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
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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 Advisor
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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
"Advisor") 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.
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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 Advisor 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 Advisor, 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 Advisor 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
Advisor 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 Advisor
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 Advisor. Bankers Finance Advisors, LLC is a division of Madison
Investment Advisors, Inc., 6411 Mineral Point Road, Madison,
Wisconsin. Bankers Finance Advisors, LLC manages assets of
administers approximately $200 million in the GIT family of
mutual funds, which includes stock, bond and money
market portfolios. Madison Investment Advisors, Inc., a registered
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 Advisor is responsible for the day-
to-day administration of the Trust's activities. Investment
decisions regarding each of the Trust's portfolios can be
influenced in various manners by a number of individuals. The
individuals primarily responsible for the management of the
Trust's Portfolios are 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 advisor 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 Sekelsky began managing the
Trust's Portfolios in 1996.
The Advisor is controlled by Madison Investment Advisors, Inc.
The Advisor purchased the investment management assets of
Bankers Finance Investment Management Corp. effective July
31, 1996. The Advisor has the same address as the Trust.
Compensation. For its services under its Investment Advisory
Agreement with the Trust, the Advisor receives a fee, payable
monthly, calculated as 5/8 percent per annum of the average daily
net assets of each portfolio. The Advisor may, in turn,
compensate certain financial organizations for services resulting
in purchases of Trust shares.
Distributor. GIT Investment Services, Inc. of the same address as
the Trust acts as the Trust's Distributor. The Distributor is
wholly owned by A. Bruce Cleveland.
Services Agreement. Under a separate Services Agreement with the
Trust, the Advisor 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 Advisor, 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 Advisor, 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 advisors 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 Advisor
("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 Advisor 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 Advisor'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 Advisor 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 Advisor 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 Advisor 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 Advisor 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 Advisor who
beneficially hold one-half percent or more of such securities,
together exceed 5% of such outstanding securities.
3. Borrowing and Lending. It is a fundamental policy of the Trust
that it may borrow (including engaging in reverse repurchase
agreement transactions) in amounts not exceeding 25% of 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 Advisor is
continuously maintained in amounts not less than the value of the
securities loaned. The Trust may not lend money (except to
governmental units), but is not precluded from entering into
repurchase agreements or purchasing debt securities.
<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 Advisor
Effective July 31, 1996, Bankers Finance Advisors, LLC, 1655 Fort Myer
Drive, Arlington, Virginia 22209-3108, is the investment advisor
to the Trust and is called the "Advisor" throughout this
Statement of Additional Information and the Prospectus. The
Advisor is responsible for the investment management of the Trust
and is authorized to execute the Trust's portfolio
transactions, to select the methods and firms with which such
transactions are executed, to oversee the Trust's operations, and
otherwise to administer the affairs of the Trust as it deems
advisable. In the execution of these responsibilities, the
Advisor is subject to the investment policies and limitations of
the Trust described in the Prospectus and this Statement of
Additional Information, to the terms of the Declaration of Trust
and the Trust's By-Laws, and to written directions given from
time to time by the Trustees.
The Advisor is a division of Madison Investment Advisors, Inc.
("Madison"), 6411 Mineral Point Road, Madison, Wisconsin.
Madison is a registered investment advisor and has numerous
advisory clients of its own. Madison also serves as investment
advisor 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 Advisor 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 Advisor, upon sixty days'
written notice to the other party. The investment advisory
agreement may not be assigned by the Advisor, and will
automatically terminate upon any assignment.
Background of the Advisor. The Advisor was formed in 1996 by
Madison for the purpose of providing investment management
services to the GIT family of mutual funds, including the Trust.
The Advisor purchased the investment management assets of the
former advisor to the Trust, Bankers Finance Investment
Management Corp. For periods prior to July 31, 1996, references
in this Statement of Additional Information and in the Prospectus
to the "Advisor" refer to Bankers Finance Investment Management
Corp. The Advisor also serves as the investment advisor to
Government Investors Trust, GIT Equity Trust and GIT Tax-Free
Trust.
Management. Frank E. Burgess is President, Treasurer and
Director of Madison and Vice President of the Advisor.
Mr. Burgess owns a majority of the controlling interest of Madison,
which, in turn, controls the Advisor. 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 Advisor 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 Advisor 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 Advisor may waive or reduce such fee during any
period. The Advisor 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 Advisor has also agreed to reimburse the Trust for all of its
expenses, including any management fees paid to the Advisor, 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 Advisor 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 Advisor, 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
Advisor is not obligated to provide or pay for any other services
to the Trust, although it has discretion to elect to do so. The
Investment Advisory Agreement permits the Advisor to make
payments out of its fee to other persons.
