelsky, members of Madison's investment policy
committee.
Madison has served as investment advisor to the Bascom Hill
Fund since its inception. The Bascom Hill Fund is managed
by Madison's investment policy committee, from which Messrs. Burgess
and Sekelsky have emerged as primarily responsible for its day-to-day
management.
MATERIAL PROVISIONS OF THE PROPOSED TRANSACTION
On July 31, 1996, Madison acquired the investment
management-related assets of Bankers Finance Investment
Management Corp., the former advisor to the GIT Investment
Funds Family of mutual funds, and began providing investment
advisory services to such funds at that time. Madison has
recommended to the Directors of the Bascom Hill Fund and
to the Trustees of the GIT Fund that economies of scale,
efficiencies of management and other benefits (see
"Reasons for the Merger Plan" below) can be achieved
through the merger of the two Funds. The Bascom Hill
Fund has entered into an Agreement and Plan
of Merger in the form attached hereto as Exhibit A.
The consummation of the reorganization contemplated by the
Agreement is subject to a number of conditions, which
include: (i) the receipt of all necessary regulatory
approvals; (ii) the approval by the shareholders of the
Bascom Hill Fund; (iii) the accuracy of the representations
and warranties contained in the Agreement; (iv) the absence
of pending or threatened litigation relating to the mergers
contemplated by the Agreement; and (v) the receipt of
various legal opinions.
Because BFA is a subsidiary of Madison, neither BFA nor
Madison will receive any amount of remuneration in
connection the with the Merger, except as otherwise
described herein under existing investment advisory and
management services agreements with the GIT Fund.
INFORMATION ABOUT THE MERGER
Plan of Merger. The following summary of the Plan is
qualified in its entirety by reference to the Plan (Exhibit
A hereto). The Plan provides that the GIT Fund will acquire
substantially all of the assets of the Bascom Hill Fund in
exchange for shares of the GIT Fund and the assumption by
the GIT Fund of certain identified liabilities of the Bascom
Hill Fund on June 13, 1997 or such later date as may be
agreed upon by the parties (the "Merger Date"). Prior to the
Merger Date, the Bascom Hill Fund will endeavor to discharge
all of its known liabilities and obligations. The GIT Fund
will not assume any liabilities or obligations of the Bascom
Hill Fund other than those liabilities reflected in an
unaudited statement of assets and liabilities of the Bascom
Hill Fund prepared as of the close of regular trading on the
New York Stock Exchange, Inc. (the "NYSE"), currently 4:00
p.m. Eastern Time, on the Merger Date. The number of full
and fractional shares of the GIT Fund to be issued to the
Bascom Hill Fund's shareholders will be determined on the
basis of the relative net asset values per share of the GIT
Fund's shares and the Bascom Hill Fund's shares, computed as
of the close of regular trading on the NYSE on the Merger
Date. The net asset value per share of such shares will be
determined by dividing the respective assets, less
liabilities, by the total number of outstanding shares.
Star Bank, the custodian for the GIT Fund, will compute the
value of each Fund's respective portfolio securities. The
method of valuation employed will be consistent with the
procedures set forth in the GIT Fund's Prospectus and
Statement of Additional Information, Rule 22c-1 under the
1940 Act, and with the interpretations of such rule by the
SEC's Division of Investment Management.
At or prior to the Merger Date, the Bascom Hill Fund shall
have declared a dividend or dividends and distribution or
distributions which, together with all previous such
dividends and distributions, shall have the effect of
distributing to the Bascom Hill Fund's shareholders all of
the Bascom Hill Fund's investment company taxable income for
the taxable year ending on or prior to the Merger Date
(computed without regard to any deduction for dividends
paid) and all of its net capital gains realized in all
taxable years ending on or prior to the Merger Date
(after reductions for any capital loss carryforward).
As soon after the Merger Date as conveniently practicable,
the Bascom Hill Fund distribute pro rata to shareholders of
record as of the close of business on the Merger Date the
full and fractional shares of the GIT Fund received by the
Bascom Hill Fund. Such distribution will be accomplished by
the establishment of accounts in the names of the Bascom Hill
Fund's shareholders on the share records of the GIT Fund's
transfer agent. Each account will represent the respective
pro rata number of full and fractional shares of the GIT
Fund due to such Bascom Hill Fund's shareholders. After the
distribution and the winding up of its affairs, the Bascom Hill
Fund will terminate as a legal entity, although
for practical and economic purposes it will continue its
business after the Merger as the GIT Fund. The GIT
Fund will not issue share certificates to shareholders
and the shares issued will not have preemption or
conversion rights.
The consummation of the Merger is subject to the conditions
set forth in the Plan, including approval by the Investors
Fund's shareholders, accuracy of various representations and
warranties and receipt of opinions of counsel including
those matters referred to in "Federal Income Tax
Consequences." The Plan can be terminated by mutual
agreement or upon the failure of either Fund to satisfy
the required conditions.
If the Merger is not approved by shareholders of the Bascom Hill Fund,
its Board of Directors will continue to operate the Bascom Hill Fund under
its existing arrangements.
Capitalization. The following table shows the capitalization as of
December 31, 1996 of the GIT Fund and the Bascom Hill Fund
individually and on a pro forma combined basis as of that date,
giving effect to the proposed acquisition of the Bascom Hill Fund's net
assets at fair value or market value, as appropriate:
<TABLE>
<S> <C> <C> <C>
GIT Bascom Hill Pro Forma For
Fund Fund Merger
Net Assets $4,397,000 $11,017,759 $15,414,759
Net Asset Value
per share $18.77 $22.03 $18.77
Shares
outstanding 234,216 500,139 821,244
Had the Merger been consummated on December 31, 1996, the
Bascom Hill Fund would have received 587,028 shares of the GIT
Fund, which would then be available for distribution to
shareholders. No assurance can be given as to how many shares
of the GIT Fund that Bascom Hill Fund shareholders will receive
on the Merger Date and the foregoing should not be relied upon
to reflect the number of shares of the GIT Fund that will
actually be received on or after the Merger Date.
As of March 31, 1997, (the "Record Date"), there were 464,095.648
outstanding shares of beneficial interest of the Bascom Hill Fund.
As of the Record Date, the officers and Directors of the
Bascom Hill Fund beneficially owned as a group less than 1%
of the outstanding shares of the Bascom Hill Fund. To the
best knowledge of the Bascom Hill Fund Directors, as of the
Record Date, no other shareholder or "group" (as that term
is used in Section 13(d) of the Securities Exchange Act of
1934, the ("Exchange Act")) beneficially owned more than 5%
of the Bascom Hill Fund's outstanding shares.
Reasons for the Merger Plan.
The independent Directors of the Board of Directors
of the Bascom Hill Fund requested and reviewed extensive
information from Madison and BFA in evaluating the effect of
the consolidation on the shareholders of the Bascom Hill
Fund. The information described: performance of BFA/Madison
managed funds; the extensive investment research, including
credit analysis, available to BFA/Madison managed funds;
the expenses of the BFA managed funds in relation to other
mutual funds and to the Bascom Hill Fund; the possibility of
a future reduction in expenses per share as a result of the
consolidation; the quality and variety of administrative
services provided BFA managed funds and the financial
condition of the service providers; the opportunities for
investment by shareholders among a family of mutual funds;
and the opportunities for marketing among a family of mutual
funds.
The independent Directors of the Bascom Hill Fund retained
independent counsel to advise them with respect to their
fiduciary duties in connection with approval of the proposed
consolidation.
In evaluating the consolidation of the Bascom Hill Fund, into the
GIT Fund, the Directors considered the advantages to the
Bascom Hill Fund's shareholders of association with a considerably
larger mutual fund complex while retaining existing
investment management, the benefits of being part of
a larger group of mutual funds with significantly greater
net assets and more diverse investment objectives and the
ability of shareholders following the proposed Merger to
utilize exchange privileges available currently to
shareholders of the other mutual funds managed by BFA.
The Directors noted that following the Merger, Bascom Hill
Fund shareholders would benefit from the GIT Fund's staff
of trained shareholder service representatives, technologically
superior shareholder services such as automated account
information by telephone, economies of scale in a variety of
areas such as marketing initiatives by the Fund's manager, state
"notification" fee payments, and a variety of expenses shared with
the other funds in the complex and in GIT Equity Trust itself.
The Directors also noted that the GIT Fund was available to
investors through broker dealers providing mutual fund "no-
transaction fee" programs, thus providing a potential source
of future growth of assets.
The Board of Directors of the Bascom Hill Fund recommends
that shareholders approve the Plan to consolidate the Bascom
Hill Fund with the GIT Fund.
DESCRIPTION OF SHARES OF THE
GIT FUND AND THE BASCOM HILL FUND
Full and fractional shares of beneficial interest of the
GIT Fund will be distributed to the Bascom Hill Fund's shareholders in
exchange for their existing shares in the Bascom Hill Fund in
accordance with the procedures detailed in the Plan.
The GIT Fund does not intend to issue share certificates to
shareholders. Instead, the transfer agent for the GIT Fund will
maintain a share account for each shareholder of record.
The shares of the GIT Fund to be issued will have no
preemptive or conversion rights and are transferable
without restriction.
FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a)
of the Internal Revenue Code of 1986, as amended (the
"Code"). As a condition to the closing of the Merger, the
Bascom Hill Fund will receive an opinion of counsel to the
effect that, on the basis of the existing provisions of the
Code, U.S. Treasury regulations issued thereunder, current
administrative rules, pronouncements and court decisions,
for federal income tax purposes, upon consummation of the
Merger:
(1) The Merger will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code;
(2) No gain or loss will be recognized to the Bascom Hill Fund;
(3) The tax basis of the assets transferred will be the
same to the GIT Fund as the tax basis of such assets to
the Bascom Hill Fund immediately prior to the
Merger;
(4) No gain or loss will be recognized by the GIT
Fund;
(5) No gain or loss will be recognized by the Bascom Hill Fund's
shareholders upon the issuance of the shares of the
GIT Fund to them; and
(6) The aggregate tax basis of the shares of the
GIT Fund, including any fractional shares, received by
each of the shareholders of the Bascom Hill Fund pursuant
to the Merger will be the same as the aggregate tax
basis of the shares of the Bascom Hill Fund held by such
shareholder immediately prior to the Merger, and the
holding period of the shares of the GIT
Fund, including fractional shares, received by each such
shareholder will include the period during which the shares
of the Bascom Hill Fund exchanged therefore were held by such
shareholder.
Opinions of counsel are not binding upon the Internal
Revenue Service or the courts. If the Merger is consummated
but does not qualify as a tax-free reorganization under the
Code, the consequences described above would not be
applicable. Shareholders of the Bascom Hill Fund should
consult their tax advisors regarding the effect, if any, of
the proposed Merger in light of their individual
circumstances. Since the foregoing discussion only relates
to the federal income tax consequences of the Merger,
shareholders of the Bascom Hill Fund should also consult
their tax advisors as to state and local tax consequences,
if any, of the Merger.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
A complete discussion the GIT Fund as of the date of the
Merger is contained in this Prospectus/Proxy Statement
(See "Additional Information" below). The GIT Fund's Prospectus
also offers two additional funds advised by BFA. These additional funds
are not involved in the Merger, and no offering of shares
of such funds, or other series of shares of the GIT Fund, are
made hereby. For a full discussion of the investment objectives,
policies and restrictions of the Bascom Hill Fund, refer to the
Prospectus of the Bascom Hill Fund under the caption "General
Description."
Investment Objective. Both Funds' investment objectives are
essentially identical. The investment objective of the Bascom Hill
Fund is considered a fundamental policy which cannot be changed
without shareholder vote. Currently and after the Merger,
the investment objective of the GIT Fund may be changed upon
written notice to its shareholders.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Form of Organization. The GIT Fund is a series of GIT
Equity Trust. Both Bascom Hill BALANCED Fund, Inc. and
GIT Equity Trust are open-end management investment
companies registered with the SEC under the 1940 Act, which
continuously offer to sell shares at their current net asset
value. GIT Equity Trust is organized as a Massachusetts business
trust and is governed by a Declaration of Trust, By-Laws, Board
of Trustees, and applicable Massachusetts
laws. The Bascom Hill Fund is a Wisconsin corporation
and is governed by its Articles of Incorporation, By-Laws,
Board of Directors and applicable Wisconsin laws.
Capitalization and Shareholder Liability. Under the terms of the
GIT Fund's 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
they have authorized. Currently, the GIT Fund's Trust consists of
four seriess of shares, the Special Growth Portfolio, the Select
Growth Portfolio, the GIT Fund and the Worldwide Growth
Portfolio. All shares issued are fully paid and
nonassessable and have no preemptive or conversion rights.
Under Massachusetts law, the 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 of any shareholder held
personally liable for obligations of the Trust. Thus, the risk of a GIT
Fund shareholder incurring direct financial loss on account of
shareholder liability is considered remote since it is limited to
circumstances in which a disclaimer is inoperative and the portfolio
or series itself would be unable to meet its respective obligations.
A substantial number of mutual funds in the United States are
organized as Massachusetts business trusts.
The Bascom Hill Fund has issued transferable common stock,
par value $0.01 per share. The Articles of Incorporation
authorize the issuance of 5.6 million shares. Fractional
shares may be issued. All Bascom Hill Fund shares are of
the same class with equal rights and privileges. Each share
has one vote and participates equally in dividends and
distributions declared by the Fund and, on liquidation, in
its net assets remaining after satisfaction of outstanding
liabilities. Under Wisconsin law, shareholders have no
personal liability for a corporation's acts or obligations,
except for certain employee wage claims.
Shareholder Meetings and Voting Rights. GIT Equity Trust is
not required to hold annual shareholder meetings. Its Trustees
may be removed by a two-thirds vote of the
number of Trustees prior to such removal or by two-thirds
vote of the shareholders at a special meeting. The By-Laws
of the Bascom Hill Fund provide that Directors may be
removed by a majority vote of shareholders. GIT Equity Trust
is required to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee
when requested in writing to do so by the holders of at
least 10% of GIT Equity Trust's outstanding shares. The
Bascom Hill Fund must hold a special meeting of its
shareholders upon the written request of shareholders
entitled to vote not less than 25% of all the votes entitled
to be cast at such meeting. GIT Equity Trust is required to
call a meeting of shareholders for the purpose of electing
Trustees if, at any time, less than a majority of the
Trustees then holding office were elected by shareholders.
GIT Equity Trust currently does not intend to hold regular
shareholder meetings. Absent certain changes, its
investment advisory contract is reviewed annually by the
Trustees whose terms of office are indefinite. The Bascom
Hill Fund holds annual shareholder meetings to approve its
investment advisory contract with Madison, elect directors
and ratify the selection of independent auditors. Although
formal shareholder meetings are not expected to be called
by the GIT Fund following the Merger, Madison and BFA intend
to host receptions at least annually for the benefit of
shareholders to discuss investment policy, strategy and
other matters of interest to shareholders.
Neither Fund permits cumulative voting. A majority of shares
entitled to vote on a matter constitutes a quorum for
consideration of such matter, and a majority of the shares
present and entitled to vote is sufficient to act on a
matter (unless otherwise specifically required by the
applicable governing documents or other law, including the
1940 Act). All shares of all classes of each portfolio in
GIT Equity Trust have equal voting rights except that in
matters affecting only a particular portfolio (for example,
a subadvisory agreement for that portfolio) only shares of
that portfolio are entitled to vote.
Liquidation or Dissolution. In the event of the liquidation
of a Fund the shareholders are entitled to receive, when,
and as declared by the Board of Trustees or Board of
Directors, the excess of the assets belonging to such Fund
over the liabilities belonging to the Fund. In either case,
the assets so distributable to shareholders of the
respective Fund will be distributed among the shareholders
pro rata based on the shares of the Fund held by them and
recorded on the books of the Fund.
The foregoing is only a summary of certain characteristics
of the operations of the Declaration of Trust and By-Laws of
the Trust and the Articles of Incorporation and By-Laws of
the Bascom Hill Fund, and of Massachusetts, Wisconsin and
federal law. The foregoing is not a complete description of
those documents or laws. Shareholders should refer to the
provisions of the respective Declaration of Trust, Articles
of Incorporation, By-Laws, and Massachusetts, Wisconsin and
federal law directly for more complete information.
ADDITIONAL INFORMATION
Bascom Hill Fund. Information about the Bascom Hill Fund is
included in its current Prospectus dated February 28, 1997, and in
the Statement of Additional Information of the same date that has
been filed with the SEC, both of which are incorporated herein by
reference. A copy of the Prospectus and the Statement of
Additional Information and the Bascom Hill Fund's Annual
Report dated December 31, 1996 are available upon request and
without charge by writing to the Bascom Hill Fund at the
address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800-553-7838.
