1933 Act Registration No. 33-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
GIT INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (914) 694-2020
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
----------------------------------------------------------------
(Address of Principal Executive Offices)
W. Richard Mason
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as
possible after the effective date of this Registration
Statement.
The Registrant has registered an indefinite amount of
securities under the Securities Act of 1933 pursuant to
Section 24(f) under the Investment Company Act of 1940;
accordingly, no fee is payable herewith. A Rule 24f-2
Notice for the Registrant's most recent fiscal year ended
March 31, 1996 was filed with the Commission on May
20, 1996.
It is proposed that this filing will become effective on
May 1, 1997 pursuant to Rule 488 of the Securities Act of
1933.
<PAGE>
GIT INCOME TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
1. Beginning of Cross Reference Sheet; Cover Page
Registration Statement
and Outside Front
Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Synopsis and Risk Cover Page; Summary; Risks
Factors
4. Information about the Summary; Reasons for the
Transaction Merger Plan; Material
Provisions of the Proposed Transaction;
Description of Shares of the GIT
Fund and the Madison Fund; Federal
Income Tax Consequences;
Comparative Information on
Shareholders' Rights; Exhibit A
5. Information about the Cover Page; Summary; Comparison of
Registrant Investment Objectives and Policies;
Description of Shares of the
GIT Fund and the
Madison Fund; Federal Income Tax
Consequences; Comparative
Information on Shareholders'
Rights; Additional Information
6. Information about the Cover Page; Summary; Comparison of
Company Being Acquired Investment Objectives and Policies;
Description of Shares of the
GIT Fund and the
Madison Fund; Federal Income Tax
Consequences; Comparative
Information on Shareholders'
Rights; Additional Information
7. Voting Information Cover Page; Summary; Information
about the Merger; Voting
Information
8. Interest of Certain Inapplicable
Persons and Experts
9. Additional Information Inapplicable
Required for
Reoffering by Persons
Deemed to be
Underwriters
10. Cover Page Cover Page
11. Table of Contents Statement of Additional Information
Dated May 1, 1997
12. Additional Information Statement of Additional Information
About the Registrant Dated May 1, 1997
13. Additional Information Statement of Additional Information
about the Company Being of the Madison Fund dated February 28,
Acquired 1997
14. Financial Statements Incorporated by reference; Pro
Forma Financial Statements
Item of Part C of Form N-14
15. Indemnification Indemnification of
Trustees/Directors"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
<PAGE>
Madison Bond Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
800-767-0300
May 1, 1997
Dear Shareholder:
We are pleased to announce the most important change made
for the shareholders of Madison Bond Fund, Inc. since
our founding in 1990. It has been our desire to further the
growth of the fund, give wider exposure to our investment
record, offer more services and hopefully to reduce
operating costs. Madison Investment Advisors, Inc.
(actually, its subsidiary) has been named as the investment
advisor to a "family of funds" including GIT Income Trust,
a mutual fund which offers several series of taxable bond
funds. In order to accomplish these goals, the management
and Directors of your fund and the Trustees of the GIT Income
Trust all recommend that your fund merge with a newly
created series of GIT Income Trust established solely
for this purpose. The important enclosed Prospectus/Proxy
Statement requires your immediate attention.
The management of your fund will not change! The same
management will continue to be responsible for the merged
fund. The investment philosophy will remain the same.
The merged fund will offer more shareholder services and
be available for sale in many more states, thus providing much
broader exposure, and it will have no sales loads or
distribution fees!
The Advantages
o The merged fund's sales loads and 12b-1 fee will be
elimited entirely, immediatly reducing fund expenses by
.25%.
o You will have the ability to "switch" to two money
market funds as well as equity funds, other bond funds and
tax-free income funds.
o You will now enjoy our own customer service staff and new
services, such as 24-hour telephone access to account
information and other state of the art account service
features.
Annual Meeting & Questions
Naturally, we're excited about the changes facing our fund
and the numerous new services we'll be able to offer. We
are always available to discuss the merger and its
implications. Please plan on attending our Annual Meeting
on May xx, 1997. Or, please call us with any questions if
you're unable to attend.
PLEASE REVIEW THE ENCLOSED PROSPECTUS/PROXY STATEMENT
AND SEND US YOUR VOTED PROXY AS SOON AS POSSIBLE.
Thank you.
Sincerely,
(signature)
Frank E. Burgess
President, Madison Bond Fund, Inc.
and Madison Investment Advisors, Inc.
Sincerely.
(signature)
Katherine L. Frank
President, GIT Income Trust
<PAGE>
Madison Bond Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 29, 1997
Notice is hereby given that the Annual Meeting of
Shareholders (the "Meeting") of the Madison Bond Fund (the
"Madison Fund") will be held at the Radisson Inn, 517 Grand
Canyon Drive, Madison, Wisconsin, on Thursday, May 29, 1997,
at 4:00 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of
Merger (the "Plan") dated as of April 1, 1997
providing for the acquisition of substantially all of the
assets of the Madison Fund by the GIT Madison Bond Fund
Portfolio (the "GIT Fund"), a newly formed
series of GIT Income Trust (the "Trust"), in exchange for
shares of the GIT Fund and the assumption by the
GIT Fund of certain identified liabilities
of the Madison Fund, and for distribution of such shares of the
GIT Fund to shareholders of the Madison Fund.
2. To elect four (4) directors to serve until the
next Annual Meeting of Shareholders, or until their
successors are duly elected and qualified, or the
Madison Fund's earlier Merger; and
3. To approve or disapprove the continuation of the
Investment Advisory Agreement between the Madison Fund
and Madison Investment Advisors, Inc.; and
4. To ratify or reject the selection of Williams,
Young & Associates, LLC as auditors of the Madison
Fund for the fiscal year ending December 31, 1997
or its earlier Merger; and
5. To transact any other business as may properly
come before the meeting or any adjournments thereof.
The Directors of the Madison Fund have fixed the close of
business on March 31, 1997 as the record date for the
determination of shareholders of the Madison Fund entitled
to notice of and to vote at this Meeting or any
adjournment thereof.
Important
Your vote is important and all Shareholders are asked to be
present in person or by proxy. If you are unable to attend
the meeting in person, we urge you to complete, sign, date
and return the enclosed proxy as soon as possible using the
enclosed stamped envelope. Sending the proxy will not
prevent you from personally voting your shares at the
Meeting since you may revoke your proxy by advising the
Secretary of the Madison Fund in writing (by subsequent
proxy or otherwise) of such revocation at anytime before it
is voted.
By Order of the Board of Directors,
(signature)
Katherine L. Frank
Vice President/Secretary
Madison, Wisconsin
May 1, 1997
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY COPY
PROSPECTUS/PROXY STATEMENT DATED MAY 1, 1997
Acquisition of Assets of
Madison Bond Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
1-800-767-0300
By and in Exchange for Shares of
The Madison Bond Fund Portfolio
of
GIT Income Trust
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
1-800-336-3063
This Prospectus/Proxy Statement is being furnished to
shareholders of Madison Bond Fund, Inc. (the "Madison
Fund") in connection with a proposed Agreement and Plan of
Merger (the "Plan"), to be submitted to shareholders of the
Madison Fund for consideration at the Annual Meeting of
Shareholders to be held at the Radisson Inn, 517 Grand
Canyon Drive, Madison, Wisconsin on Thursday, the 29th of
May, 1997 at 4:00 p.m., and any adjournments thereof (the
"Meeting"). The Plan provides for substantially all of
the assets of the Madison Fund to be acquired by the
Madison Bond Fund Portfolio, a series of GIT Income Trust
(the "GIT Fund"), in exchange for shares of the GIT Fund and
the assumption by the GIT Fund of certain identified
liabilities of the Madison Fund (hereinafter referred to as
the "Merger"). Following the Merger, shares of the GIT Fund
will be distributed to shareholders of the Madison Fund.
For economic purposes, the Madison Fund will continue as the
GIT Fund in light of the similarities in management,
investment policies and other factors. As a legal, entity,
however, the Madison Fund will not continue after the
Merger. As a result of the proposed Merger, each
shareholder of the Madison Fund will receive that number of
shares of the GIT Fund having an aggregate net asset value
equal to the aggregate net asset value of such
shareholder's shares of the Madison Fund, calculated as set
forth in the Plan. The Merger is being structured as a tax-
free reorganization for federal income tax purposes.
As of the date of the Merger, GIT Income Trust is an open-
end diversified management investment company comprised of
three series, one of which, the GIT Fund, is a party to the
Merger.
The GIT Fund and the Madison Fund have identical investment
objectives and substantially similar policies and investment
restrictions. Both Funds seek production of current income
consistent with their quality standards and preservation of
capital. Both funds seek to achieve their objectives by
investing in corporate debt securities, obligations of the
U.S. Government and its agencies and instrumentalities and
money market instruments. Both funds will invest at least
65% of their assets in bonds with the total portfolio having
an average dollar weighted maturity of ten years or less.
This Prospectus/Proxy Statement, which should be retained
for future reference, sets forth concisely the information
about the GIT Fund that shareholders of the Madison Fund
should know before voting on the Merger or investing in the
GIT Fund. Certain relevant documents listed below, which
have been filed with the Securities and Exchange Commission
("SEC"), are incorporated in whole or in part by reference.
A Statement of Additional Information dated May 1, 1997,
relating to this Prospectus/Proxy Statement and the Merger,
incorporating by reference the financial statements of the
Madison Fund dated December 31, 1996, has been filed
with the SEC and is incorporated by reference in its
entirety into this Prospectus/Proxy Statement. A copy of such
Statement of Additional Information is available upon
request and without charge by calling or writing to
the Trust at the address and phone number
listed on the cover page of this Prospectus/Proxy Statement.
The Prospectus of the Madison Fund dated February 28, 1997 is
incorporated herein in its entirety by reference. A copy of
the Prospectus, a Statement of Additional Information dated
the same date and the Annual Report for the fiscal year
ended December 31, 1996 are available upon request without
charge by writing the Madison Fund at the address listed on
the cover page of this Prospectus/Proxy Statement or by
calling 608-274-0300 or toll-free 800-767-0300.
Also accompanying this Prospectus/Proxy Statement as Exhibit
A is a copy of the Plan for the proposed Merger.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY............................................
Proposed Merger...................................
Comparison of Expenses............................
Tax Consequences..................................
Investment Objectives and Policies................
Total Return Performances of the Funds............
Management; Advisory Fees and Expense Ratios......
Distribution; Sales Charges.......................
Purchase and Redemption Procedures................
Exchange Privileges...............................
Dividend Policy...................................
RISKS..............................................
MANAGEMENT OF THE FUNDS............................
MATERIAL PROVISIONS OF THE PROPOSED TRANSACTION....
INFORMATION ABOUT THE MERGER...............
Plan of Merger....................................
Capitalization....................................
REASONS FOR THE MERGER PLAN........................
DESCRIPTION OF SHARES OF THE GIT
FUND AND THE MADISON FUND..........................
FEDERAL INCOME TAX CONSEQUENCES....................
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS....
Form of Organization..............................
Capitalization and Shareholder Liability..........
Shareholder Meetings and Voting Rights............
Liquidation or Dissolution........................
ADDITIONAL INFORMATION.............................
Madison Fund......................................
GIT Fund.........................................
About GIT Income Trust..........................
Financial Highlights............................
Investment Objective............................
Investment Policies.............................
Management of the Trust.........................
The Trust and Its Shares........................
Dividends.......................................
Performance Information.........................
Taxes...........................................
Net Asset Value.................................
How to Purchase and Redeem Shares...............
OTHER BUSINESS.....................................
Election of Directors.............................
Approval of Advisory Agreement....................
Ratification of Auditors..........................
VOTING INFORMATION.................................
Notice to Banks, Broker-Dealers and Voting
Trustees and Their Nominees.......................
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/PROXY STATEMENT (INCLUDING THE DOCUMENTS
INCORPORATED THEREIN BY REFERENCE), AND TO THE EXTENT NOT
INCONSISTENT WITH SUCH ADDITIONAL INFORMATION, THE
PROSPECTUS OF THE MADISON BOND FUND DATED FEBRUARY 28, 1997,
AND THE PLAN, A COPY OF WHICH IS ATTACHED TO THIS
PROSPECTUS/PROXY STATEMENT AS EXHIBIT A.
Proposed Merger. The Plan provides for the transfer of
substantially all of the assets of the Madison Bond Fund,
Inc. ("the Madison Fund"), in exchange for shares of the
Madison Bond Fund Portfolio ("the GIT Fund"), a newly formed
series of GIT Income Trust, and the assumption by the GIT
Fund of certain identified liabilities of the Madison Fund.
The Plan also calls for the distribution of shares of the
GIT Fund to the Madison Fund shareholders. (The transaction
is referred to in this Prospectus/Proxy Statement as the
"Merger.") As a result of the Merger, each shareholder of
record of the Madison Fund will become the record holder of
that number of full and fractional shares of the GIT Fund
having an aggregate net asset value equal to the aggregate
net asset value of the shareholder's shares of the Madison
Fund, calculated as set forth in the Plan, as of the close
of business on the date that the Madison Fund's assets are
exchanged for Shares of the GIT Fund. See "Information About
the Merger."
The Board of Directors of the Madison Fund and the Board of
Trustees of the GIT Fund, including the Directors and
Trustees who are not "interested persons," as that term is
defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), have concluded that it is in the best
interests of both Funds for the Merger to take place. The
Directors of the Madison Fund have concluded that the
interests of the existing shareholders of the Madison Fund
will not be diluted as a result of the transactions
contemplated by the Merger, and therefore has submitted the
Plan for the approval by the Madison Fund's shareholders.
The Board of Directors recommends approval of the Plan
effecting the Merger. The Board of Trustees of GIT Income
Trust has approved the Plan, and accordingly, the GIT Fund's
participation in the Merger.
Approval of the Merger on the part of the Madison Fund will
require the affirmative vote of more than 50% of its
outstanding voting securities. See "Voting Information."
If the shareholders of the Madison Fund do not vote to
approve the Merger, Madison Investment Advisors, Inc. and
the Madison Fund's Directors will continue to operate the
Madison Fund under its existing arrangements.
Comparison of Expenses:
The following tables show for the Madison Fund and the GIT
Fund the anticipated shareholder transaction costs associated
with an investment in the GIT Fund and the shares of the Madison
Fund.
GIT Fund Madison Fund
Shareholder
Transaction Expenses
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price) None 2.5%
Maximum Sales Load
Imposed on Reinvested
Dividends (as a percentage
of offering price) None None
Contingent Deferred
Sales Charge None None
Exchange Fee None None
Redemption Fees None 2.0%*
Annual Fund Operating Expenses
(as a percentage of average
daily net assets)
Management Fees .50% .50%
12b-1 Fees None .25%
Other Expenses .75% .76%
Total Fund Operating
Expenses 1.25% 1.51%
*The redemption fee is 2% when shares are redeemed during
the first or second calendar year following purchase.
The foregoing and following tables show for each Fund the
annual operating expenses (as a percentage of average net
assets) attributable to the GIT Fund and the shares of
the Madison Fund, together with examples of the cumulative
effect of such expenses on a $1,000 investment in such
shares for the periods specified, assuming (i) a 5% annual
return, and (ii) redemption at the end of such period. In
these examples, the expenses of the Madison Fund assume
deduction of the 2.5% sales charge at the time of purchase.
