<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS, NOT CONTAINED IN THIS PROSPECTUS OR IN
THE STATEMENT OF ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESEN-
TATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, THE
INVESTMENT ADVISER, OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
---------------
DISTRIBUTOR AND SHAREHOLDER SERVICE AGENT:
Wayne Hummer Investments L.L.C.
300 South Wacker Drive
Chicago, Illinois 60606
INVESTMENT ADVISER AND PORTFOLIO ACCOUNTING AGENT:
Wayne Hummer Management Company
300 South Wacker Drive
Chicago, Illinois 60606
AUDITORS:
Ernst & Young LLP
233 South Wacker Drive
Chicago, Illinois 60606
COUNSEL:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Expense Information............................................. 2
Financial Highlights....................................................... 2
Introduction............................................................... 3
Investment Objective, Policies and Restrictions............................ 3
Risks...................................................................... 4
Purchase of Shares......................................................... 4
Redemption of Shares....................................................... 6
Management of the Trust.................................................... 7
Description of Shares...................................................... 7
Pricing of Shares.......................................................... 8
Performance Information.................................................... 9
Dividends.................................................................. 9
Taxes...................................................................... 9
Reports to Shareholders.................................................... 9
</TABLE>
LOGO
Wayne
Hummer A NO-LOAD
Money MONEY MARKET FUND
Fund
Trust
300 South Wacker Drive, Chicago, Illinois 60606
The Wayne Hummer Money Fund Trust (the "Trust") is a no-load money market mu-
tual fund organized as a Massachusetts business trust. The objective of the
Trust is to maximize current income to the extent consistent with preservation
of capital and maintenance of liquidity. An investment in the Trust is not a
deposit or obligation of or guaranteed or insured by the U.S. Government, any
bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board or
any other agency. There can be no assurance that the Trust will be able to
maintain a stable net asset value of $1.00 per share. Assistance with opening
an account and information about the Trust may be obtained from Wayne Hummer
Investments L.L.C. ("Wayne Hummer") at the above address or by telephone at
one of the following numbers:
CHICAGO RESIDENTS (312) 431-1700
TOLL FREE (800) 621-4477
This prospectus sets forth concisely information about the Trust that a pro-
spective investor ought to know before investing. Please read this prospectus
and retain it for future reference. A Statement of Additional Information dated
July 25, 1997 (which is incorporated herein by reference) has been filed with
the Securities and Exchange Commission. It may be obtained from the Trust at no
charge by calling one of the numbers listed above or by writing to Wayne Hummer
at the above address.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
LOGO
---------------
The date of this prospectus is July 25, 1997.
<PAGE>
LOGO
SUMMARY OF EXPENSE INFORMATION
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases or Reinvested Dividends......... None
Deferred Sales Load..................................................... None
Redemption Fee.......................................................... None
Exchange Fee............................................................ None
Annual Trust Operating Expenses (as a percentage of average net assets)
Management Fees......................................................... .50%
12b-1 Fees.............................................................. None
Other Expenses (primarily transfer agent, shareholder service and cus-
todian)................................................................ .24%
----
Total Trust Operating Expenses........................................ .74%
====
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on
a $1,000 investment, assuming (1) a 5% annual
return, and (2) redemption at the end of each
time period. As noted in the table above, the
Trust does not charge any redemption fee...... $8 $24 $41 $92
</TABLE>
The purpose of the preceding table and example is to assist investors in
understanding the various costs and expenses that an investor (referred to
herein as a "Shareholder") in the Trust will bear directly or indirectly. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or lesser than those shown. The example assumes
a 5% annual rate of return pursuant to requirements of the Securities and
Exchange Commission and is not intended to be representative of past or future
performance of the Trust. See "Management of the Trust" and "Financial
Highlights" for further information.
FINANCIAL HIGHLIGHTS
(for a Share outstanding throughout each year)
The table below reflects the results of the Trust's operations for the ten
fiscal periods ended March 31, 1997. The Trust's audited financial statements
and information in the table for the most recent five years, including the
report thereon of Ernst & Young LLP, independent auditors, are included in the
Trust's annual report for the year ended March 31, 1997, which is incorporated
by reference into the Statement of Additional Information. The Statement of
Additional Information may be obtained from Wayne Hummer upon request and
without charge.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income.. 0.04 0.05 0.04 0.02 0.03 0.05 0.07 0.07 0.07 0.06
Less dividends from in-
vestment income....... (0.04) (0.05) (0.04) (0.02) (0.03) (0.05) (0.07) (0.07) (0.07) (0.06)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of $1.00 $1.00 $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
year................... ===== ===== ===== ====== ===== ===== ===== ===== ===== =====
Total return............ 4.80% 5.18% 4.24%(a) 2.47% 2.83% 4.74% 7.34% 8.47% 7.58% 6.29%
RATIOS AND SUPPLEMENTARY
DATA
Net assets, end of pe-
riod ($000's).......... 238,238 226,273 155,248 153,529 158,170 180,823 220,297 175,287 140,366 116,473
Ratio of total expenses
to average net assets.. .74% .79% .80% .80% .79% .76% .80% .82% .85% .86%
Ratio of net investment
income to average net
assets................. 4.70% 5.04% 4.16% 2.44% 2.80% 4.66% 7.06% 8.11% 7.39% 6.11%
</TABLE>
- -------
NOTE TO FINANCIAL HIGHLIGHTS:
(a) The total return includes the effect of the capital contribution of
$0.0011 per share from Wayne Hummer Investments LLC. The return without the
capital contribution would have been 4.12%.
<PAGE>
INTRODUCTION
The Trust is a no-load, diversified, open-end management investment company
organized as a Massachusetts business trust pursuant to an Agreement and
Declaration of Trust dated December 4, 1981 ("Trust Agreement"). The Trust is
designed to provide a convenient means of investing funds where the direct
purchase of money market instruments may be undesirable or impractical. An
investment in the Trust permits participation in money market instruments
(with maturities not exceeding one year from date of acquisition) while
relieving the investor of most details associated with the direct purchase of
money market instruments, such as the need to maintain bookkeeping records, to
make frequent investment decisions, to schedule maturities and to provide for
safekeeping. "No-load" means that the Trust imposes no commissions or charges
when its Shares are purchased or redeemed.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The Trust seeks to maximize current income to the extent consistent with
preservation of capital and maintenance of liquidity. Of course, there can be
no assurance that the Trust will achieve its investment objective.
The Trust seeks to achieve its investment objective by investing exclusively
in the following types of money market instruments maturing in one year or
less from time of purchase: (1) debt securities issued or guaranteed by the
U.S. Government or by its agencies or instrumentalities (including securities
supported by the limited right of the issuer to borrow from the U.S. Treasury,
such as Federal Home Loan Bank securities, or solely by the creditworthiness
of the issuer, such as Federal National Mortgage Association debentures and
notes), and repurchase agreements/1/ with respect to any of such securities;
(2) zero coupon securities that are U.S. Treasury notes and bonds stripped of
their unmatured interest coupons, the unmatured interest coupons or interests
in such U.S. Treasury securities or coupons; (3) certificates of deposit,
variable rate certificates of deposit, time deposits, and banker's acceptances
of United States banks (excluding foreign branches) having total assets of at
least $1 billion and which are members of the Federal Deposit Insurance
Corporation; (4) commercial paper at the time of purchase rated Prime-1 by
Moody's Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P") or, if unrated, issued or guaranteed by a corporation with
outstanding debt rated Aa or better by Moody's or AA or better by S&P; and (5)
any other corporate notes, bonds and debentures rated Aa or better by Moody's
or AA or better by S&P at the time of purchase. In addition, the Trust limits
its investments to securities that meet the quality and diversification
requirements of Rule 2a-7 under the Investment Company Act of 1940. See the
Statement of Additional Information and its "Appendix," for a description of
commercial paper, note and bond ratings and for a more detailed description of
the money market instruments in which the Trust may invest.
Generally, the Trust will invest only in securities that are considered
liquid and that are not subject to restriction as to disposition under the
federal securities laws, except that the Trust may invest in money market
instruments issued in a private placement under Section 4(2) of the Securities
Act of 1933 ("Securities Act") and may invest up to 10% of its assets in
illiquid securities. Securities issued pursuant to Section 4(2) include
instruments similar in nature to commercial paper, but which are not entitled
to the exemption afforded commercial paper by Section 3(a)(3) of the
Securities Act because they were issued to finance other than current
transactions or were issued with a maturity greater than nine months. The
Trust's investment adviser considers Section 4(2) paper generally to be
liquid. If a particular investment in Section 4(2) paper is determined not to
be liquid, however, based on specified standards, the investment will be
included within the 10% limitation on illiquid securities. The Board of
Trustees has approved guidelines and procedures adopted by the investment
adviser and has delegated the day-to-day function of determining and
monitoring the liquidity of securities to the Trust's adviser. The Board,
however, will retain oversight and be ultimately responsible for the
determination. See "Investment Objective, Policies and Restrictions" and
"Trust Investments" in the Statement of Additional Information.
In addition to the Section 4(2) paper, other types of "restricted" money
market instruments that meet the Trust's credit, maturity and other investment
criteria (such as high quality bonds with less than one year remaining to
maturity) could be purchased or sold by the Trust in a private placement. The
Trust does not have a current intention to purchase such securities, but is
permitted to do so provided that investments in all securities considered
illiquid were not greater than 10%.
The 10% limitation on illiquid securities also would include securities for
which a readily available market may not exist and repurchase agreements
maturing in more than seven days. For a more detailed discussion of the
Trust's investment restrictions, see the Statement of Additional Information,
"Investment Objective, Policies and Restrictions."
- -------
/1/Repurchase agreements are instruments under which the Trust acquires
ownership of a security and the seller (a broker-dealer or bank) agrees to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the Trust's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement the Trust
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income.
3
<PAGE>
It is the policy of the Trust to seek to maintain a net asset value of $1
per share, and, as a general policy, to hold securities until maturity. See
"RISKS." Pursuant to an exemptive order obtained from the Securities and
Exchange Commission and procedures adopted pursuant to Rule 2a-7, the Trust
values its assets on the basis of amortized cost which permits it, if the
investment adviser deems it advisable, to maintain a dollar weighted average
portfolio maturity of up to 90 days. The Trust may attempt, from time to time,
to increase its yield by trading to take advantage of variations in the
markets for short-term money market instruments. For additional information,
see the Statement of Additional Information, "Pricing of Shares."
The foregoing investment objective, policies and restrictions (as well as
certain others specified in the Statement of Additional Information) may not
be changed without the approval of the holders of a majority of the
outstanding shares of the Trust as defined under "DESCRIPTION OF SHARES."
RISKS
While the Trust intends to invest in high quality money market instruments,
these investments are not entirely without risk. An increase in interest rates
generally will reduce the value of the Trust's investments and a decline in
interest rates generally will increase their value. Redemptions of the Trust's
Shares could necessitate the sale of securities at times when such sales would
not otherwise be desirable. Because the Trust invests exclusively in short-
term high quality money market instruments, such instruments generally may not
yield as high a level of current income as longer term or lower grade
securities which generally have less liquidity and greater fluctuation in
value. Although the Trust seeks to maintain a net asset value of $1 per share,
there is no assurance that it will be able to do so. For additional risks see
the Statement of Additional Information, "Trust Investments" and "Investment
Objective, Policies and Restrictions."
PURCHASE OF SHARES
The Trust's Shares may be purchased through Wayne Hummer, 300 South Wacker
Drive, Chicago, Illinois 60606 (the "Distributor"), without a sales charge at
their net asset value next determined after an order in proper form and
payment are received. The net asset value of the Trust's Shares is determined
as of the close of trading on the New York Stock Exchange (generally 3:00 p.m.