GIT Fund.
About GIT Equity Trust
GIT Equity Trust (the "Trust") is a diversified, open-end
management investment company, commonly known as a mutual fund.
The Trust was organized as a Massachusetts business trust under a
Declaration of Trust dated November 18, 1982. The Trust is
managed by Bankers Finance Advisors, LLC (the
"Advisor") of the same address as the Trust.
The Trust offers shares of four separate portfolios: the Special
Growth Portfolio, the Select Growth Portfolio, the GIT Fund
and the Worldwide Growth Portfolio.
Financial Highlights
The financial highlights data for a share outstanding and other
performance information of the GIT Fund for the fiscal year
ended March 31, 1996 appearing below is derived from the
financial statements audited by Ernst & Young LLP, independent
auditors, whose report appears in the Annual Report to
Shareholders. This report is incorporated by reference in
the Statement of Additional Information and is
available by calling or writing the Trust. The tabulation below
of information for the fiscal years ended March 31, 1987,
1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995 has also been derived
from the financial statements audited by Ernst & Young LLP.
However, as the Bascom Hill Fund will be the economic survivor of
the merger between the Bascom Hill Fund and the GIT Fund,
financial highlights information is available from the corresponding
section in the Bascom Hill Fund Prospectus and is incorporated
herein by reference.
</TABLE>
<TABLE>
<CAPTION>
Year ended March 31,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997* 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net asset
value
beginning
of period $19.330 15.411 15.809 16.814 15.117 14.805 14.661 13.137 12.300 13.606 12.667
Net
investment
income $0.202 0.373 0.504 0.382 0.416 0.499 0.627 0.690 0.725 0.599 0.634
Net
realized &
unrealized
gains
(losses) on
securities $ 0.880 3.839 0.364 (0.543) 1.961 0.203 0.298 1.551 0.629 (1.309) 1.087
Total from
investment
operations $ 1.082 4.212 0.868 (0.161) 2.377 0.702 0.925 2.241 1.354 (0.710) 1.721
Distributions
from net
investment
income $(0.282)(0.293)(0.504)(0.352)(0.449)(0.390)(0.781)(0.717)(0.517)(0.596)(0.634)
Distributions
from capital
gains $ -- (0.762)(0.492)(0.231) -- -- -- -- -- (0.148)
Total
Distributions$(0.282)(0.293)(1.266)(0.844)(0.680)(0.390)(0.781)(0.717)(0.517)(0.596)(0.782)
Net asset
value end
of period $20.130 19.330 15.411 15.809 16.814 15.117 14.805 14.661 13.137 12.300 13.606
Total
Return 11.26%#27.56% 6.04% (1.08)%16.11% 4.74% 6.58% 17.39% 11.32% (5.37)%13.84%
Net assets
at end of
period
(thousands) $4,634 4,440 3,413 3,625 3,315 2,838 2,709 2,291 1,716 2,160 2,577
Ratio of
expenses to
average net
assets 1.85%#1.92% 2.07% 2.17% 2.19% 2.15% 2.25% 1.55% 1.50% 1.50% 1.47%
Net
investment
income to
average
net assets 2.08%#2.13% 2.53% 2.27% 2.58% 3.47% 4.28% 4.77% 5.54% 4.56% 4.66%
Portfolio
turnover 27% 7% 29% 34% 55% 32% 9% 18% -- 16% 23%
Average
Commission
Rate
Paid $0.0809
* Six-months ended September 30, 1996 (unaudited). Effective July 31, 1996, the
investment advisory services transferred to Bankers Finance Advisors, LLC from
Bankers Finance Investment Management Corp.
#Annualized
</TABLE>
Investment Objective
The Trust's investment objectives may be changed without shareholder
approval; however, shareholders will receive prior written notice
of any material change. There can be no assurance that the
Trust's investment objectives will be achieved.
As of the date of the Merger, the Equity Income Portfolio is a
balanced mutual fund which has two investment objectives:
(1) Production of current income and (2) long-term growth of
capital and income. To achieve its objectives, it will invest in a
diversified portfolio of equity securities and U.S. government
bonds and investment grade corporate bonds having potential to
realize both long-term growth and income, and in short-term money
market instruments.
Investment Policies
The Trust seeks to achieve its investment objectives through
diversified investment by each of its portfolios.
The percentage of the Equity Income Portfolio's assets which may be
invested at any particular time in equities, bonds and money market instruments
will depend on management's judgment regarding the risks in the general market.
The portfolio will not invest more than 70% in equity securities and, will
maintain at least 25% of its assets in fixed income senior securities. The
portfolio's advisor monitors many factors affecting the market outlook,
including economic and monetary trends, market momentum, institutional
psychology and historical similarities to current conditions. Careful
review is made of the equity market's relationship to the bond market and
interest rate trends.
The Trust may also invest in short-term money market instruments
for liquidity purposes to meet redemption requirements and it may
hold a portion of its assets in uninvested cash. Short-term
investments that the Trust may hold include U.S. Government
securities, certificates of deposit, high-grade commercial paper
and repurchase agreements. If BFA determines that it
would be appropriate to adopt a temporary defensive investment
position by reducing exposure in the equity markets, up to 100
percent of any portfolio could be invested in short-term
investments.
The Trust's fundamental investment policies, which may not be
changed without a shareholder vote, limit investments in the
securities of any one issuer (excluding U.S. Government
securities) to five percent of a portfolio's total assets as of
the date of purchase. Additionally, the Trust will not invest
more than 10 percent of the total assets of a portfolio offered
by this prospectus in securities which cannot be liquidated
within seven days, and it will not invest more than 25 percent of
the total assets of a portfolio in securities of issuers in a
single industry. Other fundamental policies are described in the
Statement of Additional Information.
Specialized Investment Techniques
To achieve its objectives, each Trust portfolio may use certain
specialized investment techniques, including writing covered call
options, investment in foreign securities, "when-issued"
securities, loans of portfolio securities and repurchase
agreement transactions. Use of these techniques may involve
certain risks, some of which are summarized below and described
further in the Statement of Additional Information.
Repurchase agreements involve a sale of securities to the Trust
by a financial institution or securities dealer, simultaneous
with an agreement by that institution to repurchase the same
securities at the same price, plus interest, at a later date. The
Trust will limit repurchase agreement transactions to those
financial institutions and securities dealers who are deemed
creditworthy pursuant to guidelines adopted by the Trust's Board
of Trustees. The Advisor will follow a procedure to ensure that
all repurchase agreements acquired by the Trust are always at
least 100 percent collateralized as to principal and interest.
When investing in repurchase agreements, the Trust relies on the
other party to complete the transaction on the scheduled date by
repurchasing the securities. Should the other party fail to do
so, the Trust would end up holding securities it did not intend
to own. Were it to sell such securities, the Trust might incur a
loss. In the event of insolvency or bankruptcy of the other party
to a repurchase agreement, the Trust could encounter difficulties
and might incur losses upon the exercise of its rights under the
repurchase agreement.
If through appreciation, the total market value of the portfolio's
holdings of equity securities exceeds 70% of total net
assets, necessary actions must be taken to reduce total
equities to less than 70% of total net assets within the
following sixty days. The portfolio is not required to
invest exclusively in dividend paying common stocks. There
can be no assurance that the portfolio's shareholders can be
protected from the risk of loss inherent in common stock
investing.
To achieve current income, the Equity Income Portfolio
intends to invest in corporate debt securities and U.S.
Government bonds. Eligible corporate debt securities must be
accorded one of the four highest quality ratings by Standard
& Poor's or Moody's ("investment grade") or, if unrated,
judged by BFA to be a comparable quality. Bonds
rated A, AA, or AAA by Standard & Poor's indicate strong to
high capacity of the company to pay interest and repay
principal. However, the fourth highest rating, BBB,
indicates adequate capacity to pay interest and repay
principal but suggests that adverse economic conditions may
weaken the company's ability to meet these obligations, thus
is more speculative and reflects a higher level of risk. The
portfolio may also invest in direct obligations of the
United States government, its agencies and
instrumentalities. It is not anticipated that the portfolio
will invest in United States government securities to
any significant extent and not on a routine basis, but only
when such securities appear temporarily attractive on a
yield basis when compared to other fixed income securities
of similar maturities. It is anticipated that 25-50% of the
portfolio's total net assets will generally be invested in
debt securities which have an average weighted maturity
of less than 10 years. The portfolio intends to maintain at
least 25% of its assets in fixed income senior securities,
not including any convertible securities. Mere investment
in government or corporate bonds provides no assurance that
the portfolio's shareholders can be protected from certain
risks in bond investing including increasing price
fluctuation as bond maturities become longer.
Investment Risk Considerations
Although diversification of investments may tend to reduce the
exposure involved in holding individual equity securities,
substantially all of the securities purchased by the Trust will
be subject to market and business risks. Because of its
investment in bonds, the GIT Fund also bears interest
rate risk in that as interest rates rise, the value of
the bonds in its portfolio will generally fall.
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 Advisor. Bankers Finance Advisors, LLC is a division of Madison
Investment Advisors, Inc., 6411 Mineral Point Road, Madison,
Wisconsin, 53705 ("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 registered investment advisory firm for
over 23 years, provides professional portfolio management services
to a number of clients, including stock and bond mutual funds, and
has approximately $2.8 billion under management.
The Advisor 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 Frank E. Burgess
and Jay R. Sekelsky. Mr. Burgess, President and founder of
Madison, began managing the Portfolios after July 31, 1996.
Mr. Sekelsky, vice president, has served as a principal of
Madison since 1990. Prior to joining Madison, he was vice
president for Wellington Management Company of Boston,
Massachusetts. He has been involved in the management of the Trust's
portfolios since July 31, 1996.
The Advisor is controlled by Madison. The Advisor purchased
the investment management assets of Bankers Finance Investment
Management Corp. effective July 31, 1996. The Advisor has the
same address as the Trust.
Compensation. For its services under its Investment Advisory
Agreement with the Trust, BFA receives a fee, payable
monthly, calculated as 3/4 percent per annum of the average daily
net assets of each of the Trust portfolios offered by this
prospectus. The Advisor may, in turn, compensate certain
financial organizations for services resulting in purchases of
Trust shares.
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, BFA 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 BFA, including the costs of the following:
shareholder services; legal, custodian and audit fees; trade
association memberships; accounting; certain Trustees' fees and
expenses; fees for registering the Trust's shares; the
preparation of prospectuses, proxy materials and reports to
shareholders; and the expense of holding shareholder meetings.
For the fiscal year ending March 31, 1996, the expenses paid by
the GIT Fund, including advisory fees and reimbursable expenses
paid to the then acting advisor, were $76,709 and for the six
months ended September 31, 1996 were $47,156.
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
they have authorized. All shares issued will be fully paid and
nonassessable and will have no preemptive or conversion rights.
Under Massachusetts law, the 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 of any shareholder held
personally liable for obligations of the Trust.
Shares in four portfolios are authorized by the Trustees: Special
Growth Portfolio, Select Growth Portfolio, the GIT Fund
and Worldwide Growth Portfolio. Shares of each
portfolio are of a single class, each representing an equal
proportionate share in the assets, liabilities, income and
expense of the respective 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. Voting is not cumulative.
The Trust does not intend to have regular shareholder meetings.
Shareholder inquiries can be made to the offices of the Trust at
the address on the cover of the prospectus.
Dividends
As of the date of the Merger, the GIT Fund's net income
will be declared as dividends and distributed to shareholders
annually at the end of the Trust's December 31 fiscal year.
Dividends are paid in the form of additional shares credited to
investor accounts, unless a shareholder elects in writing to
receive dividend payments by check or direct deposit. Any net
realized short- and long-term capital gains will be paid to
shareholders as capital gains distributions. Prior to inclusion
in declared dividends, the Trust's net income will be reflected
in each portfolio's net asset value per share.
Performance Information
From time to time the Trust advertises its total return. Total
return is based on historical data and is not intended to
indicate future performance.
For advertising purposes, total return takes changes in share
prices into account, assuming that dividends and other
distributions are reinvested when paid. In addition to average
annual total return, the Trust may quote total return 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 the Trust's
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
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
percent of its net income and net capital gains for each
portfolio by the end of its fiscal year. The Internal Revenue
Code also requires each portfolio to distribute at least 98
percent of undistributed net income and capital gains realized
from the sale of investments by calendar year-end. The capital
gains distribution is determined as of October 31 each year.
Capital gains 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.
State and Local
At the state and local level, dividend income and capital gains
are generally considered taxable income. Because tax laws vary
from state to state, shareholders should consult their tax
advisers concerning the impact of mutual fund ownership in their
own tax jurisdictions.
Cost Basis
Because each Portfolio's share price fluctuates, a redemption of
shares by the shareholder creates a capital gain or loss which has
tax consequences. It is the shareholder's responsibility to
calculate the cost basis of shares purchased. Shareholders are
advised to retain all statements received from the Trust and to
maintain accurate records of their investments.
Certification of Tax Identification Number
Shareholders who fail to provide a certified social security or tax
identification number may be subject to federal withholding at a
rate of 31 percent of reportable income such as dividend,
capital gain distributions and redemptions.
Net Asset Value
The net asset value per share of each portfolio is calculated as
of the close of the New York Stock Exchange each day the New York
Stock Exchange is open 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 traded on
national securities exchanges are valued at their daily closing
sale prices, if available, and if not available, such securities
are valued at the mean between the bid and ask prices. Other
securities for which current market quotations are readily
available are valued at the mean between their bid and ask
prices; securities for which current market quotations are not
readily available are valued at their fair value as determined in good
faith according to procedures established by the Trustees. The
Trustees may use an independent pricing service for
determination of securities values.
Shareholder Transactions
Transactions into or out of the Trust are recorded in shares
and maintained to an accuracy of 1/1000th of a share.
Certificates will not be issued to represent shares in the Trust.
For institutions needing to maintain separate in formation on accounts
under their management, the Trust will provide a subaccounting report.
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; and if it does not, it may be
liable for losses due to unauthorized or fraudulent transactions.
These procedures can include, among other things, 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.
How to Purchase and Redeem Shares
Purchasing Shares
Purchases are priced at the net asset value per share
next determined after the purchase order is received by the Trust
in proper form. Each shareholder is given an account with a
balance denominated in shares.
Purchases and Uncollected Funds. To protect shareholders against loss or
dilution resulting from deposit items that are returned unpaid,
the proceeds of any redemption may be delayed 10 days or more until it can
be determined that the check or other deposit item (including Automatic
Monthly Investments) used for purchase of the shares has cleared. Such deposit
items are considered "uncollected," until the Trust has determined that they
have actually been paid by the bank on which they were drawn. Purchases made
with cash, federal funds wire or U.S. Treasury check are considered collected
when received and not subject to the 10 day hold. All purchases earn dividends
from the day of credit to a shareholder's account, even while not collected.
New Accounts. As of the date of the Merger, the minimum initial
investment is $1,000.
By Check: New accounts may be opened by completing an application and
forwarding it with a check to:
GIT Equity Trust
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
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 Equity Income Account No. 48038-8883
(Investor name and account number)
Please call the Trust before the funds are wired to ensure proper and
timely credit. There is a charge of $6.00 for processing incoming wires
of less than $1,000.
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.
By Inter-Fund Exchange. Shareholders may open a new account
by exchange from an existing account when the account
registration and tax identification number will remain
the same. A new account application is required only when
the account registration or tax identification number will
differ from that on the application for the original account. Exchanges
may only be made into funds that are
sold in the shareholder's state of residence.
Subsequent Investments. Subsequent investments may be made in any
amount, but the Trust reserves the right to return investments of
less than $50.00. Checks should be payable to GIT Equity Trust and sent to:
GIT Equity 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.
By Inter Fund Exchange. Shareholders may redeem shares
from one GIT account and concurrently invest the proceeds
in another GIT account by telephone when the account registration
and tax identification number remain the same. There is no charge for
this service.
By Automatic Monthly Investment. Shareholders may elect to
have regular monthly investments in any fixed amount of $100
or more. GIT will automatically initiate an Electronic
Funds Transfer to credit the shareholder's GIT account and
debit a bank account of their choice. You can change the
amount or discontinue the automatic investment anytime.
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 mail
or by wire transfer or telephone pursuant to preauthorized
instructions.
Signature Guarantees
To protect your investment, the Trust requires signature
guarantees for some redemptions. Signature guarantees help
the Trust ensure the identity of the authorized
shareholder(s). Signature guarantees are required for any
redemption whereby the proceeds are to be delivered to (1) a
person other than the shareholder of record (2) an address
other than the address of record or (3) a bank and bank
account number other than previously designated. The Trust
accepts signature guarantees from banks with FDIC insurance,
certain credit unions, trust companies, and members of a
domestic stock exchange. A guarantee from a notary public
is not an acceptable signature guarantee.
