GIT Income Trust
Maximum Income Portfolio
Government Portfolio
1655 Ft. Myer Drive
Arlington, Virginia 22209
703-528-3600
Semi-Annual Report
September 30, 1996
(Unaudited)
Letter to Shareholders
November 15, 1996
Dear Shareholder:
Despite our optimism that inflationary pressures would remain subdued and that
a downward trend in interest rates would persist, fears of inflation on the
part of other market participants caused bond prices to move lower through
most of the six-month period covered by this report. Our optimism proved wiser
toward the end of the third quarter, when signs of a slowing caused the Fed to
leave rates unchanged and bond prices to move higher.
At present, we feel that low unemployment and increasing hourly wages are the
only forces present in the economy that could force the Fed to raise interest
rates to dampen inflation. We are vigilant for any signs of economic
acceleration that would call for portfolio adjustments, but we note that
indicators such as retail sales, unemployment claims, commodity prices and
home sales continue to suggest moderate economic growth.
Our Government Portfolio's thirty-day yield increased from 4.62% on March 29
to 5.16% on September 30, 1996, though falling bond prices resulted in a total
return of only 0.78% for the six month period. This portfolio emphasizes
intermediate securities of three to ten years maturity, with lesser emphasis
on very short and very long-term securities. We feel that short-term
securities currently offer little yield advantage, and would lose value if the
Fed were to raise short-term rates. Bonds with maturities of ten years don't
provide yields sufficiently above those of intermediate bonds to compensate
for their higher risks.
Unlike other sectors of the bond market, the high-yield market in which our
Maximum Income Portfolio operates continued to produce strong results during
the period covered by this report. High-yield returns reflect solid corporate
profits, which are in turn a result of a stable economy and low inflation. In
addition, this favorable economic environment has helped many high-yield
companies to shore up balance sheets and improve their credit quality, which
has further enhanced returns.
During this period, the Maximum Income portfolio's thirty-day yield moved only
from 8.18% on March 29 to 8.11% on September 30, 1996, with a total return of
4.28% for the six-month period. With our expectation of moderate economic
growth and low inflation, the outlook is good for the high yield market. The
Maximum Income portfolio remains diversified among several economic sectors
and we are focusing on higher quality bonds with attractive yields.
We appreciate your confidence in the GIT Income Trust portfolios, and reaffirm
out commitment to provide you with competitive returns to meet your investment
objectives.
Sincerely,
(signature)
Christopher C. Berberet
Vice President
(signature)
Jay. R. Sekelsky
Vice President
<PAGE>
Maximum Income Portfolio
Portfolio of Investments - September 30, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
Corporate Debt Securities: 85.0% of Net Assets
Cable Television: 7.8%
B2 B Cablevision Systems Corporation,
Senior Subordinated Debentures,
9.875%, 2/15/13 $250,000 $240,625
B2 B+ Century Communications Corporation,
Senior Subordinated Debentures, 11.875%,
10/15/03 250,000 267,500
Chemicals: 4.0%
B1 B NL Industries Inc., Senior Secured
Notes, 11.75%, 10/15/03 250,000 262,500
Forest and Papar Products: 11.9%
B2 B Fort Howard Corporation, Senior Subordinated
Notes, 9%, 2/1/06 250,000 246,250
B3 B Gaylord Container, Senior Notes,
11.5%, 5/15/01 250,000 265,000
B1 BB- Stone Container, 1st Mortgage Notes,
10.75%, 10/1/02 250,000 262,500
Gaming: 3.8%
Ba3 BB Grand Casinos Inc., 1st Mortgage
Notes, 10.125%, 12/1/03 250,000 245,938
Homebuilding: 4.0%
B2 B NVR Inc., Senior Notes, 11%,
4/15/03 250,000 258,750