Chicago time) on each business day and at 3:00 p.m. Chicago time on each other
day in which there is a sufficient degree of trading in the securities held by
the Trust so as to affect materially the Trust's net asset value. See "PRICING
OF SHARES."
The purchase price normally is $1 per Share. The minimum initial investment
generally is $500 and subsequent investments generally must also be at least
$500. The foregoing minimum investments may be lower for accounts that are
part of an employer sponsored and administered 401(K) pension plan. The
minimum initial purchase of Shares with respect to an Individual Retirement
Account, a Simplified Employee Pension Plan, a Defined Contribution Plan or
any other type of retirement plan provided by Wayne Hummer is $500 and
subsequent investments must be at least $100. The Trust reserves the right, in
its sole discretion, at any time to vary the initial and subsequent investment
minimums, to withdraw the offering or to refuse any purchase order.
To purchase Shares, an investor who does not currently maintain a brokerage
account with Wayne Hummer must establish one. Purchases will be effected
through the investor's brokerage account and all Shares purchased are entered
and credited to the account. Payment must be made to Wayne Hummer in cash or
by check, draft or wire transfer, unless the necessary funds are already
available as a free credit balance in the account. Shares may be purchased by
mail, in person, or in the case where an investor has an adequate free credit
balance in his or her brokerage account, automatically as described below.
Shares purchased begin to earn dividends on the business day following the day
on which an investor's order is effected.
Orders received by Wayne Hummer with payment prior to the close of trading
on the New York Stock Exchange (generally 3:00 p.m. Chicago time) will be
effected that business day. Orders received after that time will be effected
the next business day. In the case of an order for the purchase of Shares paid
for by check, Wayne Hummer advances federal funds, usually not later than the
next business day following receipt of an order in proper form, though the
order is effected when the check is received by Wayne Hummer as described
above. If Shares are purchased by a check which is subsequently dishonored,
Wayne Hummer has the right to redeem such Shares and to retain any dividends
or distributions made with respect thereto. "Business day" as used in this
prospectus means any day that the New York Stock Exchange and federal banks in
both Illinois and Massachusetts are open for business.
Additional information on retirement plans provided by Wayne Hummer,
including a description of applicable service fees and limitations on
contributions and withdrawals, may be obtained by calling Wayne Hummer at the
telephone numbers shown on the cover of this prospectus or by writing to Wayne
Hummer, Attention: Retirement Plans Department, 300 South Wacker Drive,
Chicago, Illinois 60606. A retirement plan account may combine investments in
Trust Shares with investments in shares of Wayne Hummer Investment Trust or in
other securities purchased through Wayne Hummer.
4
<PAGE>
AUTOMATIC PURCHASES
The Trust, in conjunction with Wayne Hummer, maintains a "sweep program" for
the automatic purchase and redemption of Shares. Expenses of maintaining the
"sweep program" are borne by Wayne Hummer pursuant to a Shareholder Service
Agreement. See "MANAGEMENT OF THE TRUST." Under the program, free credit cash
balances of $100 or more arising in a Shareholder's Wayne Hummer brokerage
account are automatically invested in Shares on a specified day of each week
(currently, Friday), or if the specified day is not a business day, then on
the prior business day. Free credit balances of $500 or more arising from cash
deposits into an account from dividend and interest payments that are not to
be paid to the Shareholder in cash, or from any other source, are invested in
Shares on the day of receipt in the account if deposited in the account prior
to 3:00 p.m. Chicago time. Free credit balances of $500 or more arising from
the sale of securities that do not settle on the day of the transaction (such
as most common and preferred stock transactions) and from principal repayments
on debt securities are invested in Shares on the business day on which the
proceeds are received in the brokerage account. The automatic Share purchase
procedure, and the automatic Share redemption procedure described below, may
be suspended at any time by the Trust or Wayne Hummer. A Shareholder wishing
to terminate his or her participation in the "sweep program" may do so at any
time by notifying his or her Wayne Hummer investment executive.
SYSTEMATIC INVESTMENT PLAN
Shareholders of the Trust (except retirement plan accounts) can arrange to
have a pre-authorized amount ($100 minimum) drawn on their bank checking
account and automatically invested in the Trust on a specified day of each
month. An authorization agreement which contains details of the plan can be
obtained from the Shareholder's Wayne Hummer investment executive. The
Systematic Investment Plan may be terminated by the Trust at any time and by
the Shareholder at any time by notifying his or her investment executive.
PAYROLL DIRECT DEPOSIT PLAN
Once a Shareholder meets the Trust's minimum initial investment requirement,
additional Shares may be purchased through Payroll Direct Deposit. Through
this Plan, periodic investments (minimum $100) are made automatically from the
Shareholder's payroll check into his or her existing Trust account. By
enrolling in the Plan, the Shareholder authorizes his or her employer or its
agents to deposit a specified amount from the Shareholder's payroll check into
the Trust's bank account for the purchase of additional Shares. In most cases,
the Shareholder's Trust account will be credited the day after the amount is
received by the Trust's bank. In order to participate in the Plan, the
Shareholder's employer must have direct deposit capabilities through Automated
Clearing House available to its employees. The Plan may be used for other
direct deposits, such as social security checks, military allotments, and
annuity payments.
To establish Payroll Direct Deposit, a Shareholder should call his or her
investment executive to obtain an Authorization for Payroll Direct Deposit.
Once the Plan is established, a Shareholder may alter the amount of the
deposit, alter the frequency of the deposit, or terminate participation in the
Plan by notifying his or her employer.
EXCHANGE PRIVILEGE
Shareholders of the Trust have the unlimited privilege (without charge) of
exchanging their Shares for shares of either the Wayne Hummer Growth Fund (
"Growth Fund") or the Wayne Hummer Income Fund ("Income Fund"), both of which
are portfolios of the Wayne Hummer Investment Trust ("Investment Trust") and
each of which operates as a separate no-load mutual fund. Similarly, shares of
either the Growth Fund or the Income Fund may be exchanged for Shares of the
Trust without charge. Exchanges may only be made, however, for shares of a
Trust which are available for sale in the Shareholder's state of residence. A
Shareholder desiring to utilize the exchange privilege should contact his or
her Wayne Hummer investment executive at the phone number or address shown on
the cover of this prospectus to obtain information about the Investment
Trust's mutual funds and exchange procedures. No guarantee can be made as to
the availability of the telephone exchange privilege (or the telephone
redemption privilege discussed below) during emergency situations or unusual
market conditions. Before exchanging Shares, Shareholders should read the
Investment Trust prospectus carefully. Exchanges will be effected through the
redemption of Shares tendered for exchange and the purchase of shares of the
either Growth Fund or the Income Fund at their respective net asset values
next determined after receipt by Wayne Hummer of the exchange request. For
federal income tax purposes, an exchange constitutes a sale with respect to
which a gain or loss may be realized depending upon whether the value of the
Shares being exchanged is more or less than the Shareholder's adjusted cost
basis.
5
<PAGE>
REDEMPTION OF SHARES
The Trust will redeem all or any number of a Shareholder's Shares without
charge at their net asset value next determined after receipt by Wayne Hummer
of a redemption request in proper form. Except for redemptions by check,
redemption requests must be made to Wayne Hummer by telephone, mail or in
person. Shares covered by a redemption request received in proper form prior
to 3:00 p.m. Chicago time will continue to accrue dividends through the close
of business on the date of receipt. Shares covered by a redemption request
received in proper form after 3:00 p.m. Chicago time will continue to accrue
dividends through the close of business on the next business day following the
date of receipt. Redemption proceeds are normally credited to a Shareholder's
Wayne Hummer brokerage account at the start of business on the next business
day following the date through which dividends are accrued, but in no event
later than three business days after the redemption request is received. In
certain instances, redemptions may be automatically effected by Wayne Hummer
as described below.
REDEMPTIONS BY CHECK
A Shareholder (except retirement plan accounts) may establish a special
checking account with State Street Bank and Trust Company for the purpose of
redeeming Shares by check. Checks may be requested from Wayne Hummer. Checks
may be written in amounts of $500 or more up to a maximum of $250,000 and may
be made payable to any party.
The checkwriting procedure for redeeming Shares enables a Shareholder to
earn the dividends declared on Shares until such time as the check is
presented to State Street Bank and Trust Company which effects the redemption
on behalf of the Trust and makes payment on the check. If (1) the amount of
the check is greater than the value in a Shareholder's account, or (2) the
check is for an amount less than $500 or (3) the check is in excess of
$250,000, the check will not be honored and will be returned unpaid to the
person to whom the check was written. The Trust reserves the right to impose a
charge for the checkwriting privilege at a future date, to charge for
excessive use of the checkwriting privilege, to charge Shareholders its costs
for stop payment requests and checks returned for any reason, and to make
additional charges to recover the costs of providing the checkwriting service.
The check redemption procedure may be suspended or terminated at any time by
the Trust, Wayne Hummer or State Street Bank and Trust Company.
At various times the Trust may be requested to redeem shares for which good
payment has not been received. For example, if Shares are purchased by check,
the Shareholder's check may not have been cleared through the banking system
even though Wayne Hummer has advanced federal funds to effect the purchase. In
such event, Wayne Hummer or, in the case of redemption by check, State Street
Bank and Trust Company, may delay payment for redeemed Shares for up to 15
days while the Trust awaits assurance that good payment has been collected.
AUTOMATIC REDEMPTIONS
Redemptions of Shares will be automatically effected on a daily basis by
Wayne Hummer to satisfy debit balances of $10 or more existing in a
Shareholder's brokerage account just prior to 3:00 p.m. Chicago time. After
application of any free credit cash balances in the account to such debit
balances, the number of Shares needed to satisfy the remaining debit balance
will be redeemed at net asset value determined at 3:00 p.m. Chicago time that
day. If more than one redemption transaction is processed on a specific day
and the number of Shares available for redemption is insufficient to satisfy
all redemption transactions, redemptions by check, if presented, will take
precedence over redemption to satisfy debit balances resulting from activity
in the Shareholder's brokerage account. The automatic redemption of Shares to
settle debit balances in the brokerage account for purchases of other
securities may occur prior to the settlement date of such purchases and, thus,
the redemption proceeds may remain uninvested in the brokerage account until
such settlement date.
Due to the relatively high cost of maintaining accounts of less than $500,
the Trust reserves the right to redeem involuntarily Shares in any account
(other than a retirement plan account) for their then current value if at any
time a Shareholder's total investment does not have a value of at least $500.
A Shareholder will first be notified that the value of his or her account is
less than $500 and will be allowed 60 days to make an additional investment
before the involuntary redemption is made. The proceeds of an involuntary
redemption will be credited promptly to the Shareholder's Wayne Hummer
brokerage account and, on the following business day, will be mailed to the
Shareholder by check.
The Trust may suspend the right of redemption and the determination of net
asset value and may postpone the date of payment for redeemed Shares beyond
seven days under the following unusual circumstances: when the New
6
<PAGE>
York Stock Exchange is closed (other than weekends and holidays) or trading is
restricted; when an emergency exists as determined by the Securities and
Exchange Commission, making disposal of portfolio securities or the valuation
of net assets not reasonably practicable; or during any period when the
Securities and Exchange Commission has by order permitted a suspension of
redemption for the protection of Shareholders. For a more detailed description
of these circumstances see the Statement of Additional Information, "Purchase
and Redemption of Shares."
MANAGEMENT OF THE TRUST
Wayne Hummer Management Company (the "Investment Adviser"), 300 South Wacker
Drive, Chicago, Illinois 60606, acts as investment adviser to the Trust and
provides the Trust with operating facilities and management and portfolio
accounting services and serves as investment adviser to the Investment Trust
as well as to various individual, institutional and fiduciary accounts. The
Investment Adviser, organized in 1981, is owned by the voting members of Wayne
Hummer, a securities brokerage firm, which acts as Shareholder Service Agent
and Distributor.