Redemptions and Uncollected Funds. To protect shareholders
against loss or dilution resulting from deposit items that
are returned unpaid, the proceeds of any redemption may be
delayed 10 days or more until it can be determined that the
check or other deposit item (including Automatic Monthly
Investments)used for purchase of the shares has cleared.
Such deposited items are considered "uncollected," until the
Trust has determined that they have actually been paid
by the bank on which they were drawn. Purchases made with
cash, federal funds wire or U.S. Treasury check are
considered collected when received and not subject
to the 10 day hold. All purchases earn dividends from the
day of credit to a shareholder's account, even while not
collected.
By Wire. With one business day's notice, funds can be sent
by wire transfer to the bank and account designated on the
account application or by subsequent written authorization.
Redemption by wires can be arranged by calling the
telephone numbers on the cover of this prospectus. Requests
for wire transfer must be made by 4:00 p.m. EST the day
before the wire will be sent.
Wire Fees: Wires of $10,000 or more will be processed to
U.S. domestic banks without charge. Wire transfers for
lesser amounts will be processed for a fee of $10. Wire
transfers sent to a foreign bank for any amount will be
processed for a fee of $30 or the cost of the wire if
greater.
By Telephone or By Mail. Upon request by telephone or in
writing, redemptions may be sent to the shareholder of
record to the address of record by check of the Trust.
Redemption requests received by mail and telephone are
normally processed within one business day.
Stop Payment on Check Issued By the Trust.
Call the Trust to place a stop payment on a check issued
by the Trust. Normally, the Trust charges a fee of
$28.00, or the cost of stop payment, if greater, for
stop payment requests on a check issued by the Trust on behalf of
a shareholder. Certain documents may be needed before such a
request can be processed.
Automatic Periodic Redemptions. Shareholders may request one
or more automatic periodic redemptions of a fixed or readily
determinable sum, or of the actual dividends paid. Such
payments may be sent to the shareholder or to any other
payee preauthorized in writing by the shareholder. There is
no charge for this service, but the Trust reserves the right
to impose a charge, or to impose a minimum amount for
periodic redemptions.
Closing an Account
An account may be closed by telephone, wire transfer or by
mail as explained above.
When an account is closed, shares will be redeemed at the
next determined net asset value.
Minimum Balance. The Trust reserves the right to
involuntarily redeem accounts with balances of less than
$700. Prior to closing any such account, the shareholder
will be given 30 days written notice, during which time the
shareholder may increase his or her balance to avoid having
the account closed.
Transaction Charges
Bounced Investment Checks. Shareholders will be charged (by
redemption of shares) $10.00 for items deposited for
investment that are returned unpaid for any reason. The
Trust charges $5.00 to process each bearer bond coupon
deposited.
Broker Fees. Shareholders 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,
shareholders may engage in any transaction directly with the
Trust to avoid such charges.
Additional 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, international
wire transfers, research and processes for retrieval of
documents or copies of documents.
Retirement Plans
IRAs. Individual Retirement Accounts ("IRAs") may be opened with
a reduced minimum investment of $500. Even though they may be
nondeductible or partially deductible, IRA contributions up to
the allowable annual limits may be made, and the earnings on such
contributions will accumulate tax-free until distribution. The
Trust currently charges an annual fee of $12 per shareholder
(not per IRA account) invested in an IRA at GIT. This fee may
be prepaid by the shareholder. A separate application is required
for IRA accounts.
Keogh Plans. The Trust also offers Keogh (or H.R. 10) plans for
self-employed individuals and their employees, which enable them
to obtain tax-sheltered retirement benefits similar to those
available to employees covered by other qualified retirement
plans. Currently the Trust charges an annual fee of
$15 per shareholder (not per Keogh account) invested in
a Keogh at GIT.
The Trust also offers SEP IRAs, SIMPLEs, 401(k) and 403(b)
retirement plans. Further information on the retirement plans
available through the Trust, including minimum investments, may
be obtained by calling the Trust's shareholder service
department.
AVAILABILITY OF PROXY MATERIALS
Bascom Hill BALANCED Fund, Inc. and GIT Equity Trust are each subject to the
informational requirements of the Exchange Act and the 1940 Act, and in
accordance therewith file reports and other information including proxy
material, reports and charter documents with the SEC. These items can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois, 60661-2511, and 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
OTHER BUSINESS
(1) Election of Directors
Action is to be taken with respect to the election of
the entire Board of Directors to serve until the next Annual
Meeting of Shareholders or until their successors are duly
elected and qualified or until the Merger of the
Bascom Hill Fund, if approved.
The table identifies the nominees for election as
Directors of the Bascom Hill Fund. All nominees are members
of the present Board, having been elected at the last annual
meeting. All the nominees attended each of the four meetings
of the Board of Directors held during the Fiscal year ended
December 31, 1996. The Board has no audit, nominating or
similar committees.
During the last fiscal year of the Bascom Hill Fund, the
Directors were compensated as follows:
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Portfolios
Compensa- Accrued as Annual and Fund
tion part of Benefits Complex
from Portfolios Upon Paid to
Fund Expense Retirement Directors(a)
Frank E. Burgess 0 0 0 0
Edmund B. Johnson 1,000 0 0 3,000
James R. Imhoff, Jr. 1,000 0 0 14,250
Lorence D. Wheeler 1,000 0 0 14,250
(a) Prior to the effective date of the Merger,
the complex was comprised of 4 trusts and three
corporations with a total of 16 funds and/or series.
Each nominee has consented to be named in this Prospectus/Proxy
Statement and to serve, if elected. As of the date of the Prospectus/
Proxy Statement, Management has no reason to believe that
any of the named nominees will be unable to serve. The
Management of the Bascom Hill Fund intends to nominate the
persons named in the following table, which sets forth the
name, principal occupation, address, the current position
held with the Bascom Hill Fund, and the approximate number
of shares of common stock of the Bascom Hill Fund
beneficially owned, directly or indirectly, by each nominee
as of the close of business on March 31, 1997.
<TABLE>
Directors of the Bascom Hill Fund
<S> <C> <C> <C>
Shares of
Common Stock
Beneficially
Name, Principal Occupation Position with Owned Directly
and Address (1) Bascom Hill Fund Age or Indirectly
*Frank E. Burgess Director 54 2,131(2)
President and Director
of Madison Investment
Advisors, Inc., the Madison Fund's
Investment Advisor, 6411 Mineral
Point Rd., Madison, WI 53705
James R. Imhoff, Jr. Director 52
President and Director
First Realty Group, Inc.
429 Gammon Place
Madison, WI 53719,
Director of Park Bank of Madison, WI
Edmund B. Johnson Director 75
Vice President and Director
of Medix of Wisconsin, Inc.
Medix is a medical supply company.
3302 Valley Creek Circle
Middleton, WI 53562
Lorence D. Wheeler Director 59
President of Credit Union
Benefits Services, Inc.,
Box 431, Madison, WI 53701-0431
</TABLE>
* Mr. Burgess is the only nominee who is an "interested
person" in the Bascom Hill Fund's Advisor, Madison
Investment Advisors, Inc. He is Madison's President, a
Director, and its majority shareholder.
(1) Messrs. Burgess, Wheeler, and Johnson have served as
Directors of the Bascom Hill Fund since its inception. Mr.
Imhoff was selected as a Director on February 16, 1979.
(2) Madison Investment Advisors, Inc. which is controlled by
Mr. Burgess, owns 898 shares.
Executive officers of the Bascom Hill Fund are elected
annually by the Board of Directors.
The Management of the Bascom Hill Fund recommends you
vote FOR the Directors nominated in the above table.
<TABLE>
Officers of the Bascom Hill Fund
<S> <C> <C> <C>
Name and Business History Office Age First elected
Frank E. Burgess President 54 1978
President and Director
of Madison Investment
Advisors, Inc., the Bascom Hill Fund's
Investment Advisor, 6411 Mineral
Point Rd., Madison, WI 53705
Chris Berberet Treasurer 36 1994
Vice President, Madison
Investment Advisors, Inc.
Prior to joining Advisor,
he was associated with ELCA
Board of Pensions in Minneapolis, MN.
Katherine L. Frank Vice President, 36 1988
Vice President, Madison In- Secretary
vestment Advisors, Inc. since 1986.
Previously with Wayne Hummer
& Co., Chicago, IL.
Jay R. Sekelsky Vice President 37 1991
Vice President, Madison
Investment Advisors since 1990.
Previously with Wellington
Management of Boston.
Elizabeth Hendricks Assistant Secretary 29 1996
Controller, Madison Investment
Advisors, Inc. With Madison
Investment Advisors, Inc. since
1996. Previously with McGladrey
and Pullen and Deloitte & Touche.
</TABLE>
(2) Approval or Disapproval of the Continuation of the
Investment Advisory Agreement
Action is to be taken with respect to the approval of
the Investment Advisory Agreement ("Agreement") between the
Bascom Hill Fund and its Advisor, Madison Investment
Advisors, Inc. ("Madison") until the Merger
of the Bascom Hill Fund as discussed in this
Prospectus/Proxy Agreement, if approved, or, if the
Merger is not approved, until the next Annual
Meeting of Shareholders in April or May 1998. The terms
of the Agreement have not changed since it was last
approved at the Annual Meeting of the Bascom Hill
Fund in 1996.
Under the Agreement, originally dated August 22, 1986,
Madison Investment Advisors, Inc. furnishes the Bascom Hill Fund
with continuous investment service and management. The
Agreement was approved at the last shareholder
meeting on May 1, 1996. The Board of the Bascom Hill
Fund, including the Directors who are not "interested
persons" of Madison, formally extended the Agreement as
amended at a Director's meeting called for that purpose.
Under the terms of the contract Madison is paid a
quarterly fee based on the net asset value of the Bascom
Hill Fund, as determined by the appraisals made as of the
close of each business day. On an annualized basis, the fee
is eight-and-one-half tenths of one percent (.85%) of the
first $100,000,000 of total net assets of the Bascom Hill
Fund, reduced to seven-and-one-half tenths of one percent
(.75%) on that portion of net assets in excess of
$100,000,000. The fee is higher than that of most other
investment companies. During the fiscal year ended December
31, 1996, Madison received $91,311 in fees from the
Bascom Hill Fund.
The Advisor, at its own expense and without reimburse-
ment from the Bascom Hill Fund furnishes office space,
office facilities, executive officers and overhead expenses
for managing the assets of the Bascom Hill Fund, other than
expenses incurred in complying with laws regulating the
issue or sale of securities and fees paid for attendance at
Board meetings to Directors who are not "interested persons"
of Madison or officers or employees of the Bascom Hill
Fund. The Bascom Hill Fund bears all other expenses of its
operations, subject to certain expense limitations.
The Advisor has undertaken to reimburse the Bascom Hill
Fund to the extent that expenses, including the investment
advisory fee but excluding interest, taxes and brokerage
commissions, exceed 2% of the average net assets as
determined by appraisals made as of the close of each
business day of the year. The Advisor was not required to
reimburse the Bascom Hill Fund in 1996 as the Bascom Hill
Fund's expenses were within the 2% limitation.
The Agreement is not assignable and may be terminated
by the Bascom Hill Fund (by action of its Board of Directors
or by vote of a majority of its outstanding voting
securities) or by Madison, without penalty, on sixty
(60) days written notice. Otherwise, this Agreement
continues in effect so long as it is approved annually by
the Directors of the Bascom Hill Fund who are not
"interested persons" of Madison, cast in person at a
meeting called for the purpose of voting on such approval,
and by either the Board of Directors or by a majority of the
outstanding shares of the Bascom Hill Fund.
Frank E. Burgess, who is President and Director of the
Bascom Hill Fund, is President, Treasurer and a Director of
Madison. Mr. Burgess is the majority shareholder of
Madison. Jay R. Sekelsky, who is Vice President of the
Bascom Hill Fund, is also Vice President of Madison.
Katherine L. Frank, who is Vice President and Secretary of
the Bascom Hill Fund, is also Vice President of Madison.
Chris Berberet who is Treasurer of the Bascom Hill Fund, is
also Vice President of Madison. Elizabeth Hendricks who
is Assistant Secretary of the Bascom Hill Fund, is also
Controller of Madison. All of the above may be
contacted at 6411 Mineral Point Road, Madison, Wisconsin
53705. The Advisor also manages Bascom Hill Investors,
Inc. with total net assets of $13.1 million and Madison Bond
Fund, Inc. with total net assets of $4.1 million as of
December 31, 1996. Through its Bankers Finance Advisors, LLC
subsidiary, Madison also manages the GIT Investment
Funds family of thirteen mutual funds, including
Government Investors Trust, GIT Equity Trust, GIT Income
Trust and GIT Tax-Free Trust, with total net assets of
approximately $190 million as of December 31, 1996.
The affirmative vote of the lesser of a majority of the
Bascom Hill Fund shares entitled to vote or over 67% of the
voting securities present at the Meeting if more than 50% of
the outstanding voting securities are present is required
for approval of the extension of the Agreement.
The Management of the Bascom Hill Fund recommends you
vote FOR the approval of the extension of the Agreement.
(3) Ratification or Rejection of Selection of Auditors
The Board of Directors, including the Directors of the
Bascom Hill Fund who are not "interested persons" as defined
by the Investment Company Act of 1940, has selected
Williams, Young & Associates, LLC, P.O. Box 8700, Madison,
Wisconsin, 53708, independent certified public accountants,
to act as auditors of the Bascom Hill Fund for the fiscal
year ending December 31, 1997 or until the Merger of
the Bascom Hill Fund, whichever occurs first. Williams,
Young & Associates, LLC has examined the accounts of the
Bascom Hill Fund since its organization.
A representative of Williams, Young & Associates, LLC
is expected to be present at the Annual Meeting to answer
any appropriate questions and to make a statement if he or
she so desires.
The Management of the Bascom Hill Fund recommends that
you vote FOR the selection of Williams, Young & Associates,
LLC as auditors of the Bascom Hill Fund for the fiscal year
ending December 31, 1997 or until the Merger of the Bascom
Hill Fund, whichever occurs first.
(4) Other Matters
The Management of the Bascom Hill Fund knows of no
other matter that may come before the Annual Meeting. If any
other matters properly come before the Meeting, it is the
intention of the persons acting pursuant to the enclosed
Proxy form to vote the shares represented by said proxies in
accordance with their best judgment with respect to such
matters.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection
with a solicitation of proxies by the Board of Directors of
the Bascom Hill Fund to be used at the Annual Meeting of
Shareholders of the Bascom Hill Fund, to be held at the
Radisson Inn, 517 Grand Canyon Drive, Madison, Wisconsin, on
Wednesday, May 28, 1997, at 4:00 p.m. and at any
adjournments thereof. This Prospectus/Proxy Statement, along
with a Notice of the Meeting and a proxy card, is first
being mailed to shareholders on or about May 1, 1997. Only
shareholders of record as of the close of business on the
Record Date will be entitled to notice of, and to vote at,
the Meeting or any adjournment thereof. The holders of a
majority of the shares outstanding at the close of business
on the Record Date present in person or represented by proxy
will constitute a quorum for the Meeting. If the
enclosed form of proxy is properly executed and returned in
time to be voted at the Meeting, the proxies named therein
will vote the shares represented by the proxy in accordance
with the instructions marked thereon.
Unmarked proxies will be voted FOR the proposed
Merger, FOR the election of the Directors nominated,
FOR the renewal of the investment advisory agreement with
Madison, FOR the ratification of the selected independent
auditors and FOR any other matters deemed appropriate.
Proxies that reflect abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial
owners or the persons entitled to vote or (ii) the broker or
nominee does not have discretionary voting power on a
particular matter) will be counted as shares that are
present and entitled to vote for purposes of determining the
presence of a quorum. Since shares represented by "broker
non-votes" are considered outstanding shares, a "broker non-
vote" has the same effect as a vote against the
Merger. A proxy may be revoked at any time at or
before the Meeting by written notice to the Secretary of the
Bascom Hill Fund, 6411 Mineral Point Road, Madison,
Wisconsin 53705. Unless revoked, all valid proxies will be
voted in accordance with the specifications thereon or,
in the absence of such specifications, for approval of the
Plan and the Merger contemplated thereby.
Approval of the Plan will require the affirmative vote of
more than 50% of the outstanding voting securities of the
Bascom Hill Fund. Fractional shares outstanding are not
entitled to a proportionate share of one vote.
If the shareholders do not vote to approve the Merger, the
Board of Directors of the Bascom Hill Fund will continue to
operate the Bascom Hill Fund under existing arrangements.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph, facsimile or
personal solicitations conducted by officers and employees of Madison,
its affiliates or other representatives of Madison (who will not be paid
for their solicitation activities).