GIT Fund Madison Fund
After 1 year $ 13 $ 60
After 3 years $ 40 $ 72
After 5 years $ 69 $105
After 10 years $ 151 $201
The purpose of the foregoing tables is to assist a Madison
Fund shareholder in understanding the various costs and
expenses that an investor in the GIT Fund will bear directly
and indirectly, as compared with the various direct and
indirect expenses that would be borne by a Madison Fund
shareholder. The amounts set forth in the foregoing tables
and in the examples with respect to the Madison Fund are
based on the expenses of shares of the Madison Fund for the
fiscal year ended December 31, 1996 and, with respect to the
GIT Fund, are based on the estimated expenses in its first
year of operation. These examples should not be considered
a representation of future expenses or past or future annual
return. Actual annual return and future expenses may be
greater or less than those shown.
The Trust has entered into a services agreement with Bankers
Finance Advisors, LLC (see Management; Advisory Fees
and Expense Ratios, below) for the provision of certain
transfer agency, shareholder service and administrative
functions on behalf of its existing portfolios. Such services
are currently provided at cost. The Trust is expected to establish
a flat fee prior to the date of the Merger by which such functions
are provided to the GIT Fund at a rate not to exceed 0.75%
of average daily net assets and which fee shall be reviewed
annually by the Trustees.
Tax Consequences. Prior to or at the completion of the
Merger, the Madison Fund will have received an opinion of
counsel that the Merger has been structured so that no gain
or loss will be recognized by the Madison Fund or its
shareholders for federal income tax purposes as a result of
the receipt of shares of the GIT Fund in the Merger. The
holding period and aggregate tax basis of shares of the GIT
Fund that are received by the Madison Fund shareholders will
be the same as the holding period and aggregate tax basis of
shares of the Madison Fund previously held by such
shareholders, provided that shares of the Madison Fund are
held as capital assets. In addition, the holding period and
tax basis of the assets of the Madison Fund in the hands of
the GIT Fund as a result of the Merger will be the same as
in the hands of the Madison Fund immediately prior to the
Merger.
Investment Objectives and Policies. Both Funds seek
production of current income consistent with their quality
standards and preservation of capital. Both funds seek to
achieve their objectives by investing in corporate debt
securities, obligations of the U.S. Government and its
agencies and instrumentalities and money market instruments.
Both funds will invest at least 65% of their assets in bonds
with the total portfolio having an average dollar weighted
maturity of ten years or less. There is no assurance the
investment objective of either Fund will be achieved.
The investment objective of the Madison Fund is considered a
fundamental policy which cannot be changed without
shareholder vote. The investment objective of the GIT Fund,
however, may be changed upon written notice to its
shareholders.
Total Return Performances of the Funds. Because the GIT Fund
is newly organized, there is no separate historical
information available for it. The total return for the
Madison Fund for the fiscal year ended December 31, 1996 was
2.55%. The average annual total return for the five fiscal
years ended December 31, 1996 and from inception on April
23, 1990 through December 31, 1996 was 4.81% and 7.76%,
respectively. The calculations of total return assume the
reinvestment of all dividends and capital gains
distributions on the reinvestment date and the deduction of
all recurring expenses (including sales charges) that were
charged to shareholders' accounts.
Management; Advisory Fees and Expense Ratios. Madison
Investment Advisors, Inc. ("Madison") serves as the
investment advisor for the Madison Fund for an annual fee of
.50% of average daily net assets. Bankers Finance Advisors,
LLC, a subsidiary of Madison ("BFA") serves as the investment
advisor to the GIT Fund for an annual fee of .50% of average
daily net assets, which fee will remain in effect after the
Merger. BFA assumed management of GIT Income
Trust effective July 31, 1996. Madison shares its portfolio
management personnel with BFA.
In light of the similarity in both management and investment
objectives (discussed above), Madison Fund shareholders
are not expected to experience any change in the quality,
style or manner of management of their investment after
the Merger.
The business affairs of the Madison Fund are managed by the
Board of Directors of the Madison Fund and the business
affairs of the GIT Fund are managed by the Board of Trustees
of GIT Income Trust. Madison Investment Advisors, Inc.
("Madison") serves as the investment advisor for the Madison
Fund for an annual fee of .50% of average daily net assets.
Bankers Finance Advisors, LLC, a subsidiary of Madison
("BFA") serves as the investment advisor to the GIT Fund for
an annual fee of .50% of average daily net assets. Madison
shares its portfolio management personnel with BFA. The
ratio of expenses to average daily net assets was 1.51% for
the Madison Fund (fiscal year ended December 31, 1996).
Comparable information is not available for the GIT Fund
because it is newly organized. The Trust has entered into a
services agreement with BFA for the provision of certain
transfer agency and shareholder service functions on behalf
of its existing portfolios. Such services are currently
provided at cost. The Trust is expected to establish a flat
fee prior to the date of the Merger by which such functions
are provided to the GIT Fund at a rate not to exceed 0.75%
of average daily net assets and which fee shall be reviewed
annually by the Trustees.
Distribution; Sales Charges. The GIT Fund imposes no sales charges
or redemption fees. GIT Investment Services, Inc. of the
same address as the GIT Income Trust acts as the Trust's
Distributor. The Distributor is wholly owned by A. Bruce
Cleveland, controlling owner of the previous investment
advisor to GIT Income Trust.
Madison acts as distributor of the Madison Fund's shares
pursuant to a contract (the "Distribution Agreement'') with
the Madison Fund. To compensate Madison for its expenses
incurred under the Distribution Agreement, the Fund has
adopted a Plan of Distribution pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the
Plan, the Fund pays Madison a distribution fee, which is
accrued daily and paid quarterly, of .25 of 1% on an
annualized basis of the Fund's average daily net assets.
Purchase and Redemption Procedures.
The GIT Fund sells its shares directly to investors. The
Madison Fund, on the other hand, sells shares through
broker-dealers having sales agreements with the Madison Fund
and retains a portion of the sales charge.
The minimum initial purchase requirement for the Madison
Fund and the GIT Fund is $1,000. The GIT Fund does not
have a minimum for subsequent purchases, but it
reserves the right to return investments of less than
$50.00. The minimum subsequent purchase requirement for
the Madison Fund is $100.
Each Fund provides for mail or wire redemption of shares at
net asset value next determined after receipt of the
redemption request on each day the New York Stock Exchange
is open for business. An additional feature of the GIT Fund is the
ability of shareholders to redeem by telephone.
The GIT Fund may, after prior notice, involuntarily redeem
shareholders' accounts that have less than $700 of
invested funds. There is no comparable provision in the
Madison Fund.
Exchange Privileges. After the Merger, an option not
currently available to shareholders of the Madison Fund
will be the ability of shareholders to exchange shares
of the GIT Fund for shares of other funds of
the GIT Investment Funds mutual fund family. There is no
comparable provision in the Madison Fund. No sales charge
is imposed on an exchange. An exchange which represents an
initial investment in another fund of the GIT mutual fund
family must amount to at least $1,000, or $500 for an IRA
account. Although there is no present intention to do so, an
exchange privilege may be modified or terminated at any time.
Dividend Policy. The GIT Fund accrues income daily and
distributes its investment company taxable income monthly.
The Madison Fund distributes its net investment income
quarterly. Each Fund distributes any net capital
gains annually. Income dividends and capital gain
distributions are automatically reinvested in additional
shares, unless the shareholder has made a written request
for payment in cash. Shareholders of Madison Fund that have
elected, as of June 13, 1997, to receive dividends and/or
distributions in cash will continue to do so after the
Merger. After the Merger, former Madison Fund shareholders
may change their election with respect to receipt in cash or
reinvestment of dividends or distributions of the GIT Fund.
RISKS
Since the investment objective of each Fund is identical,
the policies and investment restrictions of each Fund are
substantially similar, Madison believes that there is no
significant difference in the risks involved in investing in
each Fund's shares. There is no assurance that investment
performance will be positive and that the Funds will meet
their investment objectives.
MANAGEMENT OF THE FUNDS
Bankers Finance Advisors, LLC provides investment advisory
services to the GIT Fund. The address of BFA is 1655 Ft.
Myer Drive, Arlington, Virginia 22209. BFA is a
subsidiary of Madison, 6411 Mineral Point Road, Madison,
Wisconsin, 53705, which provides investment advisory
services to the Madison Fund. Madison and BFA maintain
identical portfolio management personnel. The persons
responsible for the day-to-day management of the GIT Fund
are Chris Berberet and Jay Sekelsky, members of Madison's
investment policy committee.
Madison has served as investment advisor to the Madison Fund
since its inception. The Madison Fund is managed by
Madison's investment policy committee.
Material Provisions of the Proposed Transaction
On July 31, 1996, Madison acquired the investment management-
related assets of Bankers Finance Investment Management
Corp., the former advisor to the GIT Investment Funds Family
of mutual funds, and began providing investment advisory
services to such funds at that time. Madison has recommended
to the Directors of the Madison Fund and to the Trustees of
the GIT Fund that economies of scale, efficiencies of management
and other benefits (see "Reasons for the Merger Plan" below) can be
achieved through the merger of the two Funds. The Madison
Fund has entered into an Agreement and Plan of Merger in the
form attached hereto as Exhibit A.
The consummation of the reorganization contemplated by the
Agreement is subject to a number of conditions, which
include: (i) the receipt of all necessary regulatory
approvals; (ii) the approval by the shareholders of the
Madison Fund; (iii) the accuracy of the representations and
warranties contained in the Agreement; (iv) the absence of
pending or threatened litigation relating to the
reorganizations contemplated by the Agreement; and (v) the
receipt of various legal opinions.
Because BFA is a subsidiary of Madison, neither BFA nor
Madison will receive any amount of remuneration in
connection the with the Merger, except as otherwise
described herein under existing investment advisory and
management services agreements with the GIT Fund.
INFORMATION ABOUT THE MERGER
Plan of Merger. The following summary of the Plan is
qualified in its entirety by reference to the Plan (Exhibit
A hereto). The Plan provides that the GIT Fund will acquire
substantially all of the assets of the Madison Fund in
exchange for shares of the GIT Fund and the assumption by
the GIT Fund of certain identified liabilities of the
Madison Fund on June 13, 1997 or such later date as may be
agreed upon by the parties (the "Merger Date"). Prior to the
Merger Date, the Madison Fund will endeavor to discharge all
of its known liabilities and obligations. The GIT Fund will
not assume any liabilities or obligations of the Madison
Fund other than those liabilities reflected in an unaudited
statement of assets and liabilities of the Madison Fund
prepared as of the close of regular trading on the New York
Stock Exchange, Inc. (the "NYSE"), currently 4:00 pm.
Eastern Time, on the Merger Date. Each shareholder of record
of the Madison Fund as of the Merger Dtae will receive the
same number of full and fractional shares of the GIT Fund as
they held in the Madison Fund immediately prior to the
Merger. The net asset value per share of the GIT Fund
shares outstanding immediately following the Merger will
equal the net asset value per share of the Madison Fund
shares outstanding immediately prior to the Merger.
At or prior to the Merger Date, the Madison Fund shall have
declared a dividend or dividends and distribution or
distributions which, together with all previous such
dividends and distributions, shall have the effect of
distributing to the Madison Fund's shareholders all of the
Madison Fund's investment company taxable income for the
taxable year ending on or prior to the Merger Date (computed
without regard to any deduction for dividends paid) and all
of its net capital gains realized in all taxable years
ending on or prior to the Merger Date (after reductions for
any capital loss carryforward).
As soon after the Merger Date as conveniently practicable,
the Madison Fund distribute pro rata to shareholders of
record as of the close of business on the Merger Date the
full and fractional shares of the GIT Fund received by the
Madison Fund. Such distribution will be accomplished by the
establishment of accounts in the names of the Madison Fund's
shareholders on the share records of the GIT Fund's transfer
agent. Each account will receive the same
number of full and fractional shares of the GIT Fund as
each Madison Fund shareholder held in the Madison Fund
immediately prior to the Merger. After the
distribution and the winding up of its affairs, the Madison
Fund will terminate as a legal entity, although for
practical and economic purposes it will continue its
business after the Merger as the GIT Fund. The GIT
Fund will not issue share certificates to shareholders
and the shares issued will not have preemption or
conversion rights.
The consummation of the Merger is subject to the conditions
set forth in the Plan, including approval by the Investors
Fund's shareholders, accuracy of various representations and
warranties and receipt of opinions of counsel including
those matters referred to in "Federal Income Tax
Consequences." The Plan can be terminated by mutual
agreement or upon the failure of either Fund to satisfy
the required conditions.
BFA will bear all the expenses of the GIT Fund in connection
with the Merger. Other than the fees and expenses of counsel
to the Madison Fund and counsel to the independent Directors
of the Madison Fund (which will be paid by the Madison
Fund), the expenses of the Merger (including the cost of any
proxy soliciting agents) will be borne by Madison and BFA.
No portion of such expenses shall be paid by the GIT Fund.
If the Merger is not approved by shareholders of the Madison Fund,
its Board of Directors will continue to operate the Madison Fund under
its existing arrangements.
Capitalization. The following table shows the capitalization as of
December 31, 1996 of the GIT Fund (assuming it was organized on
such date) and the Madison Fund individually and on a pro forma
combined basis as of that date, giving effect to the
proposed acquisition of the Madison Fund's net
assets at fair value or market value, as appropriate:
GIT Madison Pro Forma For
Fund Fund Shares Merger
Net Assets $ 20.00$4,087,988 $4,088,008
Net Asset Value
per share $ 20.00 $ 20.63 $ 20.63
Shares
outstanding 1 198,179 198,180
Had the Merger been consummated on December 31, 1996, the
Madison Fund would have received 198,179 shares of the GIT
Fund, which would then be available for distribution to
shareholders. No assurance can be given as to how many shares
of the GIT Fund that Madison Fund shareholders will receive
on the Merger Date and the foregoing should not be relied upon
to reflect the number of shares of the GIT Fund that will
actually be received on or after the Merger Date.
As of March 31, 1997, (the "Record Date"), there were [number of]
outstanding shares of beneficial interest of the Madison Fund.
As of the Record Date, the officers and Directors of the Madison Fund
beneficially owned as a group less than 1% of the outstanding shares of
the Madison Fund. To the best knowledge of the Madison Fund Directors,
as of the Record Date, no other shareholder or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934, the
("Exchange Act")) beneficially owned more than 5% of the Madison
Fund's outstanding shares.
Reasons for the Merger Plan.
The independent Directors of the Board of Directors of the
Madison Fund requested and reviewed extensive information
from Madison and BFA in evaluating the effect of the
consolidation on the shareholders of the Madison Fund. The
information described: performance of BFA/Madison managed
funds; the extensive investment research, including credit
analysis, available to BFA/Madison managed funds; the
expenses of the BFA managed funds in relation to other
mutual funds and to the Madison Fund; the possibility of a
future reduction in expenses per share as a result of the
consolidation; the quality and variety of administrative
services provided BFA managed funds and the financial
condition of the service providers; the opportunities for
investment by shareholders among a family of mutual funds;
and the opportunities for marketing among a family of mutual
funds.
The independent Directors of the Madison Fund retained
independent counsel to advise them with respect to their
fiduciary duties in connection with approval of the proposed
consolidation.
In evaluating the consolidation of the Madison Fund, into the
GIT Fund, the Directors considered the advantages to the
Madison Fund's shareholders of association with a considerably
larger mutual fund complex while retaining existing
investment management, the benefits of being part of
a larger group of mutual funds with significantly greater
net assets and more diverse investment objectives and the
ability of shareholders following the proposed Merger to
utilize exchange privileges available currently to
shareholders of the other mutual funds managed by BFA.
The Board of Directors of the Madison Fund recommends that
shareholders approve the Plan to consolidate the Madison
Fund with the GIT Fund.