Subject to the general supervision of the Board of Trustees, the Investment
Adviser determines the securities to be purchased, sold and held by the Trust,
is responsible for management of the Trust's portfolio and places all orders
subject to periodic review by the Board of Trustees.
As compensation for its advisory and management services to the Trust, the
Investment Adviser receives a fee from the Trust, payable monthly, at an
annual rate based on a percentage of the Trust's average daily net assets. The
annual rate of the advisory fee is .50% of the first $500 million of average
daily net assets and is reduced at several breakpoints for average daily net
assets in excess of $500 million. See the Statement of Additional Information,
"Management of the Trust--Investment Adviser." The Investment Adviser has
agreed to waive its fees to the extent that the Trust's operating expenses
during any fiscal year exceed 1% of the Trust's average daily net assets.
Expenses which are not subject to these limitations are interest, taxes,
brokerage commissions and extraordinary items.
The Investment Adviser also provides the Trust with certain portfolio
accounting services under the terms of a Portfolio Accounting Services
Agreement. The Investment Adviser maintains the accounting books and records
that constitute the record forming the basis for financial statements of the
Trust; maintains the capital stock account for the Trust; prepares a daily
trial balance for the Trust and calculates its net asset value; maintains all
records of a financial nature to the Trust's transactions; and processes
special ledgers and other reports when requested. As compensation for its
accounting services to the Trust, the Investment Adviser receives an annual
fee of .01 of 1% of average daily net assets of the Trust, which is computed
and accrued daily and payable monthly; but such fee shall not exceed $15,000
per annum. In addition, the Investment Adviser receives an equipment fee of
$50 per month and is reimbursed for its out-of-pocket costs for obtaining
securities pricing services, the license for use of portfolio accounting
software, and for other out-of-pocket costs which are incurred in providing
the pricing and software services.
Wayne Hummer provides services to the Trust pursuant to a Shareholder
Service Agreement. Such services, which are provided at their approximate cost
(excluding labor and overhead), if any, include such matters as: converting
funds into or advancing Federal Funds for the purchase of Shares; transmitting
purchase orders or redemption requests to the Transfer Agent; maintaining
records of Shareholders' transactions; preparing and transmitting federal and
state informational tax returns; recording Share dividends and forwarding cash
dividends to Shareholders; maintaining the automatic Share redemption and
purchase "sweep program"; generating and transmitting monthly statements; and
providing telephonic and written communications with respect to Shareholder
account inquiries.
DESCRIPTION OF SHARES
The Trust's Agreement and Declaration of Trust ("Trust Agreement") permits
the Trust to issue an unlimited number of full and fractional Shares. Each
Share is without par value, represents a proportionate interest in the Trust
which is equal to the proportionate interest represented by each other Share
and is entitled to such distributions from the net investment income generated
by the Trust's investments as are declared by the Trustees. Upon the
liquidation of the Trust, Shareholders are entitled to share pro rata in the
net assets that are available for distribution. Shares do not have
7
<PAGE>
cumulative voting rights nor any preemptive or conversion rights. Shares are
fully paid and nonassessable when issued as described herein, except as
expressly set forth below. Share Certificates are not issued. Shares owned and
dividends paid thereon will be reflected in each Shareholder's Wayne Hummer
monthly statement.
SHAREHOLDER VOTING RIGHTS
As a general rule the Trust will not hold annual or other meetings of
Shareholders. Under the Trust Agreement, Shareholders are entitled to vote in
connection with the following matters: (1) for the election or removal of one
or more Trustees if a meeting is called for that purpose; (2) with respect to
the adoption of any contract for which Shareholder approval is required under
the Investment Company Act of 1940 (such as the Trust's Investment Advisory
and Management Agreement); (3) with respect to any termination of the Trust to
the extent and as provided in the Trust Agreement; (4) with respect to any
amendment of the Trust Agreement (other than amendments changing the name of
the Trust, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); (5) as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (6) with respect to such additional matters relating
to the Trust as may be required by law, the Trust Agreement, the By-laws of
the Trust, any registration of the Trust with the Securities and Exchange
Commission or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of Shareholders and
until the election and qualification of his or her successor or until such
Trustee sooner dies, resigns, retires or is removed by vote of at least two-
thirds of the Shares entitled to vote or a majority of the Trustees.
ADDITIONAL PORTFOLIOS
The Trust Agreement permits the Board of Trustees to issue Shares in one or
more series ("Portfolios"). Only one Portfolio is currently authorized, which
is designated as the "Money Market Portfolio." If additional Portfolios are
established, each Share of a particular Portfolio will represent an equal
proportionate interest in the assets and liabilities belonging to such
Portfolio with each other Share of that Portfolio. Should the Trust issue
Shares in two or more Portfolios, voting with respect to certain matters will
be by Portfolio (such as approval of the Investment Advisory and Management
Agreement) and with respect to other matters will be by all Shareholders
without regard to Portfolio (such as election of Trustees and the ratification
of the selection of independent auditors).
SHAREHOLDER LIABILITY
The Trust is organized as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Trust Agreement provides that Shareholders shall not be subject to any
personal liability to any person extending credit to, contracting with or
having any claims against the Trust and that every written agreement,
obligation, instrument or undertaking made by the Trust shall contain a
provision that the same is not binding upon the Shareholders personally. With
respect to other claims, a Shareholder may be held personally liable to the
extent that claims are not satisfied by the Trust. Upon payment of any such
liability, however, Shareholders will be entitled to reimbursement from the
general assets of the Trust. The Trust is covered by insurance which the
Trustees consider adequate to cover foreseeable tort claims. See the Statement
of Additional Information, "Shareholder Liability."
PRICING OF SHARES
Shares may be purchased or redeemed at their net asset value, which normally
is $1. The net asset value per Share is computed by dividing the value of the
securities held by the Trust plus any other assets minus all liabilities by
the total number of Shares outstanding. The securities held by the Trust will
be valued using the amortized cost method of valuation. The net asset value
per Share is determined on each day the New York Stock Exchange is open for
trading as of the close of regular session trading on the Exchange (generally
3:00 p.m. Chicago time) and at 3:00 p.m. Chicago time on each other day during
which there is a sufficient degree of trading in securities of the Trust's
portfolio so as to affect materially the net asset value of the Shares. See
the Statement of Additional Information, "Pricing of Shares." Expenses,
including the fee payable to the Investment Adviser, are accrued daily.
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<PAGE>
PERFORMANCE INFORMATION
From time to time, in advertisements or reports to shareholders, the Trust
may quote recognized independent publishers and other sources, such as
IBC/Donoghue, Inc. or similar industry services, for purposes of comparing the
Trust's rank or performance with that of other money market funds having
similar investment objectives or asset size. Performance comparisons should
not be considered representative of the future performance of the Trust.
Additionally, from time to time, the Trust may quote "yield" and "effective
yield" figures for the Trust's performance in advertisements and other
materials furnished to present or prospective shareholders. Each of these
figures is based upon historical earnings and is not necessarily
representative of the future performance of the Trust. The yield of the Trust
refers to the income generated by a hypothetical investment in the Trust over
a specific seven day period. This income is then annualized, which means that
the income generated during the seven day period is assumed to be generated
each week over an annual period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by the investment is assumed to be reinvested. The effective
yield will be slightly higher than the yield due to this compounding effect.
The Trust's yield and effective yield will fluctuate. See the Statement of
Additional Information, "Performance Information," for more information
concerning the Trust's performance.
DIVIDENDS
The Trust declares as daily dividends all of the Trust's undistributed net
investment income. Net investment income of the Trust is determined
immediately prior to the determination of net asset value and consists of (1)
accrued interest income plus or minus amortized purchase discount or premium,
(2) plus or minus all short-term realized and unrealized gains and losses and
(3) minus accrued expenses. The Trust does not expect to realize any long-term
gains or losses. Dividends are reinvested monthly in the form of additional
full and fractional Shares at net asset value, or at the option of the
Shareholder, are paid as cash dividends monthly by credit to the Shareholder's
brokerage account with Wayne Hummer and, on the following business day, are
mailed to the Shareholder by check. Dividends are taxable to Shareholders
whether received in cash or reinvested in additional Shares, as described
below.
TAXES
The Trust intends to continue to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), as it has
since its inception. If so qualified, the Trust will not be subject to federal
income tax on its net investment income and realized capital gains distributed
to Shareholders.
Distributions of net income including any short-term capital gains are
taxable to Shareholders as ordinary income, whether such distributions are
taken in cash or reinvested in additional Shares. It is expected that none of
the Trust's distributions to Shareholders will be eligible for the dividends-
received deduction currently available to corporate Shareholders. Promptly
after the end of each calendar year, each Shareholder will receive a statement
of the federal income tax status of all distributions made during the year.
Distributions declared in October, November or December to Shareholders of
record as of a date in one of those months and paid before the following
February 1 are treated for federal income tax purposes as paid on December 31
of the calendar year declared. Shareholders are advised to consult with their
tax advisors concerning their individual tax situations.
The Trust is required by law to withhold federal income tax at a rate of 31%
from taxable distributions to Shareholders who do not furnish their correct
taxpayer identification numbers (in the case of individuals, their social
security numbers) and in certain other circumstances.
REPORTS TO SHAREHOLDERS
The Trust sends to its Shareholders various financial reports ("Reports")
such as unaudited semi-annual financial statements and fiscal year-end
financial statements audited by the Trust's independent auditors. To reduce
expenses, only one copy of most Reports may be mailed to all accounts with the
same social security or taxpayer identification number or to all Shareholders
in the same household. Shareholders may call or write Wayne Hummer to request
that copies of Reports be mailed to each account with a common taxpayer number
or to two or more Shareholders in the same household.
9
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
WAYNE HUMMER INVESTMENT TRUST
A NO-LOAD MUTUAL FUND
300 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
CHICAGO RESIDENTS CALL.........(312) 431-1700
TOLL FREE...................................(800) 621-4477
----------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT THE FUND'S PROSPECTUS. THIS
STATEMENT PROVIDES ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION
WITH THE FUND'S PROSPECTUS DATED JULY 25, 1997. THE PROSPECTUS MAY BE OBTAINED
AT NO CHARGE BY TELEPHONING WAYNE HUMMER INVESTMENTS L.L.C., THE FUND'S
DISTRIBUTOR AND SHAREHOLDER SERVICE AGENT, AT ONE OF THE ABOVE NUMBERS OR BY
WRITING TO THE ABOVE ADDRESS.
