<PAGE>
As filed with the Securities 1933 Act File No. 2-87153
and Exchange Commission 1940 Act File No. 811-3880
on July 23, 1997.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Pre Effective Amendment No. [_]
Post Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 17 [X]
WAYNE HUMMER INVESTMENT TRUST
(Exact name of registrant as specified in charter)
300 South Wacker Drive (312) 431-1700
Chicago, Illinois 60606 (Registrant's Telephone Number
(Address of Principal Executive including Area Code)
Offices, Zip Code)
Robert J. Moran
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2500
Chicago, Illinois 60601
(Name and address of agent for service)
It is proposed that this filing will become effective:
[_] immediately upon filing pursuant to paragraph (b)
[X] on July 25, 1997 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
An indefinite amount of securities has been registered under the Securities Act
of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the fiscal year ended March 31, 1997 was filed with the
Securities and Exchange Commission on or about May 22, 1997.
- --------------------------------------------------------------------------------
<PAGE>
FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Item Number
---------------------
PART A Location in Prospectus
------ ----------------------
1 Cover Page Cover Page
2 Synopsis Summary of Expense
Information
3 Condensed Financial Financial Highlights
Information for the Growth
Fund; Financial Highlights
for the Income
Fund; Performance Information
4 General Description Introduction; Investment
of Registrant Objectives, Policies and
Restrictions of the
Funds
5 Management of the Trust Cover Page; Investment
Objectives, Policies
and Restrictions of the
Funds; Management of
the Trust
5A Management's Discussion Information required by Item 5A
of Fund Performance is included in the
Registrant's Annual Report
of the Growth Fund and the
Income Fund, each for the year
ended March 31, 1996.
As required by said Item 5A,
the Registrant undertakes
under "Financial Highlights"
in the Prospectus to provide
free of charge a copy of said
Annual Reports to persons
requesting the same.
6 Capital Stock and Dividends and Capital Gains
Other Securities Distributions; Taxes;
Description of Shares
7 Purchase of Securities Purchase of Shares;
Being Offered Determination of Net
Asset Value
8 Redemption or Repurchase Redemption of Shares
i
<PAGE>
9 Pending Legal Not Applicable
Proceedings
Location in Statement
PART B of Additional Information
------ -------------------------
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and Background
History
13 Investment Objectives Investment Objectives,
and Policies Policies and Restrictions
14 Management of the Trust Management of the Trust
15 Control Persons and Management of the Trust
Principal Holders of
Securities
16 Investment Advisory Investment Advisory and
and Other Services Other Services; Independent
Auditors; Custodian and
Transfer and Dividend
Paying Agent
17 Brokerage Allocation Brokerage Allocation
18 Capital Stock and Other Shareholder Voting
Securities Rights; Shareholder
Liability
19 Purchase, Redemption and Purchase, Redemption and
Pricing of Securities Pricing of Shares
Being Offered
20 Tax Status Taxes
21 Underwriters Investment Advisory and
Other Services
22 Calculation of Performance Information
Performance Data
23 Financial Financial Statements and
Statements Report of Independent
Auditors
ii
<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 IN-
VESTMENT 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 AND TRANSFER AND DIVIDEND PAYING AGENT:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
---------------
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
Summary of Expense Information.............................................. 2
Financial Highlights for the Growth Fund.................................... 2
Financial Highlights for the Income Fund.................................... 3
Introduction................................................................ 4
Investment Objectives, Policies and Restrictions of the Funds............... 4
Purchase of Shares.......................................................... 9
Redemption of Shares........................................................ 11
Transactions through Broker-Dealers and Agents other than Wayne Hummer...... 11
Management of the Trust..................................................... 11
Dividends and Capital Gains Distributions................................... 13
Taxes....................................................................... 13
Performance Information..................................................... 14
Description of Shares....................................................... 14
Determination of Net Asset Value............................................ 15
Reports to Shareholders..................................................... 16
</TABLE>
LOGO
300 South Wacker Drive, Chicago, Illinois 60606
Wayne Hummer Investment Trust (the "Trust") is a no-load, diversified, open-end
management investment company consisting of two investment portfolios (referred
to individually as a "Fund" and collectively as "Funds") each operating as a
separate mutual fund with its own investment objectives and policies designed
to meet its specific investment goals. The primary investment objective of the
Trust's Wayne Hummer Growth Fund (the "GROWTH FUND") is long-term capital
growth. Current income is a secondary objective. The Growth Fund pursues its
objectives primarily through investment in common stocks and other securities
that the Trust's investment adviser believes have potential for long-term capi-
tal growth. The investment objective of the Trust's Wayne Hummer Income Fund
(the "INCOME FUND") is to achieve as high a level of current income as is con-
sistent with prudent investment management. The Income Fund pursues its objec-
tive primarily through investment in publicly-traded, investment grade debt se-
curities. An investment in the Trust is not a deposit or obligation of or guar-
anteed or issued by any bank, the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency. 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 fol-
lowing 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>
SUMMARY OF EXPENSE INFORMATION
<TABLE>
<CAPTION>
FUND
-------------
GROWTH INCOME
------ ------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases or Reinvested Divi-
dends.......................................................... None None
Deferred Sales Load............................................. None None
Redemption Fee.................................................. None None
Exchange Fee.................................................... None None
Annual Trust Operating Expenses (as a percentage of average net
assets)
Management Fees................................................. .80% .50%
12b-1 Fees...................................................... None None
Other Expenses (primarily custodian, transfer agent and profes-
sional fees)................................................... .19% .51%
---- -----
Total Trust Operating Expenses................................ .99% 1.01%
==== =====
</TABLE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE ------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
An investor would pay the following ex-
penses on a $1,000 investment, assum-
ing (1) a 5% annual return, and (2)
redemption at the end of each time pe-
riod. As noted in the table above, the
Trust does not charge any redemption
fee................................... Growth $10 $32 $55 $121
Income $10 $32 $56 $124
</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 and 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 THE GROWTH FUND
(for a Share outstanding throughout each year)
The table below reflects the results of the Growth Fund's operation for each
of the ten fiscal years in the period ended March 31, 1997. The Growth Fund'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 Growth Fund's annual report for the year ended
March 31, 1997 which is incorporated by reference into the Statement of
Additional Information. The Growth Fund's annual report also contains
additional performance information. The Statement of Additional Information
and/or the Annual Report 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,
BEGINNING OF YEAR...... $26.37 $23.43 $ 21.23 $21.72 $20.17 $18.04 $16.54 $14.45 $13.79 $16.14
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... .26 .32 .32 .28 .28 .36 .46 .30 .27 .33
Net realized and
unrealized gains
(losses) on
investments............ 2.69 3.41 2.40 (0.42) 1.70 2.32 2.23 2.39 0.75 (1.28)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ 2.95 3.73 2.72 (0.14) 1.98 2.68 2.69 2.69 1.02 (0.95)
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.29) (0.31) (0.31) (0.28) (0.29) (0.39) (0.44) (0.24) (0.20) (0.29)
Distributions from net
realized gain on
investments............ (1.00) (0.48) (0.21) (0.07) (0.14) (0.16) (0.75) (0.36) (0.16) (1.11)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions.... (1.29) (0.79) (0.52) (0.35) (0.43) (0.55) (1.19) (0.60) (0.36) (1.40)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR................... $28.03 $26.37 $23.43 $21.23 $21.72 $20.17 $18.04 $16.54 $14.45 $13.79
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN............ 11.61% 16.15% 13.04% (0.69)% 9.94% 15.14% 17.47% 18.88% 7.58% (5.95)%
RATIOS AND SUPPLEMENTARY
DATA
Net assets, end of year
(000's)................ $104,214 $102,608 $94,770 $92,391 $93,198 $55,837 $32,445 $24,988 $21,174 $20,451
Ratio of expenses to
average net
assets (a)............. 0.99% 1.06% 1.07% 1.07% 1.12% 1.23% 1.36% 1.50% 1.50% 1.50%
Ratio of net investment
income to average net
assets (a)............. 0.97% 1.29% 1.44% 1.33% 1.41% 2.01% 2.87% 1.91% 1.83% 1.73%
Portfolio turnover rate. 9% 6% 3% 2% 1% 3% 13% 3% 12% 10%
Average commission rate. 0.0551 -- -- -- -- -- -- -- -- --
</TABLE>
- -------
NOTE TO FINANCIAL HIGHLIGHTS FOR THE GROWTH FUND:
(a) During the years ended March 31, 1989 and 1988 expenses in excess of the
expense limitation of 0.39% and 0.05%, respectively, were reimbursed by the
Investment Adviser.
LOGO
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE INCOME FUND
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The table below reflects the results of the Income Fund's operation for the
twelve month periods ended March 31, 1997, 1996, 1995 and 1994 and for the four
month period ended March 31, 1993 (since the Income Fund's inception December
1, 1992). The Income Fund's audited financial statements and information in the
table, including the report thereon of Ernst & Young LLP, independent auditors,
are included in the Income Fund's annual report for the year ended March 31,
1997 which is incorporated by reference into the Statement of Additional
Information. The Income Fund's annual report also contains performance
information. The Statement of Additional Information and/or the annual report
may be obtained from Wayne Hummer upon request and without charge.