DESCRIPTION OF SHARES OF THE
GIT FUND AND THE MADISON FUND
Full and fractional shares of beneficial interest of the
GIT Fund will be distributed to the Madison Fund's
shareholders in exchange for their existing shares in the
Madison Fund in in accordance with the procedures detailed in
the Plan. The GIT Fund does not intend to
issue share certificates to shareholders. Instead, the
transfer agent for the GIT Fund will maintain a share
account for each shareholder of record. The shares of the
GIT Fund to be issued will have no preemptive or conversion
rights and are transferable without restriction. See
"Summary - Distribution; Sales Charges."
FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a)
of the Internal Revenue Code of 1986, as amended (the
"Code"). As a condition to the closing of the Merger, the
Madison Fund will receive an opinion of counsel to the
effect that, on the basis of the existing provisions of the
Code, U.S. Treasury regulations issued thereunder, current
administrative rules, pronouncements and court decisions,
for federal income tax purposes, upon consummation of the
Merger:
(1) The Merger will constitute a "reorganization" within the
meaning of section 368(a)(1) of the Code;
(2) No gain or loss will be recognized to the Madison Fund;
(3) The tax basis of the assets transferred will be the
same to the GIT Fund as the tax basis of such assets to
the Madison Fund immediately prior to the
Merger;
(4) No gain or loss will be recognized by the GIT
Fund;
(5) No gain or loss will be recognized by the Madison Fund's
shareholders upon the issuance of the shares of the
GIT Fund to them; and
(6) The aggregate tax basis of the shares of the
GIT Fund, including any fractional shares,
received by each of the shareholders of the Madison
Fund pursuant to the Merger will be the same as the
aggregate tax basis of the shares of the Madison Fund
held by such shareholder immediately prior to the Merger,
and the holding period of the shares of the GIT
Fund, including fractional shares, received by each such
shareholder will include the period during which the shares
of the Madison Fund exchanged therefore were held by such
shareholder.
Opinions of counsel are not binding upon the Internal
Revenue Service or the courts. If the Merger is consummated
but does not qualify as a tax-free reorganization under the
Code, the consequences described above would not be
applicable. Shareholders of the Madison Fund should consult
their tax advisors regarding the effect, if any, of the
proposed Merger in light of their individual circumstances.
Since the foregoing discussion only relates to the federal
income tax consequences of the Merger, shareholders of
the Madison Fund should also consult their tax advisors as
to state and local tax consequences, if any, of the Merger.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Form of Organization. The GIT Fund is a newly formed
series of GIT Income Trust. Both the Madison Bond Fund, Inc.
and GIT Income Trust are open-end management investment
companies registered with the SEC under the 1940 Act, which
continuously offer to sell shares at their current net asset
value plus any applicable sales loads. GIT Income Trust is
organized as a Massachusetts business trust and is governed
by a Declaration of Trust, By-Laws, Board of Trustees, and
applicable Massachusetts laws.
Madison Bond Fund, Inc. is a Wisconsin corporation and is
governed by its Articles of Incorporation,
By-Laws, Board of Directors and applicable Wisconsin laws.
Capitalization and Shareholder Liability. Under the terms of the
GIT Fund's Declaration of Trust, the Trustees may
issue an unlimited number of whole and fractional shares of
beneficial interest without par value for each series of shares
they have authorized. Currently, the GIT Fund's Trust consists
of three series of shares, the Maximum Income Portfolio, the
Government Portfolio and the GIT Fund. 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. Thus, the risk of a
GIT Fund shareholder incurring direct financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which a disclaimer is inoperative and the portfolio or series itself would be
unable to meet its respective obligations. A substantial number of mutual funds
in the United States are organized as Massachusetts business trusts.
The Madison Fund was incorporated in Wisconsin on October 11, 1989.
The Madison Fund has authorized common stock of 5,600,000 shares, $0.01
par value per share. All shares are of the same class with equal
rights and privileges. Each share has one vote and participates
equally in dividends and distributions declared by the Fund and,
on liquidation, in its net assets remaining after satisfaction of
outstanding liabilities. Under Wisconsin law, shareholders have no
personal liability for a corporation's acts or obligations, except
for certain employee wage claims.
Each Fund's shares have equal voting rights and represent equal
proportionate interests in the assets belonging to each
Fund, and are entitled to receive dividends and other
amounts as determined by GIT Income Trust's Board
of Trustees or the Madison Fund's Board of Directors.
The investment objective of the Madison Fund is considered a
fundamental policy which cannot be changed without
shareholder vote. The investment objective of the GIT Fund
may be changed upon thirty days notice to its shareholders.
Shareholder Meetings and Voting Rights. GIT Income Trust is not
required to hold annual shareholder meetings. Its Trustees
may be removed by a two-thirds vote of the number of Trustees
prior to such removal or by two-thirds vote of the
shareholders at a special meeting. The By-Laws of the
Madison Bond Fund provide that Directors may be removed by
a majority vote of shareholders. GIT Income Trust is
required to call a meeting of shareholders for the purpose
of voting upon the question of removal of a Trustee when
requested in writing to do so by the holders of at least 10%
of GIT Income Trust's outstanding shares. The Madison Bond
Fund must hold a Special Meeting of its shareholders upon
the written request of shareholders entitled to vote
not less than 25% of all the votes entitled to be cast at
such meeting. GIT Income Trust is required to call a
meeting of shareholders for the purpose of electing Trustees
if, at any time, less than a majority of the Trustees then
holding office were elected by shareholders.
GIT Income Trust currently does not intend to hold regular
shareholder meetings. Absent certain changes, its
investment advisory contract is reviewed annually by the
Trustees whose terms of office are indefinite. The
Madison Fund holds annual shareholder meetings to approve
its investment advisory contract with Madison, elect
directors and ratify the selection of independent auditors.
Although formal shareholder meetings are not expected to be
called by the GIT Fund following the Merger, Madison and BFA
intend to host receptions at least annually for the benefit
of shareholders to discuss investment policy, strategy and
other matters of interest to shareholders.
Neither Fund permits cumulative voting. A majority of shares
entitled to vote on a matter constitutes a quorum for
consideration of such matter, and a majority of the shares
present and entitled to vote is sufficient to act on a
matter (unless otherwise specifically required by the
applicable governing documents or other law, including the
1940 Act). All shares of all classes of each portfolio in
GIT Income Trust have equal voting rights except that in
matters affecting only a particular portfolio (for example,
a subadvisory agreement for that portfolio) only shares of
that portfolio are entitled to vote.
Liquidation or Dissolution. In the event of the liquidation
of a Fund the shareholders are entitled to receive, when,
and as declared by the Board of Trustees or Board of
Directors, the excess of the assets belonging to such Fund
over the liabilities belonging to the Fund. In either case,
the assets so distributable to shareholders of the
respective Fund will be distributed among the shareholders
pro rata based on the shares of the Fund held by them and
recorded on the books of the Fund.
The foregoing is only a summary of certain characteristics
of the operations of the Declaration of Trust and By-Laws of
the Trust and the Articles of Incorporation and By-Laws of
the Madison Fund, and of Massachusetts, Wisconsin and
federal law. The foregoing is not a complete description of
those documents or laws. Shareholders should refer to the
provisions of the respective Declaration of Trust, Articles
of Incorporation, By-Laws, and Massachusetts, Wisconsin and
federal law directly for more complete information.
ADDITIONAL INFORMATION
Madison Fund. Information about the Madison Fund is included
in its current Prospectus dated February 28, 1997, and in
the Statement of Additional Information of the same date
that has been filed with the SEC, both of which are
incorporated herein by reference. A copy of the Prospectus
and the Statement of Additional Information dated February
28, 1997 and the Madison Fund's Annual Report dated December 31,
1996 are available upon request and without charge by
writing to the Madison Fund at the address listed on the
cover page of this Prospectus/Proxy Statement or by calling
toll-free 1-800-553- 7838.
GIT Fund.
About GIT 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.
Upon consummation of the Merger, the Trust will offer shares
of three separate portfolios: the Madison Bond Fund
Portfolio, the Government Portfolio and the Maximum Income
Portfolio. The Government and Maximum Income Portfolios are
managed independently of the Madison Bond Fund Portfolio and
are offered pursuant to a separate prospectus.
Financial Highlights and Discussion of Fund Performance
Because GIT Income Trust intends to begin issuing shares in the
Madison Bond Fund Portfolio after the date of this prospectus,
no historical per share data or ratios are available and there is
no fund performance to discuss for the GIT Fund. The GIT
Fund will be the economic successor to the Madison
Fund following the Merger. Financial highlights for the
Madison Fund are available from the corresponding section
in the Madison Fund Prospectus and is incorporated
herein by reference.
Investment Objective
The investment objectives of the Portfolio are (1) production of
current income consistent with its quality standards and (2)
preservation of capital. The Portfolio seeks to achieve its objectives
by investing in corporate debt securities, obligations of the
U.S. Government and its agencies and instrumentalities and money
market instruments. The Portfolio will invest at least 65% of its
assets in bonds with the total portfolio having an average dollar
weighted maturity of ten years or less.
Although the investment objective of the 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 the Portfolio will be achieved.
Investment Policies
To achieve current income, the Portfolio intends to invest
in corporate debt securities and obligations of
the U.S. Government and its agencies.
The Advisor believes that capital preservation can best be
achieved through flexibility of investment strategies. Although
the careful selection of bonds and money market instruments is
the primary factor affecting the investment return of the Portfolio,
the percentage of the Portfolio's assets which may be invested at any
particular time in corporate bonds, U.S. Government and Government
Agency bonds and money market instruments, and the average
weighted maturity of the total portfolio will depend on
management's judgment regarding the risks in the general market.
The Portfolio's advisor monitors many factors affecting the
market outlook, including economic, monetary and interest rate
trends, market momentum, institutional psychology and historical
similarities to current conditions.
The Portfolio will normally invest at least 65% of its assets in bonds
with the total portfolio having an average dollar weighted maturity of
10 years or less. If the Advisor believes that market risks are high and
bond prices in general are vulnerable to decline, the Portfolio may take
certain temporary defensive actions such as reducing the average
maturity of the Portfolio's bond holdings and increasing the Portfolio's
cash reserves. Such "cash reserves"' are defined as short-term
investments such as U.S. Treasury Bills, high-grade commercial
paper, (rated in the top two rating classes by Standard & Poor's
or Moody's) bank certificates of deposit or repurchase
agreements. The objective of shortening maturities and holding
substantial cash reserves, as defined above, is to reduce the
Portfolio's exposure to bond price depreciation during periods
of rising interest rates, and to maintain desired liquidity while
awaiting more attractive investment conditions in the bond
market.
Under such circumstances, up to 100 percent of the Portfolio
may be invested in cash reserves. To the extent that the Portfolio
is so invested, it is not invested in accordance with policies designed
to achieve its stated investment objective.
It is the opinion of the Portfolio and its Advisor that the Portfolio's
willingness to shorten maturities and hold substantial cash
reserves during periods of market vulnerability are the most
important factors in comparing the Portfolio's investment philosophy
and strategies with those of most other mutual funds. In the
Advisor's opinion, most other mutual funds do not shorten
maturities dramatically during volatile times. Under normal
circumstances, when the Advisor believes interest rates are
stable or falling, the average dollar weighted maturity will be
in the 5-10 year range. On the other hand, when the advisor
believes interest rates are rising, the average dollar weighted
maturity may be shortened dramatically to 1-2 years. It is the
willingness to make these strategic shifts that differentiates
the Portfolio's strategy from most other funds. It is the general
intention of the Portfolio to maintain such defensive positions
temporarily or until it perceives that a period of market
vulnerability has passed.
Changes in the level of interest rates will directly affect
the market value of fixed income securities and the value of your
Portfolio shares. A decline in interest rates will tend to increase
their value, while a rise in interest rates will tend to decrease
their value. The longer the maturity of a security the greater
the price fluctuation will be. Limiting the average weighted
maturity of the portfolio to ten years and shortening the average
maturity during periods of rising interest rates will reduce the
extent to which the value of Portfolio shares will fluctuate. The
shorter the maturity of a bond the less volatile the price will
be.
Corporate Debt Securities. Eligible corporate debt
securities must be accorded one of the four highest quality
ratings by Standard & Poor's or Moody's or, if unrated, judged by
the Advisor to be a comparable quality. Bonds rated AAA, AA, or A
by Standard & Poor's or Aaa, Aa, or A by Moody's indicate strong
to high capacity of the company to pay interest and repay
principal. However, the fourth highest rating, (e.g. BBB by
Standard & Poor's or Baa by Moody's) indicates adequate capacity
to pay interest and repay principal but suggests that adverse
economic conditions may weaken the company's ability to meet
these obligations. Securities rated Baa by Moody's and BBB by
Standard & Poor's are regarded as having some speculative
characteristics. These bonds are also more sensitive to economic
changes than higher grade bonds. If a BBB or Baa bond held in the
portfolio is downgraded by Standard and Poor's or by Moody's, the
bond will be removed within twelve months following the
downgrade.
U.S. Government Securities. The Portfolio may invest in securities
guaranteed by the U.S. Government which include direct obligations
of the U.S. Treasury (Treasury bills, notes and bonds) and federal
agency obligations. The payment of principal and interest on
these securities is unconditionally guaranteed by the U.S.
Government, and thus they are the highest quality rated debt security.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of, nor
guaranteed by, the Treasury. However, they generally involve
federal sponsorship in one way or another. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Federal Home Administration, Federal Home Loan Banks,
Federal National Mortgage Association and Government National
Mortgage Association.
Money Market Securities. The Portfolio may invest in money
market securities which include
a) commercial paper (including variable rate master demand notes)
rated at least A-2 by Standard and Poor's Corporation or Prime-2
by Moody's, or if not so rated, issued by a corporation which has
outstanding debt obligations rated at least in the top two
ratings by Standard and Poor's and Moody's; b) debt obligations
(other than commercial paper) of corporate issuers which
obligations are rated at least AA by Standard or Poor's or Aa by
Moody's; and c) obligations of or guaranteed by the U.S.
government, its agencies or instrumentalities. Money market
securities are subject to the limitation that they mature within
one year of the date of their purchase. Government money market
securities include treasury bills, notes and bonds issued by the
U.S. government and backed by the full faith and credit of the
United States, as well as securities issued or guaranteed as to
principal and interest by agencies and instrumentalities of the
U.S. government.
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 the Portfolio may be
invested in the securities of issuers in a single industry.
The Portfolio 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. 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.
Specialized Investment Techniques
To achieve its objectives, the 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 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.
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 Annual 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 ("Madison"). Bankers Finance Advisors, LLC
administers approximately $200 million in assets and manages the
GIT family of mutual funds, which includes stock, bond and money
market portfolios. Madison, a licensed investment advisory firm for
over 23 years, provides professional portfolio management services
to a number of clients, including stock and bond mutual funds, and
has approximately $2.8 billion under management.
The Advisor is responsible for the day-
to-day administration of the Trust's activities. Investment
decisions regarding each of the Trust's portfolios can be
influenced in various manners by a number of individuals. The
individuals primarily responsible for the management of the
Trust's Portfolios are Chris Berberet and Jay Sekelsky.
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. 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 1/2 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, controlling owner of the
previous investment advisor to GIT Income Trust.
Services Agreement. Under a separate Services Agreement with the
Trust, BFA provides operational and other support
services for a fee subject to annual review and approval by the
Trustees.
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, proxy materials and reports to shareholders; and the
expense of holding shareholder meetings.
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 three portfolios are authorized by the Trustees: the
Madison Bond Fund Portfolio, 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
The 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.