The Bascom Hill Fund will be responsible for the fees and expenses of its
counsel and counsel for the independent Directors in connection with the
Merger, whether or not the Merger is consummated. With respect
to the costs of preparing this Prospectus/Proxy Statement and soliciting
shareholders of the Bascom Hill Fund, Madison has agreed to bear such costs.
In the event that sufficient votes to approve the Plan are
not received by June 13, 1997, the persons named as proxies
may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. In determining
whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of
any further solicitation and the information to be provided
to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an
affirmative vote by the holders of a majority of the shares
present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such
adjournment after consideration of all circumstances which
may bear upon a decision to adjourn the Meeting.
A shareholder who objects to the proposed transaction will
not be entitled under either Wisconsin law or the Articles
of Incorporation of the Bascom Hill Fund to demand payment
for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Merger as
proposed is not expected to result in recognition of gain or
loss to shareholders for federal income tax purposes and
that, if the Merger is consummated, shareholders
will be free to redeem the shares of the GIT Fund which
they received in the transaction at their then-current net
asset value. Shares of the Bascom Hill Fund may be redeemed
at any time prior to the consummation of the Merger.
Bascom Hill Fund shareholders may wish to consult their tax
advisors as to any differing consequences of redeeming
Bascom Hill Fund shares prior to the Merger or
exchanging such shares in the Merger.
If the Merger is not approved, Any shareholder
proposal to be presented at the Annual Meeting of
Shareholders held in 1998, must be received at the executive
offices of the Bascom Hill Fund on or before February 1,
1998 at the address set forth on the cover of this
Prospectus/Proxy Statement.
Notice to Banks, Broker-Dealers and Voting Trustees and
Their Nominees. Please advise Madison whether other persons
are beneficial owners of shares for which proxies are being
solicited and, if so, the number of copies of this
Prospectus/Proxy Statement needed to supply copies to the
beneficial owners of the respective shares.
The votes of the shareholders of the GIT Fund are not
being solicited by the Prospectus/Proxy Statement and are
not required to carry out the Merger.
THE BOARD OF DIRECTORS OF THE BASCOM HILL FUND, INCLUDING
THE "NON-INTERESTED" DIRECTORS, RECOMMENDS APPROVAL OF THE
PLAN, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE
CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN.
---------------------
May 1, 1997
<PAGE>
EXHIBIT A
Agreement and Plan of Merger
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the 1st day
of April, 1997, by and between GIT Equity Trust, a Massachusetts
business trust (the "Trust"), with its principal place of business at
1655 Ft. Myer Drive, Arlington, Virginia 22209, with respect to its Equity
Income Portfolio series (the "Acquiring Fund"), and Bascom Hill BALANCED
Fund, Inc., a Wisconsin corporation (the "Company"), with its principal
place of business at 6411 Mineral Point Road, Madison, Wisconsin 53705
(the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368 (a)(1)(C) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Merger") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for shares of beneficial interest,
no par value per share, of the Acquiring Fund (the "Acquiring Fund Shares") and
the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and the distribution, after the Merger Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in
liquidation of the Selling Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Selling Fund is an open-end, registered
investment company and the Acquiring Fund is a separate
investment series of an open-end, registered investment
company of the management type, and the Selling Fund owns
securities which generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial interest;
WHEREAS, the Trustees of the Trust, have determined that the exchange of
substantially all of the assets of the Selling Fund for Acquiring Fund Shares
and the assumption of certain stated liabilities by the Acquiring Fund on the
terms and conditions hereinafter set forth is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Board of Directors of the Selling Fund has
determined that the Selling Fund should transfer
substantially all of its assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares and the assumption of
certain liabilities by the Acquiring Fund, on the terms and
conditions hereinafter set forth, that such transfer is in
the best interests of the Selling Fund's shareholders, and
that the interests of the existing shareholders of the
Selling Fund will not be diluted as a result of the
transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE I
Transfer of Assets of the Selling Fund in Exchange for the Acquiring Fund
Shares and Assumption of Selling Fund Liabilities and Liquidation of the
Selling Fund
1.1 The Exchange. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer the Selling Fund's assets as set forth in paragraph 1.2
to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefore (i)
to deliver to the Selling Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Selling Fund's net assets computed in the manner and as of the time and date set
forth in paragraph 2.1 by the net asset value of one Acquiring Fund Share
computed in the manner and as of the time and date set forth in paragraph 2.2
and (ii) to assume certain liabilities of the Selling Fund, as set forth in
paragraph 1.3. Such transactions shall take place at the closing provided for in
paragraph 3.1 (the "Merger Date").
1.2 Assets to be Acquired. The assets of the Selling Fund to
be acquired by the Acquiring Fund shall consist of all
property, including without limitation all cash, securities,
commodities and futures interests and dividends or interest
receivable, which is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books
of the Selling Fund on the Merger Date. The Selling Fund
has provided the Acquiring Fund with its most recent audited
financial statements which contain a list of all of Selling
Fund's assets as of the date thereof. The Selling Fund
hereby represents that as of the date of the execution of
this Agreement there have been no changes in its financial
position as reflected in said financial statements other
than those occurring in the ordinary course of its business
in connection with the purchase and sale of securities and
the payment of its normal operating expenses. The Selling
Fund reserves the right to sell any of such securities but
will not, without the prior written approval of the
Acquiring Fund, acquire any additional securities other than
securities of the type in which the Acquiring Fund is
permitted to invest. The Acquiring Fund will, within a
reasonable time prior to the Merger Date, furnish the
Selling Fund with a statement of the Acquiring Fund's
investment objectives, policies and restrictions and a list
of the securities, if any, on the Selling Fund's list
referred to in the second sentence of this paragraph which
do not conform to the Acquiring Fund's investment
objectives, policies, and restrictions. In the event that
the Selling Fund holds any investments which the Acquiring
Fund may not hold, the Selling Fund will dispose of such
securities prior to the Merger Date. In addition, if it is
determined that the Selling Fund and the Acquiring Fund
portfolios, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the
Acquiring Fund with respect to such investments, the Selling
Fund if requested by the Acquiring Fund will dispose of a
sufficient amount of such investments as may be necessary to
avoid violating such limitations as of the Merger Date.
1.3 Liabilities to be Assumed. The Selling Fund will
endeavor to discharge all of its known liabilities and
obligations prior to the Merger Date. The Acquiring Fund
shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and
Liabilities of the Selling Fund prepared by Madison
Investment Advisors, Inc. the investment advisor and
administrator of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the
prior audited period. The Acquiring Fund shall assume only
those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any
other liabilities, whether absolute or contingent, known or
unknown, accrued or unaccrued, all of which shall remain the
obligation of the Selling Fund.
1.4 Liquidation and Distribution. As soon after the Merger
Date as is conveniently practicable (the "Liquidation
Date"), (a) the Selling Fund will liquidate and distribute
pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Merger Date
(the "Selling Fund Shareholders"), the Acquiring Fund Shares
received by the Selling Fund pursuant to paragraph 1.1. and
(b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the
Selling Fund on the books of the Acquiring Fund, to open
accounts on the share records of the Acquiring Fund in the
names of the Selling Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due
such shareholders. All issued and outstanding shares of the
Selling Fund will simultaneously be canceled on the books of
the Selling Fund. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in
connection with such exchange, but nothing herein prevents
the Acquiring Fund from issuing certificates to its
shareholders thereafter.
1.5 Ownership of Shares. Ownership of Acquiring Fund Shares
will be shown on the books of the Acquiring Fund's transfer
agent. Whole or fractional shares of the Acquiring Fund will
be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to
shareholders of the Selling Fund as described in Section 5.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Selling Fund
shares on the books of the Selling Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund
is and shall remain the responsibility of the Selling Fund up to and including
the Merger Date and such later date on which the Selling Fund is terminated and
deregistered.
1.8 Termination and Deregistration. The business of the Selling Fund shall be
wound up, and the Company shall be dissolved as a Wisconsin corporation and
deregistered as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), promptly following the Merger Date and the making
of all distributions pursuant to paragraph 1.4.
ARTICLE II
Valuation
2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of business on the New York Stock Exchange on the business day
immediately preceding the Merger Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Trust's Declaration of Trust and the Acquiring Fund's current prospectus and
statement of additional information or such other valuation procedures as shall
be mutually agreed upon by the parties.
2.2 Valuation of Shares. The net asset value of an Acquiring Fund Share shall be
the net asset value per share computed as of the close of business on the New
York Stock Exchange on the Valuation Date, using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's current
prospectus and statement of additional information, as applicable.
2.3 Shares to be Issued. The number of the Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Selling Fund's assets
shall be determined by dividing the value of the assets of the Selling Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value of an Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 Determination of Value. All computations of value shall be made by Bankers
Finance Advisors, LLC in accordance with its regular practice and procedures
in pricing the shares and assets of the Trust.
ARTICLE III
Closing and Merger Date
3.1 Merger Date. The Merger Date shall be June 13, 1997 or such later date as
the parties may agree to in writing. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Merger Date unless otherwise provided. The Closing shall be held as of 4:00
o'clock p.m. at the offices of Bankers Finance Advisors, LLC, 1655 Ft. Myer
Drive, Arlington, Virginia 22209, or at such other time and/or place
as the parties may agree.
3.2 Custodian's Certificate. Firstar Trust Company, as custodian for the Selling
Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Merger Date and (b) all necessary taxes including all
applicable Federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities.
3.3 Effect of Suspension in Trading. In the event that on the Valuation Date (a)
the New York Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Selling Fund shall be closed to trading
or trading thereon shall be restricted, or ( b ) trading or the reporting of
trading on said Exchange or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the Selling
Fund is impracticable, the Merger Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 Transfer Agent's Certificate. Firstar Trust Company, as transfer agent
for the Selling Fund shall deliver at the Closing a certificate of an
authorized officer stating that their records contain the names and addresses
of the Selling Fund Shareholders and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Merger. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Merger
Date to the Secretary of the Company, or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request. The Trust serves as transfer agent for the
Acquiring Fund.
ARTICLE IV
Representations and Warranties
4.1 Representations of the Selling Fund. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a Wisconsin corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin;
(b) The Selling Fund is a registered investment company classified as a
management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940 (the "1940 Act") is in
full force and effect;
(c) The current prospectus and statement of additional information of the
Selling Fund conform in all material respects to the applicable requirements of
the Securities Act of 1933, as amended, (the "1933 Act") and the 1940 Act and
the rules and regulations of the Commission thereunder and do not include any
untrue statement of material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;
(d) The Selling Fund is not, and the execution, delivery and performance of this
Agreement (subject to shareholder approval) will not result, in violation of any
provision of the Company's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Selling Fund is a party or by which it is bound;
(e) The Selling Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to it prior to the
Merger Date;
(f) Except as otherwise disclosed in writing to and accepted by the Acquiring
Fund, no litigation, administrative proceeding or investigation of or before any
court or governmental body is presently pending or to its knowledge threatened
against the Selling Fund or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial condition, the
conduct of its business or the ability of the Selling Fund to carry out the
transactions contemplated by this Agreement. The Selling Fund knows of no facts
which might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Selling Fund at December 31, 1996
have been audited by Williams, Young & Associates, LLC
certified public accountants, and are in accordance with
generally accepted accounting, principles consistently applied,
and such statements (copies of which have been furnished to the
Acquiring Fund) fairly reflect the financial condition of the
Selling Fund as of such dates, and there are no known contingent
liabilities of the Selling Fund as of such dates
not disclosed therein;
(h) Since December 31, 1996, there has not been any material adverse change in
the Selling Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Selling Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net
asset value of the Selling Fund shall not constitute a material adverse change;
(i) At the Merger Date, all Federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates shall have been
filed, and all Federal and other taxes shall have been paid so far as due, or
provision shall have been made for the payment thereof and to the best of the
Selling Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) For each of the preceding six fiscal years of its operation the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at the
Merger Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Selling Fund. All of the issued and outstanding shares of
the Selling Fund will, at the time of the Merger Date, be held by the persons
and in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Selling Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Selling Fund shares, nor
is there outstanding any security convertible into any of the Selling Fund
shares;
(l) At the Merger Date, the Selling Fund will have good and marketable title to
the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery and payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the Acquiring Fund and
accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Selling Fund and, subject
to approval by the Selling Fund's shareholders, this Agreement constitutes a
valid and binding obligation of the Selling Fund, enforceable in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations thereunder applicable thereto;
(o) The proxy statement of the Selling Fund to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Merger Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2 Representations of the Acquiring Fund. The Acquiring Fund represents
and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the Commission
as an investment company under the 1940 Act now is in effect and shall be in
full force and effect as of the Merger Date;
(c) The current prospectus and statement of additional information of the
Acquiring Fund, to be effective as of the Merger Date, shall conform in
all material respects to the applicable requirements of the 1933 Act and
the 1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading;
(d) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in violation of the Trust's Declaration of Trust
or By-Laws or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which it is bound;
(e) Except as otherwise disclosed to the Selling Fund and accepted by the
Selling Fund, no material litigation, administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition and the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this Agreement. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) The financial statements of the Acquiring Fund at March 31, 1996 have been
audited by Ernst & Young LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Acquiring Fund)
fairly reflect the financial condition of the Acquiring Fund as of such dates,
and there are no known contingent liabilities of the Acquiring Fund as of
such dates not disclosed therein;
(g) Since March 31, 1996, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted
by the Selling Fund. For the purposes of this subparagraph (g), a decline in
the net asset value of the Acquiring Fund shall not constitute a material
adverse change;
(h) At the Merger Date, all Federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed shall have been filed, and all
Federal and other taxes shown due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof and to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company;
(j) All issued and outstanding Acquiring Fund Shares are, and at the Merger
Date will be, duly and validly issued and outstanding, fully paid and
non-assessable (except that, under Massachusetts law, shareholders of the
Acquiring Fund could, under certain circumstances, be held personally liable for
obligations of the Acquiring Fund). The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquiring
Fund Shares, nor is there outstanding any security convertible into any
Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and this
Agreement constitutes a valid and binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Selling Fund,
for the account of the Selling Fund Shareholders, pursuant to the terms of this
Agreement will at the Merger Date have been duly authorized and, when so issued
and delivered, will be duly and validly issued Acquiring Fund Shares, and will
be fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(m) The information to be furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations applicable thereto;
(n) The Prospectus and Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund ) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to give the notices
or obtain the approvals and authorizations required by the 1933 Act, the
1940 Act and such of the state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the Merger Date.
ARTICLE V
Covenants of the Acquiring Fund and the Selling Fund
5. 1 Operation in Ordinary Course. The Acquiring Fund and the Selling Fund each
will operate its business in the ordinary course between the date hereof and the
Merger Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 Approval of Shareholders. The Selling Fund will call a meeting of the
Selling Fund Shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 Investment Representation. The Selling Fund covenants that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.4 Additional Information. The Selling Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Selling Fund shares.
5.5 Further Action. Subject to the provisions of this Agreement, the Acquiring
Fund and the Selling Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including any actions required to be taken after the Merger Date.
5.6 Statement of Earnings and Profits. As promptly as practicable, but in any
case within sixty days after the Merger Date, the Selling Fund shall furnish
the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring
Fund, a statement of the earnings and profits of the Selling Fund for Federal
income tax purposes which will be carried over by the Acquiring Fund as a result
of Section 381 of the Code, and which will be certified by the Selling Fund's
President, its Treasurer and its independent auditors.
5.7 Preparation of Form N-14 Registration Statement. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus and Proxy Statement") which will
include the Prospectus and Proxy Statement, referred to in paragraph 4.1(o), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, (the "1934 Act") and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
ARTICLE VI
Conditions Precedent to Obligations of the Selling Fund
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Merger Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Merger Date with the same force and effect as if made on and as of
the Merger Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Secretary, Treasurer or Assistant Treasurer, in a form
reasonably satisfactory to the Selling Fund and dated as of the Merger Date,
to such effect and as to such other matters as the Acquiring Fund shall
reasonably request; and
6.2 The Selling Fund shall have received on the Merger Date
an opinion or statement from Sullivan & Worcester LLP, counsel
to the Acquiring Fund, in form and substance satisfactory to the
Selling Fund addressing the Acquiring Fund's standing, authority
or such other matters as the Acquiring Fund may request to
ensure the timely and authorized accomplishment of the Merger
without penalty or assumption of liability. Such statement
shall contain such assumptions and limitations as shall be
in the opinion of Sullivan & Worcester, LLP appropriate to
matters expressed therein.
