WAYNE
HUMMER
INCOME
FUND
Annual
Financial Statements
Audited
March 31, 1997
<PAGE>
WAYNE
HUMMER
INCOME
FUND
Photo of: David P. Poitras
Dear Fellow Shareholder,
Welcome to the Wayne Hummer Income Fund annual report. This report covers the
twelve month period ending March 31, 1997.
Your Fund earned a total return of 4.32% for the annual period ending March 31,
1997, and paid income dividends of $.92 per share. The results earned by the
Fund stood in line with those posted by broad-based fixed income market indexes.
For example, the Merrill Lynch Domestic Master Index and the Merrill Lynch
Corporate and Government Index of 1 to 9.99 Year Maturities posted total returns
of 4.86% and 4.82%, respectively, over the same one-year period.
The past year has been a difficult period for the bond market. During that time,
interest rates rose and bond prices fell. Signs of strong economic growth
prompted concerns among many investors that inflation would rise--generally,
higher rates of inflation result in higher interest rates and lower bond prices.
On March 25, 1997, the Federal Reserve Bank delivered a preemptive monetary
strike, raising short-term interest rates by 25 basis points. Although the bond
market reacted negatively to the interest rate hike, we believe that by
increasing short-term interest rates now, and thereby slowing the economy, the
Federal Reserve Bank is paving the way for lower interest rates in the future.
While interest rates were rising, we were extending the average life of the
Fund's portfolio of fixed-income securities. By doing so, we locked-in higher
yielding interest rates for longer periods of time. The average life and
duration of the Fund's portfolio were 7.73 years and 5.31 years, respectively,
at March 31, 1997, up from 6.93 years and 4.96 years, six months earlier.
Extending the portfolio's maturity and duration should enhance the Fund's
performance if interest rates remain steady or fall.
Looking ahead, the Federal Reserve Bank may increase short-term interest rates
further, but our forecast calls for relatively stable intermediate-term and
long-term interest rates. The Fund's portfolio of investments is appropriately
positioned for that scenario. If, on the other hand, intermediate and long-term
interest rates rise, we will move to extend the Fund's average life and duration
slightly, thereby locking in higher yielding investments.
Over recent months, the relative yield advantage of corporate bonds versus
government bonds has narrowed. As a result we have increased the portfolio's
allocation of U.S. government and U.S. government agency securities. Currently,
these issues account for 44% of the portfolio's total assets. The credit quality
of the Fund's portfolio of investments remains high. Moody's Investor Service or
Standard & Poor's rates all of the Fund's investments within the four highest
credit quality categories.
In July, 1996, the Fund's Board of Trustees approved a nonfundamental investment
policy that clarifies our ongoing investment management philosophy. The policy
states that under normal market conditions the Income Fund will invest at least
65% of its assets in securities with an average life of between three and ten
years, such that the dollar-weighted average life of its portfolio will be
expected to be between three and ten years. This policy more closely reflects
the typical makeup of the Fund's portfolio of investments, and it states more
clearly the Fund's management philosophy of investing, primarily, in
intermediate-term fixed-income securities.
<PAGE>
For the reasons listed above, we have also changed the Fund's benchmark index
from the Merrill Lynch Domestic Master Index to the Merrill Lynch Corporate and
Government 1-9.99 Year Index. The latter index provides a better comparative
measure of the Fund's composition and performance than the former index. Page 1
provides a comparative table and graph detailing the Fund's performance relative
to both of these broad-based fixed income indexes.
Should you have any question regarding your investment in the Wayne Hummer
Income Fund, feel free to call us at 1-800-621-4477. Thank you for your
continued support.
Sincerely,
/s/ David P. Poitras
David P. Poitras
Vice President and Portfolio Manager
April 4, 1997
INVESTING IN BOND MUTUAL FUNDS
WHAT IS A BOND VS. A BOND FUND?
The best way to think of a bond is as an IOU. The issuer of the bond, which can
be, among others, the U.S. government, a corporation, or a municipality,
essentially borrows money from the purchaser of the bond and agrees to pay the
purchaser a fixed rate of interest on the borrowed funds for a specific period
of time. At the end of that period, the issuer returns 100% of the borrowed
funds to the purchaser.
A bond mutual fund is a professionally managed portfolio of individual bonds
that have the primary objective of providing shareholders with current income.
WHAT ADVANTAGES DOES INVESTING IN A BOND FUND HAVE OVER BUYING INDIVIDUAL BONDS?
The key advantages of a bond fund over an individual bond are:
1. Liquidity--You can buy and sell shares of a bond mutual fund any business
day at that day's net asset value (NAV). Individual bonds can be more
difficult to trade.
2. Monthly income--Most individual bonds only pay interest every six months.
3. Diversification--A mutual fund gives you ownership in a portfolio of many
different bonds. When you buy individual bonds, your fortunes are tied to
a single issuer. Mutual funds may differ in the type of bonds in which
they primarily invest, i.e. municipal bonds, corporate bonds, and high
yield bonds.
4. Full-time professional management--Experienced bond analysts and managers
select bonds for the portfolio and closely monitor the quality of all
holdings on an ongoing basis using information resources
not readily available to individual investors.
ARE THERE ANY DISADVANTAGES?
One disadvantage of bond funds over individual bonds is that bond funds never
mature. To understand why this is a disadvantage, you need to understand the
relationship between bonds and interest rates.
Bond prices generally go in the opposite direction of interest rates. When
interest rates go up, bond prices go down, and when interest rates go down, bond
prices go up. For example, if you own a bond that pays 6% interest annually and
interest rates go down, rates on new bonds will be lower than the rate on your
bond. That will make your 6% bond more attractive to investors, which will cause
its price to increase. You could then sell it for more than you paid for it.
<PAGE>
If interest rates rise, however, your 6% bond will not be attractive because
investors will prefer new, higher-yielding bonds. If you need to sell a bond in
this environment, you probably would not be able to recoup your purchase price.
If you own an individual bond and hold it to maturity, price fluctuations will
not affect you. You will simply redeem your bond at maturity for the full
purchase price. Since your bond fund shares never mature, however, they are
subject to interest rate risk and could be worth more or less than the purchase
price when you decide to sell them.
WHAT ARE THE RISKS OF INVESTING IN BONDS?
Bond investors are subject to two types of risk, interest rate risk, which is
discussed in the previous question, and credit risk, which is the risk that the
bond issuer will be unable to make interest and/or principal payments to
bondholders.
Most bonds carry credit ratings, which are assigned by various independent bond
rating agencies, such as Standard & Poor's or Moody's. As a bond's credit rating
goes up, the likelihood of default goes down. So does the yield, however. Bonds
that carry ratings below "investment grade" have to pay higher yields to
compensate bondholders for accepting higher risk. Bond funds specify what types
of bonds they will purchase and the credit ratings of those bonds. For example,
the Wayne Hummer Income Fund invests primarily in investment-grade corporate
debt securities rated Baa or higher by Moody's or BBB or higher by Standard &
Poor's, and obligations of, or guaranteed by, the U.S. Government and its
agencies.
Some rules of thumb: the longer the maturity of a bond, the higher the
volatility, i.e., the more susceptible it is to fluctuations in price.
Investment-grade bonds have lower risk of default than high-yield (sometimes
called "junk") bonds. U.S. government bonds are considered to be the safest
investments because they are backed by the full faith and credit of the U.S.
government. The Wayne Hummer Income Fund invests primarily in corporates and
U.S. government securities.
