As Filed with the
Commission on June 14, 1996
Registration No. 2-80808
SEC File No. 811-3616
Securities and Exchange Commission
Washington, D.C.
Form N-1A
Registration Statement Under The Securities Act of 1933 X
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 16 X
Registration Statement Under The Investment Company Act
of 1940 X
Amendment No. 18
GIT Income Trust
(Exact Name of Registrant as Specified in Charter)
1655 Fort Myer Drive, Arlington, Virginia 22209
Registrant's Telephone Number: (703) 528-3600
W. Richard Mason, Assistant Secretary
GIT Income Trust
1655 Fort Myer Drive
Arlington, Virginia 22209
(Name and Address of Agent for Service)
Copy to:
John A. Dudley, Esquire
Sullivan & Worcester, LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
_____ on July 31, 1996 pursuant to Rule 485(b)
______60 days after filing pursuant to Rule 485(a)(1)
_____ on July 31, 1996 pursuant to Rule 485(a)(1)
_____ 75 days after filing pursuant to Rule 485(a)(2)
_____ on pursuant to Rule 485(a)(2)
The Registrant has registered an indefinite number of
its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Registrant's Notice under Rule
24f-2 for the fiscal year ended March 31, 1996 was filed on
May 20, 1996.
<PAGE>
GIT Income Trust
Maximum Income Portfolio
Government Portfolio
Prospectus
July 31, 1996
GIT
GIT Investment Funds
<PAGE>
Table of Contents
About GIT Income Trust 2
Expense Summary 2
Financial Highlights 3
Investment Objective 3
Investment Policies 4
Management of the Trust 7
The Trust and Its Shares 8
Dividends 8
Performance Information 8
Taxes 9
Net Asset Value 9
How to Purchase and Redeem Shares 9
Office
1700 North Moore Street
Arlington, VA 22209
Custodian
Star Bank, N.A.
Cincinnati, OH 45202
Auditors
Ernst & Young LLP
Telephone Numbers
Shareholder Services
Washington, DC area: 703-528-6500
Toll-free nationwide: 800-336-3063
24-Hour ACCESS
Toll-free nationwide: 800-448-4422
<PAGE>
Prospectus/July 31, 1996
1655 Fort Myer Drive, Arlington, Virginia 22209-3108
GIT Income Trust
Government Portfolio
Maximum Income Portfolio
GIT Income Trust is a mutual fund whose goal is to provide
monthly dividends to its shareholders by investing in bonds and
other debt securities in accordance with the investment quality
policies of each of its portfolios. The Trust offers shares of
two separate portfolios: the Government Portfolio and the Maximum
Income Portfolio.
The Government Portfolio invests solely in U.S. Government
securities and emphasizes safety of principal and interest for
its portfolio investments.
The Maximum Income Portfolio invests in corporate debt securities
expected to provide the highest yields. This policy of seeking
high yields carries a high risk that an investor's shares in the
Maximum Income Portfolio could lose value.
The Maximum Income Portfolio may be entirely invested in lower-
rated securities, including those commonly referred to as "junk"
bonds. Investors should carefully consider the greater risks,
including default, that these bonds entail than those found in
higher rated securities, discussed at the references to this
portfolio on pages five and six.
Features
*No commissions or sales charges
*No "12b-1" expenses
*Invest or withdraw funds by mail, wire transfer or in person
*$2,500 minimum initial investment
*Dividends accrue from day of investment to day of withdrawal,
and can be paid by check or direct deposit, or reinvested
monthly
*Checking privileges
This Prospectus is intended to be a concise statement of
information which investors should know before investing. After
reading the Prospectus, it should be retained for future
reference. A paper copy of the prospectus is available to
investors who received an electronic prospectus without charge by
calling or writing the Trust.
A Statement of Additional Information concerning the Trust,
bearing the same date as this Prospectus, has been filed with the
Securities and Exchange Commission and is incorporated herein by
reference. It is available without charge by calling or writing
the Trust.
Shares of the Trust are not deposits or obligations of, or
guaranteed or endorsed by, any bank. Shares are not federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Bankers Finance Advisors, LLC.
Investment Adviser
<PAGE>
About GIT Income Trust
GIT Income 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
"Adviser") of the same address as the Trust.
The Trust offers shares of two separate portfolios: the
Government Portfolio and the Maximum Income Portfolio. The Trust
may offer additional portfolios which would be managed
independently. Currently, there are no such additional
portfolios.
Expense Summary
The purpose of this table is to assist investors in understanding
the various costs and expenses that an investor will bear
directly or indirectly (see also "Management of the Trust").
Maximum
Government Income
Portfolio Portfolio
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.625% 0.625%
Other expenses 0.965% 0.975%
Total Fund Operating Expenses 1.590% 1.600%
Example
1 Year 3 Years 5 Years 10 Years
You would pay the following
expenses on a $1,000
investment, assuming:
(1) a five percent annual
return and (2) redemption
at the end of each time
period
Government Portfolio $16 $50 $87 $189
Maximum Income Portfolio $16 $50 $87 $190
The hypothetical example shown above is based on the expense
levels listed under the caption "Annual Fund Operating Expenses"
and is intended to provide the investor with an understanding of
the level of expenses that might be incurred in the future. The
five percent return used in the example is arbitrary and is for
illustrative purposes only. It should not be considered
representative of the Trust's past or future performance, nor
should the expenses in the example be considered representative
of future expenses, which may actually be greater or less than
those shown.
<PAGE>
Financial Highlights
The financial highlights data for a share outstanding and other
performance information 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 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.
<TABLE>
<CAPTION>
Government Portfolio
Year ended March 31,
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net asset
value
beginning
of period $ 9.551 9.695 10.621 10.300 10.119 9.867 9.891 10.180 11.391 11.493
Net
investment
income $0.472 0.391 0.363 0.501 0.654 0.710 0.783 0.794 0.862 0.912
Net
realized &
unrealized
gains
(losses) on
securities $0.154 (0.144)(0.151) 0.854 0.222 0.292 (0.024)(0.289)(0.743)(0.102)
Total from
investment
operations $0.626 0.247 0.212 1.355 0.876 1.002 0.759 0.505 0.119 0.810
Distributions
from net
investment
income $(0.472)(0.391)(0.363)(0.501)(0.654)(0.710)(0.783)(0.794)(0.862)(0.912)
Distributions
from capital
gains $ -- -- (0.775)(0.533)(0.041)(0.040) -- -- (0.468) --
Total
Distributions$(0.472)(0.391)(1.138)(1.034)(0.695)(0.750)(0.783)(0.794)(1.330)(0.912)
Net asset
value end
of period $ 9.705 9.551 9.695 10.621 10.300 10.119 9.867 9.891 10.180 11.391
Total
Return 6.56% 2.67% 1.95% 13.96% 8.84% 10.57% 7.78% 5.19% 1.47% 7.35%
Net assets
at end of
period
(thousands) $ 6,856 7,653 8,576 9,734 7,375 6,059 6,119 6,542 6,283 9,273
Ratio of
expenses to
average net
assets 1.59% 1.52% 1.54% 1.52% 1.53% 1.65% 1.51% 1.50% 1.47% 1.41%
Net
investment
income to
average
net assets 4.77% 4.12% 3.53% 4.78% 6.28% 7.13% 7.76% 7.94% 8.18% 7.99%
Portfolio
turnover 190% 318% 287% 357% 123% 116% 86% 45% 36% 31%
Maximum Income Portfolio
Net asset
value
beginning
of period $ 6.938 7.285 7.455 7.255 6.775 7.181 8.129 8.427 9.657 9.970
Net
investment
income $ 0.608 0.597 0.606 0.674 0.689 0.781 0.873 0.866 0.928 1.063
Net
realized &
unrealized
gains
(losses) on
securities $0.224 (0.347)(0.170) 0.200 0.480 (0.406)(0.948)(0.298)(1.230)(0.313)
Total from
investment
operations $0.832 0.250 0.436 0.874 1.169 0.375 (0.075) 0.568 (0.302) 0.750
Distributions
from net
investment
income $(0.608)(0.597)(0.606)(0.674)(0.689)(0.781)(0.873)(0.866)(0.928)(1.063)
Distributions
from capital
gains $ -- -- -- -- -- -- -- -- -- --
Total
Distributions$(0.608)(0.597)(0.606)(0.674)(0.689)(0.781)(0.873)(0.866)(0.928)(1.063)
Net asset
value end
of period $ 7.162 6.938 7.285 7.455 7.255 6.775 7.181 8.129 8.427 9.657
Total
Return 12.32% 3.75% 5.89% 12.69% 18.08% 5.91% (1.27)% 7.09% (3.06)% 7.97%
Net assets
at end of
period
(thousands) $6,790 6,726 7,702 7,329 6,456 5,405 6,988 9,542 11,132 16,716
Ratio of
expenses to
average net
assets 1.60% 1.52% 1.54% 1.52% 1.54% 1.66% 1.51% 1.50% 1.45% 1.39%
Net
investment
income to
average
net assets 8.47% 8.56% 8.02% 9.26% 9.95% 11.57% 11.16% 10.45% 10.48% 10.87%
Portfolio
turnover 237% 243% 251% 73% 124% 54% 93% 80% 78% 127%
Investment Objective
The objective of each portfolio is to provide monthly dividends
to investors by investing in bonds and other debt securities
according to the investment quality policies described in this
prospectus.
Although the investment objective of a portfolio may be changed
without shareholder approval, shareholders will be notified in
writing prior to any material change. There can be no assurance
that the objective of either portfolio will be achieved.
<PAGE>
Investment Policies
The Government Portfolio invests solely in U.S. Government
securities and emphasizes safety of principal and interest for
its portfolio investments. The Maximum Income Portfolio invests
in debt securities expected to provide the highest yields, and
may include lower-rated securities, including those commonly
referred to as "high yield" or "junk" bonds.
Government Portfolio. Government Portfolio investments are
limited to U.S. Government securities, which include a variety of
securities issued or guaranteed by the U.S. Treasury, various
agencies of the federal government and various instrumentalities
which have been established or sponsored by the U.S. Government,
and certain interests in these types of securities. Treasury
securities include notes, bills and bonds. Obligations of the
Government National Mortgage Association, the Federal Home Loan
Banks, the Federal Farm Credit System, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association,
the Small Business Association and the Student Loan Marketing
Association are also considered to be U.S. Government securities.
Except for Treasury securities, these obligations may or may not
be backed by the "full faith and credit" of the United States.
Some federal agencies have authority to borrow from the U.S.
Treasury while others do not. In the case of securities not
backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not
be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its
commitments.
Maximum Income Portfolio. The Maximum Income Portfolio may invest
in corporate bonds, notes and debentures (including corporate
debt securities convertible into other securities), as well as
U.S. Government securities. The Maximum Income Portfolio invests
principally in Lower Medium Grade and Low Grade corporate debt
securities, commonly known as "high yield" or "junk" bonds. The
lowest-grade securities in which this Portfolio may invest are
those rated "Caa" or "CCC." The Adviser may vary the quality
rating mix of this portfolio based on its evaluation of each
investment in light of its yield and credit characteristics.
Other Policies. In order to ensure diversification, the Trust's
fundamental investment policies stipulate certain restrictions.
No more than five percent of each Portfolio's assets may be
invested in the securities of one issuer (excluding U.S.
Government securities) as of the date of purchase. No more than
10 percent of any Portfolio's assets may be invested in illiquid
securities, including restricted securities, other securities for
which no readily available market exists, and repurchase agreements
that cannot be terminated within seven days. No more
than 25 percent of the total assets of a portfolio may be
invested in the securities of issuers in a single industry.
The portfolios will be invested in debt securities with
maturities which, in the judgment of the Adviser, will provide
the highest yields available from debt securities over the life
of the investment. This means that the average effective maturity
of each portfolio may be 20 years or more, depending on market
conditions. The Adviser may adjust this maturity, however, and
may sell securities prior to maturity. Such sales may result in
realized capital gains or losses. The Trust does not intend,
however, to engage in extensive short-term trading.
The Trust reserves the right to invest a portion of its assets in
short-term debt securities (those with maturities of one year or
less) and to maintain a portion of its assets in uninvested cash.
However, it does not intend to hold more than 35 percent of
either portfolio in such investments unless it determines market
conditions warrant a temporary defensive investment position.
Under such circumstances, up to 100 percent of either portfolio
may be so invested. To the extent that a portfolio is so
invested, it is not invested in accordance with policies designed
to achieve its stated investment objective. Short-term
investments may include certificates of deposit, commercial paper
and repurchase agreements.
<PAGE>
Specialized Investment Techniques
To achieve its objectives, each portfolio may use certain
specialized investment techniques, including investment in
"when-issued" securities, securities with variable interest
rates, loans of portfolio securities, financial futures
contracts, foreign securities and repurchase agreements.
"When-issued" securities are purchased or sold with payment and
delivery scheduled to take place at a future time, usually 15 to
45 days from the date the transaction is arranged. When investing
in "when-issued" securities, the Trust relies on the other party
to complete the transaction. Should the other party fail to do
so, the Trust might lose a more advantageous investment
opportunity.
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 agreements to those financial
institutions and securities dealers who are considered
creditworthy under guidelines adopted by the Trustees. The
Adviser will follow a procedure designed 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 hold 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.
Investment Selection Criteria for Maximum Income Portfolio
The Maximum Income Portfolio invests principally in securities
commonly known as "high yield" or "junk" bonds. Although this
portfolio may invest in securities with ratings as low as "CCC"
or "Caa," it follows certain policies intended to mitigate some
of the risks associated with investment in such securities.
Included among such policies are the following: (1) bonds
acquired at the time of their initial public offering must be
rated at least "B" by either Standard & Poor's Corporation or
Moody's Investors Services, Inc.; (2) bonds rated "BB" or "Ba" or
lower must have more than one market maker at the time of
acquisition; and (3) unrated bonds, privately placed bonds and
bonds of issuers in bankruptcy are not purchased. In addition, no
zero coupon bonds or bonds having interest paid in the form of
additional securities (commonly called "payment-in-kind" or "PIK"
bonds) will be acquired, if immediately after the investment more
than 15 percent of the value of this portfolio would be invested
in such bonds.
Investment selection criteria apply at the time an investment is
made. An adverse change in the quality rating or other
characteristics of an investment may not necessarily result in
disposition of that investment, because the impact of such
changes is often already reflected in market prices before the
investment can be liquidated.
The weighted average portions of the investment assets of the
Maximum Income Portfolio invested in each of the quality ratings
identified below for the fiscal year ending March 31, 1996 were
as follows:
Ratings by Moody's Ratings by Standard
Investors Service Inc. & Poor's Corporation
Aaa 2.76% AAA 2.76%
BB 4.42%
Ba3 11.97% BB- 11.31%
B1 17.82% B+ 23.14%
B2 22.95% B 40.45%
B3 34.44% B- 7.87%
P1 10.06% A1 10.06%
A description of the ratings assigned to Maximum Income Portfolio
Securities is contained in the appendix to this prospectus.
<PAGE>
Investment Risk Considerations
The investment policies of the Trust involve certain risks. For
example, the market value of bonds and other debt securities
tends to rise when prevailing interest rates decline and fall
when prevailing interest rates rise. Longer maturities increase
the magnitude of these changes. Investments with the highest
yields may have longer maturities and lower credit ratings than
other securities, increasing the possibility of fluctuations in
value per share. Investments with lower credit ratings may have
limited marketability, making it difficult for the Trust to
dispose of such securities advantageously, and may present the
risk of default, which could result in a loss of principal and
interest.
Additional Investment Risk Considerations for Maximum Income Portfolio
The Maximum Income Portfolio may invest in securities rated Caa
or CCC, which may have highly speculative characteristics, may be
of poor standing and may present other elements of immediate
danger to payment of principal and interest or could even be in
default (although the portfolio will not purchase securities in
default).
Investors should consider certain risks associated with the kinds
of securities held by the Maximum Income Portfolio. These risks
include the following:
Youth and Growth of the High Yield Bond Market. The high yield
bond market is relatively young and its major growth occurred
during a long period of economic expansion. This market in its
present size and form has been affected by an economic downturn.
The economic downturn has resulted in large price swings in the
value of high yield bonds. This has also adversely affected the
value of outstanding bonds and the ability of the issuers to
repay principal and interest.
Sensitivity to Interest Rates and Economic Changes. Changes in
the economy and interest rates may affect high yield securities
differently from other securities. Prices of high yield bonds may
be less sensitive to interest rate fluctuations than investment
grade securities, but more sensitive to adverse economic changes
or individual corporate developments. An economic downturn or a
period of rising interest rates could adversely affect the
ability of highly leveraged issuers to make required principal
and interest payments, to meet financial projections or to obtain
additional financing. Periods of economic decline or uncertainty
may increase the price volatility of high yield bonds, and
therefore, magnify changes in the Maximum Income Portfolio's net
asset value. Zero coupon bonds and payment-in-kind securities may
be affected to a greater extent by such developments and thereby
tend to be more volatile than securities which pay interest
periodically in cash.
Market Expectations. High yield bond values are very sensitive to
market expectations about the credit worthiness of the issuing
companies. If events produce a sudden concern in the marketplace
about the ability of high yield bond issuers to service their
debts, investors might try to liquidate significant amounts of
high yield bonds within a short period of time. If shareholders
in the Maximum Income Portfolio were also making significant
redemptions at the same time, the portfolio might be forced to
sell some of its holdings under adverse market conditions,
without regard to their investment merits, thereby possibly
realizing capital losses and decreasing the asset base upon which
expenses can be spread. Rising interest rates can adversely
affect the value of high yield bonds, both by lowering the
perceived credit worthiness of the issuers and by lowering bond
prices generally. However, when interest rates are falling or the
credit worthiness of the issuer improves, early redemption or
call features of the bonds may limit their potential for
increased value.
Liquidity and Valuation. Adverse publicity about or public
perceptions of high yield securities and their market, whether or
not based on fundamental analysis, may cause the bonds to lose
value and liquidity. Since the high yield market is an over-the-
counter market, there may be "thin" trading during times of
market distress, meaning there is a limited number of buyers and
sellers in the market.
<PAGE>
Congressional Proposals. Various proposals have been considered
by Congress in the past that would restrict or adversely impact
the market for high yield bonds. Federally insured savings and
loan associations have been required to divest investments in
high yield bonds. Any such legislation may have had or may in the
future have an adverse impact on the net asset value of the
Maximum Income Portfolio or its investment flexibility.
Taxation. Interest income is recognized on zero coupon and pay-
in-kind securities and is passed through to shareholders for
income tax purposes, even though payment of such interest is not
received in cash.
Credit Ratings. The quality ratings of debt securities are
considered when investments are selected. However, changes in
credit ratings by the major credit rating agencies may lag
changes in the credit worthiness of the issuer. The Adviser
monitors the issuers of high yield bonds to anticipate whether
the issuer will have sufficient cash flow to meet required
principal and interest payments and to assess the bonds'
liquidity, but it may not always be able to foresee adverse
developments. Furthermore, credit ratings attempt to evaluate the
safety of principal and interest payments and may not accurately
reflect the market value risks of high yield bonds.
Management of the Trust
The Trustees. Under the terms of the Declaration of Trust, which
is governed by the laws of the Commonwealth of Massachusetts, the
Trustees are ultimately responsible for the conduct of the
Trust's affairs. They serve indefinite terms of unlimited
duration and they appoint their own successors, provided that
always at least two-thirds of the Trustees have been elected by
shareholders. The Declaration of Trust provides that a Trustee
may be removed at any special meeting of shareholders by a vote
of two-thirds of the Trust's outstanding shares.
The Adviser. Bankers Finance Advisors, LLC is a division of Madison
Investment Advisors, Inc., 6411 Mineral Point Road, Madison,
Wisconsin ("Madison"). Bankers Finance Advisors, LLC
administers approximately $200 million in assets and manages the
GIT family of mutual funds, which includes stock, bond and money
market portfolios. Madison, a licensed investment advisory firm for
over 22 years, provides professional portfolio management services
to a number of clients, including stock and bond mutual funds, and
has approximately $2.5 billion under management.
The Adviser is responsible for the day-
to-day administration of the Trust's activities. Investment
decisions regarding each of the Trust's portfolios can be
influenced in various manners by a number of individuals. The
individuals primarily responsible for the management of the
Trust's Portfolios are Charles J. Tennes, Chris Berberet and
Jay Sekelsky. Mr. Tennes, vice president, who had been associated
since 1985 with Bankers Finance Investment Management Corp.,
the adviser to the Trust prior to July 31, 1996, has been involved
in the operation of the Trust's Portfolios since early 1993.
Mr. Berberet, vice president, has served as vice president of Madison
since 1992. Prior to joining Madison, he was the Director of Fixed
Income Management for the ELCA Board of Pensions in
Minneapolis, Minnesota. Mr. Sekelsky, vice president, has served
as a principal of Madison since 1990. Prior to joining Madison,
he was vice president for Wellington Management Group of Boston,
Massachusetts. Messrs. Berberet and Sekesly began managing the
Trust's Portfolios in 1996.
The Adviser is controlled by Madison. The Adviser purchased
the investment management assets of Bankers Finance Investment
Management Corp. effective July 31, 1996. The Adviser has the
same address as the Trust.
Compensation. For its services under its Investment Advisory
Agreement with the Trust, the Adviser receives a fee, payable
monthly, calculated as 5/8 percent per annum of the average daily
net assets of each portfolio. The Adviser 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, the Adviser provides operational and other support
services for which it is reimbursed at cost.
Transfer Agent and Dividend Paying Agent. The Trust acts as its
own transfer agent and dividend paying agent.
Expenses. The Trust is responsible for all expenses not assumed
by the Adviser, including the costs of the following: shareholder
services; legal, custodian and audit fees; trade association
memberships; accounting; certain Trustees' fees and expenses;
fees for registering the Trust's shares; the preparation of
prospectuses,
<PAGE>
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 each portfolio, including advisory
fees and reimbursable expenses paid to the Adviser, were as
follows: $117,404 for the Government Portfolio, and $110,543 for
the Maximum Income Portfolio.
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 two portfolios are authorized by the Trustees: the
Government Portfolio and the Maximum Income 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. Except as otherwise required by applicable regulations,
any matter submitted to a shareholder vote will be voted upon by
all shareholders without regard to series or class. For matters
where the interests of separate series or classes are not
identical, the question will be voted on separately by each
affected series or class. Voting is not cumulative.
The Trust does not intend to have regular shareholder meetings.
Shareholder inquiries can be made to the offices of the Trust at
the address on the cover of this prospectus.
Dividends
Each Portfolio's net income is declared as dividends each
business day. Dividends are paid in the form of additional shares
credited to investor accounts at the end of each calendar month,
unless a shareholder elects in writing to receive a monthly
dividend payment by check or direct deposit. Any net realized
capital gains will be distributed at least annually.
Performance Information
From time to time the Trust advertises its yield and total
return. Both figures are based on historical data and are not
intended to indicate future performance.
For advertising purposes, the yield is calculated according to a
standard formula prescribed by the Securities and Exchange
Commission. This formula divides the theoretical net income per
share during a 30-day period by the share price on the last day
of the period.
While yield calculations ignore changes in share price, total
return takes such changes 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 each
Portfolio's yield and total return may be found in the Trust's
Statement of Additional Information. The Trust's Annual Report
contains additional performance information. A copy of the Annual
Report may be obtained without charge by calling or writing the
Trust at the telephone number and address on the cover of this
prospectus.
<PAGE>
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 in order to
avoid a 4% excise tax. The capital gain 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 year.
Because each Portfolio's share price fluctuates, a redemption of
shares by the investor creates a capital gain or loss which has
tax consequences. It is the shareholder's responsibility to
calculate the cost basis of shares purchased. Investors are
advised to retain all statements received from the Trust and to
maintain accurate records of their investments.
Investors who fail to provide a valid social security or tax
identification number may be subject to federal withholding at a
rate of 31 percent of dividends and any capital gains
distributions.
At the state and local level, dividend income and capital gains
are generally considered taxable income. Interest on certain U.S.
Government securities held by the Trust would be exempt from
state and local income taxes if held directly by the shareholder.
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.
Net Asset Value
The net asset value per share of each portfolio is calculated as
of 4 p.m. Washington, DC time each day the New York Stock
Exchange is open for trading. Net asset value per share is
determined by adding the value of all securities and other
assets, subtracting liabilities and dividing the result by the
total number of outstanding shares for the portfolio.
For purposes of calculating net asset value, securities for which
current market quotations are readily available are valued at the
mean between their bid and asked prices. Securities for which
current quotations are not readily available are valued at their
fair value as determined by the Trustees. Securities having a
remaining effective maturity of 60 days or less are valued at
amortized cost, subject to the Trustees' determination that this
method reflects their fair value. The Trustees may use an
independent pricing service for determination of security values.
Account Transactions
Transactions into or out of the Trust are entered in the
investor's account and recorded in shares. The number of shares
in the account is maintained to an accuracy of 1/1000th of a
share. Unless an investor specifically requests in writing,
certificates will not be issued to represent shares in the Trust.
The Trust will provide a subaccounting report for institutions
needing to maintain separate information on accounts under their
supervision.