ARTICLE VII
Conditions Precedent to Obligations of the Acquiring Fund
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Merger Date and, in addition thereto, the following conditions:
7.1 All representations, covenants and warranties of the Selling Fund contained
in this Agreement shall be true and correct as of the date hereof and as of the
Merger Date with the same force and effect as if made on and as of the Merger
Date, and the Selling Fund shall have delivered to the Acquiring Fund on the
Merger Date a certificate executed in its name by the Selling Fund's President
or Vice President and its Secretary, Treasurer or Assistant Treasurer, in
form and substance satisfactory to the Acquiring Fund and, dated as of the
Merger Date, to such effect and as to such other matters as the Acquiring
Fund shall reasonably request;
7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement of
the Selling Fund's assets and liabilities, together with a list of the Selling
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Merger Date, certified by the
Treasurer of the Selling Fund ; and
7.3 The Acquiring Fund shall have received on the Merger
Date an opinion or statement from DeWitt, Ross & Stevens, S.C.,
counsel to the Selling Fund, in form and substance satisfactory to
the Acquiring Fund addressing the Selling Fund's standing,
authority or such other matters as the Selling Fund may
request to ensure the timely and authorized accomplishment
of the Merger without penalty or assumption of any liability
not otherwise disclosed in the Selling Fund's financial
statements. Such statement shall contain such other
assumptions and limitations as shall be in the opinion of
DeWitt Ross & Stevens, S.C. appropriate to matters expressed
therein.
ARTICLE VIII
Further Conditions Precedent to Obligations of the Acquiring Fund
and the Selling Fund
If any of the conditions set forth below do not exist on or before the
Merger Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the Selling Fund's Articles of
Incorporation and By-Laws and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1;
8.2 On the Merger Date the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein;
8.3 All required consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities ( including those of
the Commission and of state Blue Sky and securities authorities. including any
necessary "no-action" positions of and exemptive orders from such Federal and
state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933 Act
and no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5 The Selling Fund shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of distributing to the
Selling Fund Shareholders all of the Selling Fund's investment company taxable
income for all taxable years ending on or prior to the Merger Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Merger Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of DeWitt, Ross &
Stevens, S.C. addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for Federal income tax purposes:
(a) The transfer of substantially all of the Selling Fund assets in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund's shares to the Selling Fund in dissolution and liquidation of
the Selling Fund, will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code; (b) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund; (c) no gain or loss will be
recognized by the Selling Fund upon the transfer of the Selling Fund assets to
the Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption
by the Acquiring Fund of certain identified liabilities of the Selling Fund or
upon the distribution ( whether actual or constructive ) of the Acquiring Fund
Shares to Selling Fund Shareholders in exchange for their shares of the Selling
Fund; (d) no gain or loss will be recognized by Selling Fund Shareholders upon
the exchange of their Selling Fund shares for the Acquiring Fund Shares in
liquidation of the Selling Fund; (e) the aggregate tax basis for the Acquiring
Fund Shares received by each Selling Fund Shareholder pursuant to the
Merger will be the same as the aggregate tax basis of the Selling Fund
shares held by such shareholder immediately prior to the Merger, and the
holding period of the Acquiring Fund Shares to be received by each Selling Fund
Shareholder will include the period during which the Selling Fund shares
exchanged therefore were held by such shareholder (provided the Selling Fund
shares were held as capital assets on the date of the Merger ); and (f)
the tax basis of the Selling Fund assets acquired by the Acquiring Fund will be
the same as the tax basis of such assets to the Selling Fund immediately prior
to the Merger, and the holding period of the assets of the Selling Fund
in the hands of the Acquiring Fund will include the period during which those
assets were held by the Selling Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Selling Fund may waive the
conditions set forth in this paragraph 8.6.
ARTICLE IX
Brokerage Fees and Expenses
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2 (a) Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Acquiring Fund will
be borne by Madison Investment Advisors, Inc. ("Madison"). The Selling
Fund will bear the expense of its own counsel and counsel to its Directors in
connection with the transactions contemplated by this Agreement. All other
expenses of the transactions contemplated by this Agreement incurred by the
Selling Fund will be borne by Madison. Such expenses include, without
limitation, (i) expenses incurred in connection with the entering into and
the carrying out of the provisions of this Agreement; (ii) expenses associated
with the preparation and filing of the Registration Statement under the 1933
Act covering the Acquiring Fund Shares to be issued pursuant to the provisions
of this Agreement;
(iii) registration or qualification fees and expenses of preparing and filing
such forms as are necessary under applicable state securities laws to qualify
the Acquiring Fund Shares to be issued in connection herewith in each state in
which the Selling Fund Shareholders are resident as of the date of the mailing
of the Prospectus and Proxy Statement to such shareholders; (iv) postage; (v)
printing; (vi) accounting fees; (vii) legal fees; and (viii) solicitation cost
of the transactions. (b) Consistent with the provisions of paragraph 1.3, the
Selling Fund, prior to the Merger Date, shall pay for or include in the
statement of assets and liabilities prepared pursuant to paragraph 1.3 all of
its known and reasonably estimated expenses associated with the transactions
contemplated by this Agreement
ARTICLE X
Entire Agreement; Survival of Warranties
10.1 The Acquiring Fund and the Selling Fund agree that neither party has made
any representation, warranty or covenant not set forth herein and that the
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
Termination
11.1 This Agreement may be terminated by the mutual agreement of the Acquiring
Fund and the Selling Fund. In addition, either the Acquiring Fund or the Selling
Fund may at its option terminate this Agreement at or prior to the Merger Date
because:
(a) of a breach by the other of any representation, warranty or agreement
contained herein to be performed at or prior to the Merger Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
11.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring Fund
or the Selling Fund, the Trust, or their respective Directors,
Trustees or officers, to the other party or its Directors, Trustees or officers,
but each shall bear the expenses incurred by it incidental to the preparation
and carrying out of this Agreement as provided in paragraph 9.2.
ARTICLE XII
Amendments
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Selling Fund and the Acquiring Fund: provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
Notices
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to
The Acquiring Fund:
GIT Equity Trust
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
Attention: W. Richard Mason, Esq.
or to the Selling Fund
Bascom Hill BALANCED Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin, 53705
Attention: Frank E. Burgess, Esq.
ARTICLE XIV
Miscellaneous
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed to that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of Trust of the Acquiring Fund. The
execution and delivery of this Agreement has been authorized by the Trustees of
the Trust on behalf of the Acquiring Fund and signed by authorized officers of
the Trust, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquiring Fund as
provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed and sealed
this Agreement, all as of the date first written above.
GIT Equity Trust
on behalf of the Equity Income Portfolio
By:/s/
Name: Katherine L. Frank
Title: President
Bascom Hill BALANCED Fund, Inc.
By: /s/
Name: Frank E. Burgess
Title: President
<PAGE>
Bascom Hill BALANCED Fund, Inc.
MEETING OF SHAREHOLDERS -- MAY 28, 1997
This proxy is solicited on behalf of the Directors of Bascom
Hill BALANCED Fund, Inc.
The undersigned hereby appoints Katherine L. Frank, Frank E.
Burgess and Elizabeth Hendricks, and each of them separately,
proxies, with full power of substitution, and hereby authorizes
them to represent and to vote, as designated below at the
Annual Meeting of Shareholders of the above referenced Fund
(the "Fund") to be held on Wednesday, May 28, 1997 at the
Radisson Inn, 517 Grand Canyon Drive, Madison,
Wisconsin, at 3:00 p.m. Central time, and at any adjournments
thereof (the "Meeting"), all of the shares of the Fund which the
undersigned would be entitled to vote if the undersigned
were personally present.
Note: Please sign exactly as name appears on this card.
All joint owners should sign. When signing as an executor,
administrator, attorney, trustee, guardian or custodian for
a minor, please give full title as such. If a corporation,
please sign in full corporate name and indicate the signer's
office. If a partner, sign in partnership name.
Every shareholder's vote is important! Vote this Proxy Card
today! Please detach at perforation before mailing.
THIS PPOXY, WHEN PROPERTLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE SHAREHOLDER WHOSE NAME IS
SIGNED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL.
To vote, mark blocks below in blue or black ink as follows [x]
Bascom Hill BALANCED Fund, Inc.
Keep this portion for your records.
(perforation)
Detach and return this portion only.
1. To approve the proposed Agreement and Plan of Merger
with the GIT Equity Trust Equity Income Portfolio.
o YES o NO o ABSTAIN
2. To elect the Directors nominated.
o YES o NO o ABSTAIN
3. To approve the investment advisory agreement.
o YES o NO o ABSTAIN
4. To ratify the selection of independent auditors.
o YES o NO o ABSTAIN
5. To consider and vote upon such other matters as may properly
come before said meeting or any adjournments thereof.
o YES o NO o ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Directors of Bascom
Hill Investors, Inc. has fixed the close of business on March 31, 1997, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL
MEETING ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE
PROXY CARD IN THE ENCLOSED ENVELOPE WHICH NEEDS NO POSTAGE
IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1997
Acquisition of the Assets of
Bascom Hill BALANCED Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
1-800-553-7838
By and in Exchange for Shares of
Equity Income Portfolio
of
GIT Equity Trust
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
1-800-336-3063
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets of the Bascom Hill BALANCED Fund, Inc.
in exchange for shares of the Equity Income Portfolio, a series of GIT
Equity Trust, and the assumption by the Equity Income Portfolio of
certain identified liabilities of Bascom Hill BALANCED Fund, Inc.
is not a prospectus. A Prospectus/Proxy Statement dated May 1,
1997 relating to the above-referenced matter may be obtained
from Bascom Hill BALANCED Fund, Inc., 6411 Mineral Point
Road Madison, Wisconsin 53705, 1-800-553-7838. This
Statement of Additional Information relates to and should
be read in conjunction with such Prospectus/Proxy Statement.
This Statement of Additional Information incorporates by reference the
following documents, a copy of each of which accompanies this Statement of
Additional Information:
1. The Prospectus of Bascom Hill BALANCED Fund, Inc. dated
February 28, 1997.
2. The Statement of Additional Information of Bascom
Hill BALANCED Fund, Inc., dated February 28, 1997.
3. The Annual Report of Bascom Hill BALANCED Fund, Inc.
dated December 31, 1996.
4. The Annual Report of GIT Equity Trust dated
March 31, 1996 and the Semi-Annual Report
(unaudited) of GIT Equity Trust dated
September 30, 1996.
The following information is provided with regard to the Equity
Income Portfolio of GIT Equity Trust:
Table of Contents
Introductory Information ("About GIT
Equity Trust") 3
Supplemental Investment Policies
("Investment Objectives" and
"Investment Policies") 3
Investment Limitations
("Investment Policies") 10
The Investment Advisor
("Management of the Trust") 13
Organization of the Trust
("The Trust and Its Shares") 15
Trustees and Officers
("Management of the Trust") 17
Administrative and Other Expenses
("Management of the Trust") 20
Portfolio Transactions
("Management of the Trust") 21
Share Purchases
("How to Purchase and Redeem Shares") 22
Share Redemptions
("How to Purchase and Redeem Shares") 24
Retirement Plans
("How to Purchase and Redeem Shares") 25
Declaration of Dividends
("Dividends") 26
Determination of Net Asset Value
("Net Asset Value") 27
Additional Tax Matters
("Taxes") 28
Total Return Calculations
("Performance Information") 30
Custodians and Special Custodians 31
Legal Matters and Independent Auditors
("Financial Highlights") 32
Additional Information 32
Financial Statements 32
Note: The items appearing in parentheses above are cross
references to sections in the Prospectuses/Proxy Statement
which correspond to the sections of this Statement of Additional
Information.
<PAGE>
Introductory Information
GIT Equity Trust (the "Trust") currently issues four series of
shares: Worldwide Growth Fund shares, Special Growth Fund shares,
Select Growth Fund shares and Equity Income Fund shares. These
four series of shares correspond, respectively, to three separate
portfolios consisting primarily of equity securities: the
Worldwide Growth Portfolio, the Special Growth Portfolio, and the
Select Growth Portfolio, and one portfolio investing in a combination of
fixed income and equity securities: the Equity Income Portfolio (the
"GIT Fund") . These portfolios are described more fully below
(see "Supplemental Investment Policies").
As of the date of the Merger, the investment objectives of the GIT
Fund will change from one principally invested in equity securities
to one invested in a combination of equity and fixed-income (bond)
securities. Historical expense and performance statistics described
herein should be considered in light of this change.
Supplemental Investment
The investment objectives of the Trust are described in the
Prospectuses (see "Investment Objectives"). Reference should also
be made to the Prospectuses for general information concerning
the Trust's investment policies (see "Investment Policies").
The Special Growth, Select Growth and Worldwide Growth
Portfolios of the Trust seek to achieve their investment objectives through
diversified investment by each of its portfolios principally in
equity securities, while the Equity Income Portfolio seeks to
achieve its investment objective through diversified
investment in a combination of equity and fixed-income securities.
Basic Investment Policies. The Trust intends generally to select
portfolio investments on the basis of their fundamental values
rather than on the basis of technical market factors. This means
that the Trust's investments will normally be held until there is
a change in the fundamental considerations that were the reason
for their purchase. However, the Trust will be free to sell any
of its investments at any time in response to market timing or
other considerations. Any such sales may result in realized long-
term or short-term capital gains and losses. The Trust does not
intend to engage in extensive short-term trading; thus, since it
will not normally be able to take advantage of short-term market
swings, the Trust should not be viewed as a vehicle for short-
term investment.
The Equity Income Portfolio is intended to earn substantial
current dividend income with some capital appreciation while
assuming less risk than the Trust's other portfolios.
Consideration will also be given to an investment's potential for
appreciation as a hedge against inflation and factors tending to
protect the investment's value.
The Advisor believes that capital growth and production of income
can best be achieved through flexibility of investment strategies. Although
the careful selection of common stocks and bonds is a primary factor affecting
the investment return of the portfolio, the percentage of the portfolio's
assets which may be invested at any particular time in common stocks or bonds
will depend upon management's judgment regarding the risks present in the
stock and fixed income markets. When management believes that market risks
are high and the prices of common stocks or bonds may decline, the portfolio
may move substantial assets out of common stocks or bonds and into short-
term fixed income instruments such as U.S. Treasury Bills, U.S. Treasury
Notes, U.S. Agency Notes or highly rated commercial paper or money market
funds.
While investments in the Equity Income Portfolio are intended to be less
volatile than those of the Trust's other portfolios, no assurance
can be given that this portfolio will avoid losses or succeed in
growing at a rate matching the rate of inflation. Experience has
shown that high levels of inflation may depress stock prices,
limiting the value of common stocks as an inflation hedge.
Other Policies. The Trust will not invest more than 25% of the
assets of a portfolio in any one industry. During defensive
periods the Trust may invest without limitation in U.S.
Government securities and the money market obligations of
domestic banks, their branches and other domestic depository
institutions (see "Investment Limitations"). The Trust will limit
its investments to liquid securities having readily available
market quotations, except that up to 10% of the Special, Select
or Equity Income Portfolio and up to 15% of the Worldwide Growth
Portfolio may be invested in securities having restrictions on
resale or which are otherwise illiquid (see "Investment
Limitations").
Debt Instruments. The portion of any portfolio of the Trust that
is not invested in equity securities may be invested in debt
instruments. The "Debt Instruments" in which the Special Growth,
Select Growth and Worldwide Growth Portfolios of 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 (including assets of
affiliates); (3) high grade commercial paper; (4) other corporate
and foreign government obligations of investment grade issued and
sold publicly within the United States; and (5) repurchase
agreements involving any of the foregoing securities.
"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 of the United States 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, the
Small Business Administration, the Student Loan Marketing
Association, and deposits fully insured as to principal by
federal deposit insurance. Except for Treasury securities, all of
which are full faith and credit obligations, U.S. Government
securities may either be agency securities backed by the full
faith and credit of the United States, such as those issued by
the Government National Mortgage Association, or only by the
credit of the particular federal agency or instrumentality which
issues them, such as those issued by the Federal Farm Credit
System and the Federal Home Loan Mortgage Corporation; some such
agencies have borrowing authority from the U.S. Treasury, while
others do not.
Bank obligations include certificates of deposit ("CDs"), bankers
acceptances ("BAs") and time deposits. 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. 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. Time deposits
include money market deposit accounts. The Trust will not invest
in non-transferable time deposits having penalties for early
redemption if such time deposits mature in more than seven
calendar days, and such time deposits maturing in two business
days to seven calendar days will be limited to 10% of the Special
Growth, Select Growth or Equity Income Portfolio's respective
total assets and limited to 15% of the Worldwide Growth
Portfolio's total assets.
"Commercial paper" describes the unsecured promissory notes
issued by major corporations to finance short-term credit needs.
Commercial paper is issued in maturities of nine months or less
and usually on a discount basis. High grade commercial paper is
rated A-1 by Standard and Poor's Corporation ("S&P") or P-1 by
Moody's Investors Service, Inc. ("Moody's") or is of equivalent
quality. Other corporate and foreign government obligations
generally include notes and debentures (for maturities not
exceeding 10 years) and bonds (for longer maturities). These
obligations normally pay interest to the holder semiannually;
they may be either secured or, more commonly, unsecured.