WHAT SHOULD AN INVESTOR LOOK FOR IN A BOND FUND?
It is important to examine a fund's structural and portfolio characteristics to
determine if that fund is appropriate for you and your investment goals. Some
key characteristics to examine are as follows:
1. What are the credit ratings of bonds in the fund's portfolio?
U.S. government bonds and investment grade bonds are the highest quality
and indicate that the fund is more conservative and will generate lower
yields than more aggressive funds that invest in lower quality or "junk"
bonds.
2. What is the average maturity?
A fund with shorter maturities is less subject to price fluctuations than
funds with longer maturities. However, shorter-maturity funds usually pay
a lower rate of interest, which reflects their lower level of risk.
3. How long has the fund been in business?
You might have more confidence in a relatively new fund if it is offered
by an established firm.
4. How long has the portfolio manager been with the fund?
If he or she is new to the fund you can be buying an unknown quantity.
5. Is the fund taxable or tax-exempt?
Depending on your tax bracket, a lower-yielding tax-free bond fund may
provide higher after-tax returns than a taxable fund.
Finally, if you are comfortable with the characteristics of a fund, take a look
at long-term performance. Remember that experience shows it is much more
beneficial to stay in a fund for the long-term, instead of trying to time the
market.
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<TABLE>
<CAPTION>
[line chart]
WAYNE HUMMER INCOME FUNDS VS.
MERRIL LYNCH DOMESTIC MASTER INDEX
AND MERRILL LYNCH CORPORATE AND GOVERNMENT INDEX
INCOME DOMESTIC CORPORATE
FUND MASTER AND GOVERNMENT
DATE INDEX INDEX
<S> <C> <C> <C>
12/1/92 10000 10000 10000.0
12/31/92 10035 10149 10130.2
3/31/93 10431 10572 10531.1
6/30/93 10737 10855 10751.2
9/30/93 11080 11155 11004.3
12/31/93 11044 11166 11022.5
3/31/94 10892 10857 10812.0
6/30/94 10722 10742 10750.9
9/30/94 10751 10803 10836.5
12/31/94 10835 10851 10831.1
3/31/95 11344 11393 11303.2
6/30/95 11865 12094 11867.8
9/30/95 12115 12327 12062.4
12/31/95 12516 12860 12490.9
3/31/96 12342 12634 12389.2
6/30/96 12412 12694 12462.1
9/30/96 12595 12928 12680.8
12/31/96 12956 13322 12993.3
3/31/97 12875 13248 12986.6
<CAPTION>
MERRILL LYNCH DOMESTIC MERRILL LYNCH CORPORATE AND GOVERNMENT
WAYNE HUMMER INCOME FUND MASTER INDEX INDEX OF 1 TO 9.99 YEAR MATURITIES
PERIOD GROWTH TOTAL RETURN PERIOD GROWTH TOTAL RETURN PERIOD GROWTH TOTAL RETURN
ENDED OF CUMU- AVERAGE ENDED OF CUMU- AVERAGE ENDED OF CUMU- AVERAGE
3/31/97 $10,000 LATIVE ANNUAL 3/31/97 $10,000 LATIVE ANNUAL 3/31/97 $10,000 LATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $10,432 4.32% 4.32% 1 Year $10,486 4.86% 4.86% 1 Year $10,482 4.82% 4.82%
12/1/92- $12,875 28.75% 6.01% 12/1/92- $13,248 32.48% 6.71% 12/1/92- $12,987 29.87% 6.22%
3/31/97 3/31/97 3/31/97
NOTE: This graph compares the results of $10,000 invested in Wayne Hummer Income
Fund on December 1, 1992, with the Merrill Lynch Domestic Master Index and
the Merrill Lynch Corporate and Government Index. These indices are
unmanaged and all returns include reinvested dividends. Past performance
does not guarantee future results. Actual investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
</TABLE>
<TABLE>
<CAPTION>
[Pie Charts]
PORTFOLIO HIGHLIGHTS
The chart below emphasizes the high quality of securities in the portfolio. The
average rating of our holdings is A.
PORTFOLIO QUALITY
<S> <C>
AAA 45%
AA 8%
A 20%
BBB 27%
Portfolio holdings are subject to change and may not represent future portfolio
composition. Quality breakdown as rated by S&P Corporate Bond Ratings.
<CAPTION>
The investment philosophy of the Fund is to invest primarily in intermediate-
term fixed income securities. Average maturity is determined by the maturity or
reasonable call date.
MATURITY SCHEDULE
<S> <C>
Less than 3 Years 12%
3-10 Years 71%
Over 10 Years 17%
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
March 31,
ASSETS 1997
-----------
<S> <C>
Investments, at value (Cost: $22,031,822).................... $21,556,935
Interest receivable.......................................... 390,478
Cash......................................................... 127,801
Receivable for Fund Shares sold.............................. 58,326
Deferred organizational costs
(net of accumulated amortization of $52,000)............... 8,000
Prepaid expenses............................................. 8,025
----------
Total assets................................... 22,149,565
LIABILITIES AND NET ASSETS
Payable for investment purchased............................. 96,293
Organizational costs payable................................. 11,000
Dividends payable............................................ 20,763
Due to Wayne Hummer Management Company....................... 9,410
Accounts payable............................................. 13,627
-----------
Total liabilities.............................. 151,093
-----------
Net assets applicable to 1,500,981 Shares outstanding,
no par value, equivalent to $14.66 per Share ............... $21,998,472
===========
ANALYSIS OF NET ASSETS
Paid-in capital.............................................. $23,535,117
Net unrealized depreciation of investments................... (474,887)
Accumulated net realized loss on sales of investments........ (1,061,758)
-----------
Net assets applicable to Shares outstanding.................. $21,998,472
===========
THE PRICING OF SHARES
Net asset value, offering and redemption price per Share
($21,998,472 / 1,500,981 Shares outstanding) $ 14.66
===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year
Ended
March 31,
INVESTMENT INCOME: 1997
-----------
<S> <C>
Interest................................................... $1,731,738
EXPENSES:
Management fee............................................. 119,230
Transfer agent fees........................................ 25,827
Professional fees.......................................... 22,200
Amortization of organization costs......................... 12,000
Printing and reporting fees................................ 10,650
Portfolio pricing costs.................................... 10,177
Portfolio accounting costs................................. 9,366
Custodian fees............................................. 8,900
Trustee fees............................................... 6,800
Other 15,695
----------
Total expenses................................. 240,845
----------
Net investment income........................................ 1,490,893
----------
Net realized loss on sales of investments.................... (141,101)
Change in net unrealized depreciation........................ (312,194)
----------
Net realized and unrealized loss on investments.............. (453,295)
----------
Net increase in net assets resulting from operations.......... $1,037,598
==========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended March 31,
OPERATIONS: 1997 1996
---- ----
<C> <C> <C>
Net investment income...................... $ 1,490,893 $ 1,786,001
Net realized loss on sales of investments.. (141,101) (63,196)
Change in net unrealized depreciation...... (312,194) 522,725
----------- -----------
Net increase in net assets resulting
from operations........................... 1,037,598 2,245,530
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................... (1,479,285) (1,774,546)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares sold............... 2,190,162 3,761,780
Shares issued upon reinvestment of dividends 1,118,817 1,319,391
---------- ---------
3,308,979 5,081,171
Less payments for Shares redeemed........... 6,267,431 6,505,751
---------- ---------
Decrease from Capital Share transactions...... (2,958,452) (1,424,580)
---------- ---------
Total decrease in net assets.................. (3,400,139) (953,596)
NET ASSETS:
Beginning of year........................... 25,398,611 26,352,207
----------- -----------
End of year ................................ $21,998,472 $25,398,611
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a Share outstanding throughout each period)
December 1, 1992
Year ended March 31, through
1997 1996 1995 1994 MARCH 31, 1993(a)
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $14.95 $14.69 $15.10 $15.41 $15.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... 0.92 1.02 0.99 0.95 0.25
Net realized and unrealized gains (losses)
on investments (0.29) 0.26 (0.42) (0.26) 0.41
------ ------ ----- ------ ------
Total from investment operations........... 0.63 1.28 0.57 0.69 0.66
LESS DISTRIBUTIONS:
Dividends from net investment income..... (0.92) (1.02) (0.98) (0.95) (0.25)
Dividends from net realized gain on
investments 0.00 0.00 0.00(d) (0.05) 0.00
----- ----- ----- ------ ------
Total distributions.................. (0.92) (1.02) (0.98) (1.00) (0.25)
----- ----- ----- ------ ------
Net asset value, end of period............. $ 14.66 $ 14.95 $ 14.69 $ 15.10 $ 15.41
===== ===== ===== ====== ======
Total Return............................... 4.32% 8.79% 4.16% 4.42% 4.31%
RATIOS AND SUPPLEMENTARY DATA:
Net assets, end of period (000's)........ $21,998 $25,398 $26,352 $33,652 $19,135
Ratio of expenses to average net assets.. 1.01% 0.91% 0.94% 1.13% 1.39%(b)(c)
Ratio of net investment income to average
net assets 6.25% 6.80% 6.70% 6.14% 5.58%(b)(c)
Portfolio turnover rate.................. 39% 46% 32% 86% 141%(c)
<FN>
Notes to Financial Highlights:
a) Commencement of operations was December 1, 1992.