Hospital Management: 4.2%
Ba3 B+ Tenet Healthcare Corporation, Senior Subordinated
Notes, 10.125%, 3/1/05 250,000 271,250
Oil & Gas: 3.2%
Ba3 BB- Gulf Canada Resources, Ltd., Subordinated
Debentures, 9.625%, 7/1/05 200,000 208,500
Pharmaceuticals: 4.0%
B1 B+ Owens & Minor, Inc. Holding Company, Senior Subordinated
Notes, 10.875%, 6/1/06 250,000 261,250
Radio & TV Broadcasting: 11.1%
B2 B- American Radio Systems, Senior Subordinated
Notes, 9%, 2/1/06 250,000 242,500
B3 B- Chancellor Broadcasting Co., Senior Subordinated
Notes, 12.5%, 10/1/04 188,000 211,265
B3 B- SFX Broadcasting, Inc., Senior Subordinated
Notes, 11.375%, 10/1/00 250,000 270,000
Restaurants: 4.0%
B1 B+ Carrols Corporation, Senior Notes,
11.5%, 8/15/03 250,000 260,000
Retail-Food: 15.3%
B3 B- Bruno's, Inc., Senior Subordinated
Notes, 10.5%, 8/1/05 250,000 256,250
Ba2 BB+ Safeway, Inc., Senior Subordinated
Debentures, 9.875%, 3/15/07 250,000 276,875
B2 B+ Stater Brothers Holdings Inc., Senior Notes,
11%, 3/1/01 250,000 265,000
B3 NR Supermarkets General Holding Co., Subordinated
Notes, 11.625%, 6/15/02 200,000 198,000
Telecommunications: 8.1%
B3 BB- CAI Wireless Systems, Inc., Senior
Notes, 12.25%, 9/15/02 256,000 266,880
B3 B- Mobile Telecommunications Technologies Corporation, Senior
Notes, 13.5%, 12/15/02 250,000 260,000
Textiles-Apparel: 3.8%
B3 B Dan River Inc., Senior Subordinated Notes,
10.125%, 12/15/03 250,000 247,500
Total Corporate Debt Securities (Cost $5,415,016)= 5,544,333
U.S. Government Obligations: 10.8% of Net Assets
Aaa AAA United States Treasury Notes, 5.875%,
11/15/05 500,000 472,345
Aaa AAA United States Treasury Notes, 5.625%,
2/15/06 250,000 232,070
Total U.S. Government Obligations: (Cost $757,294)= $704,415
Repurchase Agreement: 1.7% of Net Assets With Donaldson, Lufkin & Jenrette
Securities Corporation issued 9/30/96 at 5.65%, due 10/1/96 collaterized by
$114,182 in United States Treasury Notes due 8/15/97. Proceeds at maturity
are $112,017.58. (Cost $112,000)= $112,000
Total Investments (Cost $6,284,310)= $6,360,748
See Notes to Portfolios of Investments.
<PAGE>
Government Portfolio
Portfolio of Investments - September 30, 1996
(Unaudited)
Credit Rating* Principal
Moody's S&P Amount Value
U.S. Government Obligations: 85.7% of Net Assets
Aaa AAA United States Treasury Bonds,
6.875%, 8/15/25 $1,000,000 $985,160
Aaa AAA United States Treasury Notes,
6.75%, 5/31/97 1,000,000 1,006,870
Aaa AAA United States Treasury Notes,
7.125%, 2/29/00 600,000 613,872
Aaa AAA United States Treasury Notes,
7.75%, 2/15/01 1,000,000 1,049,530
Aaa AAA United States Treasury Notes,
6.5%, 8/15/05 675,000 666,353
Aaa AAA United States Treasury Notes,
5.875%, 11/15/05 1,000,000 944,690
Aaa AAA United States Treasury Notes,
5.625%, 2/15/06 250,000 232,070
Total U.S. Government Obligations
(Cost $5,654,530)= 5,498,545
U.S. Government Agency Obligations: 11.2% of Net Assets
Aaa AAA Federal Home Loan Mortgage Corporation Mortgage
Pool, 6.5%, 3/1/09 408,961 399,249
Aaa AAA Federal National Mortgage Association
Notes, 6.65%, 3/8/06 325,000 310,983
Total U.S. Government Agency Obligations
(Cost $711,826)= 710,232
Repurchase Agreement: 0.8% of Net Assets With Donaldson, Lufkin & Jenrette
Securities Corporation issued 9/30/96 at 5.65%, due 10/1/96 collateralized by
$54,032 in United States Treasury Notes due 8/15/97. Proceeds at maturity are
$53,008.32. (Cost $53,000)= 53,000
Total Investments (Cost $6,419,356)= $6,261,777
Notes to Portfolios of Investments:
= Aggregate cost for federal income tax purposes and net unrealized
appreciation of investments are as follows:
Maximum
Income Government
Portfolio Portfolio
Aggregate cost $6,284,310 $6,419,356
Gross unrealized appreciation 148,294 72,315
Gross unrealized depreciation (71,856) (229,894)
Net unrealized appreciation
(depreciation) $76,438 $(157,579)
Moody's Moody's Investors Services, Inc.