Investment grade obligations are those rated Baa or better by
Moody's or BBB or better by S&P or are of equivalent quality.
The Equity Income Portfolio may invest in the Debt Instruments
described above and in the investment grade fixed-income securities
described more fully in the Prospectus (see "Additional Information
About the Equity Income Portfolio").
Specialized Investment Techniques. In order to achieve its
investment objectives, the Trust may use, when BFA deems
appropriate, 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. Covered Call Options. The Trust may write "covered call
options" against any of its portfolio securities. These options
represent contracts sold on a national options exchange or in the
over-the-counter market allowing the purchaser of the contract to
buy specified underlying securities at a specified price (the
"strike price") prior to a specified expiration date. Writing
covered call options may increase the Trust's income, because a
fee (the "premium") is received by the Trust for each option
contract written, but unless the option contract is exercised it
has no other ultimate impact on the Trust. The premium received,
plus the strike price of the option, will always be greater than
the value of the underlying securities at the time the option is
written.
When an option contract is "covered" it means that the Trust, as
the writer of the option contract, holds in its portfolio the
underlying securities described in the contract or securities
convertible into such securities. Thus, if the holder of the
option decides to exercise his purchase rights, the Trust may
sell at the strike price securities it already holds in portfolio
or may obtain by conversion (rather than risking having to first
buy the securities in the open market at an undetermined price).
However, an option contract would not normally be exercised
unless the market price for the underlying securities specified
were greater than the strike price. Thus, when an option is
exercised the Trust will normally be forced to sell portfolio
securities at below their current market value or otherwise will
be required to buy a corresponding call contract at a price
reflecting this price differential to offset the call contract
previously written (such an offsetting call contract purchase is
called a "closing purchase transaction").
To the extent the Trust writes covered call options it will be
foregoing any opportunity for appreciation on the underlying
securities above the strike price during the period prior to
expiration of the option contract. The Trust reserves the right
to close out call option contracts written at any time in closing
purchase transactions, but there is no assurance that the Trust
will be able to effect such transactions at any particular time
or at an acceptable price. The Trust will not sell the securities
covering an option contract written prior to its expiration date
unless substitute covering securities are purchased or unless the
contract written is first offset in a closing purchase
transaction; nor will the Trust write additional option contracts
if more than 25% of the Trust's assets would then be required to
cover the options written. All of the Trust's investments will be
selected on a basis consistent with its investment policies for
the respective portfolio, notwithstanding the potential for
additional premium income from option writing. The writing of
options could increase the Trust's gross income from securities
held less than three months, and is therefore limited by tax
considerations to providing 30% of gross income or less (see
"Additional Tax Matters").
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. Frequently
when newly issued 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 purchase settlement may increase changes in the value
of the respective portfolio, because such value changes must be
added to changes in the values of those securities actually held
in the portfolio during the same period. When-issued transactions
represent a form of leveraging; the Trust will be at risk as soon
as the when-issued purchase commitment is made, prior to actual
delivery of the securities purchased.
When engaging in when-issued or delayed delivery transactions,
the Trust must rely upon the buyer or seller to complete the
transaction at the scheduled time; if the other party fails to do
so, then the Trust might lose a purchase or sale opportunity that
could be more advantageous than alternative opportunities
available at the time of the failure. If the transaction is
completed, intervening changes in market conditions or the
issuer's financial condition could make it less advantageous than
investment alternatives otherwise available at the time of
settlement. While the Trust will only commit to securities
purchases that it intends to complete, it reserves the right, if
deemed advisable, to sell any securities purchase contracts
before settlement of the transaction; in any such case the Trust
could realize either a gain or a loss, despite the fact that the
original transaction was never completed. When fixed price
contracts are made for the purchase of when-issued securities,
the Trust will maintain in a segregated 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. Foreign Securities. The Trust may invest in securities of
foreign issuers that are listed on a recognized domestic or
foreign exchange without restriction. At least 65% of the
Worldwide Growth Portfolio is intended to be invested in foreign
equity securities. Foreign investments involve certain special
considerations not typically associated with domestic
investments. Foreign investments may be denominated in foreign
currencies and may require the Trust to hold temporary foreign
currency bank deposits while transactions are completed; although
the Trust might therefore benefit from favorable currency
exchange rate changes, it could also be affected adversely by
changes in
exchange rates, by currency control regulations and by costs
incurred when converting between various currencies. Further-
more, foreign issuers may not be subject to the uniform
accounting, auditing and financial reporting requirements
applicable to domestic issuers, and there may be less publicly
available information about such issuers.
In general, foreign securities markets have substantially less
volume than comparable domestic markets and therefore foreign
investments may be less liquid and more volatile in price than
comparable domestic investments. Fixed commissions in foreign
securities markets may result in higher commissions than for
comparable domestic transactions, and foreign markets may be
subject to less governmental supervision and regulation than
their domestic counterparts. Foreign securities transactions are
subject to documentation and delayed settlement risks arising
from difficulties in international communications. Moreover,
foreign investments may be adversely affected by diplomatic,
political, social or economic circumstances or events in other
countries, including civil unrest, expropriation or
nationalization, unanticipated taxes, economic controls, and acts
of war. Individual foreign economies may also differ from the
United States economy in such measures as growth, productivity,
inflation, national resources and balance of payments position.
4. 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.
Any loans by the Trust of portfolio securities will be made in
accordance with applicable guidelines established by the
Securities and Exchange Commission or the Trustees. In
determining whether to lend securities to a particular broker,
dealer or other financial institution, BFA will consider
the creditworthiness of the borrowing institution. The Trust will
not enter into any securities lending agreement having a duration
of greater than one year.
5. 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 is 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 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 Advisor 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 the Trust's total assets.
6. Convertible securities. In addition to other equity
securities, the GIT Fund may invest in
"convertible securities." Securities convertible into
common stocks and securities having equity characteristics
are bonds that are convertible into a specific number of
shares of the common stock of the issuer either at any time
or usually at a specific future date at a determined price
per share of common stock. Such bonds tend to participate in
a substantial portion of the price appreciation of the
underlying common stock while enjoying some protection
against depreciation due to higher interest rates afforded
most bonds and because of the anticipation of the bond's
maturity. The GIT Fund anticipates that convertible
securities will represent less than 25% of it's total
assets. All convertible bonds must meet the same quality
ratings required of corporate bonds, as described in the
following paragraph. The risks involved in investment in
convertible securities are similar to the risks of
investment in the underlying common stocks.
7. Global Depository Shares and American Depository Receipts.
The Trust may invest in Global Depository Shares ("GDSs") or
American Depository Receipts ("ADRs"). These instruments are
negotiable receipts for a given number of shares of securities in
a foreign corporation. The foreign stock certificates remain in
the custody of a foreign bank. GDSs are issued by foreign banks
and traded in foreign markets while ADRs are issued by large
commercial U.S. banks and traded in U.S. markets or on U.S.
exchanges. The GDS or ADR represents the depository bank's
guarantee that it holds the underlying securities. The Trust may
invest in a GDS or ADR in lieu of trading in the underlying
shares on a foreign market. GDS investments (which include such
similarly denominated foreign securities as European Depository
Receipts) have the same risks as other foreign securities. By
comparison, ADRs are subject to a degree of U.S. regulation and
are denominated in U.S. dollars.
Policy Review. If, in the judgment of a majority of the Trustees
of the Trust, unanticipated future circumstances make inadvisable
the continuation of the Trust's policy of seeking capital
appreciation from investment principally in equity securities, 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 the Trust's affected shareholders.
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. Such fundamental policies would permit the
Trust, after notice to shareholders but without a shareholder
vote, to adopt policies permitting a wide variety of investments,
including money market instruments, all types of common and
preferred equity securities, all types of long-term debt
securities, convertible securities, and certain types of option
contracts. In the event of such a policy change, a change in the
Trust's name might be required. There can be no assurance that
the Trust's present objectives will be achieved.
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 of the Trust's shareholders as defined in
the Investment Company Act of 1940 (see "Organization of the
Trust").
1. Permissible Investments. Subject to the investment policies
from time to time adopted by the Trustees, the Trust may purchase
any type of securities under such terms as the Trust may
determine; and any such securities may be acquired 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) for which there
is no readily available market and which may not be redeemed,
terminated or otherwise converted into cash within seven days,
unless after making the investment not more than 10% of the
Special Growth, Select Growth or Equity Income Portfolios' net
assets would be so invested and not more than 15% of the
Worldwide Growth Portfolio's net assets would be so invested.
Securities of foreign issuers not listed on a recognized domestic
or foreign exchange are considered to be illiquid securities and
fall within this percentage limitation unless, in BFA's
reasonable judgment, such securities may be liquidated in the
ordinary course of business in seven or fewer days.
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
any portfolio of the Trust. Except to the extent a portfolio
purchases obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, obligations
which provide income exempt from federal income taxes, and
obligations of domestic banks, their branches, and other domestic
depository institutions, the Trust will limit its investments so
that not more than 25% of the assets of each of its portfolios
are invested in any one industry. For purposes of these
restrictions, the issuer is deemed to be the specific legal
entity having ultimate responsibility for performance of the
obligations evidenced by the security and whose assets and
revenues principally back the security. Any security that does
not have a governmental 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 such purchase would
result in more than five percent of the total assets of the
respective portfolio of the Trust being invested in such
securities.
The Trust may not purchase the securities of other investment
companies, except for shares of unit investment trusts and, with
respect to the Worldwide Growth Portfolio only, closed-end
investment companies, 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 5% 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 or 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 Advisor who
beneficially hold one-half percent or more of such securities,
together exceed 5% of such outstanding securities.
3. Borrowing and Lending. It is a fundamental policy of the Trust
that it may borrow (including engaging in reverse repurchase
agreement transactions) in amounts not exceeding 25% of a
portfolio's total assets for investment purposes. A portfolio of
the Trust may not otherwise issue senior securities representing
indebtedness and may not pledge, mortgage or hypothecate any
assets to secure bank loans, except in amounts not exceeding 15%
of its 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 the portfolio's gross assets,
provided collateral satisfactory to the Trust's Advisor is
continuously maintained in amounts not less than the value of the
securities loaned. The Trust may not lend money (except to
governmental units), 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 a Trust portfolio owns at least an equal amount
of such securities, or securities convertible or exchangeable
into such securities, and not more than 25% of the 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, real estate limited partnerships, or
invest in oil, gas or other mineral exploration or development
programs or oil, gas or mineral leases. 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. As a matter of operating
policy in order to comply with certain applicable State
restrictions, but not as a fundamental policy, the Trust will not
pledge, mortgage or hypothecate in excess of 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 use financial futures contracts and not to acquire put options
nor to invest in warrants (other than warrants acquired as a part
of a unit or attached to other securities at the time of
purchase) if such warrants (valued at the lower of cost or
market) would then exceed five percent of a portfolio's net
assets and any such warrants not listed on the New York or
American Stock Exchange would exceed two percent of the
portfolio's net assets.
Notwithstanding the Trust's fundamental policies, it does not
presently intend to borrow (including engaging in reverse
repurchase agreement transactions) for investment purposes nor to
borrow (including engaging in reverse repurchase agreement
transactions) for any purpose in amounts in excess of five
percent of a portfolio's total assets. If the Trust were to
borrow for the purpose of making additional investments, such
borrowing and investment would constitute "leverage." Leverage
would exaggerate the impact of increases or decreases in the
value of a portfolio's total assets on its net asset value, and
thus increase the risk of holding the portfolio's shares.
Furthermore, if bank borrowings by the Trust for any purpose
exceeded one-third of the value of a portfolio's total assets
(net of liabilities other than the bank borrowings), then the
Investment Company Act of 1940 would require the portfolio,
within three business days, to liquidate assets and
commensurately reduce bank borrowings until the borrowing level
was again restored to such one-third level. Funds borrowed for
leverage purposes would be subject to interest costs which might
not be recovered by interest, dividends or appreciation from the
respective securities purchases. The Trust might also be required
to maintain minimum bank balances in connection with such
borrowings or to pay line-of-credit commitment fees or other fees
to continue such borrowings; either of these requirements would
increase the cost of the borrowing.
In connection with the Trust's limitation on the industry
concentration of its investments, domestic banks and their
branches may include the domestic branches of foreign banks, to
the extent such domestic branches are subject to the same
regulations as United States banks; but they will not include the
foreign branches of domestic banks, unless the obligations of
such foreign branches are unconditionally guaranteed by the
domestic parent.
If a portfolio of the Trust alters any of the foregoing current
operating policies (relating to financial futures contracts,
options, warrants or borrowing), 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. In the
implementation of its investment policies the Trust will not
consider securities to be readily marketable unless they have
readily available market quotations.
The Investment Advisor
Effective July 31, 1996, Bankers Finance Advisors, LLC, 1655 Fort Myer
Drive, Arlington, Virginia 22209-3108, is the investment advisor
to the Trust and is called the "Advisor" throughout this
Statement of Additional Information and the Prospectus. The
Advisor 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
Advisor 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 Advisor is a division of Madison Investment Advisors, Inc.
("Madison"), 6411 Mineral Point Road, Madison, Wisconsin.
Madison is a registered investment advisor and has numerous
advisory clients of its own. 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 BFA 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 BFA, upon sixty days'
written notice to the other party. The investment advisory
agreement may not be assigned by BFA, and will
automatically terminate upon any assignment.
Background of the Advisor. The Advisor 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 Advisor purchased the investment management assets of the
former advisor 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 "Advisor" refer to Bankers Finance Investment
Management Corp. The Advisor also serves as the investment advisor to
Government Investors Trust, GIT Income Trust and GIT Tax-Free
Trust.
Management. Frank E. Burgess is President, Treasurer and
Director of Madison and Vice President of BFA.
Mr. Burgess owns a majority of the controlling interest of Madison,
which, in turn, controls BFA. Mr. Burgess is also a Trustee and
Vice President of the Trust. Mr. Burgess holds the same positions
with Government Investors Trust, GIT Income Trust and
GIT Tax-Free Trust. Katherine L. Frank is President and Treasurer
of BFA and Vice President of Madison. Ms. Frank holds the
same positions with Government Investors Trust, GIT Income Trust and
GIT Tax-Free Trust.
Advisory Fee and Expense Limitations. For its services under the
investment advisory agreement, BFA receives a fee,
payable monthly, calculated as 3/4 percent per annum of the
average daily net assets of the Special Growth, Select Growth and
Equity Income Portfolios during the month and as one percent per
annum of the average daily net assets of the Worldwide Growth
Portfolio during the month. Such fees do not decrease as net
assets increase. The Advisor may waive or reduce such fees during
any period; BFA may also reduce such fees 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 Advisor has agreed to reimburse the Trust for all of its
expenses (including any management fees paid to BFA), but
excluding securities transaction commissions and expenses, taxes,
interest, share distribution expenses, and other extraordinary
and non-recurring 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 the amount of such net assets exceeding $30 million, 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, BFA 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 BFA, 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 related expenses, and the foregoing items, the
Advisor is not obligated to provide or pay for any other services
to the Trust, although it has discretion to elect to do so.
The investment advisory agreement permits BFA to make
payments out of its fee to other persons. During the fiscal year
ended March 31, 1996, BFA received fees of $219,111 with
respect to the Special Growth Portfolio; $44,041 with respect to
the Select Growth Portfolio, and $29,875 with respect to the
Equity Income Portfolio. During the fiscal year
ended March 31, 1995, BFA received advisory fees of
$264,829 with respect to the Special Growth Portfolio, $34,429
with respect to the Select Growth Portfolio, and $26,151 with
respect to the Equity Income Portfolio. During the fiscal year
ended March 31, 1994, BFA received advisory fees of
$291,361 with respect to the Special Growth Portfolio, $40,173
with respect to the Select Growth Portfolio, and $27,570 with
respect to the Equity Income Portfolio. During prior fiscal years
BFA has waived portions or all of its advisory fees with respect
to each of the Trust's portfolios. During the fiscal year ended March
31, 1996, BFA received advisory fees of $14,252 with regard
to the Worldwide Growth Portfolio. No advisory fees were paid with
respect to the Worldwide Growth Portfolio for periods prior to the
fiscal year ended March 31, 1996.
Organization of the Trust
The Trust's Declaration of Trust, dated November 18, 1982, has
been filed with the Secretary of State of the Commonwealth of
Massachusetts and the Clerk of the City of Boston, Massachusetts.
The Prospectuses contain 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. The Trustees may authorize at any
time 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. The
Investment Company Act of 1940 would require the Trust to submit
for the approval of the shareholders of any such additional
series or class any adoption of an investment advisory contract
or any changes in the Trust's fundamental investment policies
related to the series or class.