b) During the fiscal period ended March 31, 1993, expenses in excess of the
expense limitation were reimbursable from the Investment Adviser. Absent the
expense limitation, the ratio of expenses to average net assets would have
increased, and the ratio of net investment income to average net assets would
have increased, and the ratio of net investment income to average net assets
would have decreased by 0.10%.
c) Determined on an annualized basis.
d) Less than $.01 per share.
</FN>
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
March 31, 1997
PRINCIPAL
CORPORATE OBLIGATIONS (53.2)% AMOUNT VALUE
--------- ---------
<S> <C> <C>
AUTO & MACHINERY (4.0%)
Johnson Controls, Inc., 7.70%, due 03/01/15 $350,000 $ 352,139
Parker-Hannifin Corporation, 9.750%,
due 02/15/21 480,000 535,186
---------
887,325
BANKS & FINANCE (4.9%)
Citicorp, 9.375%, due 03/01/16 149,000 154,425
Ford Motor Credit Company, 6.125%,
due 01/09/06 500,000 454,485
Norwest Corporation, 7.650%, due 03/15/05 360,000 365,710
St. Paul Bancorp, Inc., 7.125%, due 02/15/04 100,000 96,353
---------
1,070,973
BROKERAGE (2.1%)
Merrill Lynch & Co., Inc., 5.539%, due 05/19/03(b) 500,000 473,906
PAPER & FOREST PRODUCTS (8.8%)
Boise Cascade Corporation, 9.875%,
due 02/15/01 1,000,000 1,050,040
Champion International Corporation, 6.400%,
due 02/15/26 500,000 458,375
Georgia Pacific Corporation, 9.750%,
due 01/15/18 415,000 433,712
---------
1,942,127
RETAIL (5.6%)
May Department Stores Company, 9.875%,
due 06/01/17 655,000 689,473
Penney (J.C.) Company, Inc., 9.450%,
due 07/15/02 500,000 531,380
----------
1,220,853
TELECOMMUNICATIONS (4.5%)
Mountain States Telephone & Telegraph Co.,
5.500%, due 06/01/05 269,000 236,949
NYNEX Corporation, 9.550%, due 05/01/10 690,238 757,902
--------
994,851
TRANSPORTATION (7.7%)
Canadian Pacific Limited, 8.850%, due 06/01/22 500,000 517,180
Union Pacific Corporation, 6.125%, due 01/15/04 200,000 184,258
United Air Lines, Inc., 9.760%, due 05/27/06 930,124 984,108
---------
1,685,546
UTILITIES (4.5%)
Commonwealth Edison Company
8.125%, due 01/15/07 500,000 502,165
8.875%, due 10/01/21 485,000 483,540
-------
985,705
MISCELLANEOUS (11.1%)
Browning-Ferris Industries, Inc., 6.375%,
due 01/15/08 $500,000 $ 456,545
CBI Industries, Inc., 6.250%, due 06/30/00 500,000 487,110
Crown Cork & Seal Company, Inc., 8.375%,
due 01/15/05 100,000 104,221
Eastman Kodak Company, 9.750%,
due 10/01/04 325,000 372,456
Inco Ltd., Convertible Debenture, 7.750%,
due 03/15/16 500,000 526,875
Pennzoil Company, 10.250%, due 11/01/05 186,000 211,006
Reynolds Metals Company, 9.400%,
due 02/15/05 250,000 276,550
----------
2,434,763
----------
TOTAL CORPORATE OBLIGATIONS (Cost: $11,966,670) 11,696,049
----------
MUNICIPALITY-TAXABLE (1.2%)
Virginia State Housing Development, 7.950%,
due 05/01/13 (Cost: $253,715) 250,000 261,562
MORTGAGE-BACKED SECURITIES (20.7%)
COLLATERALIZED MORTGAGE OBLIGATIONS (14.1%)
Federal Home Loan Mortgage Corporation (10.9%)
7.500%, due 11/15/08 500,000 492,365
7.500%, due 02/15/20 400,000 396,000
8.000%, due 03/15/21 1,000,000 993,450
8.000%, due 04/15/22 500,000 509,950
---------
2,391,765
Federal National Mortgage Association (3.2%)
8.000%, due 02/25/07 500,000 510,160
8.500%, due 06/25/21 200,000 204,112
---------
714,272
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.3%)
11.250%, due 04/01/01 101,465 107,822
10.750%, due 09/01/15 129,820 142,361
10.500%, due 01/01/16 84,092 91,732
10.500%, due 06/01/19 276,668 304,041
9.000%, due 12/01/19 93,646 97,648
8.000%, due 12/01/22 207,181 207,983
---------
951,587
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.3%)
9.000%, due 11/15/01 $152,386 $ 158,529
8.500%, due 09/20/16 61,671 62,705
8.000%, due 01/20/17 31,455 31,455
9.000%, due 02/20/27 246,261 256,021
---------
508,710
---------
TOTAL MORTGAGE-BACKED SECURITIES (Cost: $4,638,418) 4,566,334
U.S. GOVERNMENT AND AGENCY
ISSUES (22.9%)
Federal National Mortgage Association 500,000 488,425
6.820%, due 08/23/05
U.S. Treasury Note, 8.500%, due 11/15/00 1,720,000 1,819,020
U.S. Treasury Note, 6.500%, due 05/15/05 1,360,000 1,324,776
U.S. Treasury Note, 6.250%, due 02/15/07 1,100,000 1,047,849
U.S. Treasury Strips, 0%, due 02/15/21 2,000,000 352,920
---------
TOTAL U.S. GOVERNMENT AND AGENCY
ISSUES (Cost: $5,173,019) 5,032,990
---------
TOTAL INVESTMENTS (Cost: $22,031,822) (98.0%) 21,556,935
CASH AND OTHER ASSETS, LESS LIABILITIES (2.0%) 441,537
----------
NET ASSETS (100.0%) $21,998,472
===========
<FN>
Note to Portfolio of Investments:
(a) Based on the cost of investments of $22,031,822 for federal income tax
purposes at March 31, 1997, the aggregate gross unrealized appreciation was
$73,508, the aggregate gross unrealized depreciation was $548,395 and the net
unrealized depreciation of investments was $474,887.