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 the 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 reportable income such as
redemptions and 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.
Shareholder Transactions
Transactions into or out of the Trust are recorded in shares
and maintained to an accuracy of 1/1000th of a share.
Certificates will not be issued to represent shares in the Trust.
For institutions needing to maintain separate in formation on accounts
under their management, the Trust will provide a subaccounting report.
The option to initiate inter-fund exchanges and redemptions and
to obtain account balance information by telephone is available
automatically to all shareholders. The Trust will employ
reasonable security procedures to confirm that instructions
communicated by telephone are genuine; and if it does not, it may be
liable for losses due to unauthorized or fraudulent transactions.
These procedures can include, among other things, requiring one
or more forms of personal identification prior to acting upon
telephone instructions, providing written confirmations and
recording all telephone transactions. Certain transactions,
including account registration or address changes, must be
authorized in writing.
How to Purchase and Redeem Shares
Purchasing Shares
Purchases are priced at the net asset value per share
next determined after the purchase order is received by the Trust
in proper form and funds are received by the Trust's Custodian.
This is normally one or two business days after an investment is
received. Each shareholder is given an account with a
balance denominated in shares.
Purchases and Uncollected Funds. To protect shareholders
against loss or dilution resulting from deposit items that
are returned unpaid, the proceeds of any redemption may be
delayed 10 days or more until it can be determined that the
check or other deposit item (including Automatic Monthly
Investments) used for purchase of the shares has cleared.
Such deposit items are considered "uncollected," until the
Trust has determined that they have actually been paid by
the bank on which they were drawn. Purchases made with cash,
federal funds wire or U.S. Treasury check are considered
collected when received and not subject to the 10 day hold.
All purchases earn dividends from the day of credit to a
shareholder's account, even while not collected.
New Accounts. The minimum initial investment is $1,000.
By Check: New accounts may be opened by completing an
application and forwarding it with a check to:
GIT Income Trust
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
By wire. Federal funds wires should be sent to Star Bank, N.A.,
Cinti/Trust, ABA No. 0420-0001-3, for credit as follows:
GIT Madison Bond Fund Account No. 48038-8883
(Investor name and account number)
Please call the Trust before the funds are wired to ensure
proper and timely 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 $1,000.
When a new account is opened by telephone for funds wired to
the Trust, the investor will be required to submit a signed
application promptly thereafter. Payment of redemption
proceeds is not permitted until a signed application
is on file with the Trust.
By Inter-Fund Exchange. Shareholders may open a new account
by exchange from an existing account when the account
registration and tax identification number will remain
the same. A new account application is required only when
the account registration or tax identification number will
differ from that on the application for the original account.
Exchanges may only be made into funds that are
sold in the shareholder's state of residence.
Subsequent Investments. Subsequent investments may be made in any
amount, but the Trust reserves the right to return investments of
less than $50.00. Checks should be payable to GIT Income Trust
and sent to:
GIT Income Trust
1655 Fort Myer Drive, Suite 1000
Arlington, VA 22209-3108
Please include an investment deposit slip or a clear indication
of the account to be credited.
By Inter Fund Exchange. Shareholders may redeem shares
from one GIT account and concurrently invest the proceeds
in another GIT account by telephone when the account registration
and tax identification number remain the same. There is no charge for
this service.
By Automatic Monthly Investment. Shareholders may elect to
have regular monthly investments in any fixed amount of $100
or more. GIT will automatically initiate an Electronic
Funds Transfer to credit the shareholder's GIT account and
debit a bank account of their choice. You can change the
amount or discontinue the automatic investment anytime.
Redeeming Shares
Redemptions are processed on any day the New York Stock
Exchange is open and are effected at the net asset value per
share next determined after the redemption request is received in
proper form. Redemptions may be made by mail
or by wire transfer or telephone pursuant to preauthorized
instructions.
Signature Guarantees
To protect your investment, the Trust requires signature
guarantees for some redemptions. Signature guarantees help
the Trust ensure the identity of the authorized
shareholder(s). Signature guarantees are required for any
redemption whereby the proceeds are to be delivered to (1) a
person other than the shareholder of record (2) an address
other than the address of record or (3) a bank and bank
account number other than previously designated. The Trust
accepts signature guarantees from banks with FDIC insurance,
certain credit unions, trust companies, and members of a
domestic stock exchange. A guarantee from a notary public
is not an acceptable signature guarantee.
Redemptions and Uncollected Funds. To protect shareholders
against loss or dilution resulting from deposit items that
are returned unpaid, the proceeds of any redemption may be
delayed 10 days or more until it can be determined that the
check or other deposit item (including Automatic Monthly
Investments)used for purchase of the shares has cleared.
Such deposited items are considered "uncollected," until the
Trust has determined that they have actually been paid
by the bank on which they were drawn. Purchases made with
cash, federal funds wire or U.S. Treasury check are
considered collected when received and not subject
to the 10 day hold. All purchases earn dividends from the
day of credit to a shareholder's account, even while not
collected.
By Wire. With one business day's notice, funds can be sent
by wire transfer to the bank and account designated on the
account application or by subsequent written authorization.
Redemption by wires can be arranged by calling the
telephone numbers on the cover of this prospectus. Requests
for wire transfer must be made by 4:00 p.m. EST the day
before the wire will be sent.
Wire Fees: Wires of $10,000 or more will be processed to
U.S. domestic banks without charge. Wire transfers for
lesser amounts will be processed for a fee of $10. Wire
transfers sent to a foreign bank for any amount will be
processed for a fee of $30 or the cost of the wire if
greater.
By Telephone or By Mail. Upon request by telephone or in
writing, redemptions may be sent to the shareholder of
record to the address of record by check of the Trust.
Redemption requests received by mail and telephone are
normally processed within one business day.
Stop Payment on Check Issued By the Trust.
Call the Trust to place a stop payment on a check issued
by the Trust.
Normally, the Trust charges a fee of $28.00, or the cost of
stop payment, if greater, for stop payment requests on a check
issued by the Trust on behalf of a shareholder. Certain
documents may be needed before such a request can be processed.
By Customer Check. A shareholder 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 (by redemption of shares) 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 shareholder's investor's
account.
A confirmation statement showing the amount and number of each
check written is sent to the shareholder 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.
Stop Payments on Customer Checks.
The Trust will honor stop payment requests on unpaid
customer 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.
Automatic Periodic Redemptions. Shareholders may request one
or more automatic periodic redemptions of a fixed or readily
determinable sum, or of the actual dividends paid. Such
payments may be sent to the shareholder or to any other
payee preauthorized in writing by the shareholder. There is
no charge for this service, but the Trust reserves the right
to impose a charge, or to impose a minimum amount for
periodic redemptions.
Closing an Account
An account may be closed by telephone, wire transfer or by
mail as explained above.
A shareholder 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.
Minimum Balance. The Trust reserves the right to
involuntarily redeem accounts with balances of less than
$700. Prior to closing any such account, the shareholder
will be given 30 days written notice, during which time the
shareholder may increase his or her balance to avoid having
the account closed.
Transaction Charges
Bounced Investment Checks. Shareholders will be charged (by
redemption of shares) $10.00 for items deposited for
investment that are returned unpaid for any reason. The
Trust charges $5.00 to process each bearer bond coupon
deposited.
Broker Fees. Shareholders who purchase or redeem shares
through a securities broker may be charged a transaction fee
by the broker for the handling of the transaction if the
broker so elects. Such charges are retained by the
broker and not transmitted to the Trust. However,
shareholders may engage in any transaction directly with the
Trust to avoid such charges.
Additional Charges: The Trust reserves the right to impose
additional charges, upon 30 days written notice, to cover
the costs of unusual transactions. Services for which
charges could be imposed include, but are not limited to,
processing items sent for special collection, international
wire transfers, research and processes for retrieval of
documents or copies of documents.
Retirement Plans
IRAs. Individual Retirement Accounts ("IRAs") may be opened with
a reduced minimum investment of $500. Even though they may be
nondeductible or partially deductible, IRA contributions up to
the allowable annual limits may be made, and the earnings on such
contributions will accumulate tax-free until distribution. The
Trust currently charges an annual fee of $12 per shareholder
(not per IRA account) invested in an IRA at GIT. This fee may
be prepaid by the shareholder. A separate application is required
for IRA accounts.
Keogh Plans. The Trust also offers Keogh (or H.R. 10) plans for
self-employed individuals and their employees, which enable them
to obtain tax-sheltered retirement benefits similar to those
available to employees covered by other qualified retirement
plans. Currently the Trust charges an annual fee of
$15 per shareholder (not per Keogh account) invested in
a Keogh at GIT.
The Trust also offers SEP IRAs, SIMPLEs, 401(k) and 403(b)
retirement plans. Further information on the retirement plans
available through the Trust, including minimum investments, may
be obtained by calling the Trust's shareholder service
department.
Additional information concerning the operation and
management of the GIT Fund is incorporated herein by reference
to the Statement of Additional Information of this Prospectus/
Proxy Statement. A copy of such Statement of Additional
Information is available upon request and without charge by writing
to the GIT Fund, at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free
1-800-336-3063.
Availability of Proxy Materials
The Trust and the Madison Fund are each subject to the
informational requirements of the Exchange Act and the 1940
Act, and in accordance therewith file reports and other
information including proxy material, reports and charter
documents with the SEC. These items can be inspected and
copies obtained at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the SEC's Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois, 60661-2511, and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
OTHER BUSINESS
(1) Election of Directors
Action is to be taken with respect to the election of
the entire Board of Directors to serve until the next Annual
Meeting of Shareholders or until their successors are duly
elected and qualified or until the Merger of the
Madison Fund, if approved.
Each nominee has consented to be named in this Prospectus/Proxy
Statement and to serve, if elected. As of the date of the Prospectus/
Proxy Statement, Management has no reason to believe that
any of the named nominees will be unable to serve.
Executive officers of the Madison Fund
are elected annually by the Board of Directors.
During the last fiscal year of the Madison Fund, the Directors
were compensated as follows:
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Portfolios
Compensa- Accrued as Annual and Fund
tion part of Benefits Complex
from Portfolios Upon Paid to
Fund Expense Retirement Directors(a)
Frank E. Burgess 0 0 0 0
Edmund B. Johnson 1,000 0 0 3,000
James R. Imhoff, Jr. 1,000 0 0 14,250
Lorence D. Wheeler 1,000 0 0 14,250
(a) Prior to the effective date of the Merger,
the complex was comprised of 4 trusts and three
corporations with a total of 16 funds and/or series.
The Management of the Madison Fund intends to nominate
the persons named in the following table, which sets forth
the name, principal occupation, address, the current
position held with the Madison Fund, and the approximate
number of shares of common stock of the Madison Fund
beneficially owned, directly or indirectly, by each nominee
as of the close of business on March 31, 1997.
<TABLE>
Directors of the Madison Fund
<S> <C> <C> <C>
Shares of
Common Stock
Beneficially
Name, Principal Occupation Position with Owned Directly
and Address (1) the Madison Fund Age or Indirectly
*Frank E. Burgess Director 54 x,xxx
President and Director
of Madison Investment
Advisors, Inc., the Madison Fund's
Investment Advisor, 6411 Mineral
Point Rd., Madison, WI 53705
James R. Imhoff, Jr. Director 52
President and Director
First Realty Group, Inc.
429 Gammon Place
Madison, WI 53719,
Director of Park Bank of Madison, WI
Edmund B. Johnson Director 75
Vice President and Director
of Medix of Wisconsin, Inc.
Medix is a medical supply company.
3302 Valley Creek Circle
Middleton, WI 53562
Lorence D. Wheeler Director 59
President of Credit Union
Benefits Services, Inc.,
Box 431, Madison, WI 53701-0431
</TABLE>
* Directors who are "interested persons" of the Madison
Fund as defined in the Investment Company Act of 1940 by
reason of being an officer and/or director of the Madison
Fund's advisor, Madison Investment Advisors, Inc.
1) All Directors have served since the Madison Fund's
inception.
Executive officers of the Madison Fund are elected
annually by the Board of Directors.
The Management of the Madison Fund recommends you vote
FOR the directors nominated in the above table.
<TABLE>
<CAPTION>
Officers of the Madison Fund
<S> <C> <C> <C>
Name and Business History Office Age First elected
Frank E. Burgess President 54 1978
President and Director
of Madison Investment
Advisors, Inc., the Madison Fund's
Investment Advisor, 6411 Mineral
Point Rd., Madison, WI 53705
Chris Berberet Treasurer 36 1994
Vice President, Madison
Investment Advisors, Inc.
Prior to joining Advisor,
he was associated with ELCA
Board of Pensions in Minneapolis, MN.
Katherine L. Frank Vice President, 36 1988
Vice President, Madison In- Secretary
vestment Advisors, Inc. since 1986.
Previously with Wayne Hummer
& Co., Chicago, IL.
Jay R. Sekelsky Vice President 37 1991
Vice President, Madison
Investment Advisors since 1990.
Previously with Wellington
Management of Boston.
Elizabeth Hendricks Assistant Secretary 29 1996
Controller, Madison Investment
Advisors, Inc. With Madison
Investment Advisors, Inc. since
1996. Previously with McGladrey
and Pullen and Deloitte & Touche.
</TABLE>
(2) Approval or Disapproval of the Investment Advisory Agreement
Action is to be taken with respect to the approval of
the investment advisory agreement ("Agreement") between the
Madison Fund and its Advisor, Madison Investment Advisors,
Inc. (the "Advisor") until the Merger of the
Madison Fund as discussed in this Prospectus/Proxy
Agreement, if approved, or, if the Merger is not
approved, until the annual meeting of shareholders in April
or May 1998.
Under the Agreement originally dated October 16, 1989,
and amended on February 4, 1992 Madison Investment Advisors,
Inc. furnishes the Madison Fund with continuous investment
service and management. The Agreement as amended was
approved at the last shareholder meeting on May 1, 1996.
The Board of Directors, including the directors who are not
"interested persons" of the Advisor, formally extended the
Agreement as amended at a Director's meeting called for that
purpose.
Under the terms of the contract the Advisor is paid a
quarterly fee based on the net asset value of the Madison
Fund, as determined by the appraisals made as of the close
of each business day. On an annualized basis, the fee is
five-tenths of one percent (.50%) of the total net assets of
the Madison Fund. During the period ended December 31,
1996, the Advisor received $23,878 in fees from the Madison
Fund.
The Advisor, at its own expense and without
reimbursement from the Madison Fund furnishes office space,
office facilities, executive officers and overhead expenses
for managing the assets of the Madison Fund, other than
expenses incurred in complying with laws regulating the
issue or sale of securities and fees paid for attendance at
Board meetings to directors who are not "interested persons"
of the Advisor or officers or employees of the Madison Fund.
The Madison Fund bears all other expenses of its operations,
subject to certain expense limitations.
The Advisor has undertaken to reimburse the Madison
Fund to the extent that expenses, including the investment
advisory fee but excluding interest, taxes and brokerage
commissions, exceed 2% of the net asset value as determined
by appraisals made as of the close of each business day of
the year. The Madison Fund is not subject to any individual
state expense limitations at this time. The Advisor will
offset on a quarterly basis against its fee any such
expenses in excess of the expense limitations. The Advisor
was not required to reimburse the Madison Fund in 1996 as
the Madison Fund's expenses were within the 2% limitation.
The Agreement is not assignable and may be terminated by
the Madison Fund (by action of its Board of Directors or by
vote of a majority of its outstanding voting securities) or
by the Advisor, without penalty, on sixty (60) days written
notice. Otherwise, this Agreement continues in effect so
long as it is approved annually by the Directors of the
Madison Fund who are not "interested persons" of the
Advisor, cast in person at a meeting called for the purpose
of voting on such approval, and by either the Board of
Directors or by a majority of the outstanding shares of the
Madison Fund.