S&P Standard & Poor's Corporation
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
Statements of Assets and Liabilities
September 30, 1996
(Unaudited)
Maximum
Income Government
Portfolio Portfolio
Assets
Investments, at cost $6,284,310 $6,419,356
Investments, at value (Notes 1 and 2)
Investment securities $6,248,748 $6,208,777
Repurchase agreement 112,000 53,000
Total investments 6,360,748 6,261,777
Cash 51 629
Receivables
Interest 171,926 78,211
Share subscriptions receivable 16,626 1,112
Total assets 6,549,351 6,341,729
Liabilities
Payables
Capital shares redeemed 3,457 --
Dividends 7,607 1,517
Shares reserved for subscription 16,626 1,112
Other liabilities 44 39
Total liabilities 27,734 2,668
Net Assets (Note 5) $6,521,617 $6,339,061
Capital Shares Outstanding 908,831 664,427
Net Asset Value Per Share $7.176 $9.541
Statements of Operations
For the Six Months Ended September 30, 1996
(Unaudited)
Investment Income (Note 1)
Interest income $314,052 $212,287
Other income 3,750 --
Total investment income 317,802 212,287
Expenses (Notes 2 and 3)
Investment advisory fees 20,567 20,202
Custodian fees 1,123 1,081
Professional fees 2,984 3,027
Salaries and related expenses 10,014 9,617
Securities registration and blue sky
expenses 8,507 8,433
Telephone expense 739 710
Data processing and office equipment
expenses 6,113 5,635
Office and miscellaneous expenses 2,842 2,741
Depreciation and amortization 255 245
Fees paid indirectly (50) (48)
Total expenses 53,094 51,643
Net Investment Income 264,708 160,644
Realized and Unrealized Gain(Loss) on Investments
Net realized loss on investments (38,938) (36,092)
Net unrealized appreciation (depreciation)
of investments 48,351 (78,930)
Net Gain(Loss) on Investments 9,413 (115,022)
Total Increase in Net Assets Resulting
From Operations $274,121 $45,622
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Maximum Income Portfolio Government Portfolio
Six Months Ended Six Months Ended
Sept. 30, 1996 Year Ended Sept. 30, 1996 Year Ended
(Unaudited) March 31, 1996 (Unaudited) March 31, 1996
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS
Net investment income $264,708 $584,431 $160,644 $352,814
Net realized gain (loss) on
investments (38,938) 167,400 (36,092) 253,063
Net unrealized appreciation(depreciation)
of investments 48,351 53,681 (78,930) (111,252)
Total increase in net assets
resulting from operations 274,121 805,512 45,622 494,625
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (264,708) (584,431) (160,644) (352,814)
CAPITAL SHARE TRANSACTIONS
(Note 7) (277,883) (157,381) (402,019) (938,698)
TOTAL INCREASE (DECREASE)
IN NET ASSETS (268,470) 63,700 (517,041) (796,887)
NET ASSETS
Beginning of period 6,790,087 6,726,387 6,856,102 7,652,989
End of period $6,521,617 $6,790,087 $6,339,061 $6,856,102
</TABLE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
Maximum Income Portfolio
Year ended March 31,
<C> <C> <C> <C> <C> <C>
1996 1996 1995 1994 1993 1992
Net asset
value
beginning
of period $ 7.162 6.938 7.285 7.455 7.255 6.775
Net
investment
income $0.286 0.608 0.597 0.606 0.674 0.689
Net
realized &
unrealized
gains
(losses) on
securities $0.014 0.224 (0.347)(0.170) 0.200 0.480
Total from
investment
operations $0.300 0.832 0.250 0.436 0.874 1.169