Telephone Transactions
The option to initiate inter-fund exchanges and redemptions and
to obtain account balance information by telephone is available
automatically to all shareholders. The Trust will employ
reasonable security procedures to confirm that instructions
communicated by telephone are genuine; if it does not, it may be
liable 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.
<PAGE>
Purchasing Shares
Shareholder purchases are priced at the net asset value per share
next determined after the purchase order is received by the Trust
in proper form and funds are received by the Trust's Custodian.
This is normally one or two business days after an investment is
received at the Trust.
New Accounts. A minimum of $2,500 is required to open an account.
Each investor is given an account with a balance denominated in
shares. When a new account is opened by telephone for funds wired
to the Trust, the investor will be required to submit a signed
application promptly thereafter. Payment of redemption proceeds
is not permitted until a signed application is on file with the
Trust.
New accounts may be opened by completing an application and
forwarding it with a check for the initial investment to:
GIT Income Trust
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
Subsequent investments. Subsequent investments may be made in any
amount, but the Trust reserves the right to return investments of
less than $50.00. See "Redeeming Shares" for an explanation of
the Trust's policies regarding the 10-day hold on invested
checks.
Subsequent investments should be sent to:
GIT Income Trust
P.O. Box 640393
Cincinnati, OH 45264-0393
Please include an investment deposit slip or a clear indication
of the account to be credited. Checks should be payable to GIT
Income Trust.
In person. Accounts may be opened and subsequent deposits made at
any office of the Trust.
By wire. Federal funds wires should be sent to Star Bank, N.A.,
Cinti/Trust, ABA No. 0420-0001-3, for credit as follows:
GIT Government Account No. 48038-8883
(Investor name and account number)
GIT Maximum Income Account No. 48038-8883
(Investor name and account number)
Please call before or shortly after funds are wired to ensure
proper credit. The Trust must be notified by 1 p.m. Washington,
DC time, to credit the shareholder's account the same day. There
is a charge of $6.00 for processing incoming wires of less than
$2,500.
By Inter-Fund Exchange. Investors may redeem shares from one GIT
account and concurrently invest the proceeds in another GIT
account by telephone when the account registration and tax
identification number remain the same. There is no charge for
this service. When a new account is opened by exchange, a new
account application is required if the account registration or
tax identification number will differ from that on the
application for the original account. Exchanges may only be made
into funds that are registered or otherwise permitted to be sold
in the investor's state of residence.
By Automatic Monthly Investment. Regular monthly investments in
any fixed amount of $100 or more can be made automatically by
Electronic Funds Transfer from accounts at banks or savings and
loan associations which have the required transfer capabilities.
The investor can change the amount of this automatic investment
or discontinue the service at any time by writing the Trust.
Redeeming Shares
Share redemptions are processed on any day the New York Stock
Exchange is open and are effected at the net asset value per
share next determined after the redemption request is received in
proper form. Redemptions may be made by wire transfer, by mail,
in person or pursuant to standing instructions. The Trust does
not distribute currency or coin.
To protect your account, the Trust requires signature guarantees
before certain redemptions or registration changes are considered
in good order. Signature
<PAGE>
guarantees help the Trust ensure the identity of the authorized
account owner or owners before the Trust releases redemption
proceeds or recognizes a new person to request redemptions.
Signature guarantees are required for any account transfers or
delivery of redemption proceeds to a person other than the
shareholder of record (i) at an address other than the
shareholder's address of record or (ii) by wire to a bank account
other than the shareholder's previously designated bank account
that receives wire transfers. The Trust recognizes 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.
By Wire. Wire transfers permit funds to be credited to a
shareholder's bank account, usually the same day. Wires may only
be sent to the bank account previously designated in writing.
Other wires and wires to third parties are normally not
permitted.
Redemptions of $10,000 or more will be paid by wire to U.S.
domestic banks without charge. Wires for lesser amounts will be
paid after deducting a $10 service charge. Wires to foreign banks
require a service charge of $30, or the cost of the wire if
greater.
Payment of proceeds of wire requests received after 12:30 p.m.,
Washington, DC time and requests exceeding 80 percent of the
value of the account will normally be processed the next business
day. Wires can be arranged by calling the telephone numbers on
the cover of this prospectus.
By Mail. Upon written or telephone request, redemptions may be
sent to the shareholder of record by official check of the Trust.
Redemption requests received by mail are normally processed
within one business day.
In Person. Redemptions may be requested in person at any office
of the Trust. Payment of proceeds of same-day redemptions in
excess of $10,000 are not permitted.
By Check. An investor who has requested checkwriting privileges
and submitted a signature card may write checks in any amount
payable to any party. Checks of $500 or more are processed free
of charge. There is a charge of $5.00 for checks written for
under $500. An initial supply of preprinted checks will be sent
free of charge. The cost of check reorders and of printing
special checks will be charged to the investor's account.
A confirmation statement showing the amount and number of each
check written is sent to the investor quarterly. The Trust does
not return canceled checks, but will provide copies of
specifically requested checks. A fee of $1.00 per copy is charged
for more than one check copy per year.
Uncollected Funds. To protect shareholders against loss or
dilution resulting from deposit items that are returned unpaid,
the delivery of the proceeds of any redemption of shares may be
delayed 10 days or more until it can be determined that the check
or other deposit item (including Automatic Monthly Investments)
used for purchase of the shares has cleared. Such deposit items
are considered "uncollected," unless the Trust has determined
that they have actually been paid by the bank on which they were
drawn.
Shares purchased by cash, federal funds wire or U.S. Treasury
check are considered collected when received by the Trust's
Custodian. All deposit items earn dividends from the day of
credit to a shareholder's account, even while not collected.
Stop Payments. The Trust will honor stop payment requests on
unpaid checks written by shareholders for a fee of $5.00. Oral
stop payment requests are effective for 14 calendar days, at
which time they will be canceled unless confirmed in writing.
Written stop payment orders are effective for six months and may
be extended by written request for another six months.
The Trust normally charges a fee of $28.00 or the cost of the
stop payment, if greater, for stop payment requests on "official
checks" issued by the Trust on behalf of shareholders. Certain
documents may be needed before such a request can be processed.
Periodic Redemptions. Investors may request automatic monthly
redemptions of a fixed or readily
<PAGE>
determinable sum, or of the actual dividends earned during the
past month. Such payments will be sent to the investor or to any
other single payee authorized in writing by the account holder.
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.
Transaction Charges
In addition to charges described elsewhere in this prospectus, an
account will be charged (by redemption of shares) $3.00 per month
for any account whose month-end balance is below $700. Investors
who own shares in any portfolio with an account balance that
falls below these amounts should carefully consider the impact of
the $3.00 charge on their investment. The charge may be greater
than the investment return and may deplete a shareholder's
account over time. The Trust will contact each investor prior to
charging the account and inform the investor of the option to
increase the account balance or close the account within 30 days
to avoid a fee.
Accounts will be charged (by redemption of shares) $10.00 for
invested items returned for any reason. The Trust charges $5.00
to process each bearer bond coupon deposited.
Investors who purchase or redeem shares through a securities broker
may be charged a transaction fee by the broker for the handling of the
transaction if the broker so elects. Such charges are retained by the
broker and not transmitted to the Trust. However, investors may
engage in any transaction directly with the Trust to avoid such charges.
The Trust reserves the right to impose additional charges, upon
30 days' written notice, to cover the costs of unusual
transactions. Services for which charges could be imposed
include, but are not limited to, processing items sent for
special collection, transfers to accounts at the Trust's
custodial bank and issuance of multiple share certificates.
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 for each investor's
IRA, which may be invested in an unlimited number of GIT mutual
funds. 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 maintenance fee of
$15 for Keogh accounts.
The Trust also offers SEP IRAs, SARSEPs, 401(k) and 403(b) plans.
Further information on the retirement plans available through the
Trust, including applicable minimum investments, may be obtained
by calling the Trust's shareholder service department.
Closing an Account
An investor who wishes to close an account should request that
the account be closed, rather than redeeming the amount believed
to be the account balance. When an account is closed, shares
will be redeemed at the next determined net asset value.
The Trust reserves the right to involuntarily redeem accounts
with balances of less than $700 due to prior shareholder
redemptions. Prior to closing any such account, the investor will
be given 30 days written notice, during which time the investor
may increase his or her balance to avoid having the account
closed.
Appendix - Quality Ratings
The Trust will determine the grade or credit quality of other
securities it may acquire principally by reference to the ratings
assigned by the two principal private organizations which rate
Municipal Securities: Moody's Investors Service, Inc. ("Moody's")
and Standard and Poor's Corporation ("S&P").
Corporate Obligations. For corporate obligations, Moody's uses
ratings Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C; S&P uses ratings
AAA, AA, A, BBB, BB, B, CCC, CC and C. Notes and bonds rated Aaa
or AAA are judged to be of the best quality; interest and
principal are secure and prices respond only to market rate fluctuations.
Notes and bonds rated Aa or AA are
<PAGE>
also judged to be of high quality, but margins of protection for
interest and principal may not be quite as good as for the
highest rated securities.
Notes and bonds rated A are considered upper medium grade by each
organization; protection for interest and principal is deemed
adequate but susceptible to future impairment, and market prices
of such obligations, while moving primarily with market rate
fluctuations, also may respond to economic conditions and issuer
credit factors.
Notes and bonds rated Baa or BBB are considered medium grade
obligations; protection for interest and principal is adequate
over the short term, but these bonds may have speculative
characteristics over the long term and therefore may be more
susceptible to changing economic conditions and issuer credit
factors than they are to market rate fluctuations.
Notes and bonds rated Ba or BB are considered to have immediate
speculative elements and their future can not be considered well
assured; protection of interest and principal may be only
moderate and not secure over the long term; the position of these
bonds is characterized as uncertain.
Notes and bonds rated B or lower by each organization are
generally deemed to lack desirable investment characteristics;
there may be only small assurance of payment of interest and
principal or adherence to the original terms of issue over any
long period.
Issues rated Caa or CCC and below may also be highly speculative,
of poor standing and may even be in default or present other
elements of immediate danger to payment of interest and principal.
Commercial Paper. Commercial paper is rated by Moody's with
"Prime" or "P" designations, as P-1, P-2 or P-3, all of which are
considered investment grades. P-1 issuers have superior repayment
capacity and credit characteristics; P-2 issuers have strong
repayment capacity but more variable credit characteristics;
while P-3 issuers have acceptable repayment capacity, but highly
variable credit characteristics and may be highly leveraged.
S&P rates commercial paper as A-1, A-2 or A-3. To receive a
rating from S&P the issuer must have adequate liquidity to meet
cash requirements, long-term senior debt rated A or better
(except for occasional situations in which a BBB rating is
permitted), and at least two additional channels of borrowing.
The issuer's basic earnings and cashflow must have an upward
trend (except for unusual circumstances) and, typically, the
issuer's industry is well established and it has a strong
position within the industry. S&P assigns the individual ratings
A-1, A-2 and A-3 based upon its assessment of the issuer's
relative strengths and weaknesses within the group of ratable
companies.
<PAGE>
Telephone Numbers
Shareholder Service
Washington, DC area: 703/528-6500
Toll-free nationwide: 800/336-3063
24-Hour ACCESS
Toll-free nationwide: 800/448-4422
The GIT Family of Mutual Funds
GIT Equity Trust
Special Growth Portfolio
Select Growth Portfolio
Equity Income Portfolio
Worldwide Growth Portfolio
GIT Income Trust
Maximum Income Portfolio
Government Portfolio
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Government Investors Trust
For more complete information on any GIT Investment Fund,
including charges and expenses, request a prospectus by
calling the numbers above. Read it carefully before you
invest or send money. This prospectus does not constitute an
offering by the distributor in any jurisdiction in which such
offering may not be lawfully made.
GIT
GIT Investment Funds
1655 Fort Myer Drive
Arlington Virginia 22209
http://www.gitfunds.com
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated July 31, 1996
For use with Prospectus dated July 31, 1996
GIT INCOME TRUST
1655 Fort Myer Drive
Arlington, VA 22209-3108
(800) 336-3063
(703) 528-6500
This Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Prospectus of GIT Income
Trust bearing the date indicated above (the "Prospectus"). A copy
of the Prospectus may be obtained from the Trust at the address
and telephone numbers shown.
Table of Contents
Introductory Information
("About GIT Income Trust") 2
Supplemental Investment Policies
("Investment Objectives" and "Investment Policies") 2
Investment Limitations
("Investment Policies") 5
The Investment Adviser
("Management of the Trust") 6
Organization of the Trust
("The Trust and Its Shares") 7
Trustees and Officers
("Management of the Trust") 8
Administrative and Other Expenses
("Management of the Trust") 9
Portfolio Transactions
("Management of the Trust") 10
Share Purchases
("How to Purchase and Redeem Shares") 10
Share Redemptions
("How to Purchase and Redeem Shares") 11
Retirement Plans
("How to Purchase and Redeem Shares") 12
Declaration of Dividends
("Dividends") 12
Determination of Net Asset Value
("Net Asset Value") 13
Additional Tax Matters
("Taxes") 13
Yield and Total Return Calculations
("Performance Information") 14
Custodians and Special Custodians 15
Legal Matters and Independent Auditors
("Financial Highlights") 16
Additional Information 16
Financial Statements and Report of Independent Auditors
("Financial Highlights") 16
Quality Ratings
("Investment Policies") 16
Note: The items appearing in parentheses above are cross
references to sections in the Prospectus which correspond to the
sections of this Statement of Additional Information.
<PAGE>
Statement of Additional Information Page 2
GIT Income Trust July 31, 1996
Introductory Information
GIT Income Trust (the "Trust") issues two series of shares:
Government Portfolio shares and Maximum Income Portfolio shares.
Government Portfolio shares represent interests in a portfolio of
Government Securities (the "Government Portfolio"). Maximum
Income Portfolio shares represent interests in a portfolio of
lower-grade debt securities, rated not lower than CCC or Caa or
of equivalent quality (the "Maximum Income Portfolio"). These
Portfolios are described more fully below (see "Supplemental
Investment Policies").
Supplemental Investment Policies
The investment objectives of the Trust are described in the
Prospectus (see "Investment Objective"). Reference should also be
made to the Prospectus for general information concerning the
Trust's investment policies for each of its Portfolios (see
"Investment Policies"). The Trust seeks to achieve its investment
objectives through diversified investment by each of its
Portfolios, principally in debt securities. Unless described
herein or in the Prospectus, the Trust will not invest in
"derivative" securities.
The quality rating classifications for debt securities of "High
Grade," "Upper Medium Grade," "Lower Medium Grade" and "Low
Grade" are defined below (see "Quality Ratings"). For unrated
debt securities the Adviser may make its own determinations of
those investments it assigns to each quality rating
classification, as part of the exercise of its investment
discretion on behalf of the Trust, but such determinations will
be made by reference to the rating criteria followed by
recognized rating agencies (see "Quality Ratings"). Any unrated
securities purchased for the Maximum Income Portfolio will be of
comparable quality to the rated securities that may be purchased
for the same Portfolio. The Adviser's quality classification
procedures will be subject to review by the Trustees.
Basic Investment Policies. The Government Portfolio seeks to
invest solely in U.S. Government securities. The Maximum Income
Portfolio seeks to invest in debt securities offering the highest
yields, subject to the minimum quality rating for this Portfolio
described below. To the extent the investments selected for this
Portfolio have higher yields than alternative investments, they
may be less liquid, have lower-quality ratings and entail more
risk that their value could fall than comparable investments with
lower yields. (See "Quality Ratings" for the investment
characteristics of lower-rated securities.)
Other Policies. The Trust will not invest more than 25% of the
assets of a Portfolio in any one industry. Although the
investment policies of the Trust contemplate that each of its
Portfolios will be principally invested in longer-term debt
securities, investment management considerations will mean that a
portion of each Portfolio will normally be invested in short-term
investments. The short-term investments in which the Trust may
invest are described below. The Trust also reserves the right to
maintain a portion of the assets of any Portfolio in uninvested
cash when deemed advisable.
During defensive periods the Trust may also invest up to 100% of
its assets in short-term investments, including 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").
Short-Term Investments. The "short-term investments" in which the
Trust may invest are limited to the following U.S. dollar
denominated investments: (1) U.S. Government securities; (2)
obligations of banks having total assets of $750 million or more;
(3) commercial paper having a quality rating appropriate to the
respective Portfolio of the Trust; and (4) repurchase agreements
involving any of the foregoing securities or long-term debt
securities of the type in which the respective Portfolio of the
Trust could invest directly.
Bank obligations eligible as short-term investments are
certificates of deposit ("CDs"), bankers acceptances ("BAs") and
other obligations of banks having total assets of $750 million or
more (including assets of affiliates). CDs are generally short-
term interest-bearing negotiable certificates issued by banks
against funds deposited with the issuing bank for a specified
period of time. Such CDs may be marketable or may be redeemable
upon demand of the holder; some redeemable CDs may have penalties
for early withdrawal, while others may not. Federally insured
bank deposits are presently limited to $100,000 of insurance per
depositor per bank, so the interest or principal of CDs may not
be fully insured. 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.
The Trust will not invest in non-transferable time deposits
having penalties for early withdrawal 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 respective 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. Commercial paper may be rated A-
1, P-1, A-2, P-2, A-3 or P-3 (see "Quality Ratings").
Specialized Investment Techniques. In order to achieve its
investment objective, the Trust may use, when the Adviser 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. 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 debt 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
<PAGE>
Statement of Additional Information Page 3
GIT Income Trust July 31, 1996
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 yield 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.
2. Securities with Variable Interest Rates. Some of the
securities purchased by the Trust may carry variable interest
rates. Securities with variable interest rates normally are
adjusted periodically to pay an interest rate which is a fixed
percentage of some base rate, such as the "prime" interest rate
of a specified bank. The rate adjustments may be specified either
to occur on fixed dates, such as the beginning of each calendar
month, or to occur whenever the base rate changes. Certain of
these variable rate securities may be payable by the issuer upon
demand of the holder, generally within seven days of the date of
demand; others may have a fixed stated maturity with no demand
feature.
Variable rate securities may offer higher yields than are
available from shorter-term securities, but less risk of market
value fluctuations than longer-term securities having fixed
interest rates. When interest rates generally are falling, the
yields of variable rate securities will tend to fall, while when
rates are generally rising variable rate yields will tend to
rise.
Variable rate securities may not be rated and may not have a
readily available secondary market. To the extent these
securities are illiquid, they will be subject to the Trust's 10%
limitation on investments in illiquid securities (see "Investment
Limitations"). The Trust's ability to obtain payment after the
exercise of demand rights could be adversely affected by
subsequent events prior to repayment of the investment at par.
The Adviser will monitor on an ongoing basis the revenues and
liquidity of issuers of variable rate securities and the ability
of such issuers to pay principal and interest pursuant to any
demand feature.
3. 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 less than the amount due at the
scheduled time of repurchase, then the Trust could suffer a loss
of principal or interest. The Adviser will follow procedures
designed to assure 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
difficulties and might incur losses upon 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, or to the extent the
Trust wishes to obtain cash for a more advantageous investment,
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 either for other
investments or to meet cash requirements from redemption
requests. If the Trust engages in reverse repurchase agreement
transactions, it will either maintain in a segregated account
designated High Grade investments 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 5% of the Trust's total assets.
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 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
return. It is the
<PAGE>
Statement of Additional Information Page 4
GIT Income Trust July 31, 1996
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, the Adviser 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. Financial Futures Contracts. The Trust may use financial
futures contracts, including contracts traded on a regulated
commodity market or exchange, to purchase or sell securities
which the Trust would be permitted to purchase or sell by other
means. A futures contract on a security is a binding contractual
commitment which, if held to maturity, will result in an
obligation to make or accept delivery, during a particular month,
of securities having a standardized face value and rate of
return. By purchasing a futures contract, the Trust will legally
obligate itself to accept delivery of the underlying securities
and pay the agreed price; by selling a futures contract it will
legally obligate itself to make delivery of the security against
payment of the agreed price. The Trust will use financial futures
contracts only where it intends to take or make the required
delivery of securities; however, if it is economically more
advantageous to do so, the Trust may acquire or sell the same
securities in the open market prior to the time the purchase or
sale would otherwise take place according to the contract and
concurrently liquidate the corresponding futures position by
entering into another futures transaction that precisely offsets
the original futures position.
A financial futures contract for a purchase of securities is
called a "long" position, while a financial futures contract for
a sale of securities is called a "short" position. Short futures
contracts may be used as a hedge against a decline in the value
of an investment by locking in a future sale price for the
securities specified for delivery against the contract. Long
futures contracts may be used to protect against a possible
decline in interest rates. Hedges may be implemented by futures
transactions for either the securities held or for comparable
securities that are expected to parallel the price movements of
the securities being hedged. Customarily, most futures contracts
are liquidated prior to the required settlement date by disposing
of the contract; such transactions may result in either a gain or
a loss, which when part of a hedging transaction, would be
expected to offset corresponding losses or gains on the hedged
securities.
The Trust intends to use financial futures contracts as a
defense, or hedge, against anticipated interest rate changes and
not for speculation. A futures contract sale is intended to
protect against an expected increase in interest rates and a
futures contract purchase is intended to offset the impact of an
interest rate decline. By means of futures transactions, the
Trust may arrange a future purchase or sale of securities under
terms fixed at the time the futures contract is made.
The Trust will incur brokerage fees in connection with its
futures transactions, and it will be required to deposit and
maintain cash or U.S. Government securities with brokers as
margin to guarantee performance of its futures obligations. When
purchasing securities by means of futures contracts the Trust
will maintain in separate accounts (including brokerage accounts
used to maintain the margin required by the contracts) High Grade
investments which are liquid or which mature prior to the
scheduled purchase and cash sufficient in aggregate value to
provide adequate funds for completion of the purchase. While
futures will be utilized to reduce the risks of interest rate
fluctuations, futures trading itself entails certain other risks.
Thus, while the Trust may benefit from the use of financial
futures contracts, unanticipated changes in interest rates may
result in a poorer overall performance than if the Trust had not
entered into any such contracts.
6. Foreign Securities. The Trust may invest a portion of a
Portfolio's assets in securities of foreign issuers that are
listed on a recognized domestic or foreign exchange without
restriction. 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.
Furthermore, 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.
Maturities. As used in this Statement of Additional Information
and in the Prospectus, the term "effective maturity" means either
the actual stated maturity of the investment, the time between
its scheduled interest rate adjustment dates (for variable rate
securities), or the time between its purchase settlement and
scheduled future resale settlement pursuant to a resale or
optional resale under fixed
<PAGE>
Statement of Additional Information Page 5
GIT Income Trust July 31, 1996
terms arranged in connection with the purchase, whichever period
is shorter. A "stated maturity" means the time scheduled for
final repayment of the entire principal amount of the investment
under its terms. "Short-term" means a maturity of one year or
less, while "long-term" means a longer maturity.
Policy Review. If, in the judgment of a majority of the Trustees
of the Trust, unanticipated future circumstances make inadvisable
continuation of the Trust's policy of seeking high current income
from investment principally in long-term debt 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 shareholders affected by the change.
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
Trust'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 10%
limitation.
2. Restricted Investments. Not more than 5% 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 cash and cash items); nor may
securities be purchased when as a result more than 10% of the
voting securities of the issuer would be held by the Trust. To
the extent the Trust purchases securities other than obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, obligations which provide income exempt from
federal income taxes, and short-term obligations of domestic
banks, their branches, and other domestic depository
institutions, the Trust will limit 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 5% 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 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, 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 Adviser 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 its total
assets for investment purposes. 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 Trust's gross assets,
provided collateral satisfactory to the Trust's Adviser is
continuously maintained in amounts not less than the value of the
securities loaned. The Trust may not lend money (except to
governmental units), but is not precluded from entering into
repurchase agreements or purchasing debt securities.
<PAGE>
Statement of Additional Information Page 6
GIT Income Trust July 31, 1996
4. Other Activities. The Trust may not act as an underwriter
(except for activities in connection with the acquisition or
disposition of securities intended for or held by one of the
Trust's Portfolios), make short sales or maintain a short
position (unless the Trust owns at least an equal amount of such
securities, or securities convertible or exchangeable into such
securities, and not more than 25% of the Trust'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. Investments in
warrants, valued at the lower of cost or market, may not exceed
5% of the Trust's net assets and included within that amount, but
not to exceed 2% of the value of the Trust's assets, may be
warrants which are not listed on the New York or American Stock
Exchanges.
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 acquire put options or write call options for the Government
and Maximum Income Portfolios.
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 5% of its
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 Trust's shares. Furthermore, if bank borrowings by
the Trust for any purpose exceeded one-third of the value of the
Trust's total assets (net of liabilities other than the bank
borrowings), then the Investment Company Act of 1940 would
require the Trust, 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
regulation 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 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 Adviser
Effective July 31, 1996, Bankers Finance Advisors, LLC, 1655 Fort Myer
Drive, Arlington, Virginia 22209-3108, is the investment adviser
to the Trust and is called the "Adviser" throughout this
Statement of Additional Information and the Prospectus. The
Adviser is responsible for the investment management of the Trust
and is authorized to execute the Trust's portfolio
transactions, to select the methods and firms with which such
transactions are executed, to oversee the Trust's operations, and
otherwise to administer the affairs of the Trust as it deems
advisable. In the execution of these responsibilities, the
Adviser is subject to the investment policies and limitations of
the Trust described in the Prospectus and this Statement of
Additional Information, to the terms of the Declaration of Trust
and the Trust's By-Laws, and to written directions given from
time to time by the Trustees.