Frank E. Burgess, who is President and a Director of the
Madison Fund, is President, Treasurer and a Director of the
Advisor. Mr. Burgess is the majority shareholder of the
Advisor. Katherine L. Frank, who is Vice President and
Secretary of the Madison Fund, is also Vice President of the
Advisor. Jay R. Sekelsky, who is Vice President of the
Madison Fund, is also Vice President of the Advisor. Chris
Berberet who is Treasurer of the Madison Fund, is also Vice
President of the Advisor. Elizabeth Hendricks who is
Assistant Secretary of the Madison Fund, is also Controller
of the Advisor. All of the above may be contacted at 6411
Mineral Point Road, Madison, Wisconsin 53705. The Advisor
also manages Bascom Hill Investors, Inc. with total net
assets of $13.1 million and Bascom Hill BALANCED Fund, Inc.
with total net assets of $11 million as of December 31,
1996. Through its Bankers Finance Advisors, LLC
subsidiary, the Advisor also manages the GIT Investment
Funds family of thirteen mutual funds, including
Government Investors Trust, GIT Equity Trust, GIT
Income Trust and GIT Tax-Free Trust, with total net assets of
approximately $190 million as of December 31, 1996.
The Management of the Madison Fund recommends you vote
FOR the approval of the Agreement.
(3) Ratification or Rejection of Selection of Auditors
The Board of Directors, including the Directors of the
Madison Fund who are not "interested persons" as defined by
the Investment Company Act of 1940, has selected Williams,
Young & Associates, LLC, P.O. Box 8700, Madison, Wisconsin,
53708, independent certified public accountants, to act as
auditors of the Madison Fund for the fiscal year ending
December 31, 1997 or until the Merger of the Madison
Fund, whichever occurs first. Williams, Young & Associates, LLC
is expected to be present at the Annual Meeting to answer
any appropriate questions. A copy of the Annual Report
containing audited financial statements for the period ended
December 31, 1996 was previously mailed to shareholders.
The Management of the Madison Fund recommends that you
vote FOR the selection of Williams, Young & Associates, LLC as
auditors of the Madison Fund for the fiscal year ending
December 31, 1997 or until the Merger of the Madison Fund,
whichever occurs first.
(4) Other Matters
The Management of the Madison Fund knows of no other
matter that may come before the Annual Meeting. If any
other matters properly come before the Meeting, it is the
intention of the persons acting pursuant to the enclosed
Proxy form to vote the shares represented by said proxies in
accordance with their best judgment with respect to such
matters.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection
with a solicitation of proxies by the Board of Directors of
the Madison Fund to be used at the Annual Meeting of
Shareholders of the Madison Fund, to be held at the
Radisson Inn, 517 Grand Canyon Drive, Madison, Wisconsin on
Thursday, the 29th of May, 1997 at 4:00 p.m. and at any
adjournments thereof. This Prospectus/Proxy Statement, along
with a Notice of the Meeting and a proxy card, is first
being mailed to shareholders on or about May 1, 1997. Only
shareholders of record as of the close of business on the
Record Date will be entitled to notice of, and to vote at,
the Meeting or any adjournment thereof. The holders of a
majority of the shares outstanding at the close of business
on the Record Date present in person or represented by proxy
will constitute a quorum for the Meeting. If the enclosed
form of proxy is properly executed and returned in time to
be voted at the Meeting, the persons named as proxies will
vote the shares represented by the proxy in accordance with
the instructions marked. Unmarked proxies will be voted FOR
the proposed Merger, FOR the election of the
Directors nominated, FOR the renewal of the investment
advisory agreement with Madison, FOR the ratification of the
selected independent auditors and FOR any other matters
deemed appropriate. Proxies that reflect abstentions and
"broker non-votes" (i.e., shares held by brokers or nominees
as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote or (ii)
the broker or nominee does not have discretionary voting
power on a particular matter) will be counted as shares that
are present and entitled to vote for purposes of determining
the presence of a quorum. Since shares represented by
"broker non-votes" are considered outstanding shares, a
"broker non-vote" has the same effect as a vote against the
Merger. A proxy may be revoked at any time at or
before the Meeting by written notice to the Secretary of the
Madison Fund, 6411 Mineral Point Road, Madison, Wisconsin
53705. Unless revoked, all valid proxies will be voted in
accordance with the specifications thereon or, in the
absence of such specifications, for approval of the Plan and
the Merger contemplated.
Approval of the Plan will require the affirmative vote of
more than 50% of the outstanding voting securities of the
Bascom Hill Fund. Fractional shares outstanding are not
entitled to a proportionate share of one vote.
If the shareholders do not vote to approve the Merger, the
Board of Directors of the Madison Fund will continue to operate
the Madison Fund under existing arrangements.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph, facsimile or
personal solicitations conducted by officers and employees of Madison,
its affiliates or other representatives of Madison (who will not be paid
for their solicitation activities).
The Madison Fund will be responsible for the fees and expenses of its
counsel and counsel for the independent Directors in connection with the
Merger, whether or not the Merger is consummated. With respect
to the costs of preparing this Prospectus/Proxy Statement and soliciting
shareholders of the Madison Fund, Madison has agreed to bear such costs.
In the event that sufficient votes to approve the Plan are
not received by June 13, 1997, the persons named as proxies
may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. In determining
whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of
any further solicitation and the information to be provided
to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an
affirmative vote by the holders of a majority of the shares
present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such
adjournment after consideration of all circumstances which
may bear upon a decision to adjourn the Meeting.
A shareholder who objects to the proposed transaction will not be
entitled under either Wisconsin law or the Articles of Incorporation of the
Madison Fund to demand payment for, or an appraisal of, his or her shares.
However, shareholders should be aware that the Merger as proposed is not
expected to result in recognition of gain or loss to shareholders for federal
income tax purposes and that, if the Merger is consummated, shareholders
will be free to redeem the shares of the GIT Fund which
they received in the transaction at their then-current net asset
value. Shares of the Madison Fund may be redeemed at any time
prior to the consummation of the Merger. Madison Fund
shareholders may wish to consult their tax advisors as
to any differing consequences of redeeming Madison
Fund shares prior to the Merger or exchanging such shares in
the Merger.
If the Merger is not approved, Any shareholder
proposal to be presented at the Annual Meeting of
shareholders held in 1998, must be received at the executive
offices of the Madison Fund on or before February 1, 1998 at
the address set forth on the cover of this Prospectus/Proxy
Statement.
Notice to Banks, Broker-Dealers and Voting Trustees and
Their Nominees. Please advise Madison whether other persons
are beneficial owners of shares for which proxies are being
solicited and, if so, the number of copies of this
Prospectus/Proxy Statement needed to supply copies to the
beneficial owners of the respective shares.
The votes of the shareholders of the GIT Fund are not
being solicited by the Prospectus/Proxy Statement and are
not required to carry out the Merger.
THE BOARD OF DIRECTORS OF THE MADISON FUND, INCLUDING THE
"NON-INTERESTED" DIRECTORS, RECOMMENDS APPROVAL OF THE PLAN,
AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE
CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN.
---------------------
May 1, 1997
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the 1st day
of April, 1997, by and between GIT Income Trust, a Massachusetts
business trust (the "Trust"), with its principal place of business at
1655 Ft. Myer Drive, Arlington, Virginia 22209, with respect to its
Madison Bond Fund Portfolio series (the "Acquiring Fund"), and Madison
Bond Fund, Inc., a Wisconsin corporation (the "Company"), with its
principal place of business at 6411 Mineral Point Road, Madison,
Wisconsin 53705 (the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368 (a)(1) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Merger") will consist of the transfer of substantially all of the
assets of the Selling Fund in exchange solely for shares of beneficial interest,
no par value per share, of the Acquiring Fund (the "Acquiring Fund Shares") and
the assumption by the Acquiring Fund of certain stated liabilities of the
Selling Fund and the distribution, after the Merger Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Selling Fund in
liquidation of the Selling Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Selling Fund is an open-end, registered
investment company and the Acquiring Fund is a separate
investment series of an open-end, registered investment
company of the management type, and the Selling Fund owns
securities which generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of
beneficial interest;
WHEREAS, the Trustees of the Trust, have determined that the exchange of
substantially all of the assets of the Selling Fund for Acquiring Fund Shares
and the assumption of certain stated liabilities by the Acquiring Fund on the
terms and conditions hereinafter set forth is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Board of Directors of the Selling Fund has
determined that the Selling Fund should transfer
substantially all of its assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares and the assumption of
certain liabilities by the Acquiring Fund, on the terms and
conditions hereinafter set forth, that such transfer is in
the best interests of the Selling Fund's shareholders, and
that the interests of the existing shareholders of the
Selling Fund will not be diluted as a result of the
transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 The Exchange. Subject to the terms and conditions herein
set forth and on the basis of the representations and
warranties contained herein, the Selling Fund agrees to
transfer the Selling Fund's assets as set forth in paragraph
1.2 to the Acquiring Fund, and the Acquiring Fund agrees in
exchange therefore (i) to deliver to the Selling Fund the
number of Acquiring Fund Shares, including fractional
Acquiring Fund Shares, which is equal to the number of whole
and fractional shares of the Selling Fund that are issued
and outstanding as of the Merge Date, and (ii) to assume
certain liabilities of the Selling Fund, as set forth in
paragraph 1.3. Such transactions shall
take place at the closing provided for in paragraph 3.1 (the
"Merger Date").
1.2 Assets to be Acquired. The assets of the Selling Fund to
be acquired by the Acquiring Fund shall consist of all
property, including without limitation all cash, securities,
commodities and futures interests and dividends or interest
receivable, which is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books
of the Selling Fund on the Merger Date. The Selling Fund
has provided the Acquiring Fund with its most recent audited
financial statements which contain a list of all of Selling
Fund's assets as of the date thereof. The Selling Fund
hereby represents that as of the date of the execution of
this Agreement there have been no changes in its financial
position as reflected in said financial statements other
than those occurring in the ordinary course of its business
in connection with the purchase and sale of securities and
the payment of its normal operating expenses. The Selling
Fund reserves the right to sell any of such securities but
will not, without the prior written approval of the
Acquiring Fund, acquire any additional securities other than
securities of the type in which the Acquiring Fund is
permitted to invest. The Acquiring Fund will, within a
reasonable time prior to the Merger Date, furnish the
Selling Fund with a statement of the Acquiring Fund's
investment objectives, policies and restrictions and a list
of the securities, if any, on the Selling Fund's list
referred to in the second sentence of this paragraph which
do not conform to the Acquiring Fund's investment
objectives, policies, and restrictions. In the event that
the Selling Fund holds any investments which the Acquiring
Fund may not hold, the Selling Fund will dispose of such
securities prior to the Merger Date. In addition, if it is
determined that the Selling Fund and the Acquiring Fund
portfolios, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the
Acquiring Fund with respect to such investments, the Selling
Fund if requested by the Acquiring Fund will dispose of a
sufficient amount of such investments as may be necessary to
avoid violating such limitations as of the Merger Date.
1.3 Liabilities to be Assumed. The Selling Fund will
endeavor to discharge all of its known liabilities and
obligations prior to the Merger Date. The Acquiring Fund
shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and
Liabilities of the Selling Fund prepared by Madison
Investment Advisors, Inc. the investment advisor and
administrator of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the
prior audited period. The Acquiring Fund shall assume only
those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any
other liabilities, whether absolute or contingent, known or
unknown, accrued or unaccrued, all of which shall remain the
obligation of the Selling Fund.
1.4 Liquidation and Distribution. As soon after the Merger
Date as is conveniently practicable (the "Liquidation
Date"), (a) the Selling Fund will liquidate and distribute
pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Merger Date
(the "Selling Fund Shareholders"), on a one-for-one share
basis, the Acquiring Fund Shares
received by the Selling Fund pursuant to paragraph 1.1. and
(b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such liquidation and
distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the
Selling Fund on the books of the Acquiring Fund, to open
accounts on the share records of the Acquiring Fund in the
names of the Selling Fund Shareholders and representing the
same number of whole and fractional shares in the Acquiring
Fund as the Selling Fund shareholders held in the Selling
Fund immediately prior to the Merger. All issued and
outstanding shares of the Selling Fund will simultaneously
be canceled on the books of the Selling Fund. The Acquiring
Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange, but
nothing herein prevents the Acquiring Fund from issuing
certificates to its shareholders thereafter.
1.5 Ownership of Shares. Ownership of Acquiring Fund Shares
will be shown on the books of the Acquiring Fund's transfer
agent. Whole or fractional shares of the Acquiring Fund will
be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to
shareholders of the Selling Fund as described in Section 5.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Selling Fund
shares on the books of the Selling Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund
is and shall remain the responsibility of the Selling Fund up to and including
the Merger Date and such later date on which the Selling Fund is terminated and
deregistered.
1.8 Termination and Deregistration. The business of the Selling Fund shall be
wound up, and the Company shall be dissolved as a Wisconsin corporation and
deregistered as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), promptly following the Merger Date and the making
of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of business on the New York Stock Exchange on the business day
immediately preceding the Merger Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Trust's Declaration of Trust and the Acquiring Fund's current prospectus and
statement of additional information or such other valuation procedures as shall
be mutually agreed upon by the parties, recognizing that valuation of the
Selling Fund's assets immediately before the Merger Date is anticipated to be
equal to the valuation of the Acquiring Fund's assets immediately after
the Merger Date.
2.2 Shares to be Issued. The number of the Acquiring Fund
Shares to be issued (including fractional shares, if any) in
exchange for the Selling Fund's assets shall be equal to the
number of whole and fractional shares of the Selling Fund
that are issued and outstanding as of the close of business
on the Merger Date. The net asset value per share of each
Acquiring Fund share outstanding immediately following the
Merger shall be equal to the net asset value per share of
each Selling Fund share immediately prior to the effective
time of Closing.
ARTICLE III
CLOSING AND MERGER DATE
3.1 Merger Date. The Merger Date shall be June 13, 1997 or such later date as
the parties may agree to in writing. All acts taking place pursuant to the
Merger shall be deemed to take place simultaneously as of the close of
business on the Merger Date unless otherwise provided. The Closing shall be
held as of 4:00 o'clock p.m. at the offices of Bankers Finance Advisors, LLC,
1655 Ft. Myer Drive, Arlington, Virginia 22209, or at such other time and/or
place as the parties may agree.
3.2 Custodian's Certificate. Firstar Trust Company, as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Merger Date and (b) all necessary taxes including all
applicable Federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities.