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. 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 percent 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 March 20, 1997, the shareholder which
held five percent or more of the Equity Income Portfolio was
Wenonah Development Company,
1019 Park Street, Peekskill, NY 10566 (6%).
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 upon without regard to
series or classes of shares. Matters that do not affect any
interest of a series or class of shares will not be voted upon by
the unaffected shareholders. Certain other matters 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 upon separately by each series or class
affected and will require a majority vote of each such series or
class to be approved by it. 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.
Because there is no requirement for annual elections of Trustees,
the Trust does not anticipate having regular annual shareholder
meetings after the initial meeting; shareholder meetings will be
called as necessary to consider questions requiring votes by the
shareholders. The selection of the Trust's independent auditors
will be submitted to a vote of ratification at any annual
meetings held by the Trust. Any change in the Declaration of
Trust, in the Investment Advisory Agreement (except for
reductions of BFA's fee) or
in the fundamental investment policies of the Trust 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. Voting groups will be comprised of
separate series and classes of shares or of all of the Trust's
shares, as appropriate to the matter being voted upon.
The Declaration of Trust provides that two-thirds of the holders
of record of the Trust's shares may remove a Trustee from office
either by declarations in writing filed with the Trust's
Custodian or by votes cast in person or by proxy at a meeting
called for the purpose. 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
Trustees to assist a shareholder solicitation to call such a
meeting by providing either 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 share-holders
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 the Trustees. The
Declaration of Trust provides for indemnification out of the
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 BFA 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 BFA. 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
Chairman and CEO of First Weber Group, Inc. of Madison, WI,
a residential real estate company; Chairman of the Wisconsin
Real Estate Board of the Department of Regulation and
Licensing; Director to the University of Wisconsin School of
Business, Center for Urban Land Economics Research; Director
of the Park Bank, Wisconsin; formerly President of the
Wisconsin Realtors Association and the Greater Madison Board
of Realtors and Director of the National Association of
Realtors. An alumnus of the Marquette University School of
Business. b. 5/20/44.
Lorence D. Wheeler***
P.O. Box 431, Madison, WI 53701
Trustee
President of Credit Union Benefits Services, Inc., a
provider of retirement plans and related services for credit
union employees nationwide. Previously a shareholder of the
law firm of Bell, Metzner & Gierart, SC. Mr. Wheeler
received his law degree from the University of Wisconsin.
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.
Julia M. Nelson
1655 Fort Myer Drive, Arlington, VA 22209-3108
Vice President
Vice President of GIT Investment Funds.
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
who may be compensated by the Trust 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 BFA or Madison (see "the Investment Advisor") totaling
$15,000. Mr. Imhoff and Mr. Wheeler will receive annual
compensation from the Trust and from other investment companies
managed by BFA or Madison totaling $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 1,000 0 0 15,000
James R. Imhoff, Jr.(b)1,000 0 0 14,250
Lorence D. Wheeler(b) 1,000 0 0 14,250
(a) As of the effective date of this Statement of Additional
Information, the complex was 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.
***
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 March 20, 1997 the Trustees and officers directly or
indirectly owned less than one percent of the outstanding shares
in the Equity Income Portfolio.
Administrative and Other Expenses
Except for certain expenses assumed by BFA (see "The
Investment Advisor"), 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
Advisor'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 accountants, and of legal
counsel to the Trust; the expense of registering the Trust and
its shares, of printing and distributing prospectuses and
periodic financial reports to current shareholders, and of trade
association membership; and the expense of preparing shareholder
reports, proxy materials and of holding shareholder meetings of
the Trust. The Trust is also responsible for any extraordinary or
non-recurring expenses it may incur.
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 BFA 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 such services provided to the Trust by BFA are
rendered at a flat fee reviewed and approved annually
by the Trustees. Such fee is expected to approximate
the cost of providing such services. The term "cost"
includes both direct expenditures and the related overhead
costs, such as depreciation, employee supervision, rent and the like;
reimbursements to BFA pursuant to the Services Agreement
are in addition to and independent of payments made pursuant to
the Investment Advisory Agreement. The Advisor provides
such services to GIT Income Trust, GIT Tax-Free Trust and
Government Investors Trust.
Distribution Agreement. GIT Investment Services, Inc. acts as the
Trust's distributor pursuant to a distribution agreement, dated
January 11, 1983, without compensation under such agreement. 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, but the Trust may also sell
its shares directly to any person. 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, its President.
Portfolio Transactions
Decisions as to the purchase and sale of securities for the
Trust, and decisions as to the execution of these transactions,
including selection of market, broker or dealer and the
negotiation of commissions are, where applicable, to be made by
BFA, subject to review by the officers and Trustees of
the Trust.
In general, in the purchase and sale of portfolio securities the
Trust will seek to obtain prompt and reliable execution of orders
at the most favorable prices or yields. In determining the best
price and execution, BFA may take into account a dealer's
operational and financial capabilities, the type of transaction
involved, the dealer's general relationship with BFA, and
any statistical, research or other services provided by the
dealer to BFA, including payment for the use by the
Advisor of electronic research services. Research and statistical
information regarding securities may be used by BFA for
the benefit of all members of the GIT family of
mutual funds. 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 BFA.
Brokers or dealers who execute portfolio transactions for the
Trust may also sell its shares; however, any such sales will not
be either a qualifying or disqualifying factor in the selection
of brokers or dealers. During its three most recent fiscal years
the Trust paid aggregate brokerage commissions as follows:
$156,680 for the fiscal year ending March 31, 1996; $126,777 for
the fiscal year ending March 31, 1995; and $118,479 for the
fiscal year ending March 31, 1994.
The Trust reserves the right to purchase portfolio securities
through an affiliated broker, when deemed in the Trust's best
interests by BFA, 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
Advisor 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 most recent fiscal
year.
The Trust does not expect to engage in a significant amount of
short-term trading, but securities may be purchased and sold in
anticipation of market fluctuations, as well as for other
reasons. The Trust anticipates that annual portfolio turnover for
each of its portfolios generally will not exceed 100%, but the
actual turnover rate will not be a limiting factor if the Trust
deems it desirable to conduct purchases and sales of portfolio
securities. Reference should be made to the Prospectuses for
actual rates of portfolio turnover (see "Financial Highlights").
Share Purchases
The Prospectuses describe 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
Prospectuses.
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 its minimum initial investment
requirement, or the minimum account size below which an account
is subject to a monthly service charge, or involuntary closing by
the Trust. The Trust may also institute a minimum amount for
subsequent investments, if it so chooses, by 30 days' written
notice to its shareholders. The Trust further reserves the right,
after 30 days' written notification to shareholders, to impose
special service charges for services provided to individual
shareholders that are not regularly afforded to shareholders
generally; such service charges may include special custodian
bank processing charges such as fees for stop payment orders and
returned checks. The Trust's standard service charges are also
subject to adjustment from time to time.
Subaccounting Services. The Trust offers subaccounting services
to institutions. The Trustees reserve the right to determine from
time to time such guidelines as they deem appropriate to govern
the level of subaccounting service that can be provided to
individual institutions in differing circumstances. Normally, the
Trust's minimum initial investment to open an account will not
apply to subaccounts; 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 subaccount or group of subaccounts is otherwise
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 presently aware of any such
services for which a charge will be imposed.
Crediting of Investments. All items submitted to the Trust for
investment are accepted only when submitted in proper form and will
receive the net asset value next determined.
An order to purchase shares which is received by the Trust from a
securities broker will be considered received in proper form for
the net asset value per share determined as of the close of the
New York Stock Exchange on the day of the order, provided the
broker received the order from its customer prior to that time
and transmitted it to the Trust prior to the next determination
of net asset value. Those who invest in the Trust through a 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.
The Trust reserves the right to reject any investment in the
Trust for any reason and may at any time suspend all new
investment in the Trust. The Trust may also, in its discretion or
at the instance of BFA, decline to give recognition as an
investment to funds wired for credit to any account, until such
funds are actually received by the Trust. Under present federal
regulatory guidelines, BFA may be responsible for any
losses resulting from changes in the Trust's net asset values
which are incurred by the Trust as 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 are purchased to be paid for by wire and the wire is
not received by the Trust or if shares are purchased by a check
which, after deposit, is returned unpaid or proves uncollectible,
then the share purchase may be canceled immediately. The
investor that gave notice of the intended wire or submitted the
check will be held fully responsible for any losses so incurred
by the Trust, BFA or the distributor. As a condition of
the Trust's public offering, (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, authorizing the distributor
to redeem sufficient shares from any fund of the investor 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 all 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 all withdrawal requests will
be determined according to the share net asset value next
calculated 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 the close of the New York Stock
Exchange (normally 4 p.m. Washington, DC time) on a business day
will reflect the net asset value calculated at that time; later
withdrawal requests will be processed to reflect the share net
asset value figure calculated on the next day the calculation is
made. The Trust calculates net asset values each day the New York
Stock Exchange is open for trading.
Net asset value determinations will apply as of the day the
redemption order is submitted in proper form. A withdrawal
request may not be deemed to be in proper form unless a signed
account application has been submitted to the Trust by the
investor or such an application is submitted with the withdrawal
request. Investors should be aware that it is possible, should
the share net asset value of the respective portfolio fall as a
result of normal market value changes, that amounts available for
withdrawal from an account could be less than the amount of the
original investment. All withdrawals from the Trust 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.
The Trust will use its best efforts in normal circumstances to
handle withdrawals within the times previously given. However, it
may for any reason it deems sufficient suspend the right of
redemption or postpone payment for any shares in the Trust for
any period up to seven days. The Trust's sole responsibility with
regard to withdrawals 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 any
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 means of
subsequent written notice signed by the authorized signers for
the account, then the Trust may require signed written
instructions to process withdrawals and account closings. In
response to verbal requests, however, withdrawal proceeds will
normally be mailed to the investor at the address shown on the
Trust's records, provided an original signed application has been
received. When an account is closed, the Trust reserves the right
to make payment by check of any final dividends declared to the
date of the redemption to close the account, but not yet paid, on
the same day such dividends are paid to other shareholders,
rather than at the time the account is closed. Payments of
redemption proceeds may normally be wired in response to verbal
requests by any party in accordance with preauthorized written
wire instructions.
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 withdrawals 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 and tax identification number or do not
have the same mailing address or signatories, then the Trust may
require any transfer between them to be made by making a
withdrawal from one account and a corresponding investment in the
other using the same procedures that would apply to any other
withdrawal or investment.
The Trust reserves the right, when it deems such action necessary
to protect the interests of its shareholders, to refuse to honor
withdrawal requests made by individuals purporting to act with
the authority of another person or on behalf of a corporation or
other legal entity or whose identity has not been established to
the Trust's satisfaction. Each such individual must provide a
corporate resolution or other appropriate evidence of his
authority or identity satisfactory to the Trust. The Trust
reserves the right to refuse any third party redemptions.
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; except, however, that the Trust has
elected, 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 one
percent 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.
Retirement Plans
General information on retirement plans offered by the Trust is
provided in the Prospectus/Proxy Statement (see "How to
Purchase and Redeem Shares" in the "Additional Information"
section). Additional information concerning these retirement
plans is provided below.
IRAs. The minimum initial contribution for an IRA plan with the
Trust is $500. Spousal IRAs are accepted by creating two
accounts, one for each spouse. For IRAs opened in connection with
a payroll deduction or SEP plan, the Trust may waive the initial
investment minimum on a case-by-case basis.
The Trust's annual account maintenance fee is deducted from the
account at the end of each year or at the time of the account's
closing unless prepaid by the shareholder.
Other Retirement Plans or Retirement Plan Accounts. The Trust
does not intend to impose any monthly minimum balance charge with
respect to retirement plan accounts. The Trust offers prototype
Keogh, SEP IRA, SIMPLE, 401(k) and 403(b) retirement plans. The
Trust may waive the initial investment minimum for prototype or
other retirement plan accounts on a case by case basis.
Declaration of Dividends
Substantially all of the Trust's accumulated net investment
income will be declared as dividends and distributed to the
shareholders of the Worldwide Growth, Special Growth and Select
Growth Portfolios twice a year, once during the last two months
of the calendar year and once at the end of the Trust's
fiscal year, if different. The Trust intends to declare and pay regular Equity
Income Portfolio dividends quarterly. The amount of the Trust's
net investment income will reflect the Trust's dividend income,
any premiums earned for writing call options, any interest income
(plus any discount earned less premium amortized), less expenses
accrued with respect to each portfolio for the period. All items
of income and expense which apply solely to one of the Trust's
portfolios will be wholly allocated to that portfolio; such items
which are not clearly applicable to one portfolio will be
allocated between portfolios pro-rata on the basis of their
relative net assets or upon such other basis as the Trustees
determine is equitable.
Net capital gains, if any, for the period from the Trust's fiscal
year end to October 31 will be declared as a capital gains
dividend on or before December 31; net capital gains determined
for the period from November 1 through the end of the Trust's
March 31 fiscal year will be declared no later than sixty days
following the end of the fiscal year.
Any declaration of dividends with respect to a portfolio is
dependent upon the level of income and capital gains earned by
the portfolio during the fiscal year. No historical rate of
dividend payments will be indicative of future dividends.
Notice of dividends will be mailed to each shareholder when the
dividends are paid; for tax purposes each shareholder will also
receive an annual summary of dividends paid by the Trust and the
extent to which they constitute capital gains dividends (see
"Additional Tax Matters").
Determination of Net Asset Value
The net asset value of each portfolio of the Trust, and of the
respective shares, is calculated once each day the New York Stock
Exchange is open for trading. The net asset value of the Trust 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, Christmas Day and
on other days the New York Stock Exchange is closed for trading.
The net asset value calculation is made as of the close of the
New York Stock Exchange, 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 traded on a securities exchange are valued at their
closing sales price on the principal market on which such
securities are traded, if available, and if not available, such
securities are valued at the mean between the bid and ask prices.
Other securities for which current market quotations are readily
available are valued at the mean between their bid and ask
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. The Trustees may authorize reliance
upon an independent pricing service for the determination of
securities values. An 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. The Trust's shares will be priced by
rounding their value to the nearest one-tenth of one cent.
Valuation of Covered Call Options. When call options are written,
the premium received is reflected on the Trust's books as a cash
asset offset by a deferred credit liability, so the premium has
no impact on net asset value at that time. The deferred credit
amount is then marked to the market value of the outstanding
option contract daily. If the option contract is exercised, the
Trust reflects a sale of the appropriate securities (which may be
either the underlying portfolio securities or corresponding
securities purchased in the open market to deliver against the
option contract) at a price equal to the option strike price plus
the option premium received, and the deferred credit liability is
then extinguished. If the option expires without being exercised
(or if it is offset by a closing purchase transaction), then the
Trust recognizes the deferred credit as a gain (reduced by the
cost of any closing purchase transaction).
Additional Tax Matters
Shareholders are urged to consult their tax advisors regarding
the application of foreign, federal, state and local taxes to an
investment in the Trust. The following is a general and
abbreviated summary of the applicable statutes and regulations
currently in effect. These rules are subject to legislative and
administrative change which may be prospective or retroactive.
To qualify as a "regulated investment company" and avoid Trust-
level federal income tax under the Internal Revenue Code
(the "Code"), each Trust portfolio must, among other things, in
each taxable year distribute 100% of its net income and net
capital gains in the fiscal year in which it is earned. The Code
also requires the distribution of at least 98% of undistributed
net income for the calendar year and capital gains determined as
of October 31 each year before the calendar year end. Taxable
income not distributed as required is subject to a 4% excise tax.
The Trust intends to distribute all taxable income to the extent
it is realized and avoid imposition of the excise tax.
Each Trust portfolio must derive at least 90% of its gross income
from dividends, interest, gains from the sale or disposition of
securities, and certain other types of income, and derive less
than 30% of its gross income from the sale or disposition of
securities held for less than three months. Should it fail to
qualify as a "regulated investment company" under the Code, the
portfolio would be taxed as a corporation with no allowable
deduction for the distribution of dividends.
Shareholders of the portfolio, however, will be subject to
federal income tax on any ordinary net income and net capital
gains realized by the portfolio and distributed to shareholders
as regular or capital gains dividends, whether distributed in
cash or in the form of additional shares. Generally, dividends
declared by a portfolio during October, November or December of
any calendar year and paid to shareholders prior to February 1 of
the following year will be treated for tax purposes as received
in the year the dividend was declared. Since normally at least
65% of each portfolio's assets will be invested in equity
securities, some of which may pay eligible dividends, a
substantial portion of the regular dividends paid by the
portfolio is expected to be eligible for the dividends received
deduction for corporate shareholders (70% of dividends received).