(b) Floating rate security. Rate shown is the interest rate at March 31, 1997.
</FN>
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Organization:
Wayne Hummer Investment Trust (the "Trust"), is an open-end management
investment company organized as a Massachusetts business trust. The Trust
consists of two investment portfolios, the Wayne Hummer Income Fund and the
Wayne Hummer Growth Fund, each operating as a separate mutual fund. Presented
herein are the financial statements of the Wayne Hummer Income Fund (the
"Fund"). The Fund commenced investment operations on December 1, 1992, and
may issue an unlimited number of full and fractional units of beneficial
interest (Shares) without par value. The investment objective of the Fund is
to achieve as high a level of current income as is consistent with prudent
investment management.
1. SIGNIFICANT ACCOUNTING POLICIES SECURITY VALUATION
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. Other securities for which no market quotations
are available are valued at fair value as determined in good faith by the
Board of Trustees. Debt securities having a remaining maturity of less than
60 days are valued at cost (or, if purchased more than 60 days prior to
maturity, the value on the 61st day prior to maturity) adjusted for
amortization of premiums and accretion of discounts.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the trade date. Interest income is
determined on an accrual basis, adjusted for amortization of premiums and
accretion of discounts. Realized gains and losses from security transactions
are reported on an identified cost basis.
DEFERRED ORGANIZATIONAL COSTS
Certain organizational costs are reimbursable
by the Fund to Wayne Hummer Management Company, the Fund's Investment
Adviser. The costs are being amortized on the straight-line method and repaid
quarterly over a five-year period.
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
2. FUND SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS
Fund Shares are sold and redeemed on a continuous basis at net asset value.
Net asset value per Share is determined on each day the New York Stock
Exchange is open for trading as of the close of trading on the Exchange by
dividing the value of net assets (total assets less liabilities) by the total
number of Shares outstanding.
Dividends from net investment income are declared and distributed monthly.
Capital gains dividends, if any, are paid at least annually. Dividends will
be reinvested in additional Shares unless a Shareholder requests payment in
cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to differing treatments for
mortgage-backed securities.
3. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the special provisions of the Internal
Revenue Code available to investment companies and, in the manner provided
therein, to distribute all of its taxable income, as well as any net realized
gain on sales of investments. Such provisions were complied with and
therefore no federal income tax provision is required. The accumulated net
realized loss on sales of investments for federal income tax purposes at
March 31, 1997, amounting to $1,061,758, is available to offset future
capital gains. If not applied, $880,524 of the loss carry forward expires in
2003, $51,741 expires in 2004 and $129,493 expires in 2005.
4. TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory and Management Agreement and a Portfolio
Accounting Services Agreement with Wayne Hummer Management Company
("Investment Adviser"). The shareholders of the Investment Adviser are the
Voting Members of Wayne Hummer Investments LLC ("Distributor and Shareholder
Service Agent"). For advisory and management services and facilities
furnished, the Fund pays fees of .50 of 1% of the first $100 million of
average daily net assets, .40 of 1% of the next $150 million and .30 of 1% of
the average daily net assets in excess of $250 million. The Investment
Adviser is obligated to reimburse the Fund to the extent that the Fund's
ordinary operating expenses, including the fee of the Investment Adviser,
exceed 1.50% of the average daily net assets of the Fund. During the year
ended March 31, 1997, the Fund incurred management fees of $119,230.
For portfolio accounting services, the Fund pays the Investment Adviser a fee
based on the level of average daily net assets plus out-of-pocket expenses.
Wayne Hummer Investments LLC serves as Distributor and Shareholder Service
Agent without compensation from the Fund.
Certain trustees of the Fund are also officers or directors of the Investment
Adviser or Voting Members of the Distributor and Shareholder Service Agent.
During the year ended March 31, 1997, the Fund made no direct payments to its
officers and incurred trustee fees for its unaffiliated trustees of $6,800.
5. INVESTMENT TRANSACTIONS
Investment transactions (excluding money market instruments) are as follows:
Year ended
March 31, 1997
-------------
Purchases $ 8,896,351
Proceeds from sales $10,156,810
6. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund Shares as shown in the Statement of Changes in
Net Assets are in respect of the following number of shares:
Year Ended March 31,
1997 1996
------- -------
Shares sold 147,250 247,976
Shares issued upon reinvestment
of dividends 75,320 87,237
------- -------
222,570 335,213
Shares redeemed (420,513) (430,420)
------- -------
Net decrease in Shares outstanding (197,943) (95,207)
======= =======
7. FEDERAL TAX STATUS OF 1996 DIVIDENDS
The income dividend is taxable as ordinary income. The dividends paid to you,
whether received in cash or reinvested in Shares, must be included on your
federal income tax return and must be reported by the Fund to the Internal
Revenue Service in accordance with the U.S. Treasury Department regulations.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Wayne Hummer Income Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Wayne Hummer Income Fund as of March 31, 1997,
and the related statements of operations for the year then ended and changes in
net assets for each of the two years in the period then ended, and financial
highlights for each of the fiscal years since 1993. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
March 31, 1997, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Wayne
Hummer Income Fund as of March 31, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
periods then ended, and financial highlights for each of the fiscal years since
1993, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
May 2, 1997
==============================================================================
BOARD OF TRUSTEES
Philip M. Burno
Chairman
Steven R. Becker
Charles V. Doherty
Joel D. Gingiss MEMBER OF
Patrick B. Long 100% NO-LOAD(TM) MUTUAL FUND
Eustace K. Shaw COUNCIL
==============================================================================
WAYNE HUMMER
INVESTMENTS LLC
This brochure must be preceded or accompanied by a current prospectus of the
Wayne Hummer Investment Trust.
300 South Wacker Drive
Chicago, Illinois
60606-6607
1.800.621.4477 (toll-free)
(312) 431.1700 (local)
200 E. Washington Street
Appleton, Wisconsin
54911-5468
1.800.678.0833 (toll-free)
(414) 734.1474 (local)
<PAGE>
WAYNE
HUMMER
INCOME
FUND
Annual
Financial
Statements
March 31, 1997
(Audited)
WAYNE HUMMER
INCOME FUND
300 South Wacker Drive
Chicago, IL 60606-6607
<PAGE>
WAYNE
HUMMER
GROWTH
FUND
Annual
Financial Statements
Audited
March 31, 1997
<PAGE>
WAYNE
HUMMER
GROWTH
FUND
Photo of: Thomas J. Rowland
Dear Shareholder:
This annual report of the Wayne Hummer Growth Fund ( the "Fund") covers its
thirteenth complete fiscal year which ended March 31, 1997. The report contains
a chart which compares a hypo thetical $10,000 investment in the Fund for the
past ten years with a like amount invested in "the market", as well as
management's discussion and analysis of the Fund's performance during the fiscal
year. As proxies for "the market" we again provide both the Standard & Poor's
Composite Stock Price Index (the S&P 500) and the Russell Mid-Cap Index.