3.3 Effect of Suspension in Trading. In the event that on the Valuation Date (a)
the New York Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Selling Fund shall be closed to trading
or trading thereon shall be restricted, or ( b ) trading or the reporting of
trading on said Exchange or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the Selling
Fund is impracticable, the Merger Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 Transfer Agent's Certificate. Firstar Trust Company, as transfer agent
for the Selling Fund shall deliver at the Closing a certificate of an
authorized officer stating that their records contain the names and addresses
of the Selling Fund Shareholders and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of the Company, or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request. The Trust serves as transfer agent for the
Acquiring Fund.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of the Selling Fund. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a Wisconsin corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin;
(b) The Selling Fund is a registered investment company classified as a
management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940 (the "1940 Act") is in
full force and effect;
(c) The current prospectus and statement of additional information of the
Selling Fund conform in all material respects to the applicable requirements of
the Securities Act of 1933, as amended, (the "1933 Act") and the 1940 Act and
the rules and regulations of the Commission thereunder and do not include any
untrue statement of material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;
(d) The Selling Fund is not, and the execution, delivery and performance of this
Agreement (subject to shareholder approval) will not result, in violation of any
provision of the Company's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Selling Fund is a party or by which it is bound;
(e) The Selling Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to it prior to the
Merger Date;
(f) Except as otherwise disclosed in writing to and accepted by the Acquiring
Fund, no litigation, administrative proceeding or investigation of or before any
court or governmental body is presently pending or to its knowledge threatened
against the Selling Fund or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial condition, the
conduct of its business or the ability of the Selling Fund to carry out the
transactions contemplated by this Agreement. The Selling Fund knows of no facts
which might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Selling Fund at December 31, 1996 have been
audited by Williams Young & Associates, LLC, certified public accountants, and
are in accordance with generally accepted accounting principles consistently
applied, and such statements (copies of which have been furnished to the
Acquiring Fund) fairly reflect the financial condition of the Selling Fund as
of such dates, and there are no known contingent liabilities of the Selling
Fund as of such dates not disclosed therein;
(h) Since December 31, 1996, there has not been any material adverse change in
the Selling Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Selling Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net
asset value of the Selling Fund shall not constitute a material adverse change;
(i) At the Merger Date, all Federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates shall have been
filed, and all Federal and other taxes shall have been paid so far as due, or
provision shall have been made for the payment thereof and to the best of the
Selling Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) For each of the preceding six fiscal years of its operation the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at the
Merger Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Selling Fund. All of the issued and outstanding shares of
the Selling Fund will, at the time of the Merger Date, be held by the persons
and in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Selling Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Selling Fund shares, nor
is there outstanding any security convertible into any of the Selling Fund
shares;
(l) At the Merger Date, the Selling Fund will have good and marketable title to
the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery and payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act, other than as disclosed to the Acquiring Fund and
accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Selling Fund and, subject
to approval by the Selling Fund's shareholders, this Agreement constitutes a
valid and binding obligation of the Selling Fund, enforceable in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations thereunder applicable thereto;
(o) The proxy statement of the Selling Fund to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Merger Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2 Representations of the Acquiring Fund. The Acquiring Fund represents
and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the Commission
as an investment company under the 1940 Act shall be in full force and effect
as of the Merger Date;
(c) The current prospectus and statement of additional
information of the Acquiring Fund, to be effective as of the
Merger Date, shall conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and
the rules and regulations of the Commission thereunder and
do not include any untrue statement of material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not materially misleading;
(d) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in violation of the Trust's Declaration of Trust
or By-Laws or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which it is bound;
(e) Except as otherwise disclosed to the Selling Fund and accepted by the
Selling Fund, no material litigation, administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition and the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this Agreement. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
contemplated herein;
(f) Other than actions taken in connection with its designation as an investment
series of the Trust, the Acquiring Fund has had no operations as of the date of
the Agreement and has no net assets or liabilities;
(g) Since its designation as an investment series of the
Trust, there has not been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or
business, or any incurrence by the Acquiring Fund of
indebtedness, except as otherwise disclosed to and accepted
by the Acquiring Fund;
(h) At the Merger Date, all Federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed shall have been filed, and all
Federal and other taxes shown due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof and to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company;
(j) The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe
for or purchase any Acquiring Fund Shares, nor is
there outstanding any security convertible into any
Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and this
Agreement constitutes a valid and binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Selling Fund,
for the account of the Selling Fund Shareholders, pursuant to the terms of this
Agreement will at the Merger Date have been duly authorized and, when so issued
and delivered, will be duly and validly issued Acquiring Fund Shares, and will
be fully paid and non-assessable (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(m) The information to be furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations applicable thereto;
(n) The Prospectus and Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund ) will, on the
effective date of the Registration Statement and on the Merger Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts
to give the notices or obtain the approvals and
authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the
Merger Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5. 1 Operation in Ordinary Course. The Acquiring Fund and the Selling Fund each
will operate its business in the ordinary course between the date hereof and the
Merger Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 Approval of Shareholders. The Selling Fund will call a meeting of the
Selling Fund Shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 Investment Representation. The Selling Fund covenants that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.4 Additional Information. The Selling Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Selling Fund shares.
5.5 Further Action. Subject to the provisions of this Agreement, the Acquiring
Fund and the Selling Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including any actions required to be taken after the Merger Date.
5.6 Statement of Earnings and Profits. As promptly as practicable, but in any
case within sixty days after the Merger Date, the Selling Fund shall furnish
the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring
Fund, a statement of the earnings and profits of the Selling Fund for Federal
income tax purposes which will be carried over by the Acquiring Fund as a result
of Section 381 of the Code, and which will be certified by the Selling Fund's
President, its Treasurer and its independent auditors.
5.7 Preparation of Form N-14 Registration Statement. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus and Proxy Statement") which will
include the Prospectus and Proxy Statement, referred to in paragraph 4.1(o), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, (the "1934 Act") and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Merger Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Merger Date with the same force and effect as if made on and as of
the Merger Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Secretary, Treasurer or Assistant Treasurer, in a form
reasonably satisfactory to the Selling Fund and dated as of the Merger Date,
to such effect and as to such other matters as the Acquiring Fund shall
reasonably request; and
6.2 The Selling Fund shall have received on the Merger Date
an opinion or statement from Sullivan & Worcester LLP, counsel
to the Acquiring Fund, in form and substance satisfactory to the
Selling Fund addressing the Acquiring Fund's standing, authority
or such other matters as the Acquiring Fund may request to
ensure the timely and authorized accomplishment of the Merger
without penalty or assumption of liability. Such statement
shall contain such assumptions and limitations as shall be
in the opinion of Sullivan & Worcester, LLP appropriate to
matters expressed therein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Merger Date and, in addition thereto, the following conditions:
7.1 All representations, covenants and warranties of the Selling Fund contained
in this Agreement shall be true and correct as of the date hereof and as of the
Merger Date with the same force and effect as if made on and as of the Merger
Date, and the Selling Fund shall have delivered to the Acquiring Fund on the
Merger Date a certificate executed in its name by the Selling Fund's
President or Vice President and its Secretary, Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Acquiring Fund and, dated
as of the Merger Date, to such effect and as to such other matters as the
Acquiring Fund shall reasonably request;
7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement of
the Selling Fund's assets and liabilities, together with a list of the Selling
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Merger Date, certified by the
Treasurer of the Selling Fund ; and
7.3 The Acquiring Fund shall have received on the Merger
Date an opinion or statement from DeWitt, Ross & Stevens, S.C.,
counsel to the Selling Fund, in form and substance satisfactory to
the Acquiring Fund addressing the Selling Fund's standing,
authority or such other matters as the Selling Fund may
request to ensure the timely and authorized accomplishment
of the Merger without penalty or assumption of any liability
not otherwise disclosed in the Selling Fund's financial
statements. Such statement shall contain such other
assumptions and limitations as shall be in the opinion of
DeWitt Ross & Stevens, S.C. appropriate to matters expressed
therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Merger Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the Selling Fund's Articles of
Incorporation and By-Laws and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1;
8.2 On the Merger Date the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein;
8.3 All required consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities. including any
necessary "no-action" positions of and exemptive orders from such Federal and
state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933 Act
and no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5 The Selling Fund shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of distributing to the
Selling Fund Shareholders all of the Selling Fund's investment company taxable
income for all taxable years ending on or prior to the Merger Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Merger Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of DeWitt Ross &
Stevens S.C., addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for Federal income tax purposes:
(a) The transfer of substantially all of the Selling Fund assets in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund's shares to the Selling Fund in dissolution and liquidation of
the Selling Fund, will constitute a "reorganization" within the meaning of
Section 368(a)(1)(F) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code; (b) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund; (c) no gain or loss will be
recognized by the Selling Fund upon the transfer of the Selling Fund assets to
the Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption
by the Acquiring Fund of certain identified liabilities of the Selling Fund or
upon the distribution ( whether actual or constructive ) of the Acquiring Fund
Shares to Selling Fund Shareholders in exchange for their shares of the Selling
Fund; (d) no gain or loss will be recognized by Selling Fund Shareholders upon
the exchange of their Selling Fund shares for the Acquiring Fund Shares in
liquidation of the Selling Fund; (e) the aggregate tax basis for the Acquiring
Fund Shares received by each Selling Fund Shareholder pursuant to the
Merger will be the same as the aggregate tax basis of the Selling Fund
shares held by such shareholder immediately prior to the Merger, and the
holding period of the Acquiring Fund Shares to be received by each Selling Fund
Shareholder will include the period during which the Selling Fund shares
exchanged therefore were held by such shareholder (provided the Selling Fund
shares were held as capital assets on the date of the Merger ); and (f)
the tax basis of the Selling Fund assets acquired by the Acquiring Fund will be
the same as the tax basis of such assets to the Selling Fund immediately prior
to the Merger, and the holding period of the assets of the Selling Fund
in the hands of the Acquiring Fund will include the period during which those
assets were held by the Selling Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Selling Fund may waive the
conditions set forth in this paragraph 8.6.
ARTICLE IX
BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Selling Fund each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2 (a) Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Acquiring Fund will
be borne by Madison Investment Advisors, Inc. ("Madison"). The Selling
Fund will bear the expense of its own counsel and counsel to its Directors in
connection with the transactions contemplated by this Agreement. All other
expenses of the transactions contemplated by this Agreement incurred by the
Selling Fund will be borne by Madison. Such expenses include, without
limitation, (i) expenses incurred in connection with the entering into and
the carrying out of the provisions of this Agreement; (ii) expenses
associated with the preparation and filing of the Registration Statement
under the 1933 Act covering the Acquiring Fund Shares to be issued pursuant
to the provisions of this Agreement; (iii) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing
of the Prospectus and Proxy Statement to such shareholders; (iv) postage; (v)
printing; (vi) accounting fees; (vii) legal fees; and (viii) solicitation cost
of the transactions. (b) Consistent with the provisions of paragraph 1.3, the
Selling Fund, prior to the Merger Date, shall pay for or include in the
statement of assets and liabilities prepared pursuant to paragraph 1.3 all of
its known and reasonably estimated expenses associated with the transactions
contemplated by this Agreement.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party has made
any representation, warranty or covenant not set forth herein and that the
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Acquiring
Fund and the Selling Fund. In addition, either the Acquiring Fund or the Selling
Fund may at its option terminate this Agreement at or prior to the Merger Date
because:
(a) of a breach by the other of any representation, warranty or agreement
contained herein to be performed at or prior to the Merger Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
11.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring Fund
or the Selling Fund, the Trust, or their respective Directors,
Trustees or officers, to the other party or its Directors, Trustees or officers,
but each shall bear the expenses incurred by it incidental to the preparation
and carrying out of this Agreement as provided in paragraph 9.2.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Selling Fund and the Acquiring Fund: provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail addressed to
The Acquiring Fund:
GIT Income Trust
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
Attention: W. Richard Mason, Esq.
or to the Selling Fund
Madison Bond Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin, 53705
Attention: Frank E. Burgess, Esq.
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed to that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of Trust of the Acquiring Fund. The
execution and delivery of this Agreement has been authorized by the Trustees of
the Trust on behalf of the Acquiring Fund and signed by authorized officers of
the Trust, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquiring Fund as
provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed and sealed
this Agreement, all as of the date first written above.
GIT Income Trust
on behalf of the Madison Bond Fund Portfolio
By:/s/
Name: Katherine L. Frank
Title: President
Madison Bond Fund, Inc.
By: /s/
Name: Frank E. Burgess
Title: President
<PAGE>
MADISON BOND FUND, INC.
MEETING OF SHAREHOLDERS -- MAY 29, 1997
This proxy is solicited on behalf of the Directors of the
Madison Bond Fund, Inc.
The undersigned hereby appoints Katherine L. Frank, Frank E.
Burgess and Elizabeth Hendricks, and each of them separately,
proxies, with full power of substitution, and hereby authorizes
them to represent and to vote, as designated below at the
Annual Meeting of Shareholders of the above referenced
Madison Fund (the "Fund") to be held on Thursday, May 29,
1997 at the Radisson Inn, 517 Grand Canyon Drive, Madison,
Wisconsin, at 3:00 p.m. Central time, and at any
adjournments thereof (the "Meeting"), all of the shares of
the Fund which the undersigned would be entitled to vote if
the undersigned were personally present.
Note: Please sign exactly as name appears on this card.
All joint owners should sign. When signing as an executor,
administrator, attorney, trustee, guardian or custodian for
a minor, please give full title as such. If a corporation,
please sign in full corporate name and indicate the signer's
office. If a partner, sign in partnership name.
Every shareholder's vote is important! Vote this Proxy Card
today! Please detach at perforation before mailing.
This proxy, when properly executed, will be voted in the
manner directed herein by the shareholder whose name is
signed herein. If no direction is made, this proxy will be
voted for each proposal.
To vote, mark blocks below in blue or black ink as follows [x]
Madison Bond Fund, Inc.
Keep this portion for your records.
(perforation)
Detach and return this portion only.
1. To approve the proposed Agreement and Plan of Merger
with the GIT Income Trust Madison Bond Fund Portfolio.
o YES o NO o ABSTAIN
2. Proposal to elect each of the nominees for Directors of
the Madison Fund (except those marked below)
[ ] For all nominees [ ] Withhold authority for all [ ] To
withhold authority to vote for an individual nominee (or
nominees), write the nominee's name on the line below.
Frank E. Burgess, James R. Imhoff, Jr., Edmund Johnson,
Lorence D. Wheeler
_____________________________________
3. To approve the investment advisory agreement between
Madison Investment Advisors, Inc. and the Madison Fund.
o YES o NO o ABSTAIN
4. To ratify the selection of Williams, Young &
Associates, LLC, independent auditors.
o YES o NO o ABSTAIN
5. To consider and vote upon such other matters as may properly
come before said meeting or any adjournments thereof.
o YES o NO o ABSTAIN
These items are discussed in greater detail in the attached
Prospectus/Proxy Statement. The Board of Directors of the Madison
Bond Fund, Inc. has fixed the close of business on March 31, 1997, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING ARE
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. INSTRUCTIONS FOR
THE PROPER EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1997
Acquisition of the Assets of
Madison Bond Fund, Inc.
6411 Mineral Point Road
Madison, Wisconsin 53705
1-800-767-0300
By and in Exchange for Shares of
Madison Bond Fund Portfolio
of
GIT Income Trust
1655 Ft. Myer Drive, Suite 1000
Arlington, Virginia 22209
1-800-336-3063
This Statement of Additional Information, relating
specifically to the proposed transfer of the assets of the
Madison Bond Fund, Inc., in exchange for shares of the
Madison Bond Fund Portfolio, a series of GIT Income Trust,
and the assumption by GIT Income Trust of certain identified
liabilities of the Madison Bond Fund Portfolio, is not a
prospectus. A Prospectus/Proxy Statement dated May 1, 1997
relating to the above-referenced matter may be obtained from
Madison Investment Advisors, Inc., 6411 Mineral Point Road,
Madison, Wisconsin 53705 or by calling 800-767-0300. This
Statement of Additional Information relates to and should be
read in conjunction with such Prospectus/Proxy Statement.
This Statement of Additional Information incorporates by reference the
following documents, a copy of each of which accompanies this Statement of
Additional Information:
1. The Prospectus of the Madison Bond Fund, Inc. dated February 28, 1997.
2. The Statement of Additional Information of the Madison Bond
Fund, Inc. dated February 28, 1997.
3. The Annual Report of the Madison Bond Fund,
dated February 28, 1997.