The date of this Statement of Additional Information is July 25, 1997
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
BACKGROUND................................................................. B-1
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS........................... B-1
Growth Fund.............................................................. B-1
Income Fund.............................................................. B-1
MANAGEMENT OF THE TRUST.................................................... B-10
Trustees................................................................. B-10
Officers................................................................. B-10
INVESTMENT ADVISORY AND OTHER SERVICES..................................... B-11
Investment Adviser....................................................... B-11
Distributor and Shareholder Service Agent................................ B-14
BROKERAGE ALLOCATION....................................................... B-15
PERFORMANCE INFORMATION.................................................... B-16
SHAREHOLDER VOTING RIGHTS.................................................. B-17
Other Matters............................................................ B-18
SHAREHOLDER LIABILITY...................................................... B-18
Limitation of Liability.................................................. B-18
TRUST NAME................................................................. B-18
PURCHASE, REDEMPTION AND PRICING OF SHARES................................. B-19
Determination of Net Asset Value......................................... B-19
TAXES...................................................................... B-20
Federal Income Tax....................................................... B-20
Other Taxes.............................................................. B-20
INDEPENDENT AUDITORS....................................................... B-21
CUSTODIAN AND TRANSFER AND DIVIDEND PAYING AGENT........................... B-21
LEGAL COUNSEL.............................................................. B-21
REPORTS TO SHAREHOLDERS.................................................... B-21
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS.................... B-21
</TABLE>
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BACKGROUND
Wayne Hummer Investment Trust (the "Trust") is a no-load, diversified, open-
end management investment company the beneficial units ("Shares") of which are
offered in two funds. The Trust is organized as a Massachusetts business trust
pursuant to an Agreement and Declaration of Trust dated September 29, 1983
("Trust Agreement"). Shares of the Trust are distributed by Wayne Hummer
Investments L.L.C. ("Wayne Hummer" or the "Distributor" and "Shareholder
Service Agent")(1). Wayne Hummer Management Company (the "Investment Adviser")
is responsible for the management of the Trust's investment funds subject to
the review of the Trust's Board of Trustees. The Trust is intended to provide
its investors (referred to individually as "Shareholder" and collectively as
"Shareholders") with access to professional advice and portfolio management
resources that are normally beyond the reach of most individual investors. The
Trust Agreement provides that the Trust may issue Shares in one or more series
(referred to individually as "Fund" and collectively as "Funds"). Presently,
only two Funds are authorized--the "Growth Fund" and the "Income Fund." Shares
of the Growth Fund were first offered to the public on December 30, 1983 and
shares of the Income Fund on December 1, 1992. See "DESCRIPTION OF SHARES" in
the Trust's prospectus dated July 25, 1997 (the "Prospectus").
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
GROWTH FUND. As stated in the Prospectus, the Growth Fund's primary
investment objective is long-term capital growth. Current income is a
secondary objective. Investments generally will be made in companies which the
Growth Fund's investment adviser believes to have an ability to achieve the
Growth Fund's investment objectives. See "INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS" in the Prospectus.
INCOME FUND. As stated in the Prospectus, the Income Fund's investment
objective is to maximize total return, including a competitive level of
current income, consistent with investing primarily in publicly-traded
investment grade securities. See "INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS" in the Prospectus.
Each Fund of the Trust has adopted certain investment restrictions which,
together with the investment objectives and fundamental policies of such
Trust, cannot be changed without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940,
this means the lesser of the vote of (a) 67% of the shares of the Fund at a
meeting where more than 50% of the outstanding shares are present or (b) more
than 50% of the outstanding shares of the Fund.
The following investment restrictions, which cannot be changed without
Shareholder approval, apply to each of the Funds except as indicated to the
contrary.
The Fund may not:
(1) Invest in the securities of an issuer, if immediately after and as a
result of such investment, the Fund owns more than 10% of the outstanding
securities, or more than 10% of the outstanding voting securities, of such
issuer.
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(1) Prior to April 1, 1996, Wayne Hummer & Co. was the Trust's Distributor and
Shareholder Service Agent. Effective as of April 1, 1996, Wayne Hummer &
Co., which was organized as an Illinois limited partnership, was
reorganized as a Delaware limited liability company and is now known as
Wayne Hummer Investments L.L.C. Each of the general partners of Wayne
Hummer & Co. became voting members of Wayne Hummer Investments L.L.C.
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(2) Concentrate its investments in any particular industry; provided that
if it is deemed appropriate for the attainment of the Fund's investment
objectives, up to 25% of its total assets may be invested in any one
industry.
(3) Make investments for the purpose of exercising control or management.
(4) Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization, or
by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved and only if immediately
thereafter no more than 10% of the Fund's total assets would be invested in
such securities.
(5) Purchase or sell real estate, commodities or commodity contracts,
except that the Income Fund may enter into options on financial futures
contracts.
(6) Purchase any securities on margin, except that the Fund may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities, except with respect to the Income Fund
which may make margin deposits in connection with transactions on options,
futures and options on futures.
(7) Make short sales of securities or maintain a short position.
(8) Make loans to other persons; provided that the Fund may use
repurchase agreements, and provided further that the acquisition of bonds,
debentures, or other corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of deposit, bankers'
acceptances, variable rate notes or other money market instruments that are
a portion of an issue to the public shall not be deemed to be the making of
a loan and provided further that the Fund may lend its portfolio securities
as set forth in paragraph (9) below.
(9) Lend its portfolio securities in excess of 20% of its total assets;
provided that such loans may be made only to New York Stock Exchange member
firms, other brokerage firms having net capital of at least $10 million and
financial institutions, such as registered investment companies, banks and
insurance companies, having at least $10 million in capital and surplus,
and provided further that such loans shall be in accordance with guidelines
established by the Securities and Exchange Commission for such loans and by
the Board of Trustees of the Trust including maintaining collateral from
borrowers at least equal at all times to the current value of the
securities loaned.(2)
(10) Mortgage, pledge, hypothecate or in any manner transfer (except as
provided in paragraph (9) above), as security for indebtedness, any
securities owned or held by the Fund except as may be necessary in
connection with borrowings mentioned in paragraphs (15) and (16) above, and
then such mortgaging, pledging or hypothecating may not exceed 15% of the
Fund's total assets.
(11) Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended, in selling portfolio securities.
(12) (Growth Fund only) Invest in securities for which there are legal or
contractual restrictions on resale or for which there is no readily
available market, if at the time of acquisition more than 5% of its total
assets would be invested in such securities.
(13) Invest in the securities of any one issuer (other than the United
States, its agencies or instrumentalities), if immediately after and as a
result of such investment, more than 5% of the Fund's total assets would be
invested in the securities of such issuer.
- --------
(2) Neither Fund has in the past engaged in the practices of lending its
portfolio securities as permitted under paragraph (9) or borrowing amounts
as permitted under paragraphs (15) and (16) and neither Fund has a present
intention to do so. Shareholders will be notified of any changes in these
practices.
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(14) Issue any senior securities except to the extent permitted under the
Investment Company Act of 1940.
(15) (Growth Fund only) Borrow amounts aggregating more than 5% of its
total assets and then only from banks as a temporary measure for
extraordinary or emergency purposes.
(16) (Income Fund only) Borrow amounts aggregating more than 10% of its
total assets and then only from banks as a temporary measure for
extraordinary or emergency purposes.
The following additional investment restrictions, which may be changed by
the Board of Trustees without Shareholder approval, apply to each of the Funds
except as indicated to the contrary.
The Fund may not:
(17) Purchase or sell interests in oil, gas or other mineral exploration
or development programs.
(18) Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except that the Fund may purchase put and call
options, including put and call options on stock indices, to the extent
permitted under paragraph (22) below, and may write covered call options on
individual portfolio securities.
(19) Invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets would be invested in such
securities.(3)
(20) Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation if at the
time of acquisition more than 5% of its total assets would be invested in
such securities.(3)
(21) Purchase or retain the securities of any issuer, if those officers,
trustees and directors of the Fund, its Investment Adviser or any parent or
subsidiary thereof, each owning beneficially more than 1/2 of 1% of the
securities of such issuer, own in the aggregate more than 5% of the
securities of such issuer.
(22) Purchase put and call options, including put and call options on
stock indices, if the total cost of all such options held by the Fund would
exceed 5% of the value of the Fund's net assets considered each time such
an option is acquired.
(23) (Growth Fund only) Invest in warrants if at the time of acquisition
more than 2% of its total assets would be invested in warrants. For
purposes of this restriction, warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.(4)
(24) (Income Fund only) Invest in financial futures contracts and options
on financial futures contracts, unless the aggregate of the contract value
of the outstanding futures contracts and futures contracts subject to
outstanding options written by the Income Fund does not exceed 50% of the
total assets of the Income Fund.
(25) (Income Fund only) Invest more than 15% of its net assets in
illiquid securities, including repurchase agreements maturing in more than
seven days.
- --------
(3) Although permitted to a limited extent under paragraphs (19) and (20),
respectively, neither Fund has in the past invested in foreign securities
not publicly traded in the United States or in securities of companies
having a record of less than three years of continuous operations. Neither
Fund has the present intention to begin using these investment practices.
Shareholders will be notified of any change in this intention.
(4) Although permitted to a limited extent under paragraph (23), the Growth
Fund has not in the past invested in warrants. The Growth Fund has no
present intention to begin using this investment practice. Shareholders
will be notified of any change in this intention.
B-3
<PAGE>
In order to permit the sale of Shares of each of the Funds in certain
states, the Fund may make commitments more restrictive than the restrictions
described above. Should the Board of Trustees determine that any such
commitment is no longer in the best interests of the Fund and its
Shareholders, the Fund will revoke the commitment by terminating the
qualification of its Shares in the state(s) involved. In such event, the right
of Shareholders in any such state(s) to purchase additional Shares may be
restricted.
If any applicable percentage limitations contained in the foregoing
investment restrictions is satisfied at the time the securities subject
thereto are purchased, the Fund will not be required to dispose of such
securities in the event that the percentage restriction is subsequently
exceeded due to a fluctuation in the value of such securities or other
securities of the portfolio or a fluctuation in the number of outstanding
securities of the issuer. Notwithstanding the foregoing, if the percentage
restrictions contained in paragraph (9) or in paragraphs (15) and (16) are
violated due to a subsequent fluctuation in portfolio value, the Fund shall be
entitled, as a condition which shall be a part of all loans subject to
paragraph (9) and all borrowings subject to paragraphs (15) and (16), to
reduce within three business days the outstanding amount of such loans or
borrowings in order once again to satisfy such percentage restriction.
The following discussion applies to each of the Funds except as indicated to
the contrary.
LENDING OF FUND SECURITIES
In connection with any loan of portfolio securities made by either of the
Funds as permitted under paragraph (9), certain conditions must be met: (i)
the collateral to be received from the borrower will be invested in short-term
securities, the income from which will increase the return to the Fund; (ii)
the Fund will retain rights of beneficial ownership as to the loaned portfolio
securities, including voting rights and rights to dividends, interest or other
distributions, and will have the right to regain record ownership of loaned
securities to exercise such beneficial rights; (iii) such loans will be
terminable within three business days; and (iv) upon termination of the loan,
the Fund will receive securities that are of the same class and issue as those
loaned. In the event that the borrower of loaned portfolio securities fails
financially, the Fund might experience a delay in recovery, incur expenses in
enforcing its rights and experience losses, including a substitution of
securities and loss of income. The Fund may pay reasonable fees to persons not
affiliated, as defined in the Investment Company Act of 1940, with the Fund in
connection with the arranging of such loans.
OPTIONS ON SECURITIES
As discussed in the Prospectus, each Fund may engage in options transactions
in accordance with its investment objectives and policies. The Fund may
purchase put and call options to the extent permitted under paragraph (22)
above and may write covered call options on individual portfolio securities
having an aggregate market value of up to 25% of the net assets of the Fund.
The Fund may enter into closing transactions, exercise its options or permit
them to expire. Each of the Funds intend to engage in such transactions at
times when it appears advantageous to its investment adviser to do so in order
to hedge against the effects of market conditions and to protect the value of
its assets. Neither Fund currently engages in or currently plans to engage in
the practice of writing covered call options.
A put option gives the holder (buyer) the "right to sell" a security at a
specified price (the exercise price) at any time until a certain date (the
expiration date). In effect, the buyer of a put option who also owns the
related stock is protected by ownership of a put option against any decline in
that security's price below the exercise price less the amount paid for the
option. The ability to purchase put options allows the Fund to protect capital
gains in an appreciated security it owns, without being required to sell that
security. If the market price of the related investment is above the exercise
price and, as a result, the put is not exercised or sold, the put will become
worthless at its expiration date. A call option gives the holder (buyer) the
"right to purchase" a security at a specified price (the exercise price) at
B-4
<PAGE>
any time until a certain date (the expiration date). At times the Fund may
wish to establish a position in securities upon which call options are
available. By purchasing a call option the Fund is able to fix the cost of
acquiring the stock at the cost of the call option plus the exercise price of
the option. The Fund will benefit only if the market price of the related
investments is above the call price plus the premium during the exercise
period and the call is either exercised or sold at a profit. This procedure
also provides some protection from an unexpected downturn in the market
because the Fund would be at risk only for the amount of the premium paid for
the call option which the Trust's investment adviser may, if it chooses,
permit to expire.