For the fiscal year ended March 31, 1997, the value of a fund share increased to
$28.03 from $26.37 on March 31, 1996, or 6.3%. If distributions to shareholders
of income and capital gains were reinvested, the Fund's total return would be
11.6%. During this same period the total return of the S&P 500 was 19.8% and the
Russell Mid Cap Index, 11.3%, as the mid-cap sector of the market continued to
lag the stocks of large market capitalization companies.
The S&P 500, like the Dow Jones Industrial Average, is widely recognized and
commonly cited in the financial media as a barometer of stock market activity.
Stocks in the S&P 500 represent a broad distribution by industry group,
comparable to that of stocks traded on the New York Stock Exchange. In fact, 91%
of the total market value of the S&P 500 is composed of companies listed on the
New York Stock Exchange.
At calendar year-end, the companies comprising the S&P 500 had a median market
capitalization in excess of $5.4 billion, while the stocks in the Fund's
portfolio had a significantly smaller median market capitalization of $2.5
billion. This reflects the emphasis placed in the past several years on
attempting to identify and acquire promising investments that would generally be
characterized as mid-capitalization stocks. We believe, therefore, that the
Russell Mid-Cap Index more closely represents the significant characteristics of
the Fund. The Russell Mid-Cap Index had a median market capitalization of $2.2
billion. It carries a 19.2 price/earnings ratio on composite estimated 1997
earnings, and had a 15.2% return on shareholders equity last year. The
securities in the Fund's portfolio carry a price/earnings ratio of 18.8 on
expected 1997 earnings, and had a 17.0% return on shareholders equity last year.
As is evident on the enclosed graph, the performance of the Fund tracked that of
the two indices quite closely for much of its history, but developed an obvious
negative divergence which became most pronounced in the very strong market
performance covering the past two fiscal years. Only a part of the negative
variation can be attributed to the Fund's expense ratio which averaged 1.06%
(currently 0.99%) over the past five years. Despite its double digit returns in
each of the past two years, the Fund significantly lagged the market returns
over this two year period. The Fund has historically tended to trail the indices
in strong markets and produce its best relative returns in more adverse market
environments. Independent assessments of the Fund over the years have
characterized it as a relatively low risk fund over all time periods measured,
as reflected by its volatility. A standard measure of volatility (or risk) is
beta. A lower value connotes less volatility; a higher value, greater volatility
compared to the market. The market (S&P 500) beta, or central value, is 1.0. The
Fund's beta has consistently fallen in a range of .75-.95.
As discussed at some length in our previous shareholder letter, much of the
market strength of the past year was narrowly based on a relatively small group
of stocks with huge market values.* We are encouraged that the Fund modestly
narrowed its performance divergence against the Russell
<PAGE>
Mid-Cap over the past fiscal year, and we remain confident of the validity of
our mid-cap emphasis.
The Fund paid a $0.06 ordinary dividend and a $1.02 long term gain distribution
today, April 23, 1997.
As always, we are pleased to be a part of your long-term investment planning.
Sincerely,
/s/ Thomas J. Rowland
Thomas J. Rowland, CFA
President
Wayne Hummer Investment Trust
April 23, 1997
* For a more complete discussion on this topic, please see our previous
shareholder letter, a copy of which is available upon request.
PORTFOLIO HIGHLIGHTS
<TABLE>
<CAPTION>
10 LARGEST HOLDINGS AT MARCH 31, 1997
(% of Total Net Assets)
<S> <C>
Illinois Tool Works, Inc 5.1
Morton International, Inc 4.9
Scherer (R.P.) Corporation 4.2
Interpublic Group of Companies, Inc 3.8
Emerson Electric Co 3.5
Cincinnati Financial Corporation 3.3
Sara Lee Corporation 3.1
Old Republic International Corporation 3.0
The Boeing Company 2.8
Consolidated Papers, Inc 2.8
There is no guarantee that the Fund will continue to hold any one particular
security. The composition of the Fund's top holdings is subject to change.
<CAPTION>
PORTFOLIO CHANGES FOR THE QUARTER ENDED
MARCH 31, 1997
SHARES
HOLDINGS
ADDITIONS INCREASE 3/31/97
<S> <C> <C>
Fastenal Company 30,000 30,000
Schulman (A.), Inc 15,000 125,000
STERIS Corporation 7,000 30,000
HOLDINGS
REDUCTIONS DECREASE 3/31/97
AMP Incorporated 10,000 40,000
Calgon Carbon Corporation 40,000 --
Emerson Electric Co 15,000 80,000
First of America Bank Corporation 15,000 35,000
Northern Trust Corporation 10,000 75,000
UMB Financial Corporation 5,400 27,172
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[line chart]
WAYNE HUMMER GROWTH FUND VS.
RUSSELL MID-CAP AND THE S&P 500
Value of $10,000 Initial Investment
(Thousands)
WAYNE
HUMMER
GROWTH S & P RUSSELL
DATE FUND 500 MID-CAP
<S> <C> <C> <C>
1987 10.00 10.00 10.00
10.29 10.18 10.50
11.03 10.78 11.20
8.99 8.34 8.68
1988 9.40 9.36 9.17
9.71 10.04 9.77
9.54 9.95 9.80
9.62 9.99 10.10
1989 10.12 10.74 10.82
10.73 11.72 11.76
11.64 12.84 13.02
11.93 12.62 13.28
1990 12.03 12.13 12.88
12.71 12.58 13.68
11.18 10.08 11.80
12.53 11.17 12.85
1991 14.13 13.45 14.73
14.37 13.53 14.66
14.92 14.53 15.45
16.14 15.81 16.75
1992 16.26 16.06 16.33
16.15 16.02 16.62
17.12 17.43 17.16
17.82 19.26 18.03
1993 17.88 20.31 18.81
17.65 20.63 18.88
17.73 21.74 19.37
18.45 22.02 19.95
1994 17.76 21.37 19.19
17.55 20.91 19.25
18.34 22.10 20.20
18.28 21.56 20.20
1995 20.08 23.80 22.16
20.59 25.79 24.26
21.36 28.08 26.19
22.82 28.98 27.76
1996 23.32 30.73 29.25
23.74 31.60 30.55
24.18 32.58 31.49
25.53 34.49 34.12
1997 26.03 34.21 35.03
<CAPTION>
WAYNE HUMMER GROWTH FUND RUSSELL MID-CAP S&P 500
PERIOD GROWTH TOTAL RETURN PERIOD GROWTH TOTAL RETURN PERIOD GROWTH TOTAL RETURN
ENDED OF CUMU- AVERAGE ENDED OF CUMU- AVERAGE ENDED OF CUMU- AVERAGE
3/31/97 $10,000 LATIVE ANNUAL 3/31/97 $10,000 LATIVE ANNUAL 3/31/97 $10,000 LATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 11,161 11.61% 11.61% 1 Year 11,133 11.33% 11.33% 1 Year 11,984 19.84% 19.84%
5 Year 16,002 60.02% 9.86% 5 Year 21,306 113.06% 16.33% 5 Year 21,380 113.80% 16.41%
10 Year 26,031 160.31% 10.04% 10 Year 34,209 242.09% 13.09% 10 Year 35,037 250.37% 13.36%
NOTE: The Russell Mid-Cap and the S&P 500 Indices are unmanaged and all returns
include reinvested dividends.