The following information is provided with regard to the Madison Bond Fund
Portfolio of GIT Income Trust.
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
Pro Forma Financial Statements xx
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.
Introductory Information
GIT Income Trust (the "Trust") issues three series of shares:
Government Portfolio shares, Maximum Income Portfolio shares
and Madison Bond Fund 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").
Madison Bond Fund Portfolio shares represent interests in a
portfolio of investment grade corporate debt securities, Government
Securities and short-term fixed income securities. 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 what are generally considered to be risky "derivative"
securities. Any deviation from this policy must be approved
by the Trustees in advance.
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.)
The Madison Bond Fund Portfolio invests in
corporate debt securities and obligations of the U.S.
Government and its Agencies. Eligible corporate debt
securities must be accorded one of the four highest
quality ratings by Standard & Poor's or Moody's or, if
unrated, judged by the Advisor to be of comparable
quality. Bonds rated A, AA, or AAA by Standard & Poor's or
Aaa, Aa, or A by Moody's indicate strong to high capacity
of the company to pay interest and repay principal.
However, the fourth highest rating, BBB, or Baa indicates
adequate capacity to pay interest and repay principal but
suggests that adverse economic conditions may weaken the
company's ability to meet these obligations. Securities
rated Baa are regarded by Moody's as having some
speculative characteristics.
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
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 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
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.
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 Wisconsin limited liability company owned by
Madison Investment Advisors, Inc. ("Madison"), whose
principal offices are at 6411 Mineral Point Road, Madison,
Wisconsin. Madison is a registered investment Advisor which
has numerous advisory clients. Madison was founded in 1973 and
has no other business affiliations other than those described
in the Prospectus and this Statement of Additional Information.
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 the Government and Maximum Income Portfolio's
shareholders held in July 1996 and by the initial shareholders of
the Madison Bond Fund Portfolio prior to the Merger.
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. on July 31, 1996. For periods prior to July 31,
1996, references in this Statement of Additional Information
to the "Advisor" refer to Bankers Finance Investment Management
Corp. with respect to the Trust's other two portfolios, the Maximum
Income Portfolio and the Government Portfolio. 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.
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 the Government and Maximum
Income Portfolios and 1/2 percent per annum of the
average daily net assets of the Madison Bond Fund Portfolio 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 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.
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.
Shareholder votes relating to the election of Trustees, approval
of the Trust's selection of independent 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 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 special 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 April 1, 1997, 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.
Julia M. Nelson
1655 Fort Myer Drive, Arlington, VA 22209-3108
Vice President
Vice President of GIT Investment Funds.
Jay R. Sekelsky
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of GIT Investment Funds and of
Madison Investment Advisors, Inc. Formerly Vice President
of Wellington Management Group of Boston, MA.
Mr. Sekelsky holds a BBA in Accounting and an MBA in
Finance from the University of Wisconsin.
Christopher C. Berberet
6411 Mineral Point Road, Madison, WI 53705
Vice President
Vice President of GIT Investment Funds and of
Madison Investment Advisors, Inc. Formerly the
Director of Fixed Income Management for the
ELCA Board of Pensions, Minneapolis, MN. A
graduate of the University of Wisconsin.
W. Richard Mason
1655 Ft. Myer Drive, Arlington, VA 22209
Secretary
Secretary of GIT Investment Funds, GIT Investment
Services, Inc., Presidential Savings Bank, FSB and
Presidential Service Corporation. Formerly Assistant
General Counsel for the Investment Company
Institute. Mr. Mason holds a BS in Foreign Service
from Georgetown University and received his law
degree from The George Washington University. He is
a member of the District of Columbia and Texas bars.
[FN]
<F1>
Trustee deemed to be an "interested person" of the Trust as the
term is defined in the Investment Company Act of 1940. Only those
persons named in the table of Trustees and officers who are not
interested persons of the Trust are eligible to be compensated by
the Trust. The compensation of each non-interested Trustee
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") totaling
$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 totaling $18,000.
During the last fiscal year of the Trust, the Trustees were compensated
as follows:
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Portfolios
Compensa- Accrued as Annual and Fund
tion part of Benefits Complex
from Portfolios Upon Paid to
Portfolios Expense Retirement Trustees(a)
Frank E. Burgess 0 0 0 0
Thomas S. Kleppe 1,000 0 0 15,000
James R. Imhoff, Jr.(b) 750 0 0 14,250
Lorence D. Wheeler(b) 750 0 0 14,250
(a) Prior to the effective date of the Merger,
the complex was comprised of 4 trusts and three
corporations with a total of 16 funds and/or series. On the
effective date of the Merger, the complex is
expected to be comprised of 4 trusts with a total of 15 funds
and/or series.
(b) Messrs. Imhoff and Wheeler joined the Board of Trustees on
July 31, 1996.
***Member of the Audit Committee of the Trust. The Audit Committee
is responsible for reviewing the results of each audit of the
Trust by its independent auditors and for recommending the
selection of independent auditors for the coming year.
Under the Declaration of Trust, the Trustees are entitled to be
indemnified by the Trust to the fullest extent permitted by law
against all liabilities and expenses reasonably incurred by them
in connection with any claim, suit or judgment or other liability
or obligation of any kind in which they become involved by virtue
of their service as Trustees of the Trust, except liabilities
incurred by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of their office.
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 a flat fee reviewed and approved annually
by the Trustees. Such fee is expected to approximate
the cost of providing such services. The term "cost"
includes both direct expenditures and the related overhead
costs, such as depreciation, employee supervision, rent and the like;
reimbursements to the Advisor pursuant to the Services Agreement
are in addition to and independent of payments made pursuant to
the Investment Advisory Agreement. The Advisor provides
such services to GIT Equity Trust, GIT Tax-Free Trust and
Government Investors Trust.
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 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").
In valuing brokerage services, the Advisor makes a judgment
of the usefulness of research and other information and
services provided by a broker to the Advisor in managing the
Portfolio's investment portfolio. In some cases, the information,
e.g. data or recommendations concerning
particular securities, relates to the specific transaction
placed with the broker, but, for the greater part, the
research and services consist of a wide variety of
information concerning companies, industries, investment
strategy and economic, financial and political conditions
and prospects, some of which may be provided by
means of payment for the use of electronic terminals
providing such information, useful to the Advisor in
advising the Portfolio and other clients of the Advisor.
In compensating brokers for their services, the Advisor
takes into account the value of the information received for
use in advising the Portfolio. It is understood by the
Portfolio that other clients of the advisor might also
benefit from the information and services obtained. Where
the Portfolio and one or more clients of the Advisor are
simultaneously engaged in the purchase or sale of the same
security, the transactions will, to the extent possible, be averaged
as to price and allocated equitably. In most
cases, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of
the Portfolio.
Share Purchases
The Prospectus/Proxy Statement describes the basic procedures
for investing in the Portfolio (see "How to Purchase and Redeem
Shares"). The following information concerning other investment
procedures is presented to supplement the information contained
in the Prospectus/Proxy Statement.
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 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
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, SIMPLE, 401(k) and 403(b) retirement
plans. The Trust may waive the initial investment minimum for
prototype or other retirement plan accounts on a case by case
basis.
Declaration of Dividends
Substantially all of the Trust's accumulated net 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
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
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), totaled
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
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.
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 Madison Bond
Fund Portfolio will be compared to mutual funds categorized as
"Intermediate Corporate Debt Funds". If this category should
be changed by Lipper Analytical Services, Inc., comparisons
will be made thereafter based on the revised category.
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 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").
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
The pro forma financial statement for the GIT Fund is included
in this Statement of Additional Information. The audited annual
report for the Madison Fund for the year ended December
31, 1996 are incorporated herein by reference and are available
at no cost by calling or writing the Madison Fund at 800-767-
0300. Such Annual Report was filed with the SEC on
March 3, 1997.
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
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."
<PAGE>
The following pro forma financial information relates to the
Madison Bond Fund, Inc. and the Madison Bond Fund Portfolio:
PRO FORMA COMBINING PORTFOLIOS OF INVESTMENTS OF
MADISON BOND FUND, INC. AND MADISON BOND FUND PORTFOLIO
DECEMBER 31, 1996
(unaudited)
<TABLE>
Statement of Net Assets
Madison Bond Fund, Inc. and Pro Forma Combined GIT Income Trust
Madison Bond Fund, Inc. and GIT Income Trust Madison Bond
Madison Bond Fund Portfolio Fund Portfolio
<S> <C> <C> <C>
Principal Market Principal and
Amount Value Market Value
Fixed Income Investments -93.7%
Treasury Securities - 51.5%
U.S. Treasury Notes 5.63% due 1/31/98 $610,000 $610,506 0
U.S. Treasury Notes 6.25% due 5/31/00 440,000 442,784 0
U.S. Treasury Notes 5.63% due 2/28/01 430,000 421,778 0
U.S. Treasury Notes 5.88% due 2/15/04 405,000 394,753 0
U.S. Treasury Notes 6.50% due 8/15/05 235,000 236,826 0
Total Treasury Securities (Cost $2,091,681) $2,106,647 0
CMO/Remic Securities - 10.7%
Residential Funding 7.0% due 12/25/07 $17,855 $17,782
Ryland Accept. Corp. 9.0% due 8/01/18 120,689 125,856
FNMA Remic 6.75% due 5/25/19 300,000 294,375
Total CMO/Remic Securities (Cost $437,127) $438,013 0
Corporate Bonds - 31.5%
Morgan Stanley 8.10% due 6/24/02 $ 200,000 $212,343
Reynolds Metals 9.0% due 08/15/03 200,000 220,839
Ford Motor Credit Co. 7.75% due 3/15/05160,000 168,151
Columbia/HCA 6.91% due 6/15/05 200,000 200,117
U.S. West Capital Funding Inc. 6.75%
due 10/1/05 100,000 97,841
J.P. Morgan & Co. 6.25% due 12/15/05 200,000 192,279
Kohls Corp. 6.70% due 2/1/06 200,000 193,619
Total Corporate Bonds (Cost $1,292,673) $1,285,189 0
Total Fixed Income Investments(Cost $3,821,481)$3,829,849 0
Short Term Investments - 2.2%
Variable Rate Demand Notes
Johnson Controls Inc. 5.23% due 1/1/97 $91,574 $ 91,574
Total Short Term Investments (Cost $91,574) $ 91,574 0
Cash & Receivables Less Liabilities - 4.1% $166,565 0
TOTAL NET ASSETS --
Equivalent to $20.63 per share on 198,179.235 shares
and paid-in capital aggregated $4,374,504. $4,087,988 0
</TABLE>
See notes to pro forma financial statements
<PAGE>
PRO FORMA COMBINING STATEMENT OF Operations of
Madison Bond Fund, Inc. and GIT Income Trust
Madison Bond Fund Portfolio
DECEMBER 31, 1996
(unaudited)
<TABLE>
Madison Bond Fund, Inc. GIT Income Trust
and Pro Forma Combined Madison
Madison Bond Fund, Inc. Bond
and GIT Income Trust Fund
Madison Bond Fund Portfolio Portfolio
<S> <C> <C>
Income:
Interest $ 304,230 0
Expenses:
Auditing Fee $ 9,642 0
Custodial Fee 1,426 0
Directors' Fee 3,600 0
Distribution Fee 11,940 0
Fidelity Bond 941 0
Investment Advisor Fee 23,878 0
Legal Fee 1,043 0
Licensing Fee 2,493 0
Printing Cost 3,635 0
Transfer Agent Fee 9,641 0
Other Fees 3,870 0
$ 72,109 0
Net Investment Income $ 232,121 0
Ratio of Expenses to Income 23.7% 0
Realized Gains (Losses) on Investments:
Proceeds from Sale $ 5,660,514 0
Cost 5,637,441 0
Net Realized Gains (Losses)$23,073 0
Unrealized Appreciation (Depreciation) on Investments:
Balance, Beginning of Year$163,441 0
Balance, End of Year 8,368 0
Increase (Decrease) in
Unrealized Appreciation $(155,073) 0
Net Realized Gains (Losses)
and Increase (Decrease)
in Unrealized
Appreciation $(132,000) 0
See notes to pro forma financial statements
<PAGE>
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS OF
Madison Bond Fund, Inc. and GIT Income Trust Madison Bond
Fund Portfolio
DECEMBER 31, 1996
(unaudited)
1. BASIS OF COMBINATION
The Pro Forma Combining Portfolio of Investments and Pro
Forma Combining Statement of Net Assets reflect the
accounts of GIT Income Trust, Madison Bond Fund Portfolio
(GIT) and Madison Bond Fund, Inc. (Madison) at December 31,
1996. The Pro Forma Combining Statement of Operations
reflects the accounts of GIT and Madison for the year ended
December 31, 1996. GIT was organized as a separate series of
GIT Income Trust on April 1, 1997, for the sole purpose
of merging with Madison. GIT did not have any assets or
operations as of the date of these pro forma statements, and
will not have any assets or operations until the merger with
Madison. These statements have been derived from Madison's
books and records utilized in calculating daily net asset
value at December 31, 1996.
The pro forma statements give effect to the proposed
transfer of the assets and stated liabilities of Madison in
exchange for shares of GIT under generally accepted
accounting principles. The historical cost of investment
securities will be carried forward to the surviving entity
and the results of operations of GIT for pre-combination
periods will not be restated. The pro forma statements do
not reflect the expenses of either fund in carrying out its
obligations under the Agreement and Plan of Merger. The
actual fiscal year of the combined fund will be December 31,
the fiscal year end of Madison.
The Pro Forma Combining Statement of Net Assets and
Liabilities and the Pro Forma Combining Statement of Net
Investment Income should be read in conjunction with the
historical financial statements of Madison included or
incorporated by reference in the Statement of Additional
Information.
2. SHARES OF BENEFICIAL INTEREST
The pro forma net asset value per share assumes the issuance of shares of
GIT, which would have been issued at December
31, 1996, in connection with the proposed reorganization, had it occurred then.
3. PRO FORMA OPERATIONS
The Pro Forma Statement of Operations assumes the same rate
of gross investment income for the investments of Madison.
Pro Forma operating expenses include the actual expenses of
MADISON. The expected expenses of the combined Fund
should be lower in light of the elimination of the 12b-1
expense and the sharing of certain expenses with the other
GIT Income Trust portfolios.
<PAGE>
GIT Income Trust
PART C
OTHER INFORMATION
Item 15. Indemnification
Madison maintains a Directors and Officers Errors and
Omissions Policy which covers the officers and
Directors/Trustees of the Madison Bond Fund, Inc. and
GIT Income Trust as well as the officers and directors of the
Advisor and its affiliates. Such policy does not protect
against any liability resulting from willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
(Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of such registrants pursuant
to any provision in the Trust or its By-Laws, each registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.)
Item 16. Exhibits:
1. Declaration of Trust dated November
18, 1982, as amended.*
2. Bylaws of GIT Income Trust.*
3. Not applicable.
4. Agreement and Plan of Merger.
Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Not applicable.
6. Form of Investment Advisory Agreement
dated July 31, 1996 between Bankers
Finance Advisors, LLC and GIT Income
Trust.*
7. Distribution Agreement dated July 3,
1985 between the Trust and GIT
Investment Services, Inc.*
8. Not applicable.
9. Custody Agreement between the Trust
and Star Bank, N.A. dated September
8, 1993.*
10. Not applicable.
11. Opinion of counsel, Sullivan &
Worcester, LLP.*
12. Draft tax opinion of DeWitt Stevens
and Ross, S.C. Filed herewith.