The Adviser is a division of Madison Investment Advisors, Inc.
("Madison"), 6411 Mineral Point Road, Madison, Wisconsin.
Madison is a registered investment adviser and has numerous
advisory clients of its own. Madison also serves as investment
adviser to the following investment companies: Bascom Hill
Investors, Inc., Bascom Hill BALANCED Fund, Inc. and
Madison Bond Fund, Inc.Madison was founded in 1973 and
has never been controlled or affiliated with any other business
entity or person.
This investment advisory agreement between the Trust, on behalf
of the portfolios, and the Adviser is subject to annual review
and approval by the Trustees, including a majority of those who
are not "interested persons," as defined in the Investment
Company Act of 1940. The investment advisory agreement was
approved by shareholders for an initial two year term at a special
meeting of each portfolio's shareholders held in July 1996.
The investment advisory agreement may be terminated at any time,
without penalty, by the Trustees or, with respect to any series
or class of the Trust's shares, by the vote of a majority of the
outstanding voting securities of that series or class (see
"Organization of the Trust"), or by the Adviser, upon sixty days'
written notice to the other party. The investment advisory
agreement may not be assigned by the Adviser, and will
automatically terminate upon any assignment.
Background of the Adviser. The Adviser was formed in 1996 by
Madison for the purpose of providing investment management
services to the GIT family of mutual funds, including the Trust.
The Adviser purchased the investment management assets of the
former adviser to the Trust, Bankers Finance Investment
Management Corp. For periods prior to July 31, 1996, references
in this Statement of Additional Information and in the Prospectus
to the "Adviser" refer to Bankers Finance Investment Management
Corp. The Adviser also serves as the investment adviser to
Government Investors Trust, GIT Equity Trust and GIT Tax-Free
Trust.
Management. Frank E. Burgess is President, Treasurer and
Director of Madison and Vice President of the Adviser.
Mr. Burgess owns a majority of the controlling interest of Madison,
which, in turn, controls the Adviser. Mr. Burgess is also a Trustee and
Vice President of the Trust. Mr. Burgess holds the same positions
with Government Investors Trust, GIT Equity Trust and
GIT Tax-Free Trust. Katherine L. Frank is President and Treasurer
of the Adviser and Vice President of Madison. Ms. Frank holds the
same positions with Government Investors Trust, GIT Equity Trust and
GIT Tax-Free Trust.
<PAGE>
Statement of Additional Information Page 7
GIT Income Trust July 31, 1996
Advisory Fee and Expense Limitations. For its services under the
Investment Advisory Agreement, the Adviser receives a fee,
payable monthly, calculated as 5/8 percent per annum of the
average daily net assets of each of the Trust's Portfolios during
the month. The Adviser may waive or reduce such fee during any
period. The Adviser may also reduce such fee on a permanent
basis, without any requirement for consent by the Trust or its
shareholders, under such terms as it may determine, by written
notice thereof to the Trust.
The Adviser has also agreed to reimburse the Trust for all of its
expenses, including any management fees paid to the Adviser, but
excluding securities transaction commissions and expenses, taxes,
interest, share distribution expenses, and other extraordinary
and 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 any 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, the Adviser has agreed, in any event, to be
responsible for the fees and expenses of the Trustees and
officers of the Trust who are affiliated with the Adviser, the
rent expenses of the Trust's principal executive office premises,
and its various promotional expenses (including the distribution
of Prospectuses to potential shareholders). Other than investment
management and the related expenses, and the foregoing items, the
Adviser is not obligated to provide or pay for any other services
to the Trust, although it has discretion to elect to do so. The
Investment Advisory Agreement permits the Adviser to make
payments out of its fee to other persons.
During the fiscal year ended March 31, 1996, the Adviser received
advisory fees of $46,093 with respect to the Government Portfolio
and $42,986 with respect to the Maximum Income Portfolio. During
the fiscal year ended March 31, 1995, the Adviser received
advisory fees of $48,356 with respect to the Government Portfolio
and $44,235 with respect to the Maximum Income Portfolio. During
the fiscal year ended March 31, 1994, the Adviser received
advisory fees of $60,470 with respect to the Government Portfolio
and $49,021 with respect to the Maximum Income Portfolio.
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 Prospectus contains general information concerning the
Trust's form of organization and its shares, including the series
of shares currently authorized (see "The Trust and Its Shares").
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 May 20, 1996, Firstcinco, Trustee,
P.O. Box 118, Cincinnati, Ohio 45201 held 9% of the Government
Portfolio.
Shareholder votes relating to the election of Trustees, approval
of the Trust's selection of independent public auditors and any
contract with a principal underwriter, as well as any other
matter in which the interests of all shareholders are
substantially identical, will be voted 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
<PAGE>
Statement of Additional Information Page 8
GIT Income Trust July 31, 1996
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; shareholder meetings will be called as necessary to
consider matters requiring votes by the shareholders. The
selection of the Trust's independent auditors will be submitted
to a vote of ratification at any annual meeting held by the
Trust. Any change in the Declaration of Trust, in the Investment
Advisory Agreement (except for reductions of the Adviser's fee)
or in 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 shareholders
of an entity such as the Trust may, under certain circumstances,
be held personally liable for its obligations. The Declaration of
Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or 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 the Adviser under the
terms of the Investment Advisory Agreement and the Services
Agreement. In addition, protection from personal liability for
the obligations of the Trust itself, similar to that provided to
shareholders, is provided to all Trustees, officers, employees
and agents of the Trust.
Trustees and Officers
As of July 31, 1996, the Trustees and executive officers of the
Trust and their principal occupations during the past five years
are shown below:
Frank E. Burgess <F1>
6411 Mineral Point Road, Madison, WI 53705
Trustee and Vice President
President and Director of Madison Investment
Advisors, Inc., the entity which controls the Adviser. Prior to
forming Madison in 1973, he was Assistant Vice President and
Trust Officer of M&I Bank of Madison, Wisconsin. Mr. Burgess
received his BS from Iowa State University and his law degree
from the University of Wisconsin. He is a member of the State
Bar of Wisconsin. b. 8/4/42.
Thomas S. Kleppe <F2>
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.<F2>
429 Gammon Place, Madison, WI 53719
Trustee
President of First Weber Group, Inc. of Madison, Wisconsin. b. 5/20/44.
Lorence D. Wheeler<F2>
P.O. Box 431, Madison, WI 53701
Trustee
President of Credit Union Benefits Services, Inc.
b. 1/31/38.
Katherine L. Frank
6411 Mineral Point Road, Madison, WI 53705
President
President of GIT Investment Funds, Vice President
of Madison Investment Advisors, Inc. A graduate
of Macalester College, St. Paul, Minnesota.
Charles J. Tennes
1655 Fort Myer Drive, Arlington, VA 22209-3108
Vice President
Vice President of GIT Investment Funds and Executive
Vice President of GIT Investment Services, Inc.;
Director of Presidential Savings Bank, FSB and
Presidential Service Corp.; formerly Vice President
of Ferris & Company, Inc. (now Ferris, Baker Watts). A Certified
Financial Planner and graduate of the University of Washington.
Jay R. Sekelsky
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of GIT Investment Funds and of
Madison Investment Advisors, Inc. Formerly Vice President
of Wellington Management Group of Boston, MA.
Mr. Sekelsky holds a BBA in Accounting and an MBA in
Finance from the University of Wisconsin.
Christopher C. Berberet
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of GIT Investment Funds and of
Madison Investment Advisors, Inc. Formerly the
Director of Fixed Income Management for the
ELCA Board of Pensions, Minneapolis, MN. A
graduate of the University of Wisconsin.
W. Richard Mason
1655 Ft. Myer Drive, Arlington, VA 22209
Secretary
Secretary of GIT Investment Funds, GIT Investment
Services, Inc., Presidential Savings Bank, FSB and
Presidential Service Corporation. Formerly Assistant
General Counsel for the Investment Company
Institute. Mr. Mason holds a BS in Foreign Service
from Georgetown University and received his law
degree from The George Washington University. He is
a member of the District of Columbia and Texas bars.
<FN>
<F1>
Trustee deemed to be an "interested person" of the Trust as the
term is defined in the Investment Company Act of 1940. Only those
persons named in the table of Trustees and officers who are not
interested persons of the Trust are eligible to be compensated by
the Trust. The compensation of each non-interested Trustee
has been fixed at $4,000 per year, to be pro-rated
according to the number of regularly scheduled meetings each
year. Four Trustees' meetings are currently scheduled to take
place each year. The Trustees have stipulated that their compensation
will be at 25% of the regular rate until the net assets of the Trust reach
$25 million and 50% of the regular rate until the net assets of the
Trust reach $50 million. In addition to such compensation, those Trustees
who may be compensated by the Trust shall be reimbursed for any
out-of-pocket expenses incurred by them in connection with the
affairs of the Trust. Mr. Kleppe will receive annual compensation
from the Trust and from the other investment companies managed
by the Adviser or Madison (see "the Investment Adviser") totalling
$15,000. Mr. Imhoff and Mr. Wheeler will receive annual
compensation from the Trust and from other investment companies
managed by the Adviser or Madison totalling $18,000.
<PAGE>
Statement of Additional Information Page 9
GIT Income Trust July 31, 1996
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) 0 0 0 3,000
Lorence D. Wheeler(b) 0 0 0 3,000
(a) Complex is comprised of 4 trusts and three corporations with
a total of 16 funds and/or series.
(b) Messrs. Imhoff and Wheeler joined the Board of Trustees on
July 31, 1996. Their expected annual compensation is decribed
above.
<F2>
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.
</FN>
Under the Declaration of Trust, the Trustees are entitled to be
indemnified by the Trust to the fullest extent permitted by law
against all liabilities and expenses reasonably incurred by them
in connection with any claim, suit or judgment or other liability
or obligation of any kind in which they become involved by virtue
of their service as Trustees of the Trust, except liabilities
incurred by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of their office.
As of May 20, 1996, the Trustees and officers of the Trust
directly or indirectly owned as a group less than 10% of the
Government Portfolio and less than 1% of the Maximum Income
Portfolio.
Administrative and Other Expenses
Except for certain expenses assumed by the Adviser (see "The
Investment Adviser"), the Trust is responsible for payment from
its assets of all of its expenses. These expenses can include any
of the business or other expenses of organizing, maintaining and
operating the Trust. Certain expense items which may represent
significant costs to the Trust include the payment of the
Adviser's fee; the expense of shareholder accounting, customer
services, and calculation of net asset value; the fees of the
Custodian; of the Trust's independent auditors; and of legal
counsel to the Trust; the expense of registering the Trust and
its shares; of printing and distributing prospectuses and
periodic financial reports to current shareholders; 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 the Adviser for the
provision of operational and other services required by the
Trust. Such services may include the functions of shareholder
servicing agent and transfer agent; bookkeeping and portfolio
accounting services; the handling of telephone inquiries, cash
withdrawals and other customer service functions including
monitoring wire transfers; and providing to the Trust appropriate
supplies, equipment and ancillary services necessary to the
conduct of its affairs. The Trust is registered with the
Securities and Exchange Commission as the transfer agent for its
shares and acts as its own dividend-paying agent; while transfer
agent personnel and facilities are included among those provided
to the Trust under the Services Agreement, the Trust itself is
solely responsible for its transfer agent and dividend payment
functions and for the supervision of those functions by its
officers.
All such services provided to the Trust by the Adviser are
rendered at cost. The term "cost" includes both direct
expenditures and the related overhead costs, such as
depreciation, employee supervision, rent and the like;
reimbursements to the Adviser pursuant to the Services Agreement
are in addition to and independent of payments made pursuant to
the Investment Advisory Agreement. The Trust believes that
contracting for the previously described services may permit them
to be provided on a relatively efficient basis, whereby many
separate specialized functions are performed by personnel and
equipment not required to be devoted full time to serving the
Trust. Accordingly, certain of the "costs" attributable to
services provided to the Trust may require allocation of
expenses, such as employee salaries, occupancy expense, telephone
service, computer service and equipment costs, depreciation,
interest, and supervisory expenses. To the extent that costs must
be allocated between the Trust and other activities of the
Adviser, such allocations may be made on the basis of reasonable
approximations calculated by the Adviser and periodically
reviewed by the Trustees.
Distribution Agreement. GIT Investment Services, Inc. acts as the
Trust's Distributor and principal underwriter under a
Distribution Agreement, dated January 11, 1983, as amended and
restated as of July 3, 1985. The Distribution Agreement had 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 Distributor may act as the
Trust's agent for any sales of its shares. The Trust may also
sell its shares directly to any party. The Distributor makes the
Trust's shares
<PAGE>
Statement of Additional Information Page 10
GIT Income Trust July 31, 1996
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
the Adviser, 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, the Adviser may take into account a dealer's
operational and financial capabilities, the type of transaction
involved, the dealer's general relationship with the Adviser, and
any statistical, research or other services provided by the
dealer to the Adviser. To the extent such non-price factors are
taken into account the execution price paid may be increased, but
only in reasonable relation to the benefit of such non-price
factors to the Trust as determined in good faith by the Adviser.
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 no aggregate brokerage commissions.
Owing to the nature of the market for debt securities, the Trust
expects that most Portfolio transactions will be made directly
with an underwriter, issuer or dealer acting as a principal, and
thus will not involve the payment of commissions, although
purchases from an underwriter will involve payments of fees and
concessions by the issuer to the underwriting group. The Trust
also reserves the right to purchase Portfolio securities through
an affiliated broker, when deemed in the Trust's best interests
by the Adviser, provided that: (1) the transaction is in the
ordinary course of the broker's business; (2) the transaction
does not involve a purchase from another broker or dealer; (3)
compensation to the broker in connection with the transaction is
not in excess of one percent of the cost of the securities
purchased; and (4) the terms to the Trust for purchasing the
securities, including the cost of any commissions, are not less
favorable to the Trust than terms concurrently available from
other sources. Any compensation paid in connection with such a
purchase will be in addition to fees payable to the Adviser under
the Investment Advisory Agreement. The Trust does not anticipate
that any such purchases through affiliates will represent a
significant portion of its total activity; no such transactions
took place during the Trust's three most recent fiscal years.
The Trust does not expect to engage in 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%. The actual
turnover rate, however, 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 Prospectus
for actual rates of Portfolio turnover (see "Financial Highlights").
Share Purchases
The Prospectus describes the basic procedures for investing in
the Trust (see "How to Purchase and Redeem Shares"). The
following information concerning other investment procedures is
presented to supplement the information contained in the
Prospectus.
Shareholder Service Policies. The Trust's policies concerning
shareholder services are subject to change from time to time. The
Trust reserves the right to change the minimum account size below
which an account is subject to a monthly service charge or to
involuntary closing by the Trust. The Trust may also institute a
minimum amount for subsequent investments by 30 days' written
notice to its shareholders. The Trust further reserves the right,
after 30 days' written notice to shareholders, to impose special
service charges for services that are not regularly afforded to
shareholders, such service charges may include fees for stop
payment orders and returned checks. The Trust's standard service
charges are also subject to adjustment from time to time.
Those who invest through a securities broker may be charged a
commission for the handling of the transaction if the broker so
elects; however, any investor is free to deal directly with the
Trust in any such transaction.
Share Certificates. Share certificates will not be issued unless
an investor specifically requests certificates in a signed
instruction. Share certificates will never be issued until
payment for the shares has become "collected funds," as described
in the Prospectus (see "How to Purchase and Redeem Shares").
In the event share certificates are issued, the certificate must
be returned to the Trust, properly endorsed before any redemption
request can be honored. The Trust may further require that the
shareholder's signature be guaranteed by a commercial bank
insured by the Federal Deposit Insurance Corporation or by a
member firm of the New York Stock Exchange. The Trust also
reserves the right to decline to open any account for which the
issuance of share certificates is or has been requested, if it
deems such action would be in the Trust's best interests.
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
subaccounting 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
<PAGE>
Statement of Additional Information Page 11
GIT Income Trust July 31, 1996
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. In order to obtain the highest yields
available within the limitations of its investment policies, the
Trust has a policy of being as fully invested as reasonably
practicable at all times (although it may retain uninvested cash
if deemed appropriate; see "Supplemental Investment Policies").
All items submitted to the Trust for investment are accepted
only when submitted in proper form. They are credited to
shareholder accounts one or two business days following receipt.
Normally, items received by the Trust prior to 1 p.m. Washington,
DC time will be converted into shares of the Trust at the
applicable net asset value determined at the end of the next
business day. Items received by the Trust after 1 p.m.
Washington, DC time will be converted into shares of the Trust at
the applicable net asset value determined at the end of the
second business day after receipt. Funds received by wire are
normally converted into shares in the Trust at the net asset
value next determined, provided the Trust is notified of the wire
by 1 p.m. Washington, DC time. If the Trust is not notified by
such time, the investment by wire will be converted into shares
of the Trust at the net asset value determined at the end of the
next business day.
After investments have been converted into shares in the Trust,
they begin to accrue dividends immediately. The trust reserves
the right to delay credit for investments if it determines to do
so for operational reasons or if local banking practice makes
earlier crediting impractical; however, no such delay will affect
the net asset value per share used to determine the number of
shares purchased.
Telephone exchanges from another account or other GIT funds will
be considered received in federal funds on the day of the
telephone request, provided the telephone request has been
received by 12:30 p.m., Washington, DC time (the daily wire
withdrawal deadline) and sufficient collected funds are available
for immediate withdrawal from the appropriate fund account at
that time. Checks drawn on foreign banks will not be considered
received in federal funds until the Trust has actual receipt of
payment in immediately available U.S. dollars after submission of
the check for collection; collection of such checks through the
international banking system may require 30 days or more.
The Trust reserves the right to reject any investment 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 the Adviser, decline to give recognition as an
investment to funds wired for credit to either type of account,
until such funds are actually received by the Trust. Under
present federal regulatory guidelines, the Adviser may be
responsible for any losses resulting from changes in the Trust's
net asset value 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 or the
purchased shares may be immediately redeemed. 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,
the Adviser or the Distributor.
As a condition of the Trust's public offering (which the investor
will be deemed to have accepted 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 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 properly submitted to the Trust by
the investor or such an application is submitted with the
withdrawal request. A shareholder draft check drawn against an
account will not be considered in proper form unless sufficient
collected funds are available in the account on the day the check
is presented for payment. The "day of withdrawal" for share
redemptions refers to the day on which corresponding funds are
paid out by the Trust, whether by wire transfer, exchange between
accounts, official check prepared, or debit of the investor's
account to cover shareholder checks presented for payment.
Investors should be aware that it is possible, should the share
net asset value of the 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
affected by the redemption of the appropriate number of whole and
fractional shares having a net asset value equal to the amount
withdrawn. In cases where investors are paid immediately in cash
for redemptions not exceeding 80% of the most recent account
value, the number of
<PAGE>
Statement of Additional Information Page 12
GIT Income Trust July 31, 1996
shares redeemed from the account to cover the immediate payment
will nevertheless be determined according to the net asset value
per share next determined after receipt of the withdrawal
request.
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 in 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.
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 anyone purporting to act with the
authority of another person or on behalf of a corporation or
other legal entity. Each such individual must provide a corporate
resolution or other appropriate evidence of his or her authority
or identity satisfactory to the Trust. The Trust reserves the
right to refuse any third party redemption requests.
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 1%
of the aggregate net assets of the Trust or $250,000. Any
property of the Trust distributed to shareholders will be valued
at fair 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 (see "How to Purchase and Redeem
Shares"). 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 IRA, Keogh or 403(b) accounts. The Trust offers
prototype Keogh, SEP IRA, SARSEP, 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 income is
declared as dividends, when calculated, each business day.
Calculation of accumulated net income for each of the Trust's
portfolios will be made just prior to calculation of the
portfolio's net asset value (see "Determination of Net Asset
Value"). The amount of such net income will reflect the interest
income (plus any discount earned less premium amortized), and
expenses accrued by the Portfolio reflected since the previously
declared dividends.
Realized capital gains and losses and unrealized appreciation and
depreciation are reflected as changes in net asset value per
share of the Trust's portfolios. Premium on securities purchased
is amortized daily as a charge against income.
Dividends are payable to shareholders of record at the time as of
which they are determined. Dividends are paid in the form of
additional shares of the Trust credited to the respective
investor
<PAGE>
Statement of Additional Information Page 13
GIT Income Trust July 31, 1996
account at the end of each calendar month (or normally when the
account is closed, if sooner), unless the shareholder makes a
written election to receive dividends in cash.
Notice of payment of dividends will be mailed to each shareholder
quarterly. For tax purposes each shareholder will also receive an
annual summary of dividends paid by the Trust and the extent to
which they constitute capital gains dividends (see "Additional
Tax Matters"). Any investor purchasing shares in an account of
the Trust as of a particular net asset value determination (4
p.m., Washington, DC time) on a given day will be considered a
shareholder of record for the dividend declaration made that day;
but an investor withdrawing as of such determination will not be
considered a shareholder of record with respect to the shares
withdrawn. A "business day" will be any day the New York Stock
Exchange is open for trading.
Net realized capital gains, if any, will be distributed to
shareholders at least annually as capital gains dividends.
Determination of Net Asset Value
The net asset value of each portfolio of the Trust, and of the
respective shares, is calculated each day the New York Stock
Exchange is open for trading. Net asset value is not calculated
on New Year's Day, the observance of Washington's Birthday
(President's Day), Good Friday, the observance of Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day
and on other days the New York Stock Exchange is closed for
trading. The net asset value calculation is made as of a specific time
of day, as described in the Prospectus.
Net asset value per share of each portfolio is determined by
adding the value of all its securities and other assets,
subtracting its liabilities and dividing the result by the total
number of outstanding shares that represent an interest in the
portfolio. These calculations are performed by the Trust and for
its account, pursuant to the Services Agreement (see
"Administrative and Other Expenses"). The Trust's shares are
redeemed at net asset value. Shares of the Trust are offered at
net asset value.
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. Securities having a remaining
effective maturity of 60 days or less are valued at their
amortized cost, subject to the Trustees' determination that this
method reflects their fair value. The Trustees may authorize
reliance upon an independent pricing service for the
determination of 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 are priced by rounding their value to the
nearest one-tenth of one cent.
Valuation of Futures Contracts. Although initial margin must be
posted when financial futures contracts are acquired and a
maintenance margin may be required as the value of the contracts
changes, such margin deposits remain an asset of the respective
portfolio. Any financial futures contracts held by the portfolio
will be marked to the market each business day, so that the
difference between the contract price of the futures contracts
and their corresponding current market price will be reflected
daily as unrealized gains or losses. When a futures contract is
liquidated by acquiring an offsetting contract, then either a
gain or a loss will be realized, reflecting the difference
between the prices of the original and the offsetting contracts.
If a futures contract is held until delivery and settlement is
made, then the transaction will be treated as a purchase or sale
of the underlying securities at the contract price.
Futures contracts are valued at the daily settlement price
determined by the commodity exchange where they are traded, if
available, or otherwise at fair value, taking into account the
most recent settlement, bid or asked prices available, as
determined in good faith by the Trustees or by the Adviser
according to procedures approved by the Trustees.
Valuation of Options Held or Written. Options held by a Portfolio
and liabilities for options written by a portfolio are valued in
the same manner as futures contracts, if they are traded on a
commodity exchange. Other options are valued at the last reported
sale price of the options, or if no sales are reported, at the
mean between the last reported bid and asked prices for the
current day, if available, or otherwise at fair value as
determined in good faith by the Trustees or by the Adviser
according to procedures approved by the Trustees.
When put or call options are written, the premium received is
reflected on the portfolio's books as a cash asset that is offset
by a deferred credit liability, so that the premium received 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 an option contract on securities is
exercised, then the Trust will reflect, as appropriate, either a
purchase or sale of the securities (when a call is exercised, the
securities may be either held by the Portfolio or purchased for
delivery in the open market). The purchase or sale price for the
securities will be equal to the exercise price of the option,
adjusted by the amount of the option premium previously received;
the previously established deferred credit liability will then be
extinguished. If an option contract on financial futures is
exercised, the portfolio will acquire either a long or a short
position in the underlying futures contract; a gain or loss will
then be recognized equal to the option premium previously
received, reduced by the difference between the option exercise
price and the current market value of the futures contract, and
the previously established deferred credit liability will be
extinguished. If an option expires without being exercised (or if
it is offset by a closing purchase transaction), then the
portfolio will recognize the deferred credit as a gain (reduced
by the cost of any closing purchase transaction).
Additional Tax Matters
To qualify as a "regulated investment company" and avoid Trust-
level federal income tax under the Internal
Revenue Code (the "Code"), the Trust 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
<PAGE>
Statement of Additional Information Page 14
GIT Income Trust July 31, 1996
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.
The Trust 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
Trust would be taxed as a corporation with no allowable deduction
for the distribution of dividends.