</TABLE>
<TABLE>
<CAPTION>
WAYNE HUMMER GROWTH RUND
VALUE OF INITIAL $10,000 INVESTMENT
(Thousands)
VALUE OF VALUE OF
NET ASSET REINVESTED REINVESTED
QUARTER ENDED YEAR VALUE DIVIDENDS CAPITAL GAINS
<S> <C> <C> <C> <C>
31-Dec-83 1983 10 0 0
31-Mar-84 9.83 0 0
30-Jun-84 9.35 0.058 0
30-Sep-84 9.98 0.149 0
31-Dec-84 1984 10.17 0.245 0
31-Mar-85 10.67 0.357 0
30-Jun-85 11.12 0.504 0.007
30-Sep-85 10.53 0.536 0.006
31-Dec-85 1985 12.25 0.695 0.007
31-Mar-86 13.85 0.857 0.008
30-Jun-86 13.88 0.926 0.397
30-Sep-86 12.57 0.903 0.359
31-Dec-86 1986 13.33 1.023 0.381
31-Mar-87 16.14 1.309 0.461
30-Jun-87 15.84 1.436 1.149
30-Sep-87 16.93 1.606 1.228
31-Dec-87 1987 13.22 1.323 1.557
31-Mar-88 13.79 1.43 1.624
30-Jun-88 14.19 1.523 1.676
30-Sep-88 13.9 1.54 1.642
31-Dec-88 1988 13.74 1.669 1.821
31-Mar-89 14.45 1.756 1.915
30-Jun-89 15.13 1.935 2.152
30-Sep-89 16.36 2.169 2.327
31-Dec-89 1989 16.41 2.306 2.656
31-Mar-90 16.54 2.324 2.678
30-Jun-90 16.96 2.58 3.224
30-Sep-90 14.86 2.343 2.825
31-Dec-90 1990 16 2.843 3.6
31-Mar-91 18.04 3.206 4.059
30-Jun-91 18.13 3.365 4.242
30-Sep-91 18.74 3.609 4.385
31-Dec-91 1991 20.02 4.142 4.757
31-Mar-92 20.17 4.173 4.792
30-Jun-92 19.84 4.202 4.883
30-Sep-92 20.95 4.56 5.156
31-Dec-92 1992 21.64 4.919 5.355
31-Mar-93 21.72 4.938 5.374
30-Jun-93 21.38 4.949 5.29
30-Sep-93 21.4 5.06 5.295
31-Dec-93 1993 22.06 5.486 5.511
31-Mar-94 21.23 5.279 5.303
30-Jun-94 20.91 5.297 5.223
30-Sep-94 21.79 5.628 5.443
31-Dec-94 1994 21.34 5.766 5.649
31-Mar-95 23.43 6.331 6.202
30-Jun-95 23.84 6.565 6.481
30-Sep-95 24.66 6.902 6.704
31-Dec-95 1995 25.81 7.481707 7.592308
31-Mar-96 26.37 7.644038 7.757039
30-Jun-96 26.04 7.69294 8.800398
30-Sep-96 26.45 7.919352 8.93896
31-Dec-96 1996 27.5 8.468123 9.773039
31-Mar-97 28.03 8.631326 9.961393
NOTE: This graph illustrates the results of $10,000 invested in Wayne
Hummer Growth Fund on December 31, 1983. Past performance does not
guarantee future results. Actual investment return and principal
value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
</TABLE>
<PAGE>
INVESTING IN STOCK MUTUAL FUNDS
WHAT ADVANTAGES DOES INVESTING IN A STOCK FUND HAVE OVER BUYING INDIVIDUAL
STOCKS?
The key advantages of a stock fund over an individual stock are:
1. Diversification--A mutual fund gives you ownership in a portfolio of many
different stocks. When you buy individual stocks, your fortunes are tied
to a single company.
2. Affordability--It would take tens of thousands of dollars to assemble a
well-diversified portfolio of individual stocks. Stock mutual funds give
you ownership of a diversified stock portfolio for around $1,000.
3. Full-time professional management--Experienced stock analysts and
managers select stocks for the portfolio and closely monitor the quality
of all holdings on an ongoing basis using information resources not
readily available to individual investors.
ARE THERE ANY DISADVANTAGES?
When you own individual stocks, you receive a great deal of information from the
company about its performance and strategies for the future in the form of
quarterly and annual reports. Also, you can vote on issues at the company's
annual meeting. When you own shares of a stock mutual fund, you receive
information about fund performance, but not about each company in the portfolio.
WHAT ARE THE RISKS OF INVESTING IN STOCKS?
Stock investors are subject to market risk, which is the risk that the price of
their stock will decline in value. Of course, the potential benefit is that
their stock will increase in value. Stock market investing is often
characterized as being very risky. Studies have shown that, indeed, it is very
risky--for two types of investors:
1. Those who attempt to time the market.
2. Those who invest for only a short period of time.
Long-term stock investors, by contrast, have fared well. According to a study by
Ibbotson Associates, the risk of loss in the stock market goes down over time.
Between 1926 and 1995, a one-year investment in the Standard & Poor's 500 would
have increased 71% of the time and decreased 29%. Over five years, it would have
increased 89% and decreased 11%. A 15-year investment, however, would have
increased 100% of the time.
WHAT SHOULD AN INVESTOR LOOK FOR IN A STOCK FUND?
The temptation is to look solely at performance and pick a fund at the top of
the performance charts. However, past performance is no guarantee of future
results. It is far more important to examine a fund's structural and portfolio
characteristics to determine if that fund is appropriate for you and your
investment goals. Some key characteristics to examine are as follows:
1. What type of stocks does the fund invest in?
Large and mid capitalization companies tend to perform differently than
small capitalization companies. Small capitalization and international
stocks are subject to higher volatility than other types of stocks, so
experts advise keeping investment in these stocks to about 20 or 30% of
your total portfolio. Market capitalization is the value of a company as
determined by the market price of its stock.
2. How long has it been in business?
You might have more confidence in a relatively new fund if it is offered
by an established firm.
3. How long has the portfolio manager been with the fund?
If he or she is new to the fund you can be buying an unknown quantity.
4. What percentage of total assets does the fund hold in its largest
positions?
The greater the portfolio concentration, the less diversified the fund.
This can make the fund more volatile on both the up and down side.
5. What percentage of total assets does the fund hold in cash?
The higher the percentage held in cash, the more conservative the fund.