When the Fund writes (sells) a covered call option, it will receive a
premium from the buyer of the option and will be obligated to sell the related
securities at the specified price if the option is exercised before the
expiration date. A call option is considered "covered" when the writer
(seller), in this case the Fund, already owns the underlying securities. In
determining whether a covered call option will be written on one of its
securities, the investment adviser will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for the option. The Fund does not consider a security covered by a call
to be "pledged" as that term is used in paragraph (10) above limiting the
pledging or mortgaging of its assets. If an option written (sold) by the Fund
is not exercised, the Fund will profit from the premium received and, in the
event of a decline in the market value of the related securities, will be able
to offset depreciation in such securities to the extent of the premium
received. While holding securities during the term of a related option written
by the Fund, the Fund may be exposed to possible decreases in the value of
such securities that may otherwise have been avoided if the securities had
been sold. In the event the market value of the related securities increases
and the holder does exercise the call option, the Fund will recognize capital
appreciation in the related securities only to the extent of the exercise
price plus the amount of premium paid and may forfeit an opportunity to
realize profit from any increase in the value of the underlying security above
the exercise price plus the premium.
As part of its options transactions, each of the Funds may also purchase
index options. Through the purchase of index options the Fund can achieve many
of the same objectives as through the purchase of options on individual
securities. Options on securities indices are similar to options on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of an option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. The value of a stock index option will generally vary directly in the
case of a call, and inversely in the case of a put, with movements in the
underlying index, and the percentage fluctuations in the value of an option
may be many times greater than those of the underlying index. The adviser may
purchase call index options as a hedge against a general increase in the price
of securities in connection with either sales of portfolio securities or
deferrals of purchases of securities it may desire to purchase at a later
date. Put index options may be purchased as a hedge against a general decline
in the value of securities rather than selling portfolio securities. Any
protection provided by stock index options is effective only against changes
in the level of a stock index and not necessarily against a change in the
value of individual securities. Thus, the effectiveness of the use of stock
index options as a hedge is dependent on the extent to which price movements
of individual securities which are being hedged correlate with price movements
in the underlying stock index. Unless a stock index option can be sold or
exercised at a profit prior to expiration, the Fund will forfeit its entire
investment in the option, often in a relatively short period of time. Any
profit that may be realized from the sale or exercise of stock index options
will be reduced by related transaction costs.
FINANCIAL FUTURES CONTRACTS
The Income Fund may enter into financial futures contracts for the future
delivery of a financial instrument, such as a security, or the cash value of a
securities index. This investment technique is
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designed primarily to hedge (i.e., protect) against anticipated future changes
in interest rates or equity market conditions which otherwise might affect
adversely the value of securities which the Income Fund holds or intends to
purchase. A "sale" of a futures contract means the undertaking of a
contractual obligation to deliver the securities or the cash value of an index
called for by the contract at a specified price during a specified delivery
period. A "purchase" of a futures contract means the undertaking of a
contractual obligation to acquire the securities or cash value of an index at
a specified price during a specified delivery period. At the time of delivery,
in the case of fixed income securities pursuant to the contract, adjustments
are made to recognize differences in value arising from the delivery of
securities with a different interest rate than that specified in the contract.
In some cases, securities called for by a futures contract may not have been
issued at the time the contract was written. The Income Fund will not enter
into any futures contracts or options on futures contracts if the aggregate of
the contract value of the outstanding futures contracts of the Income Fund and
futures contracts subject to outstanding options written by the Income Fund
would exceed 50% of the total assets of the Income Fund.
Although some futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases a party will close out the
contractual commitment before delivery without having to make or take delivery
of the security by purchasing (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for delivery in the
same month. Such a transaction, if effected through a member of an exchange,
cancels the obligation to make or take delivery of the securities. All
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded.
The Income Fund will incur brokerage fees when it purchases or sells
contracts, and will be required to maintain margin deposits. At the time the
Income Fund enters into a futures contract, it is required to deposit with its
custodian, on behalf of the broker, a specified amount of cash or eligible
securities, called "initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded. Subsequent
payments, called "variation margin," to and from the broker are made on a
daily basis as the market price of the futures contract fluctuates. The costs
incurred in connection with futures transactions could reduce the Income
Fund's return. Futures contracts entail risks. If the investment adviser's
judgment about the general direction of interest rates or markets is wrong,
the overall performance may be poorer than if no such contracts had been
entered into by the Fund.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If
participants in the futures market elect to close out their contracts through
offsetting transactions rather than meet margin requirements, distortions in
the normal relationship between the securities and futures markets could
result. Price distortions could also result if investors in futures contracts
decide to make or take delivery of underlying securities rather than engage in
closing transactions because of the resultant reduction in the liquidity of
the futures market. In addition, because, from the point of view of
speculators, the margin requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions. Due
to the possibility of price distortions in the futures market and because of
the imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment adviser may still not result in a successful hedging
transaction. If any of these events should occur, the Income Fund could lose
money on the financial futures contracts and also on the value of its
portfolio securities.
OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Income Fund may purchase and write call and put options on financial
futures contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a
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position in a futures contract at a specified exercise price at any time
during the period of the option. Upon exercise, the writer of the option
delivers the futures contract to the holder at the exercise price. The Income
Fund would be required to deposit with its custodian initial margin and
maintenance margin with respect to put and call options on futures contracts
written by it. Options on futures contracts involve risks similar to those
risks relating to transactions in financial futures contracts described above.
Also, an option purchased by the Income Fund may expire worthless, in which
case the Income Fund would lose the premium paid therefor.
REPURCHASE AGREEMENTS
The Income Fund may invest in repurchase agreements, under which it acquires
ownership of a security and the broker-dealer or bank agrees to repurchase the
security at a mutually agreed upon time and price, thereby determining the
yield during the Income Fund's holding period. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Income Fund might
have expenses in enforcing its rights, and could experience losses, including
a decline in the value of the underlying securities and loss of income. The
securities underlying a repurchase agreement will be marked-to-market every
business day so that the value of such securities is at least equal to the
investment value of the repurchase agreement, including any accrued interest
thereon. In addition, the Income Fund must take physical possession of the
security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book-Entry System. Repurchase agreements
will be limited to transactions with financial institutions believed by the
investment adviser to present minimal credit risk. The Trust's investment
adviser will monitor on an on-going basis the creditworthiness of the broker-
dealers and banks with which the Income Fund may engage in repurchase
agreements. Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of the Income Fund's 15% limitation in
illiquid securities.
DELAYED DELIVERY TRANSACTIONS
The Income Fund may purchase or sell portfolio securities on a when-issued
or delayed delivery basis. When-issued or delayed delivery transactions
involve a commitment by the Income Fund to purchase or sell securities with
payment and delivery to take place in the future in order to secure what is
considered to be an advantageous price or yield to the Income Fund at the time
of entering into the transaction. When the Income Fund enters into a delayed
delivery transaction, it becomes obligated to purchase securities and it has
all of the rights and risks attendant to ownership of a security, although
delivery and payment occur at a later date. The value of fixed income
securities to be delivered in the future will fluctuate as interest rates
vary. At the time the Income Fund makes the commitment to purchase a security
on a when-issued or delayed delivery basis, it will record the transaction and
reflect the liability for the purchase and the value of the security in
determining its net asset value. Likewise, at the time the Income Fund makes
the commitment to sell a security on a delayed delivery basis, it will record
the transaction and include the proceeds to be received in determining its net
asset value; accordingly, any fluctuations in the value of the security sold
pursuant to a delayed delivery commitment are ignored in calculating net asset
value so long as the commitment remains in effect. The Income Fund generally
has the ability to close out a purchase obligation on or before the settlement
date, rather than take delivery of the security.
To the extent the Income Fund engages in when-issued or delayed delivery
purchases, it will do so for the purpose of acquiring portfolio securities
consistent with its investment objectives and policies and not for the purpose
of investment leverage or to speculate in interest rate changes. The Income
Fund will only make commitments to purchase securities on a when-issued or
delayed delivery basis with the intention of actually acquiring the
securities, but it reserves the right to sell these securities before the
settlement date if deemed advisable.
COLLATERALIZED MORTGAGE OBLIGATIONS
As described in the Prospectus, the Income Fund may purchase or sell
collateralized mortgage obligations ("CMOs"). CMOs are obligations fully
collateralized by a portfolio of mortgages or
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mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holders of the CMOs on the same schedule
as they are received, although certain classes of CMOs have priority over
others with respect to the receipt of prepayments on the mortgages. Therefore,
depending on the type of CMOs in which the Income Fund invests, the investment
may be subject to a greater or lesser risk of prepayment than other types of
mortgage-related securities. The issuer of a series of CMOs may elect to be
treated as a Real Estate Mortgage Investment Conduit (a "REMIC"), which has
certain special tax attributes.
MORTGAGE-BACKED SECURITIES
As discussed in the Prospectus, the Income Fund may invest in mortgage-
backed securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Mortgage-backed securities are securities representing
interests in a pool of mortgages. Principal and interest payments made on the
mortgages in the underlying mortgage pool are passed through to the Income
Fund. Unscheduled prepayments of principal shorten the securities' weighted
average life and may lower total return. (When a mortgage in the underlying
mortgage pool is prepaid, an unscheduled principal prepayment is passed
through to the Income Fund. This principal is returned to the Income Fund at
par. As a result, if a mortgage security was trading at a premium, its total
return would be lowered by prepayments, and if a mortgage security were
trading at a discount, its total return would be increased by prepayments).
The value of these securities also may change because of changes in the
market's perception of the creditworthiness of the federal agency that issued
them. In addition, the mortgage securities market in general may be adversely
affected by changes in governmental regulation or tax policies.
The Income Fund may also invest in the securities of certain supranational
entities, such as the International Development Bank.
ASSET-BACKED SECURITIES
As described in the Prospectus, the Income Fund may purchase or sell debt
obligations known as asset-backed securities. Asset-backed securities are
securities which represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets, most often a pool
or pools of similar assets (e.g., trade receivables). The credit quality of
most asset-backed securities depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator or any other affiliated
entities and the amount and quality of any credit support provided to the
securities. The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets
which in turn may be affected by a variety of economic and other factors. As a
result, the yield on any asset-backed security is difficult to predict with
precision and actual yield to maturity may be more or less than the
anticipated yield to maturity. Asset-backed securities may be classified
either as pass-through certificates or collateralized obligations.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets. Pass-
through certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool. Because pass-
through certificates represent an ownership interest in the underlying assets,
the holders thereof bear directly the risk of any defaults by the obligors on
the underlying assets not covered by any credit support.
Asset-backed securities issued in the form of debt instruments, also known
as collateralized obligations, are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. Such assets are most often trade, credit card or automobile
receivables. The assets collateralizing such asset-backed securities are
pledged to a
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<PAGE>
trustee or custodian for the benefit of the holders thereof. Such issuers
generally hold no assets other than those underlying the asset-backed
securities and any credit support provided. As a result, although payments on
such asset-backed securities are obligations of the issuers, in the event of
defaults on the underlying assets not covered by any credit support, the
issuing entities are unlikely to have sufficient assets to satisfy their
obligations on the related asset-backed securities.