Shareholders of the Trust, however, will be subject to federal
income tax on any ordinary net income and net capital gains
realized by the Trust 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 the
Trust during October, November or December of any calendar year
and paid to shareholders before February 1 of the following year
will be treated for tax purposes as received in the year the
dividend was declared. No portion of the regular dividends paid
by the Trust is expected to be eligible for the dividends
received deduction for corporate shareholders (70% of dividends
received).
Shareholders who fail to comply with the interest and dividends
"back-up" 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 will nevertheless 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
sales 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.
Special rules apply to the taxation of financial futures
contracts and options that may be acquired or written by the
Trust. The holding period of securities purchased may be affected
by hedging transactions, such as the purchase of puts or the sale
of calls against those securities. Hedging transactions involving
debt securities and either futures or options contracts are
considered "mixed straddles" under the Code, meaning that any
losses realized from one part of the transaction may only be
deducted to the extent that they exceed any unrecognized gains in
offsetting positions.
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.
Interest on U.S. Government securities may be entitled to an
exemption from State and local income taxes that is otherwise
available to the shareholder if he had purchased U.S. Government
securities directly. Shareholders should consult their tax
advisers about the status of distributions from the Trust in
their own tax jurisdictions.
Yield and Total Return Calculations
In order to provide a basis for comparisons of the Trust's
portfolios with similar funds, with comparable market indices,
and with investments such as savings accounts, savings
certificates, taxable and tax-free bonds, money market funds and
money market instruments, the Trust calculates yields and total
return for each of its portfolios.
Standardized Yield. For advertising and certain other purposes,
the yield of each portfolio is calculated according to a
standardized formula prescribed by the Securities and Exchange
Commission. Such standardized yields are calculated by adding one
to the respective Portfolio's total daily theoretical net income
per share during a given 30-day period divided by the portfolio's
maximum offering price per share on the last day of the period,
raising the result to the sixth power, subtracting one, and
multiplying the result by two. Such standardized yields may be
calculated daily; weekly, as of each Friday; and monthly, as of
the last day of each month.
For purposes of such yield calculations, the daily theoretical
gross income of each obligation in a portfolio is determined as
1/360 of the obligation's yield to maturity (or put or call date
in certain cases), based upon its current value (defined as the
obligation's closing market value that day, plus any accrued
interest), multiplied by such current value. A portfolio's daily
theoretical gross income is the sum of the daily theoretical
gross income amounts computed for each of the obligations in the
portfolio. A portfolio's total daily theoretical net income per
share during a given 30-day period is the portfolio's daily
theoretical gross income, less daily expenses accrued (as reduced
by any expenses waived or reimbursed by the Adviser), totalled
for each day in the period and divided by the average number of
shares outstanding during the period.
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
<PAGE>
Statement of Additional Information Page 15
GIT Income Trust July 31, 1996
the portfolio to the ending redeemable value the investment would
have had at the end of the period, taking into account the effect
of the changes in the portfolio's share price during the period
and any recurring fees charged to shareholder accounts, and
assuming the reinvestment of all dividends and other
distributions at the applicable share price when they were paid.
Non-annualized aggregate total returns may also be calculated by
computing the simple percentage change in value that equates an
assumed initial investment in the portfolio with its redeemable
value at the end of a given period, determined in the same manner
as for average annual total return calculations.
Representative Yield and Total Return Quotations. As of March 29,
1996, the standardized 30-day yield of the Government Portfolio
was 4.62% per annum and of the Maximum Income Portfolio was 8.18%
per annum.
For the year ended March 31, 1996, the average annualized total
return of the Government Portfolio was 6.56% and of the Maximum
Income Portfolio was 12.32%. For the calendar quarter ending March
31, 1996, the non-annualized aggregate total return of the
Government Portfolio was (3.13)% and of the Maximum Income
Portfolio was 1.47%.
For the five years ended March 31, 1996, the average annualized
total return of the Government Portfolio was 6.71% and its non-
annualized aggregate total return was 38.34%.
For the five years ended March 31, 1996, the average annualized
total return of the Maximum Income Portfolio was 10.42% and its
non-annualized aggregate total return was 64.19%.
For the ten years ended March 31, 1996, the average annualized
total return of the Government Portfolio was 6.57% and its non-
annualized aggregate total return was 88.92%.
For the ten years ended through March 31, 1996, the average
annualized total return of the Maximum Income Portfolio was 6.77%
and its non-annualized aggregate total return was 92.44%.
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 Solomon 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
Russel Company, SCI and CDA Investment Technologies.
When the Trust uses Lipper Analytical Services, Inc. in making
performance comparisons in advertisements or in reports to
shareholders or others, the performance of the Government
Portfolio will be compared to mutual funds categorized as
"General U.S. Government Funds" and the performance of the
Maximum Income Portfolio will be compared to mutual funds
categorized as "High Current Yield Funds". If either of these
categories should be changed by Lipper Analytical Services, Inc.,
comparisons will be made thereafter based on the revised
categories.
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, the Bond
Fund Survey. Financial news is broadcast by the Financial News
Network, Cable News Network, Public Broadcasting System, and the
three major television networks, NBC, CBS and ABC, 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.
Average Maturities. The Trust also calculates average maturity
information for each of its portfolios. The "average maturity" of
a Portfolio on any day is determined by multiplying the number of
days then remaining to the effective maturity (see "Supplemental
Investment Policies") of each investment in the Portfolio by the
value of that investment, summing the results of these
calculations, and dividing the total by the aggregate value of
the portfolio that day (determined as of 4 p.m. Washington, DC
time). Thus, the average maturity represents a dollar-weighted
average of the effective maturities of portfolio investments. The
"mean average maturity" of a portfolio over some period, such as
seven days, a month or a year, represents the arithmetic mean
(i.e., simple average) of the daily average maturity figures for
the portfolio during the respective period.
It should be noted that the investment results of the Trust's
portfolios will tend to fluctuate over time, and so historical
yields and 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
market interest rates, 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 yields and 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
Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
Custodian for the cash and securities of the Trust. The Custodian
maintains custody of the Trust's cash and securities, handles its
securities settlements and performs transaction processing for
cash
<PAGE>
Statement of Additional Information Page 16
GIT Income Trust July 31, 1996
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 the Adviser 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 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 Prospectus 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 Prospectus or
not included in this Statement of Additional Information and is
available for public inspection and copying at the offices of
such Commission.
Financial Statements and Report of Independent Auditors
Audited Financial Statements for the Trust, together with the
Report of Ernst & Young LLP, Independent Auditors for the fiscal
year ended March 31, 1996, appear in the Trust's Annual Report to
shareholders for the fiscal year ended March 31, 1996, which is
incorporated herein by reference. Such Report has been filed with
the Securities and Exchange Commission and is furnished to
investors with this Statement of Additional Information.
Additional copies of such Report are available upon request at no
charge by writing or calling the Trust at the address and
telephone number shown on the cover page above.
Quality Ratings
All U.S. Government securities that may be acquired by the Trust
are expected to be classified as "High Grade" investments. Any
obligation of a bank or savings and loan association having total
assets of at least $750 million (or the foreign currency
equivalent) as of the end of its most recent fiscal year,
provided it earned a profit during that year, is eligible to be
classified "High Grade"; but the actual classification of such
obligations will be subject to such additional liquidity,
profitability and other tests as the Adviser deems appropriate in
the circumstances.
The Trust will determine the grade or credit quality of other
securities it may acquire principally by reference to the ratings
assigned by the two principal private organizations which rate
Municipal Securities: Moody's Investors Service, Inc. ("Moody's")
and Standard and Poor's Corporation ("S&P"). In cases where both
Moody's and S&P rate an issue, it will be graded according to
whichever of the assigned ratings the Adviser deems appropriate;
in cases where neither organization rates the issue it will be
graded by the Adviser following standards which, in its judgment,
are comparable to those followed by Moody's and S&P. All grading
procedures followed by the Adviser will be subject to review by
the Trustees.
Corporate Obligations. For corporate obligations, Moody's uses
ratings Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C; S&P uses ratings
AAA, AA, A, BBB, BB, B, CCC, CC and C. Notes and bonds rated Aaa
or AAA are judged to be of the best quality; interest and
principal are secure and prices respond only to market rate
fluctuations. Notes and bonds rated Aa or AA are also judged to
be of high quality, but margins of protection for interest and
principal may not be quite as good as for the highest rated
securities.
Notes and bonds rated A are considered upper medium grade by each
organization; protection for interest and principal is deemed
adequate but susceptible to future impairment, and market prices
of such obligations, while moving primarily with market rate
fluctuations, also may respond to economic conditions and issuer
credit factors.
Notes and bonds rated Baa or BBB are considered medium grade
obligations; protection for interest and principal is adequate
over the short term, but these bonds may have speculative
characteristics over the long term and therefore may be more
<PAGE>
Statement of Additional Information Page 17
GIT Income Trust July 31, 1996
susceptible to changing economic conditions and issuer credit
factors than they are to market rate fluctuations.
Notes and bonds rated Ba or BB are considered to have immediate
speculative elements and their future can not be considered well
assured; protection of interest and principal may be only
moderate and not secure over the long term; the position of these
bonds is characterized as uncertain.
Notes and bonds rated B or lower by each organization are
generally deemed to lack desirable investment characteristics;
there may be only small assurance of payment of interest and
principal or adherence to the original terms of issue over any
long period.
Issues rated Caa or CCC and below may also be highly speculative,
of poor standing and may even be in default or present other
elements of immediate danger to payment of interest and
principal.
Obligations rated Baa or above by Moody's or rated BBB or above
by S&P are considered "investment grade" securities, whereas
lower rated obligations are considered "speculative grade"
securities.
Commercial Paper. Commercial paper is rated by Moody's with
"Prime" or "P" designations, as P-1, P-2 or P-3, all of which are
considered investment grades. In assigning its rating, Moody's
considers a number of credit characteristics of the issuer,
including: (1) industry position; (2) rates of return; (3)
capital structure; (4) access to financial markets; and (5)
backing by affiliated companies. P-1 issuers have superior
repayment capacity and credit characteristics; P-2 issuers have
strong repayment capacity but more variable credit
characteristics; while P-3 issuers have acceptable repayment
capacity, but highly variable credit characteristics and may be
highly leveraged.
S&P rates commercial paper as A-1, A-2 or A-3. To receive a
rating from S&P the issuer must have adequate liquidity to meet
cash requirements, long-term senior debt rated A or better
(except for occasional situations in which a BBB rating is
permitted), and at least two additional channels of borrowing.
The issuer's basic earnings and cashflow must have an upward
trend (except for unusual circumstances) and, typically, the
issuer's industry is well established and it has a strong
position within the industry. S&P assigns the individual ratings
A-1, A-2 and A-3 based upon its assessment of the issuer's
relative strengths and weaknesses within the group of ratable
companies.
For purposes of its investment criteria, the Trust considers only
commercial paper rated A-1, P-1, or of a credit standing deemed
equivalent by the Adviser, to be "High Grade."
<PAGE>
Part C
July 31, 1996
GIT Income Trust
Cross Reference Sheet Page 1
Pursuant to Rule 495(a)
24(a) Financial Statements
Included in Part A: Financial Highlights
Included in Part B: Filed with the Securities and Exchange
Commission pursuant to Section 30 of the Investment Company
Act of 1940 on May 31, 1996 and incorporated herein by
reference is the Trust's Annual Report to Shareholders for the
fiscal year ended March 31, 1996.
Included in such Annual Report to Shareholders are: Statement
of Assets and Liabilities, Statement of Operations, Statement
of Changes in Net Assets, Financial Highlights, Portfolio of
Investments, Notes to Financial Statements and Report of Ernst
& Young LLP, Independent Auditors.
Included in Part C: Consent of Independent Auditors
24(b) Exhibits
Exhibit No. Description of Exhibit
1 Declaration of Trust*
2 By-Laws*
3 Not Applicable
4 Specimen Share Certificate*
5 Investment Advisory Agreement (Filed herewith)***
6 Distribution Agreement (Filed herewith)**
7 Not Applicable
8 Custodian Agreement with Fee Schedule (Filed herewith)**
9 Services Agreement (Filed herewith)***
10 Consent of Counsel*
11 Consent of Independent Auditors (Filed Herewith)
12 Not Applicable
13 Agreements Relating to Initial Capital*
14 Not Applicable
15 Plan of Distribution and Share Sales Agreement*
16 Computation of Performance Data*
17 Power of Attorney*
* Previously filed by GIT Income Trust.
** Previously filed by GIT Income Trust in hard copy.
*** Current agreement previously filed. Agreement effective July 31, 1996
filed herewith.
25. Persons Controlled by or Under Common Control with Registrant.
None
<PAGE>
Cross Reference Sheet Page 2
Pursuant to Rule 495(a)
26. Number of Holders of Securities.
The number of holders of record of securities of the
Registrant as of May 23, 1996 is as follows:
Title of Class Number of Holders of Record
Shares of Beneficial Interest 932
27. Indemnification
Previously Filed
28. Business and Other Connections of Investment Adviser effective
July 31, 1996.
Name Position with Other Business
Adviser
Frank E. Burgess Director President and Director of
Madison Investment Advisors,
Inc., 6411 Mineral Point
Road, Madison, WI 53705
Katherine L. Frank President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
Charles J. Tennes Vice President Director of Presidential
Savings Bank, FSB, and
Presidential Service
Corporation, 4600 East-West
Highway, Bethesda, MD
20814; Executive Vice
President of GIT Investment
Services, Inc. of the same
address as the Trust.
Jay R. Sekelsky Vice President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
Chris Berberet Vice President Vice President of Madison
Investment Advisors, Inc.
6411 Mineral Point
Road, Madison, WI 53705
<PAGE>
Cross Reference Sheet Page 3
Pursuant to Rule 495(a)
W. Richard Mason Secretary Secretary of Presidential
Savings Bank, FSB and
Presidential Service
Corporation, 4600 East-West
Highway, Bethesda, MD
20814; Secretary of GIT
Investment Services, Inc.
of the same
address as the Trust.
Julia M. Nelson Vice President Vice President of GIT
Investment Services, Inc.,
of the same address as the
Trust
29. Principal Underwriters
(a) GIT Investment Services, Inc., the principal underwriter
of the Trust, also acts as principal underwriter to GIT Equity Trust,
GIT Tax-Free Trust and Government Investors Trust.
<PAGE>
Cross Reference Sheet Page 4
Pursuant to Rule 495(a)
(b)
Name and Principal Position and Offices Position and Offices
Business Address with Underwriters with Registrant
A. Bruce Cleveland Chairman, President None
1655 Ft. Myer Dr.
Arlington, VA 22209
W. Richard Mason Secretary Asst. Secretary
1655 Ft. Myer Dr.
Arlington, VA 22209
Charles J. Tennes Executive Vice Secretary
1655 Ft. Myer Dr. President
Arlington, VA 22209
Edward J. Karpowicz Treasurer None
1655 Ft. Myer Dr.
Arlington, VA 22209
Julia W. Nelson Vice President None
1655 Ft. Myer Dr.
Arlington, VA 22209
<PAGE>
Cross Reference Sheet Page 5
Pursuant to Rule 495(a)
(c) Not Applicable
30. Location of Accounts and Records
The books, records and accounts of the Registrant will be
maintained at 1655 Ft. Myer Drive, Arlington, VA 22209, at
which address are located the offices of the Registrant and
of Bankers Finance Investment Management Corp. Additional
records and documents relating to the affairs of the
Registrant are maintained by the Star Bank, N.A. of
Cincinnati, OH, the Registrant's Custodian, at the
Custodian's offices located at 425 Walnut Street,
Cincinnati, OH 45202. Pursuant to the Custodian Agreement
(see Article IX, Section 12), such materials will remain the
property of the Registrant and will be available for
inspection by the Registrant's officers and other duly
authorized persons.
31. Management Services
Previously Filed and discussed in Parts A and B. See item 28 above.
32. Undertakings
(a) Not Applicable
(b) Not Applicable
(c) The Registrant shall furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest
Annual Report to shareholders upon such person's request and
without charge.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has
duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the County of
Arlington, Commonwealth of Virginia, on the xx day of June,
14, 1996.
GIT Income Trust
By: (signature)
A. Bruce Cleveland
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement
has been signed below by the following persons in the
capacities and on the date indicated.
(Signature), Trustee, President 6/14/96
A. Bruce Cleveland and Treasurer
(Principal Executive
Officer, Principal
Financial Officer)
Trustee
John D. Reilly <F1> (Date)
Trustee
Thomas S. Kleppe <F1> (Date)
Trustee
Smith T. Wood <F1> (Date)
(Signature), <FN><F1> Attorney-In-Fact </FN>6/14/96
John A. Dudley, Esquire
</TABLE>
Investment Advisory Agreement
This Agreement is made by and between Bankers Finance
Advisors, LLC, a Wisconsin limited liability company having
its principal place of business in Arlington, Virginia (the
"Advisor"), and GIT Income Trust, a Massachusetts business
trust created pursuant to a Declaration of Trust filed with
the Clerk of the City of Boston, Massachusetts (the
"Trust").
The parties hereto, intending so to be legally bound,
agree with each other as follows:
1. Appointment and Acceptance. The Trust hereby
appoints the Advisor to manage the investment of its assets
and to administer its affairs; and the Advisor hereby
accepts such appointment. The Advisor shall employ its best
efforts to supervise the investment management of the Trust.
2. Discretion of the Advisor. In the performance of
its duties hereunder the Advisor shall have full authority
to act as it deems advisable, except that it shall be bound
by the terms of the Declaration of Trust and By-Laws of the
Trust, and by any written direction given by the Trustees of
the Trust not inconsistent with this Agreement; and it shall
be guided by the investment policies of the Trust from time
to time duly in effect. Subject only to the foregoing, the
Advisor shall have full authority to purchase and sell
securities for the Trust; the Advisor may determine the
persons with whom such securities transactions are to be
made and the terms thereof.
3. Other Activities of the Advisor. The Advisor and
any of its affiliates shall be free to engage in any other
lawful activity, including the rendering to others of
services similar to those rendered to the Trust hereunder;
and the Advisor or any interested person thereof shall be
free to invest in the Trust as a shareholder, to become an
officer or Trustee of the Trust if properly elected, or to
enter into any other relationship with the Trust approved by
the Trustees and in accordance with law.
The Advisor agrees that it will not deal with itself or
with any affiliated person or promoter or principal
underwriter of the Trust (or any affiliated person of the
foregoing) acting as a principal, in effecting securities
transactions for the account of the Trust. It is further
agreed that in effecting any such transaction with such a
person acting as a broker or agent, compensation to such
person shall be permitted, provided that the transaction is
in the ordinary course of such person's business and the
amount of such compensation does not exceed one percent of
the purchase or sale price of the securities involved.
If the Advisor or any affiliate thereof provides any
other goods or services which otherwise would be paid for by
the Trust pursuant to this Agreement, then the Trust shall
pay the Advisor or such affiliate the cost reasonably
allocated by the Advisor or affiliate to such goods or
services.
4. Investment by Advisor. The Advisor shall not take,
and shall not permit any of its shareholders, officers,
directors or employees to take long or short positions in
the shares of the Trust, except for the purchase of shares
of the Trust for investment purposes at the same price as
<PAGE>
that available to the public at the time of purchase, or in
connection with the original capitalization of the Trust.
In connection with purchases or sales of portfolio
securities for the account of the Trust neither the Advisor
nor any officer, director or employee of the Advisor shall
act as a principal or receive any commission therefor.
5. Expenses of the Trust. The Trust shall pay all of
its expenses not expressly assumed by the Advisor herein.
Without limitation, the expenses of the Trust, assumed by
the Trust hereby, shall include the following:
a. Expenses related to the continued existence of the
Trust.
b. Fees and expenses of the Trustees (except those
affiliated with the Advisor), the officers and the
administrative employees of the Trust.
c. Fees paid to the Advisor hereunder.
d. Fees and expenses of preparing, printing and
distributing official filings, reports, prospectuses and
documents required pursuant to applicable state and Federal
securities law and expenses of reports to shareholders.
e. Fees and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents,
registrars, and similar agents.
f. Expenses related to the issuance, registration,
repurchase, exchange and redemption of shares and
certificates representing shares.
g. Auditing, accounting, legal, insurance, portfolio
administration, association membership, printing, postage,
and other administrative expenses.
h. Expenses relating to qualification or licensing of
the Trust, shares in the Trust, or officers, employees and
agents of the Trust under applicable state and Federal
securities law.
i. Expenses related to shareholder meetings and proxy
solicitations and materials.
j. Interest expense, taxes and franchise fees, and all
brokerage commissions and other costs related to purchase
and sales of portfolio securities.
In addition, the Trust shall assume all losses and
liabilities incurred in the administration to the Trust and
of its investment portfolio; and it shall pay such non-
recurring expenses as may arise through litigation,
administrative proceedings, claims against the Trust, the
indemnification of Trustees, officers, employees,
shareholders and agents, or otherwise.
6. Compensation to the Advisor. For its services
hereunder, the Trust shall pay to the advisor a management
fee equal to five-eighths (5/8) percent per annum of the
average daily net assets of each of the portfolios of the
Trust. As of the execution of this agreement such
management fee shall be payable hereunder with respect to
the portfolios comprising the following series of shares:
The Government Portfolio Shares and the Maximum Income
Portfolio Shares. Such fee shall be payable monthly as of
the last day of the month and shall be the sum of the daily
<PAGE>
fees calculated as one-three hundred sixty-fifth (1/365),
except in leap years one-three hundred sixty-sixth (1/366),
of the annual fee based upon each portfolio's assets
calculated for the day.
With respect to any portfolio of the Trust subsequently
authorized by the Trustees, the management fee provided
herein may be revised upward or downward by mutual agreement
between the parties at the time the additional portfolio is
authorized, provided such revision is approved by the
Trustees, including the vote of a majority of those Trustees
who are not interested persons of the Trust, cast in person
at a meeting called for that purpose. The Advisor shall
have the right to waive any portion of its management fee
during any period, and it may permanently reduce the amount
of the fee under such terms as it may determine by written
notice thereof to the Trust. The Advisor shall have the
right to share its management fee with others or make
payments out of its management fee to others, as it solely
determines.
7. Limitation of Expenses of the Trust. In addition
to investment management expenses related to the Trust, the
Advisor shall pay the fees and expenses of any Trustees and
officers of the Trust affiliated with the Advisor, all
promotional expenses of the Trust to the extent not paid for
by the Trust pursuant to a Plan of Distribution, the rent
expense of the Trust's principal executive office premises,
and the expenses of formation of the Trust.
The Advisor shall further reimburse the Trust for all
of its expenses, excluding securities transaction
commissions and expenses, taxes, interest, share
distribution expenses, and extra-ordinary and non-recurring
expenses, which exceed during any fiscal year the applicable
expense limitation in any State or other jurisdiction in
which the Trust, during the fiscal year, becomes subject to
regulation by qualification or sale of its shares. Any such
required reimbursement shall be made within a reasonable
period following the close of the fiscal year to which it
relates; and the Advisor may elect to pay all or a portion
of any such reimbursement it anticipates will be required at
any time or from time to time during the fiscal year to
which the reimbursement relates.
8. Limitation of Advisor's Liability. The Advisor
shall not be liable for any loss incurred in connection with
its duties hereunder, nor for any action taken, suffered or
omitted and believed by it to be advisable or within the
scope of its authority or discretion, except for acts or
omissions involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties assumed by it
under this Agreement.
9. Limitation of Trust's Liability. The Advisor
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder in any case shall be limited to the
Trust and to its assets and that the Advisor shall not seek
satisfaction of any such obligation from the shareholders of
the Trust nor from any Trustee, officer, employee or agent
of the Trust.
10. Term of Agreement. This Agreement shall continue
in effect for two years from the date of its execution; and
it shall continue in force thereafter (but subject to the
termination provisions below), provided that it is
specifically approved at least annually by the Trustees of
the Trust or by a majority vote of the outstanding
securities of each series and class of the Trust's shares
with respect to which it is to continue in effect, and in
either case by the vote of a majority of the Trustees who
are not interested persons of the Trust, cast in person at a
meeting called for that purpose.
<PAGE>
11. Termination by Notice. Notwithstanding any
provision of this Agreement, it may be terminated at any
time, without penalty, by the Trustees of the Trust or, with
respect to any series or class of the Trust's shares, by the
vote of a majority of the outstanding voting securities of
such series or class, or by the Advisor, upon sixty days
written notice to the other party.
12. Termination Upon Assignment. This Agreement may
not be assigned by the Adviser and shall automatically
terminate immediately upon any assignment. Nothing herein
shall prevent the Advisor from employing any other persons
or agents, including Madison Investment Advisors, Inc., at
its own expense, to assist it in the performance of its
duties hereunder.
13. Name of the Trust. In consideration of its
formation of the Trust and the related expenses, the Advisor
has retained the rights to the name "GIT Income Trust" (and
any similar name), which rights the Trust hereby
acknowledges. The Trust, however, shall have the exclusive
right to the use of the name "GIT Income Trust" (although
its rights to the "GIT" portion of such name shall be non-
exclusive) so long as this contract shall remain in force,
except that the Advisor may withdraw such rights from the
Trust at any time, effective immediately or at a time
specified, upon written notice to the Trust. In the event
of such notice, the Trust agrees that it will cause the
question of continuation of this Agreement to be put to a
vote of the shareholders of the Trust as soon as practicable
after such notice has been given.