Foreign securities held by a portfolio may be subject to
withholding or taxation by foreign governments on their interest
or dividends. Such withholding or taxation may be reduced or
eliminated by tax conventions between certain countries and the
U.S. However, as long as more than 50% of the value of any
portfolio's assets at the close of a taxable year consists of
securities of foreign corporations, the Trust may elect to treat
its shareholders as having paid the foreign tax directly, and not
deduct the taxes itself. If such an election is made, these
shareholders will be required to include their proportionate
share of such withholding or taxes in their U.S. income tax
returns as gross income, treat such proportionate share as taxes
paid by them, and deduct such proportionate share in computing
their taxable incomes or, alternatively, use them as foreign tax
credits against their U.S. income taxes. The Trust will annually
report to shareholders the amount per share of foreign
withholding or taxes paid by their portfolio, if applicable. The
Trust cannot assure shareholders that they will be eligible for
the foreign tax credit.
The Advisor does not anticipate that any portfolio will invest in
securities issued by a passive foreign investment company
("PFIC"). For federal income tax purposes, a PFIC is any foreign
corporation where 75% or more of its gross income for the taxable
year is passive income (foreign personal holding company income
as defined in Section 954(c) of the Code), or the average
percentage of its assets (by value) held by the corporation which
produce passive income or which are held for the production of
passive income is at least 50%. Foreign securities held by any
portfolio nevertheless may be determined to be issued by a PFIC.
In the event of such classification, the portfolio holding PFIC
securities may be subject to a liability for interest on taxes
deferred as a result of the PFIC's failure to distribute
dividends. This liability could reduce the portfolio's net asset
value and total performance. In the event any portfolio is
determined to hold PFIC securities, BFA may make any
reasonable election permitted by Treasury regulations regarding
PFIC securities.
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.
For tax purposes, the Trust will send shareholders an annual
notice of dividends paid during the prior year. Investors are
advised to retain all statements received from the Trust to
maintain accurate records of their investment. Shareholders of
each portfolio of the Trust will be subject to federal income tax
on the net capital gains, if any, realized by each portfolio and
distributed to shareholders as capital gains dividends.
Shareholders should carefully consider the tax implications of
buying the Trust's shares just prior to declaration of a regular
or capital gains dividend. Prior to the declaration, the value of
the distribution will be reflected in net asset value per share
and thus will be paid for by the shareholder when the shares are
purchased; when the dividend is declared the amount to be
distributed will be deducted from net asset value, lowering the
value of the shareholder's investment by the same amount, but the
shareholder nevertheless will be taxed on the amount of the
dividend without any offsetting deduction for the drop in share
value until the shares are ultimately redeemed. A loss on the
sale of shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gains
dividend received.
The Trust reserves the right to involuntarily redeem any of its
shares if, in its judgment, ownership of the Trust's shares has
or may become so concentrated as to make the Trust a personal
holding company under the code.
State and Local Taxes. Dividends paid by the Trust are generally
expected to be subject to any state or local taxes on income.
Shareholders should consult their tax advisors about the status
of distributions from the Trust in their own tax jurisdictions.
Total Return Calculations
In order to provide a basis for comparisons of the Trust's
portfolios with similar funds, with comparable market indices,
and with investments such as savings accounts, savings
certificates, taxable and tax-free bonds, common stocks, money
market funds and money market instruments, the Trust calculates
total return for each of its portfolios.
Total Return. 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, raking 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 Total Return Quotations. For the year ended March
31, 1997, the average annualized total return of the Equity Income
Portfolio was 13.88% For the calendar quarter ending March 31,
1997 the non-annualized aggregate total return of the Equity Income
Portfolio was 2.15%.
The 10-year average annualized total return through March 31,
1997, and the 5-year average annualized total return of the
Equity Income Portfolio through such date was 9.34% and 12.09%,
respectively.
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
indices 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.
The Trust may also compare the performance of its portfolios to
that of other funds managed by the same Advisor. It may compare
its performance to that of other types of investments,
substantiated by representative indices and statistics for those
investments.
Market indices 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
indices compiled by securities rating or valuation services, such
as Ryan Financial Corporation and Standard and Poor's Corporation
may also be used. Periodicals which report market averages and
indices, performance information, and/or rankings may include:
The Wall Street Journal, Investors Daily, The New York Times, The
Washington Post, Barron's, Financial World Magazine, Forbes
Magazine, Money Magazine, Kiplinger's Personal Finance, and the
Bank Rate Monitor. Independent performance measurement firms
include Lipper Analytical Services, Inc., Frank Russell Company,
SCI and CDA Investment Technologies.
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 Directory, the Switch Fund Advisory, Mutual
Fund Investing, the Mutual Fund Observer, Morningstar, and the
Bond Fund Survey. Financial news is broadcast by the Financial
News Network, Cable News Network, Public Broadcasting System, and
the major television networks as well as by numerous independent
radio and television stations.
The Trust may also disclose the contents of each of its portfolios as
frequently as daily in advertisements and elsewhere.
It should be noted that the investment results of the Trust's
portfolios will tend to fluctuate over time, so historical total
returns should not be considered representations of what an
investment may earn in any future period. Actual distributions to
shareholders will tend to reflect changes in portfolio income,
and will also depend upon the level of the Trust's expenses,
realized or unrealized investment gains and losses, and the
relative results of the Trust's investment policies. Thus, at any
point in time future total returns may be either higher or lower
than past results, and there is no assurance that any historical
performance record will continue.
Custodians and Special Custodians
StarBank, 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.
The Trust may appoint as Special Custodians, from time to time,
certain banks, trust companies, and firms which are members of
the New York Stock Exchange and trade for their own account 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 of BFA would most suitably be held by
such Special Custodians rather than by the Custodian. In the
event any such Special Custodian is used, it shall serve the
Trust only in accordance with a written agreement with the Trust
meeting the requirements of the Securities and Exchange
Commission for custodians and approved and reviewed at least
annually by the Trustees, and, if a securities dealer, only if it
delivers to the Custodian its receipt for the safekeeping of each
lot of securities involved prior to payment by the Trust for such
securities.
The Trust has approved the appointment by the Custodian of
certain eligible foreign custodians to serve as Special
Custodians to hold foreign securities as necessary. These
eligible custodians have entered into a written agreement with
the Custodian for this purpose. The written agreement and the
eligible foreign custodians are approved annually by the
Trustees.
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 and Independent Auditors
Sullivan & Worcester LLP, 1025 Connecticut Avenue, NW,
Washington, DC, 20036, acts 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, if any, 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; the annual reports are audited
by the Trust's independent auditors.
Statements contained in this Statement of Additional Information
and in the Prospectuses as to the contents 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 By-Laws 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 Prospectuses or
not included in this Statement of Additional Information and is
available for public inspection and copying at the offices of
such Commission.
<PAGE>
Financial Statements
This Statement of Additional Information incorporates by reference the
following documents, a copy of each of which accompanies this Statement of
Additional Information:
1. The Prospectus of Bascom Hill BALANCED Fund,
Inc. dated February 28, 1997.
2. The Statement of Additional Information of Bascom
Hill BALANCED Fund, Inc. dated February 28, 1997.
3. The Annual Report of Bascom Hill BALANCED
Fund, Inc. dated December 31, 1996.
4. The Annual Report of GIT Equity Trust dated
March 31, 1996 and the Semi-Annual Report
(unaudited) of GIT Equity Trust dated
September 30, 1996.
The following pro forma financial information relates to Bascom
Hill BALANCED Fund, Inc. and the GIT Equity Trust Equity Income
Portfolio:
PRO FORMA FINANCIAL STATEMENTS OF
Bascom Hill BALANCED Fund, Inc. and the GIT Equity Trust Equity
Income Portfolio
DECEMBER 31, 1996
(unaudited)
PRO FORMA STATEMENT OF NET ASSETS
Schedule of Investments
December 31, 1996
Balanced GIT
Fund Fund ADJ Combined
Schedule of Investments
December 31, 1996
Common Stocks
Automotive
Pep Boys - Manny Moe & Jack 269,063 116,850 385,913
Chrysler Corporation - 89,100 89,100
Basic Industry
"Morton International, Inc. 301,550 122,250 423,800
Computer - Hardware and Peripherals
Compaq Computer Corp. 215,687 - 215,687
Computer - Software and Services
American List Corporation - 91,125 91,125
Cabletron Systems, Inc. 282,625 126,350 408,975
Consumer Products
Kimberly-Clark Corporation 266,700 114,300 381,000
Lancaster Colony Corp. 404,800 - 404,800
Electronics - General
Eastman Kodak Company 276,862 120,375 397,237
Electronics - Semiconductors
Intel Corp. 170,219 - 170,219
Financial Services
American Express 271,200 118,650 389,850
Chase Manhattan Corporation - 25,375 25,375
Federal Home Loan Mortgage
Corp. 325,606 137,656 463,262
Green Tree Financial
Corporation 104,288 104,288
Norwest Corp. 267,525 113,100 380,625
Food & Beverage
Conagra, Inc. 277,356 121,887 399,243
Dole Food Co. 204,944 89,769 294,713
Insurance
MGIC Investment Corp. 239,400 - 239,400
Medical & Health Care
Abbott Laboratories 340,025 129,412 469,437
Columbia/HCA Healthcare Corp.354,525 97,800 452,325
Pfizer, Inc. - 116,025 116,025
Schering-Plough Corporation 346,413 155,400 501,813
Petroleum
Amoco Corporation - 161,000 161,000
Chevron Corporation - 130,000 130,000
Royal Dutch Petroleum
Company, ADR - 170,750 170,750
Real Estate
Hospitality Properties Trust - 72,500 72,500
Post Properties, Inc. - 60,375 60,375
Sum Communities, Inc. - 103,500 103,500
Restaurants
McDonalds 267,712 115,388 383,100
Retail - Department Stores
Wal-Mart stores, Inc. 300,300 130,388 430,688
Telecommunications
Ameritech Corporation - 109,125 109,125
Bell Atlantic Corp. 294,613 129,500 424,113
Pacific Telesis Group - 73,500 73,500
Royal PTT Nederland NV, ADR - 37,875 37,875
SBC Communications, Inc. - 129,375 129,375
Sprint Corporation - 79,750 79,750
Transportation
CSX Corporation - 84,500 84,500
Utilities - Electric
Baltimore Gas & Electric Co. - 123,050 123,050
Central and Sothwest Corporation - 38,437 38,437
SCANA Corporation - 74,900 74,900
Utilities - Gas
Brooklyn Union Gas Company - 90,375 90,375
Northwest Natural Gas Company - 126,656 126,656
Washington Gas Light Company - 90,500 90,500
Williams Companies, Inc. - 171,338 171,338
Total Common Stocks
(Cost $8,034,469) 5,677,125 4,292,494 - 9,969,619
Fixed Income Investments
Treasury Securities
U.S. Treasury Notes
5.625% due 1/31/98 375,311 - 375,311
U.S. Treasury Notes
6.25% due 5/31/00 427,689 - 427,689
U.S. Treasury Notes
5.625% due 2/28/01 441,396 - 441,396
U.S. Treasury Notes
5.875% due 2/15/04 243,675 - 243,675
U.S. Treasury Notes
6.50% due 8/15/05 191,476 - 191,476
Total Treasury Securities
(Cost $1,670,709) 1,679,547 - - 1,679,547
CMO/Remic Securities
Residential Funding
7.00% due 12/25/07 17,782 - 17,782
FNMA Remic 6.75 % due
5/25/19 196,250 - 196,250
Total CMO/Remic Securities
(Cost $215,751) 214,032 - - 214,032
Corporate Bonds
General Telephone Co. of
California 6.75% due
12/1/97 125,469 - 125,469
Morgan Stanley Group, Inc.
8.10% due 6/24/02 169,874 - 169,874
Price/Costco Wholesale Corp.
5.75% due 5/15/02 119,087 - 119,087
Norwest Corp. 6.625% due
3/1/03 89,498 - 89,498
Marshall & Ilsley Corp.
6.375% due 7/15/03 97,610 - 97,610
Ford Motor Credit Corp.
7.75% due 3/15/05 136,623 - 136,623
Columbia/HCA 6.91% due
6/15/05 170,067 - 170,067
Kohls Corp. 6.70% due 2/1/06 169,417 - 169,417
Disney 6.75% due 3/30/06 173,791 - 173,791
Total Corporate Bonds
(Cost $1,246,935) 1,251,436 - - 1,251,436
Total Fixed Income Investments
(Cost $3,133,395) 3,145,015 - - 3,145,015
Short-Term Investments
Variable Rate Demand Notes
American Family Financial
Services 5.21 due 1/1/97 450,000 - 450,000
General Mills, Inc.
5.20% due 1/1/97 450,000 - 450,000
Johnson Controls Inc.
5.23% due 1/1/97 450,000 - 450,000
Pitney Bowes Credit Corp.
5.20% due 1/1/97 450,000 - 450,000
Southwestern Bell Telephone
5.19% due 1/1/97 364,670 - 364,670
Total Variable Rate Demand
Notes 2,164,670 - - 2,164,670
Repurchase Agreement - 670,000 670,000
Total Short Term Investments
(Cost $2,834,670) 2,164,670 670,000 - 2,834,670
Cash & Receivables Less
Liabilities 30,949 (57,940) (26,991)
Total Net Assets 11,017,759 4,904,554 - 15,922,313
Capital Shares Outstanding 500,140 261,284 86,817 848,240
Net Asset Value per Share 22.029 18.771 - 18.771
PRO FORMA STATEMENT OF OPERATIONS
Income
Interest 307,236 146,635 453,871
Dividends 67,454 138,904 206,358
Total Income 374,690 285,539 - 660,229
Expenses
Auditing Fee 5,896 1,837 7,733
Custodial Fee 3,359 3,026 6,385
Directors' Fee 3,000 3,000 (3,000) 3,000
Fidelity Bond 1,082 954 2,036
Investment Advisor Fee 91,311 31,222 (10,742) 111,791
Legal Fee 848 678 1,526
Licensing Fee 3,018 8,234 (3,018) 8,234
Printing Costs 5,808 910 6,718
Transfer Agent Expenses 28,213 19,905 48,118
Other Fees 10,540 - 10,540
Total Expenses 153,075 69,766 (16,760) 206,081
Net Investment Income 221,615 215,773 16,760 454,148
Net Realized Gains 1,558,337 1,684,659 3,242,996
Unrealized Depreciation (146,758) (85,008) (231,766)
Net Realized Gains and
Unrealized Depreciation 1,411,579 1,599,651 - 3,011,230
Total Increase in Net
Assets 1,633,194 1,815,424 16,760 3,465,378
See Accompanying Notes to Financial Statements
NOTES TO PRO FORMA FINANCIAL STATEMENTS OF
Bascom Hill BALANCED Fund, Inc. and GIT Equity Trust Equity
Income Portfolio
DECEMBER 31, 1996
(unaudited)
1. BASIS OF COMBINATION
The Pro Forma Statement of Net Assets reflects the accounts of GIT Equity Trust,
Equity Income Portfolio (GIT) and Bascom Hill BALANCED Fund, Inc. (BHB) at
December 31, 1996. The Pro Forma Statement of Operations
reflects the accounts of GIT and BHB for the year ended December 31, 1996.
These statements have been derived from GIT's and BHB's books and records
utilized in calculating daily net asset value at December 31, 1996.
The pro forma statements give effect to the proposed transfer of the assets
and stated liabilities of BHB in exchange for shares of
GIT under generally accepted accounting principles. The historical cost
of investment securities will be carried forward to the surviving entity and the
results of operations of GIT for pre-combination periods will not be
restated. The pro forma statements do not reflect the expenses of either fund
in carrying out its obligations under the Agreement and Plan of Merger.
The actual fiscal year of the combined fund will be December 31, the fiscal
year end of BHB.
The Pro Forma Statement of Net Assets and the Pro
Forma Statement of Operations should be read in
conjunction with the historical financial statements of BHB included or
incorporated by reference in the Statement of Additional Information.
2. SHARES OF BENEFICIAL INTEREST
The pro forma net asset value per share assumes the issuance of shares of
GIT, which would have been issued at December
31, 1996, in connection with the proposed reorganization, had it occurred then.
3. PRO FORMA OPERATIONS
The Pro Forma Statement of Operations assumes the same rate of
gross investment income for the investments of GIT and BHB. Pro
Forma operating expenses include the actual expenses of BHB and GIT.
The expected expenses of the combined Fund should be lower in light
of the larger net asset size among which expenses will be divided.
Pro Forma operating expenses would be required to be adjusted
downward by approximately $6,000 in order for the pro forma total
expenses to result in an expense ratio of 0.55%. This decrease in
expenses is a result of a general decline in expenses due to the
restructuring of the services agreement between GIT and the
investment advisor.