Distributions
from net
investment
income $(0.286)(0.608)(0.597)(0.606)(0.674)(0.689)
Distributions
from capital
gains $ -- -- -- -- -- --
Total
Distributions$(0.286)(0.608)(0.597)(0.606)(0.674)(0.689)
Net asset
value end
of period $7.176 7.162 6.938 7.285 7.455 7.255
Total
Return 8.57%**12.32% 3.75% 5.89% 12.69% 18.08%
Net assets
at end of
period
(thousands) $6,522 6,790 6,726 7,702 7,329 6,456
Ratio of
expenses to
average net
assets 1.62%**1.60% 1.52% 1.54% 1.52% 1.54%
Net
investment
income to
average
net assets 8.05%**8.47% 8.56% 8.02% 9.26% 9.95%
Portfolio
turnover 25% 237% 243% 251% 73% 124%
</TABLE>
<TABLE>
Government Portfolio
Year ended March 31,
<C> <C> <C> <C> <C> <C>
1996***1996 1995 1994 1993 1992
Net asset
value
beginning
of period $ 9.705 9.551 9.695 10.621 10.300 10.119
Net
investment
income $0.237 0.472 0.391 0.363 0.501 0.654
Net
realized &
unrealized
gains
(losses) on
securities $(0.164)0.154 (0.144)(0.151) 0.854 0.222
Total from
investment
operations $0.073 0.626 0.247 0.212 1.355 0.876
Distributions
from net
investment
income $(0.237)(0.472)(0.391)(0.363)(0.501)(0.654)
Distributions
from capital
gains $ -- -- -- (0.775)(0.533)(0.041)
Total
Distributions$(0.237)(0.472)(0.391)(1.138)(1.034)(0.695)
Net asset
value end
of period $ 9.541 9.705 9.551 9.695 10.621 10.300
Total
Return 1.57%** 6.56% 2.67% 1.95% 13.96% 8.84%
Net assets
at end of
period
(thousands) $6,339 6,856 7,653 8,576 9,734 7,375
Ratio of
expenses to
average net
assets 1.60%** 1.59% 1.52% 1.54% 1.52% 1.53%
Net
investment
income to
average
net assets 4.97%** 4.77% 4.12% 3.53% 4.78% 6.28%
Portfolio
turnover 11% 190% 318% 287% 357% 123%
</TABLE>
* For the year ended March 31, 1996 and thereafter, ratio reflects fees paid
indirectly (Note 3).
** Annualized
*** For the six months ended September 30, 1996 (unaudited). Effective July
31, 1996, the investment advisory services transferred to Bankers Finance
Advisors, LLC from Bankers Finance Investment Management Corp. (See Note 3).
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
GIT Income Trust
Notes to Financial Statements
September 30, 1996
(Unaudited)
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. 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, if any,
are declared and paid twice annually at calendar and fiscal year end.
Additional distributions may be made if necessary.
Income Tax: In accordance with the provisions of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies, all 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 the same advisor, 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.
3. Investment Advisory Fees and Other Transactions with Affiliates. The
Investment Advisor to the Trust, Bankers Finance Advisors, LLC ("the
Advisor"), earns an advisory fee equal to 0.625% per annum of the average net
assets of each of the Trust's portfolios; the fees are accrued daily and are
paid monthly. The Advisory Agreement between the Trust and the Advisor was
approved at the special meeting of the Trust's shareholders on July 29, 1996.
The Advisor purchased the investment management assets of Bankers Finance
Investment Management Corp. ("BFIMC"), the Trust's previous investment
advisor, effective July 31, 1996.