14. Use of Terms. The terms "affiliated person",
"interested person", "assignment", "broker", and "majority
of the outstanding voting securities" as used herein, shall
have the same meanings as in the Investment Company Act of
1940 and any applicable regulations thereunder.
15. Control of Advisor. Bankers Finance Advisors, LLC
is controlled by Madison Investment Advisors, Inc. a
registered investment advisor located in Madison, Wisconsin.
As such, it is expected that Bankers Finance Advisors, LLC
and Madison Investment Advisors, Inc. will work closely
together in the management of the portfolios including but
not limited to portfolio management, research, securities
trading, and other investment management responsibilities.
<PAGE>
In witness whereof, the parties have caused this
Agreement to be signed on their behalf by their respective
officers duly authorized and their respective seals to be
affixed hereto, this day of 1996.
Bankers Finance Advisors, LLC
By
Katherine L. Frank, President
Attest:
___________________, Vice President
GIT Income Trust
By
By
By
By
Attest:
Services Agreement
This Agreement is made by and between Bankers Finance
Advisors, LLC, a Wisconsin limited liability company
having its principal place of business in Arlington, Virginia
("BFA"), and GIT Income Trust, a Massachusetts business
trust created pursuant to a Declaration of Trust filed with the
Clerk of the City of Boston, Massachusetts (the "Trust").
The parties hereto, intending so to be legally bound, agree
with each other as follows:
1. Provision of Services. BFA hereby undertakes to provide
the Trust with such operational support services as it may
require in the conduct of its business, to extent which BFA
(or any other person), acting as the Trust's investment
adviser, has not undertaken to provide such services. Such
services may include the functions of shareholder servicing
agent and transfer agent, bookkeeping and portfolio
accounting services, the handling of telephone inquires,
cash withdrawals and other customer service functions
(including processing and monitoring wire transfers), and
providing to the Trust appropriate supplies, equipment and
ancillary services necessary to the conduct of its affairs.
Such services may also include providing or arranging for
and making reimbursable expenditures with respect to any
activities intended to be financed by the Trust pursuant to
its Plan of Distribution. The Trust hereby engages BFA to
provide it with such services.
2. Scope of Authority. BFA shall be at all times, in the
performance of its functions hereunder, subject to any
direction and control of the Trustees of the Trust and of
its officers, and to the terms of its Declaration of Trust
and By-Laws, except only that it shall have no obligation to
provide to the Trust any services that are clearly outside
the scope of those contemplated in this Agreement. In the
performance of its duties hereunder, BFA shall be authorized
to take such action not inconsistent with the express
provisions hereof as it deems advisable. It may contract
with other persons to provide to the Trust any of the
services contemplated herein under such terms as it deems
reasonable and shall have the authority to direct the
activities of such other persons in the manner it deems
appropriate.
3 Other Activities of BFA. BFA and any of its affiliates
shall be free to engage in any other lawful activity,
including the rendering to others services similar to those
to be rendered to the Trust hereunder; and BFA or any
interested person thereof shall be free to invest in the
Trust as a shareholder, to become an officer or Trustee
thereof if properly elected, or to enter into any other
relationship with the Trust approved by the Trustee and in
accordance with law.
BFA agrees that it will not deal with the Trust in any
transaction in which BFA acts as a principal, except to the
extent as may be permitted by the terms of this Agreement.
The records BFA maintains on behalf of the Trust are the
sole property of the Trust and will be surrendered promptly
to the Trust upon its request pursuant to Rule 31a-3 of the
Investment Company Act of 1940.
4. Compensation to BFA. BFA shall have no responsibility
hereunder to bear at its own expense any costs or expenses
of the Trust. The Trust shall reimburse to BFA monthly all
of BFA's costs involved in the provision of services to the
Trust hereunder, as the term "cost" is more fully described
herein. The "cost" of services provided to the Trust
hereunder shall be deemed to include both the relevant
direct expenditures by BFA (including the cost of goods and
services obtained from others) and the related overhead
costs, such as depreciation, interest, employee supervision,
rent and like cost. Where only a portion of a specific
expenditure by BFA is related to services provided to the
Trust hereunder, then BFA may allocate such amount between
the Trust and the other activities of BFA on a reasonable
basis, which may involve the use of assumptions and
approximations not subject to precise verification without
undue cost, provided that a majority of the Trustees,
including a majority of the Trustees who are not interested
persons of the Trust approve the basis upon which such
allocations are made. BFA may, in its discretion, defer
billing to and payment by the Trust of any costs which are
reimbursable to it hereunder, and no such deferment shall
affect the right of BFA to receive reimbursement from the
Trust when the cost are billed.
5. Relationship to Investment Adviser. It is understood by
the parties hereto that concurrently with the execution of
this Agreement, the Trust has entered into an Investment
Advisory Agreement with Bankers Finance Advisors, LLC,
in its separate capacity as the investment
adviser to the Trust (the "Adviser") pursuant to which the
Adviser will provide management services to the Trust and
administer its affairs. BFA has entered into this Agreement
to perform certain services at its cost in consideration of
the Trust's employment of it as the Adviser as aforesaid.
If at any time the Adviser ceases to act as investment
adviser to the Trust under terms substantially those of the
Investment Advisory Agreement or if at any time the Adviser
ceases to be a subsidiary owned at least 50% (in terms of
voting rights) under common control with BFA, then this
Agreement shall immediately terminate as of a date 30 days
from the date of such event, unless within such 30-day
period BFA gives written notice to the Trust that it waives
such termination. The Trust specifically acknowledges and
accepts the relationship between separate capacities of BFA
hereunder and as the Adviser.
6. Limitation of BFA's Liability. BFA shall not be liable
for any loss incurred in connection with any of its services
hereunder, nor for any action taken, suffered or omitted and
believed by it to be advisable or within the scope of its
authority of discretion, except for acts or omissions
involving willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties assumed by it under this
Agreement.
7. Force Majeure. It is specifically agreed by the parties
that if BFA is delayed in the performance of any of the
services to be performed by it hereunder or prevented
entirely or in part from performing such services due to
causes or events beyond its control, then such delay or non-
performance may either be excused and the reasonable time
for performance thereby extended as necessary, or if such
delay or non-performance continues for 30 days then the
Trust may cancel this Agreement immediately thereafter or at
any time prior to the cessation of delay or resumption of
performance by BFA; but BFA shall not otherwise be liable
for and the Trust shall otherwise hold it harmless from any
such delay or non-performance. "Causes or events beyond
control" shall include, without limitation, the following:
Acts of God; interruption of power or other utility,
transportation or communications services; malfunction of
computer equipment; acts of civil or military authority;
sabotage national emergencies, war, explosion, flood,
accident, earthquake, fire, or other catastrophe; strike or
other labor problem; shortage of suitable parts, material,
labor or transportation; or present or future law,
governmental order, rule, regulations or official policy.
8. Limitation of Trust's Liability. BFA acknowledges that
it has received notice of and accepts the limitations upon
the Trust's liability set forth in its Declaration of Trust.
BFA agrees that the Trust's obligations hereunder in any
case shall be limited to the Trust and to its assets and
that BFA shall not seek satisfaction of any such obligation
from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
9. Term of Agreement. This Agreement shall continue in
effect for two years from the date of its execution; and it
shall continue in force thereafter (but subject to the
termination provisions below), provided that it is
specifically approved at least annually by the Trustees of
the Trust or a majority vote of the outstanding securities
of each series and class of the Trust's shares with respect
to which it is to continue in effect, and in either case by
either case by the vote of a majority of the Trustees who
are not interested persons of the Trust, cast in person at a
meeting called for that purpose.
10. Termination by Notice. Notwithstanding any provision of
this Agreement, it may be terminated at any time without
penalty, by the Trustees of the Trust or, with respect to
any series or class of the Trust's shares, by the vote of
the majority of the outstanding voting securities of such
series or class, or by BFA, upon thirty days written notice
to the other party.
11. Termination upon Assignment. This Agreement may not be
assigned by BFA and shall automatically terminate upon any
such assignment; except that BFA may assign or transfer its
interest herein to a wholly-owned subsidiary of BFA, or to
another entity operated substantially under common control
with BFA, provided BFA represents to the Trust that
substantial continuity of management, personnel and services
previously available to the Trust will be maintained
following such assignment or transfer and that the Trustees
of the Trust (including a majority of the Trustees who are
not interested persons of the Trust) accept such
representation. Nothing herein shall limit the right of BFA
to obtain goods and services from other persons as described
in Section 2 above.
12. Use of Terms. The terms "affiliated person," "interested
persons," "assignment," and "majority of the outstanding
voting securities," as used herein, shall have the same
meanings as in the Investment Company Act of 1940 and any
applicable regulations thereunder. In Witness Whereof, the
parties have caused this Agreement to be signed in their
behalf by their respective officers duly authorized and
their respective seals to affixed hereto, this ____ day of
___________, 1996
Bankers Finance Advisors LLC
by _________________________
GIT Income Trust
by _________________________
4
4
3
3
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions
"Financial Highlights" in the Prospectus and "Legal Matters
and Independent Auditors" and "Financial Statements and
Report of Independent Auditors" in the Statement of
Additional Information and to the incorporation by reference
in this Post-Effective Amendment Number 16 to
Registration Statement Number 2-80808 (Form N-1A) of our
report dated May 3, 1996, on the financial statements and
financial highlights of GIT Income Trust (comprising the
Maximum Income and Government Portfolios) for the year ended
March 31, 1996, included in the 1996 Annual Report to
Shareholders.
(signature)
Ernst and Young, LLP
Washington, DC
June 11, 1996
GIT Income Trust
Maximum Income Portfolio
Government Portfolio
Annual Report
March 31, 1996
GIT
GIT Investment Funds
<PAGE>
Management's Discussion of Fund Performance
May 20, 1996
Dear Shareholder:
The year ended March 31, 1996, was a volatile one for the
bond markets. The yield from 30-year Treasury bonds,
considered a proxy for investors' outlook on inflation, sank
from 7.43% on April 1, 1995 to 5.95% on December 30, and
then rose to 6.63% on April 1, 1996.
Economic reports released during April 1995 reinforced the
view that the Federal Reserve Board's rate increases in 1994
and early 1995 boosted borrowing costs enough to slow
consumer demand and subdue inflation. From July 6, 1995,
through January 31, 1996, the Fed dropped the Federal Funds
rate three times. After the January 31 rate cut, the economy
showed signs of strength. The Labor Department's
announcement of the creation of 705,000 new jobs in February
coupled with a stronger than expected gross domestic product
for the first quarter of 1996 left little doubt that the
economy had a healthy tone. During the March 26, 1996,
Federal Open Market Committee meeting, Federal Reserve
Chairman Alan Greenspan assured the bond markets that the
economy is "moving forward with inflation in check." Low
inflation and a moderately expanding economy bode well for
both the government and high-yield bond markets.
During 1995, GIT's Government Portfolio was positioned to
react to inflationary pressures by keeping a short maturity.
As we determined that inflation was in check, the fund's
average maturity was increased, and we now favor
intermediate maturities, which we feel provide the best
value. This maturity range tempers the downside risk should
yields rise and provides some upside potential in the event
that rates fall. For the year ending March 31,1996, the one
year total return for the Government Portfolio was 6.56%
Economic stability is good news for the high-yield market in
which our Maximum Income Portfolio invests. The Portfolio
had a one-year total return of 12.32% for the year ended
March 31, 1996. In February and March prices declined on
high yield bonds, but we are encouraged by strong demand for
new issues during the same period. The Maximum Income
Portfolio is diversified across twelve industry sectors,
with exposure in cable television, communications, retail
and home-building among others. We continue to focus on
issuers that provide attractive rates of return without
assuming an undue degree of risk.
The current economic conditions of low inflation and
moderate growth cause us to look favorably on the near-term
outlook for the bond market. We appreciate your confidence
in GIT Investment Funds and encourage you to look at all our
no-load mutual funds.
Sincerely,
A. Bruce Cleveland
President
<PAGE>
Management's Discussion of Fund Performance (continued)
Comparison of Changes in the Value of a $10,000 Investment
and the Shearson Lehman Aggregate Bond Index
Depicted herein is a graphic presentation consisting of two
charts comparing the values of a $10,000 investment made to
each of the portfolios against the Shearson Lehman Aggregate
Bond Index. Through the use of line graphs, the following
information is presented:
Value (as of March 31, 1996) of a $10,000 investment made on
March 31, 1986 in the Maximum Income Portfolio: $19,244.
Average Annual Total Returns:
1 year - 12.32 percent
5 year - 10.42 percent
10 year - 6.77 percent.
Value (as of March 31, 1996) of a $10,000 investment made on
March 31, 1986 in the Government Portfolio: $18,891.
Average Annual Total Returns:
1 year - 6.56 percent
5 year - 6.71 percent
10 year - 6.57 percent.
Corresponding value of the Shearson Lehman Aggregate Bond Index: $22,857
Past performance is not predictive of future performance.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees and Shareholders, Maximum Income
Portfolio and Government Portfolio, GIT Income Trust:
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of GIT
Income Trust (comprising, respectively, Maximum Income and
Government Portfolios), as of March 31, 1996, and the
related statements of operations for the year then ended,
the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These
financial statements and financial highlights are the
responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial
highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
March 31, 1996, by correspondence with the custodian. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of each of the respective
portfolios constituting GIT Income Trust at March 31, 1996,
the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the
period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Washington, DC
May 3, 1996
<PAGE>
Maximum Income Portfolio
Portfolio of Investments - March 31, 1996
Credit Rating* Principal
Moody's S&P Amount Value
CORPORATE DEBT SECURITIES: 80.8% of Net Assets
CABLE TELEVISION: 7.8%
B2 B Cablevision Systems Corporation,
Senior Subordinated Debentures,
9.875%, 2/15/13 $250,000 $260,000
B3 BB- CAI Wireless Systems, Inc., Senior
Discount Notes, 12.25%,
9/15/02 256,000 271,360
CHEMICALS: 3.8%
B1 B NL Industries Inc., Senior Secured
Notes, 11.75%, 10/15/03 250,000 259,375
COMMUNICATIONS: 25.6%
B2 B- American Radio Systems, Senior
Subordinated Notes, 9%, 2/1/06 250,000 245,000
B3 B- Arch Communications Group, Inc.,
Senior Discount Notes, 10.875%,
3/15/08 410,000 234,725
B2 B+ Century Communications Corporation,
Senior Subordinated Notes,
11.875%, 10/15/03 250,000 267,500
NR B- Chancellor Broadcasting Co., Senior
Subordinated Notes, 12.5%,
10/1/04 188,000 209,620
B2 B- EZ Communications Inc., Senior
Subordinated Notes, 9.75%
12/1/05 250,000 248,125
B2 BB- Mobile Telecommunications
Technologies Corporation, Senior
Notes, 13.5%, 12/15/02 250,000 266,250
B2 B SFX Broadcasting, Inc., Senior
Subordinated Notes, 11.375%,
10/1/00 250,000 270,000
FOREST AND PAPER PRODUCTS: 7.4%
B3 B Gaylord Container Corp., Senior
Notes, 11.5%, 5/15/01 250,000 252,500
B1 BB- Stone Container Corporation,
1st Mortgage Notes, 10.75%,
10/1/02 250,000 248,125
GAMING: 3.9%
Ba3 BB Grand Casinos Inc., 1st Mortgage
Notes, 10.125%, 12/1/03 250,000 265,000
HOMEBUILDING: 7.7%
Ba3 B+ Continental Homes Holding Corp.,
Senior Notes, 12%, 8/1/99 250,000 270,000
B2 B NVR Inc., Senior Notes, 11%,
4/15/03 250,000 252,500
LODGING: 3.6%
B3 B- Motels of America Inc., Senior
Subordinated Notes, 12%,
4/15/04 250,000 242,500
RESTAURANTS: 3.8%
B1 B+ Carrols Corporation, Senior Notes,
11.5%, 8/15/03 250,000 256,250
RETAIL-FOOD: 10.0%
B3 B- Ralph's Grocery Company, Senior
Subordinated Notes, 11%,
6/15/05 250,000 225,000
B2 B+ Stater Brothers Holdings Inc.,
Senior Notes, 11%, 3/1/01 250,000 257,500
B3 NR Super Markets General Holding
Corp., Subordinated Notes,
11.625%, 6/15/02 200,000 194,000
STEEL: 3.7%
B2 B GS Technologies Operating Inc.,
Senior Notes, 12%, 9/1/04 250,000 251,875
TEXTILES-APPAREL: 3.5%
B3 B Dan River Inc., Senior Subordinated
Notes, 10.125%, 12/15/03 250,000 237,500
TOTAL CORPORATE DEBT SECURITIES
(Cost $5,417,908) 5,484,705
U.S. GOVERNMENT OBLIGATIONS: 10.6% of Net Assets
Aaa AAA United States Treasury Notes,
5.875%, 11/15/05 500,000 481,875
Aaa AAA United States Treasury Notes,
5.625%, 2/15/06 250,000 237,110
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $757,696) 718,985
REPURCHASE AGREEMENT: 6.1% of Net Assets
With Donaldson, Lufkin & Jenrette Securities
Corporation issued 3/29/96 at 5.3%, due
4/1/96 collateralized by $420,480 in Federal
National Mortgage Association Medium-Term
Notes due 3/19/03. Total proceeds at
maturity are $411,182. (Cost $411,000) 411,000
TOTAL INVESTMENTS (Cost $6,586,604)+ $6,614,690
See Notes to Portfolio of Investments.
<PAGE>
Government Portfolio
Portfolio of Investments - March 31, 1996
Credit Rating* Principal
Moody's S&P Amount Value
U.S. GOVERNMENT OBLIGATIONS:
96.1% of Net Assets
Aaa AAA United States Treasury Bonds,
6.875%, 8/15/25 $1,250,000 $1,269,525
Aaa AAA United States Treasury Notes,
6.75%, 5/31/97 1,000,000 1,012,500
Aaa AAA United States Treasury Notes,
7.125%, 2/29/00 1,000,000 1,036,560
Aaa AAA United States Treasury Notes,
7.75%, 2/15/01 1,000,000 1,068,590
Aaa AAA United States Treasury Notes,
6.5%, 8/15/05 1,000,000 1,003,910
Aaa AAA United States Treasury Notes,
5.875%, 11/15/05 1,000,000 963,750
Aaa AAA United States Treasury Notes,
5.625%, 2/15/06 250,000 237,110
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $6,670,595) 6,591,945
REPURCHASE AGREEMENT: 2.7% of Net Assets
With Donaldson, Lufkin & Jenrette Securities
Corporation issued 3/29/96 at 5.3%, due 4/1/96
collateralized by $188,244 in Federal National
Mortgage Association Medium-Term Notes due
3/19/03. Total proceeds at maturity are $184,081.
(Cost $184,000) 184,000
TOTAL INVESTMENTS (Cost $6,854,595)+ $6,775,945
Notes to Portfolio of Investments:
Moody's Moody's Investors Service, Inc.
S&P Standard & Poor's Corporation
* Unaudited
+ Aggregate cost for federal income tax purposes and
net unrealized appreciation (depreciation) of
investments is as follows:
Maximum
Income Government
Portfolio Portfolio
Aggregate cost $6,586,604 $6,854,595
Gross unrealized appreciation $ 121,843 $ 115,326
Gross unrealized depreciation 93,757 193,976
Net unrealized appreciation
(depreciation) $ 28,086 $ (78,650)
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
Statements of Assets and Liabilities
March 31, 1996
Maximum
Income Government
Portfolio Portfolio
ASSETS
Investments, at cost $6,586,604 $6,854,595
Investments, at value (Notes 1 and 2)
Investment securities $6,203,690 $6,591,945
Repurchase agreement 411,000 184,000
Total investments 6,614,690 6,775,945
Cash 487 211
Receivables
Interest 184,800 81,880
Share subscriptions (Note 1) 200 1,250
Total assets 6,800,177 6,859,286
LIABILITIES
Payables
Shares reserved for subscriptions
(Note 1) 200 1,250
Dividends 9,830 1,926
Other liabilities 60 8
Total liabilities 10,090 3,184
NET ASSETS (Note 5) $6,790,087 $6,856,102
CAPITAL SHARES OUTSTANDING 948,038 706,487
NET ASSET VALUE PER SHARE $7.162 $9.705
Statements of Operations
For the Year Ended March 31, 1996
Maximum
Income Government
Portfolio Portfolio
INVESTMENT INCOME (Note 1)
Interest income $687,474 $470,218
Other income 7,500 --
EXPENSES (Notes 3 and 4)
Investment advisory fee 42,986 46,093
Custodian fees 2,847 3,079
Professional fees 6,943 7,390
Salaries and related expenses 26,860 29,000
Securities registration and blue sky
expenses 8,126 8,084
Telephone expense 1,634 1,765
Data processing and office equipment
expenses 13,932 14,506
Office and miscellaneous expenses 6,450 6,661
Depreciation and amortization 765 826
Total expenses 110,543 117,404
NET INVESTMENT INCOME 584,431 352,814
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments 167,400 253,063
Net unrealized appreciation
(depreciation) of investments 53,681 (111,252)
NET GAIN ON INVESTMENTS 221,081 141,811
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $805,512 $494,625
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
Statements of Changes in Net Assets
For the Years Ended March 31
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment
income $584,431 $607,704 $352,814 $320,146
Net realized gain
(loss) on
investments 167,400 (740,266) 253,063 (565,914)
Net unrealized
appreciation
(depreciation)
of investments 53,681 373,832 (111,252) 437,937
Total increase in net
assets resulting
from operations 805,512 241,270 494,625 192,169
DISTRIBUTIONS TO SHAREHOLDERS
From net investment
income (584,431) (607,704) (352,814) (320,146)
CAPITAL SHARE
TRANSACTIONS
(Note 7) (157,381) (609,412) (938,698) (795,057)
TOTAL INCREASE (DECREASE)
IN NET ASSETS 63,700 (975,846) (796,887) (923,034)
NET ASSETS
Beginning of year6,726,387 7,702,233 7,652,989 8,576,023
End of year $6,790,087 $6,726,387 $6,856,102 $7,652,989
Financial Highlights
Selected data for a share outstanding throughout each year:
Maximum Income Portfolio
Year ended March 31,
[C] [C] [C] [C] [C]
1996 1995 1994 1993 1992
Net asset
value
beginning
of period $ 6.938 7.285 7.455 7.255 6.775
Net
investment
income $ 0.608 0.597 0.606 0.674 0.689
Net
realized &
unrealized
gains
(losses) on
securities $0.224 (0.347)(0.170) 0.200 0.480
Total from
investment
operations $0.832 0.250 0.436 0.874 1.169
Distributions
from net
investment
income $(0.608)(0.597)(0.606)(0.674)(0.689)
Distributions
from capital
gains $ -- -- -- -- --
Total
Distributions$(0.608)(0.597)(0.606)(0.674)(0.689)
Net asset
value end
of period $ 7.162 6.938 7.285 7.455 7.255
Total
Return 12.32% 3.75% 5.89% 12.69% 18.08%
Net assets
at end of
period
(thousands) $6,790 6,726 7,702 7,329 6,456
Ratio of
expenses to
average net
assets 1.60% 1.52% 1.54% 1.52% 1.54%
Net
investment
income to
average
net assets 8.47% 8.56% 8.02% 9.26% 9.95%
Portfolio
turnover 237% 243% 251% 73% 124%
Government Portfolio
Year ended March 31,
[C] [C] [C] [C] [C]
1996 1995 1994 1993 1992
Net asset
value
beginning
of period $ 9.551 9.695 10.621 10.300 10.119
Net
investment
income $0.472 0.391 0.363 0.501 0.654
Net
realized &
unrealized
gains
(losses) on
securities $0.154 (0.144)(0.151) 0.854 0.222
Total from
investment
operations $0.626 0.247 0.212 1.355 0.876
Distributions
from net
investment
income $(0.472)(0.391)(0.363)(0.501)(0.654)
Distributions
from capital
gains $ -- -- (0.775)(0.533)(0.041)
Total
Distributions$(0.472)(0.391)(1.138)(1.034)(0.695)
Net asset
value end
of period $ 9.705 9.551 9.695 10.621 10.300
Total
Return 6.56% 2.67% 1.95% 13.96% 8.84%
Net assets
at end of
period
(thousands) $ 6,856 7,653 8,576 9,734 7,375
Ratio of
expenses to
average net
assets 1.59% 1.52% 1.54% 1.52% 1.53%
Net
investment
income to
average
net assets 4.77% 4.12% 3.53% 4.78% 6.28%
Portfolio
turnover 190% 318% 287% 357% 123
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
GIT Income Trust
Notes to Financial Statements
March 31, 1996
1. Summary of Significant Accounting Policies. GIT Income
Trust (the "Trust") is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940
as an open-end, diversified investment management company.