TIME DEPOSITS, CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES
The Income Fund may invest in time deposits ("TDs"), certificates of
deposits ("CDs") and bankers' acceptances. TDs are non-negotiable deposits
maintained in a banking institution for a specified period of time (in no
event longer than seven days) at a stated interest rate. CDs are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. TDs maturing in more than seven days will not be
purchased by the Income Fund and TDs maturing from two business through seven
calendar days will not exceed 10% of the Income Fund's total assets.
Investments in TDs generally are limited to domestic banks having total assets
in excess of one billion U.S. dollars or to foreign branches of such domestic
banks, and investments in CDs and bankers' acceptances are limited to domestic
or Canadian banks having total assets in excess of one billion dollars. CDs
issued by domestic branches of domestic banks do not benefit materially, and
TDs issued by foreign branches of domestic banks do not benefit at all, from
insurance from the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the Federal Deposit Insurance Corporation ("FDIC").
Both domestic banks and foreign branches of domestic banks are subject to
extensive but different governmental regulations which may limit both the
amount and types of loans which may be made and interest rates which may be
charged. In addition, the profitability of the banking industry is dependent
largely upon the availability and cost of funds for the purpose of financing
lending operations under prevailing money market conditions. General economic
conditions as well as exposure to credit losses arising from possible
financial difficulties of borrowers play an important part in the operations
of this industry.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to have their deposits insured by the FDIC.
Domestic banks organized under state law are supervised and examined by state
banking authorities. In addition, state banks whose CDs may be purchased by
the Income Fund are insured by the FDIC (although such insurance may not be of
material benefit to the Income Fund, depending upon the principal amount of
the CDs of each bank held by the Income Fund) and are subject to Federal
examination and to a substantial body of Federal law and regulation.
As a result of the foregoing Federal and state laws and regulations,
domestic banks, among other things, are required to maintain specified levels
of reserves, limited in amounts which they can loan a single borrower, and
subject to other regulations designed to promote financial soundness. However,
not all such laws and regulations apply to foreign branches of domestic banks.
RATING OF SECURITIES
The Income Fund may invest in securities that are given ratings by Moody's
and S&P. After purchase by the Income Fund, such a security may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Income Fund. Neither event will require a sale of such security by the
Income Fund. However, the Adviser will consider such event in its
determination of whether the Income Fund should continue to hold the security.
To the extent that the ratings given by Moody's and S&P may change as a result
of changes in such organizations or their rating systems, the Income Fund will
attempt to use comparable ratings as standards for investments in accordance
with the investment policies contained in the prospectus.
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<PAGE>
MANAGEMENT OF THE TRUST
The Trustees and executive officers of the Trust, their ages and their
principal occupations are set forth below. Unless otherwise noted, the address
of each of the following persons is 300 South Wacker Drive, Chicago, Illinois
60606.
TRUSTEES
STEVEN R. BECKER (46), Member, Wayne Hummer and prior to April 1, 1996,
Partner, Wayne Hummer & Co.; Director and Former Vice President, Wayne Hummer
Management Company.*(5)
PHILIP M. BURNO (65), Chairman, Board of Trustees of the Trust; Member,
Wayne, Wayne Hummer and prior to April 1, 1996, Partner, Wayne Hummer & Co.,
Director, Wayne Hummer Management.*(5)
CHARLES V. DOHERTY (63), 3 First National Plaza, Suite 1400, Chicago,
Illinois 60602; Director, Lakeside Bank, Chicago, Illinois (Illinois State
Chartered Bank); Managing Director, Madison Asset Group, Chicago, Illinois
(Registered Investment Adviser); President and Director, Doherty Zable & Co.
(Certified Public Accountants); September 1, 1989 to December 31, 1992,
President and Chief Operating Officer, Midwest Stock Exchange (now, Chicago
Stock Exchange).(5)
JOEL D. GINGISS (54), 207 Hazel, Highland Park, Illinois 60035; Assistant
States Attorney, Lake County, Illinois September, 1993 to Present; Former
Chairman of the Board of Directors and President, Gingiss International, Inc.
(franchisor of Gingiss Formalwear Stores); Past President, International
Franchise Association.(5)
PATRICK B. LONG (54), 101 North Main Street, Ann Arbor, Michigan 48104;
Chairman and Chief Executive Officer, KMS Industries, Inc. (fusion energy
research).
EUSTACE K. SHAW (72), 200 First Avenue E., Newton, Iowa 50208; President, B.
F. Shaw Printing Co.; Chairman of the Board of Directors, B. F. Shaw Printing
Co.; Former Publisher, Newton Daily News.
The Trustees serve in similar capacities with the Wayne Hummer Money Fund
Trust.
OFFICERS
THOMAS J. ROWLAND (51), President of the Trust; Vice President, Wayne Hummer
Money Fund Trust and President, Wayne Hummer Management Company (formerly Vice
President of the Trust and Wayne Hummer Management Company); Member, Wayne
Hummer and prior to April 1, 1996, Partner, Wayne Hummer & Co.;
DAVID P. POITRAS (36), Vice President of the Trust; President, Wayne Hummer
Money Fund Trust since 1993; Vice President, Wayne Hummer Management Company
since May, 1992; Member,
- --------
* Interested person, as defined in the Investment Company Act of 1940, of the
Fund, the Investment Adviser and/or the Distributor.
(5)Member of the Executive Committee of the Trust. The Executive Committee is
elected by the Board of Trustees and is composed of four Trustees, two of whom
are interested persons as defined in the Investment Company Act of 1940. The
Executive Committee is authorized to exercise such powers and authority of the
Board of Trustees, as the Board of Trustees may determine, when the Board of
Trustees is not in session and as are consistent with law.
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<PAGE>
Wayne Hummer and prior to April 1, 1996, Partner, Wayne Hummer & Co., since
January, 1992 and Bond Department Manager, Wayne Hummer.
JEAN M. MAURICE (34), Secretary and Treasurer of the Trust and Treasurer,
Wayne Hummer Money Fund Trust since March, 1988; Administrative Assistant for
the Trust and Wayne Hummer Money Fund Trust, prior thereto.
Wayne Hummer Management Company, the Investment Adviser, pays all
compensation of the officers of the Trust and the compensation of all Trustees
of the Trust who are interested persons, as defined in the Investment Company
Act of 1940, of the Trust. The Trust pays each Trustee who is not an
interested person of the Trust $2,000 per year, plus $500 and expenses for
each Board and committee meeting attended.
The following table sets forth the compensation received by all trustees of
the Trust for the fiscal year ended March 31, 1997. The information in the
last column of the table sets forth the total compensation received by all
trustees for calendar year 1996 for service as a trustee of the Trust and the
Wayne Hummer Money Fund Trust.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACQUIRED COMPENSATION
COMPENSATION AS PART OF HUMMER FUNDS
FROM THE TRUST PAID TO
TRUSTEE TRUST EXPENSES TRUSTEES
------- ------------ ---------- ------------
<S> <C> <C> <C>
Steven R. Becker..................... $ 0 $ 0 $ 0
Philip M. Burno...................... 0 0 0
Charles V. Doherty................... 5,000 0 9,000
Joel D. Gingiss...................... 6,000 0 10,500
Patrick B. Long...................... 5,000 0 9,000
Eustace K. Shaw...................... 5,000 0 9,000
</TABLE>
As of June 30, 1997, the Trustees and officers as a group beneficially owned
less than 1% of the outstanding Shares of the Trust. As of June 30, 1997, the
Wayne Hummer Employees Profit Sharing Trust (the "Retirement Plan") owned of
record and beneficially 3.72% and 4.42%, respectively, of the outstanding
Shares of the Growth Fund and the Income Fund, being 3.92% of the aggregate
outstanding Shares of the Trust. Messrs. Rowland, Cannova, Reilly, Kratzer and
Poitras, as trustees of the Retirement Plan may be deemed to hold beneficial
ownership of the percentage of Shares of the Funds and the Trust as stated
above. Messrs. Rowland, Kratzer and Poitras are also Members of Wayne Hummer,
the Trust's Distributor. Messrs. Poitras and Rowland also are officers of the
Trust and Wayne Hummer Management Company, the Trust's Investment Adviser.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Wayne Hummer Management Company (the "Investment Adviser"), 300 South Wacker
Drive, Chicago, Illinois 60606, acts as investment adviser to the Trust and
provides the Trust with operating facilities and management services under the
terms of an Investment Advisory and Management Agreement. The Investment
Adviser was organized on November 30, 1981, and also serves as investment
adviser to the Wayne Hummer Money Fund Trust, a diversified open-end
investment company.
The shareholders of the Investment Adviser are the voting members of Wayne
Hummer, a Delaware limited liability company, who own shares in proportion to
their percentage of voting
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<PAGE>
membership interest. Wayne Hummer, a registered broker-dealer firm, acts as
the Trust's Distributor and Shareholder Service Agent.
As noted in the preceding discussion of Trustees and officers, certain of
the members of Wayne Hummer are also officers, directors or employees of the
Investment Adviser, as well as officers and interested persons, as defined in
the Investment Company Act of 1940, of the Trust. Moreover, Wayne Hummer may
be deemed an affiliated person of the Investment Adviser and the Trust.
Subject to the review of the Board of Trustees, the Investment Adviser is
responsible for the management of the Trust and reviews the portfolio holdings
of each of the Funds in light of its own research analysis and information
from other relevant sources.
The investment decisions for the Funds are reached independently from one
another and from those for Wayne Hummer Money Fund Trust ("WHMFT"), the other
investment company managed by the Investment Adviser. WHMFT may, however, make
investments in money market instruments at the same time as one or both of the
Funds. When one or both Funds and WHMFT have funds available for investment in
or wish to sell money market instruments, the Investment Adviser, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be purchased or sold in order to obtain the best combination of
price and execution. In such event, allocation of the securities so purchased
or sold, as well as the costs incurred in the transaction, will be made by the
Investment Adviser in a manner it considers to be equitable and consistent
with its fiduciary obligations to WHMFT and the Trust. In some cases this
procedure may affect the size or price of the position obtainable for the
Trust. It is the opinion of the Board of Trustees that the benefits available
outweigh any disadvantages that may arise from concurrent transactions.
The executive officers and directors of the Investment Adviser are as
follows:
Harry Flagg Baum, Director; Steven R. Becker, Director; G. Ted Becker,
Treasurer; Philip M. Burno, Director; Philip Wayne Hummer, Director and
Chairman, David P. Poitras, Vice President; William A. Rogers, Director and
Secretary; Thomas J. Rowland, President; Mark H. Dierkes, Vice President;
and Damaris E. Martinez, Vice President, Administration.
The Investment Adviser is obligated, among other things: to provide
investment advisory and portfolio management services; to furnish
administrative services, office space and basic facilities for management of
the Trust's affairs (other than distribution of the Trust's Shares and the
furnishing of Shareholder services); and to pay the compensation of all
officers and other personnel of the Trust for their services to the Trust as
well as the compensation of the Trustees of the Trust who are interested
persons, as defined in the Investment Company Act of 1940, of the Trust. The
Trust pays all other expenses incurred in the operation of the Trust
including, among other things: brokerage commissions and other transaction
costs in connection with the purchase or sale of portfolio securities; taxes;
expenses for legal, auditing and accounting services; costs of preparing,
typesetting, printing and mailing prospectuses, Shareholder reports, proxy
materials (pertaining to solicitations by the Trust or its Board of Trustees)
and notices to Shareholders of the Trust; costs of preparing and filing
reports with regulatory agencies; charges of the Custodian, Transfer Agent and
Distributor and Shareholder Service Agent; premiums for insurance carried by
the Trust pursuant to the requirements of Section 17(g) of the Investment
Company Act of 1940 or otherwise required by law or deemed desirable by the
Board of Trustees; expenses related to the computation of daily net asset
value; expenses related to the issuance or redemption of Shares; expenses of
registering, qualifying and maintaining registration and qualification of the
Trust or its Shares under federal, state and other laws; fees and out-of-
pocket expenses of Trustees who are not interested persons, as defined in the
Investment Company Act of 1940, of the Trust; expenses incident to holding
meetings of the Trust's Shareholders, including proxy solicitations of the
Trust or its Board of Trustees therefor, as well as expenses incident to
holding meetings of the Board of Trustees and committees of the Board of
Trustees; interest expenses; costs incident to generating and mailing
confirmations and periodic statements to
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Shareholders; fees and expenses incurred in connection with any investment
company organization or trade association of which the Trust may be a member;
and other expenses properly payable by the Trust. Certain of these expenses
may be advanced on behalf of the Trust by the Investment Adviser or the
Shareholder Service Agent and will be reimbursed to such party by the Trust.