The Advisor is responsible for the fees and expenses of Trustees who are
affiliated with the Advisor, the rent expense of the Trust's principal
executive office premises and certain promotional expenses. For the six months
ended September 30, 1996, outside Trustee fees were $750 for each Portfolio.
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 the Advisor, pursuant to which such
services are provided for amounts not exceeding the cost to the Advisor.
Common expenses incurred by the Trust, GIT Tax-Free Trust, Government
Investors Trust and GIT Equity Trust ("the Trusts") are allocated among the
portfolios based on the ratio of net assets of each portfolio to the combined
net assets of the Trusts. For the six months ended September 30, 1996,
operating expenses of $32,527 for the Maximum Income Portfolio and $31,441
for the Government Portfolio have been reimbursed to the Advisor under the
Services Agreement. To the extent the Trust had incurred expenses for which
BFIMC, the previous advisor, was not reimbursed as of July 31, 1996, such
expenses from prior years will not be billed to the Trust by the Advisor.
Fees are reduced under an expense offset arrangement with the Trust's
Custodian. The amount of the expense offset for the six months ended September
30, 1996 was $50 for the Maximum Income Portfolio and $48 for the Government
Portfolio.
5. Net Assets. At September 30, 1996, net assets include the following:
Maximum Income Government
Portfolio Portfolio
Net paid in capital on shares of beneficial
interest $9,047,277 $6,846,158
Accumulated net realized losses (2,602,098) (349,518)
Net unrealized appreciation (depreciation) of
investments 76,438 (157,579)
Total net assets $6,521,617 $6,339,061
6. Investment Transactions. Purchases and sales of securities other than
short-term securities for the six months ended September 30, 1996 were
as follows:
Maximum Income Government
Portfolio Portfolio
Purchases $1,508,125 $711,580
Sales 1,472,250 975,992
7. Capital Share Transactions. An unlimited number of capital shares, without
par value, are authorized. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Maximum Income Portfolio Government Portfolio
Six Months Ended Six Months Ended
Sept. 30, 1996 Year Ended Sept. 30, 1996 Year Ended
(Unaudited) March 31, 1996 (Unaudited) March 31, 1996
<S> <C> <C> <C> <C>
In Dollars
Shares sold $719,809 $1,935,692 $252,957 $754,345
Shares issued in reinvestment of
dividends 218,292 470,973 149,185 328,159
Total shares issued 938,101 2,406,665 402,142 1,082,504
Shares redeemed (1,215,984) (2,564,046) (804,161) (2,021,202)
Net decrease $ (277,883) $ (157,381) $(402,019) $(938,698)
In Shares
Shares sold 101,365 270,513 26,660 76,059
Shares issued in reinvestment of
dividends 30,677 65,664 15,703 33,140
Total shares issued 132,042 336,177 42,363 109,199
Shares redeemed (171,249) (357,676) (84,423) (204,022)
Net decrease (39,207) (21,499) (42,060) (94,823)
</TABLE>
GIT Income Trust
Special Information
September 30, 1996
(Unaudited)
A special meeting of the Trust's shareholders was held on July 29, 1996. The
following shares were voted at the meeting:
1. Approval of an advisory agreement with Bankers Finance
Advisors, LLC/Madison Investment Advisors, Inc.
<TABLE>
Shares
Outstanding For Against Abstain
<C> <C> <C> <C>
Maximum Income Portfolio 934,862 507,022 2,616 19,301
Government Portfolio 675,180 366,154 1,936 23,706
</TABLE>
2. Election of Trustees (1,610,043 shares outstanding)
For Withhold Authority
Frank E. Burgess 899,020 21,717
James R. Imhoff, Jr. 898,793 21,944
Thomas S. Kleppe 898,072 22,665
Lorence D. Wheeler 899,020 21,717
3. To ratify the selection of Ernst & Young LLP as
independent auditors of the Trust for the year ending
March 31, 1997 (1,610,043 shares outstanding): For:
895,303 Against: None Abstain: 25,433
<PAGE>
This page was left blank intentionally.
<PAGE>
This page was left blank intentionally.
<PAGE>
This page was left blank intentionally.