During the fiscal year ended March 31, 1996, the Advisor 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 Advisor 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 Advisor 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. No shareholders owned more than five percent of the
Maximum Inocme 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 Advisor'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 Advisor 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 advisor
to Bascom Hill Investors, Inc., Bascom Hill BALANCED Fund, Inc. and
Madison Bond Fund, Inc.; director of such funds since their inception.
Prior to founding Madison Investment Advisors, Inc. in 1973, he was
Assistant Vice President and Trust Officer of M&I Bank of Madison,
Wisconsin. He is a member of the State Bar of Wisconsin. b. 8/4/42.
James R. Imhoff, Jr.***
429 Gammon Place, Madison, WI 53719
Trustee
Chairman and CEO of First Weber Group, Inc. of Madison, WI, a residential
real estate company; Chairman of the Wisconsin Real Estate Board of the
Department of Regulation and Licensing; Director to the University of
Wisconsin School of Business, Center for Urban Land Economics Research;
Director of the Park Bank, Wisconsin; formerly President of the Wisconsin
Realtors Association and the Greater Madison Board of Realtors and Director
of the National Association of Realtors. An alumnus of the Marquette
University School of Business. b. 5/20/44.
Thomas S. Kleppe***
7100 Darby Road, Bethesda, MD 20817
Trustee
Private Investor; formerly Visiting Professor at the University of Wyoming,
Secretary of the U.S. Department of the Interior, Administrator of the U.S.
Small Business Administration, U.S. Congressman from North Dakota,
Vice President and Director of Dain, Kalman & Quail, investment bankers,
and President of Gold Seal Co., manufacturers of household cleaning products.
Attended Valley City State College of North Dakota. b. 7/1/19.
Lorence D. Wheeler***
PO Box 431, Madison, WI 53701
Trustee
President of Credit Union Benefits Services, Inc., a provider of retirement
plans and related services for credit union employees nationwide. Previously
a shareholder of the law firm of Bell, Metzner & Gierart, SC. Mr. Wheeler
received his law degree from the University of Wisconsin. b. 1/31/38.
Katherine L. Frank
6411 Mineral Point Road, Madison, WI 53705
President
President of GIT Investment Funds, Vice President
of Madison Investment Advisors, Inc. A graduate
of Macalester College, St. Paul, Minnesota.
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 Advisor or Madison (see "the Investment Advisor") totalling
$15,000. Mr. Imhoff and Mr. Wheeler will receive annual
compensation from the Trust and from other investment companies
managed by the Advisor 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 Advisor (see "The
Investment Advisor"), the Trust is responsible for payment from
its assets of all of its expenses. These expenses can include any
of the business or other expenses of organizing, maintaining and
operating the Trust. Certain expense items which may represent
significant costs to the Trust include the payment of the
Advisor's fee; the expense of shareholder accounting, customer
services, and calculation of net asset value; the fees of the
Custodian; of the Trust's independent 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 Advisor 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 Advisor 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 Advisor 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
Advisor, such allocations may be made on the basis of reasonable
approximations calculated by the Advisor 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 Advisor, 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 Advisor may take into account a dealer's
operational and financial capabilities, the type of transaction
involved, the dealer's general relationship with the Advisor, and
any statistical, research or other services provided by the
dealer to the Advisor. 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 Advisor.
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 Advisor, provided that: (1) the transaction is in the
ordinary course of the broker's business; (2) the transaction
does not involve a purchase from another broker or dealer; (3)
compensation to the broker in connection with the transaction is
not in excess of one percent of the cost of the securities
purchased; and (4) the terms to the Trust for purchasing the
securities, including the cost of any commissions, are not less
favorable to the Trust than terms concurrently available from
other sources. Any compensation paid in connection with such a
purchase will be in addition to fees payable to the Advisor under
the Investment Advisory Agreement. The Trust does not anticipate
that any such purchases through affiliates will represent a
significant portion of its total activity; no such transactions
took place during the Trust's 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 Advisor, 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 Advisor 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 Advisor 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 Advisor
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 Advisor
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
advisors 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 Advisor), 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
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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
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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 Advisor 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 Advisor 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 Advisor deems appropriate;
in cases where neither organization rates the issue it will be
graded by the Advisor following standards which, in its judgment,
are comparable to those followed by Moody's and S&P. All grading
procedures followed by the Advisor 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 Advisor, to be "High Grade."
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