Under the Investment Advisory and Management Agreement in effect since
August 1, 1988, as amended, the Investment Adviser receives as compensation
for its services to the Growth Fund an annual fee equal to .80 of 1% of the
average daily net assets of the Growth Fund up to $100 million, plus .65 of 1%
of the next $150 million of average daily net assets, plus .50 of 1% of
average daily net assets in excess of $250 million. Such fees are computed and
accrued daily and payable monthly. For the Income Fund, the Investment Adviser
receives an annual fee of .50 of 1% of the average daily net assets up to $100
million, plus .40 of 1% of the next $150 million of average daily net assets,
plus .30 of 1% of average daily net assets in excess of $250 million. The
advisory fee provided for in the Advisory Agreement is similar to that of
comparably sized funds with similar investment objectives and policies but is
higher than fees paid by most other mutual funds with different investment
objectives, such as money market funds. For the fiscal years ended March 31,
1997, 1996 and 1995, the total advisory fees incurred by the Growth Fund were
$817,835, $785,739 and $721,072, respectively. For the fiscal years ended
March 31, 1997, 1996 and 1995, the total advisory fees incurred by the Income
Fund were $119,230, $131,344 and $141,795, respectively.
The Investment Adviser has agreed to waive its fee to the extent that a
Fund's ordinary operating expenses during any fiscal year, including the fee
of the Investment Adviser, exceed either (1) 1.5% of the average daily net
assets of the Fund or (2) the expense limitations applicable to the Fund
imposed by the securities laws or regulations thereunder of any state in which
the Fund's Shares are qualified for sale, as such limitations may be increased
or decreased from time to time, and if required by such laws or regulations,
to reimburse the Fund for certain expenses in excess of any applicable expense
limitation. It is believed that the most restrictive such state limitation is
currently 2.5% of the first $30 million of average daily net assets, 2% of the
next $70 million of average daily net assets and 1.5% of average daily net
assets over $100 million. Expenses that are not subject to these limitations
are interest, taxes, brokerage commissions and extraordinary items such as
litigation costs. For the fiscal years ended March 31, 1997, 1996 and 1995,
the Investment Adviser was not required to reimburse the Trust for any
expenses in excess of any applicable expense limitation or to waive its fees.
The Investment Advisory and Management Agreement (as amended) was approved
(i) at the May 2, 1997 meeting of the Board of Trustees by a majority of the
Trustees who are neither parties to the Agreement nor interested persons, as
defined in the Investment Company Act of 1940, of any such party, and (ii) by
a majority of the Growth Fund's outstanding shares at a special meeting of
Shareholders held on July 19, 1988. An Amendment to the Investment Advisory
and Management Agreement by which the Investment Adviser agreed to render
services to the Income Fund was approved (i) at the November 24, 1992 meeting
of the Board of Trustees by a majority of the Trustees who are neither parties
to the Agreement nor interested persons, as defined in the Investment Company
Act of 1940, of any such party, and (ii) by a majority of the Income Fund's
outstanding shares by written consent on December 1, 1992. Unless earlier
terminated as described below, the Investment Advisory and Management
Agreement, as amended, will continue in effect until July 31, 1998, and
thereafter if approved annually (i) by the Board of Trustees of the Trust or
by a majority of the outstanding Shares of the Trust (as defined under
"SHAREHOLDER VOTING RIGHTS") and (ii) by a majority of Trustees who are not
parties to such Agreement or interested persons, as defined in the Investment
Company Act of 1940, of any such party. The Agreement is not assignable and
may be terminated without penalty on 60 days' written notice at the option of
either party thereto or by the vote of the Shareholders.
The Investment Adviser also provides the Trust with certain portfolio
accounting services under the terms of a Portfolio Accounting Services
Agreement (the "Accounting Agreement"). The
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Investment Adviser maintains the accounting books and records pertaining to
each Fund that constitute the record forming the basis for financial
statements of the Funds; maintains capital stock accounts for each Fund;
prepares a daily trial balance for each Fund; calculates the net asset value
of each Fund; maintains all records of a financial nature to each Fund's
transactions; and processes special ledgers and other reports when requested.
Under the Accounting Agreement in effect since November 1, 1994, the
Investment Adviser receives as compensation for its accounting services to the
Trust, an annual fee which is computed and accrued daily and payable monthly.
The Investment Adviser received for the period January 1, 1995 through
December 31, 1995 an annual fee of .0025 of 1% of average daily net assets and
for the period January 1, 1996 and thereafter an annual fee of .01 of 1% of
average daily net assets; but such fee shall not exceed $15,000 per Fund per
annum. In addition, the Investment Adviser receives an equipment fee of $50
per Fund per month and is reimbursed for its out-of-pocket costs for obtaining
securities pricing services, the license for use of portfolio accounting
software, and other out-of-pocket costs which are incurred in providing the
pricing and software services. For the fiscal years ended March 31, 1997, 1996
and 1995, the total portfolio accounting services fees incurred by the Growth
Fund were $17,043, $12,099 and $5,196, respectively. For the fiscal years
ended March 31, 1997, 1996 and 1995, the total portfolio accounting services
fees incurred by the Income Fund were $19,543, $19,588 and $4,307,
respectively.
The Accounting Agreement was approved at the October 25, 1994 meeting of the
Board of Trustees by a majority of the Trustees who are neither parties to the
Accounting Agreement nor interested persons, as defined in the Investment
Company Act of 1940, of any such party. The Accounting Agreement shall
continue in effect until terminated. The Accounting Agreement may be
terminated by either party upon sixty days' prior written notice; provided,
however, that the Trust may terminate the Accounting Agreement without prior
notice in order to preserve the integrity of its records from material and
continuing errors and omissions on the part of the Investment Adviser.
DISTRIBUTOR AND SHAREHOLDER SERVICE AGENT
Wayne Hummer, with offices at 300 South Wacker Drive, Chicago, Illinois
60606 acts as Distributor of the Trust's Shares and Shareholder Service Agent.
Pursuant to a Distribution Agreement and a Shareholder Service Agreement,
Wayne Hummer directly or through other firms, as discussed below, provides
information and services to existing and potential Shareholders such as:
processing new Shareholder account applications; converting funds into or
advancing federal funds for the purchase of Shares as well as transmitting
purchase orders to the Trust's Transfer Agent; transmitting redemption
requests to the Trust's Transfer Agent and transmitting the proceeds of
redemption of Shares pursuant to Shareholder instructions when such redemption
is effected through Wayne Hummer; providing telephonic and written
communications with respect to Shareholder account inquiries and serving as
the primary interface with existing and potential Shareholders in answering
questions concerning the Trust and their transactions with the Trust; and
providing literature distribution, advertising and promotion as is necessary
or appropriate for providing information and services to existing and
potential Shareholders. Wayne Hummer may be reimbursed by the Trust for
certain out-of-pocket costs in connection with its services to existing
Shareholders as Shareholder Service Agent including such costs as postage;
data entry, modification and printout; stationery; tax forms and all external
forms or printed material, though it does not receive a fee from the Trust nor
is it reimbursed from the Trust for any expenses it incurs in its capacity as
Distributor of the Trust's Shares.
As of January 1, 1991 the Investment Adviser entered into an Agreement with
Wayne Hummer whereby the Investment Adviser agreed to pay to Wayne Hummer the
following: (a) for distribution services rendered to the Trust under the
Distribution Agreement, an amount equal to 35% of the gross revenues generated
from the rendering of investment advisory services to the Trust, not to exceed
in
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<PAGE>
the aggregate for a particular fiscal year, however, the net profit (before
taxes and before payment of the fees so payable) earned by the Investment
Adviser for such year for the rendering of such advisory services, and (b) for
services rendered by Wayne Hummer to Trust Shareholders under the Shareholder
Service Agreement, an amount equal to 130% of the unreimbursed overhead and
labor expenses incurred by Wayne Hummer in rendering such services. The
Agreement also provides for similar payments to be made by the Investment
Adviser to Wayne Hummer for distribution and shareholder services rendered to
WHMFT and its shareholders.
Wayne Hummer may appoint various broker-dealer firms to assist in providing
distribution services for the Trust and may appoint broker-dealers and other
firms (including depository institutions such as commercial banks and savings
and loan associations) to provide administrative services for their clients as
Shareholders of the Trust under service agreements. Wayne Hummer may pay these
broker-dealers and other firms a fee for their services.
The following persons, all of whom, except as specified, are located at 300
South Wacker Drive, Chicago, Illinois 60606, have been members or employees of
Wayne Hummer, and partners of Wayne Hummer's predecessor Wayne Hummer & Co.,
for at least the past five years, and are presently members of Wayne Hummer:
William B. Hummer; Philip Wayne Hummer; Harry Flagg Baum; William A. Rogers;
Robert F. Kahlfeldt; Philip M. Burno; Joseph A. Piekarczyk; G. Ted Becker;
Steven R. Becker; W. Douglas Carroll; Richard J. Kosarek; Raymond L. Kratzer;
Jean E. Williams; Linda C. Becker; Thomas J. Rowland; Laura A. Kogut; David P.
Poitras; Richard Wholey, Jr.; Peder H. Culver; and Daniel G. Hack. Ronald A.
Tyrpin, a member of Wayne Hummer, joined the firm in September, 1992. The
George E. Barnes Family Trust(6) is a Class C Member of Wayne Hummer and prior
to April 1, 1996 had been a limited partner of Wayne Hummer since April, 1986,
and Robert H. Chase(7) is a Class D Member of Wayne Hummer and prior to April
1, 1996, had been a limited partner of Wayne Hummer & Co.(7) since January,
1992.
BROKERAGE ALLOCATION
The Investment Adviser determines the securities to be purchased, held and
sold by the Funds and places all orders subject to the general supervision of
the Board of Trustees. Transactions are allocated among various broker-dealers
by the Investment Adviser in its best judgment. In placing such orders, the
Investment Adviser primarily is concerned with obtaining the best combination
of price and execution. This does not mean that the Fund must base their
execution decisions solely on whether the lowest possible price or commission
costs may be obtained. In seeking to achieve the best combination of price and
execution, an effort will be made to evaluate the overall quality and
reliability of broker-dealers and the services they provide, including their
general execution capability, reliability and integrity, willingness to take
positions in securities, general operational capabilities and financial
condition. The Investment Adviser is authorized, consistent with Section 28(e)
of the Securities Exchange Act of 1934, to pay a commission to a broker-dealer
that may be greater than the commission another broker-dealer would have
charged for effecting the transaction if the Investment Adviser determines
that the commission is reasonable in relation to the value of brokerage and
research services provided. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; and furnishing analysis and reports concerning issuers and
industries, securities, economic factors, trends and portfolio strategy. It is
not possible to place a
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(6) George E. Barnes, grantor of the Family Trust, was a founding partner of
Wayne Hummer & Co. and was a general partner through March, 1986. Mr.
Barnes' address is 46-730 Amir Drive, Palm Desert, California 92260.
(7) Robert H. Chase was a general partner of Wayne Hummer & Co. through
December, 1991. His address is 1246 Nicolet Circle, Appleton, Wisconsin
54915.