The Trust maintains two separate portfolios whose principal
objectives are to obtain high current income. The Maximum
Income Portfolio invests in long-term debt securities which
may include securities rated as low as "Caa" or "CCC" by
Moody's Investors Service, Inc. or Standard & Poor's
Corporation, respectively. The Government Portfolio invests
in securities of the U. S. Government and its agencies.
Securities Valuation: Securities having maturities of 60
days or less are valued at amortized cost, which
approximates market value. Securities having longer
maturities, for which market quotations are readily
available, are valued at the mean between their bid and
asked prices. Securities for which market quotations are
not readily available are valued at their fair value as
determined in good faith by the Trustees. Investment
transactions are recorded on the trade date. The cost of
investments sold is determined on the identified cost basis
for financial statement and federal income tax purposes.
Repurchase Agreements are valued at amortized cost, which
approximates market value.
Investment Income: Interest income, net of amortization of
premium or discount, and other income (if any) are accrued
as earned.
Dividends: Net investment income, determined as gross
investment income less expenses, is declared as a regular
dividend each business day. Declared dividends are
distributed to shareholders or reinvested in additional
shares as of the close of business at the end of each month.
Capital gains distributions reflecting net realized gains of
each portfolio (if any) are declared and paid twice annually
at calendar and fiscal year end. Additional distributions
will be made if necessary.
Income Tax: In accordance with the provisions of Subchapter
M of the Internal Revenue Code applicable to regulated
investment companies, all of the taxable income of each
portfolio is distributed to its shareholders, and therefore
no federal income tax provision is required. As of March
31, 1996, the Maximum Income and Government Portfolios had
available for federal income tax purposes unused capital
loss carryovers of $2,563,160, expiring from March 31, 1997
through March 31, 2003, and $313,426, expiring March 31,
2003, respectively.
Share Subscriptions: Shares purchased by check or otherwise
not paid for in immediately available funds are accounted
for as share subscriptions receivable and shares reserved
for subscriptions.
Use of Estimates: The preparation of the financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and reported amounts of increases and decreases
in net assets from operations during the reporting period.
Actual results could differ from those estimates.
2. Investments in Repurchase Agreements. When the Trust
purchases securities under agreements to resell, the
securities are held for safekeeping by the Trust's custodian
bank as collateral. Should the market value of the
securities purchased under such an agreement decrease below
the principal amount to be received at the termination of
the agreement plus accrued interest, the counterparty is
required to place an equivalent amount of additional
securities in safekeeping with the Trust's custodian bank.
Repurchase agreements may be terminated within seven days.
Pursuant to an Exemptive Order issued by the Securities and
Exchange Commission, the Trust, along with other registered
investment companies having Advisory and Services Agreements
with Bankers Finance Investment Management Corp.("BFIMC"),
transfers uninvested cash balances into a joint trading
account. The aggregate balance in this joint trading
account is invested in one or more consolidated repurchase
agreements whose underlying securities are U.S. Treasury or
federal agency obligations.
<PAGE>
Notes to Financial Statements (continued)
3. Investment Advisory Fees and Other Transactions with
Affiliates. The Investment Adviser to the Trust, BFIMC,
earns an advisory fee equal to 0.625% per annum of the
average net assets of each of the Trust's portfolios; the
fees accrue daily and are payable monthly. In order to meet
the securities registration requirements of certain states,
BFIMC has undertaken to reimburse the Trust by the amount,
if any, by which the total expenses of the Trust (less
certain excepted expenses) exceed the applicable expense
limitation in any state or other jurisdiction in which the
Trust is subject to regulation during the fiscal year. The
Trust believes the current applicable expense limitation is
2.5% per annum of the average net assets of each portfolio
up to $30 million, 2% of any amount of such net assets
exceeding $30 million but not exceeding $100 million, and
1.5% per annum of such amount in excess of $100 million.
BFIMC is responsible for the fees and expenses of Trustees
who are affiliated with BFIMC, the rent expense of the
Trust's principal executive office premises and certain
promotional expenses. For the year ended March 31, 1996,
outside Trustee fees were $1,500 for each Portfolio. At
March 31, 1996, certain officers, Trustees, companies and
individuals affiliated with the Trust had investments in the
Trust aggregating 1.3% of the Maximum Income Portfolio
shares outstanding and 0.3% of the Government Portfolio
shares outstanding.
4. Other Expenses. With the exception of certain expenses
of the Trust payable by it directly, all support services
are provided to the Trust under a Services Agreement between
the Trust and BFIMC, pursuant to which such services are
provided for amounts not exceeding the cost to BFIMC of the
support provided. Common expenses incurred by the Trust are
allocated among the portfolios based on the ratio of net
assets of each portfolio to the combined net assets. For
the year ended March 31, 1996, operating expenses of $67,557
for the Maximum Income Portfolio and $71,311 for the
Government Portfolio have been reimbursed to BFIMC under the
Services Agreement. As of March 31, 1996, expenses of
$39,097 for the Maximum Income Portfolio and $52,350 for the
Government Portfolio have been incurred by BFIMC on behalf
of the portfolios, the billings of which have been deferred.
5. Net Assets. At March 31, 1996, net assets include the
following:
Maximum
Income Government
Portfolio Portfolio
Net paid in capital on shares of
beneficial interest $9,325,161 $7,248,177
Accumulated net realized losses (2,563,160) (313,425)
Net unrealized appreciation
(depreciation) of investments 28,086 (78,650)
Total net assets $6,790,087 $6,856,102
The Maximum Income Portfolio reclassified $(509,459) from
accumulated net realized losses to paid in capital as a
result of permanent book and tax basis differences. This
reclassification had no impact on net asset value.
6. Investment Transactions. Purchases and sales of
securities other than short-term securities for the year
ended March 31, 1996 were as follows:
Maximum
Income Government
Portfolio Portfolio
Purchases $14,650,949 $12,093,711
Sales 14,495,120 12,717,422
See Notes to Portfolios of Investments.
<PAGE>
Notes to Financial Statements (continued)
7. Capital Share Transactions. An unlimited number of
capital shares, without par value, are authorized.
Transactions in capital shares for the years ended March 31
were as follows:
In Dollars
Shares sold $1,935,692 $3,563,512 $754,345 $1,891,049
Shares issued
in reinvestment
of dividends 470,973 480,421 328,159 294,883
Total shares
issued 2,406,665 4,043,933 1,082,504 2,185,932
Shares
redeemed (2,564,046) (4,653,345)(2,021,202) (2,980,989)
Net decrease $(157,381) $(609,412) $(938,698) $(795,057)
In Shares
Shares sold 270,513 510,956 76,059 200,394
Shares issued
in reinvestment
of dividends 65,664 69,036 33,140 31,146
Total shares
issued 336,177 579,992 109,199 231,540
Shares redeemed(357,676) (667,780) (204,022) (314,806)
Net decrease (21,499) (87,788) (94,823) (83,266)
<PAGE>
This page was left blank intentionally.
<PAGE>
Telephone Numbers
Shareholder Service
Washington, DC area: 703/528-6500
Toll-free nationwide: 800/336-3063
24-Hour ACCESS
Toll-free nationwide: 800/448-4422
The GIT Family of Mutual Funds
GIT Equity Trust
Special Growth Portfolio
Select Growth Portfolio
Equity Income Portfolio
Worldwide Growth Portfolio
GIT Income Trust
Maximum Income Portfolio
Government Portfolio
GIT Tax-Free Trust
Arizona Portfolio
Maryland Portfolio
Missouri Portfolio
Virginia Portfolio
National Portfolio
Money Market Portfolio
Government Investors Trust
For more complete information on any GIT Investment Fund,
including charges and expenses, request a prospectus by
calling the numbers above. Read it carefully before you
invest or send money. This prospectus does not constitute an
offering by the distributor in any jurisdiction in which such
offering may not be lawfully made.
GIT
GIT INVESTMENT FUNDS
1655 Fort Myer Drive
Arlington Virginia 22209
http://www.gitfunds.com
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM NSAR
THE ANNUAL REPORT AND THE PROSPECTUS FOR THE REGISTRANT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH SOURCE DOCUMENTS.
</LEGEND>
<CIK> 0000710978
<NAME> GIT INCOME TRUST
<SERIES>
<NUMBER> 1
<NAME> MAXIMUM INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 6,586,604
<INVESTMENTS-AT-VALUE> 6,614,690
<RECEIVABLES> 185,000
<ASSETS-OTHER> 487
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,800,177
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,090
<TOTAL-LIABILITIES> 10,090
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,834,620
<SHARES-COMMON-STOCK> 948,038
<SHARES-COMMON-PRIOR> 969,537
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,072,619)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,086
<NET-ASSETS> 6,790,087
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 687,474
<OTHER-INCOME> 7,500
<EXPENSES-NET> 110,543
<NET-INVESTMENT-INCOME> 584,431
<REALIZED-GAINS-CURRENT> 167,400
<APPREC-INCREASE-CURRENT> 53,681
<NET-CHANGE-FROM-OPS> 221,081
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 584,431
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,935,692
<NUMBER-OF-SHARES-REDEEMED> 2,564,046
<SHARES-REINVESTED> 470,973
<NET-CHANGE-IN-ASSETS> (157,381)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,245,865)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 42,986
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110,543
<AVERAGE-NET-ASSETS> 6,901,838
<PER-SHARE-NAV-BEGIN> 6.938
<PER-SHARE-NII> 0.608
<PER-SHARE-GAIN-APPREC> 0.224
<PER-SHARE-DIVIDEND> (0.608)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.162
<EXPENSE-RATIO> 1.602
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
NSAR, THE ANNUAL REPORT AND THE PROSPECTUS FOR THE REGISTRANT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SOURCE DOCUMENTS.
</LEGEND>
<CIK> 0000710978
<NAME> GIT INCOME TRUST
<SERIES>
<NUMBER> 2
<NAME> GOVERNMENT PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 6,854,595
<INVESTMENTS-AT-VALUE> 6,775,945
<RECEIVABLES> 83,130
<ASSETS-OTHER> 211
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,859,286
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,184
<TOTAL-LIABILITIES> 3,184
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,248,177
<SHARES-COMMON-STOCK> 706,487
<SHARES-COMMON-PRIOR> 801,310
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (313,425)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (78,650)
<NET-ASSETS> 6,856,102
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 470,218
<OTHER-INCOME> 0
<EXPENSES-NET> 117,404
<NET-INVESTMENT-INCOME> 352,814
<REALIZED-GAINS-CURRENT> 253,063
<APPREC-INCREASE-CURRENT> (111,252)
<NET-CHANGE-FROM-OPS> 141,811
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 352,814
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 754,345
<NUMBER-OF-SHARES-REDEEMED> 2,021,202
<SHARES-REINVESTED> 328,159
<NET-CHANGE-IN-ASSETS> (938,698)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (566,489)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,093
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 117,404
<AVERAGE-NET-ASSETS> 7,399,493
<PER-SHARE-NAV-BEGIN> 9.551
<PER-SHARE-NII> 0.472
<PER-SHARE-GAIN-APPREC> 0.154
<PER-SHARE-DIVIDEND> (0.472)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.705
<EXPENSE-RATIO> 1.587
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Distribution Agreement
This Agreement is made by and between GIT Investment
Services, Inc., a Virginia corporation having its principal
place of business in Arlington, Virginia (the
"Distributor"),and GIT Income Trust, a Massachusetts
business trust created pursuant to a Declaration of Trust
filed with the Clerk of the City of Boston, Massachusetts
(the "Trust").
In consideration of the mutual covenants contained herein
and for other good and valuable consideration, the parties
hereto, intending so to be legally bound, agree with each
other as follows:
1. Appointment of Distributor. Except as otherwise provided
herein, the Trust hereby appoints the Distributor its
exclusive agent to sell and distribute shares of the Trust
at the public offering price thereof described and set forth
in the Trust's current prospectus. The Distributor hereby
accepts such appointment. The Distributor shall have no
obligation to sell, distribute or redeem any specific amount
of the Trust's shares.
<PAGE>
2. Scope of Authority. The Distributor is authorized act as
the Trust's agent to make sales of the Trust's shares
directly to the public or distribute such shares to the
public through securities brokers, dealers or other
intermediaries. The Distributor is also authorized to act
as an agent of the Trust in connection with any redemption
of the Trust's shares, either directly or through securities
brokers, dealers or other intermediaries. In the
performance of its activities hereunder, the Distributor
shall be authorized to take such action not inconsistent
with the express provisions hereof as it deems advisable.
The Distributor agrees that in offering, selling or
redeeming shares of the Trust it will duly conform to all
applicable State and Federal laws and the rules and
regulations of any self-regulatory organization established
pursuant to Federal law to which the Distributor may belong.
The Distributor is authorized by the Trust only to give
information or make representations regarding the Trust's
shares to the extent such information or representations are
contained in the Trust's current prospectus or in its
registration statement filed with the Securities and
Exchange Commission or in supplemental information to such
prospectus approved by the Trust. The Distributor agrees
that any other such information or representations it
provides shall be given entirely without liability or
recourse to the Trust.
<PAGE>
3. Discretion of the Trust. Notwithstanding any other
provision hereof and in its sole discretion with or without
prior notice thereof to the Distributor, the Trust may
distribute its own shares directly to any person, may
suspend any or all sales of its shares, and may decline to
make any particular sale of its shares By notice thereof to
the Distributor, the Trust may appoint additional non-
exclusive agents for the sale and distribution of its
shares, but in the absence of such notice the Distributor
shall remain the Trust's exclusive agent for such sales.
4. Other Activities of the Distributor. The Distributor and
any of its affiliates shall be free to engage in any other
lawful activity, including the rendering to others of
services similar to those to be rendered to the Trust
hereunder; and the Distributor or any interested person
thereof shall be free to invest in the Trust as a
shareholder, to become an officer or Trustee thereof if
properly elected, or to enter into any other relationship
with the Trust approved by the Trustees and in accordance
with law.
5. Compensation to the Distributor. Unless a current
prospectus of the Trust provides for compensation to
underwriters or to persons who distribute its shares, the
Distributor shall receive no direct compensation in
connection with the activities authorized hereby. Except to
any extent specifically otherwise authorized by the terms of
a current prospectus of the Trust, the Distributor shall
sell and redeem shares of the Trust at their current net
asset value.
<PAGE>
The Trust shall reimburse to the Distributor
monthly for any reimbursable costs incurred by the
Distributor in connection with the affairs of the Trust.
Such "reimbursable cost" shall be limited to the reasonable
costs incurred by the Distributor in connection with
services rendered to the Trust's existing shareholders
approved by the Trustees of the Trust or in connection with
registration under State or Federal securities laws, taxes
or other out-of-pocket charges incurred by reason of sales
or are redemptions of the Trust's shares, but only to the
extent the Distributor is not otherwise directly compensated
for such services, sales or redemptions.
The "costs" which are reimbursable hereunder shall be deemed
to include both the relevant direct expenditures by the
Distributor (including the cost of goods and services
obtained from other) and the related overhead costs, such as
depreciation, interest, employee supervision, rent and like
costs. Where only a portion of a specific expenditure by
the Distributor is related to reimbursable costs hereunder,
then the Distributor may allocate such amount between the
Trust and other activities of the Distributor on a
reasonable basis, which may involve the use of assumptions
and approximations not subject to precise verification
without undue cost, provided that majority of the Trustees,
including a majority of the Trustees who are not interested
persons of the Trust, approve the basis upon which such
allocations are made. The Distributor may, in its
discretion, defer billing to and payment by the Trust of any
reimbursable costs hereunder, and no such deferment shall
affect the right of the Distributor to receive reimbursement
from the Trust when the
<PAGE>
reimbursable costs are billed.
5a. Sales Charges. Notwithstanding any other provision of
this Agreement, during the term hereof the Trust shall
distribute shares in any portfolio of the Trust for which a
sales charge is paid ("Load Share") exclusively through the
Distributor, acting as the Trust's principal underwriter.
As compensation for the distribution of Load Shares by or
through the Distributor, the Distributor shall receive the
entire sales charge, as described in the current prospectus
of the Trust. Such compensation shall be in place of any
compensation for reimbursible costs otherwise payable as
described herein.
The Distributor may distribute Load Shares either directly
to the general public, or through other qualified securities
brokers and dealers that it engages to act as distributors
of Load Shares on a non-exclusive basis ("Dealers"), as it
solely determines. All Load Shares distributed by the
Distributor or by Dealers through the Distributor shall be
offered only at the applicable public offering price
described in the Trust's current prospectus. The
Distributor shall pay the dealer concession provided in the
Trust's current prospectus to such Dealer, out of the sales
charge received by the Distributor with respect to the
corresponding Load Shares. The Distributor shall only be
obligated to pay such dealer concessions to the extent that
it has received payment of the corresponding sales charges
from the proceeds of sale of such Load Shares.
<PAGE>
6. Relationship to Investment Adviser. It is understood by
the parties hereto that concurrently with the execution of
Agreement or previously, the Trust has also entered into an
Investment Advisory Agreement with Bankers Finance
Investment Management Corp., as the investment adviser to
the Trust (the "Adviser"), pursuant to which the Adviser
will provide management services to the Trust and administer
its affairs. The voting securities of the Adviser and of
the Distributor has entered into this Agreement to perform
certain services partially in consideration of the Trust's
ongoing employment of the Adviser as aforesaid. If at any
time the Adviser ceases to act as investment adviser to the
Trust under terms substantially those of the Investment
Advisory Agreement or if at any time the Adviser ceases to
be an entity at least 50% (in terms of voting rights) under
common control with the Distributor, then this Agreement
shall immediately terminate as of a date 30 days from the
date of such event, unless within such 30-day period the
Distributor gives written notice to the Trust that it waives
such termination. The Trust specifically acknowledges and
accepts the relationship between the Distributor hereunder
and the Adviser.
<PAGE>
7. Limitation of the Distributor's Liability. The
Distributor shall not be liable for any loss incurred in
connection with any of its activities hereunder, nor for any
action taken, suffered or omitted and believed by it to be
advisable or within the scope of its authority or
discretion, except for acts or omissions involving willful
misfeasance, bad faith, gross negligence or reckless
disregard of the responsibilities assumed by it under
this Agreement.
8. Limitation of Trust's Liability. The Distributor
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its
Declaration of Trust. The Distributor agrees that the
Trust; obligations hereunder in any case shall be limited to
the Trust and to its assets and that the Distributor shall
not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trustee, officer,
employee or agent of the Trust.
9. Term of Agreement. This Agreement shall continue in
effect for two years from the date of its execution; and it
shall continue in force thereafter (but subject to the
termination provisions below), provided that it is
specifically approved at least annually by the Trustees of
the Trust or by a majority vote of the outstanding
securities of the Trust (without regard to series or classes
of shares), and in either case by the vote of a majority of
the Trustees who are not interested persons of the Trust,
cast in person at a meeting called for that purpose.
<PAGE>
10. Termination by Notice. Notwithstanding any provision of
this Agreement, it may be terminated at any time, without
penalty, by the Trustees of the Trust or by the Distributor,
upon 30 day's written notice to the other party.
11. Termination Upon Assignment. This Agreement may not be
assigned by the Distributor and shall automatically
terminate immediately upon any assignment. Noting herein
shall prevent the Distributor from employing any other
persons or agents, as its own expense, to assist it in the
performance of its duties hereunder.
12 Amendments. This Agreement may be amended at any time by
mutual agreement in writing by the parties hereto, provided
that such amendment is approved by Trustees of the Trust,
including a majority of the Trustees who are not interested
persons of the Trust, cast in person at a meeting called for
that purpose.
13. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth
of Virginia.
14. Use of Terms. The terms "interested person," assignment
and "majority of the outstanding voting securities," as used
herein, shall have the same meanings as in the Investment
Company Act of 1940 and any applicable regulations
thereunder.
<PAGE>
This Agreement, originally executed by the parties on
January 11, 1983, is amended and restated to read as
provided above.
In Witness Whereof, the parties have caused this amended and
restated Agreement to be signed on their behalf by their
respective officers duly authorized and their respective
seals to be affixed hereto, this 3rd day of July, 1985.
GIT Investment Services, Inc.
(Seal)(Signature)
By A. Bruce Cleveland, President
(signature)
Attest: Bonnie G. Tyler, Assistant Secretary
GIT Income Trust
(Seal)
(signature)
By A. Bruce Cleveland, Trustee
(signature)
By Michael D. Goth, Trustee
(signature)
By Robert W. Dudley, Trustee
(signature)
By Thomas S. Kleppe, Trustee
(signature)
By Gerald W. Nensel, Trustee
(signature)
Attest: Philip K. Holl, Secretary
Custody Agreement
Agreement made as of the 8th day of September 1993,
between Government Investors Trust, GIT Equity Trust, GIT Income
Trust and GIT Tax-Free Trust (the "Trusts"), business trusts
organized under the laws of Massachusetts and having their office
at 1655 Fort Myer Drive, Arlington, Virginia 22209, acting for
and on behalf of all mutual fund portfolios as are currently
authorized and issued by the Trusts or may be authorized and
issued by any of the Trusts subsequent to the date of this
Agreement (the "Funds"), which are operated and maintained by
their respective Trusts for the benefit of the holders of shares
of the Funds, and Star Bank, N.A. (the "Custodian"), a national
banking association having its principal office and place of
business at Star Bank Center, 425 Walnut Street, Cincinnati, Ohio
45202, which Agreement provides for the furnishing of custodian
services to the Funds.
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Trusts, on behalf of the Funds, and the Custodian
agree as follows:
Article I
Definitions
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Person" shall be deemed to include the
Chairman, President, Secretary, Treasurer, and the Executive Vice
<PAGE>
President, or any other person, whether or not any such person is
an officer or employee of the Trusts, duly authorized by the
Board of Trustees of the Trusts to give Oral Instructions and
Written Instructions on behalf of the Funds and listed in the
Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to
time, subject in each case to any limitations on the authority of
such person as set forth in Appendix A or any such Certificate.
Authorized Persons shall also include the President, Executive
Vice President, Secretary and such other officers employed by
Bankers Finance Investment Management Corp. (the "Adviser") as
are designated in writing by the Adviser pursuant to the terms of
the services agreements between the Trusts and the Adviser
regarding day-to-day management of the Funds.
2. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees, provided the Custodian has received a certified copy of
a resolution of Board of Trustees of the Trusts specifically
approving deposits in the Book-Entry System.
3. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is signed on behalf
of the Funds by an Officer of the Trusts and is actually received
by the Custodian.
4. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
<PAGE>
Exchange Commission, its successor or successors and its nominee
or nominees. The term "Depository" shall further mean and include
any other person or clearing agency authorized to act as a
depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, provided
that the Custodian has received a certified copy of a resolution
of the Board of Trustees of the Trusts specifically approving
such other person or clearing agency as a depository.
5. "Dividend and Transfer Agent" shall mean the dividend
and transfer agent active, from time to time, in such capacity
pursuant to a written agreement with the Funds, changes in which
the Trusts shall immediately report to the Custodian in writing.
6. "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States
or agencies or instrumentalities thereof, commercial paper,
obligations (including certificates of deposit, bankers'
acceptances, repurchase and reverse repurchase agreements with
respect to the same) and bank time deposits of domestic banks
that are members of Federal Deposit Insurance Trust, and short-
term corporate obligations where the purchase and sale of such
securities normally require settlement in federal funds or their
equivalent on the same day as such purchase or sale.
7. "Officers" shall be deemed to include the Chairman, the
President, the Secretary, the Treasurer, and Executive Vice
President of the Trusts listed in the Certificate annexed hereto
<PAGE>
as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
8. "Oral Instructions" shall mean oral instructions
actually received by the Custodian from an Authorized Person (or
from a person which the Custodian reasonably believes in good
faith to be an Authorized Person) and confirmed by Written
Instructions from Authorized Persons in such manner so that such
Written Instructions are received by the Custodian on the next
business day.
9. "Prospectus" or "Prospectuses" shall mean the Funds'
currently effective prospectuses and statements of additional
information.
10. "Security or Securities" shall mean Money Market
Securities, common or preferred stocks, options, bonds,
debentures, corporate debt securities, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe
for the same, or evidencing or representing any other rights or
interest therein, or any property or assets.
11. "Written Instructions" shall mean communication
actually received by the Custodian from one Authorized Person or
from one person which the Custodian reasonably believes in good
faith to be an Authorized Person in writing, telex or any other
data transmission system whereby the receiver of such
communication is able to verify by codes or otherwise with a
reasonable degree of certainty the authenticity of the senders of
such communication.
<PAGE>
Article II
Appointment of Custodian
1. The Trusts, acting for and on behalf of their respective
Funds, hereby constitute and appoint the Custodian as custodian
of Securities and monies owned by the Funds during the period of
this Agreement ("Fund Assets").
2. The Custodian hereby accepts appointment as such
Custodian and agrees to perform the duties thereof as hereinafter
set forth.
Article III
Documents to be Furnished by the Trust
Each Trust hereby agrees to furnish to the Custodian the
following documents within a reasonable time after the effective
date of this Agreement:
1. A copy of its Declaration of Trust (the "Declaration of
Trust") certified by its Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. Copies of the most recent Prospectuses of the Trust.
4. A Certificate of the President and Secretary setting
forth the names and signatures of the present Officers of the
Trust.