13. Contracts consisting of Services
Agreement between the Trust and
Bankers Finance Advisors, LLC
dated July 31, 1996.*
14. Consent of Independent Auditors. Filed
herewith.
15. Not applicable.
16. Powers of Attorney. Filed herewith.
* Incorporated by reference to Post-Effective
Amendment No. 17 filed by GIT Income Trust, 1933 Act
Registration Number 2-80808, Investment Company
Act of 1940 File Number 811-3616 on March 27, 1997.
Item 17. Undertakings.
(1) The undersigned Registrant agrees
that prior to any public reoffering
of the securities registered through
the use of a prospectus which is a
part of this Registration Statement
by any person or party who is deemed
to be an underwriter within the
meaning of Rule 145(c) of the
Securities Act of 1933, the
reoffering prospectus will contain
the information called for by the
applicable registration form for
reofferings by persons who may be
deemed underwriters, in addition to
the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees
that every prospectus that is filed
under paragraph (1) above will be
filed as a part of an amendment to
the Registration Statement and will
not be used until the amendment is
effective, and that, in determining
any liability under the Securities
Act of 1933, each post-effective
amendment shall be deemed to be a
new Registration Statement for the
securities offered therein, and the
offering of the securities at that
time shall be deemed to be the
initial bona fide offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the County of Arlington and
Commonweath of Virginia, on the 1st day of April, 1997.
Registrant: GIT Income Trust
By: (signature)
----------------------------------
Name: Katherine L. Frank
Title: President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
**, Trustee, Vice President (Date)
Frank E. Burgess
**, Trustee
James Imhoff (Date)
**, Trustee
Thomas S. Kleppe (Date)
**, Trustee
Lorence Wheeler (Date)
_____________________, **Attorney-In- 3/31/97
David Leahy, Esquire Fact
52
</TABLE>
DeWitt Ross & Stevens S.C.
Law Firm
Capitol Square Office West Office
Two East Mifflin Street Firstar Financial Centre
Suite 600 8000 Excelsior Drive, Suite 401
Madison, WI 53703-2865 Madison, WI 53717-1914
Fax 608-252-9243 Fax 608-831-2106
Tel 608-255-8891 Tel 608-831-2100
Please respond to: Capitol Square Office
[DATE]
Madison Bond Fund, Inc.
6411 Mineral Point Road
Madison, WI 53705
GIT Income Trust
Madison Bond Portfolio
1655 Ft. Myer Drive, Suite 1000
Arlington, VA 22209
Gentlemen:
You have asked for our opinion as to certain tax consequences of the proposed
acquisition of assets of Madison Bond Fund, Inc. ("Selling Fund"), a Wisconsin
corporation, by the Madison Bond Portfolio ("Acquiring Fund"), a new portfolio
of GIT Income Trust, a Massachusetts business trust, in exchange for voting
shares of Acquiring Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied upon the form of
Agreement and Plan of Reorganization dated as of April 1, 1997 (the
"Reorganization Agreement") between Selling Fund and GIT Income Trust on
behalf of Acquiring Fund and the related preliminary Prospectus/Proxy
Statement dated May 1, 1997. We have relied, without independent
verification, upon the factual statements made therein, and assume that there
will be no change in material facts disclosed therein between the date of this
letter and the date of closing of the Reorganization. We further assume that
the Reorganization will be carried out in accordance with the Reorganization
Agreement. We have also relied upon the following representations, each of
which has been made to us by officers of Selling Fund or of GIT Income Trust
on behalf of Acquiring Fund:
A. Selling Fund has not redeemed and will not redeem the shares of
any of its shareholders in connection with the Reorganization except to the
extent necessary to comply with its legal obligation to redeem its shares.
B. The management of Acquiring Fund has no plan or intention to
redeem or reacquire any of the Acquiring Fund shares to be received by Selling
Fund shareholders in connection with the Reorganization except to the extent
necessary to comply with its legal obligation to redeem its shares.
C. The management of Acquiring Fund has no plan or intention to
sell or dispose of any of the assets of Selling Fund which will be acquired by
Acquiring Fund in the Reorganization, except for dispositions made in the
ordinary course of business, and to the extent necessary to enable Acquiring
Fund to comply with its legal obligation to redeem its shares.
D. Following the Reorganization, Acquiring Fund will continue the
historic business of Selling Fund in a substantially unchanged manner as part of
the regulated investment company business of Acquiring Fund, or will use a
significant portion of Selling Fund's historic business assets in a business.
E. Acquiring Fund will not make any payment of cash or of property
other than shares to Selling Fund or to any shareholder of Selling Fund in
connection with the Reorganization.
F. To the best knowledge of management of Selling Fund, there is
no plan or intention on the part of the holders of shares of Selling Fund to
sell, exchange or otherwise dispose of any of the shares of Acquiring Fund
received in the transaction.
G. Immediately following consummation of the transaction, Acquiring
Fund will possess the same assets and liabilities, except for assets used to pay
expenses incurred in connection with the transaction, as those possessed by
Selling Fund immediately prior to the transaction.
H. Neither Selling Fund nor Acquiring Fund expects to issue
additional shares other than in the ordinary course of its business as a
regulated investment company.
I. The foregoing representations are true on the date of this letter and
will be true on the date of closing of the Reorganization.
Based on and subject to the foregoing, and our examination of the legal
authority we have deemed to be relevant, it is our opinion that for federal
income tax purposes:
1. The acquisition by Acquiring Fund of substantially all of the assets
of Selling Fund solely in exchange for voting shares of Acquiring Fund followed
by the distribution by Selling Fund of said Acquiring Fund shares to the
shareholders of Selling Fund in exchange for their Selling Fund shares will
constitute a reorganization within the meaning of Section 368(a)(1)(F) of the
Code, and Acquiring Fund and Selling Fund will each be "a party to the
reorganization" within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized to Selling Fund upon the
transfer of substantially all of its assets to Acquiring Fund solely in exchange
for Acquiring Fund voting shares and assumption by Acquiring Fund of any
liabilities of Selling Fund, or upon the distribution of such Acquiring Fund
voting shares to the shareholders of Selling Fund in exchange for all of their
Selling Fund shares.
3. No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Selling Fund (including any cash retained initially by
Selling fund to pay liabilities but later transferred) solely in exchange for
Acquiring Fund voting shares and assumption by Acquiring Fund of any
liabilities of Selling Fund.
4. The basis of the assets of Selling Fund acquired by Acquiring
Fund will be the same as the basis of those assets in the hands of Selling Fund
immediately prior to the transfer, and the holding period of the assets of
Selling Fund in the hands of Acquiring Fund will include the period during
which those assets were held by Selling Fund.
5. The shareholders of Selling Fund will recognize no gain or loss
upon the exchange of all of their Selling Fund shares solely for Acquiring Fund
voting shares. Gain, if any, will be realized by Selling Fund shareholders who
in exchange for their Selling Fund shares receive other property or money in
addition to Acquiring Fund shares, and will be recognized, but not in excess of
the amount of cash and the value of such other property received. If the
exchange has the effect of the distribution of a dividend, then the amount of
gain recognized that is not in excess of the ratable share of
undistributed earnings and profits of Selling Fund will be treated as a
dividend.
6. The basis of the Acquiring Fund voting shares to be received by
the Selling Fund shareholders will be the same as the basis of the Selling Fund
shares surrendered in exchange therefor.
7. The holding period of the Acquiring Fund voting shares to be
received by the Selling Fund shareholders will include the period during which
the Selling Fund shares surrendered in exchange therefor were held, provided
the Selling Fund shares were held as a capital asset on the date of the
exchange.
This opinion letter is delivered to you in satisfaction of the requirements of
Section 8.6 of the Reorganization Agreement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 and to use of our name and any reference
to our firm in the Registration Statement or in the Prospectus/Proxy
Statement constituting a part thereof. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or
the rules and regulations of the Securities and Exchange Commission
thereunder.
Sincerely,
DeWitt Ross & Stevens s.c.
Williams, Young & Associates, LLC
2901 West Beltline Highway
P.O. Box 8700
Madison, WI 53708
608-274-1980
Fax 608-274-8085
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the
use of our report dated January 24, 1997, and to all
references to our Firm included in or made a part of the
Prospectus/Proxy Statement on Form N-14.
WILLIAMS, YOUNG & ASSOCIATES, LLC
(signature)
Madison, Wisconsin
March 25, 1997
Member of the Institute of Profit Advisors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a
trustee of GIT Income Trust, a Massachusetts business trust,
does hereby constitute and appoint JOHN A. DUDLEY, ROBERT N.
HICKEY and DAVID M. LEAHY, and each of them, his true and
lawful attorney and agent to do any and all acts and things
and to execute any and all instruments which said attorney
and agent may deem necessary or advisable: (1) to enable
the said Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the registration under said Securities Act
of the shares of beneficial interest of said Trust (the
"Securities"), including, specifically, but without limiting
the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or to any amendment thereto filed with the
Securities and Exchange Commission in respect of said
Securities and to any instrument or document filed as part
of, an exhibit to or in connection with said Registration
Statement or amendment; (2) to enable said Trust to comply
with the Investment Company Act of 1940, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with
the registration under said Investment Company Act of the
Trust, including specifically, but without limiting the
generality of the foregoing, the power an authority to sign
for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or of any amendment thereto filed with the
Securities and Exchange Commission in respect of said Trust
and to any instrument or document filed as part of, as an
exhibit to or in connection with said Registration Statement
or amendment; and (3) to register or qualify said Securities
for sale and to register or license said Trust as a broker
or dealer in said Securities under the securities or Blue
Sky laws of all such states as may be necessary or
appropriate to permit therein the offering and sale of said
Securities as contemplated by said Registration Statement,
including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as
Trustee of said Trust to any application, statement,
petition, prospectus, notice or other instrument or
document, or to any amendment thereto, or to any exhibit
filed as a part thereof or in connection therewith, which is
required to be signed by the undersigned and to be filed
with the public authority or authorities administering said
securities or Blue Sky laws for the purpose of so
registering or qualifying said Securities or registering or
licensing said Trust, and the undersigned does hereby ratify
and confirm as his own act and deed all that said attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 22 day of August, 1996.
(signature)
Thomas S. Kleppe
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a
trustee of GIT Income Trust, a Massachusetts business trust,
does hereby constitute and appoint JOHN A. DUDLEY, ROBERT N.
HICKEY and DAVID M. LEAHY, and each of them, his true and
lawful attorney and agent to do any and all acts and things
and to execute any and all instruments which said attorney
and agent may deem necessary or advisable: (1) to enable
the said Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the registration under said Securities Act
of the shares of beneficial interest of said Trust (the
"Securities"), including, specifically, but without limiting
the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or to any amendment thereto filed with the
Securities and Exchange Commission in respect of said
Securities and to any instrument or document filed as part
of, an exhibit to or in connection with said Registration
Statement or amendment; (2) to enable said Trust to comply
with the Investment Company Act of 1940, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with
the registration under said Investment Company Act of the
Trust, including specifically, but without limiting the
generality of the foregoing, the power an authority to sign
for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or of any amendment thereto filed with the
Securities and Exchange Commission in respect of said Trust
and to any instrument or document filed as part of, as an
exhibit to or in connection with said Registration Statement
or amendment; and (3) to register or qualify said Securities
for sale and to register or license said Trust as a broker
or dealer in said Securities under the securities or Blue
Sky laws of all such states as may be necessary or
appropriate to permit therein the offering and sale of said
Securities as contemplated by said Registration Statement,
including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as
Trustee of said Trust to any application, statement,
petition, prospectus, notice or other instrument or
document, or to any amendment thereto, or to any exhibit
filed as a part thereof or in connection therewith, which is
required to be signed by the undersigned and to be filed
with the public authority or authorities administering said
securities or Blue Sky laws for the purpose of so
registering or qualifying said Securities or registering or
licensing said Trust, and the undersigned does hereby ratify
and confirm as his own act and deed all that said attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 22 day of August, 1996.
(signature)
Lorence D. Wheeler
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a
trustee of GIT Income Trust, a Massachusetts business trust,
does hereby constitute and appoint JOHN A. DUDLEY, ROBERT N.
HICKEY and DAVID M. LEAHY, and each of them, his true and
lawful attorney and agent to do any and all acts and things
and to execute any and all instruments which said attorney
and agent may deem necessary or advisable: (1) to enable
the said Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the registration under said Securities Act
of the shares of beneficial interest of said Trust (the
"Securities"), including, specifically, but without limiting
the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or to any amendment thereto filed with the
Securities and Exchange Commission in respect of said
Securities and to any instrument or document filed as part
of, an exhibit to or in connection with said Registration
Statement or amendment; (2) to enable said Trust to comply
with the Investment Company Act of 1940, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with
the registration under said Investment Company Act of the
Trust, including specifically, but without limiting the
generality of the foregoing, the power an authority to sign
for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or of any amendment thereto filed with the
Securities and Exchange Commission in respect of said Trust
and to any instrument or document filed as part of, as an
exhibit to or in connection with said Registration Statement
or amendment; and (3) to register or qualify said Securities
for sale and to register or license said Trust as a broker
or dealer in said Securities under the securities or Blue
Sky laws of all such states as may be necessary or
appropriate to permit therein the offering and sale of said
Securities as contemplated by said Registration Statement,
including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as
Trustee of said Trust to any application, statement,
petition, prospectus, notice or other instrument or
document, or to any amendment thereto, or to any exhibit
filed as a part thereof or in connection therewith, which is
required to be signed by the undersigned and to be filed
with the public authority or authorities administering said
securities or Blue Sky laws for the purpose of so
registering or qualifying said Securities or registering or
licensing said Trust, and the undersigned does hereby ratify
and confirm as his own act and deed all that said attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 22 day of August, 1996.
(signature)
Frank E. Burgess
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a
trustee of GIT Income Trust, a Massachusetts business trust,
does hereby constitute and appoint JOHN A. DUDLEY, ROBERT N.
HICKEY and DAVID M. LEAHY, and each of them, his true and
lawful attorney and agent to do any and all acts and things
and to execute any and all instruments which said attorney
and agent may deem necessary or advisable: (1) to enable
the said Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the registration under said Securities Act
of the shares of beneficial interest of said Trust (the
"Securities"), including, specifically, but without limiting
the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or to any amendment thereto filed with the
Securities and Exchange Commission in respect of said
Securities and to any instrument or document filed as part
of, an exhibit to or in connection with said Registration
Statement or amendment; (2) to enable said Trust to comply
with the Investment Company Act of 1940, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with
the registration under said Investment Company Act of the
Trust, including specifically, but without limiting the
generality of the foregoing, the power an authority to sign
for and on behalf of the undersigned the name of the
undersigned as Trustee of said Trust to a Registration
Statement or of any amendment thereto filed with the
Securities and Exchange Commission in respect of said Trust
and to any instrument or document filed as part of, as an
exhibit to or in connection with said Registration Statement
or amendment; and (3) to register or qualify said Securities
for sale and to register or license said Trust as a broker
or dealer in said Securities under the securities or Blue
Sky laws of all such states as may be necessary or
appropriate to permit therein the offering and sale of said
Securities as contemplated by said Registration Statement,
including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as
Trustee of said Trust to any application, statement,
petition, prospectus, notice or other instrument or
document, or to any amendment thereto, or to any exhibit
filed as a part thereof or in connection therewith, which is
required to be signed by the undersigned and to be filed
with the public authority or authorities administering said
securities or Blue Sky laws for the purpose of so
registering or qualifying said Securities or registering or
licensing said Trust, and the undersigned does hereby ratify
and confirm as his own act and deed all that said attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 22 day of August, 1996.
(signature)
James R. Imhoff, Jr.