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monetary value on such research services. Since such research and statistical
services only supplement the Investment Adviser's own research efforts and any
information received must be analyzed, weighed and reviewed by the Investment
Adviser's staff, the receipt of such information is not expected to reduce
materially the Investment Adviser's cost of performing its obligations under
its advisory agreement with the Trust. The information received may be made
available to Wayne Hummer for use in serving its customers. Likewise,
information available to Wayne Hummer may be made available to the Investment
Adviser in serving the Trust and its other clients. Fund securities will not
be purchased from or sold to Wayne Hummer or the Investment Adviser or an
affiliate, as defined in the Investment Company Act of 1940, of either. The
total brokerage commissions and other transaction costs paid by the Trust in
connection with the purchase or sale of portfolio securities for the Growth
Fund for the fiscal years ended March 31, 1997, 1996, and 1995, were $24,203,
$30,300, and $23,385, respectively. For the fiscal years ended March 31, 1997,
1996, and 1995, the Trust paid no brokerage commissions or other transaction
costs in connection with the purchase or sale of portfolio securities for the
Income Fund.
PERFORMANCE INFORMATION
As described in the Prospectus, each Fund of the Trust's historical
performance may be shown in the form of "average annual total return," "total
return" and "yield" figures. These various measures of performance are
described below.
Average annual total return and total return measure both the net income
generated by, and the effect of any realized and unrealized appreciation or
depreciation of, the underlying investments of the Funds. Yield is an
annualized measure of the net investment income per share earned over a
specific one-month or 30-day period expressed as a percentage of the net asset
value of the particular Fund.
The Fund's average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a specific period is
determined by assuming a hypothetical $1,000 investment in the Fund's shares
on the first day of the period at the then effective net asset value per share
("initial investment"), and computing the ending redeemable value ("redeemable
value") of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains dividends by the Funds have been
reinvested at net asset value on the reinvestment dates during the period.
Average annual total return figures for the Growth Fund for the one-, five-
and ten-year periods ended March 31, 1997 are 11.61%, 9.86% and 10.04%,
respectively, and from the date the Growth Fund commenced operations through
March 31, 1997 (a 159 month period) the average annual total return is 12.32%.
Average annual total return for the Income Fund from the date the Income Fund
commenced operations through March 31, 1997 (a 52-month period) is 6.01%, and
for the one-year period ended March 31, 1997 is 4.32%.
The calculation of the Fund's total return is not subject to a standardized
formula. Total return performance for a specific period is calculated by first
taking an investment (assumed to be $1,000) in the Fund's shares on the first
day of the period at the then effective net asset value per share ("initial
investment") and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the redeemable value and
dividing the difference by the initial investment and expressing the result as
a percentage. This calculation assumes that all income and capital gains
dividends by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return figures for the Growth Fund for the one-, five- and ten-year periods
ended
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<PAGE>
March 31, 1997, are 11.61%, 60.02% and 160.31% and from the date the Growth
Fund commenced operations through March 31, 1997 (a 159-month period) the
total return is 366.23%, respectively. Total return for the Income Fund from
the time the Income Fund commenced operations through March 31, 1997 (a 52-
month period) is 28.75%, and for the one-year period ended March 31, 1997 is
4.32%.
The yield for the particular Fund is computed in accordance with a
standardized method prescribed by rules of the Securities and Exchange
Commission. The Growth Fund's yield based upon the one-month period ended
March 31, 1997 was 1.22%. The Income Fund's yield based upon the one-month
period ended March 31, 1997 was 6.47%. Each Fund's yield is computed by
dividing the net investment income per share earned during the specific one-
month or 30-day period by the offering price per share on the last day of the
period, according to the following formula:
[(a - b + 1)/6/ ]
Yield = 2 [-------------- - 1]
[ cd ]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the offering price per share on the last day of the period.
In computing yield, the Funds follow certain standardized accounting
practices specified by Securities and Exchange Commission rules. These
practices are not necessarily consistent with those that the Funds use to
prepare their annual and interim financial statements in accordance with
generally accepted accounting principles.
The particular Fund's performance quotations are based upon historical
results and are not necessarily representative of future performance. The
particular Fund's shares are sold at net asset value, and performance figures
and net asset value will fluctuate. Factors affecting the Trust's performance
include general market conditions, operating expenses and investment
management. Shares of each particular Fund are redeemable at net asset value,
which may be more or less than original cost.
SHAREHOLDER VOTING RIGHTS
See "DESCRIPTION OF SHARES--Shareholder Voting Rights" in the Prospectus for
a discussion of those matters in connection with which Shareholders are
entitled to vote. As a general rule the Trust will not hold annual or other
meetings of Trust Shareholders; provided, however, that with respect to the
election of Trustees, the Trust will, in accordance with the Investment
Company Act of 1940, hold a Shareholders' meeting for the election of Trustees
at such time as less than a majority of the Trustees holding office have been
elected by Shareholders, and, if as a result of a vacancy in the Board of
Trustees less than two-thirds of the Trustees holding office have been elected
by the Shareholders, that vacancy will be filled only by a vote of the
Shareholders. In addition, Trustees may be removed from office by a vote of
the holders of at least two-thirds of the outstanding Shares at a meeting duly
called for that purpose, which meeting shall be held upon the written request
of the holders of not less than 10% of the outstanding Shares. Upon the
written request of the holders of Shares having a net asset value of $25,000
or constituting 1% of the outstanding Shares of each Fund stating that such
Shareholders wish to communicate with the other Shareholders for the purpose
of obtaining the signatures necessary to demand a meeting to consider removal
of a Trustee, the Trust has undertaken to provide a list of Shareholders or to
disseminate appropriate materials (at the expense of the requesting
Shareholders).
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<PAGE>
The Trust Agreement specifically authorizes the Board of Trustees to
terminate the Trust without Shareholder approval by notice to the
Shareholders. The Investment Company Act of 1940, however, prohibits an
investment company from changing the nature of its business so as to cease to
be an investment company unless such action is authorized by the vote of a
majority of its outstanding Shares.
OTHER MATTERS
The Trust is a trust of the type commonly known as a "Massachusetts business
trust." The Trust Agreement and the By-Laws of the Trust are designed to make
the Trust similar in many respects to a Massachusetts business corporation.
Unlike a corporation, a Massachusetts business trust is not required to issue
share certificates. Unless terminated by vote of Shareholders holding at least
a majority of the outstanding Shares of a Fund entitled to vote or by the
Trustees by written notice to the Shareholders, the Fund will continue without
limitation as to duration. As used in this Statement of Additional
Information, the term "majority of the outstanding Shares" of the Fund means
the vote of the lesser of (1) the holders of 67% or more of the Shares of the
Fund present or represented by proxy at a meeting, if the holders of more than
50% of the outstanding Shares of the Fund are present or represented by proxy,
or (2) the holders of more than 50% of the outstanding Shares of the Fund.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of
the trust, which is not the case with a corporation.
The Trust Agreement provides that Shareholders shall not be subject to any
personal liability to any person extending credit to, contracting with or
having any claims against the Trust and that every written agreement,
obligation, instrument or undertaking made by the Trust shall contain a
provision that the same is not binding upon the Shareholders personally. The
law firm of Ropes & Gray, Boston, Massachusetts, which supervised the
organization of the Trust under Massachusetts law, is of the opinion that,
pursuant to Massachusetts law, Shareholders will not be liable personally for
contract claims under any such agreement, obligation, instrument or
undertaking governed by Massachusetts law and containing such provision when
adequate notice of such provision is given. With respect to other claims, a
Shareholder may be held personally liable to the extent that claims are not
satisfied by the Trust. Upon payment of any such liability, however, the Trust
Agreement provides that Shareholders will be entitled to reimbursement from
the general assets of the Trust.
The Trustees intend to conduct the operations of the Trust, with the advice
of counsel, in such a way so as to avoid, as far as possible, ultimate
liability of the Shareholders for liabilities of the Trust. The Trust is
covered by insurance which the Trustees consider adequate to cover foreseeable
tort claims.
LIMITATION OF LIABILITY
The Trust Agreement provides that the Trust shall indemnify the Trustees and
officers of the Trust against liability arising in connection with the affairs
of the Trust to the fullest extent permitted by law. The Trust Agreement also
provides that all third persons shall look solely to the Trust property for
satisfaction of claims arising in connection with the affairs of the Trust.
TRUST NAME
The Board of Trustees voted to change the name of the Trust from "Wayne
Hummer Growth Fund Trust" to "Wayne Hummer Investment Trust" effective
December 1, 1992.
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<PAGE>
Pursuant to an agreement with the Investment Adviser, the Trust has been
granted a non-exclusive license ("License") to use the trade name and service
mark "Wayne Hummer" (the "Name"), a registered service mark of Wayne Hummer,
without charge for as long as the Trust is solvent, Wayne Hummer Management
Company is the Investment Adviser to the Trust and Wayne Hummer is the
Distributor and Shareholder Service Agent. If Wayne Hummer Management Company
ceases to act as Investment Adviser or if Wayne Hummer ceases to act as
Distributor and Shareholder Service Agent, then the Trust will be required to
change its name and to deliver to Wayne Hummer Management Company for
destruction all materials in which the Name is used. Wayne Hummer Management
Company may exercise control over use of the Name and the Trust has agreed to
indemnify Wayne Hummer Management Company against expenses or losses which may
arise from the Trust's misuse of the Name or out of any breach of the License
regarding the use of the Name. The Investment Adviser has entered into a
similar non-exclusive license for use of the Name with Wayne Hummer Money Fund
Trust.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For a discussion of the manner in which Trust shares are offered to the
public, see "PURCHASE OF SHARES" in the Prospectus. Additionally, an investor
in the Trust may purchase additional Trust shares through automatic
reinvestment of dividends. See "DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS" in
the Prospectus. For a full description of redemption procedures, see
"REDEMPTION OF SHARES" in the Prospectus.
DETERMINATION OF NET ASSET VALUE
The purchase price for each of the Fund Shares is the net asset value per
Share which is determined on each day the New York Stock Exchange is open for
trading as of the close of regular session trading on the New York Stock
Exchange (generally 3:00 p.m. Chicago time) on each business day and at 3:00
p.m. Chicago time on each other day during which there is a sufficient degree
of trading in securities of the particular Fund so as to affect materially the
net asset value of the Shares of such Fund. The net asset value per Share for
each Fund is computed by dividing the value of the portfolio of securities of
the particular Fund plus any other assets minus all liabilities by the total
number of such Fund's Shares outstanding. Expenses, including the fees payable
to the Investment Adviser and the Distributor and Shareholder Service Agent,
are accrued daily.
In valuing the Growth Fund securities, each listed and unlisted security for
which last sale information is regularly reported is valued at the last
reported sale price on that day. If there has been no sale on such day, the
last reported sale price prior to that day is utilized if such sale is between
the closing bid and asked price of the current day. If the last sale price on
a prior day is not between the current day's closing bid and asked prices,
then the value of such security is taken to be the mean between the current
day's bid and asked prices. In valuing the Income Fund's securities, fixed
income securities are valued by using market quotations, or independent
pricing services that use prices provided by market makers or estimates of
market values obtained from yield data relating to instruments or securities
with similar characteristics. Any unlisted security for which last sale
information is not regularly reported or any listed debt security which has an
inactive listed market for which over-the-counter market quotations are
readily available is valued at the highest closing bid price determined on the
basis of reasonable inquiry. Restricted securities and any other securities or
other assets for which market quotations are not readily available are valued
by appraisal at their fair values as determined in good faith under procedures
established by and under the general supervision and responsibility of the
Board of Trustees. Debt securities having a remaining maturity of less than
sixty days are valued at cost adjusted for amortization of premiums and
accretion of discounts.
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