<PAGE>
Article IV
Custody of Cash and Securities
1. Each Trust will deliver or cause to be delivered to the
Custodian Fund Assets, including cash received for the issuance
of its shares. The Custodian will not be responsible for such
Fund Assets until actually received by it. Upon such receipt, the
Custodian shall hold in safekeeping and physically segregate at
all times from the property of any other persons, firms or
corporations all Fund Assets received by it from or for the
accounts of the Funds. The Custodian will be entitled to reverse
any credits made on the Funds' behalf where such credits have
been previously made and monies are not finally collected within
90 days of the making of such credits. The Custodian is hereby
authorized by the Trusts, acting on behalf of the Funds, to
actually deposit any Fund Assets in the Book-Entry System or in a
Depository, provided, however, that the Custodian shall always be
accountable to the Trusts for the Fund Assets so deposited. Funds
Assets deposited in the Book-Entry System or the Depository will
be represented in accounts which include only assets held by the
Custodian for customers, including but not limited to accounts in
which the Custodian acts in a fiduciary or representative
capacity.
2. The Custodian shall credit to a separate account or
accounts in the name of each respective Fund all monies received
by it for the account of such Fund, and shall disburse the same
only:
<PAGE>
(a) In payment for Securities purchased for the account of such
Fund, as provided in Article V;
(b) In payment of dividends or distributions, as provided in
Article VI hereof;
(c) In payment of original issue or other taxes, as provided
in Article VII hereof;
(d) In payment for shares of such Fund redeemed by it, as
provided in Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and setting
forth the name and address of the person to whom the payment is
to be made, the amount of such payment and the purpose for which
payment is to be made (the Custodian not being required to
question such direction) or (ii) if reserve requirements are
established for a Fund by law or by valid regulation, directing
the Custodian to deposit a specified amount of collected funds in
the form of U. S. dollars at a specified Federal Reserve Bank and
state the purpose of such deposit; or
(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IX hereof.
3. Promptly after the close of business on each day the
Funds are open and valuing their portfolios, the Custodian shall
furnish the respective Trusts with a detailed statement of monies
held for the Funds under this Agreement and with confirmations
and a summary of all transfers to or from the account of the
Funds during said day. Where Securities are transferred to the
account of the Funds without physical delivery, the Custodian
shall also identify as belonging to the Funds a quantity of
<PAGE>
Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian
shall furnish the Trusts with a detailed statement of the
Securities held for the Funds under this Agreement.
4. All Securities held for the Funds, which are issued or
issuable only in bearer form, except such Securities as are held
in the Book-Entry System, shall be held by the Custodian in that
form; all other Securities held for the Funds may be registered
in the name of the Funds, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System
or the Depository or their successor or successors, or their
nominee or nominees. Each Trust agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry
System or the Depository, any Securities which it may hold for
the account of the Funds and which may from time to time be
registered in the name of the Funds. The Custodian shall hold all
such Securities which are not held in the Book-Entry System by
the Depository or a Sub-Custodian in a separate account or
accounts in the name of the Funds segregated at all times from
those of any other fund maintained and operated by the Trust and
from those of any other person or persons.
<PAGE>
5. Unless otherwise instructed to the contrary by a
Certificate, the Custodian shall with respect to all
Securities held for the Funds in accordance with this
Agreement:
(a) Collect all income due or payable to the Funds with
respect to each Fund's Assets;
(b) Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed,
or retired, or otherwise become payable;
(c) Surrender Securities in temporary form for definitive
Securities;
(d) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws
or the laws or regulations of any other taxing authority,
including any foreign taxing authority, now or hereafter in
effect; and
(e) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited,
for the account of the Funds all rights and similar
securities issued with respect to any Securities held by the
Custodian hereunder.
6. Upon receipt of Written Instructions and not
otherwise, the Custodian directly or through the use of the
Book-Entry System or the Depository shall:
(a) Execute and deliver to such persons as may be
designated in such Written Instructions proxies, consents,
authorizations, and any other instruments whereby the
authority of the Funds as owner of any Securities may be
exercised;
(b) Deliver any Securities held for the Funds in exchange
for other Securities or cash issued or paid in connection
<PAGE>
with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(c) Deliver any Securities held for the account of the
Funds to any protective committee, reorganization committee
or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale
of assets of any corporation, and receive and hold under the
terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery; and
(d) Make such transfers or exchanges of the assets of the
Funds and take such other steps as shall be stated in a
Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Funds.
7. The Custodian shall promptly deliver to each
respective Trust all notices, proxy material and executed
but unvoted proxies pertaining to shareholder meetings of
Securities held by the Funds. The Custodian shall not vote
or authorize the voting of any Securities or give any
consent, waiver or approval with respect thereto unless so
directed by a Certificate or Written Instruction.
8. The Custodian shall promptly deliver to the Trusts
all material and notices received by the Custodian and
pertaining to Securities held by the Funds with respect to
tender or exchange offers, calls for redemption or purchase,
expiration of rights, <PAGE>name changes, stock splits and stock
dividends, or any other activity involving ownership rights
in such Securities.
9. The Custodian shall conduct such periodic physical
inspection of Securities held by it under this Agreement as
it deems advisable to verify the accuracy of its inventory.
The Custodian shall promptly report to the Trusts any
discrepancies or shortages revealed by such inspections and
shall make every effort promptly to remedy such
discrepancies or shortages.
Article V
Purchase and Sale of Investments of the Funds
1. Promptly after each purchase of Securities by the
Funds, the respective Trust shall deliver to the Custodian
(i) with respect to each purchase of Securities which are
not Money Market Securities, a Certificate or Written
Instructions, and (ii) with respect to each purchase of
Money Market Securities, Written Instructions, a Certificate
or Oral Instructions, specifying with respect to each such
purchase: (a) the name of the issuer and the title of the
Securities, (b) the principal amount purchased and accrued
interest, if any, (c) the date of purchase and settlement,
(d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person
from whom or the broker through whom the purchase was made.
The Custodian shall upon receipt of Securities purchased by
or for the Funds, pay out of the monies held for the account
of the Funds the total amount payable to the person from
whom or the broker through whom the purchase was made,
provided that the same <PAGE>conforms to the total amount
payable as set forth in such Certificate, Written
Instructions or Oral Instructions.
2. Promptly after each sale of Securities by the
respective Trust for the account of the Funds, such Trust shall
deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate
or Written Instructions, and (ii) with respect to each sale of
Money Market Securities, Written Instructions, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a)
the name of the issuer and the title of the Security, (b) the
principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount
payable to the Funds upon such sale and (f) the name of the
broker through whom or the person to whom the sale was made. The
Custodian shall deliver the Securities upon receipt of the total
amount payable to the Funds upon such sale, provided that the
same conforms to the total amount payable as set forth in such
Certificate, Written Instructions or Oral Instructions. Subject
to the foregoing, the Custodian may accept payment in such form
as shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing
among dealers in Securities.
3. Promptly after the time as of which a Trust, on behalf
of a Fund, either -
(a) writes an option on Securities or writes a covered put
option in respect of a Security, or
<PAGE>
(b) notifies the Custodian that its obligations in respect
of any put or call option, as described in such Trust's
Prospectus, require that the Fund deposit Securities or
additional Securities with the Custodian, specifying the type and
value of Securities required to be so deposited, or
(c) notifies the Custodian that its obligations in respect
of any other Security, as described in each Fund's respective
Prospectus, require that the Fund deposit Securities or
additional Securities with the Custodian, specifying the type and
value of Securities required to be so deposited, the Custodian
will cause to be segregated or identified as deposited, pursuant
to the Fund's obligations as set forth in such Prospectus,
Securities of such kinds and having such aggregate values as are
required to meet the Fund's obligations in respect thereof.
The Trust will provide to the Custodian, as of the end of
each trading day, the market value of each Fund's option
liability, if any, and the market value of its portfolio of
common stocks.
4. On contractual settlement date, the account of each
respective Fund will be charged for all purchases settling on
that day, regardless of whether or not delivery is made. On
contractual settlement date, sale proceeds will likewise be
credited to the account of such Fund irrespective of delivery.
In the case of "sale fails", the Custodian may request the
assistance of the Trusts in making delivery of the failed
Security.
<PAGE>
Article VI
Payment of Dividends or Distributions
1. Each Trust shall furnish to the Custodian Written
Instructions to release or otherwise apply cash insofar as
available for the payment of dividends or other distributions to
Fund shareholders entitled to payment as determined by the
Dividend and Transfer Agent of the Funds. The Custodian may rely
on any such Written Instructions so received, and shall be
indemnified by the Trust providing such instructions for such
reliance.
2. Upon the payment date specified in such Written
Instructions, the Custodian shall arrange for such payments to be
made by the Dividend and Transfer Agent out of monies held for
the accounts of the Funds.
Article VII
Sale and Redemption of Shares of the Funds
1. The Custodian shall receive and credit to the account
of each Fund such payments for shares of such Fund issued or sold
from time to time as are received from the distributor for the
Fund's shares, from the Dividend and Transfer Agent of the Fund,
or from the Trust.
2. Upon receipt of Written Instructions, the Custodian
shall arrange for payment of redemption proceeds to be made by
the Dividend and Transfer Agent out of the monies held for the
account of the respective Funds in the total amount specified in
the Written Instructions.
<PAGE>
3. Notwithstanding the above provisions regarding the
redemption of any shares of the Funds, whenever shares of the
Funds are redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Funds, the
Custodian, unless otherwise subsequently instructed by Written
Instructions shall, upon receipt of any Written Instructions
setting forth that the redemption is in good form for redemption
in accordance with the check redemption procedure, or pursuant to
preauthorized Written Instructions or procedures established with
regard thereto, honor the check presented as part of such check
redemption privilege out of the money held in the account of the
Funds for such purposes.
Article VIII
Indebtedness
In connection with any borrowings, each Trust, on behalf of
its respective Funds, will cause to be delivered to the Custodian
by a bank or broker (including the Custodian, if the borrowing is
from the Custodian), requiring Securities as collateral for such
borrowings, a notice or undertaking in the form currently
employed by any such bank or broker setting forth the amount
which such bank or broker will loan to the Funds against delivery
of a stated amount of collateral. Each Trust shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the name of the bank or broker, (b) the
amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly
endorsed by the Trust, acting on behalf of a Fund, or other loan
<PAGE>
agreement, (c) the date and time, if known, on which the loan is
to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Fund on the
borrowing date, (f) the market value of Securities
collateralizing the loan, including the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities and (g) a statement that such loan is in
conformance with the Investment Company Act of 1940 and the
Fund's then current Prospectus. The Custodian shall deliver on
the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank or broker of the total amount of the
loan payable provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank or broker, keep such collateral in
its possession, but such collateral shall be subject to all
rights therein given the lending bank or broker, by virtue of any
promissory note or loan agreement. The Custodian shall deliver in
the manner directed by the Trust from time to time such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in
this paragraph. Such Trust shall cause all Securities released
from collateral status to be returned directly to the Custodian
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that a Trust
fails to specify in a Certificate the name of the issuer, the
title and number of shares or the principal amount of any
<PAGE>
particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities. The Custodian may require such reasonable
conditions with respect to such collateral and its dealings with
third-party lenders as it may deem appropriate.
Article IX
Concerning the Custodian
1. Except as otherwise provided herein, the Custodian
shall not be liable for any loss or damage, including counsel
fees, resulting from its action or omission to act or otherwise,
except for any such loss or damage arising out of its own
negligence or willful misconduct. Each Trust, on behalf of its
Funds and only from applicable Fund Assets (or insurance
purchased by a Trust with respect to its liabilities on behalf of
its Funds hereunder), shall defend, indemnify and hold
harmless the Custodian, its officers, employees and agents,
with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to
arise from or relating to each Trust's duties with respect
to its Funds hereunder or any other action or inaction of
the respective Trust or its Trustees, Officers, employees or
agents as to the Funds, except such as may arise from the
negligent action, omission or willful misconduct of the
Custodian, its officers, employees or agents. The Custodian
shall defend, indemnify and hold harmless each Trust and its
Trustees, Officers, employees or agents with respect to any
loss, claim, liability or cost (including reasonable
attorneys' fees) arising or alleged to arise from or relating to
<PAGE>
the Custodian's duties with respect to the Funds hereunder
or any other action or inaction of the Custodian or its
Trustees, Officers, employees, agents, nominees or Sub-
Custodians as to the Funds, except such as may arise from
the negligent action, omission or willful misconduct of the
Trust, its Trustees, Officers, employees or agents. The
Custodian may, with respect to questions of law apply for
and obtain the advice and opinion of counsel to the Trusts
at the expense of the Funds, or of its own counsel at its
own expense, and shall be fully protected with respect to
anything done or omitted by it in good faith in conformity
with the advice or opinion of counsel to the Trusts, and
shall be similarly protected with respect to anything done
or omitted by it in good faith in conformity with the advice
or opinion of its counsel, unless counsel to the Funds
shall, within a reasonable time after being notified of
legal advice received by the Custodian, have a differing
interpretation of such question of law. The Custodian shall
be liable to the Trusts for any proximate loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance
or misconduct on the part of the Custodian or any of its
employees, agents, nominees or Sub-Custodians but not for
any special, incidental, consequential, or punitive damages;
provided, however, that nothing contained herein shall
preclude recovery by a Trust, on behalf of its Funds, of
principal and of interest to the date of recovery on,
Securities incorrectly omitted from or included in a Fund's
<PAGE>
accounts or penalties imposed on the Trusts, in connection
with the Funds, therefrom or for any failures to deliver
Securities.
In any case in which one party hereto may be asked to indemnify the other
or hold the other harmless, the party from
whom indemnification is sought (the "Indemnifying Party") shall
be advised of all pertinent facts concerning the situation in
question, and the party claiming a right to indemnification (the
"Indemnified Party") will use reasonable care to identify and
notify the Indemnifying Party promptly concerning any situation
which presents or appears to present a claim for indemnification
against
the Indemnifying Party. The Indemnifying Party shall have
the option to defend the Indemnified Party against any claim
which may be the subject of the indemnification, and in the event
the Indemnifying Party so elects, such defense shall be conducted
by counsel chosen by the Indemnifying Party and satisfactory to
the Indemnified Party and the Indemnifying Party will so notify
the Indemnified Party and thereupon such Indemnifying Party shall
take over the complete defense of the claim and the Indemnifying
Party shall sustain no further legal or other expenses in such
situation for which indemnification has been sought under this
paragraph, except the expenses of any additional counsel retained
by the Indemnified Party. In no case shall any party claiming the
right to indemnification confess any claim or make any compromise
in any case in which the other party has been asked to indemnify
such party (unless such confession or compromise is made with such
other party's prior written consent).
<PAGE>
The Custodian acknowledges the limitation of liability
provisions of Article XI of each Trust's Declaration of Trust and
agrees that the obligations and liabilities of each Trust under
this Agreement shall be limited by and to the extent of the Trust
and its assets and that the Custodian shall not be entitled to
seek satisfaction of any such obligation or liability from the
Trusts' shareholders, Trustees, Officers, employees or agents.
The obligations of the parties hereto under this
paragraph shall survive the termination of this Agreement.
2. Without limiting the generality of the foregoing,
the Custodian, acting in the capacity of Custodian
hereunder, shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities purchased
by or for the account of the Funds, the legality of the
purchase
thereof, or the propriety of the amount paid therefor;
(b) The legality of the sale of any Securities by or for
the account of the Funds, or the propriety of the amount for
which the same are sold;
(c) The legality of the issue or sale of any shares of the
Funds, or the sufficiency of the amount to be received
therefor;
(d) The legality of the redemption of any shares of the
Funds, or the propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any
dividend by the Trust in respect of shares of the Funds;
(f) The legality of any borrowing by the Trust, on behalf
of the Funds, using Securities as collateral;
<PAGE>
(g) The sufficiency of any deposit made pursuant to a
Certificate described in clause (ii) of paragraph 2(e) of
Article IV hereof.
3. The Custodian shall not be liable for any money or
collected funds in U.S. dollars deposited in a Federal
Reserve Bank other than the Custodian in accordance with a
Certificate described in clause (ii) of paragraph 2(e) of
Article IV hereof, nor be liable for or considered to be the
Custodian of any money, whether or not represented by any
check, draft, or other instrument for the payment of money,
received by it on behalf of the Funds until the Custodian
actually receives and collects such money directly or by the
final crediting of the account representing the Funds'
interest at the Book-Entry System or Depository.
4. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount
due to the Funds from the Dividend and Transfer Agent of the
Funds nor to take any action to effect payment or
distribution by the Dividend and Transfer Agent of the Funds
of any amount paid by the Custodian to the Dividend and
Transfer Agent of the Funds in accordance with this
Agreement.
5. Income due or payable to the Funds with respect to
Funds Assets will be credited to the account of the Funds as
follows:
(a) Dividends will be credited on the first business day
following payable date irrespective of collection.
<PAGE>
(b) Interest on fixed rate municipal bonds and debt
securities issued or guaranteed as to principal and/or
interest by the government of the United States or agencies
or instrumentalities thereof (excluding securities issued by
the Government National Mortgage Association) will be
credited on payable date irrespective of collection.
(c) Interest on fixed rate corporate debt securities will
be credited on the first business day following payable date
irrespective of collection.
(d) Interest on variable and floating rate debt securities
and debt securities issued by the Government National
Mortgage Association will be credited upon the Custodian's
receipt of funds.
(e) Proceeds from options will be credited upon the
Custodian's receipt of funds.
6. Notwithstanding paragraph 5 of this Article IX, the
Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities
upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction
of reimbursement of its costs and expenses in connection
with any such action or, at the Custodian's option,
prepayment.
7. The Custodian may appoint one or more financial or
banking institutions, as Depository or Depositories or as Sub-
Custodian or Sub-Custodians, including, but not limited to,
<PAGE>
banking institutions located in foreign countries, of
Securities and monies at any time owned by the Funds, upon
terms and conditions approved in a Certificate. Current
Depository(s) and Sub-Custodian(s) are noted in Appendix B.
The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the
appointment or activities of such Depositories or Sub-
Custodians.
8. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time
delivered to or held by it for the account of the Funds are
such as properly may be held by the Funds under the
provisions of the Declarations of Trust and the Trusts' By-
Laws.
9. The Custodian shall treat all records and other
information relating to the Trusts, the Funds and the Funds'
Assets as confidential and shall not disclose any such
records or information to any other person unless (a) the
respective Trust shall have consented thereto in writing or
(b) such disclosure is compelled by law.
10. The Custodian shall be entitled to receive and the
Trusts agree to pay to the Custodian such compensation as shall
be determined pursuant to Appendix C attached hereto, or as shall
be determined pursuant to amendments to such Appendix approved by
the Custodian and the Trust, on behalf of the Funds. The
Custodian shall be entitled to charge against any money held by
it for the account of the Funds the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this
<PAGE>
Agreement as determined by agreement of the Custodian and
the applicable Trust or by the final order of any court or
arbitrator having jurisdiction and as to which all rights of
appeal shall have expired. The expenses which the Custodian
may charge against the accounts of the Funds include, but
are not limited to, the expenses of Sub-Custodians incurred
in settling transactions involving the purchase and sale of
Securities of the Funds.
Notwithstanding the above, to the extent such compensation
and expenses of the Custodian are paid to the Custodian by the
Adviser pursuant to the services agreements between the Trusts
and the Adviser, no charges shall be made against the accounts of
the Funds by the Custodian.
11. The Custodian shall be entitled to rely upon any
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or V hereof. Each Trust
agrees to forward to the Custodian Written Instructions from
Authorized Persons confirming Oral Instructions in such manner so
that such Written Instructions are received by the Custodian,
whether by hand delivery, telex or otherwise, on the first
business day following the day on which such Oral Instructions
are given to the Custodian. Each Trust agrees that the fact that
such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Trust. Each Trust agrees that the Custodian shall incur no
<PAGE>
liability to the Funds in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions.
12. The Custodian will (a) set up and maintain proper
books of account and complete records of all transactions in
the accounts maintained by the Custodian hereunder in such
manner as will meet the obligations of the Funds under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31 a-1 and 31 a-2 thereunder,
and (b) preserve for the periods prescribed by applicable
Federal statute or regulation all records required to be so
preserved. The books and records of the Custodian shall be
open to inspection and audit at reasonable times and with
prior notice by officers and auditors employed by the
Trusts.
13. The Custodian and its Sub-Custodians shall
promptly send to the Trusts, for the account of the Funds,
any report received on the systems of internal accounting
control of the Book-Entry System or the Depository and with
such reports on their own systems of internal accounting
control as the Trusts may reasonably request from time to
time.
14. The Custodian performs only the services of a
custodian and shall have no responsibility for the
management, investment or reinvestment of the Securities
from time to time owned by the Funds. The Custodian is not a
selling agent for shares of the Funds and performance of its
duties as a custodial agent shall not be deemed to be a
recommendation to the Custodian's depositors or others of
shares of the Funds as an investment.
<PAGE>
Article X
Termination
1. The Custodian or any of the Trusts may terminate this
Agreement for any reason by giving to the other party a notice in
writing specifying the date of such termination, which shall be
not less than ninety (90) days after the date of giving of such
notice. If such notice is given by any Trust, on behalf of any of
its Funds, it shall state in writing that the Trust is electing
to terminate this Agreement and shall designate a successor
custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. In the event such notice is given
by the Custodian, the Trusts shall, on or before the termination
date, deliver to the Custodian a copy of a resolution of their
Board of Trustees, certified by the Secretary or Assistant
Secretary, designating a successor custodian or custodians to act
on behalf of the Funds. In the absence of such designation by the
Trusts, the Custodian may designate a successor custodian which
shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus, and undivided profits. Upon the date
set forth in such notice this Agreement shall terminate, and the
Custodian, provided that it has received a notice of acceptance
by the successor custodian, shall deliver, on that date, directly
to the successor custodian all Securities and monies then owned
by the Funds and held by it as Custodian. Upon termination of
this Agreement, the Trusts shall pay to the Custodian on behalf
of the Funds such compensation as may be due as of the date of
<PAGE>
such termination. The Trusts agree on behalf of the Funds that
the Custodian shall be reimbursed for its reasonable costs in
connection with the termination of this Agreement.
2. If a successor custodian is not designated by the
Trusts, on behalf of the Funds, or by the Custodian in accordance
with the preceding paragraph, or the designated successor cannot
or will not serve, each Trust shall upon the delivery by the
Custodian to each Trust of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the
Trust) and monies then owned by its Funds, other than monies
deposited with a Federal Reserve Bank pursuant to a Certificate
described in clause (ii) of paragraph 2(e) of Article IV, be
deemed to be the custodian for its Funds, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant
to this Agreement, other than the duty with respect to Securities
held in the Book-Entry System which cannot be delivered to the
Trust to hold such Securities hereunder in accordance with this
Agreement.
Article XI
Miscellaneous
1. Appendix A sets forth the names and the signatures of
all Authorized Persons. Each Trust agrees to furnish to the
Custodian, on behalf of its Funds, a new Appendix A in form
similar to the attached Appendix A, if any present Authorized
Person ceases to be an Authorized Person or if any other or
additional Authorized Persons are elected or appointed. Until
such new Appendix A shall be received, the Custodian shall be
<PAGE>
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered Appendix A.
2. No recourse under any obligation of this Agreement or
for any claim based thereon shall be had against any organizer,
shareholder, Officer, Trustee, past, present or future as such,
of the Trusts or of any predecessor or successor, either directly
or through the Trusts or any such predecessor or successor,
whether by virtue of any constitution, statute or rule of law or
equity, or by the enforcement of any assessment or penalty or
otherwise; it being expressly agreed and understood that this
Agreement and the obligations thereunder are enforceable solely
against Fund Assets, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the organizers,
shareholders, Officers, Trustees of the Trusts or of any
predecessor or successor, or any of them as such, because of the
obligations contained in this Agreement or implied therefrom and
that any and all such liability is hereby expressly waived and
released by the Custodian as a condition of, and as a
consideration for, the execution of this Agreement.
3. The obligations set forth in this Agreement as having
been made by the Trusts have been made by each Trust for and on
behalf of its Funds, pursuant to the authority vested in the
Trusts under the laws of the Commonwealth of Massachusetts, the
Declarations of Trust and the By-Laws of the Trusts. This
Agreement has been executed by Officers of the Trusts as
officers, and not individually, and the obligations contained
<PAGE>
herein are not binding upon any of the Trustees, Officers, Agents
or holders of shares, personally, but bind only the Trusts and
then only to the extent of the respective Trust's Fund Assets.
4. Such provisions of the Prospectuses of the Funds and any
other documents (including advertising material) specifically
mentioning the Custodian (other than merely by name and address)
shall be reviewed with the Custodian by the Trust.
5. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at Star Bank Center, 425 Walnut
Street, M. L. 5127, Cincinnati, Ohio 45202, attention Mutual
Funds Custody Department, or at such other place as the Custodian
may from time to time designate in writing.
6. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to any Trust shall be
sufficiently given if addressed to the Trust and mailed or
delivered to it at its office at 1655 Fort Myer Drive, 10th
Floor, Arlington, Virginia 22209, or at such other place as the
Trusts may from time to time designate in writing.