Finally, if you are comfortable with the characteristics of a fund, take a look
at long-term performance. Remember that experience shows it is much more
beneficial to stay in a fund for the long-term, instead of trying to time the
market.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
March 31,
ASSETS 1997
---------
<S> <C>
Investments, at value (Cost: $64,503,522).................... $104,028,097
Cash......................................................... 72,025
Receivable for Fund Shares sold.............................. 49,175
Dividends receivable......................................... 146,375
Prepaid expenses............................................. 14,459
Insurance deposit........................ ................... 3,846
-----------
Total assets................................... 104,313,977
LIABILITIES AND NET ASSETS
Due to Wayne Hummer Management Company....................... 72,075
Accounts payable............................................. 27,424
------------
Total liabilities.............................. 99,499
------------
Net assets applicable to 3,718,059 Shares outstanding,
no par value, equivalent to $28.03 per Share................. $104,214,478
============
ANALYSIS OF NET ASSETS
Paid-in capital.............................................. $ 60,727,226
Net unrealized appreciation of investments................... 39,524,575
Undistributed net realized gain on sales of investments...... 3,769,744
Undistributed net investment income......................... 192,933
------------
Net assets applicable to Shares outstanding................... $104,214,478
============
THE PRICING OF SHARES
Net asset value, offering and redemption price per Share
($104,214,478 / 3,718,059 Shares outstanding) $ 28.03
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year
ended
March 31,
INVESTMENT INCOME: 1997
---------
<S> <C>
Dividends................................................. $ 1,899,940
Interest ................................................. 108,484
---------
Total investment income....................... 2,008,424
EXPENSES:
Management fee............................................ 817,835
Transfer agent fees....................................... 54,920
Professional fees......................................... 35,764
Custodian fees............................................ 20,500
Trustee fees.............................................. 19,956
Portfolio accounting fees................................. 17,043
Registration costs........................................ 10,293
Other..................................................... 36,892
------------
Total expenses................................. 1,013,203
------------
Net investment income........................................ 995,221
------------
Net realized gain on sales of investments.................... 4,861,756
Change in net unrealized appreciation........................ 5,425,276
------------
Net gain on investments..................................... 10,287,032
------------
Net increase in net assets resulting from operations........ $ 11,282,253
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended March 31,
1997 1996
OPERATIONS:
<S> <C> <C>
Net investment income...................... $ 995,221 $ 1,263,927
Net realized gain on sales of investments.. 4,861,756 4,173,633
Change in net unrealized appreciation...... 5,425,276 9,280,681
------------ ------------
Net increase in net assets resulting
from operations ........................... 11,282,253 14,718,241
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income...................... (1,127,423) (1,237,815)
Net realized gain on investments........... (3,830,121) (1,872,634)
------------ -----------
Total dividends to Shareholders.............. (4,957,544) (3,110,449)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares sold.................. 5,813,237 6,451,170
Shares issued upon reinvestment of dividends 4,796,167 2,991,110
------------ -----------
10,609,404 9,442,280
Less payments for Shares redeemed........... 15,327,845 13,211,590
------------ -----------
Decrease from Capital Share transactions...... (4,718,441) (3,769,310)
Total increase in net assets.................. 1,606,268 7,838,482
NET ASSETS:
Beginning of year........................... 102,608,210 94,769,728
----------- -----------
End of year (including undistributed net
investment income of $192,933 and $325,135
at March 31, 1997 and 1996, respectively). $104,214,478 $102,608,210
============ ============
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a Share outstanding throughout each year)
Year ended March 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 26.37 $ 23.43 $ 21.23 $ 21.72 $ 20.17
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.26 0.32 0.32 0.28 0.28
Net realized and unrealized gains (losses)
on investments....................... 2.69 3.41 2.40 (0.42) 1.70
------- ------- ------ ------ ------
Total from investment operations......... 2.95 3.73 2.72 (0.14) 1.98
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.29) (0.31) (0.31) (0.28) (0.29)
Distributions from net realized gain
on investments ...................... (1.00) (0.48) (0.21) (0.07) (0.14)
--------- ---------- -------- ------ -----
Total distributions...................... (1.29) (0.79) (0.52) (0.35) (0.43)
--------- ---------- -------- ------ -----
Net asset value, end of year............. $ 28.03 $ 26.37 $ 23.43 $ 21.23 $ 21.72
========= ========== ======== ====== =====
Total Return............................. 11.61% 16.15% 13.04% (0.69%) 9.94%
RATIOS AND SUPPLEMENTARY DATA:
Net assets, end of year ($000's)....... 104,214 102,608 94,770 92,391 93,198
Ratio of expenses to average net assets 0.99% 1.06% 1.07% 1.07% 1.12%
Ratio of net investment income to average
net assets ....................... 0.97% 1.29% 1.44% 1.33% 1.41%
Portfolio turnover rate................ 9% 6% 3% 2% 1%
Average commission rate................ 0.0551 -- -- -- --
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
March 31, 1997
NUMBER
OF
COMMON STOCKS (98.3%) SHARES VALUE
--------- ---------
<S> <C> <C>
AUTO & MACHINERY 8.6%
Echlin Inc. 35,000 $ 1,190,000
Illinois Tool Works, Inc. 65,000 5,305,625
Regal-Beloit Corporation 100,000 2,450,000
----------
8,945,625
BANKS 5.7%
First of America Bank Corporation 35,000 2,091,250
Northern Trust Corporation 75,000 2,812,500
UMB Financial Corporation 27,172 1,073,294
----------
5,977,044
CHEMICAL 11.3%
Avery Dennison Corporation 70,000 2,695,000
Morton International, Inc. 120,000 5,070,000
RPM, Inc. 100,000 1,662,500
Schulman (A.), Inc. 125,000 2,375,000
----------
11,802,500
COMMUNICATION EQUIPMENT 3.9%
QUALCOMM Incorporated (c) 40,000 2,255,000
Motorola, Inc. 30,000 1,811,250
----------
4,066,250
ELECTRICAL/ELECTRONICS 8.6%
AMP Incorporated 40,000 1,375,000
Applied Materials, Inc. (c) 50,000 2,318,750
Emerson Electric Co. 80,000 3,600,000
Thomas & Betts Corporation 40,000 1,710,000
----------
9,003,750
FOOD, BEVERAGE & HOUSEHOLD 10.3%
McCormick & Company, Incorporated 100,000 2,450,000
PepsiCo, Inc. 40,000 1,305,000
Rubbermaid Incorporated 100,000 2,487,500
Sara Lee Corporation 80,000 3,240,000
Smucker (The J. M.) Company Class B 80,000 1,260,000
----------
10,742,500
HEALTH CARE & PHARMACUTICALS 12.2%
Abbott Laboratories 40,000 2,245,000
C.R. Bard, Inc. 60,000 1,710,000
MedPartners, Inc. (c) 43,862 932,068
Patterson Dental Company (c) 50,000 1,700,000
R. P. Scherer Corporation (c) 85,000 4,409,375
STERIS Corporation (c) 30,000 731,250
Tecnol Medical Products, Inc. (c) 60,000 945,000
----------
12,672,693
INSURANCE 10.0%
AON Corporation 30,000 1,837,500
Cincinnati Financial Corporation 49,612 3,485,243
Ohio Casualty Corporation 50,000 2,056,250
Old Republic International Corporation 120,000 3,075,000
---------
10,453,993
MERCHANDISING & DISTRIBUTION 3.8%
Arbor Drugs, Inc. 100,000 1,750,000
Fastenal Company 30,000 1,050,000
The Gap, Inc. 35,000 1,172,500
----------
3,972,500
OIL & GAS 2.5%
Burlington Resources, Inc. 60,000 2,565,000
PAPER & FOREST PRODUCTS 7.3%
Albany International Corp. Class A 100,000 2,062,500
Consolidated Papers, Inc. 55,000 2,866,875
Sonoco Products Company 100,000 2,700,000
----------
7,629,375
PUBLISHING & MEDIA 3.8%
Interpublic Group of Companies, Inc. 75,000 3,956,250
SERVICES 3.8%
H & R Block, Inc. 60,000 1,762,500
Choice Hotels International, Inc. (c) 100,000 1,350,000
Olsten Corporation 50,000 806,250
----------
3,918,750
MISCELLANEOUS 6.5%
Bacou USA, Inc. (c) 65,000 975,000
The Boeing Company 30,000 2,958,750
Pall Corporation 120,000 2,775,000
----------
6,708,750
----------
Total Common Stocks (Cost: $62,890,405) 102,414,980
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT-TERM INVESTMENTS (1.5%)
MATURITY DATE PRINCIPAL
RATE % (1997) AMOUNT VALUE
--------------- ------------ --------
<S> <C> <C> <C> <C>
General Electric Capital Corp. 5.382 04/11 $ 300,000 $ 299,558
United States Treasury Bill 5.086 05/15 303,000 301,154
United States Treasury Bill 5.163 05/29 202,000 200,357
United States Treasury Bill 5.168 06/05 807,000 799,644
United States Treasury Bill 5.654 02/05/98 13,000 12,404
------------
Total Short-Term Investments (Cost: $1,613,117) 1,613,117
------------
TOTAL INVESTMENTS (Cost: $64,503,522) (99.8%) 104,028,097
CASH AND OTHER ASSETS, LESS LIABILITIES (0.2%) 186,381
------------
NET ASSETS (100.0%) $104,214,478
============
<FN>
NOTES TO PORTFOLIO OF INVESTMENTS:
(a) Interest rates on money market instruments represent annualized yield
to date of maturity.
(b) Based on the cost of investments of $64,503,522 for federal income tax
purposes at March 31, 1997, the aggregate gross unrealized appreciation
was $41,578,748, the aggregate gross depreciation was $2,054,173 and
the net unrealized appreciation of investments was $39,524,575.
(c) Non-income producing security.
</FN>
</TABLE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION:
Wayne Hummer Investment Trust (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust. The Trust
consists of two investment portfolios, the Wayne Hummer Growth Fund and the
Wayne Hummer Income Fund, each operating as a separate mutual fund. Presented
herein are the financial statements of the Wayne Hummer Growth Fund (the
"Fund"). The Fund commenced investment operations on December 30, 1983, and
may issue an unlimited number of full and fractional units of beneficial
interest (Shares) without par value. The investment objective of the Fund is
to achieve long-term capital growth.
1. SIGNIFICANT ACCOUNTING POLICIES SECURITY VALUATION
Investments are stated at value. 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 price on a prior
day is not between the current day's closing bid and asked price, then the
value of such security is taken to be the mean between the current day's
closing bid and asked price. Any unlisted security for which last sale
information is not regularly reported and 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, except that debt securities having a
remaining maturity of 60 days or less are valued on an amortized cost basis.
Restricted securities and any other securities or other assets for which
market quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by the Board of
Trustees.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date, and interest income is recorded on the
accrual basis and includes amortization of money market instrument premium
and discount.
2. FUND SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS
Fund Shares are sold and redeemed on a continuous basis at net asset value.
Net asset value per Share is determined on each day the New York Stock
Exchange is open for trading as of the close of trading on the Exchange by
dividing the value of net assets (total assets less liabilities) by the total
number of Shares outstanding.
Ordinary income dividends are normally declared and paid in April, July,
October, and December. Capital gains dividends, if any, are paid at least
annually. Dividends will be reinvested in additional Shares unless a
Shareholder requests payment in cash. Dividends payable to Shareholders are
recorded by the Fund on the ex-dividend date. On April 23, 1997, an ordinary
income dividend of $0.06 per Share and a long-term capital gain dividend of
$1.02 were declared, payable April 23, 1997, to Shareholders of record on
April 23, 1997.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the special provisions of the Internal
Revenue Code available to investment companies and, in the manner provided
therein, to distribute all of its taxable income, as well as any net realized
gain on sales of investments. Such provisions were complied with and
therefore no federal income tax provision is required.
4. TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory and Management Agreement and a Portfolio
Accounting Services Agreement with Wayne Hummer Management Company
("Investment Adviser"). The shareholders of the Investment Adviser are the
Voting Members of Wayne Hummer Investments LLC ("Distributor and Shareholder
Service Agent"). For advisory and management services and facilities
furnished, the Fund pays fees of .80 of 1% on the first $100 million of
average daily net assets, .65 of 1% of the next $150 million of average daily
net assets and .50 of 1% of the average daily net assets in excess of $250
million. The Investment Adviser is obligated to reimburse the Fund to the
extent that the Fund's ordinary operating expenses, including the fee of the
Investment Adviser, exceed 1.50% of the average daily net assets of the Fund.
During the year ended March 31, 1997, the Fund incurred management fees of
$817,835.
For portfolio accounting services, the Fund pays the Investment Adviser a fee
based on the level of average daily net assets plus out-of-pocket expenses.
Wayne Hummer Investments LLC serves as Distributor and Shareholder Service
Agent without compensation from the Fund.
Certain trustees of the Fund are also officers or directors of the Investment
Adviser or Voting Members of the Distributor and Shareholder Service Agent.
During the year ended March 31, 1997, the Fund made no direct payments to its
officers and incurred trustee fees for its unaffiliated trustees of $19,956.
5. INVESTMENT TRANSACTIONS
Investment transactions (excluding money market instruments) are as follows:
Year ended
March 31, 1997
-------------
Purchases $ 8,696,045
Proceeds from sales $13,170,404
6. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund Shares as shown in the Statement of Changes in
Net Assets are in respect of the following number of shares:
Year ended March 31,
1997 1996
----------- -----------
Shares sold 217,693 260,713
Shares issued upon reinvestment
of dividends 183,754 120,173
----------- -----------
401,447 380,886
Shares redeemed (574,850) (534,552)
----------- -----------
Net decrease in Shares outstanding (173,403) (153,666)
=========== ===========
7. FEDERAL TAX STATUS OF 1996 DIVIDENDS
The income dividend is taxable as ordinary income. The dividends paid to you,
whether received in cash or reinvested in Shares, must be included on your
federal income tax return and must be reported by the Fund to the Internal
Revenue Service in accordance with U.S. Treasury Department regulations. An
amount equal to 100% of ordinary income dividends paid during 1996 qualifies
for the dividends-received deduction available to corporations as provided by
the Internal Revenue Code.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Wayne Hummer Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Wayne Hummer Growth Fund as of March 31, 1997,
and the related statements of operations for the year then ended and changes in
net assets for each of the two years in the period then ended, and financial
highlights for each of the fiscal years since 1993. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
March 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Wayne
Hummer Growth Fund as of March 31, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
periods then ended, and financial highlights for each of the fiscal years since
1993, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
May 2, 1997
==============================================================================
BOARD OF TRUSTEES
Philip M. Burno
Chairman
Steven R. Becker
Charles V. Doherty
Joel D. Gingiss MEMBER OF
Patrick B. Long 100% NO-LOAD(TM) MUTUAL FUND
Eustace K. Shaw COUNCIL
==============================================================================
Wayne Hummer
Investment LLC
This brochure must be preceded or accompanied by a current prospectus of the
Wayne Hummer Investment Trust.
300 South Wacker Drive
Chicago, Illinois
60606-6607
1.800.621.4477 (toll-free)
(312) 431.1700 (local)
200 E. Washington Street
Appleton, Wisconsin
54911-5468
1.800.678.0833 (toll-free)
(414) 734.1474 (local)
<PAGE>
WAYNE
HUMMER
GROWTH
FUND
Annual
Financial
Statements
March 31, 1997
WAYNE HUMMER
GROWTH FUND
300 South Wacker Drive
Chicago, IL 60606-6607