<TABLE>
<CAPTION>
DECEMBER
1, 1992
THROUGH
YEAR ENDED MARCH 31, MARCH
------------------------------------ 31,
1997 1996 1995 1994 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 OP-
ERATIONS:
Net investment income... 0.92 1.02 0.99 0.95 0.25
Net realized and
unrealized gains (loss-
es) 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 in-
vestment income........ (0.92) (1.02) (0.98) (0.95) (0.25)
Dividends from net real-
ized gains 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 pe-
riod (000's)........... $21,998 $25,398 $26,352 $33,652 $19,135
Ratio of expenses to av-
erage 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)
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS FOR THE INCOME FUND:
(a) Commencement of operations was December 1, 1992.
(b) During the fiscal period ended March 31, 1993, expenses in excess of the
expense limitation of 0.10% were reimbursed by the Investment Adviser.
(c) Determined on an annualized basis.
(d) Less than $.01 per share.
LOGO
<PAGE>
INTRODUCTION
The Trust is a no-load, diversified, open-end management investment company
organized as a Massachusetts business trust on September 29, 1983, and
consisting of two Funds, each operating as a separate mutual fund with its own
investment objectives and policies designed to meet its specific investment
goals. An objective of the Trust is to provide its investors with access to
professional advice and portfolio management resources that are normally
beyond the reach of most individual investors. As a "no-load" mutual fund, the
Trust imposes no commissions or charges on its investors when its shares of
either Fund ("Shares" or "Trust Shares") are purchased or redeemed. Shares are
distributed by Wayne Hummer pursuant to a Distribution Agreement. See
"MANAGEMENT OF THE TRUST."
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE FUNDS
GROWTH FUND. The primary investment objective of the Growth Fund is to
achieve long-term capital growth. Current income is a secondary objective. The
Growth Fund pursues these investment objectives by investing primarily in
common stocks that the Growth Fund's investment adviser believes have good
long-term growth possibilities, such as the common stocks of companies in
cyclical industries during periods when their common stocks appear to possess
above average potential for capital appreciation. Due to market fluctuations
and the risks inherent in the ownership of all common stocks and other
investments, there can be no assurance that the Growth Fund will achieve its
objectives. The Growth Fund will, however, seek to reduce these risks through
careful management and by investing in a diversified portfolio to enhance
opportunities for above average long-term growth of capital. The Growth Fund's
investment objectives may be changed by the Board of Trustees without
shareholder approval.
Although the Growth Fund normally invests primarily in common stocks of
domestic corporations, occasionally, when such securities are believed to
offer good opportunities for long-term capital growth, the Growth Fund may
make limited investments in preferred stocks and bonds and convertible
debentures rated not less than BBB by Standard and Poor's Corporation ("S&P")
or Baa by Moody's Investors Service, Inc. ("Moody's"). Like higher rated
securities, securities rated in the BBB or Baa categories are considered to
have adequate capacity to pay principal and interest, although they may have
fewer protective provisions than higher rated securities and thus may be
adversely affected by severe economic circumstances and are considered to have
speculative characteristics with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation
than is the case with securities in the higher rating categories. If a
defensive position is deemed desirable due to a change in economic or market
conditions, the Growth Fund may, as discussed more fully below, purchase put
and call options, including stock index options, and write covered call
options. The Growth Fund may also invest on a temporary defensive basis all or
part of its assets in fixed income securities such as investment-grade
commercial paper and corporate bonds, United States Government securities,
certificates of deposit, bankers' acceptances, variable rate notes or other
money market instruments (such as short-term corporate debt instruments), or
it may retain cash.
The Growth Fund usually makes investments with the intention of holding such
investments for at least six months, although purchases and sales of
securities will be made whenever necessary to achieve the Growth Fund's
investment objective. During any period when changing market or economic
conditions are foreseen, shifts in portfolio emphasis could increase the rate
of portfolio turnover. This may increase the amount of expenses and brokerage
commissions incurred by the Growth Fund. Because the major portion of the
Growth Fund's investment portfolio normally consists of common stocks, its net
asset value may be subject to greater fluctuation than a portfolio containing
a substantial portion of fixed income securities.
The Growth Fund may invest up to 5% of its net assets in put and call
options traded on national securities exchanges, including put and call
options on stock indices, and may write (sell) covered call options on
securities held in the Growth Fund's investment portfolio. The aggregate
market value of portfolio securities underlying options written by the Growth
Fund may not exceed 25% of the Growth Fund's net assets. Option transactions
will be used primarily to hedge the Growth Fund's investment portfolio and to
protect portfolio securities from unexpected downturns in the market. The
effectiveness of these investment techniques depends on the investment
adviser's ability to predict movements in both interest rates and stock
prices. The risks involved in writing (selling) covered call options include
the possible inability to effect closing transactions at favorable prices and
the inability to participate in any appreciation of the underlying securities
above the exercise price. The risks involved in purchasing put or call options
include the possible loss of the entire premium paid.
LOGO
<PAGE>
In selecting its portfolio investments, the Growth Fund is subject to
certain restrictions and limitations which are fundamental policies of the
Growth Fund. For instance, the Growth Fund may not invest more than 5% of its
total assets in the securities of any one issuer (other than the United States
Government, its agencies or instrumentalities) or own more than 10% of the
outstanding securities, or more than 10% of the outstanding voting securities,
of any one issuer. The Growth Fund also may not invest more than 25% of its
total assets in any one industry.
If any of the foregoing percentage restrictions are adhered to at the time
of investment, a later increase or decrease in percentage ownership resulting
from a change in the value of the Growth Fund's assets will not result in a
violation. A more detailed discussion of the Growth Fund's investment
practices and restrictions and a discussion of their associated risks are
contained in the Trust's Statement of Additional Information under "Investment
Objectives, Policies and Restrictions."
INCOME FUND. The investment objective of the Income Fund is to achieve as
high a level of current income as is consistent with prudent investment
management. The Income Fund pursues its objective primarily through investment
in publicly-traded, investment grade debt securities. The Income Fund's assets
may be invested in a number of types of securities including, but not limited
to, the following: (1) U.S. dollar-denominated corporate debt securities
(domestic or foreign) which are rated not less than Baa by Moody's or BBB by
S&P; (2) obligations of, or guaranteed by, the United States of America, its
agencies or instrumentalities; (3) obligations (payable in U.S. dollars) of,
or guaranteed by, the Government of Canada or any instrumentality or political
subdivision thereof; (4) municipal debt obligations issued by states,
territories or possessions of the United States or the District of Columbia or
their political subdivisions, agencies or instrumentalities, or multistate
agencies or authorities; (5) commercial paper rated Prime-1 or Prime-2 by
Moody's or A-1 or A-2 by S&P; (6) bank certificates of deposit or banker's
acceptances issued by domestic or Canadian chartered banks having total
deposits in excess of $1 billion; (7) time deposits issued by domestic banks
having total deposits in excess of $1 billion and foreign branches of such
banks; (8) options on securities and on indices as described below to hedge
its portfolio investments and not for speculation; (9) financial futures
contracts and options on financial futures contracts to hedge its portfolio
investments and not for speculation; (10) convertible securities which are
convertible into common stock or other equity securities; and (11) cash or
cash equivalents for temporary defensive purposes. Any securities that are
restricted as to disposition under the federal securities laws or are
otherwise considered to be illiquid will not exceed 15% of the net assets of
the Income Fund. A more detailed discussion of the Income Fund's investment
practices and restrictions and a discussion of their associated risks are
contained in the Trust's Statement of Additional Information under "Investment
Objectives, Policies and Restrictions."
Under normal market conditions, the Income Fund invests at least 65% of its
assets in securities with an average life of between three and ten years, and
expects that the dollar-weighted average life of its portfolio will be between
three and ten years. Average life is the weighted average period over which
the investment adviser expects the principal to be paid, and differs from
stated maturity in that it estimates the effect of expected principal
prepayments and call provisions. With respect to Government National Mortgage
Association ("GNMA") securities and other mortgage-backed securities, average
life is likely to be substantially less than the stated maturity of the
mortgages in the underlying pools. With respect to obligations with call
provisions, average life is typically the next call date on which the
obligation reasonably may be expected to be called. Securities without
prepayment or call provisions generally have an average life equal to their
stated maturity. During periods of rising interest rates, the average life of
mortgage-backed securities and callable obligations may increase substantially
because they are not likely to be prepaid, which may result in greater net
asset value fluctuation.
The Income Fund also may invest in other preferred or debt securities
(including those convertible into or carrying warrants to purchase common
stocks or other equity interests, and privately placed debt securities) that
the investment adviser considers likely to yield relatively high income in
relation to cost.
There are market and investment risks with any security and the value of an
investment in the Income Fund may fluctuate over time. Normally, the value of
the Income Fund's investments varies inversely with changes in interest rates.
There can be no assurance that the objective of the Income Fund will be
achieved. Corporate debt securities rated within the four highest grades by
Moody's or S&P are generally considered to be "investment grade." Like higher
rated debt securities, securities rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest, although
they may have fewer protective provisions than higher rated securities and
thus may be adversely affected by severe economic circumstances and are
considered to have speculative characteristics. The Income Fund
LOGO
<PAGE>
may invest up to 20% of its total assets in fixed income securities that are
rated below Baa by Moody's or BBB by S&P or are non-rated. For a discussion of
lower rated and non-rated securities and related risks, see "Special Risk
Factors--High Yield (High Risk) Bonds" below. The characteristics of the
rating categories are described in the Trust's Statement of Additional
Information under "Appendix A--Ratings of Investments."
The Income Fund may purchase put and call options traded on national
securities exchanges or the Chicago Board of Trade, including put and call
options on stock indices and interest rates, and may write (sell) covered call
options on securities held in the Income Fund's investment portfolio. The
aggregate market value of portfolio securities underlying options written by
the Income Fund may not exceed 5% of the Income Fund's net assets. Option
transactions will be used to hedge the Income Fund's investment portfolio and
to protect portfolio securities from unexpected downturns in the market. The
effectiveness of these investment techniques depends on the investment
adviser's ability to predict movements in both interest rates and stock
prices. The risks involved in writing (selling) covered call options include
the possible inability to effect closing transactions at favorable prices and
the inability to participate in any appreciation of the underlying securities
above the exercise price. The risks involved in purchasing put or call options
include the possible loss of the entire premium paid.
In selecting its portfolio investments, the Income Fund is subject to
certain restrictions and limitations which are fundamental policies of the
Income Fund. For instance, the Income Fund may not invest more than 5% of its
total assets in the securities of any one issuer (other than the United
States, its agencies or instrumentalities) or own more than 10% of the
outstanding securities, or more than 10% of the outstanding voting securities,
of any one issuer. The Income Fund also may not invest more than 25% of its
total assets in any one industry.
If any of the foregoing percentage restrictions are adhered to at the time
of investment, a later increase or decrease in percentage ownership resulting
from a change in the value of the Income Fund's assets will not result in a
violation. A more detailed discussion of the Income Fund's investment
practices and restrictions and a discussion of their associated risks are
contained in the Trust's Statement of Additional Information under "Investment
Objectives, Policies and Restrictions."
SPECIAL RISK FACTORS--HIGH YIELD (HIGH RISK) BONDS. Subject to its specific
investment objective and policies as described above, the Income Fund may
invest up to 20% of its assets in fixed-income securities below investment
grade offering high current income. Such high yield (high risk), fixed-income
securities ordinarily will be in the lower rating categories of recognized
rating agencies or will be non-rated. Lower rated and non-rated securities,
which are sometimes referred to by the popular press as "junk bonds," have
widely varying characteristics and qualities. These lower-rated or non-rated
fixed-income securities are considered, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and generally will
involve more credit risk than securities in the higher rating categories.
The market values of such lower rated or non-rated securities tend to react
to individual corporate developments to a greater extent than do those of
higher rated securities, which react primarily to fluctuations in the general
level of interest rates. Such securities also tend to be more sensitive to
economic conditions than higher rated securities. Adverse publicity and
investor perceptions regarding lower rated and non-rated securities, whether
or not based on fundamental analysis, may depress the prices for such
securities. These and other factors adversely affecting the market value of
high yield securities will adversely affect the Income Fund's net asset value.
High yield securities frequently are issued by corporations in the growth
stage of their development. They may also be issued in connection with a
corporate reorganization or a corporate takeover. Companies that issue such
high yielding securities often are highly leveraged and may not have available
to them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is the
case with higher rated securities. For example, during an economic downturn or
recession, highly leveraged issuers of high yield securities may experience
financial stress. During such periods, such issuers may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability to
service its debt obligations may also be adversely affected by specific
corporate developments, the issuer's inability to meet specific projected
business forecasts, or the unavailability of additional financing among other
factors. The risk of loss from default by the issuer is significantly greater
for the holders of high yield securities because such securities are generally
unsecured and are often subordinated to other creditors of the issuer.
Although some risk is inherent in all securities ownership, holders of fixed
income securities have
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a claim on the assets of the issuer prior to the holders of common stock.
Therefore, an investment in fixed income securities generally entails less risk
than an investment in common stock of the same issuer.
The Income Fund may have difficulty disposing of certain high yield
securities because they may have a thin trading market. Because not all dealers
maintain markets in all high yield securities, the Income Fund anticipates that
such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may have an
adverse effect on the market price of such securities. The Income Fund's
ability to dispose of particular issues may also make it more difficult for the
Income Fund to obtain accurate market quotations for purposes of valuing the
Income Fund's assets. Market quotations generally are available on many high
yield issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales.
Municipal Obligations are debt obligations issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate agencies
or authorities. While in general, Municipal Obligations are tax exempt
securities having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain issues of Municipal Obligations, offer
yields comparable to and in some cases greater than the yields available on
other permissible Income Fund investments. Municipal Obligations generally
include debt obligations issued to obtain funds for various public purposes as
well as certain industrial development bonds issued by or on behalf of public
authorities. Municipal Obligations are classified as general obligation bonds,
revenue bonds or notes. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general
taxing power. Industrial development bonds, in most cases, are revenue bonds
that do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal Obligations include
municipal lease/purchase agreements which are similar to installment purchase
contracts for property or equipment issued by municipalities although such
agreements are obligations of a municipality, no assurance can be given that
the municipality will appropriate funds for such lease payments. Municipal
Obligations bear fixed, variable or floating rates of interest. The Income Fund
may invest in Municipal Obligations, the ratings of which correspond with the
ratings of other permissible Income Fund investments. Dividends received by
shareholders of Income Fund attributable to interest income received by the
Income Fund from Municipal Obligations will be subject to federal income tax.
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities, which differ only in their
interest rates, maturities and times of issuance. Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one
to ten years; and Treasury Bonds generally have initial maturities greater than
ten years. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Government National Mortgage Association
("GNMA") pass-through certificates, are supported by the full faith and credit
of the U.S. Treasury; others, such as those of the Federal Home Loan Banks, by
the right of the issuer to borrow from the Treasury; others, such as those
issued by the Federal National Mortgage Association ("Freddie Mac"), by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as those issued by the
Student Loan Marketing Association, only by the credit of the agency or
instrumentality. While the U.S. Government provides financial support to such
U.S. Government sponsored agencies or instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law. The Income
Fund will invest in such securities only when it is satisfied that the credit
risk with respect to the issuer is minimal.
Additional information concerning high yield (high risk) securities appears
in the Trust's Statement of Additional Information under "Appendix A--Ratings
of Investments."
ADDITIONAL INVESTMENT INFORMATION. Zero coupon securities and pay-in-kind
bonds involve additional special considerations. Zero coupon securities are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified cash payment date when the securities
begin paying current interest (the "cash payment date") and therefore are
issued and traded at a discount from their face amount or par value. The market
prices of zero coupon securities are generally more volatile than the market
prices of securities that pay interest periodically and are likely to respond
to changes in interest rates to a greater degree than do securities paying
interest
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currently having similar maturities and credit quality. Zero coupon, pay-in-
kind or deferred interest bonds carry additional risk in that, unlike bonds
that pay interest throughout the period to maturity, the Income Fund will
realize no cash until the cash payment date unless a portion of such securities
are sold and, if the issuer defaults, the Income Fund may obtain no return at
all on its investment. In addition, pay-in-kind bonds are generally issued by
corporations whose cash flows are currently insufficient to service the
intended debt and whose balance sheets already reflect a significant amount of
debt. The utilization of pay-in-kind bonds has the effect of adding to this
debt burden and results in greater risk to the investor.
Current federal income tax law requires the holder of a zero coupon security
or of certain pay-in-kind bonds (bonds which pay interest through the issuance
of additional bonds) to accrue income with respect to these securities prior to
the receipt of cash payments. To maintain its qualification as a registered
investment company and avoid liability for federal income and excise taxes, the
Income Fund will be required to distribute income accrued with respect to these
securities and may be required to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
The Income Fund will not normally engage in the trading of securities for the
purpose of realizing short-term profits, but will adjust its portfolio as
considered advisable in view of prevailing or anticipated market conditions and
its investment objective. Accordingly, the Income Fund may sell fixed income
securities in anticipation of a rise in interest rates. Frequency of portfolio
turnover will not be a limiting factor should the investment adviser deem it
desirable to purchase or sell securities.
Higher portfolio turnover involves correspondingly greater brokerage
commissions or other transaction costs. Higher portfolio turnover may result in
the realization of greater net short-term capital gains. In order to continue
to qualify as a regulated investment company for federal income tax purposes,
less than 30% of the annual gross income of the Income Fund must be derived
from the sale or other disposition of securities and certain other investments
held by the Income Fund for less than three months. See "Taxes" in the
Statement of Additional Information.
The Income Fund may take full advantage of the entire range of maturities of
fixed income securities and may adjust the average maturity of its portfolio
from time to time, depending upon its assessment of relative yields on
securities of different maturities and its expectations of future changes in
interest rates. Thus, the average maturity of its portfolio may be relatively
short (under 5 years, for example) at some times and relatively long (over 15
years, for example) at other times. Generally, since the values of short-term
debt securities tend to be more stable than longer term debt securities, the
portfolio's average maturity will be shorter when interest rates are expected
to rise and longer when interest rates are expected to fall.
Neither the Growth Fund nor the Income Fund may borrow money except for
temporary or emergency purposes and not for leverage purposes, and then only in
an amount up to 5% of the net assets of the Growth Fund and up to 10% of the
net assets of the Income Fund, in order to meet redemption requests without
immediately selling any portfolio securities or other assets. These Funds may
not pledge their assets in an amount exceeding the amount of the borrowings
secured by such pledge.
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. The value of fixed yield
securities to be delivered in the future will fluctuate as interest rates vary.
Because the Income Fund is required to set aside cash or liquid high grade
securities to satisfy its commitments to purchase when-issued or delayed
delivery securities, flexibility to manage the Income Fund's investments may be
limited if commitments to purchase when-issued or delayed delivery securities
were to exceed 25% of the value of its assets.
To the extent the Income Fund engages in when-issued or delayed delivery
transactions, it will do so for the purpose of acquiring portfolio securities
consistent with the Income Fund's investment objective and policies and not for
the purpose of investment leverage or to speculate in interest rate changes.
The Income Fund will make commitments to purchase securities on a when-issued
or delayed delivery basis only with the intention of actually acquiring the
securities, but the Income Fund reserves the right to sell these securities
before the settlement date if deemed advisable. See "Investment Objectives,
Policies and Restrictions" in the Statement of Additional Information.
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ASSET-BACKED SECURITIES. The Income Fund may invest in 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). Asset-backed commercial paper, one type of asset-
backed security, is issued by a special purpose entity organized solely to
issue the commercial paper and to purchase the interest in the assets. The
credit quality of these securities depends primarily upon the quality of the
underlying assets and the level of credit support and/or enhancement provided.
The underlying assets (e.g., loans) are often subject to prepayments which
shorten the securities' weighted average life and may lower their return. If
the credit support or enhancement is exhausted, losses or delays in payment
may result if the required payments of principal and interest are not made.
The value of these securities also may change because of changes in the
market's perception of the creditworthiness of the servicing agent for the
pool, the originator of the pool, or the financial institution providing the
credit support or enhancement.
COLLATERALIZED MORTGAGE OBLIGATIONS. The Income Fund may invest in
collateralized mortgage obligations (CMOs). CMOs are obligations fully
collateralized by a portfolio of mortgages or 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.
MORTGAGE-BACKED SECURITIES. The Income Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Some of these securities, such as GNMA certificates, are
backed by the full faith and credit of the U.S. Treasury while others, such as
Freddie Mac certificates, are not.
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 their total return. 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.
REPURCHASE AGREEMENTS. The Income Fund may enter into repurchase agreements
with a securities dealer or a bank which is a member of the Federal Reserve
System. In the event of a bankruptcy or default of certain sellers of
repurchase agreements, the Income Fund could experience costs and delays in
liquidating the underlying security, which is held as collateral, and the
Income Fund might incur a loss if the value of the collateral held declines
during this period. There is no limit on the percentage of the portfolio's
total assets that may be invested in repurchase agreements, except that
repurchase agreements maturing in more than 7 days, together with any
securities that are restricted as to disposition under the federal securities
laws or are otherwise considered to be illiquid, will not exceed 15% of the
net assets of the Income Fund.
PREFERRED STOCK. Without regard to quality, the Income Fund may invest up to
25% of its total assets (not including cash) in preferred stock. Preferred
stocks are securities that represent an ownership interest in a corporation
providing the owner with claims on the company's earnings and assets before
common stock owners, but after bond owners.
PURCHASE OF SHARES
The Trust's Shares are offered on a continuous basis and sold without a
sales load at their net asset value next determined after an order in proper
form and payment is received. See "DETERMINATION OF NET ASSET VALUE." The
minimum initial investment for the Growth Fund is generally $1,000 and
subsequent investments must generally be at least $500. The minimum initial
investment for the Income Fund is generally $2,500 and subsequent investments
must generally be at least $1,000. The foregoing minimum investments may be
lower for accounts that are part of an employer sponsored and administered
401(K) pension plan. Investments may be made in any amount in excess of these
minimums. Shares may be purchased through the Trust's Distributor, Wayne
Hummer, after establishing a brokerage account with Wayne Hummer. There is no
charge for opening such a brokerage account and no sales charge for purchasing
Shares through Wayne Hummer. The Trust reserves the right, in its sole
discretion, to vary at any time the initial and subsequent investment
minimums, to withdraw the offering or to refuse any purchase order.
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To purchase Shares of the Trust, a new investor should mail a completed new
account application to the Trust's Distributor and Shareholder Service Agent,
Wayne Hummer, 300 South Wacker Drive, Chicago, Illinois 60606, and a brokerage
account will then be established in the name of the investor. An investor who
already maintains a brokerage account with Wayne Hummer should contact his or
her investment executive to purchase Shares of the Trust. Purchases will be
effected through the investor's brokerage account and all Shares purchased are
entered and credited to the account. Payment for Trust Shares 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 investor's
brokerage account. Trust Shares may be purchased through Wayne Hummer in
person, by mail or, where an investor already has a free credit balance in his
or her brokerage account, by telephone. 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 Trust Shares paid for by check, Wayne Hummer
advances federal funds on behalf of the Shareholder, though if the check is
subsequently dishonored, Wayne Hummer has the right to redeem such Trust
Shares and to retain any dividends or distributions made with respect thereto.
The Trust may suspend the determination of the net asset value, which would
delay the normal processing of orders, in certain unusual circumstances. See
"DETERMINATION OF NET ASSET VALUE." "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.
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 account and automatically invested in the specific Fund(s)
of 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 minimum initial
investment requirement of the specific Fund(s), additional Shares of the
respective Fund(s) 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 of the Growth Fund or the Income
Fund for each other or for shares of the Wayne Hummer Money Fund Trust, a
money market mutual fund (the "Money Fund"). Similarly, shares of the Money
Fund may be exchanged for Shares of the Growth Fund and/or the Income Fund
without charge. 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 Money Fund and exchange procedures. However, exchanges may only be
made for such Funds which are available for sale in the Shareholder's state of
residence. 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
Trust Shares, Shareholders should read the Money Fund prospectus carefully.
Exchanges will be effected through the redemption of Trust Shares tendered for
exchange and the purchase of Money Fund shares 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 Trust Shares being exchanged is more or less than the Shareholder's
adjusted cost basis.
RETIREMENT PLANS. Wayne Hummer provides several prototype self-directed
retirement plans, including an Individual Retirement Account Plan, a
Simplified Employee Pension Plan and a Defined Contribution Plan (formerly
"Keogh Plan"), through which an investor may invest in the Trust on a tax-
sheltered basis. The minimum initial purchase
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of Growth Fund Shares with respect to each account under the various types of
retirement plans is $500 and subsequent investments must be at least $200. The
minimum initial purchase of Income Fund Shares with respect to each account
under the various types of retirement plans is $2,000 and subsequent
investments must be at least $500. Orders for Trust Shares to be purchased for
a retirement plan account must be placed by Wayne Hummer. A retirement plan
account may combine investments in Trust Shares with investments in shares of
Wayne Hummer Money Fund Trust or in other securities purchased through Wayne
Hummer.
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.
REDEMPTION OF SHARES
Trust Shares may be redeemed without charge at any time at their net asset
value next determined after the redemption order is received in proper form.
The value of a Shareholder's Trust Shares upon redemption may be more or less
than the cost of such Shares, depending on the net asset value of the Trust's
Shares at the time of redemption.
A Shareholder may redeem Trust Shares through his or her Wayne Hummer
investment executive by telephone, mail or in person. Such redemption requests
should state the Shareholder's account number. A redemption request received
by Wayne Hummer prior to the close of trading on the New York Stock Exchange
is effected that day and the proceeds credited to the Shareholder's Wayne
Hummer brokerage account the next business day. A redemption request received
after the close of trading will be effected the next business day. The
telephone redemption procedure may be terminated by the Trust or Wayne Hummer
at any time. If, at the time the redemption request is made, a Shareholder has
requested that Wayne Hummer transmit the redemption proceeds by mail, the
proceeds normally will be mailed on the day they are credited to the
Shareholder's Wayne Hummer brokerage account, or, if the request to transmit
the proceeds by mail is made subsequent to the request to redeem, on the next
business day after receipt of the Shareholder's request to transmit the
proceeds by mail. In either event, payment will be made within seven days
after the redemption is effected or the request to transmit proceeds is
received. The Trust may suspend the right of redemption and may postpone the
date of payment for Shares for more than seven days under certain unusual
circumstances. See "DETERMINATION OF NET ASSET VALUE."
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem Shares (other than Shares purchased for a
retirement plan provided by Wayne Hummer) for their then current value if at
any time the value of the Shareholder's account is less than $750 in the case
of the Growth Fund or $2,000 in the case of the Income Fund unless this is due
to a decline in the market value of the Trust's assets. In such event, a
Shareholder first will be notified that the value of his or her total
investment is less than the minimum and allowed two months to make an
additional investment before the redemption is made. The proceeds of any such
redemption will be credited to the Shareholder's Wayne Hummer brokerage
account, if applicable, or will be sent to the Shareholder by mail.
TRANSACTIONS THROUGH BROKER-DEALERS AND AGENTS OTHER THAN WAYNE HUMMER
Shares may be purchased or redeemed through broker-dealers or agents
appointed by Wayne Hummer, who may charge Shareholders a fee for their
services. The Fund may agree to modify or waive its purchase and redemption
procedures or requirements in order to facilitate these transactions.
MANAGEMENT OF THE TRUST
Wayne Hummer Management Company (the "Investment Adviser"), 300 South Wacker
Drive, Chicago, Illinois 60606, acts as investment adviser of the Trust and
provides the Trust with operating facilities and management and portfolio
accounting services and serves as investment adviser to the Money Fund, as
well as to various individual, institutional and fiduciary accounts. The
Investment Adviser, organized in 1981, is owned by the members of Wayne
Hummer, a securities brokerage firm, which acts as Shareholder Service Agent
and Distributor for the Trust.
Subject to the general supervision of the Board of Trustees, the Investment
Adviser is responsible for management of the Trust's Funds and reviews the
holdings of the Funds in light of its own research analysis and information
from other relevant sources. The Investment Adviser determines the securities
to be purchased, held and sold by the Funds and places all orders.
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Thomas J. Rowland is the portfolio manager of the Growth Fund. Mr. Rowland,
a member of Wayne Hummer, joined Wayne Hummer in 1987. He serves as president
of both Wayne Hummer Management Company and the Trust. Prior to joining Wayne
Hummer, Mr. Rowland spent 14 years with CNA Financial Corporation as a
portfolio manager, research analyst and securities trader. In addition, he
spent five years with the trust department at Harris Trust & Savings Bank. He
received a BBA in finance from the University of Notre Dame and an MBA from
Northwestern University. He is a Chartered Financial Analyst, a Fellow of the
Financial Analysts Federation, a member of the Association for Investment
Management and Research, the Investment Analysts Society of Chicago, and the
Security Traders Association of Chicago.
David P. Poitras is the portfolio manager of the Income Fund. Mr. Poitras, a
member of Wayne Hummer, joined Wayne Hummer in 1985. He serves as vice
president of the Trust and President and portfolio manager of the Wayne Hummer
Money Fund Trust. He earned a Bachelor of Science degree in finance from
Northern Illinois University. He is a member of the Municipal Bond Club of
Chicago and the Bond Club of Chicago.
As compensation for its advisory and management services to the Trust, the
Investment Adviser receives an annual fee which is computed and accrued daily
and payable monthly. The Investment Adviser receives an annual fee of .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, and an annual fee of
.50 of 1% of the average daily net assets of the Income Fund 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 fees paid by the Growth Fund are higher than fees paid by most other
mutual funds, including funds with different investment objectives such as
money market funds. The Investment Adviser has agreed to waive its fees for a
particular Fund to the extent that such Fund's ordinary operating expenses
during any fiscal year exceed 1.5% of the average daily net assets of the
Fund. Expenses which are not subject to these limitations are interest, taxes,
brokerage commissions and extraordinary items. Wayne Hummer Management Company
bore all of the initial organizational costs of the Income Fund and all
expenses relating to the initial registration of the Income Fund's Shares.
Such costs and expenses up to $60,000 will be reimbursed by the Trust to Wayne
Hummer Management Company in twenty (20) equal quarterly installment payments,
the first installment of which became due on the ninetieth day next following
the day on which the Income Fund commenced investment operations and was paid
within such time period.
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
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.
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
each Fund, which is computed and accrued daily and payable monthly; 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 and 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 acts as the Distributor of the Trust's Shares and the
Shareholder Service Agent to provide 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, handling purchase orders and redemption requests, and
answering questions concerning the Trust and Shareholders' transactions with
the Trust. Wayne Hummer does not receive any compensation for its services as
the Trust's Distributor, though it may be reimbursed by the Trust for certain
out-of-pocket costs which it advances on behalf of the Trust in connection
with its services as Shareholder Service Agent such as postage, data entry,
stationery, and all external forms or other printed material. Any such
reimbursable expenses will be monitored for reasonableness by the Treasurer of
the Trust. Further information with respect to the management of the Trust is
contained in the Trust's Statement of Additional Information under "Management
of the Trust" and "Investment Advisory and Other Services."
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DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Trust distributes to Shareholders substantially all of its net ordinary
income and any net capital gains realized from the sale of portfolio
securities. The Growth Fund normally declares ordinary income dividends in
April, July, October and December. The Income Fund normally declares ordinary
dividends monthly. Net realized capital gains for both Funds, if any, will be
paid in late April and December.
Dividends and capital gains distributions are automatically reinvested in
Fund Shares at net asset value on the payable date, without a sales charge,
unless the Shareholder instructs otherwise. Such instructions take effect
within 10 days after they are received in writing by Wayne Hummer. Dividends
are taxable to Shareholders whether they are received in cash or reinvested in
additional Shares, as described below.
TAXES
Each Fund intends to continue to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). If so
qualified, a Fund will not be subject to federal income tax on its net
investment income and net realized capital gains distributed to Shareholders.
Dividends paid by the Funds from their net investment income and
distributions of the Fund's net realized capital gains are taxable to
Shareholders whether they are paid in cash or are reinvested in additional
Shares. For federal income tax purposes, distributions of net investment income
and net short-term capital gains are taxable to Shareholders as ordinary
income, while distributions of long-term capital gains are taxable to
Shareholders as long-term capital gains regardless of the length of time the
Shareholder has held Shares of a Fund. Under current law, long-term capital
gains received by corporations are taxed at the same rates as ordinary income;
long-term capital gains received by individuals are taxed at a maximum rate of
28%.
Dividends and distributions declared by the Funds 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 as paid for federal income tax
purposes on December 31 of the calendar year in which declared. A portion of
the ordinary income dividends paid by the Growth Fund are expected to be
eligible for the dividends-received deduction available to corporate
Shareholders. Only a small portion, if any, of the ordinary income dividends
paid by the Income Fund are expected to qualify for the dividends-received
deduction. Capital gains distributions are not eligible for the dividends-
received deduction. Not later than 60 days after the Trust's fiscal year end,
the Trust will send to its Shareholders a notice designating the amount of any
capital gain distributions, and for corporate Shareholders any distributions
eligible for the dividends-received deduction, which were made during such
year. Shareholders are advised to consult with their tax advisors concerning
their individual tax situations.
A dividend received shortly after the purchase of Shares reduces the net
asset value of the Shares by the amount of the dividend and, although in effect
a return of capital, will be taxable to the Shareholder. If the net asset value
of Shares were reduced below the Shareholder's cost by dividends representing
gains realized on sales of securities, such distributions would be a return of
investment though taxable as stated above.
Any unlisted security for which last sale information is not regularly
reported, any listed debt security which has an inactive listed market for
which over-the-counter market quotations are not readily available and all
other securities and assets are valued for each particular Fund by appraisal at
its fair value 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 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.
The Trust may suspend the determination of net asset value and the processing
of orders, the payment of redemption proceeds and postpone the date of payment
for redeemed Shares for more than seven days under the following unusual
circumstances: when the New 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.
LOGO
<PAGE>
The Funds are required by law to withhold federal income tax at a rate of 31%
from taxable distributions and redemption proceeds paid to Shareholders who do
not furnish their correct taxpayer identification number (in the case of
individuals, their social security number) and in certain other circumstances.
PERFORMANCE INFORMATION
GROWTH AND INCOME FUNDS. From time to time, in advertisements or reports to
shareholders, each Fund may compare its performance to that of the Consumer
Price Index or various unmanaged indexes such as the Dow Jones Industrial
Average, the Standard & Poor's 500, the Russell Mid-Cap Index, the Lehman
Brothers Bond Indices and the Merrill Lynch Bond Indices. Such Fund may also
quote mutual fund quotation services, such as Lipper Analytical Services, Inc.
or similar industry services, or industry publications such as Morningstar,
Inc., Wall Street Journal, Investor's Daily, Forbes, Barron's, The Chicago
Tribune, USA Today, Institutional Investor and Registered Representative for
purposes of comparing their rank or performance to that of other mutual funds
having similar investment objectives. Performance comparisons should not be
considered representative of the future performance of the Fund.
Additionally, from time to time, a Fund may quote average annual total
return, total return and yield figures for its performance in advertisements
and other materials furnished to present or prospective Shareholders. Each of
these figures is based upon historical results and is not necessarily
representative of the future performance of the Fund.
Average annual total return and total return figures measure both the net
income generated by, and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments in the particular Fund for the
period in question, assuming the reinvestment of all dividends and
distributions during the period. Thus, these figures reflect the change in
value of an investment in such Fund during a specified period. Average annual
total return will be quoted for at least one-, five- and ten-year periods (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of such Fund) ending on a recent calendar quarter.
Average annual total return figures represent the compound annual percentage
change in the value of a specific dollar invested in such Fund's shares for the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the entire measurement period.
Yield is a measure of the net investment income per share earned over a
specific one-month or 30-day period expressed as a percentage of the particular
Fund's net asset value per share at the end of the period. Yield is expressed
as an annualized figure representing what such Fund's annual yield would be if
the Fund generated the same level of monthly net investment income over the
one-year period. Semi-annual compounding is assumed for the Income Fund.
The Funds' shares are sold at net asset value, and performance and net asset
value will fluctuate. Shares of each Fund are redeemable by an investor at the
then current net asset value, which may be more or less than original cost.
Please refer to the Statement of Additional Information under "Performance
Information" for further information concerning performance of a particular
Fund.
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 units of
beneficial interest ("Shares") in one or more separate series. Only two series
are currently established, which are designated as the "Growth Fund" and the
"Income Fund." Each Share of a Fund of the Trust is without par value,
represents a proportionate interest in that Fund equal to the proportionate
interest represented by each other Share in that Fund, and is entitled to such
dividends and distributions as are declared by the Trustees. Upon liquidation
of a Fund, Shareholders are entitled to share pro rata in the net assets of the
Fund available for distribution. Shares do not have cumulative voting rights
nor any preemptive or conversion rights. Shares when issued as described herein
are fully paid and nonassessable, except as expressly set forth below.
Certificates representing the Shares are not issued. State Street Bank and
Trust Company, the Trust's Transfer Agent, maintains a record of each
Shareholder's ownership. Shareholders will receive confirmations of all
purchases and sales of Trust Shares made for his or her account including
reinvestment of dividends or other distributions.
LOGO
<PAGE>
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 Trustees if a meeting is called for such purpose; (2) with
respect to the adoption of any contract for which approval is required by 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, if any,
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. Each Share
is entitled to one vote for each Trustee to be elected and one vote on each
other matter presented to Shareholders for a vote.
The Trust Agreement provides that on any matter submitted to a vote of the
Shareholders, all Shares entitled to vote, irrespective of Fund shall be voted
in the aggregate and not by Fund except if the Trustees have determined that
the matter affects only one Fund or as required by the Investment Company Act
of 1940. Thus, voting with respect to certain matters will be by Fund (such as
approval of the Investment Advisory and Management Agreement) and with respect
to other matters will be by all Shareholders without regard to Fund (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, the Trust Agreement provides that Shareholders of a
particular Fund will be entitled to reimbursement from the general assets of
that Fund. The Trust is covered by insurance which the Trustees consider
adequate to cover foreseeable tort claims. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote, since it is limited to circumstances in which the provisions limiting
liability are inoperative and the Trust itself is unable to meet its
obligations.
DETERMINATION OF NET ASSET VALUE
GROWTH AND INCOME FUNDS. The net asset value per Share for each Fund 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 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 amounts reimbursable
to the Shareholder Service Agent, are accrued daily.
In valuing the Growth Fund's 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 price is
between the closing bid and asked prices of the current day. If such last
reported sale price 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.
LOGO
<PAGE>
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.
Additional information concerning performance results of the Trust is
contained in the Annual and Semi-Annual Reports which are available upon
request without cost from the Trust.
LOGO
<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
----------------
<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>
i
<PAGE>
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.
- --------
(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.
B-1
<PAGE>
(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.
B-2
<PAGE>
(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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<PAGE>
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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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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<PAGE>
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
B-14
<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
- --------
(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.
B-15
<PAGE>
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
B-16
<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.
B-18
<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.
B-19
<PAGE>
TAXES
Please refer to information concerning taxes which is found in the
Prospectus under the heading "TAXES," which is incorporated herein by
reference. The following discussion relates to both Funds.
FEDERAL INCOME TAX
All distributions of net investment income and net short-term capital gains
will be taxable to Shareholders as ordinary income whether received in cash or
reinvested in additional Shares. Distributions of long-term capital gains,
whether received in cash or reinvested in additional Shares, will be taxable
to Shareholders as long-term capital gains, regardless of the length of time
the Shareholder has held Shares in a Fund. Under current law, ordinary income
distributions and capital gain distributions received by corporate
Shareholders will be taxed at the same rate. However, capital gain
distributions received by individual Shareholders will be taxed at a maximum
rate of 28%. Since distributions reduce net asset value, an investor
purchasing Shares shortly before a record date will, in effect, receive a
return of a portion of his or her investment in such distribution, but the
distribution will be taxable. If the net asset value of Shares is reduced by
distributions below a Shareholder's cost, such distributions would be taxable
even though constituting a return of investment. However, for federal income
tax purposes the Shareholder's original cost continues as the tax basis of the
Shares and on redemption his or her capital gain or loss generally is the
difference between the original cost and the redemption proceeds.
Any loss recognized on the disposition of Shares held for six months or less
will be treated as long-term capital loss to the extent that the Shareholder
has received any long-term capital gain distributions on such Shares.
A Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain
gains or losses, change the character of certain gains or losses, or alter the
holding periods of certain of the Fund's securities.
The mark-to-market rules of the Code may require a Fund to recognize
unrealized gains and losses on certain options and futures held by a Fund at
the end of the fiscal year. Under these provisions, 60% of any capital gain
net income or loss recognized will generally be treated as long-term and 40%
as short-term. In addition, the straddle rules of the Code would require
deferral of certain losses realized on positions of a straddle to the extent
that a Fund had unrealized gains in offsetting positions at year end.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution generally is the sum of 98% of a Fund's net investment income for
the calendar year plus 98% of its capital gain net income for the one-year
period ending October 31. Each Fund intends to declare or distribute dividends
during the calendar year in an amount sufficient to prevent imposition of the
4% excise tax.
Shareholders who are non-resident aliens are subject to U.S. withholding tax
on ordinary income dividends (whether received in cash or shares) at a rate of
30% or such lower rate as prescribed by an applicable tax treaty.
OTHER TAXES
The Trust may be subject to tax in certain states where it does business.
Further, in those states which have income tax laws, the tax treatment of the
Trust and of Shareholders may differ from federal income tax treatment.
Shareholders are advised to consult their own tax advisors regarding specific
questions as to federal, state or local taxes.
B-20
<PAGE>
INDEPENDENT AUDITORS
The Trust's independent auditors are Ernst & Young LLP, 233 South Wacker
Drive, Chicago, Illinois 60606, who audit and report on the Trust's annual
financial statements, review certain regulatory reports and the Trust's
federal income tax return, and perform other professional accounting,
auditing, tax and advisory services when engaged to do so by the Trust. The
selection of independent auditors is subject to ratification by the Trust's
Shareholders when Shareholders' meetings are held.
CUSTODIAN AND TRANSFER AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as Custodian for the Trust's assets and as the
Trust's Transfer and Dividend Paying Agent.
The Custodian is responsible for holding all securities and cash of the
Trust, receiving and paying for securities purchased, receiving payment for
and delivering securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Trust, and
performing other administrative duties, all as directed by authorized persons.
The Custodian does not perform any advisory function in such matters as
purchase and sale of portfolio securities, payment of dividends, or payment of
expenses of the Trust. The Trust has authorized the Custodian to deposit
certain portfolio securities in central depository systems as permitted under
federal law. The Trust may invest in obligations of the Custodian and may
purchase or sell securities from or to the Custodian.
LEGAL COUNSEL
The law firm of Vedder, Price, Kaufman & Kammholz, Chicago, Illinois, acts
as legal counsel for the Trust. The law firm of Bell, Boyd & Lloyd, Chicago,
Illinois, acts as special counsel to those Trustees who are not interested
persons, as defined in the Investment Company Act of 1940, of the Trust.
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.
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT AUDITORS
The financial statements and the report of independent auditors contained in
the Growth Fund's and the Income Fund's annual report to Shareholders (each
entitled "Annual Financial Statements (Audited)") for the fiscal year ended
March 31, 1997, are incorporated herein by reference. The Trust's "Annual
Financial Statements (Audited)," unless previously received, must accompany
this Statement of Additional Information.
B-21
<PAGE>
Wayne
Hummer
Growth
Fund
Annual
Financial Statements
Audited
March 31, 1997
<PAGE>
Wayne
Hummer
Growth
Fund
[PHOTO]
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 hypothetical $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
</TABLE>
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.
<TABLE>
<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
[GRAPH APPEARS HERE]
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
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%
----------------------------------- -------------------------------------- -------------------------------------
</TABLE>
NOTE: The Russell Mid-Cap and the S&P 500 Indices are unmanaged and all returns
include reinvested dividends.
WAYNE HUMMER GROWTH FUND
VALUE OF INITIAL $10,000 INVESTMENT
(Thousands)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
$46,623 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
</TABLE>
.Value of Reinvested Capital Gains
.Value of Reinvested Dividends
.Net Asset Value
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.
1
<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.
2
<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
============
</TABLE>
See accompanying notes to financial statements.
3
<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 -- -- -- --
</TABLE>
See accompanying notes to financial statements.
4
<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 & Pharmaceuticals 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
</TABLE>
5
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
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
============
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.
</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.
6
<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.
7
<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
COUNCIL
Eustace K. Shaw ============================
==============================================================================
[LOGO]
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
Audited
March 31, 1997
<PAGE>
WAYNE
HUMMER
INCOME
FUND
[PHOTO]
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>
INVESTING IN BOND MUTUAL FUNDS
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.
<PAGE>
WAYNE HUMMER INCOME FUND VS.
MERRILL LYNCH DOMESTIC MASTER INDEX
AND MERRILL LYNCH CORPORATE AND GOVERNMENT INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
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
</TABLE>
<TABLE>
<CAPTION>
Income Fund Domestic Master Index Corporate and Government Index
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
</TABLE>
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.
PORTFOLIO HIGHLIGHTS
The chart below emphasizes the high quality of securities in the portfolio. The
average rating of our holdings is A.
PORTFOLIO QUALITY
[Pie Chart Appears Here]
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.
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
[Pie Chart Appears Here]
Less than 3 Years 12%
3-10 Years 71%
Over 10 Years 17%
1
<PAGE>
<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
==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended March 31,
OPERATIONS: 1997 1996
- ----------- ---- ----
<S> <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)
</TABLE>
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.
See accompanying notes to financial statements.
3
<PAGE>
<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
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (CONTINUED)
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
==========
</TABLE>
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.
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.
5
<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.
6
<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
COUNCIL
Eustace K. Shaw ============================
==============================================================================
[WH]
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)
7
<PAGE>
<PAGE>
PART C
WAYNE HUMMER INVESTMENT TRUST
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Index to Financial Statements:
1. Included in Part A of this Registration Statement:
(i) Condensed Financial Information for the Growth Fund -
Per Share Income and Capital Changes
(ii) Condensed Financial Information for the Income Fund -
Per Share Income and Capital Changes
2. Included in Part B of this Registration Statement through
incorporation by reference to the financial statements in each of
the Trust's annual reports to Shareholders for the fiscal year
ended March 31, 1997:
(i) Report of Independent Auditors
(ii) Statement of Assets and Liabilities at March 31, 1997
(iii) Statement of Operations for the year ended March 31,
1997
(iv) Statement of Changes in Net Assets for the years
ended March 31, 1997 and 1996
(v) Portfolio of Investments at March 31, 1997
(vi) Notes to Financial Statements
3. Included in Part C of this Registration Statement:
(i) Schedule I has been omitted as the required
information is presented in the Portfolio of
Investments at March 31, 1997
(ii) Schedules II, III, IV and V are omitted as the
required information is not present.
C-1
<PAGE>
(b) Exhibits:
1.(a) Agreement and Declaration of Trust
dated September 29, 1983 /1/
1.(b) Written Instrument Amending The
Agreement and Declaration of Trust
dated December 16, 1983 /1/
1.(c) Written Instrument Amending The
Agreement and Declaration of Trust
dated July 19, 1988 /1/
1.(d) Written Instrument Amending The
Agreement and Declaration of Trust
dated November 24, 1992 /1/
2. Amended and Restated By-laws /1/
3. Not applicable
4. Not applicable
5.(a) Investment Advisory and Management
Agreement dated April 29, 1988 /1/
5.(b) Amendment to Investment Advisory
and Management Agreement dated
November 24, 1992 /1/
6.(a) Distribution and Shareholder
Service Agreement /1/
6.(b) Distribution Agreement dated August 1,
1988 /1/
6(c) Acknowledgment and Consent of Assignment /2/
7. Not applicable
______________________________
* Filed herewith
/1/ Previously filed via EDGAR with Post-Effective Amendment No. 15 on or about
July 27, 1995 and incorporated herein by reference.
/2/ Previously filed with Post-Effective Amendment No. 16 on May 31, 1996 and
incorporated herein by reference.
C-2
<PAGE>
8.(a) Custodian Agreement /1/
8.(b) Amendments to Custodian Agreement dated
October 1987 /1/
8.(c) Amendments to Custodian Agreement dated
June 1988 /1/
8.(d) Amendment to Custodian Agreement
dated November 24, 1992 /1/
9.(a)(1) Transfer and Dividend Paying
Agency Agreement /1/
9.(a)(2) Amendment to Transfer and Dividend
Paying Agency Agreement dated November 24,
1992 /1/
9.(b) Trade Name and Service Mark
License Agreement /1/
9.(c) Shareholder Service Agreement dated
August 1, 1988 /1/
9.(d) Portfolio Accounting Services
Agreement /1/
10. Not applicable
*11.(a) Consent of Ernst & Young LLP
*11.(b) Representation of Vedder, Price,
Kaufman & Kammholz
12. Not applicable
13. Investment Letter from Wayne Hummer
Management Company to the Registrant /1/
14.(a) IRA Prototype Plan and Documents /1/
14.(b) SEP Prototype Plan and Documents /1/
C-3
<PAGE>
14.(c) Defined Contribution Prototype Plans
and Documents /1/
15. Not applicable
16. Computation of Performance Quotations /1/
*27. Financial Data Schedules
C-4
<PAGE>
Item 25. Persons Controlled By or Under Common Control with
--------------------------------------------------
Registrant
----------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
Number of Holders
Title of Class of Securities
-------------- -----------------
Growth Fund Portfolio Shares 5,267
Income Fund Portfolio Shares 888
(Information provided as of June 30,1997)
Item 27. Indemnification
---------------
The information required by this item is incorporated herein by reference
to Item 4 of Part II of Pre-effective Amendment No. 1 to the Form N-1
Registration Statement for Wayne Hummer Growth Trust (renamed Wayne Hummer
Investment Trust), File No. 2-87153, filed on or about December 29, 1983.
Item 28. Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Wayne Hummer Management Company, Registrant's investment adviser and
portfolio accounting agent, is a corporation organized under the laws of
Illinois on November 30, 1981. Wayne Hummer Management Company acts as
investment adviser and portfolio accounting agent to Wayne Hummer Money Fund
Trust, a registered investment company, and as investment adviser to other
institutional, corporate, fiduciary and individual accounts. Set forth below is
information as to any other business, vocation or employment of a substantial
nature in which each director or officer of the Registrant's investment adviser
is, or at any time during the past two fiscal years has been, engaged for his
own account or in the capacity of director, officer, employee, partner or
trustee:
<TABLE>
<CAPTION>
Name and
Affiliation with Name of Company and/or
Investment Adviser Principal Business Capacity
- -------------------- ------------------------ -------------
<S> <C> <C>
Harry Flagg Baum, Wayne Hummer Investments Voting Member
Director L.L.C., securities
brokerage firm
</TABLE>
C-5
<PAGE>
Name and
Affiliation with Name of Company and/or
Investment Adviser Principal Business Capacity
- -------------------- ------------------------ -------------
Steven R. Becker, Wayne Hummer Investments Voting Member
Director L.L.C., securities
brokerage firm
Wayne Hummer Money Trustee
Fund Trust
Registrant Trustee
G. Ted Becker, Wayne Hummer Investments, Voting Member
Treasurer L.L.C., securities
brokerage firm
Philip M. Burno, Wayne Hummer Investments Voting Member
Director L.L.C., securities
brokerage firm
Wayne Hummer Money Chairman of
Fund Trust the Board of
Trustees
Registrant Chairman of
the Board of
Trustees
Philip Wayne Hummer, Wayne Hummer Investments Voting Member
C-6
<PAGE>
Name and
Affiliation with Name of Company and/or
Investment Adviser Principal Business Capacity
- -------------------- ------------------------ -------------
Chairman and L.L.C., securities
Director brokerage firm
David P. Poitras, Wayne Hummer Investments Voting Member
Vice President L.L.C., securities
brokerage firm
Wayne Hummer Money Fund President
Trust, registered
investment company
Registrant Vice President
William A. Rogers, Wayne Hummer Investments Voting Member
Secretary and L.L.C., securities
Director brokerage firm
Thomas J. Rowland, Wayne Hummer Investments Voting Member
President L.L.C., securities
brokerage firm
Registrant President
Mark H. Dierkes Wayne Hummer Investments Employee
Vice President L.L.C., securities
brokerage firm
Damaris E. Martinez Wayne Hummer Investments Employee
Vice President L.L.C., securities
brokerage firm
The principal business address of each company or other entity named above
is 300 South Wacker Drive, Chicago, Illinois 60606.
Item 29. Principal Underwriters
----------------------
(a) Wayne Hummer, the Registrant's distributor, also acts as distributor
of Wayne Hummer Money Fund Trust.
(b) The members of Wayne Hummer are:
C-7
<PAGE>
Positions and Positions and
Offices with Offices with
Name Wayne Hummer Registrant
---- -------------- -------------------
William B. Hummer Voting Member None
Philip Wayne Hummer Voting Member None
Harry Flagg Baum Voting Member None
Robert H. Chase Class D Member None
William A. Rogers Voting Member None
Robert F. Kahlfeldt Voting Member None
Philip M. Burno Voting Member Chairman of the
Board of Trustees
Joseph A. Piekarczyk Voting Member None
G. Ted Becker Voting Member None
Steven R. Becker Voting Member Trustee
W. Douglas Carroll Voting Member None
Richard J. Kosarek Voting Member None
Raymond L. Kratzer Voting Member None
Jean E. Williams Voting Member None
C-8
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name Wayne Hummer Registrant
---- -------------- -------------------
<S> <C> <C>
George E. Barnes Class C Member None
Family Trust
Thomas J. Rowland Voting Member President
Linda C. Becker Voting Member None
Laura A. Kogut Voting Member None
David P. Poitras Voting Member Vice President
Richard Wholey, Jr. Voting Member None
Peder H. Culver Voting Member None
Daniel G. Hack Voting Member None
Ronald A. Tyrpin Voting Member None
</TABLE>
The principal business address of each Member listed above is 300 South
Wacker Drive, Chicago, Illinois 60606. George E. Barnes, grantor of the Family
Trust, was a founding partner of Wayne Hummer & Co., was a General Partner until
April 1, 1986 and had been a limited partner from April 1986 through April 1996.
Mr. Barnes, whose address is 46-730 Amir Drive, Palm Desert, California 92260,
was formerly a Trustee of Registrant. Robert H. Chase, whose address is 1246
Nicolet Circle, Appleton, Wisconsin 54915, was a General Partner of Wayne Hummer
& Co. until December, 1991 and had been a limited partner from December 1991
through April 1, 1996.
C-9
<PAGE>
(c) Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books and other documents required to be maintained pursuant
to Section 31(a) of the Investment Company Act of
1940 and the Rules promulgated thereunder are in the physical possession of:
Registrant's investment adviser, Wayne Hummer Management Company; Registrant's
distributor and shareholder service agent, Wayne Hummer; and Registrant's
transfer and dividend paying agent and custodian, State Street Bank and Trust
Company. The address of Wayne Hummer Management Company and of Wayne Hummer is
300 South Wacker Drive, Chicago, Illinois 60606. The address of State Street
Bank and Trust Company is 225 Franklin Street, Boston, Massachusetts 02110.
Item 31. Management Services
-------------------
Not Applicable.
Item 32. Undertakings
------------
Not Applicable.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Chicago and State of Illinois on 21st day of
July, 1997.
WAYNE HUMMER INVESTMENT TRUST
By /s/ Thomas J. Rowland
----------------------------------
Thomas J. Rowland, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on July 21, 1997 by the following
persons in the capacities indicated.
Signature Title
- ------------------------------ -----
/s/ Thomas J. Rowland President
- ------------------------------
Thomas J. Rowland
/s/ Jean M. Maurice Treasurer
- ------------------------------
Jean M. Maurice
/s/ Steven R. Becker Trustee
- ------------------------------
Steven R. Becker
/s/ Philip M. Burno Trustee
- ------------------------------
Philip M. Burno
/s/ Joel D. Gingiss Trustee
- ------------------------------
Joel D. Gingiss
/s/ Patrick B. Long Trustee
- ------------------------------
Patrick B. Long
/s/ Eustace K. Shaw Trustee
- ------------------------------
Eustace K. Shaw
/s/ Charles V. Doherty Trustee
- ------------------------------
Charles V. Doherty
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
- -------
1.(a) Agreement and Declaration of Trust
dated September 29, 1983 /1/
1.(b) Written Instrument Amending The
Agreement and Declaration of Trust
dated December 16, 1983 /1/
1.(c) Written Instrument Amending The
Agreement and Declaration of Trust
dated July 19, 1988 /1/
1.(d) Written Instrument Amending
The Agreement and Declaration of
Trust dated November 24, 1992. /1/
2. Amended and Restated By-laws /1/
3. Not applicable
4. Not applicable
5.(a) Investment Advisory and Management
Agreement dated April 29, 1988 /1/
5.(b) Amendment to Investment
Advisory and Management Agreement
dated November 24, 1992 /1/
6.(a) Distribution and Shareholder
Service Agreement /1/
6.(b) Distribution Agreement dated August 1,
1988 /1/
*6.(c) Acknowledgement and Consent of Assignment /2/
7. Not applicable
8.(a) Custodian Agreement /1/
8.(b) Amendments to Custodian Agreement
dated October 1987 /1/
8.(c) Amendments to Custodian
Agreement dated June 1988 /1/
8.(d) Amendment to Custodian
Agreement dated November 24, 1992
9.(a)(1) Transfer and Dividend Paying
Agency Agreement /1/
9.(a)(2) Amendment to Transfer and
Dividend Paying Agency Agreement
dated November 24, 1992
9.(b) Trade Name and Service Mark
License Agreement /1/
9.(c) Shareholder Service Agreement
dated August 1, 1988 /1/
9.(d) Portfolio Accounting Services
Agreement /1/
10. Not applicable
*11.(a) Consent of Ernst & Young LLP
*11.(b) Representation of Vedder, Price, Kaufman and Kaummholz
12. Not applicable
13. Investment Letter from Wayne Hummer
Management Company to the Registrant /1/
14.(a) IRA Prototype Plan and Documents /1/
14.(b) SEP Prototype Plan and Documents /1/
14.(c) Defined Contribution Prototype Plans
and Documents /1/
15. Not applicable
16. Computation of Performance Quotations /1/
*27. Financial Data Schedules
__________________________________
/1/ Previously filed via EDGAR with Post-Effective Amendment
No. 15 on or about July 27, 1995.
/2/ Previously filed with Post-Effective Amendment No. 16
on or about May 31, 1996.
<PAGE>
Exhibit 11(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial Highlights
for the Growth Fund," "Financial Highlights for the Income Fund," and
"Independent Auditors" and to the use of our reports dated May 2, 1997 relating
to the Wayne Hummer Growth Fund and Wayne Hummer Income Fund in the Registration
Statement (Form N-1A) and their incorporation by reference in the related
Prospectus and Statement of Additional Information of Wayne Hummer Investment
Trust, filed with the Securities and Exchange Commission in this Post-Effective
Amendment No. 17 to the Registration Statement under the Securities Act of 1933
(Registration No. 2-87153) and in this Amendment No. 17 to the Registration
Statement under the Investment Company Act of 1940 (Registration No.
811-3880).
/S/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
July 21, 1997
<PAGE>
Exhibit 11(b)
July 23, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Wayne Hummer Investment Trust
To the Commission:
We are counsel to the above-referenced investment company (the "Fund") and
as such have participated in the preparation and review of Post-Effective
Amendment No. 17 to the Fund's Registration Statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485, we hereby represent that such amendment does not contain
disclosures that would render it ineligible to become effective pursuant to
paragraph (b) thereof.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By /s/ Robert J. Moran
------------------------------
Robert J. Moran
RJM/cy
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> WAYNE HUMMER GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 64,503,522
<INVESTMENTS-AT-VALUE> 104,028,097
<RECEIVABLES> 195,550
<ASSETS-OTHER> 90,330
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 104,313,977
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99,499
<TOTAL-LIABILITIES> 99,499
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,727,226
<SHARES-COMMON-STOCK> 3,718,059
<SHARES-COMMON-PRIOR> 3,891,462
<ACCUMULATED-NII-CURRENT> 192,933
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,769,744
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39,524,575
<NET-ASSETS> 104,214,478
<DIVIDEND-INCOME> 1,899,940
<INTEREST-INCOME> 108,484
<OTHER-INCOME> 0
<EXPENSES-NET> 1,013,203
<NET-INVESTMENT-INCOME> 995,221
<REALIZED-GAINS-CURRENT> 4,861,756
<APPREC-INCREASE-CURRENT> 5,425,276
<NET-CHANGE-FROM-OPS> 11,282,253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,127,423
<DISTRIBUTIONS-OF-GAINS> 3,830,121
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,813,237
<NUMBER-OF-SHARES-REDEEMED> 15,327,845
<SHARES-REINVESTED> 4,796,167
<NET-CHANGE-IN-ASSETS> (4,718,441)
<ACCUMULATED-NII-PRIOR> 325,135
<ACCUMULATED-GAINS-PRIOR> 2,738,109
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 817,835
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,013,203
<AVERAGE-NET-ASSETS> 102,442,545
<PER-SHARE-NAV-BEGIN> 26.37
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 2.69
<PER-SHARE-DIVIDEND> .29
<PER-SHARE-DISTRIBUTIONS> 1.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.03
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> WAYNE HUMMER INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 22,031,822
<INVESTMENTS-AT-VALUE> 21,556,935
<RECEIVABLES> 448,804
<ASSETS-OTHER> 143,826
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,149,565
<PAYABLE-FOR-SECURITIES> 96,293
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,800
<TOTAL-LIABILITIES> 151,093
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,535,117
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<REALIZED-GAINS-CURRENT> (141,101)
<APPREC-INCREASE-CURRENT> (312,194)
<NET-CHANGE-FROM-OPS> 1,037,598
<EQUALIZATION> 0
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<NET-CHANGE-IN-ASSETS> (3,400,139)
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<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 23,841,352
<PER-SHARE-NAV-BEGIN> 14.95
<PER-SHARE-NII> .92
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<PER-SHARE-NAV-END> 14.66
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