7. This Agreement with the exception of Appendices A & B
may not be amended or modified in any manner except by a written
agreement executed by all parties provided that no amendment
shall be in contravention of or inconsistent with any federal or
state law or regulation or the Declarations of Trust or By-Laws
of the Trusts.
<PAGE>
8. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Trusts or by the Custodian, and no attempted assignment by
the Trusts or the Custodian shall be effective without the
written consent of the other party hereto.
9. This Agreement shall be construed in accordance with the
laws of the State of Ohio.
10. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
11. Where applicable and required based upon the context
used, the singular of any term used in this Agreement shall
include the plural and the plural may refer to the singular.
In Witness Whereof, the parties hereto have caused this Agreement
to be executed by their respective Officers, thereunto duly
authorized as of the day and year first above written.
Attest: Government Investors Trust
GIT Equity Trust, GIT Income
Trust and GIT Tax-Free Trust
(signature) (signature)
W. Richard Mason By: C.J. Tennes
Attest: Star Bank, N.A.
(signature) (signature)
Stephen J. Black By: Lynette C. Gibson
Senior Trust Officer
<PAGE>
Appendix A
Authorized Persons Specimen Signatures
Fund Officers:
Charles J. Tennes (signature)
W. Richard Mason (signature)
Adviser Employees:
Julia Mailliard (signature)
John Edwards* (signature)
Jason L. Michel* (signature)
T. Daniel Gillespie* (signature)
See Signature Cards for Additional Adviser Employees Authorized To
Sign Checks on Fund Accounts
* Denotes authority restricted to securities trades.
Amendment Dated: February 13, 1995
<PAGE>
Appendix B
The following Depository(s) and Sub-Custodian(s) are employed
currently by Star Bank, N.A. for securities processing and control
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
<PAGE>
Schedule C
Star Bank, N.A. as Custodian, will receive monthly compensation
for services according to the terms of the following Schedule:
I. Portfolio Transaction Fees:
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $10.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security purchase$40.00
(e) For each GNMA/Prin/Int Paydown, GNMA
Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $100.00
(h) For each Disbursement (Fund expenses only)$5.00
A transaction is a purchase/sale of a security, free receipt/
free delivery (excludes initial conversion), maturity, tender
or exchange:
II. Monthly Market Value Fee
Based upon Month-end at a rate of: Million
.0002 (2 Basis Points) on First $50
.0001 (1 Basis Points) on Next $25
.000075 (3/4 Basis Point) on Balance
III. Out-of-Pocket Expenses
The only out-of-pocket expenses charged to your account
will be shipping fees or transfer fees.
IV. IRA Documents
Per Shareholder/year to hold each IRA Document $8.00
V. Earnings Credits
On a monthly basis any earnings credits generated from univested
custody balances will be first applied against any cash management
service fees and then to custody transaction fees (as referenced
in item #1 above). Earnings credits are based on the average yield
on the 91 day U.S. Treasury Bill for the preceding thirteen weeks
less the 10% reserve.
<PAGE>
Amendment To Agreement
This Amendment is made effective the 15th day of November,
1993 to the Custody Agreement made as of September 8, 1993
by and between Government Investors Trust, GIT Equity Trust,
GIT Income Trust and GIT Tax-Free Trust (the "Trust") and
Star Bank, N.A. (the "Custodian") to provide custodian
services to the Funds.
The Trusts and the Custodian agree to amend the Agreement as
follows:
1. This sentence shall be added to the first paragraph:
Custodian agrees to retain custody of U.S. Government
Securities and securities issued and sold primarily in the
United States. Pursuant to Paragraph 7 of Article IX of
this Agreement, Custodian hereby appoints Bankers Trust
Company as Sub-Custodian to retain custody of foreign
securities in accordance with the terms and conditions of
the Agreement dated as November 15, 1993 between Bankers
Trust Company and Star Bank, N.A. attached hereto as
Appendix D (the "Sub-Custodian Agreement"). The Trust
hereby acknowledges such appointment and expressly agrees to
the terms and conditions set forth in the Sub-Custodian
Agreement.
2. A new Paragraph 12 shall be added to Article I,
Definitions as follows.
"Foreign Securities" include securities issued and sold
primarily outside of the United States by a foreign
government, a national of any foreign country or a
corporation or other organization incorporated or organized
under the laws of any foreign country and securities issued
or guaranteed by the Government of the United States or by
any state or any political subdivision thereof or by any
agency thereof by any entity organized under the laws of the
United States or of any state thereof which have been issued
and sold primarily outside the United States.
In Witness Whereof, the parties hereby ratify and affirm the
Agreement in its entirety as amended by this Amendment.
Attest:
(signature) W. Richard Mason
Government Investors Trust,
GIT Equity Trust, GIT Income Trust
and GIT Tax-Free Trust
By: (signature) C. J. Tennes
Attest:
(signature) Stephen J Blackwell, Trust Officer
Star Bank, N.A.
By: (signature) Lynnette C. Gibson, Senior Trust Officer
<PAGE>
Appendix D
Custodian Agreement
Agreement dated as of 11/15, 1993, between Bankers Trust
Company (the "Custodian") and Star Bank, N.A. (the
"Customer"). Customer represents and Custodian acknowledges
that it is entering into this Agreement solely as Custodian
of GIT Equity Trust Worldwide Growth Portfolio, (the
"Portfolio"), its client, with whom Customer has a Custody
Agreement, and, Portfolio is a third party beneficiary of
this Agreement between Customer and Custodian.
1. Employment of Custodian. The Customer hereby employs
the Custodian as custodian of all assets of the Customer
which are delivered to and accepted by the Custodian or any
of its subcustodians (as that term is defined in Section 5)
anywhere in the world (the "Property") pursuant to the terms
and conditions set fort herein. Without limitation, such
Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments
representing same or rights or obligations to received,
purchase, deliver or sell same and other non-cash investment
property of the Customer ("Securities") and cash from
whatever source and in whatever currency ("Cash"). The
Custodian shall not be responsible for any property of the
Customer held or received by the Customer or others and not
delivered to the Custodian or any of its subcustodian.
2. Custody Account. The Custodian agrees to establish and
maintain a custody account in the name of the Customer (the
"Account") for any and all Property from time received and
accepted by the Custodian or nay of its subcustodians for
the account of the Customer. The Customer acknowledges its
responsibility as a principal for all of its obligations to
the Custodian arising under or in connection with this
Agreement, notwithstanding that it may be acting on behalf
of Portfolio and warrants its authority to deposit in the
Account and Property received therefor by the Custodian
shall not be subject to, nor shall its rights and
obligations under this Agreement or with respect to the
Account be affected by, any agreement between the Customer
and other person.
The Custodian shall hold, keep safe and protect as custodian
in the Account, on behalf of the Customer, all Property.
All transactions, including, but not limited to, foreign
exchange transactions, involving the Property shall be
executed or settled solely in accordance with Instructions
(as that term is defied in Section 10), except that until
the Custodian receives Instructions to the contrary, the
Custodian will:
(a) collect all interest and dividends and all other income
payments whether paid in cash or in kind, on the Property,
as the same become payable and credit the same to the
Account;
(b) present for payment all Securities held in the Account
which are called, redeemed or retired or otherwise become
payable and all coupons and other income items which call
for payment upon presentation and hold the cash received in
the Account pursuant to this Agreement;
<PAGE>
(c) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves);
(d) whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock
dividend or stock split is received for the Account and such
rights entitlement or fractional interest bears and
expiration date, if after endeavoring to obtain the
Custodian's Instructions such Instructions are not received
in time for the Custodian to take timely action, sell in the
discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or
fractional interest and credit the Account with the net
proceeds of such sale;
(e) executed in the Customer's name for the Account,
whenever the Custodian deems it appropriate, such ownership
and other certificates as may be required to obtain the
payment of income from the Property; and
(f) pay for the Account, any and all taxes and levies in the
nature of taxes imposed on income on the Property by any
governmental authority. In the event there is insufficient
Cash available in the Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in the Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with
the payment of any such taxes to cooperate with the
Custodian in furnishing information, executing documents or
otherwise.
The Custodian shall deliver, subject to Section 12 below,
and all Property in the Account in accordance with
instructions and in connection therewith, the Customer will
accept delivery of Securities of the same class and
denomination in place of those contained in the Account.
Neither the Custodian nor any subcustodian shall have any
duty or responsibility to see to the application of any
Property withdrawn from the Account upon Instructions.
Except as otherwise may be agreed upon by the parties
hereto, the Custodian shall not be required to comply with
any Instructions to settle the purchase of any Securities
for the Account unless there is sufficient Cash in the
Account at the time or to settle the sale of any Securities
form the Account unless such Securities are in deliverable
form. Notwithstanding the foregoing, if the purchase price
of such Securities exceeds the amount of Cash in the Account
at the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any
such advance shall be deemed a loan from the Custodian to
the Customer payable on demand and bearing interest accruing
from the date such loan is made to but not including the
date such loan is repaid at a rate per annum customarily
charged by the Custodian on similar loans.
3. Records, Ownership of Property and Statements. The
ownership of the Property whether Securities, Cash and/or
other property, and whether held by the Custodian or a
subcustodian or in a securities depository or clearing
agency as hereinafter authorized, shall be clearly recorded
on the
<PAGE>
Custodian's books as belonging to the Account and not for
the Custodian's own interest. The Custodian shall keep
accurate and detailed accounts of all investments, receipts,
disbursements and other transactions for the Account. All
account, books and records of the Custodian relating thereto
shall be open to inspection and audit at all reasonable
times during normal business hours by any person designated
by the Customer. The Custodian will supply to the Customer
from time to time, as mutually agreed upon, a statement in
respect to any Property in the Account held by the Custodian
or by a subcustodian. In the absence of the filing in
writing with the Custodian by the Customer of exceptions or
objections to any such statement within sixty (60) days of
the mailing thereof, the Customer shall be deemed to have
approved such statement; and in such case or upon written
approval of the Customer of any such statement, the
Custodian shall, to the extent permitted by law, be
released, relieved and discharged with respect to all
matters and things set forth in such statement as though
such statement had been settled by the decree of a court of
competent jurisdiction in any action in which the Customer
and all persons having any equity interest in the Customer
were parties.
4. Maintenance of Property Outside of the United States.
Property in the Account may be held in a country or other
jurisdiction outside of the United States; provided that (a)
with respect to Securities, such country or other
jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or
other jurisdiction in which such Securities are to be
presented for payment or acquired for the Account and (b)
with respect to cash, the amount thereof to be maintained in
any country or other jurisdiction shall be an amount which
is deemed necessary to settle transactions relating to
Securities purchased for the Account in such country or
jurisdiction or which is received in connection with the
holding of such Securities in the Account.
5 Subcustodians and Securities Depositories. The Custodian
may employ, directly or in directly, one or more
subcustodians to assist in the performance of its
obligations hereunder; provided however, that the employment
of any such subcustodians (other than any such subcustodian
which is a securities depository or clearing agency) the
Custodian shall only be responsible or liable for loses
arising from such employment caused by the Custodian's own
failure to exercise reasonable care.
The Customer authorizes and instructs the Custodian to hold
the Property in the Account in custody accounts which have
been established by the Custodian with one of its branches,
a branch of another U.S. bank, a foreign bank or trust
company acting as custodian or a securities depository in
which the Custodian participants. Hereinafter, the term
"subcustodian" will refer to any third-party agent referred
to in the first sentence of this paragraph which has entered
into an agreement with the Custodian of the type
contemplated hereunder regarding Securities and/or Cash held
in or to be acquired for the Account. In addition the
Customer also authorizes the Custodian to authorize any
subcustodian to hold the Property in the Account in one or
more accounts with securities depositories or clearing
agencies in which such subcustodian participates subject to
the provisions set forth below. The Custodian shall select
in its sole discretion the entity or entities in the custody
of which any of the Securities may be so maintained or with
which any Cash may be so deposited. Furthermore, any entity
so selected in authorized to hold such Securities or Cash in
its account with any securities depository or clearing
agency in which it participates.
6. Use of Subcustodian. With respect to Securities in the
Account which are maintained by the Custodian in the custody
of a subcustodian pursuant to Section 5,
<PAGE>
(a) The Custodian will identify on its books as belonging to
the Customer any Securities held by such subcustodian.
(b) In the event that a subcustodian permits any of the
Securities placed in its care to be held in a securities
depository or clearing agency, such subcustodian will be
required by its agreement with the Custodian to identify on
its books such Securities as being held for the account of
the Custodian for its customers.
(c) Any Securities in the Account held by a subcustodian
will be subject only to the instructions of the Custodian or
its agents unless specifically otherwise authorized by the
Custodian on an exception basis; and any Securities held in
a securities depository or clearing agency for the account
of the Custodian or a subcustodian will be subject only to
the instructions of the Custodian or such subcustodian, as
the case may be.
(d) Securities deposited with a subcustodian will be
maintained in an account holding only assets for customers
of the Custodian
(e) Any agreement the Custodian shall enter into with a
subcustodian with respect to the holding of securities shall
require that (i) the Securities are not subject to any
right, charge, security interest lien or claim of any kind
in favor of such subcustodian except a claim for payment in
accordance with such agreement for their safe custody or
administration and expenses related thereto and (ii)
beneficial ownership of such Securities be freely
transferable without the payment of money or value other
than for safe custody or administration and expenses related
thereto.
(f) Upon request by the Customer, the Custodian will
identify the name, address and principal place of business
of any subcustodian and the name and address of the
governmental agency or other regulatory authority that
supervises or regulates such subcustodian.
7. Holding of Securities, Nominees, etc. Securities in the
Account which are held by the Custodian or any subcustodian
may be held by such entity in the name of the Customer, in
its own name, in the name of its nominee or in bearer form.
Securities which are held with a subcustodian or are
eligible for deposit in a securities depository as provided
above may be maintained with the subcustodian or depository,
as the case may be, in an account for the Custodian's or
subcustodian's customers. The Custodian or subcustodian, as
the case may be, may combine certificates of the same issue
held by it as fiduciary or as a custodian. In the event
that any Securities in the name of the Custodian or its
nominee or held by one of its subcustodians and registered
in the name of such subcustodian or its nominee are called
for partial redemption by the issuer or such Security, the
Custodian may, subject to the rules or regulations
pertaining to allocation of any securities depository in
which such Securities have been deposited, allot, or cause
to allotted, the called portion to the respective beneficial
holders of such class of security in any manner the
Custodian deems to fair and equitable.
<PAGE>
8. Proxies, etc. With respect to any proxies, notices,
reports other communications relative to any of the
Securities in the Account, the Custodian shall perform such
services relative thereto as may be agreed upon between the
Custodian and the Customer. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of
the Securities in the Account, execute any form of proxy to
vote thereon, or give any consent or take any action (except
as provided in Section 2) with respect the thereto except
upon the receipt of Instructions from the Customer relative
thereto.
9. Settlement Procedures Settlement and payment for
Securities received for the Account and delivery of
Securities maintained for the Account may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the
purchase thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such Securities
from such purchaser or dealer, and in accordance with the
standard operating procedures of the Custodian in effect
from time to time for that jurisdiction or market.
10. Instructions. The term "Instruction" means instructions
from the Customer in respect of any of the Custodian's
duties hereunder which have been received by the Custodian
at its address set forth in Section 15 below in writing or
by tested telex signed or given by such one or more person
or persons as the Customer shall have from time to time
authorized to give the particular class of Instructions in
question and whose name ad (if applicable) signature and
office address have been filed with the Custodian, or upon
receipt of such other form of instructions as the Customer
may from time to time authorized in writing and which the
Custodian agrees to accept. The Custodian shall have the
right to assume in the absence of notice to the contrary
from the Customer that any person whose name is on file with
the Custodian pursuant to this Section 10 has been
authorized by the Customer to give the Instructions in
question and that such authorization has not been revoked.
11. Standard of Care. The Custodian shall be responsible
for the performance of only such duties as are set forth
herein or contained in Instructions given to he Custodian
which are not contrary to the provisions of this Agreement.
The Custodian will use reasonable care with respect to the
safekeeping of Securities in the Account and in carrying out
its obligations under the Agreement. So long as and to the
extent that it has exercised reasonable care, the Custodian
shall not be responsible for the title, validity or
genuineness of any Property or other property or evidence or
title thereto received by it or delivered by it pursuant to
this Agreement and shall be held harmless in acting upon,
and may conclusively rely on, without liability for any loss
resulting therefrom, any notice, request, consent,
certificate or other instrument reasonably believed by it to
be genuine and to be signed or furnished by the proper party
or parties, including, without limitation, Instructions, and
shall be indemnified by the Customer for any losses,
damages, costs and expenses (including, without limitation,
the fees and expenses of counsel) incurred by the Custodian
and arising out of action take or omitted in good faith by
the Custodian hereunder or under any Instructions. The
Custodian shall be liable to the Customer for any loss which
shall occur directly as the result of the failure of a
subcustodian (other than any subcustodian which is a
securities depository or clearing agency the actions or
omissions for which the Custodian's liability and
responsibility is set forth in the last proviso of the first
paragraph of Section 5) to exercise reasonable care with
respect to the safekeeping of such Securities. In the event
of any loss to the Customer by reason of the failure of the
Custodian or its subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent
of the Customer's actual damages at the time such loss was
discovered without reference to any special conditions or
circumstances. In no event shall the
<PAGE>
Custodian be liable for any consequential or special
damages. The Custodian shall be entitled to rely, and may
act, on advice of counsel (who may be counsel for the
Customer) on all matters and shall be without liability for
any action reasonably taken or omitted pursuant to such
advice.
All collections of funds or other property paid or
distributed in respect of Securities in the Account,
including funds involved in third-party foreign exchange
transactions, shall be made at the risk of the Customer.
The Custodian shall have no liability for any loss
accessioned by delay in the actual receipt of notice by the
Custodian or by its subcustodian of any payment, reception
or other transaction regarding Securities in the Accounting
respect of which the Custodian has agreed to take action as
provided in Section 2 hereof. The Custodian shall not be
liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de
jur or de facto), including, without limitation,
nationalization, expropriation, and the imposition of
currency restrictions; acts of war, terrorism, insurrection
or revolution; strikes or work stoppages; the inability of a
local clearing and settlement system to settle transactions
for reasons beyond the control of the Custodian; hurricane,
cyclone, earthquake, volcanic eruption, nuclear fusion,
radioactivity or other acts of God.
The provisions of this Section shall survive termination of
this Agreement.
12. Fees and Expenses. The Customer agrees to pay to the
Custodian such compensation for its services pursuant to
this Agreement as may be mutually agreed upon in writing
from time to time and the Custodian's out-of-pocket or
incidental expenses, including (but not limitation) legal
fees. The Customer hereby agrees to hold the Custodian
harmless from any liability or loss resulting from any taxes
or other governmental charges, and any expense related
thereto, which may be imposed, or assessed with respect to
any Property in the Account and also agrees to hold the
Custodian, its subcustodians, and their respective nominees
harmless from any liability as a record holder of Property
in the Account. The Custodian is authorized to charge any
account of the Customer for such items. The provisions of
this Section shall survive the termination of this
Agreement.
13. Amendment, Modifications, etc. No provisions of this
Agreement may amended, modified or waived except in writing
signed by the parties hereto.
14. Termination. This Agreement may be terminated by the
Customer or the Custodian by ninety (90) days' notice to the
other; provided that notice by the Customer shall specify
the names of the persons to who the Custodian shall deliver
the Securities in the Account and to whom the Cash in the
Account shall be paid. If notice of termination is given by
the Custodian, the Customer shall, within ninety (90) days
following the giving of such notice, deliver to the
Custodian a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities
in the Account and to whom the Cash in the Account shall be
paid. In either case, the Custodian will deliver such
Securities and Cash to the persons so specified, after
deducting therefrom any amounts which the Custodian
determines to be owed to it under Section 12. In addition,
the Custodian may in its discretion withhold from such
delivery such Cash and Securities as may be necessary to
settle transactions pending at the time of such delivery.
If within ninety (90) days following the giving of a notice
of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the
names of the persons to whom the Cash in the Account shall
be paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a ban or trust company doing
business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or may
continue to hold such Securities and Cash until a written
notice as aforesaid is delivered to the Custodian.
<PAGE>
15. Notices. Expect as otherwise provided in this Agreement,
all requests, demands or other communications between the
parties or notices in connection herewith (a) shall be in
writing, had delivered or sent by telex, telegram, facsimile
or cable, addressed, if to the Customer, its address set
forth on the signature page hereof and, if to the Custodian,
to c/o BTNY Services, Inc., 34 Exchange Place, Jersey City,
New Jersey 07302, Attention: Global Securities Services.
(Telex No. 420066 Area 19 Answerback: BANTRUS) (Facsimile
No.201-860-7290), or in either case such other address as
shall have been furnished to the receiving party pursuant to
the provisions hereof and (b) shall be deemed effective when
received, or, in the case of a telex, when sent to the
proper number and acknowledged by a proper answerback.
16. Security for Payment. To secure payment of all fees and
expenses payable to Custodian hereunder, including but not
limited to amounts payable pursuant to indemnification
provisions and to the last paragraph of Section 2, the
Customer hereby grants to Custodian a continuing security
interest in and right to setoff against the Account and all
Property held therein from time to time in the full amount
of such obligations; provided that, if the Account consists
of more than one portfolio and the obligations secured
pursuant to this Section 16 can be allocated to a specific
portfolio, such security interest and right of setoff will
be limited to any amounts owned hereunder, Custodian shall
be entitled to use available Cash in the Account or such
applicable portion thereof held for a specific portfolio, as
the case may be, and to dispose of Securities in the Account
or such applicable portion thereof as is necessary. In the
event Securities in the Account or such applicable portion
thereof are insufficient to discharge such obligations, the
Customer hereby grants Custodian a continuing security
interest in and right of setoff against the balance from
time to time in any non-custodian account of the Customer
(the "Pledged Balances"), and Custodian may, at any time or
from time to time at Custodian's sole option and without
notice appropriate and apply toward the payment of such
obligations, the Pledged Balances. If at any time Property
in the Account or such applicable portion thereof and the
Pledge Balances are insufficient to fully collateralize such
obligations, Customer shall provide to Custodian additional
collateral in form and amount satisfactory to Custodian and
shall grant to Custodian a continuing security interest in
and right of setoff against such collateral. In any such
case and without limiting the foregoing, Custodian shall be
entitled to take such other action(s) or exercise such other
options, powers and rights as Custodian now or hereafter has
a secured creditor under the New York Uniform Commercial
Code or any other applicable law.
17. Governing Law and Successors and Assigns. This
Agreement shall be governed by the law of the State of New
York and shall not be assignable by either party, but shall
bind the successors in interest of the Customer and
Custodian.
18. Publicity Customer shall furnish to Custodian at its
office referred to in Section 15, above, prior to any
distribution thereof, copies of any material prepared for
distribution to any persons who not parties hereto that
refer in any way Custodian. Customer shall not distribute
or permit the distribution of such materials if Custodian
reasonable objects in writing within ten (10) business days
(or such other time as may be mutually agreed) after receipt
thereof. The provisions of this Section shall survive the
termination of this Agreement.
19. Submission to Jurisdiction. To the extent, if any, to
which the Customer or any of its respective properties may
be deemed to have or hereafter to acquire immunity, on the
ground of sovereignty or otherwise, from any judicial
process or proceeding to enforce this Agreement or to collect
<PAGE>
amounts due hereunder (including, without limitation,
attachment proceedings prior to judgment or in aid of
execution) in any jurisdiction, the Customer hereby waives
such immunity and agrees not to claim the same. Any suit,
action or proceedings arising out of this Agreement may be
instituted in any State or Federal court sitting in the City
of New York, State of New York, United States of America,
and the Customer irrevocably submits to the non-exclusive
jurisdiction of any such court in any such suit, action or
proceeding and waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to
laying of venue of such suit, action or proceeding brought
in such a court and any claim that such suit, action or
proceeding brought in an inconvenient forum. The Customer
hereby irrevocably designates, appoints and empowers, as its
authorized agent to receive, for and on behalf of actions or
proceedings may be brought in any of the aforementioned
courts, and such service of process shall be deemed complete
upon the date of delivery thereof to such agent whether or
not such agent gives notice thereof to the Customer or upon
the earliest of any other date permitted by applicable law.
The Customer further irrevocably consents to the service of
process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by
certified air mail, postage prepaid, to the Customer at its
address set forth below or in any other manner permitted by
law, such service to become effective upon the earlier of
(i) the date fifteen (15) days after such mailing or (ii)
any earlier of date permitted by applicable law. The
Customer agrees that it will at all times continuously
maintain an agent to receive service of process in the City
and State of New York on behalf of itself and its properties
with respect to this Agreement and in the event that, for
any reason, the agent named above or its successor shall no
longer serve as agent of the Customer to receive service of
process in the City and State of New York on its behalf, the
Customer shall promptly appoint a successor to so serve and
shall advise the Custodian thereof.
20. Headings. The headings of the paragraphs hereof are
included for convenience of reference only and do not form a
part of this Agreement.
Star Bank, N.A.
By: (signature)
Title:
Address:
Bankers Trust Company
By: (signature)
Title:
