SUMMIT INVESTMENT TRUST, 485BPOS, 1996-10-01

SUMMIT INVESTMENT TRUST
485BPOS, 1996-10-01

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<PAGE> 1

As filed with the U.S. Securities and Exchange Commission on September 30, 1996

Registration No. 33-76250
File No. 811-8406

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
--
Post-Effective Amendment No. 5 (X)

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 7

(Check appropriate box or boxes.)

SUMMIT INVESTMENT TRUST
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

3435 Stelzer Road, Columbus, OH 43219
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)(Zip Code)

(800) 272-3442
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)

Scott A. Englehart
Craig C. Rudesill
Summit Investment Trust
3435 Stelzer Road
Columbus, OH 43219
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)

Copy to:
Bruce G. Leto, Esq.
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square, Suite 2600
Philadelphia, PA 19103
(215) 564-8115

It is proposed that this filing will become effective (check appropriate box):

Immediately upon filing pursuant to paragraph (b)
- --
X On October 1, 1996 pursuant to paragraph (b)
- --
60 days after filing pursuant to paragraph (a)(1)
- --
On (__________________) pursuant to paragraph (a)(1)
- --
75 days after filing pursuant to paragraph (a)(2)
- --
On (__________________) 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.
Registrant has previously registered an indefinite number of shares of common
stock of the Summit Investment Trust under the Securities Act of 1933 pursuant
to Rule 24f-2 under the Investment Company Act of 1940, as amended. Registrant
filed a Notice pursuant to Rule 24f-2 for the fiscal period ended May 31, 1996
on July 24, 1996.
TOTAL PAGES: _____
INDEX TO EXHIBITS, PAGE: _____

<PAGE> 2

SUMMIT INVESTMENT TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481(a)

This Amendment to the Registration Statement of SUMMIT INVESTMENT TRUST, which
consists of one portfolio, Summit High Yield Fund, which offers two classes of
shares, Summit High Yield Shares and Summit High Yield Institutional Service
Shares, is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

<TABLE>
<CAPTION>
ITEM PROSPECTUS HEADING
NO. (RULE 495(c) CROSS REFERENCE)
- ---- -----------------------------
<S> <C> <C>
1. Cover Page. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD INSTITUTIONAL
SERVICE SHARES: Cover Page.

2. Synopsis. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD INSTITUTIONAL
SERVICE SHARES: About the Summit High Yield Fund ---
Transaction Costs and Fund Expenses.

3. Condensed Financial Information. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: About the Summit High
Yield Fund --- Financial Highlights; About the Summit High
Yield Fund --- Fund and Market Characteristics/Risk
Factors; The Trust and the Fund --- Understanding
Performance Information.

4. General Description of Registrant. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD INSTITUTIONAL
SERVICE SHARES: The Trust and the Fund --- Organization of
the Trust and the Fund; Investment Policies, Practices and
Risks; About the Summit High Yield Fund --- Fund and Market
Characteristics/Risk Factors.

5. Management of the Fund. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD INSTITUTIONAL
SERVICE SHARES: The Trust and the Fund --- Management of the
Trust and the Fund; The Trust and the Fund ---
Management-Related Services; The Trust and the Fund --- Fund
Expenses; The Trust and the Fund --- Distribution Expenses.

6. Capital Stock and Other Securities. SUMMIT HIGH YIELD SHARES: The Trust and the Fund
--Organization of the Trust and the Fund; The Trust and the
Fund --- Management of the Trust and the Fund; Investing
with Summit Investment Trust --- Distributions and Taxes;
Investing with Summit Investment Trust --- Obtaining
Information on Your Investment.

SUMMIT HIGH YIELD INSTITUTIONAL SERVICE SHARES: The Trust
and the Fund --- Organization of the Trust and the Fund; The
Trust and the Fund --- Management of the Trust and the Fund;
Investing with Summit Investment Trust --Distributions and
Taxes; Investing with Summit Investment Trust --- Obtaining
Information on Your Investment; Investing with Summit
Investment Trust --- Other Classes of Shares.
</TABLE>

<PAGE> 3

PROSPECTUS
SUMMIT HIGH YIELD FUND

SUMMIT HIGH YIELD SHARES CLASS

SUMMIT INVESTMENT TRUST - 3435 STELZER ROAD - COLUMBUS, OHIO 43219 -
1-800-272-3442

Summit Investment Trust (the "Trust") is organized as an open-end,
management investment company (a mutual fund). The Trust is authorized to
provide a range of investment objectives through a series of separate investment
portfolios or funds. This prospectus relates to the Summit High Yield Shares
class ("Shares") of the SUMMIT HIGH YIELD FUND (the "Fund"), a diversified
investment portfolio of the Trust. The Fund also offers, by means of a separate
prospectus, an institutional class of shares. The Fund is the only Trust
portfolio currently available.

FACTS AT A GLANCE
INVESTMENT OBJECTIVES:
High current income with capital appreciation a secondary goal. As with any
mutual fund, there is no assurance that the Fund will achieve its
objectives.

STRATEGY:
Investing primarily in lower-quality, intermediate to long-term corporate
bonds, often called "high yield" or "junk" bonds. The portfolio will be
actively managed to take advantage of relative values of various issuers and
industry sectors of the high yield market. Emphasis will be given to issuers
and sectors whose credit fundamentals and technical trading factors provide
attractive risk reward characteristics.

RISKS OF JUNK BONDS:
The Fund may invest up to 100% of its assets in lower-rated, or "junk"
bonds, that entail greater risks, including default risks, than those found
in higher-rated securities. The Fund may also invest in lower-rated foreign
debt securities that entail special additional risks. Investors should
carefully consider these risks before investing. See "Risk Factors," "Fund
and Market Characteristics/Risk Factors," "Foreign Sovereign Debt
Securities" and "Foreign Securities" in this prospectus and "Special Risks
of Investing in 'Junk Bonds'," "Foreign Sovereign Debt Securities" and
"Foreign Securities" in the Combined Statement of Additional Information. An
investment in the Fund should be considered speculative.

INVESTOR PROFILE:
A risk-oriented investor seeking the highest level of current income, paid
monthly, who is willing to accept the possibility of significant
fluctuations in principal value. The Fund should represent only a portion of
such an investor's overall investment program, not the only investment. When
sold, Fund shares may be worth more or less than when purchased.

FEES AND CHARGES:
Shares are offered to the public at their net asset value plus a front end
sales charge of 4.50%, reduced on investments of $100,000 or more, subject
to certain discounts and exceptions. The Fund pays various advisory, service
and distribution fees.

INVESTMENT ADVISER/FUND ADMINISTRATOR:
First Summit Capital Management ("FSCM" or the "Adviser") is the investment
adviser to the Fund. The Administrator of the Fund is BISYS Fund Services,
Limited Partnership ("BISYS Fund Services" or the "Administrator").
------------------------

Shares of the Trust are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation or any other government agency. An investment in
the Fund involves investment risk, including the possible loss of principal.
------------------------

This prospectus sets forth information you should know before making an
investment decision. You should read this prospectus and keep it for future
reference. A Combined Statement of Additional Information about the Fund, dated
October 1, 1996, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference in this prospectus. To obtain a free
copy, write the Trust at the above address or call 1-800-272-3442.

The Fund also offers an additional class of shares, the Summit High Yield
Institutional Service Shares, which is designed for purchase by institutional
investors. A prospectus for the Summit High Yield Institutional Service Shares
class can be obtained by writing to BISYS Fund Services at the above address or
by calling the above telephone number.
------------------------

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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October 1, 1996.
<PAGE> 4

RISK FACTORS -- SPECIAL SUMMARY

SPECIAL RISKS OF INVESTING IN "JUNK BONDS"

The Fund may invest up to 100% of its assets in lower-rated or "junk" bonds
that entail greater risks, including default risks, than those found in
higher-rated securities. The following special considerations are additional
risk factors associated with the Fund's investments in lower-rated debt
securities known as "junk bonds":

YOUTH AND GROWTH OF THE LOWER-RATED DEBT SECURITIES MARKET. The market for
lower-rated debt securities is relatively new and its growth has paralleled a
long economic expansion. Past experience may not, therefore, provide an accurate
indication of future performance of this market, particularly during periods of
economic recession. An economic downturn or increase in interest rates is likely
to have a greater negative effect on this market, the value of lower-rated debt
securities in the Fund's portfolio, the Fund's net asset value and the ability
of the bonds' issuers to repay principal and interest, meet projected business
goals and obtain additional funding, than on higher-rated securities. These
circumstances also may result in a higher incidence of defaults than with
respect to higher-rated securities. An investment in the Fund is more
speculative than investment in shares of a fund which invests only in
higher-rated debt securities.

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. The prices of
lower-rated debt securities may be more sensitive to adverse economic changes or
corporate developments than higher-rated investments. Debt securities with
longer maturities, which may have higher yields, may increase or decrease in
value more than debt securities with shorter maturities. Market prices of
lower-rated debt securities structured as zero-coupon or pay-in-kind securities
are affected to a greater extent by interest rate changes and may be more
volatile than securities which pay interest periodically and in cash. Where it
deems it appropriate and in the best interests of Fund shareholders, the Fund
may incur additional expenses to seek recovery on a debt security on which the
issuer has defaulted and to pursue litigation to protect the interests of
security holders of its portfolio companies.

LIQUIDITY AND VALUATION. Because the market for lower-rated securities may
be thinner and less active than for higher-rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Non-rated securities are usually not as attractive to as many buyers as
rated securities are, a factor which may make non-rated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by the Fund and may also limit the ability of the
Fund to sell such securities at their fair value either to meet redemption
requests or in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-rated debt securities,
especially in a thinly-traded market. To the extent the Fund owns or may acquire
illiquid or restricted lower-rated securities, these securities may involve
special registration responsibilities, liabilities and costs, and liquidity and

2
<PAGE> 5

valuation difficulties. Changes in values of debt securities which the Fund owns
will affect its net asset value per share. If market quotations are not readily
available for the Fund's lower-rated or non-rated securities, these securities
will be valued by a method that the Board of Trustees (the "Trustees") believes
accurately reflects fair value. Judgment plays a greater role in valuing
lower-rated debt securities than with respect to securities for which more
external sources of quotations and last sale information are available.

TAXATION. Special tax considerations are associated with investing in
lower-rated debt securities structured as zero-coupon or pay-in-kind securities.
The Fund accrues income on these securities prior to the receipt of cash
payments. The Fund must distribute substantially all of its income to its
shareholders to qualify for pass-through treatment under the tax laws and may,
therefore, have to dispose of its portfolio securities to satisfy distribution
requirements.

PAYMENT EXPECTATIONS. High yielding, fixed-income securities frequently
have call or buy-back features which permit an issuer to call or repurchase the
securities from the Fund. Although such securities are typically not callable
for a period from three to five years after their issuance, if a call were
exercised by the issuer during periods of declining interest rates, the Fund
would likely have to replace such called securities with lower-yielding
securities, thus decreasing the net investment income to the Fund and dividends
to shareholders. The premature disposition of a high yielding security due to a
call or buy-back feature, the deterioration of the issuer's creditworthiness, or
a default may also make it more difficult for the Fund to manage the timing of
its receipt of income, which may have tax implications.

LEGISLATIVE PROPOSALS. There are a variety of legislative actions which
have been taken or which are considered from time to time by the United States
Congress which could adversely affect the market for high yield bonds. For
example, congressional legislation limited the deductibility of interest paid on
certain high yield bonds used to finance corporate acquisitions. Also,
Congressional legislation has, with some exceptions, generally prohibited
federally-insured savings banks from investing in high yield securities.
Regulatory actions have also effected the high yield market. For example, many
insurance companies have restricted or eliminated their purchases of high yield
bonds as a result of, among other factors, actions taken by the National
Association of Insurance Commissioners. If similar legislative and regulatory
actions are taken in the future, they could result in further tightening of the
secondary market for high yield issues, could reduce the number of new high
yield securities being issued and could make it more difficult for the Fund to
attain its investment objectives.

OTHER RISKS

The Fund may invest in derivative securities, such as mortgage-backed and
asset-backed securities and options and futures contracts. For risks relating to
investing in foreign securities and futures contracts and options, see "Fund and
Market Characteristics/Risk Factors," "Foreign Sovereign Debt Securities" and
"Foreign Securities" in this prospectus, and "Special Risks of Investing in
'Junk Bonds'," "Foreign Sovereign Debt Securities" and "Foreign Securities" in
the Combined Statement of Additional Information. Risks associated with certain
investment policies are discussed in the prospectus under the caption
"Investment Policies, Practices and Risks." The Fund and the Adviser were
organized in 1994.

3
<PAGE> 6

1. ABOUT THE SUMMIT HIGH YIELD FUND

TRANSACTION COSTS AND FUND EXPENSES

Shares are sold subject to a sales charge, Rule 12b-1 distribution fees and
the other expenses of the Fund's operation as set forth in the following table:

FEE TABLE

HIGH YIELD SHARES CLASS TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)................................................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)................................... None
Redemption Fees (as a percentage of amount redeemed, if
applicable)..................................................... None
Exchange Fee...................................................... None
</TABLE>

ANNUAL HIGH YIELD SHARES CLASS OPERATING EXPENSES
(As percentage of average net assets)

<TABLE>
<S> <C>
Management Fees................................................... 0.35%(1)
12b-1 Fees........................................................ 0.25%
Other Administrative and Servicing Costs.......................... 1.00%
Total High Yield Shares Operating Expenses........................ 1.60%
</TABLE>

- ---------------

(1) This fee may vary between 0.35% and 1.15%; however, the Adviser has agreed
to waive a portion of its advisory fee so as to confine the Fund's total
expenses to 1.60%. (See "Management of the Trust and the Fund -- The
Advisory Fee.")

The foregoing Fee Table should help you understand the kinds of expenses
you will bear directly or indirectly as a Fund shareholder. "High Yield Shares
Class Transaction Costs" shows what you pay as direct costs in buying Shares in
the Fund. Because a portion of the 12b-1 fees is considered an asset-based sales
charge by the National Association of Securities Dealers, Inc. ("NASD"),
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the NASD. "Annual High Yield Shares Class
Operating Expenses" provides an estimate of how much it will cost to operate the
Shares for a year. These are costs paid indirectly by holders of the Shares
because they are deducted from the Fund's total assets before the daily share
price is calculated and before dividends and other distributions are made.

4
<PAGE> 7

EXAMPLE:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return whether or
not redeemed at the end of each time period:........ $ 61 $93 $ 128 $226
</TABLE>

The Example should not be considered a representation of past or future
expenses. Actual Fund expenses may be higher or lower than those shown.

The "Annual High Yield Shares Operating Expenses" set forth above are:

-- MANAGEMENT FEE: the percent of Fund assets paid to the Fund's
investment adviser; this fee is a performance fee which is based on the
performance of the Fund in relation to the change in the Salomon Brothers High
Yield Market Index; the fee may be as high as 1.15% or as low as .35% annually;
for the fiscal year ended May 31, 1996, the Fund paid a management fee of 0.27%,
absent waivers the Fund paid a management fee of .87%.

-- MARKETING OR DISTRIBUTION FEES: an annual charge ("12b-1 Fee") to
existing shareholders to defray the cost of selling Shares to new shareholders;
and

-- "OTHER" ADMINISTRATIVE EXPENSES: primarily the administration of the
Fund, the servicing of shareholder accounts, such as providing statements and
reports, disbursing dividends, and custodial services.

For further details on Fund expenses, see "Management of the Trust and the
Fund -- The Advisory Fee," "Management of the Trust and the Fund -- The
Sub-Advisory Fee," "Management-Related Services" and "Distribution Expenses."

5
<PAGE> 8
FINANCIAL HIGHLIGHTS

SUMMIT HIGH YIELD FUND

For a share of each class outstanding throughout each period.

HIGH YIELD
SHARES FOR THE
---------- PERIOD FROM
YEAR JUNE 27,
ENDED 1994 TO MAY
MAY 31, 31,
1996 1995(a)
---------- -------------
<S> <C> <C>
Net Asset Value, Beginning of Period.................. $ 10.11 $ 10.00
---------- -------------
INVESTMENT ACTIVITIES:
Net investment income............................... 1.01 0.83
Net realized and unrealized gains (losses) on
investments...................................... 0.95 0.11
---------- -------------
Total from Investment Activities............ 1.96 0.94
---------- -------------
DISTRIBUTIONS:
Net investment income............................... (1.01) (0.83)
Net realized gains.................................. (0.01) --
---------- -------------
Total Distributions......................... (1.02) (0.83)
---------- -------------
Net Asset Value, End of period........................ $ 11.05 $ 10.11
======== ==========
Total Return (excludes sales charges)................. 20.34% 9.97% (b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)................... $ 28,628 $27,676
Ratio of expenses to average net assets............. 1.60% 1.56% (c)
Ratio of net investment income to average net
assets........................................... 9.42% 9.13% (c)
Ratio of expenses to average net assets*............ 2.24% 1.61% (c)
Ratio of net investment income to average net
assets*.......................................... 8.78% 9.08% (c)
Portfolio turnover.................................. 187.61% 158.36%
</TABLE>

- ---------------

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.

(a) Period from commencement of operations.

(b) Not annualized.

6
<PAGE> 9

FUND AND MARKET CHARACTERISTICS/RISK FACTORS

WHAT IS A HIGH YIELD OR "JUNK" BOND?

A bond that is rated "Ba" or lower by Moody's, "BB" or lower by Standard &
Poor's, or comparably rated by another rating agency ("NRSRO") (or an unrated
bond of similar quality), because it is believed to represent greater risk of
default than more creditworthy bonds -- hence the term "junk bond." (Default is
the failure to make timely interest or principal payments.) To compensate an
investor for this risk, these bonds must offer high yields. The market for high
risk, high yield debt securities is relatively new and its growth has paralleled
a long economic expansion. Past experience may not, therefore, provide an
accurate indication of future performance of this market, particularly during
periods of economic recession. An investment in the Fund is more speculative
than investment in a fund investing only in higher-rated debt securities.

The debt security ratings of several NRSROs are set forth in Appendix I to
this prospectus.

WHO ISSUES HIGH YIELD BONDS?

Typically, corporations in one of several categories: small and medium-size
companies that lack the history or capital strength to merit "investment-grade"
status; former blue-chip companies that have been downgraded due to financial
difficulties; companies electing to borrow heavily to finance (or avoid) a
takeover or buyout; and highly indebted ("leveraged") companies seeking to
refinance their debt at lower rates. With high yield securities, there is a
greater possibility of a default or the bankruptcy of the issuer, circumstances
that might increase the expense of the Fund in seeking recovery from such an
issuer.

DOES THE FUND INVEST ONLY IN HIGH YIELD BONDS?

No, but such bonds will generally represent a significant portion of the
Fund's assets. The portfolio may also include loan participations, convertible
securities -- preferred stocks and bonds which may be converted at some future
point into common stock -- and substantial holdings of foreign securities. When,
in the opinion of the Adviser, market or economic conditions warrant a temporary
defensive posture, the Fund may place all or a portion of its assets in high
grade, fixed-income securities, short-term debt obligations or cash.

WHY SHOULD THE INVESTOR IN THIS FUND BE PREPARED FOR GREATER PRICE SWINGS THAN
IN HIGH QUALITY BOND FUNDS?

For two main reasons:

Greater credit risk. Companies issuing high yield bonds are not as strong
financially as those with higher credit ratings and their bonds are often viewed
as speculative investments. High yield bond issuers are more vulnerable to real
or perceived business setbacks and to changes in the economy, such as a
recession or an increase in interest rates, that might impair their ability to
make timely interest and principal payments and thus adversely affect the value
of their securities held by the Fund. As a result, the Fund will rely heavily on

7
<PAGE> 10

proprietary credit research and experienced portfolio management when selecting
investments. (See "Management of the Trust and the Fund -- Portfolio Managers.")

Reduced market liquidity. The junk bond market is generally less "liquid"
than the market for higher quality bonds, meaning that there may be no public
market or only inactive trading markets for some of the securities in which the
Fund invests. Large purchases or sales of certain issues may thus cause
significant changes in their prices, and the Fund may be required to retain
certain investments for indefinite periods or sell them at substantial losses. A
lack of liquidity or low trading volume also means that judgement may play a
significant role in valuing the securities.

HOW MIGHT INTEREST RATES AND THE FUND'S AVERAGE MATURITY AFFECT ITS PRICE?

The Fund's average maturity (expected to be in the 5 to 10-year range,
although it may vary if market conditions warrant) makes its share price more
sensitive to broad changes in interest rate movements than shorter-term bond
funds. In comparison to higher quality bond funds having a similar average
maturity, the Fund's share price is likely to be more sensitive to credit
conditions and somewhat less sensitive to interest rate changes.

HOW DO SHARE PRICE CHANGES AFFECT OVERALL RETURN?

Your total return for any given period has two parts:

Income, which will always be positive, and

Change in share price, which can be positive or negative. If the Fund's
income return was 10% during a year, for example, and the price declined 15%,
your total return would be approximately -5%. A price increase of 5% would have
given you a return of approximately 15%. Always remember that the Fund's yield
does not indicate its total return. (Also see "Understanding Performance
Information.")

HOW DOES THE FUND ADDRESS THE SPECIAL RISKS OF HIGH YIELD BOND INVESTING?

The Fund employs a number of approaches which may mitigate, but cannot
eliminate, risk: (1) thorough credit research; (2) technical analysis of trading
and ownership patterns of targeted securities; (3) extensive diversification,
intended to limit the Fund's exposure to any one industry, issuer or category of
issuer or security; and (4) detailed analysis of contractual obligations to
lenders relating to specific securities.

2. INVESTMENT POLICIES, PRACTICES AND RISKS

8
<PAGE> 11

at a meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares. The Fund's OPERATING POLICIES can
be changed by the Trustees without shareholder approval. Unless otherwise
specified, the investment program and restrictions of the Fund are not
fundamental policies.

The Fund's investment program is subject to further restrictions and risks
described in the Fund's Combined Statement of Additional Information. Certain of
those restrictions are fundamental policies. Reference should be made to the
discussion under "Investment Restrictions" in the Combined Statement of
Additional Information.

TYPES OF PORTFOLIO SECURITIES

As an operating policy, the Fund seeks to meet its investment objectives of
high income and, secondarily, capital appreciation by investing its assets in a
widely diversified portfolio consisting primarily of high yield bonds, loan
participations, convertible securities and preferred stocks. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in high
yield securities. These and the other securities the Fund may purchase are
described below. The Fund is allowed to buy securities on a when-issued basis.

FUNDAMENTAL POLICY: The Fund will not purchase securities of any
issuer (other than obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities) if, as a result, it would own more than
10% of the outstanding voting securities of any issuer or have more than 5%
of its total assets invested in the securities of a single issuer, except
that up to 25% of the Fund's total assets may be invested without regard to
these restrictions.

DEBT SECURITIES.

BONDS. A bond is an interest-bearing debt security issued by a corporation
or governmental unit. The issuer has a contractual obligation to pay interest at
a stated rate on specific dates and to repay principal (the bond's face value)
on a specified date. An issuer may have the right to redeem or "call" a bond
before maturity, and the investor may have to reinvest the proceeds at lower
market rates.

While the bond's annual interest income, established by the coupon rate,
may be fixed for the life of the bond, its yield (income as a percent of current
price) will reflect current interest rate levels. The bond's price rises and
falls so that its yield remains reflective of current market conditions.
Therefore, bond prices usually rise when interest rates fall, and vice versa.
High yield bond prices are less directly responsive to interest rate changes
than investment-grade issues and may not always follow this pattern.

Bonds may be secured (backed by specified collateral) or unsecured (backed
by the issuer's general creditworthiness). Most high yield "junk" bonds are
unsecured.

Bond Ratings and High Yield Bonds. Larger bond issues are evaluated by
NRSROs such as Moody's and Standard & Poor's on the basis of the issuer's
ability to meet all required interest and principal payments. Other things being
equal, lower-rated bonds have higher yields due to greater risk. "High yield" or
"junk" bonds are those rated below "Baa" by Moody's or "BBB" by Standard &
Poor's.

9
<PAGE> 12

The table below shows the weighted average of the ratings of the bonds in
the Fund's portfolio during the fiscal year ended May 31, 1996. The credit
rating categories are those provided by Standard & Poor's. The percentages in
the column titled "Rated" reflect the percentage of bonds in the portfolio which
received a rating from at least one NRSRO. The percentages in the column titled
"Not Rated" reflect the percentage of bonds in the portfolio which are not rated
but which the Adviser has judged to be comparable in quality to the
corresponding rated bonds.

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL
MARKET VALUE OF BOND HOLDINGS
------------------------------
CREDIT RATING RATED NOT RATED TOTAL
------------- ----- --------- ------
<S> <C> <C> <C>
BB......................................... 7.02 % 0.00% 7.02%
B.......................................... 78.55% 0.00% 78.55%
CC & CCC................................... 12.63% 1.80% 14.43%
----- --------- ------
98.20% 1.80% 100.00%
===== ========= ======
</TABLE>

The debt security ratings of several NRSROs are set forth in Appendix I to
this prospectus.

Some specific types of bonds the Fund may hold from time to time are set
forth below. For additional information with respect to certain of these
instruments, reference should be made to the Combined Statement of Additional
Information.

MORTGAGE-BACKED OR ASSET-BACKED SECURITIES. The Fund may invest up to 10%
of its total assets in both mortgage-backed securities and asset-backed
securities. 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 Fund. Asset-backed
securities, which may be classified either as pass-through certificates or
collateralized obligations, represent fractional interests in pools of secured
or unsecured assets. Such assets are most often trade, credit card or automobile
receivables. The assets collateralizing such asset-backed securities are pledged
to a trustee or custodian for the benefit of the holders thereof. The 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. The actual prepayment experience of a pool of
mortgage loans or other obligations may cause the yield realized by the Fund to
differ from the yield calculated on the basis of the average life of the pool.
In addition, for mortgage-backed or asset-backed securities purchased at a
premium, the premium may be lost in the event of early prepayment which may
result in a loss to the Fund. The Fund may invest in asset-backed securities
that are either pass-through certificates or collateralized obligations. Such
securities may be of short duration, such as commercial paper, or longer, such
as bonds, and may be issued with only one class of security or have more than
one class with some classes having rights to payments on the asset-backed
security subordinate to the rights of the other classes. These subordinated
classes will take the risk of default before the classes to which they are
subordinated. It is anticipated that asset-backed securities other than those
described above will be issued in

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<PAGE> 13

the future. The Fund may invest in such securities in the future if such
investment is otherwise consistent with the Fund's investment objectives and
policies.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND STRIPPED MORTGAGE-BACKED
SECURITIES. CMOs are debt securities that are fully collateralized by a
portfolio of mortgages or mortgage-backed securities. CMOs generally are issued
in multiple classes. The principal of and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many ways.
The general goal sought to be achieved in allocating cash flows on the
underlying mortgages is to create tranches on which the expected cash flows have
a higher degree of predictability than the underlying mortgages. As part of the
process of creating more predictable cash flows on some of the tranches, one or
more tranches generally must be created that absorb most of the volatility in
the cash flows on the underlying mortgages. The yields on these tranches are
relatively higher than on tranches with more predictable cash flows. The Fund
may invest in these subordinated, higher-yielding tranches which take the risk
of default first. Because of the uncertainty of the cash flows on these
tranches, and the sensitivity thereof to changes in prepayment rates on the
underlying mortgages, the market prices of and yield on these tranches tend to
be highly volatile.

Stripped mortgage securities are created by separating the interest and
principal payments generated by a pool of mortgage-backed instruments to create
two classes of securities. One class receives interest-only payments ("IOs") and
one principal payments ("POs"). CMOs, IOs, and POs are acutely sensitive to
interest rate changes and the rate of principal prepayments on the underlying
mortgages serving as collateral. For example, declining interest rates may
result in prepayments and thus termination of a stream of IO interest payments,
in which event the Fund may fail to recoup its investment. Moreover, the
proceeds of prepayments may have to be reinvested at the lower interest rates.
IOs, POs, and certain CMOs are very volatile in price and may have reduced
liquidity.

ZERO-COUPON AND PAY-IN-KIND BONDS. The Fund may invest up to 25% of its
total assets in zero-coupon bonds. A zero-coupon security has no cash coupon
payments. Instead, the issuer sells the security at a substantial discount from
its maturity value. The interest received by the investor from holding this
security to maturity is the difference between the maturity value and the
purchase price. The advantage to the investor is that the reinvestment risk of
the income received during the life of the bond is eliminated. However,
zero-coupon bonds, like other bonds, retain interest rate and credit risk and
usually display more price volatility than securities that pay a cash coupon.
Since there are no periodic interest payments made to the holder of a
zero-coupon security, when interest rates rise, the value of such a security
will fall more dramatically than a bond paying out interest on a current basis.
When interest rates fall, however, zero-coupon securities rise more rapidly in
value because the bonds have locked in a specific rate of return which becomes
more attractive the further interest rates fall.

The Fund may invest up to 25% of its total assets in pay-in-kind bonds.
Pay-in-kind ("PIK") bonds are securities that pay interest in either cash or
additional securities, at the issuer's option, for a specified period. PIKs,
like zero-coupon bonds, are designed to give an issuer flexibility in managing
cash flow. PIK bonds can be either senior or subordinated debt and trade flat
(i.e., without accrued interest). The price of PIK bonds is expected to reflect
the market value of the underlying debt plus an amount representing accrued
interest since the last payment. PIKs are usually less volatile than zero-coupon
bonds, but more volatile than cash pay

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<PAGE> 14

securities. PIK bonds may provide an attractive yield on the Fund's investment
even when the interest paid is in the form of additional securities of the
issuer instead of cash.

The Fund is required to distribute to shareholders income imputed to any
zero-coupon or PIK investments. Such distributions could reduce the Fund's cash
position.

OTHER SECURITIES.

Other types of securities and investments the Fund may buy are:

CONVERTIBLES. These corporate securities, usually bonds or preferred
stocks, are exchangeable for a specified number of shares of common stock, at a
pre-stated price. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique characteristics such as: (1) higher
yields than common stocks but lower yields than comparable nonconvertible
securities; (2) a lesser degree of fluctuation in value than the underlying
stock since they have fixed income characteristics; and (3) the potential for
capital appreciation if the market price of the underlying stock increases.
Although investments in convertible securities will be consistent with the
Fund's secondary objective of capital appreciation, because of their basically
lower yields than comparable nonconvertible securities, such investments will
not be treated as "high yield" for purposes of the Fund's policy of generally
having 65% of its assets invested in high yield securities.

EQUITIES: COMMON AND PREFERRED STOCK; WARRANTS. Each share of common and
preferred stock represents ownership or "equity" in a corporation, but usually
only common stockholders have the right to elect company directors and vote on
other matters. Preferred stock may have various preferences over common stock,
such as a prior right to payment of dividends. Warrants are options to buy a
stated number of shares of common stock at a specified price at any time during
the life of the warrant, usually one or two years. The common and preferred
stocks in which the Fund may invest may be traded either on a national
securities exchange or in the "over-the-counter" market, and the issuers of such
stocks may be unseasoned issuers with relatively smaller capitalizations. Such
issuers may or may not have outstanding issues of higher-yielding debt
securities. As an OPERATING POLICY, the Fund may not invest more than 10% of
total assets in common stocks (including up to 5% in warrants).

PRIVATE PLACEMENTS. Securities sold directly to a small number of
investors, usually institutions, without registration under the Securities Act
of 1933 (the "1933 Act") are called private placements. Privately placed
securities are considered "restricted securities" and may not be readily
marketable. Selling these securities pursuant to a registration statement may
involve substantial delays and additional costs. As an OPERATING POLICY, the
Fund will not invest more than 15% of its net assets in illiquid securities.
Some restricted securities are eligible for purchase and sale under Rule 144A
under the 1933 Act. This rule permits "qualified institutional buyers," such as
the Fund, to trade in certain privately placed securities even though such
securities are not registered under the 1933 Act. The Trustees may determine,
when appropriate, that such securities, although restricted, are nevertheless
liquid and therefore not subject to the 15% limitation. A

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<PAGE> 15

security is illiquid if it cannot be sold or disposed of in the ordinary course
of business within seven days at approximately the value at which the Fund has
valued the investment.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Large loans to corporations or to
governments, including governments of less developed countries ("LDCs"), may be
shared or syndicated among several lenders, usually banks. The Fund's
investments in loans are expected in most instances to be in the form of
participations therein or assignments of all or a portion thereof from third
parties. In a participation, the Fund will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the lender
selling the participation and only upon its receipt of payments from the
borrower. As a result, the Fund may be subject to the credit risk of both the
borrower and the lender. In an assignment, the Fund acquires direct rights
against the borrower on a loan, although such rights may differ from and be more
limited than those held by the assigning lender. The Fund may have difficulty
disposing of assignments and participations where disposition involves assigning
such interests to third parties. These investments are treated as securities,
not as the making of loans subject to the Fund's investment restriction relating
to loans. Since these investments may not be readily marketable, they may be
subject to the Fund's policy against investing more than 15% of the Fund's net
assets in illiquid securities. Participations in or assignments of loans to
governments of LDCs may involve risks in addition to those attendant on
investments in foreign securities generally (see "Foreign Sovereign Debt
Securities" and "Foreign Securities" below).

FOREIGN SOVEREIGN DEBT SECURITIES. The Fund expects to invest in foreign
sovereign debt securities, including those of LDCs. Such securities will include
Brady Bonds. Brady Bonds are debt securities issued under the framework of the
Brady Plan, an initiative announced by U.S. Treasury Secretary Nicholas F. Brady
in 1989 as a mechanism for debtor nations to restructure their outstanding
external indebtedness. The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt, some or all of which may have
gone into default, for newly-issued bonds. Multilateral institutions such as the
International Bank for Reconstruction and Development (the "World Bank") and the
International Monetary Fund support the restructuring by providing funds
pursuant to loan agreements or other arrangements which enable the debtor nation
to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount. Under these arrangements, debtor nations have been required to agree
to the implementation of various domestic monetary and fiscal reforms intended
to promote economic growth and development. Investors should recognize that
Brady Bonds have been issued only recently, and accordingly do not have a long
payment history. Moreover, the financial packages offered by each country
differ. Countries that have issued or are about to issue Brady Bonds include
Argentina, Brazil, Costa Rica, the Dominican Republic, Mexico, Nigeria, the
Philippines, Poland, Uruguay and Venezuela. The Fund may purchase Brady Bonds
issued by any of these countries, and it reserves the right to acquire Brady
Bonds that may be issued by other countries in the future.

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<PAGE> 16

difficulties and extreme poverty and unemployment. Many of these countries are
also characterized by political uncertainty or instability. Additional factors
which may influence the ability or willingness to service debt include, but are
not limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the size of its debt service
burden relative to the economy as a whole, and its government's policy towards
the IMF, the World Bank and other international agencies.

Sovereign obligors in LDCs are among the world's largest debtors to
commercial banks, other governments, international financial organizations and
other financial institutions. Some of these obligors have in the past
experienced substantial difficulties in servicing their external debt
obligations, leading to defaults on certain obligations and the restructuring of
certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Holders of certain foreign sovereign debt securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that the Brady Bonds and other
foreign sovereign debt securities in which the Fund may invest will not be
subject to similar restructuring arrangements or to requests for new credit
which may adversely affect the Fund's holdings. Brady Bonds issued to date are
generally purchased and sold in secondary markets through U.S. securities
dealers and maintained through European transnational securities depositories.

FOREIGN SECURITIES. These are securities denominated in non-U.S. dollar
currencies that are issued and principally traded outside the U.S. Investments
in foreign securities broaden the Fund's holdings and thus may reduce the risk
of loss associated with a decline in the value of investments within U.S.
markets. They also involve some special risks: exposure to potentially adverse
local political and economic developments; nationalization or expropriation of
assets; imposition of currency exchange controls; the chance that fluctuations
in foreign exchange rates will decrease the investment's value (favorable
changes can increase its value); confiscatory taxation; potentially lower
liquidity and higher volatility and possible problems arising from accounting,
disclosure, settlement, and regulatory practices that differ from U.S.
standards. Additional risks pertain to investments in LDCs (see "Foreign
Sovereign Debt Securities" above) or in countries which have recently changed
from, but could revert back to, centrally-planned communist or closed economies.
As an OPERATING POLICY, the Fund may invest up to 20% of its net assets in
non-U.S. dollar-denominated fixed-income securities principally traded in
financial markets outside the United States and may invest without limit in U.S.
dollar-denominated securities of foreign issuers in developed countries. The
Fund may also invest in securities of foreign branches of U.S. banks as long as
such investments do not exceed 25% of the Fund's total assets.

WHEN-ISSUED SECURITIES. The Fund may from time to time purchase securities
on a "when-issued" basis ("forward commitments"). The price of such securities,
which may be expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment take place at a later date. Normally,
the settlement date occurs within 90 days of the purchase. During the period
between purchase and settlement, no payment is made by the Fund to the issuer,
and no interest accrues to the Fund. Forward commitments involve a risk of loss
if the value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in value of the Fund's
other assets. Such when-issued securities may be sold prior to the settlement
date. At the time the Fund makes the commitment to purchase a

14
<PAGE> 17

security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The Fund does not
believe that its net asset value or income will be adversely affected by its
purchase of securities on a when-issued basis. The Fund will maintain cash and
marketable securities equal in value to commitments for when-issued securities.
Such segregated securities either will mature or, if necessary, be sold on or
before the settlement date. Except as may be imposed by these factors, there is
no limit on the percentage of the Fund's total assets that may be committed to
such transactions.

TYPES OF FUND MANAGEMENT PRACTICES

TEMPORARY OR DEFENSIVE INVESTMENTS. When, in the opinion of the Adviser,
changes in economic, financial, political or market conditions so warrant, the
Fund may, for temporary defensive purposes, reduce its holdings in high yield
securities and invest all or a portion of its assets in cash or in high grade
fixed-income securities or in high grade short-term debt obligations, including
certificates of deposit, commercial paper, notes, obligations issued or
guaranteed by the United States government or any of its agencies or
instrumentalities and repurchase agreements involving such government
securities. The Fund may also invest in such instruments to maintain liquidity
or pending selection of investments in accordance with its policies.

BORROWING MONEY AND TRANSFERRING ASSETS. The Fund can borrow money from
banks subject to the fundamental policy set forth below. Such borrowings may be
collateralized with Fund assets.

FUNDAMENTAL POLICY: The Fund will not borrow money, except the Fund
may borrow from banks as a temporary measure for extraordinary or emergency
purposes in amounts not exceeding 15% of its total assets valued at market.
The Fund will not borrow in order to increase income (leveraging), but only
to facilitate redemption requests which might otherwise require untimely
disposition of portfolio securities. The Fund will not purchase additional
securities when money borrowed exceeds 5% of total assets.

For purposes of the above restriction, entering into futures contracts or
reverse repurchase agreements will not be deemed a borrowing. The Fund may not
enter into reverse repurchase agreements if the total investment in such
agreements would exceed 5% of the total assets of the Fund.

As an OPERATING POLICY, the Fund will not mortgage, pledge, hypothecate or,
in any other manner, transfer as security for indebtedness any security owned by
the Fund, except as may be necessary in connection with permissible borrowings,
in which event such mortgaging, pledging or hypothecating may not exceed 10% of
the Fund's net assets valued at market.

INVESTMENT COMPANY SECURITIES. Investing in securities of other investment
companies will result in an additional layer of certain fees. The Fund may
invest in securities of money market funds and in securities of other investment
companies of any type, but only under arrangements that will ensure that there
will be no duplication of investment management or advisory fees. As an
OPERATING POLICY, the Fund will not purchase securities of other investment
companies if the purchase would cause more than 10% of the value of the Fund's
total assets to be invested in investment company securities, provided that: (i)
no investment will be made in the securities of any one investment company if
immediately after such investment more than 3% of the

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<PAGE> 18

outstanding voting securities of such company would be owned by the Fund or more
than 5% of the value of the Fund's total assets would be invested in such
company; and (ii) no restrictions shall apply to a purchase of investment
company securities in connection with a merger, consolidation or reorganization.

FUTURES CONTRACTS AND OPTIONS. Futures contracts are often used to manage
risk because they enable the investor to buy or sell an asset in the future at a
price agreed upon in the present. Options give the investor the right (or
option) to buy or sell an asset at a predetermined price in the future. A put
option gives the purchaser of the option, upon payment of a premium, the right
to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. The Fund may buy and sell futures contracts (and options on such
contracts) to manage its exposure to changes in interest rates, stock or bond
prices, and foreign currencies; to adjust its overall exposure to certain
markets; and also to adjust the portfolio's duration. The Fund may write covered
call and covered put options, buy puts and calls, and buy and sell covered
spread options on securities, financial indices, and foreign currencies. (A
spread option gives the Fund the right to sell an asset at a fixed dollar or
yield spread in relation to a benchmark security. The Fund will not commit more
than 5% of its total assets to premiums when purchasing spread options.)

Futures contracts and options may not always be successful hedges. The
prices of futures contracts are volatile and are influenced by, among other
things, actual and anticipated changes in market and interest rates which in
turn are influenced by fiscal and monetary policies and national and
international policies and economic events. Futures trading involves an
extremely high degree of leverage because of the low margin deposits required.
As a result, a relatively small price movement in a futures contract may result
in substantial loss (as well as gain) to the investor. Further risk arises
because of the imperfect correlation between movements in the prices of futures
contracts and movements in the prices of the underlying instruments which are
the subject of the hedge.

The use of futures and options transactions entails certain special risks.
In particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related securities position of the
Fund could create the possibility that losses on the hedging instrument are
greater than gains in the value of the Fund's position. In addition, futures and
options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses. Although the Fund's use of futures and options transactions
for hedging should tend to minimize the risk of loss due to a decline in the
value of the hedged position, at the same time it will tend to limit any
potential gain to the Fund that might result from an increase in value of the
position. Finally, the daily variation margin requirements for futures contracts
create a greater ongoing potential financial risk than would purchases of
options, in which case the exposure is limited to the cost of the initial
premium.

In connection with the purchase of futures contracts and certain options or
the writing of certain options, the Fund will maintain an amount of cash, U.S.
government securities or other liquid securities, equal to the market value of
the futures contracts and options (less any related margin deposits) in a
segregated account with the Fund's custodian to cover the position, or
alternative cover will be employed thereby insuring that the

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<PAGE> 19

use of such contracts and options is unleveraged. See "Futures Contracts" and
"Options" in the Combined Statement of Additional Information.

DEALER OPTIONS. The Fund may engage in transactions involving dealer
options. Dealer options are options purchased from or sold to securities
dealers, financial institutions or other parties through direct bilateral
agreements with such parties. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanisms, all of the terms
of a dealer option are determined by negotiation of the parties. Certain risks
are specific to dealer options as opposed to exchange-traded options. For
example, the Fund must rely on performance by the dealer from whom it purchased
the option if the option is exercised and will generally be able to realize the
value of a dealer option only by exercising it or reselling it to the dealer who
issued it. Similarly, when the Fund writes a dealer option, it generally will be
able to close out the option prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the Fund originally wrote
the option. There can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. Consistent
with a position taken by the staff of the SEC, the Fund will treat dealer
options as subject to the Fund's limitation prohibiting investment of more than
15% of its net assets in illiquid securities.

As OPERATING POLICIES, the Fund will not engage in transactions in futures
contracts and options thereon for speculation, and the Fund will not write a
covered call option if, as a result, the aggregate market value of all portfolio
securities or currencies covering call options exceeds 25% of the market value
of the Fund's net assets. In addition, the Fund will not enter into futures
contracts or options thereon if, as a result thereof, more than 5% of the Fund's
total assets (taken at market value at the time of entering into the contract)
would be committed to initial margin and premiums on such contracts or options
thereon, provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount, as defined in certain
Commodity Futures Trading Commission regulations, may be excluded in computing
such 5%. The Combined Statement of Additional Information should be consulted
for a fuller description of the special risks relating to futures contracts and
options.

MANAGING FOREIGN EXCHANGE RISK. Investors in non-U.S. dollar securities
may "hedge" their exposure to potentially unfavorable currency changes by
purchasing a contract to exchange one currency for another on some future date
at the present prevailing exchange rate. In certain circumstances, a "proxy
currency" may be substituted for the currency in which the investment is
denominated, a strategy know as "proxy hedging." In such a case, the amount of
the foreign currency to be sold may exceed the value of the Fund's securities
denominated in such currency. The Fund may also maintain a net exposure to
forward contracts in excess of the value of the Fund's assets to which the
forward contracts relate in order to avoid excess transactions and transaction
costs. In either case, any such excess amount must be "covered" by liquid
securities, denominated in any currency, at least equal at all times to the
amount of such excess. Although foreign currency transactions will be used
primarily to protect the Fund's foreign securities from adverse currency
movements, they involve the risk that anticipated currency movements will not be
accurately predicted and the Fund's total return could be adversely affected as
a result. As an OPERATING POLICY, the Fund will normally conduct its foreign
exchange transactions in cash or by entering into forward currency contracts
(not exceeding 20% of net assets) expiring in less than one year.

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<PAGE> 20

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
well-established securities dealers or banks that are members of the Federal
Reserve System. Any such dealer or bank will have been deemed creditworthy in
accordance with guidelines approved by the Trustees. In a repurchase agreement,
the Fund buys a security from a seller that has agreed to repurchase it at a
specified future date and at an agreed upon price. Repurchase agreements, which
may be viewed as loans made by the Fund which are collateralized by the
securities subject to repurchase, are generally for a short period of time,
often less than a week. The Fund will not enter into a repurchase agreement
which does not provide for payment within seven days if, as a result, more than
15% of the value of its net assets would then be invested in such repurchase
agreements. The Fund may enter into repurchase agreements without any limit if
the repurchase agreements provide for payment within seven days. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying security and losses,
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights.

SHORT SALES. The Fund may sell a security short as a hedge against
portfolio holdings whose credit is deteriorating. In short sales, investors sell
borrowed securities in hopes of buying them back later at a lower price.
However, if the price rises instead of falls, the investor will lose money when
repurchasing the security. As an OPERATING POLICY, the Fund's short sales are
limited to situations where the Fund owns a debt security of a company and sells
short a different type of security issued by the same company, such as common or
preferred stock or a senior or junior debt security. Securities sold short will
be limited to securities listed on a national securities exchange. No securities
will be sold short if, after giving effect to such short sale, the total market
value of all securities sold short would exceed 2% of the Fund's net assets.

LENDING OF PORTFOLIO SECURITIES. Like other mutual funds, the Fund may
lend securities to broker-dealers or other institutions to earn additional
income. The principal risk is the potential default, whether through insolvency
or otherwise, of such a borrower in its obligation to return borrowed securities
in a timely manner. In this event, the Fund could experience delays in
recovering its securities and possibly capital losses.

FUNDAMENTAL POLICY: The Fund may lend portfolio securities provided
that no such loan may be made if, as a result, the aggregate of such loans
would exceed one-third of the value of the Fund's total assets.

PORTFOLIO TRANSACTIONS. Although the Fund will not generally trade for
short-term profits, circumstances may warrant a sale without regard to the
length of time a security was held. A high turnover rate may increase
transaction costs and result in additional gains.

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<PAGE> 21

3. THE TRUST AND THE FUND

ORGANIZATION OF THE TRUST AND THE FUND

HOW ARE THE TRUST AND THE FUND ORGANIZED?

The Trust is a diversified, open-end, management investment company,
commonly known as a mutual fund. The Trust was organized as a business trust
under the laws of the Commonwealth of Massachusetts on March 8, 1994. Pursuant
to the Trust's Agreement and Declaration of Trust (the "Declaration of Trust")
and By-Laws, the Trust is authorized to issue an unlimited number of shares
which may be offered in separate series of shares corresponding to separate
investment portfolios or funds having different investment objectives. The Trust
is also authorized to offer shares of a series in separate classes.

The Fund is a separate investment portfolio or series of shares of the
Trust which became available to investors on June 27, 1994. The Fund is the only
Trust portfolio currently available. This prospectus relates to the Summit High
Yield Shares of the Fund. (See "Other Classes of Shares" in this prospectus.)
The Summit High Yield Shares are designed for purchase by retail investors.

WHAT IS MEANT BY "SHARES"?

As with all mutual funds, investors receive "shares" when they invest money
in the Fund. These shares are part of the Trust's authorized capital stock. All
shares in the Fund are issued without a par value, have equal voting rights and
have no pre-emptive or conversion rights. Each share or fractional share
entitles the shareholder to receive a proportional interest in the Fund's income
and capital gain distributions, and to cast one vote per share on certain
matters, including the election of Trustees, changes in fundamental investment
policies and changes in the Fund's Investment Advisory Agreement and the
Investment Sub-Advisory Agreement. The Fund does not issue share certificates.

DOES THE TRUST HAVE ANNUAL SHAREHOLDER MEETINGS?

The Trust is not required to hold annual meetings of shareholders. However,
the Trustees or the President may call meetings for action by shareholder vote.
If the Trustees or President fail to call a meeting for a 30-day period after
requested in writing to do so by the holders of 10% or more of the outstanding
shares of the Trust, then such shareholders may call such meeting. If a meeting
is held and you cannot attend, you can vote by proxy. Well before the meeting,
the Trust will send you proxy materials explaining the issues to be decided and
including a voting card for you to mail back to the Trust.

Under Massachusetts law, shareholders of a business trust may, in certain
circumstances, be held personally liable as partners for the obligations of the
Trust. However, the Declaration of Trust pursuant to which the Trust was
organized contains an express disclaimer of shareholder liability for acts or
obligations of each portfolio of the Trust and requires that notice of such
disclaimer be given in each instrument entered into or executed by the Trust.
The Declaration of Trust also provides for indemnification out of a portfolio's
property for any shareholder of such portfolio held personally liable for any of
the portfolio's obligations. Thus,

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<PAGE> 22

the risk of a shareholder being personally liable as a partner for obligations
of a portfolio is limited to the unlikely circumstance in which the portfolio
itself would be unable to meet its obligations.

As of September 16, 1996, The Union Central Life Insurance Company was a
"control person" of the Fund by virtue of its ownership of shares of the Summit
High Yield Shares class of the Fund. Pursuant to the Investment Company Act of
1940, as amended (the "1940 Act"), a "control person" possesses the ability to
control the outcome of matters submitted for shareholder vote.

MANAGEMENT OF THE TRUST AND THE FUND

HOW ARE THE TRUST AND THE FUND MANAGED?

Trustees. Under Massachusetts law and the Trust's Declaration of Trust and
By-Laws, the business and affairs of the Trust are managed under the direction
of its Trustees.

Investment Management. First Summit Capital Management ("FSCM" or the
"Adviser"), a joint venture having its principal offices at 1876 Waycross Road,
Cincinnati, Ohio 45240, is the investment adviser to the Fund. FSCM was
organized on January 4, 1994, principally for purposes of sponsoring and
managing the Trust pursuant to a Joint Venture Agreement (the "Joint Venture
Agreement") between Carillon Advisers, Inc. ("Carillon"), an Ohio corporation,
and Freeman Holding Company, Inc. ("Freeman"), a Delaware corporation. Under the
Joint Venture Agreement, Carillon serves as the general manager of the Adviser
and is responsible for maintaining its books of account and other financial
records and for preparing its quarterly financial statements. Carillon has full
authority to act on behalf of the Adviser except with respect to matters
involving single commitments in excess of $10,000 which must be approved by both
Carillon and Freeman. Each of Carillon and Freeman is authorized to appoint two
representatives ("Representative(s)") to serve, in effect, as officers of the
Adviser. Carillon is a wholly-owned subsidiary of The Union Central Life
Insurance Company ("Union Central Life"), an Ohio mutual insurance company.
Freeman is the parent corporation of Freeman Securities Company, Inc., a New
Jersey corporation which is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "1934 Act") and a member of the NASD. The Adviser is
registered under the Investment Advisers Act of 1940.

Portfolio Managers. Since May 21, 1996, Messrs. Steven R. Sutermeister and
Gary R. Rodmaker, and since October 1, 1996, Mr. Bradley L. Lutz, have been
primarily responsible for the day-to-day management of the Fund's investment
portfolio. The portfolio managers have extensive experience in managing high
yield investment portfolios. Mr. Sutermeister has been a Representative of FSCM
since its organization in January 1994, and has also been a Vice President and
Director of the Fixed Income Group of Carillon since September, 1990. In that
capacity, Mr. Sutermeister oversees the management of over $3 billion in fixed
income assets, and is personally responsible for the investment of nearly $200
million in high yield assets for various clients. In addition, Mr. Sutermeister
serves as the portfolio manager of Carillon Bond Fund, another registered
investment company that is advised by Carillon. Mr. Rodmaker, a Chartered
Financial Analyst, has been an employee of the Adviser since its inception, and
is also a senior member of the Fixed Income Group of Carillon. Mr. Rodmaker
joined Carillon in 1990. In his present position, Mr. Rodmaker is responsible
for

20
<PAGE> 23

managing $1.250 billion of corporate bonds, including investment grade
securities, private placements and high yield bonds. Mr. Lutz, who was
previously a Vice President at Pacholder Associates, Inc. from June, 1992
through August, 1996, became an employee of the Adviser in September, 1996. Mr.
Lutz also serves as a Fixed Income Portfolio Manager with Carillon, specializing
in high yield bonds.

THE ADVISORY AGREEMENT

The Adviser serves pursuant to an Investment Advisory Agreement with the
Trust dated June 27, 1994 (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser, subject to the supervision of the Trustees, provides a
continuous investment program for the Fund, including investment research and
management with respect to all securities, investments and cash equivalents, in
accordance with the Fund's investment objectives, policies and restrictions as
set forth in this prospectus, the Combined Statement of Additional Information
and the resolutions of the Trustees. The Adviser is responsible for effecting
all security transactions on behalf of the Fund, including the allocation of
principal business and portfolio brokerage and the negotiation of commissions.
It also maintains books and records with respect to the securities transactions
of the Fund and furnishes to the Trustees such periodic or other reports as the
Trustees may request.

During the term of the Advisory Agreement, the Adviser pays all expenses
incurred by it in connection with its activities thereunder except the cost of
securities (including brokerage commissions, if any) purchased for the Fund. The
advisory services furnished by the Adviser under the Advisory Agreement are not
exclusive, and the Adviser is free to perform similar services for others.

THE ADVISORY FEE

As full compensation for services furnished to the Fund and expenses of the
Fund assumed by the Adviser, the Fund pays the Adviser an advisory fee which
increases or decreases based on the total return investment performance of the
Fund for the prior twelve-month period relative to the percentage change in the
Salomon Brothers High Yield Market Index (the "Index") for the same period (the
"Index Return"). A general description of the Index is set forth in Appendix II
to this prospectus.

The advisory fee is paid monthly at an annual rate which varies between
0.35% and 1.15% of the Fund's average daily net assets. The advisory fee is
structured so that it will be 0.75% of the Fund's average daily net assets if
the Fund's investment performance for the preceding twelve months (net of all
fees and expenses, including the advisory fee) equals the Index Return. The
advisory fee increases or decreases from the "fulcrum fee" of 0.75% by 4% of the
difference between the Fund's investment performance during the preceding twelve
months and the Index Return during that period, up to the maximum fee of 1.15%
of average daily net assets or down to the minimum fee of 0.35%. The following
table shows examples of the advisory fees

21
<PAGE> 24

which would be applicable at the stated levels of the Fund's performance
relative to the Index Return for a particular twelve-month period:

<TABLE>
<CAPTION>
ADVISORY FEE
FUND PERFORMANCE (AS % OF AVERAGE
(NET OF FEES AND EXPENSES) NET ASSETS)
-------------------------- ----------------
<S> <C>
Index Return + 10 percentage points or more........... 1.15%
Index Return + 9..................................... 1.11
Index Return + 8..................................... 1.07
Index Return + 7..................................... 1.03
Index Return + 6..................................... 0.99
Index Return + 5..................................... 0.95
Index Return + 4..................................... 0.91
Index Return + 3..................................... 0.87
Index Return + 2..................................... 0.83
Index Return + 1..................................... 0.79
Index Return 0..................................... 0.75
Index Return - 1..................................... 0.71
Index Return - 2..................................... 0.67
Index Return - 3..................................... 0.63
Index Return - 4..................................... 0.59
Index Return - 5..................................... 0.55
Index Return - 6..................................... 0.51
Index Return - 7..................................... 0.47
Index Return - 8..................................... 0.43
Index Return - 9..................................... 0.39
Index Return - 10 percentage points or more........... 0.35
</TABLE>

For the fiscal year ended May 31, 1996, the Adviser received an investment
advisory fee of $73,369 (0.27%), following certain voluntary waivers. Pursuant
to the provisions of the Advisory Agreement, the Adviser was entitled to receive
an advisory fee of $95,827 (0.35%) for the fiscal year ended May 31, 1996.
Absent this provision in the Advisory Agreement and the voluntary waivers
undertaken by the Adviser, the Adviser would have been entitled to receive an
advisory fee of $238,006 (0.87%), based on the Fund's performance for the fiscal
year ended May 31, 1996, pursuant to the performance schedule above. Under the
provisions of the Advisory Agreement, the Adviser is entitled to receive
one-twelfth of the performance-related portion of the fee computed for the
preceding twelve-month period. At the present time, the Adviser has agreed to
waive a portion of its advisory fee so as to confine the Fund's total expenses
to 1.60%.

The advisory fee paid by the Fund may exceed the advisory fees paid by most
other investment companies, even if the investment performance of the Fund is
less than the Index Return. In addition, the "fulcrum fee" of 0.75% is higher
than the fees paid by most other investment companies, although it is not
necessarily higher than the fees paid by most fund portfolios having the same
investment objectives and policies. Investors may pay higher advisory fees under
the performance arrangement even though the Fund's performance may have
declined. For example, if the market declined and the Index dropped by 27
percentage

22
<PAGE> 25

points, and the Fund's performance declined by 17 percentage points, the Fund
would pay the maximum advisory fee.

THE SUB-ADVISER

Carillon Advisers, Inc., an Ohio corporation with offices at 1876 Waycross
Road, Cincinnati, Ohio 45246, is registered as an investment adviser under the
Investment Advisers Act of 1940. The Sub-Adviser is a wholly-owned subsidiary of
Union Central Life. Carillon and its affiliates currently act as an investment
adviser to the Carillon Group of Mutual Funds, which consist of the Carillon
Fund, Inc. and the Carillon Investment Trust.

THE SUB-ADVISORY AGREEMENT

The Sub-Adviser serves pursuant to an Investment Sub-Advisory Agreement
with the Adviser dated September 18, 1996 (the "Sub-Advisory Agreement").

Under the Sub-Advisory Agreement, Carillon provides, subject to the
Adviser's direction, a portion of the investment advisory services for which the
Adviser is responsible pursuant to the Advisory Agreement relating to the Fund.
The Sub-Adviser provides investment research and advice with respect to
securities and investments and cash equivalents in the Fund. Research services
provided by the Sub-Adviser include information, analytical reports, computer
screening studies, statistical data and factual resumes pertaining to high yield
securities. Such supplemental research may be subject to additional analysis by
the Adviser.

Under the Sub-Advisory Agreement, the Sub-Adviser receives from First
Summit an annual fee in the amount of $150,000 per year. If the Sub-Adviser
renders services to the Adviser under the Sub-Advisory Agreement for a period
that is less than twelve months in length, the Sub-Adviser is entitled to a
pro-rata portion of such fee, or such other fee as shall be agreed to by the
Adviser and the Sub-Adviser, not to exceed the equivalent of the pro-rata
portion of such fee. In the event that the amount payable as the Sub-Adviser's
fees exceeds the amount of advisory fees paid to the Adviser pursuant to the
Advisory Agreement, the difference will be shared equally by the Adviser's
general partners, Freeman and Carillon, or paid by the Joint Venture.

The Sub-Advisory Agreement, which became effective on September 18, 1996,
shall continue in effect for two years. It is renewable annually thereafter for
successive periods not to exceed one year each (i) by a vote of the Trustees or
by a vote of a majority of the outstanding voting shares of the Fund, and (ii)
by the vote of a majority of the Trustees of the Trust who are not parties to
the Sub-Advisory Agreement or "interested persons" (as such term is defined in
the 1940 Act) thereof, cast in person at a meeting called for the purpose of
voting on such approval.

23
<PAGE> 26

event of any transfer or assignment thereof, as defined in the 1940 Act, and in
the event of any act or event that terminates the Advisory Agreement between the
Adviser and the Fund.

Prior to the implementation of the Sub-Advisory Agreement, the Adviser had
entered into an Investment Service Agreement (the "Service Agreement") with the
Trust and Union Central Life, which permitted the Adviser to have access to and
to utilize Union Central Life's advisory personnel, administrative services,
supplies and equipment in the performance of its advisory services and functions
under the Advisory Agreement. In consideration for such services, the Adviser
paid Union Central Life for the costs, direct or indirect, fairly attributable
thereto, but in no event less than $65,000 per year or such other amount as was
agreed to by the Adviser and Union Central Life. For the fiscal year ended May
31, 1996, the Adviser paid Union Central Life $65,000 pursuant to the Service
Agreement. The Service Agreement was terminated on September 18, 1996.

A more comprehensive description of the Advisory and Sub-Advisory
Agreements is contained in the Combined Statement of Additional Information, and
a copy of each Agreement is on file with and may be obtained from the SEC.

MANAGEMENT-RELATED SERVICES

BISYS SERVICE AGREEMENTS. The Trust has entered into three
management-related service agreements with affiliates of BISYS Fund Services,
Inc., a Delaware corporation which is a wholly owned subsidiary of The BISYS
Group, Inc. BISYS Fund Services, Limited Partnership ("BISYS Fund Services"), an
Ohio limited partnership of which BISYS Fund Services, Inc. is the General
Partner, serves as Administrator of the Fund (the "Administrator"). BISYS Fund
Services Ohio, Inc. ("BISYS"), an Ohio corporation and also a wholly-owned
subsidiary of The BISYS Group, Inc., serves as Fund Accountant (the "Fund
Accountant") and additionally as the Trust's transfer and dividend disbursing
agent (the "Transfer Agent"). BISYS Fund Services acts also as the Fund's
Distributor or principal underwriter (the "Distributor") (see "Distribution
Expenses -- The Distributor").

Each of the "BISYS Companies" named herein has its principal offices at
3435 Stelzer Road, Columbus, Ohio 43219. The three service agreements between
the Trust and the BISYS Companies are described immediately below. They are more
fully described in the Combined Statement of Additional Information, and copies
of such agreements are on file with and available from the SEC. The Distribution
Agreement between the Fund and BISYS Fund Services is described below under the
caption "Distribution Expenses -- The Distributor."

24
<PAGE> 27

and state tax returns; assist the Trust in preparing Annual and Semi-Annual
Reports to Shareholders and its Registration Statements; and keep and maintain
certain financial accounts and records of the Fund. Partners, officers or
employees of the Administrator may serve as officers or employees of the Trust,
and those who do so will be compensated by the Administrator.

FUND ACCOUNTANT. Pursuant to a Fund Accounting Agreement with the Trust
(the "Accounting Agreement"), BISYS, as Fund Accountant, is responsible for
accounting relating to the Fund and its investment transactions; maintaining
certain books and records of the Fund; determining daily the net asset value per
share of the Fund and calculating yield, dividends and capital gains
distributions; and preparing security position, transaction and cash position
reports.

For such services, the Fund reimburses the Fund Accountant for all
out-of-pocket expenses incurred by it (including all charges for delivery of
materials, telephone and other communications expenses, and costs of pricing
portfolio securities) and pays it a fee, computed daily and paid monthly, at the
annual rate of 0.03% of the Fund's average daily net assets, provided, however,
that such fee will not be less than $30,000.

TRANSFER AGENT. Pursuant to a Transfer Agency Agreement with the Trust
(the "Transfer Agency Agreement"), BISYS also acts as the Trust's transfer,
dividend disbursing and redemption agent. BISYS provides certain shareholder and
other services to the Trust, including: furnishing certain account and
transaction information; providing mailing labels for the distribution to Fund
shareholders of financial reports, prospectuses, proxy statements and other such
materials; providing compliance reports; calculating distribution plan and
marketing expenses; and maintaining shareholder account records.

FUND EXPENSES

Under the Advisory, Administration, Fund Accounting and Transfer Agency
Agreements, the Fund pays the service fees of, and/or reimburses certain
expenses incurred by, the Adviser, Administrator, Fund Accountant and Transfer
Agent. The expenses incurred in the operation of the Fund which are borne by the
Fund include: taxes, interest and brokerage fees and commissions, if any; fees
and expenses of Trustees who are not partners, officers, directors, shareholders
or employees of the Adviser, the Administrator or the Distributor (see
"Distribution Plan and The Distributor"); commission fees and state Blue Sky
qualification and renewal fees and expenses; custodian fees (see "Custodian");
transfer and dividend disbursing agent's fees; certain insurance premiums;
auditing and legal fees and expenses; fund accounting fees including pricing of
portfolio securities; costs of maintenance of legal existence; typesetting and
printing prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund; costs of Trustees' and shareholders' reports and
meetings; and any extraordinary expenses.

25
<PAGE> 28

LIMITATION ON FUND EXPENSES. If in any fiscal year the aggregate expenses
of the Fund (as defined under the securities regulations of any state having
jurisdiction over the Trust) exceed the expense limitations of any such state,
each of the Adviser and the Administrator will reimburse the Fund for a portion
of such excess expenses, such portions being allocated in accordance with the
ratio of the fees otherwise payable to each of the Adviser and the Administrator
by the Fund under the Advisory and Administration Agreements, respectively. In
the event one of the two agreements is not in effect, the party to the other
agreement will reimburse the Fund for all excess expenses. The expense
reimbursement obligation of each of the Adviser and the Administrator is limited
for any fiscal year to the amount of its fees for such fiscal year, unless
required otherwise under applicable state securities regulations. Presently, the
most restrictive expense ratio limitation imposed by any state is 2.5% of the
first $30 million of the Fund's average daily net assets, 2% of the next $70
million of such assets and 1.5% of net assets in excess of $100 million.
Excluded from the computation of expenses are taxes, portfolio brokerage
commissions, interest, certain litigation and indemnification expenses,
extraordinary expenses and certain distribution expenses.

NET ASSET VALUE

The net asset value of Fund shares is determined once daily as of the close
of regularly scheduled trading (normally 4:00 p.m., Eastern Standard Time) on
the New York Stock Exchange (the "Exchange"), Monday through Friday, except that
no determination is required on (i) days on which the Exchange is closed or on
which changes in the value of the Fund's securities holdings will not materially
affect the current net asset value of the shares of the Fund; (ii) days during
which no shares of the Fund are tendered for redemption and no order to purchase
or sell such shares is received by the Fund; or (iii) the following business
holidays or the days on which such holidays are observed by the Exchange: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Generally, trading in non-U.S.
securities, as well as U.S. Government securities and money market instruments,
is substantially completed each day at various times prior to the close of
regularly scheduled trading of the Exchange. The values of such securities used
in computing the net asset value of Fund shares are generally determined as of
such times.

The net asset value per share of the Fund is computed by adding the sum of
the value of the securities held by the Fund plus any cash or other assets it
holds, subtracting all its liabilities, and dividing the result by the total
number of Fund shares outstanding at such time. Securities which are traded on
stock exchanges are valued at the last sales price as of the close of the
Exchange, or lacking any sales, at the closing bid prices. Securities traded
only in the "over-the-counter" market are valued at the last bid prices quoted
by brokers that make markets in the securities at the close of trading on the
Exchange. Securities and assets for which market quotations are not readily
available or not obtained from a pricing service are valued at fair value as
determined in good faith by the Trustees, although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees. If approved
by the Trustees, the Fund may make use of a pricing service or services in
determining the net asset value of the Fund. Debt securities with a remaining
maturity of 60 days or less are valued on an amortized cost basis, which the
Trustees have determined reflects fair value.

26
<PAGE> 29

Each of the Fund's two classes of shares will bear, pro-rata, all of the
common expenses of the Fund. The net asset value of all outstanding shares of
each class of the Fund will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Fund represented by the
value of shares of that class. All income earned and expenses incurred by the
Fund will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Fund represented by the value of shares
of such class, except that the Shares will not incur any of the expenses under
the Rule 12b-1 Plan of the Summit High Yield Institutional Service Shares class.

The different expenses borne by each class of shares will result in
different net asset values and dividends. The per share net asset value of the
Summit High Yield Shares class will generally be lower than that of the Summit
High Yield Institutional Service Shares class of the Fund becasue of the higher
expenses borne by the shareholders of the Summit High Yield Shares class. It is
expected, however, that the net asset value per share of the two classes will
tend to converge immediately after the payment of dividends, which will differ
by approximately the amount of the service expense differential between the
classes.

DISTRIBUTION EXPENSES

DISTRIBUTION PLAN. In addition to the sales charge which may be deducted
at the time of purchase of Fund shares, the Fund is authorized under the Trust's
Distribution and Shareholder Service Plan (the "Plan"), adopted pursuant to Rule
12b-1 (the "Rule") under the 1940 Act, on behalf of Shares to use its assets to
finance certain activities relating to the distribution of Shares to investors.
The Plan is a "compensation" plan providing for the payment of a fixed
percentage of the Shares' average net assets to finance distribution expenses.
Under the Plan, the Fund pays monthly to BISYS Fund Services, as its principal
underwriter, a distribution fee which may not exceed, on an annual basis, 0.25%
of the Shares' average daily net assets.

On July 7, 1992, the SEC approved amendments to Article III, Section 26 of
the NASD Rules of Fair Practice, the NASD's maximum sales charge rule relating
to mutual fund shares. The amendments, which took effect July 7, 1993, establish
limits on all types of sales charges, whether front-end, deferred or asset-
based. These amendments may operate to limit the aggregate distribution fees to
which shareholders may be subject under the terms of the Plan. BISYS Fund
Services will monitor the Fund for compliance with the amended NASD rule.

The Plan authorizes BISYS Fund Services to use the distribution fee to pay,
or reimburse expenses incurred by, banks, broker-dealers and other institutions
which, pursuant to agreements with the Distributor, provide distribution
assistance and/or shareholder services including, but not limited to, printing
and distributing prospectuses to persons other than shareholders of Shares,
printing and distributing advertising and sales literature and reports to
shareholders used in connection with selling Shares, furnishing personnel and
communications equipment to service shareholder accounts and prospective
shareholder inquiries. Such services may be performed by the Distributor or any
of its affiliates.

27
<PAGE> 30

The Plan provides that so long as it is in effect the selection and
nomination of Trustees who are not "interested persons" (as defined in the 1940
Act) of the Trust will be committed to the discretion of the Trustees then in
office who are not interested persons of the Trust.

Neither the Plan nor any related agreements can take effect until approved
by a majority vote of both all the Trustees and those Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to it, cast
in person at a meeting called for the purpose of voting on the Plan and the
related agreements. Such approval of the Plan was obtained on May 24, 1994. The
Plan was approved by the sole shareholder of the Fund on May 24, 1994.

The Plan may not be amended so as to materially increase the amount of the
distribution fee unless the amendment is approved by a vote of at least a
majority of the outstanding voting securities of the Summit High Yield Shares
class of the Fund. In addition, no material amendment may be made unless
approved by the Trustees in the manner described above for Trustee approval of
the Plan.

THE DISTRIBUTOR. BISYS Fund Services serves as the Fund's Distributor or
principal underwriter (the "Distributor") pursuant to a Distribution Agreement
with the Trust (the "Distribution Agreement"). BISYS Fund Services is registered
as a broker-dealer under the 1934 Act and is a member of the NASD. The offering
of the Fund's shares is continuous. The Distribution Agreement provides that the
Distributor, as agent in connection with the distribution of Fund shares, will
use appropriate efforts to solicit orders for the sale of Fund shares and
undertake such advertising and promotion as it deems reasonable. The Distributor
will finance appropriate sales activities which it deems reasonable, including,
but not limited to: advertising, compensation of underwriters, dealers and sales
personnel, printing and mailing prospectuses to persons other than current Fund
shareholders and printing and mailing sales literature. As compensation, the
Distributor receives the distribution fee payable pursuant to the Plan (see
"Distribution Plan").

In addition, the Distributor has the right, as principal, to purchase Fund
shares at their net asset value and to sell such shares to the public, or to
dealers who have entered into selected dealer agreements with the Distributor,
in both cases against orders for such shares, at the public offering price (i.e.
net asset value plus a maximum sales charge of 4.50%) or, in the case of sales
to dealers, at the public offering price less a concession determined by the
Distributor which may not exceed the amount of the sales charge or the
underwriting discount. (See "How to Purchase Fund Shares -- Share Price and
Sales Charges.")

UNDERSTANDING PERFORMANCE INFORMATION

This section should help you understand the terms used to describe
performance of both classes of shares of the Fund. You will come across them in
shareholder reports you receive from the Fund as well as in advertisements and
in the media. Information about a portfolio's performance is based on that
portfolio's record up to a certain date and is not intended to indicate future
performance.

28
<PAGE> 31

total return numbers include the effect of compounding, i.e., you receive income
and capital gain distributions on a rising number of shares.

Advertisements for the Fund may include aggregate or average annual total
return figures, which may be compared with various indices, other performance
measures, or other mutual funds.

"AGGREGATE TOTAL RETURN" is the rate of return on an investment for a
specified period before annualizing it. An aggregate return does not indicate
how much the value of the investment may have fluctuated between the beginning
and the end of the period specified.

"AVERAGE ANNUAL TOTAL RETURN" is the constant year-by-year return produced
by the aggregate return. By smoothing out all the variations in annual
performance, it gives you an idea of the investment's annual contribution to
your portfolio provided you held it for the entire period in question.

"YIELD" refers to the advertised or "SEC yield" found by determining the
net income per share (as defined by the SEC) earned by the Fund during a 30-day
base period, dividing this amount by the per-share price on the last day of the
base period, and annualizing the result.

Further information about the performance of the Summit High Yield Shares
class of the Fund is included in the Fund's Annual Report dated May 31, 1996,
which may be obtained without charge by contacting the Fund at 1-800-272-3442.

4. INVESTING WITH SUMMIT INVESTMENT TRUST

HOW TO PURCHASE SHARES

Shares are offered continuously for sale directly through the Distributor,
BISYS Fund Services, or though securities dealers and banks which have
established dealer agreements with the Distributor. You are encouraged to
consult a registered financial representative for assistance in making an
investment selection.

The initial purchase of Shares must be at least $1000 with the exception
that the initial purchase for a retirement plan account may be made with a
minimum of $500. In addition, an account can be established with a minimum of
$500 if the account will be receiving periodic, regular investments through a
program such as the Automatic Investment Plan (see "Shareholder Services" for a
description of this plan).

The minimum for subsequent investments is $50.

NOTE: The Fund is eligible as a vehicle for a wide range of retirement plans for
individuals and institutions, including large and small businesses: IRAs,
SEP-IRAs, Keoghs (profit sharing, money purchase pension), 401(k), and 403(b)
plans. For information on retirement plans, please consult your broker-dealer.

29
<PAGE> 32

GENERAL METHODS OF PURCHASING SHARES

1. By Mail. To make an initial account purchase, mail a check made or
money order payable to "Summit High Yield Fund" with a completed Account
Registration Form (copy enclosed with this prospectus) to:

Summit Investment Trust
Dept. L-1358
Columbus, OH 43260-1358

To purchase additional Shares for an existing account, please note your
account number on the check or money order and return it with an account
investment slip to the above address. Account Registration and other account
forms may be obtained by calling the Trust at 1-800-272-3442.

2. By Federal Funds Wire. Shares may be purchased by wire transfer. To
obtain instructions for Federal Funds Wire purchases, including the bank account
number into which funds are to be wired, please contact the Trust at
1-800-272-3442.

3. Through a Securities Dealer. You may purchase Shares by contacting a
securities dealer having a selected dealer agreement or selling agreement with
the Distributor.

Orders for Shares of the Fund will be assigned the next closing price after
receipt of the order by the Distributor. The securities dealer is responsible
for transmitting such orders promptly to the Distributor. If the securities
dealer fails to do so, the investor's right to that day's closing price must be
settled between the investor and the dealer.

NOTE: In accordance with the Internal Revenue Service (the "IRS") regulations,
the Fund may be required to withhold 31% of all reportable distributions from
any account without a certified taxpayer or Social Security number on file.
Omission of this information from the Account Registration Form may result in
31% penalty withholding on any taxable dividends, capital gain distributions or
share redemptions, including shares redeemed as a result of an exchange.

SHARE PRICE AND SALES CHARGES

SHARE PRICE

The public offering price of the Shares of the Class is the net asset value
per share (next determined following receipt of an order), plus a sales charge
(expressed as a percentage of the offering price as set forth in the table
below). The Fund's Distributor receives this sales charge and may reallow
discounts to securities dealers with whom it has agreements and retain the
balance over such discounts, and at times the Distributor

30
<PAGE> 33

may reallow the entire sales charge to such dealers. In such circumstances,
dealers may be deemed to be underwriters under the 1933 Act. The sales charges
and dealer discounts are as follows:

SALES CHARGE

<TABLE>
<CAPTION>
CONCESSION TO
PERCENTAGE OF PERCENTAGE OF BROKER-DEALER
AMOUNT OF PURCHASE THE OFFERING THE NET AMOUNT AS A PERCENTAGE
PAYMENT PRICE INVESTED OF OFFERING PRICE
--------------------- ------------- -------------- -----------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000 but less
than $250,000 3.50% 3.63% 3.15%
$250,000 but less
than $500,000 2.25% 2.30% 2.03%
$500,000 or more 0% 0% 0%
</TABLE>

The Distributor may also pay banks and other financial service firms that
provide services for their clients to facilitate transactions in Shares of the
Fund a transaction fee up to an amount equal to the greater of the full
applicable sales charge or the "Concession to Broker-Dealer as a Percentage of
Offering Price" as shown in the above table. Banks are currently prohibited
under the Glass-Steagall Act from providing certain underwriting or distribution
services. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. In addition, state securities laws may differ from
federal laws regarding banks and financial institutions which may be required to
register under state securities laws as brokers and/or dealers.

The sales charges set forth in the above table are applicable to purchases
made at one time by any investor, which includes: (i) an individual, his or her
spouse and children under the age of 21; and (ii) a trustee or other fiduciary
of a single trust estate or single fiduciary account. In order to qualify for
the lower sales charges keyed to the breakpoints ($100,000; $250,000; and
$500,000) set forth in the table, all orders from an investor will have to be
placed through a single investment dealer and identified at the time of purchase
as originating from the same investor, although such orders may be placed into
more than one discrete account which identifies the investor.

REDUCED SALES CHARGES

Investors may be able to benefit from a reduction or elimination of the
sales charge through several purchase plans.

RIGHT OF ACCUMULATION. Investors may purchase Shares of the Class with a
reduced front-end sales charge or without a sales charge if the combined total
of the value of the Shares currently being purchased plus the current net asset
value of the investor's holdings of Shares exceeds one of the sales charge
breakpoints ($100,000; $250,000; and $500,000). The investor must, at the time
of purchase, give the Transfer Agent or the Distributor sufficient information,
including identification of all share accounts to be considered in exercising
the right of accumulation, to permit confirmation of qualification.

31
<PAGE> 34

LETTER OF INTENT. Investors may obtain a reduced sales charge or the
elimination of the sales charge by means of a written Letter of Intent which
establishes a total investment goal in Shares of the Class (which are sold with
a sales charge) which is to be achieved within a thirteen-month period and which
exceeds one of the Fund's sales charge breakpoints ($100,000; $250,000; and
$500,000). The applicable sales charge will be determined in accordance with the
total amount to be invested. All Shares previously purchased and still
beneficially owned by the investor may, upon written notice to the Transfer
Agent, also be included at the current net asset value to reach the above
minimums. A Letter of Intent may be executed by checking the appropriate box on
the Account Registration Form.

A Letter of Intent permits a purchaser to achieve a total investment goal
by any number of investments over a thirteen-month period. Each investment made
during the period will be assessed, as the case may be, the applicable reduced
sales charge or no sales charge. Shares totaling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Transfer Agent in the name of the
purchaser to secure payment of the higher sales charge which may be applicable
to the purchase of Shares if the full Letter of Intent amount is not purchased.
Dividends on escrowed shares, whether paid in cash or reinvested in additional
shares, are not subject to escrow. The effective date of a Letter of Intent may
be back-dated up to 30 days, in order that any investments made during this
30-day period, valued at the purchaser's cost, can be applied to the fulfillment
of the Letter of Intent goal.

The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the stated investment goal is
not achieved within the thirteen-month period, the purchaser is required to pay
the balance of the full sales charge that would otherwise have applied to the
purchases made during this period. If a payment is due under the preceding
sentence, it must be made directly to the Distributor within twenty days of
notification or, if not paid, the Distributor will liquidate sufficient escrowed
Shares to obtain such difference. Additionally, if the total purchases within
the thirteen-month period exceed the stated investment goal, an adjustment will
be made to reflect further reduced sales charges applicable to such purchases.
All such adjustments will be made at the conclusion of the thirteen-month period
and in the form of additional shares at the then current applicable public
offering price.

CERTAIN QUALIFIED PURCHASERS. No sales charge is applicable to any Shares
purchased through reinvestment of dividends or distributions, to any sale of
Shares to a Trustee or officer of the Trust, or to the immediate families (i.e.,
the spouse and any children under the age of 21) of such persons, or to any
full-time employee or registered representative of broker-dealers having dealer
agreements with the Distributor ("Selling Broker") and their immediate families
(or any trust, pension, profit-sharing or other benefit plan for such persons),
or to any orders placed on behalf of other investment companies the securities
of which are also distributed by BISYS Fund Services, The BISYS Group, Inc. or
their affiliated companies.

In addition, no sales charge is applicable to any sale to any Union Central
Life separate account used to fund tax-qualified variable annuity contracts, or
to a director, officer, full-time employee or sales representative of Union
Central Life or any of its affiliates, the Adviser or any of its affiliates, or
the Distributor or any of its affiliates, or to the immediate families of such
persons, or any trust, pension, profit-sharing or other benefit plan for such
persons.

32
<PAGE> 35

Also, no sales charge will apply to a registered investment adviser
purchasing for discretionary accounts, provided such registered adviser executes
a Fund load waiver agreement which specifies certain aggregate minimum and
operating provisions. This waiver is available only for Shares purchased
directly from the Distributor, without a broker, and is unavailable if the
registered adviser is part of an organization principally engaged in the
brokerage business.

In addition, no sales charge will be assessed in connection with certain
exchange arrangements made with two no-load money market portfolios described
below under "Shareholder Services -- Exchange Privileges."

SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN

Shareholders who open an account with $500 or more and who wish to make
subsequent, regular monthly or quarterly investments in the Fund may establish
an Automatic Investment Plan as part of the initial Account Registration or
subsequently by submitting an application. Under this plan, the Fund's Transfer
Agent will debit the shareholder's designated bank account in the amount
specified by the shareholder (which monthly or quarterly amount may not be less
than $50). The proceeds will be invested in Shares at the applicable offering
price determined on the date of the debit. Participation in the Automatic
Investment Plan may be discontinued upon 30 days' written notice to the Transfer
Agent, or if a debit is not honored.

TRANSFER OF SHARES

Shareholders may transfer Shares to family members and others at any time
without incurring a sales charge. Shareholders should consult their tax advisor
concerning such transfers.

REDEMPTION OF SHARES

Shareholders may redeem shares in any amount and at any time at the Class'
net asset value next determined after the request for redemption is received in
proper order by the Fund. The Fund will normally send the proceeds on the next
business day, but if making immediate payment could adversely affect the Fund,
it may take up to seven days for payment to be made. If the Shares to be
redeemed were purchased by check or Automated Clearing House funds, redemption
proceeds will be sent upon clearance of the purchase which may involve a delay
for 15 days or more. Such delay may be avoided if shares are purchased by wire
transfer of federal funds.

EXCHANGE PRIVILEGES

Shares of the Fund may be exchanged for shares of two no-load money market
portfolios of The ARCH Fund, Inc., namely, the ARCH Money Market Portfolio and
the ARCH Treasury Money Market Portfolio (the "Money Market Funds"). The ARCH
Fund, Inc. is an investment company for which BISYS Fund Services also serves as
the distributor. Exchanges are not currently permitted between the classes of
shares of the Fund. Since shares of the Money Market Funds may be purchased at
no load, purchases of Shares made

33
<PAGE> 36

by redeeming shares of the Money Market Funds will be subject to the sales
charge applicable to an initial purchase of Shares (see "Sales Price and Sales
Charges" above). However, shareholders exchanging shares of the Money Market
Funds that were acquired through a previous exchange of Shares on which a sales
charge was paid will not be required to pay an additional sales charge upon
reinvestment of those shares into Shares. Under such circumstances, the
shareholder must notify the Distributor that a sales charge was originally paid
and provide the Distributor with sufficient information to permit confirmation
of the shareholder's right not to pay a sales charge.

Exchanges are regarded as sales for federal and state income tax purposes
and could result in a gain or loss, depending on the original cost of shares
exchanged. If the exchanged shares were acquired within the previous 90 days,
the gain or loss may have to be computed without regard to any sales charges
incurred on the exchanged shares (except to the extent those sales charges
exceed the sales charges waived in connection with the exchange). The terms of
the foregoing exchange privilege are subject to change and the privilege may be
terminated on 60 days' written notice to shareholders. The exchange privilege is
only available where the exchange may legally be made.

GENERAL METHODS OF REDEEMING SHARES

1. By Mail. You may redeem Shares by mail by sending a written request for
the redemption to the Transfer Agent at 3435 Stelzer Road, Columbus, Ohio 43219.
The Transfer Agent may require a signature guarantee by an eligible guarantor
institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the 1934 Act. The Transfer Agent
reserves the right to reject any signature guarantee if: (1) it has reason to
believe that the signature is not genuine; (2) it has reason to believe that the
transaction would otherwise be improper; or (3) the guarantor institution is a
broker or dealer that is neither a member of a clearing corporation nor
maintains net capital of at least $100,000. The signature guarantee requirement
will be waived if all of the following conditions apply: (1) the redemption
check is payable to the shareholder(s) of record and (2) the redemption check is
mailed to the shareholder(s) at the address of record or the proceeds are either
mailed or wired to a commercial bank account previously designated on the
account registration form. There is no charge for having redemption requests
mailed to a designated bank account.

2. Through a Securities Dealer. You may sell your Shares by contacting a
securities dealer having a dealer or selling agreement with the Distributor.
(See "General -- Repurchase of Shares" in the Combined Statement of Additional
Information for more details.) The dealer may assess a nominal fee for this
service.

MINIMUM ACCOUNT BALANCE

The Trust reserves the right to involuntarily redeem your account any time
the value of your account falls below $300 as a result of redemption. You will
be notified in writing prior to the redemption and be allowed 60 days to make
additional investments before the redemption is processed.

34
<PAGE> 37

REDEMPTION IN KIND

The Trustees reserve the right to redeem proceeds in whole or in part by a
distribution in kind of marketable securities held by the Fund. See
"General -- Redemption in Kind" in the Combined Statement of Additional
Information for more details.

ADDITIONAL SHAREHOLDER PRIVILEGES

CERTAIN PRIVILEGES LISTED IN THIS SECTION MAY NOT BE OFFERED BY THE FUND IF
YOU HOLD SHARES IN THE "STREET NAME" OF A FINANCIAL INSTITUTION, OR IF THE
ACCOUNT IS NETWORKED THROUGH NATIONAL SECURITIES CLEARING CORPORATION (NSCC).

AUTOMATIC WITHDRAWAL PLAN

You may establish a plan for redemptions to be made automatically at
monthly or quarterly intervals with payments sent directly to you or to persons
designated by you as recipients of the withdrawals. Requests for this service
not made on the initial application require signature guarantees unless the
payments are to be made to you and mailed to the address of record on your
account. You are required to maintain a minimum account value of $10,000 at all
times, and the minimum withdrawal amount is $100. Maintenance of an Automatic
Withdrawal Plan concurrently with purchases of additional Shares may be
disadvantageous to you because of the sales charge on certain purchases.

The redemptions will occur on or about the 25th day of the month and the
checks will generally be mailed within two days after the redemption occurs. No
redemption will occur if the account balance falls below the amount required to
meet the requested withdrawal amount. This service may be terminated at any
time, and the Distributor reserves the right to initiate a fee upon 30 days'
written notice to the shareholder.

TELEPHONE TRANSACTIONS

Shareholders are permitted to request exchanges and/or redemptions by
telephone. The Trust will not be liable for following instructions communicated
by telephone that it reasonably believes to be genuine. To be permitted to
request an exchange or redemption by telephone, a shareholder must elect the
option on the Account Registration Form. (If a shareholder does not initially
elect an option on the Account Registration Form, the shareholder may request
authorization by executing an appropriate authorization form provided by the
Trust upon request.) The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and may only be liable for
any losses due to unauthorized or fraudulent instructions where it fails to
employ its procedures properly. Such procedures include the following. Upon
telephoning a request, shareholders will be asked to provide their account
number and, if not available, their social security number. For the
shareholders' and the Trust's protection, all conversations with shareholders
will be tape recorded. All telephone transactions will be followed by a
confirmation statement of the transaction. If, due to temporary adverse
conditions, investors are unable to effect telephone transactions, investors may
mail their requests to the Trust.

35
<PAGE> 38

Telephone Exchanges. You may authorize your account for telephone
exchanges by completing the appropriate portion of the Account Registration
Form. By electing this option you may exchange Shares by calling the Fund.
Requests will be processed in the same day as receipt of the telephone call if
the request is made before the close of regularly scheduled trading on the
Exchange (normally, 4:00 p.m. Eastern Standard Time).

Telephone Redemptions. You may request the option to redeem Shares by
telephone by completing the appropriate portion of the Account Registration
Form. In order to obtain that day's closing net asset value on the redemption,
the telephone call must be received by the Trust prior to the close of regularly
scheduled trading on the Exchange (normally, 4:00 p.m. Eastern Standard Time).

Payment for Shares will be made by federal wire or by mail as specified by
you on the Application. Payment will normally be sent on the business day
following the date of receipt of the request. Payment by wire to your bank
account must be in amounts of $1,000 or more. Although the Fund does not assess
a charge for wire transfers, your bank may assess a charge for the transaction.
Payments by mail may only be sent to your account address of record and may only
be payable to the registered owner(s).

DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS:

The Fund declares and pays income dividends monthly. If the Fund has net
capital gains (after subtracting any capital losses) they are declared and paid
at least annually. Dividend and capital gain distributions are reinvested in
additional Shares of the class unless you select another option on your Account
Registration Form.

TAX INFORMATION:

You should be aware of the possible tax consequences when the Fund makes a
distribution to your account, or when you sell Shares. In addition to federal
taxes, you may also be subject to state taxes. No attempt is here made to
discuss state tax consequences, and accordingly you should consult your own tax
adviser. Note: The following summary does not apply to retirement accounts, such
as IRAs or Keoghs, which are tax-deferred until you withdraw money from them.

TAXES ON FUND DISTRIBUTIONS. In January, the Trust will send you
information indicating the federal tax status of dividends and capital gain
distributions in your Fund account.

The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code and will distribute substantially all
of its net income and gains to shareholders. All distributions are taxable to
shareholders for the year in which they were paid. The only exception is that
distributions declared during the last three months of the year and paid in
January are taxed as though they were paid by December 31.

Distributions are taxable whether reinvested in additional Shares of the
class or received in cash.

36
<PAGE> 39

Distributions from net income and short-term capital gains are taxable as
ordinary income, and long-term capital gains are taxable at the applicable rate
for long-term capital gains. The gain is long- or short-term depending on how
long the Fund held the securities, not how long you held shares in the Fund.

BUYING A DIVIDEND. On the record date for a distribution from capital
gains, the Fund's share price is reduced by the amount of the distribution. If
Shares are bought immediately before the record date ("buying a dividend"), you
will pay the full price for the Shares. You will receive a portion of the
Shares' price back as a taxable distribution. A similar result may occur with
regard to distributions from net income.

TAXES ON YOUR FUND TRANSACTIONS. When you sell Shares in the Fund, you may
realize a gain or loss. An exchange from one fund to another is treated as a
sale for tax purposes. In January, the Trust will send you information
indicating the date and amount of each sale of Shares that you made during the
prior year. A copy is filed with the IRS.

You may calculate the cost basis of the Shares you sold using the average
cost of the Shares or other methods acceptable to the IRS, such as "specific
identification." To help you maintain accurate records, we send you a
confirmation immediately following each transaction you make and a year-end
statement detailing all your transactions during the year.

At year-end the Trust will also send you any additional information you
need to determine your taxes, such as the sources of Fund income.

37
<PAGE> 40

OBTAINING INFORMATION ON YOUR INVESTMENT

CONFIRMATION OF SHARE TRANSACTIONS AND DIVIDEND PAYMENTS

Every shareholder will receive a confirmation of each new transaction in
his or her Fund account. The Trust will confirm all account activity, including
the payment of dividend and capital gain distributions and transactions made as
a result of an Automatic Withdrawal Plan or an Automatic Investment Plan.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares will not be issued.

SHAREHOLDER INQUIRIES

Please direct any questions or requests that you may have concerning the
Trust or your Fund account by writing to Summit Investment Trust, 3435 Stelzer
Road, Columbus, OH 43219, or by calling the Trust at 1-800-272-3442.

OTHER CLASSES OF SHARES

In addition to offering the Summit High Yield Shares class, the Fund also
offers the Summit High Yield Institutional Service Shares class, which is
described in a separate prospectus relating to that class of shares and is
available for purchase by institutional investors. Shares of the Summit High
Yield Institutional Service High Yield Shares class are subject to a 12b-1 fee,
which may affect the performance of the class. To obtain a prospectus for the
class, or to obtain other information, contact BISYS Fund Services by writing to
the address or by calling the telephone number listed on the cover of this
prospectus.

38
<PAGE> 41

APPENDIX I

BOND RATINGS

The following is a description of the bond rating categories of Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("Standard
& Poor's") and Fitch Investors Service, Inc. ("Fitch"):

MOODY'S CORPORATE BOND RATINGS

Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

Moody's also supplies numerical indicators 1, 2, 3 to rating categories.

39
<PAGE> 42

STANDARD & POOR'S CORPORATE BOND RATINGS

AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA - Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.

BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.

CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.

FITCH CORPORATE BOND RATINGS

AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.

A - Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

40
<PAGE> 43

BBB - Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.

BB - Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.

B - Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC - Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.

CC - Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C - Bonds are in imminent default in payment of interest or principal.

DDD-DD- and D - Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category.

APPENDIX II

DESCRIPTION OF THE SALOMON BROTHERS HIGH YIELD MARKET INDEX

The Salomon Brothers High Yield Market Index (the "Index") is an index of
high yield corporate debt securities, which at May 31, 1996, included 1,013
issues with an aggregate par value of $200.9 billion and an aggregate market
value of $193.8 billion. The securities comprising the Index include all public,
nonconvertible high yield issues which are rated by at least one rating agency
as below investment grade (BB or less) or which are unrated but of below
investment grade quality. Other criteria include issue size of at least $50
million, at least one year remaining to maturity, and issues must be considered
"current pay" (not in default). Securities issued as investment grade securities
but which subsequently are reduced to a rating below investment grade are
included in the Index subject to the same criteria. All securities that go into
default after inclusion in the Index are deleted from the Index. All additions
to and deletions from the Index occur after

41
<PAGE> 44

month-end and are made at market prices. On May 31, 1996, of the 1,013 issues
comprising the Index, 941 (91.9% of market value) were cash paying issues not in
default and 72 issues (8.1% of market value) were zero-coupon, deferred interest
or step-up coupons not in default. The Index is calculated and published monthly
by Salomon Brothers Fixed Income Index Group.

42
<PAGE> 45

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
RISK FACTORS - SPECIAL SUMMARY................ 2
1. ABOUT THE SUMMIT HIGH YIELD FUND......... 4
Transaction Costs and Fund Expenses...... 4
Financial Highlights..................... 6
Fund and Market Characteristics/Risk
Factors.................................. 7
2. INVESTMENT POLICIES, PRACTICES AND
RISKS.................................... 8
Types of Portfolio Securities............ 9
Types of Fund Management Practices....... 15
3. THE TRUST AND THE FUND................... 19
Organization of the Trust and the Fund... 19
Management of the Trust and the Fund..... 20
Management-Related Services.............. 24
Fund Expenses............................ 25
Net Asset Value.......................... 26
Distribution Expenses.................... 27
Understanding Performance Information.... 28
4. INVESTING WITH SUMMIT INVESTMENT TRUST... 29
How to Purchase Shares................... 29
General Methods of Purchasing Shares..... 30
Share Price and Sales Charges............ 30
Shareholder Services..................... 33
General Methods of Redeeming Shares...... 34
Additional Shareholder Privileges........ 35
Distributions and Taxes.................. 36
Obtaining Information on Your
Investment............................... 38
Other Classes of Shares.................. 38
APPENDIX I -- Bond Ratings.................... 39
APPENDIX II -- Description of The Salomon Brothers
High Yield Market Index.................. 41
</TABLE>

----------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S COMBINED
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND, THE TRUST, OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY THE FUND, THE TRUST OR THE DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

----------------------------

DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219

-------------------------------------------------

MANAGED BY
FIRST SUMMIT CAPITAL MANAGEMENT

-------------------------------------------------

SUMMIT HIGH YIELD FUND

SUMMIT HIGH YIELD SHARES CLASS

-------------------------------------------------
PROSPECTUS AS OF OCTOBER 1, 1996
<PAGE> 46

<TABLE>
<CAPTION>
ITEM PROSPECTUS HEADING
NO. (RULE 495(c) CROSS REFERENCE)
- ---- -----------------------------
<S> <C> <C>
7. Purchase of Securities Being Offered. SUMMIT HIGH YIELD SHARES: Investing with Summit Investment
Trust --- How to Purchase Shares; Investing with Summit
Investment Trust --- Share Price and Sales Charges; The
Trust and the Fund --- Distribution Expenses; Investing with
Summit Investment Trust --Shareholder Services; Investing
with Summit Investment Trust --- Additional Shareholder
Privileges; The Trust and the Fund --- Net Asset Value.

SUMMIT HIGH YIELD INSTITUTIONAL SERVICE SHARES: Investing
with Summit Investment Trust --- How to Purchase
Institutional Service Shares; Investing with Summit
Investment Trust --- Share Price; The Trust and the Fund --
Distribution Expenses; Investing with Summit Investment
Trust --- Shareholder Services; Investing with Summit
Investment Trust --- Additional Shareholder Privileges; The
Trust and the Fund --- Net Asset Value.

8. Redemption or Repurchase. SUMMIT HIGH YIELD SHARES: Investing with Summit
Investment Trust --- Share Price and Sales Charges;
Investing with Summit Investment Trust --- General
Methods of Redeeming Shares; Investing with Summit
Investment Trust --- Shareholder Services; Investing with
Summit Investment Trust --- Additional Shareholder
Privileges.

SUMMIT HIGH YIELD INSTITUTIONAL SERVICE SHARES: Investing
with Summit Investment Trust --- Share Price; Investing with
Summit Investment Trust --- General Methods of Redeeming
Shares; Investing with Summit Investment Trust ---
Shareholder Services; Investing with Summit Investment Trust
--- Additional Shareholder Privileges.

9. Pending Legal Proceedings. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Not Applicable.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

10. Cover Page. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Cover Page.

11. Table of Contents. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Table of Contents.

12. General Information and History. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: General Information.

13. Investment Objectives and Policies. SUMMIT HIGH YIELD SHARES: Investment Objectives and
Policies; Risk Factors; Investment Program; Investment
Restrictions; Portfolio Transactions.
</TABLE>

<PAGE> 47

PROSPECTUS
SUMMIT HIGH YIELD FUND

SUMMIT HIGH YIELD INSTITUTIONAL SERVICE SHARES CLASS

SUMMIT INVESTMENT TRUST - 3435 STELZER ROAD - COLUMBUS, OH 43219 -
1-800-272-3442

Summit Investment Trust (the "Trust") is organized as an open-end,
management investment company (a mutual fund). The Trust is authorized to
provide a range of investment objectives through a series of separate investment
portfolios or funds. This prospectus relates to the Summit High Yield
Institutional Service Shares class ("Institutional Service Shares") of the
SUMMIT HIGH YIELD FUND (the "Fund"), a diversified investment portfolio of the
Trust. The Fund also offers, by means of a separate prospectus, a retail class
of shares. The Fund is the only portfolio of the Trust currently available.

FACTS AT A GLANCE
INVESTMENT OBJECTIVES:
High current income with capital appreciation a secondary goal. As with any
mutual fund, there is no assurance that the Fund will achieve its
objectives.
STRATEGY:
Investing primarily in lower-quality, intermediate to long-term corporate
bonds, often called "high yield" or "junk" bonds. The portfolio will be
actively managed to take advantage of relative values of various issuers and
industry sectors of the high yield market. Emphasis will be given to issuers
and sectors whose credit fundamentals and technical trading factors provide
attractive risk reward characteristics.
RISKS OF JUNK BONDS:
The Fund may invest up to 100% of its assets in lower-rated, or "junk"
bonds, that entail greater risks, including default risks, than those found
in higher-rated securities. The Fund may also invest in lower-rated foreign
debt securities that entail special additional risks. Investors should
carefully consider these risks before investing. See "Risk Factors," "Fund
and Market Characteristics/Risk Factors," "Foreign Sovereign Debt
Securities" and "Foreign Securities" in this prospectus and "Special Risks
of Investing in 'Junk Bonds'," "Foreign Sovereign Debt Securities" and
"Foreign Securities" in the Combined Statement of Additional Information. An
investment in the Fund should be considered speculative.
INVESTOR PROFILE:
A risk-oriented investor seeking the highest level of current income, paid
monthly, who is willing to accept the possibility of significant
fluctuations in principal value. The Fund should represent only a portion of
such an investor's overall investment program, not the only investment. When
sold, Fund shares may be worth more or less than when purchased.
FEES AND CHARGES:
Institutional Service Shares are offered to qualified purchasers (i.e.
primarily institutional investors as described under "Organization of the
Trust and the Fund") at their net asset value. The Fund pays various
advisory, service and distribution fees.

Minimum Investment: $100,000 minimum for initial investments; however, this
amount may be waived for certain classes of purchasers described under "How
to Purchase Institutional Service Shares."
INVESTMENT ADVISER/FUND ADMINISTRATOR:
First Summit Capital Management ("FSCM" or the "Adviser") is the investment
adviser to the Fund. The Administrator of the Fund is BISYS Fund Services,
Limited Partnership ("BISYS Fund Services" or the "Administrator").
------------------------

The Fund also offers an additional class of shares, the Summit High Yield
Shares, which is designed for purchase by retail investors. A prospectus for the
Summit High Yield Shares class can be obtained by writing to BISYS Fund Services
at the above address or by calling the above telephone number.
------------------------

The date of this prospectus is October 1, 1996.
<PAGE> 48

RISK FACTORS -- SPECIAL SUMMARY

SPECIAL RISKS OF INVESTING IN "JUNK BONDS"

The Fund may invest up to 100% of its assets in lower-rated, or "junk"
bonds that entail greater risks, including default risks, than those found in
higher-rated securities. The following special considerations are additional
risk factors associated with the Fund's investments in lower-rated debt
securities known as "junk bonds".

2
<PAGE> 49

per share. If market quotations are not readily available for the Fund's
lower-rated or non-rated securities, these securities will be valued by a method
that the Board of Trustees (the "Trustees") believes accurately reflects fair
value. Judgment plays a greater role in valuing lower-rated debt securities than
with respect to securities for which more external sources of quotations and
last sale information are available.

LEGISLATIVE PROPOSALS. There are a variety of legislative actions which
have been taken or which are considered from time to time by the United States
Congress which could adversely affect the market for high yield bonds. For
example, Congressional legislation limited the deductibility of interest paid on
certain high yield bonds used to finance corporate acquisitions. Also,
Congressional legislation has, with some exceptions, generally prohibited
federally-insured savings banks from investing in high yield securities.
Regulatory actions have also effected the high yield market. For example, many
insurance companies have restricted or eliminated their purchases of high yield
bonds as a result of, among other factors, actions taken by the National
Association of Insurance Commissioners. If similar legislative and regulatory
actions are taken in the future, they could result in further tightening of the
secondary market for high yield issues, could reduce the number of new high
yield securities being issued and could make it more difficult for the Fund to
attain its investment objectives.

OTHER RISKS

3
<PAGE> 50

1. ABOUT THE SUMMIT HIGH YIELD FUND

TRANSACTION COSTS AND FUND EXPENSES

The Institutional Service Shares of the Fund are sold subject to Rule 12b-1
distribution fees and the other expenses of the Fund's operation as set forth in
the following table:

FEE TABLE

INSTITUTIONAL SERVICE SHARES CLASS TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)................................... None
Redemption Fees (as a percentage of amount redeemed, if
applicable)..................................................... None
Exchange Fee...................................................... None
</TABLE>

ANNUAL INSTITUTIONAL SERVICE SHARES CLASS OPERATING EXPENSES
(As percentage of projected average net assets)

<TABLE>
<S> <C>
Management Fees................................................... 0.35%(1)
12b-1 Fees........................................................ 0.25%
Other Administrative and Servicing Costs.......................... 1.00%
Total Institutional Service Shares Operating Expenses............. 1.60%
</TABLE>

- ---------------

(1) This fee may vary between 0.35% and 1.15%; however, the Adviser has agreed
to waive a portion of its advisory fee to limit the Fund's total expenses to
1.60%. (See "Management of the Trust and the Fund -- The Advisory Fee.")

The foregoing "Fee Table" should help you understand the kinds of expenses
you will bear directly or indirectly as a Fund shareholder. "Institutional
Service Shares Class Transaction Expenses" shows what you pay as direct costs in
buying Institutional Service Shares in the Fund. Because a portion of the 12b-1
fees is considered an asset-based sales charge by the National Association of
Securities Dealers, Inc. ("NASD"), long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
NASD. The "Other Administrative and Servicing Costs" fees are derived from those
costs incurred by the Summit High Yield Shares class of the Fund, since the
Institutional Service Shares of the Fund were not offered to the public prior to
January 19, 1996. "Annual Institutional Service Shares Operating Expenses"
provides an estimate of how much it will cost to operate the Institutional
Service Shares of the Fund for one year. These are costs paid indirectly by
holders of the Institutional Service Shares because they are deducted from the
Fund's total assets before the daily share price is calculated and before
dividends and other distributions are made.

4
<PAGE> 51

EXAMPLE:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end
of each time period:......................................... $ 16 $50 $87 $190
</TABLE>

The Example should not be considered a representation of past or future
expenses. Actual Fund expenses may be higher or lower than those shown.

The "Annual Institutional Service Shares Operating Expenses" set forth above
are:

-- MANAGEMENT FEE: the percent of Fund assets paid to the Fund's
investment adviser; this fee is a performance fee which is based on the
performance of the Fund in relation to the change in the Salomon Brothers High
Yield Market Index; the fee may be as high as 1.15% or as low as 0.35% annually;
for the fiscal year ended May 31, 1996, the Fund paid a management fee of 0.27%,
absent waivers the Fund paid a management fee of 0.87%.

-- MARKETING OR DISTRIBUTION FEES: an annual charge ("12b-1 Fee") to
existing shareholders to defray the cost of selling Institutional Service Shares
to new shareholders; and

5
<PAGE> 52

FINANCIAL HIGHLIGHTS

SUMMIT HIGH YIELD FUND
For a share of each class outstanding throughout each period.

<TABLE>
<CAPTION>
SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE CLASS*
-----------------------------
<S> <C> <C>
INSTITUTIONAL
SERVICE
SHARES FOR THE PERIOD
---------- FROM
YEAR ENDED JUNE 27, 1994
MAY 31, TO
YEAR ENDED MAY 31, 1996 1996(D) MAY 31, 1995(A)
- ------------------------------------------------------------------- ---------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD............................... $10.59 $ 10.00
---------- ---------------
INVESTMENT ACTIVITIES:
Net investment income......................................... 0.40 0.83
Net realized and unrealized gains (losses) on investments..... 0.47 0.11
---------- ---------------
Total from Investment Activities.............................. 0.87 0.94
---------- ---------------
DISTRIBUTIONS:
Net investment income......................................... (0.40) (0.83)
In excess of net investment income............................ (0.03)
Net realized gains............................................ 0.00 0.00
---------- ---------------
Total Distributions........................................... (0.43) (0.83)
---------- ---------------
NET ASSET VALUE, END OF PERIOD................................ $11.03 $ 10.11
======== ============
Total Return (excludes sales charges)......................... 20.16% 9.97%(b)
RATIOS/SUPPLEMENTAL DATA
Net Assets at end of period (000)............................. $1,773 $27,676
Ratio of expenses to average net assets....................... 1.52% 1.56%(c)
Ratio of net investment income to average net assets.......... 9.86% 9.13%(c)
Ratio of expenses to average net assets*...................... 2.76% 1.61%(c)
Ratio of net investment income to average net assets*......... 8.62% 9.08%(c)
Portfolio turnover............................................ 187.61% 158.36%
</TABLE>

- ---------------

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.

(a) Period from commencement of operations.

(b) Not annualized.

(d) On January 19, 1996, the Fund began offering a second class of
shares and designated such shares as "Institutional Service" shares.

6
<PAGE> 53

FUND AND MARKET CHARACTERISTICS/RISK FACTORS

WHAT IS A HIGH YIELD OR "JUNK" BOND?

The debt security ratings of several NRSROs are set forth in Appendix I to
this prospectus.

WHO ISSUES HIGH YIELD BONDS?

Typically, corporations in one of several categories: small and medium-size
companies that lack the history or capital strength to merit "investment-grade"
status; former blue-chip companies that have been downgraded due to financial
difficulties; companies electing to borrow heavily to finance (or avoid) a
takeover or buyout; and highly indebted ("leveraged") companies seeking to
refinance their debt at lower rates. With high yield securities, there is a
greater possibility of a default or the bankruptcy of the issuer, circumstances
that might increase the expenses of the Fund in seeking recovery from such an
issuer.

DOES THE FUND INVEST ONLY IN HIGH YIELD BONDS?

WHY SHOULD THE INVESTOR IN THIS FUND BE PREPARED FOR GREATER PRICE SWINGS THAN
IN HIGH QUALITY BOND FUNDS?

For two main reasons:

7
<PAGE> 54

securities in which the Fund invests. Large purchases or sales of certain issues
may thus cause significant changes in their prices, and the Fund may be required
to retain certain investments for indefinite periods or sell them at substantial
losses. A lack of liquidity or low trading volume also means that judgement may
play a significant role in valuing the securities.

HOW MIGHT INTEREST RATES AND THE FUND'S AVERAGE MATURITY AFFECT ITS PRICE?

HOW DO SHARE PRICE CHANGES AFFECT OVERALL RETURN?

Your total return for any given period has two parts:

Income, which will always be positive, and

Change in share price, which can be positive or negative. For example, if
the Fund's income return was 10% during a year, and the price declined 15%, your
total return would be approximately -5%. A price increase of 5% would have given
you a return of approximately 15%. Always remember that the Fund's yield does
not indicate its total return. (Also see "Understanding Performance
Information.")

HOW DOES THE FUND ADDRESS THE SPECIAL RISKS OF HIGH YIELD BOND INVESTING?

2. INVESTMENT POLICIES, PRACTICES AND RISKS

This section takes a detailed look at the types of securities the Fund may
hold in its portfolio and the various kinds of investment practices that may be
used in day-to-day portfolio management. Certain FUNDAMENTAL POLICIES and
current OPERATING POLICIES of the Fund are noted where applicable. The Fund's
FUNDAMENTAL POLICIES (as with its investment objectives stated on page 1) may
not be changed without shareholder approval. Such approval requires a vote of
the lesser of: (i) 67% or more of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented; or (ii) more than 50%
of the outstanding shares. The Fund's OPERATING POLICIES can be changed by the
Trustees without shareholder approval. Unless otherwise specified, the
investment program and restrictions of the Fund are not fundamental policies.

8
<PAGE> 55

Reference should be made to the discussion under "Investment Restrictions" in
the Combined Statement of Additional Information.

TYPES OF PORTFOLIO SECURITIES

DEBT SECURITIES

Bonds may be secured (backed by specified collateral) or unsecured (backed
by the issuer's general creditworthiness). Most high yield "junk" bonds are
unsecured.

9
<PAGE> 56

bonds in the portfolio which are not rated, but which the Adviser has judged to
be comparable in quality to the corresponding rated bonds.

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL
MARKET VALUE OF BOND HOLDINGS
-----------------------------
CREDIT RATING RATED NOT RATED TOTAL
------------------------------------------------- ----- --------- -----
<S> <C> <C> <C>
BB............................................... 7.02% 0.00% 7.02%
B................................................ 78.55% 0.00% 78.55%
CC & CCC......................................... 12.63% 1.80% 14.43%
----- --------- -----
98.20% 1.80% 100%
===== ======== =====
</TABLE>

The debt security ratings of several NRSROs are set forth in Appendix I to
this prospectus.

10
<PAGE> 57

achieved in allocating cash flows on the underlying mortgages is to create
tranches on which the expected cash flows have a higher degree of predictability
than the underlying mortgages. As part of the process of creating more
predictable cash flows on some of the tranches, one or more tranches generally
must be created that absorb most of the volatility in the cash flows on the
underlying mortgages. The yields on these tranches are relatively higher than on
tranches with more predictable cash flows. The Fund may invest in these
subordinated, higher-yielding tranches which take the risk of default first.
Because of the uncertainty of the cash flows on these tranches, and the
sensitivity thereof to changes in prepayment rates on the underlying mortgages,
the market prices of and yield on these tranches tend to be highly volatile.

Stripped mortgage securities are created by separating the interest and
principal payments generated by a pool of mortgage-backed instruments to create
two classes of securities. One class receives interest-only payments ("IOs") and
one principal-only payment ("POs"). CMOs, IOs, and POs are acutely sensitive to
interest rate changes and the rate of principal prepayments on the underlying
mortgages serving as collateral. For example, declining interest rates may
result in prepayments and thus termination of a stream of IO interest payments,
in which event the Fund may fail to recoup its investment. Moreover, the
proceeds of prepayments may have to be reinvested at the lower interest rates.
IOs, POs, and certain CMOs are very volatile in price and may have reduced
liquidity.

ZERO-COUPON AND PAY-IN-KIND BONDS. The Fund may invest up to 25% of its
total assets in zero-coupon bonds. A zero-coupon security has no cash coupon
payments. Instead, the issuer sells the security at a substantial discount from
its maturity value. The interest received by the investor from holding this
security to maturity is the difference between the maturity value and the
purchase price. The advantage to the investor is that the reinvestment risk of
the income received during the life of the bond is eliminated. However, zero-
coupon bonds, like other bonds, retain interest rate and credit risk and usually
display more price volatility than securities that pay a cash coupon. Since
there are no periodic interest payments made to the holder of a zero-coupon
security, when interest rates rise, the value of such a security will fall more
dramatically than a bond paying out interest on a current basis. When interest
rates fall, however, zero-coupon securities rise more rapidly in value because
the bonds have locked in a specific rate of return which becomes more attractive
the further interest rates fall.

The Fund is required to distribute to shareholders income imputed to any
zero-coupon or PIK investments. Such distributions could reduce the Fund's cash
position.

11
<PAGE> 58

OTHER SECURITIES

Other types of securities and investments the Fund may buy are:

CONVERTIBLES. These corporate securities, usually bonds or preferred
stocks, are exchangeable for a specified number of shares of common stock, at a
pre-stated price. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique characteristics such as: (i) higher
yields than common stocks but lower yields than comparable nonconvertible
securities; (ii) a lesser degree of fluctuation in value than the underlying
stock since they have fixed income characteristics; and (iii) the potential for
capital appreciation if the market price of the underlying stock increases.
Although investments in convertible securities will be consistent with the
Fund's secondary objective of capital appreciation, because of their basically
lower yields than comparable nonconvertible securities, such investments will
not be treated as "high yield" for purposes of the Fund's policy of generally
having 65% of its assets invested in high yield securities.

EQUITIES: COMMON AND PREFERRED STOCK; WARRANTS. Each share of common and
preferred stock represents ownership or "equity" in a corporation, but usually
only common stockholders have the right to elect company directors and vote on
other matters. Preferred stock may have various preferences over common stock,
such as a prior right to payment of dividends. Warrants are options to buy a
stated number of shares of common stock at a specified price at any time during
the life of the warrant, usually one or two years. The common and preferred
stocks in which the Fund may invest may be traded either on a national
securities exchange or in the "over-the-counter" market, and the issuers of such
stocks may be unseasoned issuers with relatively smaller capitalizations. Such
issuers may or may not have outstanding issues of higher-yielding debt
securities. As an OPERATING POLICY, the Fund may not invest more than 10% of its
total assets in common stocks (including up to 5% in warrants).

PRIVATE PLACEMENTS. Securities sold directly to a small number of
investors, usually institutions, without registration under the Securities Act
of 1933 (the "1933 Act") are called private placements. Privately-placed
securities are considered "restricted securities" and may not be readily
marketable. Selling these securities pursuant to a registration statement may
involve substantial delays and additional costs. As an OPERATING POLICY, the
Fund will not invest more than 15% of its net assets in illiquid securities.
Some restricted securities are eligible for purchase and sale under Rule 144A
under the 1933 Act. This rule permits "qualified institutional buyers," such as
the Fund, to trade in certain privately-placed securities even though such
securities are not registered under the 1933 Act. The Trustees may determine,
when appropriate, that such securities, although restricted, are nevertheless
liquid and therefore, not subject to the 15% limitation. A security is illiquid
if it cannot be sold or disposed of in the ordinary course of business within
seven days at approximately the value at which the Fund has valued the
investment.

12
<PAGE> 59

may be subject to the credit risk of both the borrower and the lender. In an
assignment, the Fund acquires direct rights against the borrower on a loan,
although such rights may differ from and be more limited than those held by the
assigning lender. The Fund may have difficulty disposing of assignments and
participations where disposition involves assigning such interests to third
parties. These investments are treated as securities, not as the making of loans
subject to the Fund's investment restriction relating to loans. Since these
investments may not be readily marketable, they may be subject to the Fund's
policy against investing more than 15% of the Fund's net assets in illiquid
securities. Participations in or assignments of loans to governments of LDCs may
involve risks in addition to those attendant on investments in foreign
securities generally (see "Foreign Sovereign Debt Securities" and "Foreign
Securities" below).

FOREIGN SOVEREIGN DEBT SECURITIES. The Fund expects to invest in foreign
sovereign debt securities, including those of LDCs. Such securities will include
Brady Bonds. Brady Bonds are debt securities issued under the framework of the
Brady Plan, an initiative announced by U.S. Treasury Secretary Nicholas F. Brady
in 1989 as a mechanism for debtor nations to restructure their outstanding
external indebtedness. The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt, some or all of which may have
gone into default, for newly-issued bonds. Multilateral institutions such as the
International Bank for Reconstruction and Development (the "World Bank") and the
International Monetary Fund ("IMF") support the restructuring by providing funds
pursuant to loan agreements or other arrangements which enable the debtor nation
to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount. Under these arrangements, debtor nations have been required to agree
to the implementation of various domestic monetary and fiscal reforms intended
to promote economic growth and development. Investors should recognize that
Brady Bonds have been issued only recently, and accordingly do not have a long
payment history. Moreover, the financial packages offered by each country
differ. Countries that have issued, or are about to issue Brady Bonds include
Argentina, Brazil, Costa Rica, the Dominican Republic, Mexico, Nigeria, the
Philippines, Poland, Uruguay and Venezuela. The Fund may purchase Brady Bonds
issued by any of these countries, and it reserves the right to acquire Brady
Bonds that may be issued by other countries in the future.

Investing in foreign sovereign debt securities will expose the Fund to the
direct or indirect consequences of political, social or economic changes in the
LDCs that issue the securities. The ability and willingness of sovereign
obligors in LDCs or the governmental authorities that control repayment of their
external debt to pay principal and interest on such debt when due may depend on
general economic and political conditions within the relevant country. Countries
such as those in which the Fund may invest have historically experienced, and
may continue to experience, high rates of inflation, high interest rates,
exchange rate trade difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political uncertainty or instability.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
size of its debt service burden relative to the economy as a whole, and its
government's policy towards the IMF, the World Bank and other international
agencies.

13
<PAGE> 60

among other things, reducing and rescheduling interest and principal payments by
negotiating new or amended credit agreements or converting outstanding principal
and unpaid interest to Brady Bonds, and obtaining new credit to finance interest
payments. Holders of certain foreign sovereign debt securities may be requested
to participate in the restructuring of such obligations and to extend further
loans to their issuers. There can be no assurance that the Brady Bonds and other
foreign sovereign debt securities in which the Fund may invest will not be
subject to similar restructuring arrangements or to requests for new credit
which may adversely affect the Fund's holdings. Brady Bonds issued to date are
generally purchased and sold in secondary markets through U.S. securities
dealers and maintained through European transnational securities depositories.

WHEN-ISSUED SECURITIES. The Fund may, from time to time, purchase
securities on a "when-issued" basis ("forward commitments"). The price of such
securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment take place at a later
date. Normally, the settlement date occurs within 90 days of the purchase.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer, and no interest accrues to the Fund. Forward commitments
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in value of the Fund's other assets. Such when-issued securities may be sold
prior to the settlement date. At the time the Fund makes the commitment to
purchase a security on a when-issued basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The Fund
does not believe that its net asset value or income will be adversely affected
by its purchase of securities on a when-issued basis. The Fund will maintain
cash and marketable securities equal in value to commitments for when-issued
securities. Such segregated securities either will mature or, if necessary, be
sold on or before the settlement date. Except as may be imposed by these
factors, there is no limit on the percentage of the Fund's total assets that may
be committed to such transactions.

14
<PAGE> 61

TYPES OF FUND MANAGEMENT PRACTICES

BORROWING MONEY AND TRANSFERRING ASSETS. The Fund can borrow money from
banks subject to the fundamental policy set forth below. Such borrowings may be
collateralized with Fund assets.

FUNDAMENTAL POLICY: The Fund will not borrow money, except the Fund
may borrow from banks as a temporary measure for extraordinary or emergency
purposes, in amounts not exceeding 15% of its total assets valued at
market. The Fund will not borrow in order to increase income (leveraging),
but only to facilitate redemption requests which might otherwise require
untimely disposition of portfolio securities. The Fund will not purchase
additional securities when money borrowed exceeds 5% of total assets.

15
<PAGE> 62

the underlying instrument at the exercise price. The Fund may buy and sell
futures contracts (and options on such contracts) to manage its exposure to
changes in interest rates, stock or bond prices, and foreign currencies; to
adjust its overall exposure to certain markets; and also to adjust the
portfolio's duration. The Fund may write covered call and covered put options,
buy puts and calls, and buy and sell covered spread options on securities,
financial indices, and foreign currencies. (A spread option gives the Fund the
right to sell an asset at a fixed dollar or yield spread in relation to a
benchmark security. The Fund will not commit more than 5% of its total assets to
premiums when purchasing spread options.)

16
<PAGE> 63

prior to its expiration only by entering into a closing purchase transaction
with the dealer to which the Fund originally wrote the option. There can be no
assurance that the Fund will be able to liquidate a dealer option at a favorable
price at any time prior to expiration. Consistent with a position taken by the
staff of the SEC, the Fund will treat dealer options as subject to the Fund's
limitation prohibiting investment of more than 15% of its net assets in illiquid
securities.

As OPERATING POLICIES, the Fund will not engage in transactions in futures
contracts and options thereon for speculation, and the Fund will not write a
covered call option if, as a result, the aggregate market value of all portfolio
securities or currencies covering call options exceeds 25% of the market value
of the Fund's net assets. In addition, the Fund will not enter into futures
contracts or options thereon if, as a result thereof, more than 5% of the Fund's
total assets (taken at market value at the time of entering into the contract)
would be committed to initial margin and premiums on such contracts or options
thereon, provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount, as defined in certain
Commodity Futures Trading Commission regulations, may be excluded in computing
this 5% limitation. The Combined Statement of Additional Information should be
consulted for a fuller description of the special risks relating to futures
contracts and options.

MANAGING FOREIGN EXCHANGE RISK. Investors in non-U.S. dollar securities
may "hedge" their exposure to potentially unfavorable currency changes by
purchasing a contract to exchange one currency for another on some future date
at the present prevailing exchange rate. In certain circumstances, a "proxy
currency" may be substituted for the currency in which the investment is
denominated, a strategy known as "proxy hedging." In such a case, the amount of
the foreign currency to be sold may exceed the value of the Fund's securities
denominated in such currency. The Fund may also maintain a net exposure to
forward contracts in excess of the value of the Fund's assets to which the
forward contracts relate in order to avoid excess transactions and transaction
costs. In either case, any such excess amount must be "covered" by liquid
securities, denominated in any currency, at least equal at all times to the
amount of such excess. Although foreign currency transactions will be used
primarily to protect the Fund's foreign securities from adverse currency
movements, they involve the risk that anticipated currency movements will not be
accurately predicted and the Fund's total return could be adversely affected as
a result. As an OPERATING POLICY, the Fund will normally conduct its foreign
exchange transactions in cash or by entering into forward currency contracts
(not exceeding 20% of net assets) expiring in less than one year.

17
<PAGE> 64

to enforce its rights thereto; (b) possible subnormal levels of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights.

3. THE TRUST AND THE FUND

ORGANIZATION OF THE TRUST AND THE FUND

HOW ARE THE TRUST AND THE FUND ORGANIZED?

The Fund is a separate investment portfolio or series of shares of the
Trust, which became available to investors on June 27, 1994. The Fund is the
only Trust portfolio currently available. This prospectus relates to the
Institutional Service Shares of the Fund. (See "Other Classes of Shares" in this
prospectus.) The Institutional Service Shares are designed to meet the specific
and unique needs of very high net worth individuals and institutional investors,
such as: plan sponsors of both public and corporate defined benefit, defined
contribution, profit sharing, 401(k) and other savings and/or retirement type
plans; endowments, foundations and other eleemosynary institutions; banks and
trust companies; investment advisory and asset

18
<PAGE> 65

management firms; third-party non-transactional fee fund programs; and other
similar types of institutions and/or programs, either investing directly for
their own accounts or for the accounts of others.

WHAT IS MEANT BY "SHARES"?

DOES THE TRUST HAVE ANNUAL SHAREHOLDER MEETINGS?

As of September 16, 1996, The Union Central Life Insurance Company was a
"control person" of the Fund by virtue of its ownership of the Institutional
Service Shares of the Fund. Pursuant to the Investment Company Act of 1940, as
amended (the "1940 Act"), a "control person" possesses the ability to control
the outcome of matters submitted for shareholder vote.

MANAGEMENT OF THE TRUST AND THE FUND

HOW ARE THE TRUST AND THE FUND MANAGED?

Trustees. Under Massachusetts law and the Trust's Declaration of Trust and
By-Laws, the business and affairs of the Trust are managed under the direction
of its Trustees.

Investment Management. First Summit Capital Management ("FSCM" or the
"Adviser"), a joint venture having its principal offices at 1876 Waycross Road,
Cincinnati, OH 45240, is the investment adviser to the Fund. FSCM was organized
on January 4, 1994, principally for purposes of sponsoring and managing the

19
<PAGE> 66

Trust pursuant to a Joint Venture Agreement (the "Joint Venture Agreement")
between Carillon Advisers, Inc. ("Carillon"), an Ohio corporation, and Freeman
Holding Company, Inc. ("Freeman"), a Delaware corporation. Under the Joint
Venture Agreement, Carillon serves as the general manager of the Adviser and is
responsible for maintaining its books of account and other financial records and
for preparing its quarterly financial statements. Carillon has full authority to
act on behalf of the Adviser except with respect to matters involving single
commitments in excess of $10,000 which must be approved by both Carillon and
Freeman. Each of Carillon and Freeman is authorized to appoint two
representatives ("Representative(s)") to serve, in effect, as officers of the
Adviser. Carillon is a wholly-owned subsidiary of The Union Central Life
Insurance Company ("Union Central Life"), an Ohio mutual insurance company.
Freeman is the parent corporation of Freeman Securities Company, Inc., a New
Jersey corporation which is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "1934 Act") and a member of the NASD. The Adviser is
registered under the Investment Advisers Act of 1940.

Portfolio Managers. Since May 21, 1996, Messrs. Steven R. Sutermeister and
Gary R. Rodmaker, and since October 1, 1996, Mr. Bradley L. Lutz have been
primarily responsible for the day-to-day management of the Fund's investment
portfolio. The portfolio managers have extensive experience in managing high
yield investment portfolios. Mr. Sutermeister has been a Representative of FSCM
since its organization in January 1994, and has also been a Vice President and
Director of the Fixed Income Group of Carillon since September, 1990. In that
capacity, Mr. Sutermeister oversees the management of over $3 billion in fixed
income assets, and is personally responsible for the investment of nearly $200
million in high yield assets for various clients. In addition, Mr. Sutermeister
serves as the portfolio manager of Carillon Bond Fund, another registered
investment company that is advised by Carillon. Mr. Rodmaker, a Chartered
Financial Analyst, has been an employee of the Adviser since its inception, and
is also a senior member of the Fixed Income Group of Carillon. Mr. Rodmaker
joined Carillon in 1990. In his present position, Mr. Rodmaker is responsible
for managing $1.250 billion of corporate bonds, including investment grade
securities, private placements and high yield bonds. Mr. Lutz, who was
previously a Vice President at Pachreder Associates, Inc., from June, 1992
through August, 1996, became an employee of the Adviser in September, 1996. Mr.
Lutz also serves as a Fixed Income Portfolio Manager with Carillon, specializing
in high yield bonds.

THE ADVISORY AGREEMENT

20
<PAGE> 67

for the Fund. The advisory services furnished by the Adviser under the Advisory
Agreement are not exclusive, and the Adviser is free to perform similar services
for others.

THE ADVISORY FEE

<TABLE>
<CAPTION>
ADVISORY FEE
FUND PERFORMANCE (AS % OF AVERAGE
(NET OF FEES AND EXPENSES) NET ASSETS)
------------------------------------------------------ ----------------
<S> <C>
Index Return + 10 percentage points or more........... 1.15%
Index Return + 9..................................... 1.11
Index Return + 8..................................... 1.07
Index Return + 7..................................... 1.03
Index Return + 6..................................... 0.99
Index Return + 5..................................... 0.95
Index Return + 4..................................... 0.91
Index Return + 3..................................... 0.87
Index Return + 2..................................... 0.83
Index Return + 1..................................... 0.79
Index Return 0.................................... 0.75
Index Return - 1..................................... 0.71
Index Return - 2..................................... 0.67
Index Return - 3..................................... 0.63
Index Return - 4..................................... 0.59
Index Return - 5..................................... 0.55
Index Return - 6..................................... 0.51
Index Return - 7..................................... 0.47
Index Return - 8..................................... 0.43
Index Return - 9..................................... 0.39
Index Return - 10 percentage points or more........... 0.35
</TABLE>

21
<PAGE> 68

For the fiscal year ended May 31, 1996, the Adviser received an investment
advisory fee of $73,369 (0.27%), following certain voluntary waivers. Pursuant
to the provisions of the Advisory Agreement, the Adviser was entitled to receive
an advisory fee of $95,827 (0.35%) for the fiscal year ended May 31, 1996.
Absent this provision in the Advisory Agreement and the voluntary waiver
undertaken by the Adviser, the Adviser would have been entitled to receive an
advisory fee of $238,006 (0.87%), based on the Fund's performance for the fiscal
year ended May 31, 1996, pursuant to the performance schedule above. Under the
provisions of the Advisory Agreement, the Adviser is entitled to receive
one-twelfth of the performance-related portion of the fee computed for the
preceding twelve-month period. At the present time, the Adviser has agreed to
waive a portion of its advisory fee so as to confine the Fund's total expenses
to 1.60%.

THE SUB-ADVISER

THE SUB-ADVISORY AGREEMENT

The Sub-Adviser serves pursuant to an Investment Sub-Advisory Agreement
with the Adviser dated September 18, 1996 (the "Sub-Advisory Agreement").

Under the Sub-Advisory Agreement, Carillon provides, subject to the
Adviser's direction, a portion of the investment advisory services for which the
Adviser is responsible pursuant to the Advisory Agreement relating to the Fund.
The Sub-Adviser provides investment research and advice with respect to
securities and investments and cash equivalents to the Fund. Research services
provided by the Sub-Advisor include information, analytical reports, computer
screening studies, statistical data and factual resumes pertaining to high yield
securities. Such supplemental research may be subject to additional analysis by
the Adviser.

22
<PAGE> 69

fees exceeds the amount of advisory fees paid to the Adviser pursuant to the
Advisory Agreement, the difference will be shared equally by the Adviser's
general partners, Freeman and Carillon, or paid by the Joint Venture.

The Sub-Advisory Agreement may be terminated at any time, without payment
of any penalty, by the Trustees or by a vote of a majority of the outstanding
voting securities of the Fund, upon sixty (60) days' written notice to the
Adviser and Carillon, and by the Adviser or Carillon, upon ninety (90) days'
written notice to the other party and the Fund. The Sub-Advisory Agreement shall
also terminate automatically in the event of any transfer or assignment thereof,
as defined in the 1940 Act, and in the event of any act or event that terminates
the Advisory Agreement between the Adviser and the Fund.

Prior to the implementation of the Sub-Advisory Agreement, the Adviser had
entered into a Investment Service Agreement (the "Service Agreement") with the
Trust and Union Central Life, which permitted the Adviser to have access to and
to utilize Union Central Life's advisory personnel, administrative services,
supplies and equipment in the performance of its advisory services and functions
under the Advisory Agreement. In consideration for such services, the Adviser
paid Union Central Life for the costs, direct or indirect, fairly attributable
thereto, but in no event less than $65,000 per year or such other amount as was
agreed to by the Adviser and Union Central Life. For the fiscal year ended May
31, 1996, the Adviser paid Union Central Life $65,000 pursuant to the Service
Agreement. The Service Agreement was terminated on September 18, 1996.

MANAGEMENT-RELATED SERVICES

BISYS SERVICE AGREEMENTS. The Trust has entered into three
management-related service agreements with affiliates of BISYS Fund Services,
Inc., a Delaware corporation which is a wholly-owned subsidiary of The BISYS
Group, Inc. BISYS Fund Services, Limited Partnership ("BISYS Fund Services"), an
Ohio limited partnership of which BISYS Fund Services, Inc. is the General
Partner, serves as Administrator of the Fund (the "Administrator"). BISYS Fund
Services Ohio, Inc. ("BISYS"), an Ohio corporation and also a wholly-owned
subsidiary of The BISYS Group, Inc., serves as Fund Accountant (the "Fund
Accountant") and additionally as the Trust's transfer and dividend disbursing
agent (the "Transfer Agent"). BISYS Fund Services acts also as the Fund's
Distributor or principal underwriter (the "Distributor") (see "Distribution
Expenses -- The Distributor").

23
<PAGE> 70

ADMINISTRATOR. Pursuant to a Management and Administration Agreement with
the Trust (the "Administration Agreement"), the Administrator, BISYS Fund
Services, subject to the direction and control of the Trustees, supervises all
aspects of the operation of the Fund except those performed by the Fund's
Adviser, custodian, Transfer Agent and Fund Accountant pursuant to their
respective agreements with the Trust. The Administrator is obligated to:
maintain office facilities for the Trust; furnish statistical and research data,
clerical and certain bookkeeping services, and stationery and office supplies;
prepare periodic reports to the SEC on Form N-SAR; assist the Trust or its
designee in the preparation of, and file, the Fund's federal and state tax
returns; assist the Trust in preparing Annual and Semi-Annual Reports to
Shareholders and its Registration Statements; and keep and maintain certain
financial accounts and records of the Fund. Partners, officers or employees of
the Administrator may serve as officers or employees of the Trust, and those who
do so will be compensated by the Administrator.

24
<PAGE> 71

FUND EXPENSES

Under the Advisory, Administration, Fund Accounting and Transfer Agency
Agreements, the Fund pays the service fees of, and/or reimburses certain
expenses incurred by, the Adviser, Administrator, Fund Accountant and Transfer
Agent. The expenses incurred in the operation of the Fund which are borne by the
Fund include: taxes, interest and brokerage fees and commissions, if any; fees
and expenses of Trustees who are not partners, officers, directors, shareholders
or employees of the Adviser, the Administrator or the Distributor (see
"Distribution Plan" and "The Distributor"); commission fees and state Blue Sky
qualification and renewal fees and expenses; custodian fees (see "Custodian");
transfer and dividend disbursing agent's fees; certain insurance premiums;
auditing and legal fees and expenses; fund accounting fees including pricing of
portfolio securities; costs of maintenance of legal existence; typesetting and
printing prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund; costs of Trustees' and shareholders' reports and
meetings; and any extraordinary expenses.

NET ASSET VALUE

The net asset value of Fund shares is determined once daily as of the close
of regularly scheduled trading (normally 4:00 p.m., Eastern Standard Time) on
the New York Stock Exchange (the "Exchange"), Monday through Friday, except that
no determination is required on: (i) days on which the Exchange is closed or on
which changes in the value of the Fund's securities holdings will not materially
affect the current net asset value of the shares of the Fund; (ii) days during
which no shares of the Fund are tendered for redemption and no order to purchase
or sell such shares is received by the Fund; or (iii) the following business
holidays or the days on which such holidays are observed by the Exchange: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Generally, trading in non-U.S.
securities, as well as U.S. Government securities and money market instruments,
is substantially completed each day at various times prior to the close of
regularly scheduled trading of the Exchange. The values of such securities used
in computing the net asset value of Fund shares are generally determined as of
such times.

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<PAGE> 72

Each of the Fund's two classes of shares will bear, pro-rata, all of the
common expenses of the Fund. The net asset value of all outstanding shares of
each class of the Fund will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Fund represented by the
value of shares of that class. All income earned and expenses incurred by the
Fund will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Fund represented by the value of shares
of such class, except that the Institutional Service Shares will not incur any
of the expenses under the Rule 12b-1 Plan of the Summit High Yield Shares class.

The different expenses borne by each class of shares will result in
different net asset values and dividends. The per share net asset value of the
Summit High Yield Shares class will generally be lower than that of the Summit
High Yield Institutional Service Shares class of the Fund because of the higher
expenses borne by the shareholders of the Summit High Yield Shares class. It is
expected, however, that the net asset value per share of the two classes will
tend to converge immediately after the payment of dividends, which will differ
by approximately the amount of the service expense differential between the
classes.

DISTRIBUTION EXPENSES

DISTRIBUTION PLAN. The Fund is authorized under the Trust's Distribution
and Shareholder Service Plan (the "Plan"), adopted pursuant to Rule 12b-1 (the
"Rule") under the 1940 Act, on behalf of the Institutional Service Shares, to
use its assets to finance certain activities relating to the distribution of
Institutional Service Shares to investors. The Plan is a "compensation" plan
providing for the payment of a fixed percentage of the Institutional Service
Shares' average net assets to finance distribution expenses. Under the Plan, the
Fund pays monthly to BISYS Fund Services, as its principal underwriter, a
distribution fee which may not exceed, on an annual basis, 0.25% of the
Institutional Service Shares' average daily net assets.

26
<PAGE> 73

The Plan authorizes BISYS Fund Services to use the distribution fee to pay,
or reimburse expenses incurred by, banks, broker-dealers and other institutions
which, pursuant to agreements with the Distributor, provide distribution
assistance and/or shareholder services including, but not limited to, printing
and distributing prospectuses to persons other than shareholders in the
Institutional Service Shares, printing and distributing advertising and sales
literature and reports to shareholders used in connection with selling the
Institutional Service Shares, furnishing personnel and communications equipment
to service shareholder accounts and prospective shareholder inquiries. Such
services may be performed by the Distributor or any of its affiliates.

The Plan may not be amended so as to materially increase the amount of the
distribution fee unless the amendment is approved by a vote of at least a
majority of the outstanding voting securities of the Summit High Yield
Institutional Service Shares class. In addition, no material amendment may be
made unless approved by the Trustees in the manner described above for Trustee
approval of the Plan.

UNDERSTANDING PERFORMANCE INFORMATION

27
<PAGE> 74

"TOTAL RETURN" tells you how much an investment in the Fund has changed in
value over a given time period. It reflects any net increase or decrease in the
share price and assumes that all dividends and capital gains (if any) paid
during the period were reinvested in additional shares. Reinvesting
distributions means that total return numbers include the effect of compounding,
i.e., you receive income and capital gain distributions on a rising number of
shares.

Advertisements for the Fund may include aggregate or average annual total
return figures, which may be compared with various indices, other performance
measures, or other mutual funds.

Further information about the performance of the Summit High Yield
Institutional Service Shares class of the Fund is included in the Fund's Annual
Report dated May 31, 1996, which may be obtained without charge by contacting
the Fund at 1-800-272-3442.

4. INVESTING WITH SUMMIT INVESTMENT TRUST

HOW TO PURCHASE INSTITUTIONAL SERVICE SHARES

Institutional Service Shares of the Fund are offered continuously for sale
directly through the Distributor, BISYS Fund Services, or through securities
dealers and banks which have established dealer agreements with the Distributor.
You are encouraged to consult a registered financial representative for
assistance in making an investment selection.

The initial purchase of Institutional Service Shares must be at least
$100,000. For purchases made in connection with 401(k) plans, 403(b) plans and
other employer-sponsored, qualified retirement plans, as well as "wrap" type
programs, non-transactional fee fund programs and other types of institutions,
the minimum initial investment amount may be waived.

NOTE: The Fund is eligible as a vehicle for a wide range of retirement plans
for individuals and institutions, including large and small businesses: IRAs,
SEP-IRAs, Keoghs (profit sharing, money purchase pension), 401(k), and 403(b)
plans. For information on retirement plans, please consult your broker-dealer.

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<PAGE> 75

GENERAL METHODS OF PURCHASING SHARES

By Mail. To make an initial account purchase, mail a check made or money
order payable to "Summit High Yield Fund" with a completed "Institutional"
Account Registration Form (copy enclosed with this prospectus) to:
Summit Investment Trust
Dept. L-1358
Columbus, OH 43260-1358

To purchase additional Institutional Service Shares for an existing
account, please note your account number on the check or money order and return
it with an account investment slip to the above address. "Institutional" Account
Registration and other account forms may be obtained by calling the Trust at
1-800-272-3442.

By Federal Funds Wire. Institutional Service Shares may be purchased by
wire transfer. To obtain instructions for Federal Funds Wire purchases,
including the bank account number into which funds are to be wired, please
contact the Trust at 1-800-272-3442.

Through a Securities Dealer. You may purchase Institutional Service Shares
by contacting a securities dealer having a selected dealer agreement or selling
agreement with the Distributor.

Orders for Institutional Service Shares of the Fund will be assigned the
next closing price after receipt of the order by the Distributor. The securities
dealer is responsible for transmitting such orders promptly to the Distributor.
If the securities dealer fails to do so, the investor's right to that day's
closing price must be settled between the investor and the dealer.

SHARE PRICE

The public offering price of the Shares of the Class is the net asset value
per share (next determined following receipt of an order).

SHAREHOLDER SERVICES

TRANSFER OF SHARES

Shareholders may transfer Institutional Service Shares to family members
and others at any time. Shareholders should consult their tax advisor concerning
such transfers.

REDEMPTION OF SHARES

Shareholders may redeem Institutional Service Shares in any amount and at
any time at the Class' net asset value next determined after the request for
redemption is received in proper order by the Fund. The Fund will normally send
the proceeds on the next business day, but if making immediate payment could
adversely affect the Fund, it may take up to seven days for payment to be made.
If the Institutional Service Shares to be redeemed were purchased by check or
Automated Clearing House funds, redemption proceeds

29
<PAGE> 76

will be sent upon clearance of the purchase which may involve a delay for 15
days or more. Such delay may be avoided if shares are purchased by wire transfer
of federal funds.

EXCHANGE PRIVILEGES

Institutional Service Shares of the Fund may be exchanged for shares of two
no-load money market portfolios of The ARCH Fund, Inc., namely, the ARCH Money
Market Portfolio and the ARCH Treasury Money Market Portfolio (the "Money Market
Funds"). The ARCH Fund, Inc. is an investment company for which BISYS Fund
Services also serves as the distributor. Exchanges are not currently permitted
between classes of shares of the Fund. Exchanges are regarded as sales for
federal and state income tax purposes and could result in a gain or loss,
depending on the original cost of shares exchanged. The terms of the foregoing
exchange privilege are subject to change and the privilege may be terminated on
60 days' written notice to shareholders. The exchange privilege is only
available where the exchange may legally be made.

GENERAL METHODS OF REDEEMING SHARES

By Mail. You may redeem Institutional Service Shares by mail by sending a
written request for the redemption to the Transfer Agent at 3435 Stelzer Road,
Columbus, OH 43219. The Transfer Agent may require a signature guarantee by an
eligible guarantor institution. For purposes of this policy, the term "eligible
guarantor institution" shall include banks, brokers, dealers, credit unions,
securities exchanges and associations, clearing agencies and savings
associations as those terms are defined in Rule 17Ad-15 under the 1934 Act. The
Transfer Agent reserves the right to reject any signature guarantee if: (i) it
has reason to believe that the signature is not genuine; (ii) it has reason to
believe that the transaction would otherwise be improper; or (iii) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(i) the redemption check is payable to the shareholder(s) of record; and (ii)
the redemption check is mailed to the shareholder(s) at the address of record or
the proceeds are either mailed or wired to a commercial bank account previously
designated on the account registration form. There is no charge for having
redemption requests mailed to a designated bank account.

Through a Securities Dealer. You may sell your Institutional Service
Shares by contacting a securities dealer having a dealer or selling agreement
with the Distributor. (See "General -- Repurchase of Shares" in the Combined
Statement of Additional Information for more details.) The dealer may assess a
nominal fee for this service.

MINIMUM ACCOUNT BALANCE

REDEMPTION-IN-KIND

The Trustees reserve the right to redeem proceeds in whole or in part by a
distribution in kind of marketable securities held by the Fund. See
"General -- Redemption-in-Kind" in the Combined Statement of Additional
Information for more details.

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<PAGE> 77

ADDITIONAL SHAREHOLDER PRIVILEGES

CERTAIN PRIVILEGES LISTED IN THIS SECTION MAY NOT BE OFFERED BY THE FUND IF
YOU HOLD INSTITUTIONAL SERVICE SHARES WITH THE FUND IN THE "STREET NAME" OF A
FINANCIAL INSTITUTION, OR IF THE ACCOUNT IS NETWORKED THROUGH NATIONAL
SECURITIES CLEARING CORPORATION (NSCC).

AUTOMATIC WITHDRAWAL PLAN

TELEPHONE TRANSACTIONS

Telephone Exchanges. You may authorize your account for telephone
exchanges by completing the appropriate portion of the Account Registration
Form. By electing this option you may exchange Institutional Service Shares of
the Fund by calling the Fund. Requests will be processed on the same day as
receipt of the telephone call if the request is made before the close of
regularly scheduled trading on the Exchange (normally, 4:00 p.m. Eastern
Standard Time).

Telephone Redemptions. You may request the option to redeem Institutional
Service Shares by telephone by completing the appropriate portion of the Account
Registration Form. In order to obtain that day's closing net asset value on the
redemption, the telephone call must be received by the Trust prior to the close
of regularly scheduled trading on the Exchange (normally, 4:00 p.m. Eastern
Standard Time).

Payment for Institutional Service Shares will be made by federal wire or by
mail as specified by you on the Application. Payment will normally be sent on
the business day following the date of receipt of the request.

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<PAGE> 78

Payment by wire to your bank account must be in amounts of $1,000 or more.
Although the Fund does not assess a charge for wire transfers, your bank may
assess a charge for the transaction. Payments by mail may only be sent to your
account address of record and may only be payable to the registered owner(s).

DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS:

The Fund declares and pays income dividends monthly. If the Fund has net
capital gains (after subtracting any capital losses) they are declared and paid
at least annually. Dividend and capital gain distributions are reinvested in
additional Institutional Service Shares unless you select another option on your
Account Registration Form.

TAX INFORMATION:

You should be aware of the possible tax consequences when the Fund makes a
distribution to your account, or when you sell Institutional Service Shares. In
addition to federal taxes, you may also be subject to state taxes. No attempt is
here made to discuss state tax consequences, and accordingly you should consult
your own tax adviser. Note: The following summary does not apply to retirement
accounts, such as IRAs or Keoghs, which are tax-deferred until you withdraw
money from them.

TAXES ON FUND DISTRIBUTIONS. In January, the Trust will send you
information indicating the federal tax status of dividends and capital gain
distributions in your Fund account.

Distributions are taxable whether reinvested in additional Institutional
Service Shares or received in cash.

BUYING A DIVIDEND. On the record date for a distribution from capital
gains, the Fund's share price is reduced by the amount of the distribution. If
Institutional Service Shares are bought immediately before the record date
("buying a dividend"), you will pay the full price for the Institutional Service
Shares. You will receive a portion of the Institutional Service Shares' price
back as a taxable distribution. A similar result may occur with regard to
distributions from net income.

TAXES ON YOUR FUND TRANSACTIONS. When you sell Institutional Service
Shares of the Fund, you may realize a gain or loss. An exchange from one fund to
another is treated as a sale for tax purposes. In January, the Trust will send
you information indicating the date and amount of each sale of Institutional
Service Shares of the Fund that you made during the prior year. A copy is filed
with the IRS.

You may calculate the cost basis of the Institutional Service Shares of the
Fund you sold using the average cost of the Institutional Service Shares or
other methods acceptable to the IRS, such as "specific

32
<PAGE> 79

identification." To help you maintain accurate records, we send you a
confirmation immediately following each transaction you make and a year-end
statement detailing all your transactions during the year.

At year-end the Trust will also send you any additional information you
need to determine your taxes, such as the sources of Fund income.

OBTAINING INFORMATION ON YOUR INVESTMENT

CONFIRMATION OF SHARE TRANSACTIONS AND DIVIDEND PAYMENTS

SHAREHOLDER INQUIRIES

OTHER CLASSES OF SHARES

In addition to offering the Institutional Service Shares, the Fund also
offers the Summit High Yield Shares class, which is described in a separate
prospectus relating to that class of shares and is available for purchase by
retail investors. Shares of the Summit High Yield Shares class are subject to a
front-end sales charge and a 12b-1 fee, which may affect the performance of the
class. To obtain a prospectus for the class, or to obtain other information,
contact BISYS Fund Services by writing to the address or by calling the
telephone number listed on the cover of this prospectus.

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<PAGE> 80

APPENDIX I

BOND RATINGS

MOODY'S CORPORATE BOND RATINGS

Aa - Bonds rated Aa are judged to be of high-quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

Moody's also supplies numerical indicators 1, 2, 3 to rating categories.

STANDARD & POOR'S CORPORATE BOND RATINGS

AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

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<PAGE> 81

Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within major rating
categories.

FITCH'S CORPORATE BOND RATINGS

35
<PAGE> 82

CCC - Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.

CC - Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C - Bonds are in imminent default in payment of interest or principal.

DDD, DD and D - Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category.

APPENDIX II

DESCRIPTION OF THE SALOMON BROTHERS HIGH YIELD MARKET INDEX

36
<PAGE> 83

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
RISK FACTORS - SPECIAL SUMMARY................ 2
1. ABOUT THE SUMMIT HIGH YIELD FUND......... 4
Transaction Costs and Fund Expenses...... 4
Financial Highlights..................... 6
Fund and Market Characteristics/Risk
Factors.................................. 7
2. INVESTMENT POLICIES, PRACTICES AND
RISKS.................................... 8
Types of Portfolio Securities............ 9
Types of Fund Management Practices....... 15
3. THE TRUST AND THE FUND................... 18
Organization of the Trust and the Fund... 18
Management of the Trust and the Fund..... 19
Management-Related Services.............. 23
Fund Expenses............................ 24
Net Asset Value.......................... 25
Distribution Expenses.................... 26
Understanding Performance Information.... 27
4. INVESTING WITH SUMMIT INVESTMENT TRUST... 28
How to Purchase Institutional Service
Shares................................... 28
General Methods of Purchasing Shares..... 28
Share Price.............................. 29
Shareholder Services..................... 29
General Methods of Redeeming Shares...... 29
Additional Shareholder Privileges........ 30
Distributions and Taxes.................. 31
Obtaining Information on Your
Investment............................... 32
Other Classes of Shares.................. 33
APPENDIX I -- Bond Ratings.................... 34
APPENDIX II -- Description of The Salomon
Brothers High Yield Market
Index....................... 36
</TABLE>

----------------------------

DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219

-------------------------------------------------
SERVICE

MANAGED BY
FIRST SUMMIT CAPITAL MANAGEMENT
-------------------------------------------------

SUMMIT HIGH YIELD FUND
SUMMIT HIGH YIELD
INSTITUTIONAL
SERVICE SHARES

-------------------------------------------------
PROSPECTUS AS OF OCTOBER 1, 1996
<PAGE> 84

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

<TABLE>
<CAPTION>
ITEM PROSPECTUS HEADING
NO. (RULE 495(c) CROSS REFERENCE)
- ---- -----------------------------
<S> <C> <C>
13. Investment Objectives and Policies. SUMMIT HIGH YIELD INSTITUTIONAL SERVICE SHARES:
Investment Objectives and Policies; Risk Factors;
Investment Program; Investment Restrictions; Portfolio
Transactions.

14. Management of the Registrant. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Management of the Trust.

15. Control Persons and Principal SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
Holders of Securities. INSTITUTIONAL SERVICE SHARES: Principal Holders of
Securities.

16. Investment Advisory and Other SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
Services. INSTITUTIONAL SERVICE SHARES: Investment Advisory
Services; Management-Related Services; Distribution Plan.

17. Brokerage Allocation and Other SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
Practices. INSTITUTIONAL SERVICE SHARES: Portfolio Transactions.

18. Capital Stock and Other Securities. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Capital Stock; General.

19. Purchase, Redemption and Pricing of SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
Securities Being Offered. INSTITUTIONAL SERVICE SHARES: Pricing of Securities;
Dividends; General.

20. Tax Status. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Tax Status.

21. Underwriters. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Distribution Plan.

22. Calculation of Performance Data. SUMMIT HIGH YIELD SHARES AND SUMMIT HIGH YIELD
INSTITUTIONAL SERVICE SHARES: Investment Performance.

23. Financial Statements. SUMMIT HIGH YIELD SHARES: Financial Information.
</TABLE>

PART C. INFORMATION REQUIRED IN PART C.
Information required to be included in Part C is set forth
under the appropriate item, so numbered in Part C of this
Registration Statement.

<PAGE> 85
SUMMIT INVESTMENT TRUST
(the "Trust")
3435 Stelzer Road
Columbus, OH 43219
1-800-272-3442

COMBINED STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------

SUMMIT HIGH YIELD FUND
(the "Fund")

SUMMIT HIGH YIELD SHARES CLASS
SUMMIT HIGH YIELD INSTITUTIONAL SERVICE SHARES CLASS

This Combined Statement of Additional Information is not a prospectus
but should be read in conjunction with the prospectus for either the Summit High
Yield Shares class or the Summit High Yield Institutional Service Shares class
("Institutional Service Shares") of the Summit High Yield Fund, each dated
October 1, 1996, and which may be obtained from the Summit Investment Trust,
3435 Stelzer Road, Columbus, OH 43219.

The date of this Combined Statement of Additional Information is
October 1, 1996.

<PAGE> 86

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION...............................................................................................1
INVESTMENT OBJECTIVES AND POLICIES................................................................................1
Investment Objectives..........................................................................................1
RISK FACTORS......................................................................................................2
Special Risks of Investing in Junk Bonds.......................................................................2
INVESTMENT PROGRAM................................................................................................3
Investment in Debt Securities..................................................................................3
Corporate Debt Securities......................................................................................3
U.S. Government Obligations....................................................................................3
U.S. Government Agency Securities..............................................................................3
Bank Obligations...............................................................................................3
Asset-Backed Securities........................................................................................4
Methods of Allocating Cash Flows............................................................................4
Types of Credit Support.....................................................................................5
Automobile Receivable Securities............................................................................6
Credit Card Receivable Securities...........................................................................6
Other Assets................................................................................................7
Mortgage-Backed Securities.....................................................................................7
Collateralized Mortgage Obligations ("CMOs")...................................................................7
Stripped Mortgage-Backed Securities............................................................................8
Zero-Coupon and Pay-in-Kind Bonds..............................................................................9
Repurchase Agreements.........................................................................................10
Private Placements (Restricted Securities)....................................................................10
Foreign Sovereign Debt Securities.............................................................................11
Foreign Securities............................................................................................14
Foreign Currency Transactions.................................................................................15
Warrants......................................................................................................17
Lending of Portfolio Securities...............................................................................18
Loan Participations and Assignments...........................................................................18
Short Sales...................................................................................................19
Futures Contracts.............................................................................................20
Interest Rate and Stock Index Futures......................................................................22
Regulatory Limitations.....................................................................................22
Special Risks of Futures Contracts.........................................................................23
Volatility and Leverage................................................................................23
Liquidity..............................................................................................24
Hedging Risk...........................................................................................24
Options on Futures Contracts...............................................................................26
Special Risks of Options on Futures Contracts..............................................................26
Additional Futures and Options on Futures Contracts........................................................27
Options ..................................................................................................27
Writing Covered Call Options...............................................................................28
Writing Covered Put Options................................................................................31
Purchasing Put Options.....................................................................................32
Purchasing Call Options....................................................................................33
Dealer Options.............................................................................................34
Spread Option Transactions.................................................................................35
Options on Securities and Other Financial Indices..........................................................35
Other Options..............................................................................................35
Federal Tax Treatment of Options, Futures
Contracts and Forward Foreign Exchange Contracts............................................................36
</TABLE>

<PAGE> 87

<TABLE>
<CAPTION>
<S> <C>
INVESTMENT RESTRICTIONS..........................................................................................37
Fundamental Policies or Restrictions..........................................................................37
Non-Fundamental Policies or Restrictions......................................................................38
MANAGEMENT OF THE TRUST..........................................................................................40
Compensation of Trustees......................................................................................42
PRINCIPAL HOLDERS OF SECURITIES..................................................................................43
INVESTMENT ADVISORY SERVICES.....................................................................................44
The Investment Adviser........................................................................................44
The Advisory Agreement........................................................................................45
The Advisory Fee..............................................................................................46
The Sub-Adviser...............................................................................................
The Sub-Advisory Agreement....................................................................................
MANAGEMENT-RELATED SERVICES......................................................................................48
BISYS Service Agreements......................................................................................48
Administrator.................................................................................................48
Fund Accountant...............................................................................................50
Transfer Agent................................................................................................50
DISTRIBUTION PLANS...............................................................................................51
The Distributor...............................................................................................53
PORTFOLIO TRANSACTIONS...........................................................................................53
Investment or Brokerage Discretion............................................................................53
How Brokers and Dealers are Selected..........................................................................54
How Evaluations are Made of the Overall
Reasonableness of Brokerage Commissions Paid................................................................54
Description of Research Services Received
from Brokers and Dealers....................................................................................55
Commissions to Brokers Who Furnish Research
Services...................................................................................................56
Internal Allocation Procedures................................................................................56
Portfolio Turnover........................................................................................... 56
Miscellaneous.................................................................................................57
CAPITAL STOCK....................................................................................................57
PRICING OF SECURITIES............................................................................................58
DIVIDENDS........................................................................................................59
TAX STATUS.......................................................................................................59
Foreign Currency Gains and Losses.............................................................................60
INVESTMENT PERFORMANCE...........................................................................................60
Yield Information.............................................................................................60
Total Return Performance......................................................................................61
GENERAL..........................................................................................................63
Redemption-in-Kind............................................................................................63
Repurchase of Shares..........................................................................................63
Payment for Shares Presented..................................................................................64
Custodian.....................................................................................................64
Independent Accountants.......................................................................................64
FINANCIAL INFORMATION............................................................................................65
</TABLE>

<PAGE> 88

GENERAL INFORMATION

The Trust was organized as a business trust under the laws of the
Commonwealth of Massachusetts on March 8, 1994. The Fund is a separate
investment portfolio or series of the Trust, and currently offers shares in two
classes: the Summit High Yield Shares and the Summit High Yield Institutional
Service Shares ("Institutional Service Shares"). See "Capital Stock" in this
Combined Statement of Additional Information.

This Combined Statement of Additional Information relates to Summit
High Yield Shares, which are designed for purchase by retail investors, and the
Institutional Service Shares, which are designed to meet the specific and unique
needs of very high net worth individuals and institutional investors, such as:
plan sponsors of both public and corporate defined benefit, defined
contribution, profit-sharing, 401(k) and other savings and/or retirement type
plans; endowments, foundations and other eleemosynary institutions; banks and
trust companies; investment advisory and asset management firms; third-party
non-transactional fee fund programs; and other similar types of institutions
and/or programs, either investing directly for their own accounts or for the
accounts of others.

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of the Fund's
investment objectives and policies on pages 1 and 11 through 26 of the
prospectuses. No material change in the Fund's investment objectives will be
made without obtaining shareholder approval. Unless otherwise specified, the
investment program and restrictions of the Fund are not fundamental policies.
The operating policies of the Fund are subject to change by the Board of
Trustees of the Trust (the "Trustees") without shareholder approval. The
fundamental policies of the Fund may not be changed without the approval of at
least a majority of the outstanding shares of the Fund or, if it is less, 67% of
the shares represented at a meeting of shareholders at which the holders of 50%
or more of the shares are represented.

INVESTMENT OBJECTIVES.

The Fund's investment objectives are to seek a high level of income
and, secondarily, capital appreciation. The Fund's share price and yield will
fluctuate with changing market conditions, and your investment may be worth more
or less when redeemed than when purchased. The Fund should not be relied upon as
a complete investment program, nor used to play short-term swings in the bond
market. The Fund's high yield is a reflection of the added risk associated with
junk bonds and is not necessarily indicative of the total return you will
receive on your investment. The Fund cannot guarantee that it will achieve its
objectives.

The Fund will invest its assets in a widely diversified portfolio
consisting primarily of high yield bonds, loan partici-

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<PAGE> 89

pations, convertible securities and preferred stocks. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in high
yield securities. The Fund has no maturity limitation; however, the Fund's
average maturity is expected to be in the range of 5-10 years, although it may
vary if market conditions warrant. In addition, the Fund calculates its weighted
average maturity based on final activity instead of call maturity or estimated
average life (which factors in prepayments). The Fund seeks to invest in
lower-medium and low-quality bonds and may also purchase bonds in default if, in
the opinion of the Fund's investment adviser, First Summit Capital Management
("FSCM" or the "Adviser"), there is significant potential for capital
appreciation. When, in the opinion of the Adviser, changes in economic,
financial, political or market conditions so warrant, the Fund may, for
temporary defensive purposes, reduce its holdings in high yield securities and
invest all or a portion of its assets in cash or in high-grade fixed income
securities or in high-grade short term debt obligations, including certificates
of deposit, commercial paper, notes, obligations issued or guaranteed by the
United States government or any of its instrumentalities and repurchase
agreements involving such government securities.

In seeking to achieve its investment objectives, the Fund may invest in
companies which are believed to be under-valued or out-of-favor in the eyes of
the investment community. Under-valued opportunities in bonds are usually found
among distressed companies, or in less popular areas of the market. The latter
might include bonds that are relatively illiquid, or those for which information
is not widely available. Sometimes opportunities can arise from takeover
situations where high-grade bonds have been substantially downgraded as
companies add heavier debt loads.

RISK FACTORS

Because of its investment policies, the Fund may not be suitable or
appropriate for all investors. The Fund is designed for long-term investors who
can accept the risks entailed in seeking a high level of current income
available from investments in intermediate to long-term, high yield, medium and
lower-quality, fixed-income securities. Consistent with a long-term investment
approach, investors in the Fund should not rely on the Fund for their short-term
financial needs. The principal value of the lower quality securities in which
the Fund invests will be affected by interest rate levels, general economic
conditions, specific industry conditions and the creditworthiness of the
individual issuer. Although the Fund seeks to reduce risk by portfolio
diversification, extensive credit analysis and attention to trends in the
economy, industries and financial markets, such efforts will not eliminate all
risk. There can, of course, be no assurance that the Fund will achieve these
results. Both the Trust and the Adviser were organized in 1994.

SPECIAL RISKS OF INVESTING IN "JUNK BONDS."

The Fund's prospectuses, in their sections entitled "Risk Factors -
Special Summary" and "Fund and Market Characteristics/Risk

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<PAGE> 90

Factors" describes the special considerations and additional risk factors
associated with the Fund's investments in lower-rated debt securities known as
"junk bonds."

Reference is also made to the sections in this Combined Statement of
Additional Information entitled "Investment in Debt Securities," "Asset-Backed
Securities," "Mortgage-Backed Securities," "Collateralized Mortgage Obligations
("CMOs")," "Stripped Mortgage-Backed Securities," "Zero-Coupon and Pay-in-Kind
Bonds," "Repurchase Agreements," "Private Placements (Restricted Securities),"
"Foreign Sovereign Debt Securities," "Foreign Securities," "Foreign Currency
Transactions," "Warrants," "Lending of Portfolio Securities," "Loan
Participations and Assignments," "Short Sales," "Futures Contracts," and
"Options" for discussions of the risks associated with these investments or
investment practices.

INVESTMENT PROGRAM

INVESTMENT IN DEBT SECURITIES.

The securities that the Fund may invest in include those described below:

CORPORATE DEBT SECURITIES. (Outstanding convertible and non-convertible
corporate debt securities (e.g., bonds and debentures) that generally have
maturities of at least five years.) The Fund will generally invest in
intermediate to long-term corporate obligations which are rated BB or lower by
Standard & Poor's Ratings Group ("S&P") or Ba or lower by Moody's Investors
Service, Inc. ("Moody's"), or, if not rated, are of equivalent quality as
determined by the Adviser.

U.S. GOVERNMENT OBLIGATIONS. (Bills, notes, bonds, and other
debt securities issued by the U.S. Treasury.) These are direct obligations of
the U.S. Government and differ mainly in the length of their maturities.

U.S. GOVERNMENT AGENCY SECURITIES. (Issued or guaranteed by U.S.
Government sponsored enterprises and federal agencies.) These include securities
issued by the Federal National Mortgage Association, Government National
Mortgage Association, Federal Home Loan Bank, Federal Land Banks, Farmers Home
Administration, Banks for Cooperatives, Federal Intermediate Credit Banks,
Federal Financing Banks, Farm Credit Banks, the Small Business Administration
and the Tennessee Valley Authority. Some of these securities are supported by
the full faith and credit of the U.S. Treasury, and the remainder are supported
only by the credit of the instrumentality, which may or may not include the
right of the issuer to borrow from the Treasury.

BANK OBLIGATIONS. (Certificates of deposit, bankers' acceptances, and
other debt obligations.) Certificates of deposit are short-term obligations of
commercial banks. A bankers' acceptance is a time draft drawn on a commercial
bank by a

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<PAGE> 91

borrower, usually in connection with international commercial transactions.
Certificates of deposit may have fixed or variable rates.

The Fund may also invest in the securities of certain supranational
entities, such as the International Development Bank.

ASSET-BACKED SECURITIES.

The Fund may invest a portion of its assets in debt obligations known
as asset-backed securities. 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. See "Types
of Credit Support" below.

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 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
(see "Types of Credit Support" below), the issuing entities are unlikely to have
sufficient assets to satisfy their obligations on the related asset-backed
securities.

METHODS OF ALLOCATING CASH FLOWS. While many asset-backed securities
are issued with only one class of security, many asset-

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<PAGE> 92

backed securities are issued in more than one class, each with different payment
terms. Multiple class asset-backed securities are issued for two main reasons.
First, multiple classes may be used as a method of providing credit support.
This is accomplished typically through creation of one or more classes whose
right to payments on the asset-backed security is made subordinate to the right
to such payments of the remaining class or classes. See "Types of Credit
Support." Second, multiple classes may permit the issuance of securities with
payment terms, interest rates or other characteristics differing both from those
of each other and from those of the underlying assets. Examples include
so-called "strips" (asset-backed securities entitling the holder to
disproportionate interests with respect to the allocation of interest and
principal of the assets backing the security), and securities with class or
classes having characteristics which mimic the characteristics of
non-asset-backed securities, such as floating interest rates (i.e., interest
rates which adjust as a specified benchmark changes) or scheduled amortization
of principal.

Asset-backed securities in which the payment streams on the underlying
assets are allocated in a manner different than those described above may be
issued in the future. The Fund may invest in such asset-backed securities if
such investment is otherwise consistent with its investment objectives and
policies and with the investment restrictions of the Fund.

TYPES OF CREDIT SUPPORT. Asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
such securities may contain elements of credit support. Such credit support
falls into two classes: liquidity protection and protection against ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pool of
assets, to ensure that scheduled payments on the underlying pool are made in a
timely fashion. Protection against ultimate default ensures ultimate payment of
the obligations on at least a portion of the assets in the pool. Such protection
may be provided through guarantees, insurance policies or letters of credit
obtained from third parties, through various means of structuring the
transaction or through a combination of such approaches. Examples of
asset-backed securities with credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class
asset-backed securities with certain classes subordinate to other classes as to
the payment of principal thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class) and
asset-backed securities that have "reserve funds" (where cash or investments,
sometimes funded from a portion of the initiating payments on the underlying
assets, are held in reserve against future losses) or that have been
"over-collateralized" (where the scheduled payments on, or the principal amount
of, the underlying assets substantially exceeds that required to make payment of
the asset-backed securities and pay any servicing or other fees). The degree of
credit support provided on each issue

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<PAGE> 93

is based generally on historical information respecting the level of credit risk
associated with such payments. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in an asset-backed security.

AUTOMOBILE RECEIVABLE SECURITIES. The Fund may invest in asset-backed
securities which are backed by receivables from motor vehicle installment sales
contracts or installment loans secured by motor vehicles ("Automobile Receivable
Securities"). Since installment sales contracts for motor vehicles or instrument
loans related thereto ("Automobile Contracts") typically have shorter durations
and lower incidences of prepayment, Automobile Receivable Securities generally
will exhibit a shorter average life and are less susceptible to prepayment risk.

Most entities that issue Automobile Receivable Securities create an
enforceable interest in their respective Automobile Contracts only by filing a
financing statement and by having the servicer of the Automobile Contracts,
which is usually the originator of the Automobile Contracts, take custody
thereof. In such circumstances, if the servicer of the Automobile Contracts were
to sell the same Automobile Contracts to another party, in violation of its
obligation not to do so, there is a risk that such party could acquire an
interest in the Automobile Contracts superior to that of the holders of
Automobile Receivable Securities. Also, although most Automobile Contracts grant
a security interest in the motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to create an enforceable security interest against competing claims of other
parties. Due to the large number of vehicles involved, however, the certificate
of title to each vehicle financed, pursuant to the Automobile Contracts
underlying the Automobile Receivable Security, usually is not amended to reflect
the assignment of the seller's security interest for the benefit of the holders
of the Automobile Receivable Securities. Therefore, there is the possibility
that recoveries on repossessed collateral may not, in some cases, be available
to support payments on the securities. In addition, various state and federal
laws give the motor vehicle owner the right to assert against the holder of the
owner's Automobile Contract certain defenses such owner would have against the
seller of the motor vehicle. The assertion of such defenses could reduce
payments on the Automobile Receivable Securities.

CREDIT CARD RECEIVABLE SECURITIES. The Fund may invest in asset-backed
securities backed by receivables from revolving credit card agreements ("Credit
Card Receivable Securities"). Credit balances on revolving, credit card
agreements ("Accounts") are generally paid down more rapidly than are Automobile
Contracts. Most of the Credit Card Receivable Securities issued publicly to date
have been pass-through certificates. In order to lengthen the maturity of Credit
Card Receivable Securities, most such securities provide for a fixed period
during which only interest payments on the underlying Accounts are passed
through to the security holder and principal payments received on such Accounts
are used to fund

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<PAGE> 94

the transfer to the pool of assets supporting the related Credit Card Receivable
Securities of additional credit card charges made on an Account. The initial
fixed period usually may be shortened upon the occurrence of specified events
which signal a potential deterioration in the quality of the assets backing the
security, such as the imposition of a cap on interest rates. The ability of the
issuer to extend the life of an issue of Credit Card Receivable Securities thus
depends upon the continued generation of additional principal amounts in the
underlying accounts during the initial period and the non-occurrence of
specified events. An acceleration in cardholders' payment rates or any other
event which shortens the period during which additional credit card charges on
an Account may be transferred to the pool of assets supporting the related
Credit Card Receivable Security could shorten the weighted average life and
yield of the Credit Card Receivable Security.

Credit cardholders are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such holder the right to
set off certain amounts against balances owed on the credit card, thereby
reducing amounts paid on Accounts. In addition, unlike most other asset-backed
securities, Accounts are unsecured obligations of the cardholder.

OTHER ASSETS. FSCM anticipates that asset-backed securities backed by
assets other than those described above will be issued in the future. The Fund
may invest in such securities in the future if such investment is otherwise
consistent with its investment objectives and policies. There are, of course,
other types of securities that are, or may become, available, which are similar
to the foregoing.

MORTGAGE-BACKED SECURITIES.

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 Fund. Unscheduled prepayments
of principal shorten the securities' weighted average life and may lower their
total return. (When a mortgage in the underlying mortgage pool is prepaid, an
unscheduled principal prepayment is passed through to the Fund. This principal
is returned to the Fund at par. As a result, if a mortgage security were 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.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS").

The Fund may invest in CMOs, bonds that are collateralized by whole
loan mortgages or mortgage pass-through securities. The bonds issued in a CMO
deal are divided into groups, and each group

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<PAGE> 95

of bonds is referred to as a "tranche." Under the traditional CMO structure, the
cash flows generated by the mortgages or mortgage pass-through securities in the
collateral pool are used to first pay interest and then pay principal to the CMO
bondholders. The bonds issued under a CMO structure are retired sequentially as
opposed to the pro-rata return of principal found in traditional pass-through
obligations. Subject to the various provisions of individual CMO issues, the
cash flow generated by the underlying collateral (to the extent it exceeds the
amount required to pay the stated interest) is used to retire the bonds. Under
the CMO structure, the repayment of principal among the different tranches is
prioritized in accordance with the terms of the particular CMO issuance. The
"fastest-pay" tranche of bonds, as specified in the prospectus for the issuance,
would initially receive all principal payments. When that tranche of bonds is
retired, the next tranche, or tranches, in the sequence, as specified in the
prospectus, receive all of the principal payments until they are retired. The
sequential retirement of bond groups continues until the last tranche, or group
of bonds, is retired. Accordingly, the CMO structure allows the issuer to use
cash flows of long maturity, monthly-pay collateral to formulate securities with
short, intermediate and long final maturities and expected average lives.

The primary risk of any mortgage security is the uncertainty of the
timing of cash flows. For CMOs, the primary risks result from the rate of
prepayments on the underlying mortgages serving as collateral. An increase or
decrease in prepayment rates (resulting from a decrease or increase in mortgage
interest rates) will affect the yield, average life and price of CMOs. CMOs can
be quite sensitive to interest rate changes and the rate of principal
prepayments on the underlying mortgages serving as collateral. As an
illustration, declining interest rates may result in prepayments and thus,
termination of interest payments. In addition, the proceeds of prepayments may
have to be reinvested at the lower interest rates. The prices of certain CMOs,
depending on their structure and the rate of prepayments, can be volatile. Some
CMOs may also not be as liquid as other securities.

STRIPPED MORTGAGE-BACKED SECURITIES.

These are securities representing interests in a pool of mortgages, the
cash flow of which has been separated into its interest and principal
components. Interest-only securities ("IOs") receive the interest portion of the
cash flow while principal-only securities ("POs") receive the principal portion.
The Fund may invest up to 5% of its total assets in IOs and POs. Stripped
mortgage-backed securities may be issued by U.S. Government agencies or by
private issuers. The value of IOs tends to move in the same direction as
interest rates. The value of the other mortgage-backed securities described
herein, like other debt instruments, will tend to move in the opposite direction
compared to interest rates. Under the Internal Revenue Code of 1986, as amended
(the "Code"), POs may generate taxable income from the current accrual of
original issue discount, without a corresponding distribution of cash to the
Fund.

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The cash flows and yields on IO and PO classes are extremely sensitive
to the rate of principal payments (including prepayments) on the related
underlying mortgage assets. In general, for IOs, prepayments affect the amount,
but not the timing of cash flows, whereas, for POs, the opposite is true. For
example, a rapid or slow rate of principal payments may have a material adverse
effect on the prices of IOs or POs, respectively. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, an investor
may fail to recoup fully its initial investment in an IO class of a stripped
mortgage-backed security, even if the IO class is rated AAA or Aaa. Conversely,
if the underlying mortgage assets experience slower than anticipated prepayments
of principal, the price on a PO class will be affected more severely than would
be the case with a traditional mortgage-backed security.

The staff of the Securities and Exchange Commission ("SEC" or the
"Commission") has taken the position that IOs and POs, other than
government-issued IOs or POs backed by fixed-rate mortgages, should be treated
as illiquid securities and, accordingly, the Fund will limit its investments in
such securities, together with all other illiquid securities, to 15% of the
Fund's net assets. Under the staff's position, the determination of whether a
particular government-issued IO and PO backed by fixed-rate mortgages is liquid
may be made on a case by case basis under guidelines and standards established
by the Trustees. The Trustees have delegated to the Adviser the authority to
determine the liquidity of these investments based on the following guidelines:
the type of issuer; type of collateral, including age and prepayment
characteristics; rate of interest on coupon relative to current market rates and
the effect of the rate on the potential for prepayments; complexity of the
issue's structure, including the number of tranches; size of the issue and the
number of dealers who make a market in the IO or PO. The Fund will treat
non-government-issued IOs and POs not backed by fixed-rate mortgages as illiquid
unless and until the SEC modifies its position.

ZERO-COUPON AND PAY-IN-KIND BONDS.

The Fund may invest up to 25% of its total assets in zero-coupon bonds.
A zero-coupon security has no cash coupon payments. Instead, the issuer sells
the security at a substantial discount from its maturity value. The interest
received by the investor from holding this security to maturity is the
difference between the maturity value and the purchase price. The advantage to
the investor is that reinvestment risk of the income received during the life of
the bond is eliminated. However, zero-coupon bonds like other bonds retain
interest rate and credit risk and usually display more price volatility than
those securities that pay a cash coupon.

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to give an issuer flexibility in managing cash flow. PIK bonds can be either
senior or subordinated debt and trade flat (i.e., without accrued interest). The
price of PIK bonds is expected to reflect the market value of the underlying
debt plus an amount representing accrued interest since the last payment. PIKs
are usually less volatile than zero-coupon bonds, but more volatile than
cash-pay securities.

For federal income tax purposes, these types of bonds will require the
recognition of gross income each year even though no cash may be paid to the
Fund until the maturity or call date of the bond. The Fund will nonetheless be
required to distribute substantially all of this gross income each year to
comply with the Code and such distributions could reduce the amount of cash
available for investment by the Fund.

REPURCHASE AGREEMENTS.

The Fund may enter into repurchase agreements with well-established
securities dealers or banks that are members of the Federal Reserve System. Any
such dealer or bank will have been deemed creditworthy in accordance with
guidelines approved by the Trustees and will have a credit rating with respect
to its short-term debt in the highest rating category by a rating agency. In a
repurchase agreement, the Fund buys a security (known as the "underlying
security") from a seller that has agreed to repurchase it at a specified future
date and an agreed upon price. Repurchase agreements, which may be viewed as
loans collateralized by the underlying securities, are generally for a short
period of time, often less than a week. The Fund will not enter into a
repurchase agreement which does not provide for payment within seven days if, as
a result, more than 15% of the value of its net assets would then be invested in
such repurchase agreements. The Fund will only enter into repurchase agreements
where: (i) the underlying securities are of the type (excluding maturity
limitations) which the Fund's investment guidelines would allow it to purchase
directly, either in normal circumstances or for temporary defensive purposes;
(ii) the market value of the underlying security, including interest accrued,
will be at all times equal to or exceed the value of the repurchase agreement;
and (iii) payment for the underlying security is made only upon physical
delivery or evidence of book-entry transfer to the account of the custodian or a
bank acting as agent. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience both delays in liquidating
the underlying security and losses, including: (i) possible decline in the value
of the underlying security during the period while the Fund seeks to enforce its
rights thereto; (ii) possible subnormal levels of income and lack of access to
income during this period; and (iii) expenses of enforcing its rights.

PRIVATE PLACEMENTS (RESTRICTED SECURITIES).

The Fund may invest in securities, including restricted securities
(privately-placed debt securities), which are not readily marketable, but will
not acquire such securities if as a

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result they would comprise more than 15% of the value of the Fund's net assets.

Certain restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act"). Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities without readily
available market quotations will be priced at fair value as determined in good
faith by the Trustees.

Some restricted securities are eligible for purchase and sale under
Rule 144A under the 1933 Act. This rule permits certain qualified institutional
buyers, such as the Fund, to trade in privately-placed securities, including
various debt securities, even though such securities are not registered under
the 1933 Act. Securities purchased under Rule 144A, although restricted, may
nevertheless be liquid, and the Adviser, under the supervision of the Trustees,
on a case-by-case basis will make this determination. In making this
determination, the Adviser will consider the trading markets for the specific
security, taking into account the unregistered nature of a Rule 144A security.
In addition, the Adviser could consider the: (i) frequency of trades and quotes;
(ii) number of dealers and potential purchasers; (iii) dealer undertakings to
make a market; and (iv) nature of the security and of marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer). The liquidity of Rule 144A securities will be
monitored, and if as a result of changed conditions it is determined that a Rule
144A security is no longer liquid, the Fund's holdings of illiquid securities
will be reviewed to determine what, if any, steps are required to assure that
the Fund does not invest more than 15% of its net assets in illiquid securities.
Investing in Rule 144A securities could have the effect of increasing the amount
of the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.

FOREIGN SOVEREIGN DEBT SECURITIES.

The Fund expects to invest in foreign sovereign debt securities,
including those of less developed countries ("LDCs"). Such securities will
include Brady Bonds. Sovereign obligors in LDCs are among the world's largest
debtors to commercial banks, other governments, international financial
organizations and other financial institutions. Some of these obligors have in
the past experienced substantial difficulties in servicing their external debt
obligations, leading to defaults on certain obligations and the restructuring of
certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling

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interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds, and
obtaining new credit to finance interest payments. Holders of certain foreign
sovereign debt securities may be requested to participate in the restructuring
of such obligations and to extend further loans to their issuers. There can be
no assurance that the Brady Bonds and other foreign sovereign debt securities in
which the Fund may invest will not be subject to similar restructuring
arrangements or to requests for new credit which may adversely affect the Fund's
holdings. Furthermore, certain participants in the secondary market for such
debt may be directly involved in negotiating the terms of these arrangements and
may therefore have access to information not available to other market
participants.

Brady Bonds are debt securities issued under the framework of the Brady
Plan, an initiative announced by U.S. Treasury Secretary Nicholas F. Brady in
1989 as a mechanism for debtor nations to restructure their outstanding external
indebtedness. In restructuring external debt under the Brady Plan framework, a
debtor nation negotiates with its existing bank lenders as well as multilateral
institutions such as the International Bank for Reconstruction and Development
(the "World Bank") and the International Monetary Fund (the "IMF"). The Brady
Plan framework, as it has developed, contemplates the exchange of commercial
bank debt for newly-issued bonds. The World Bank and/or the IMF support the
restructuring by providing funds pursuant to loan agreements or other
arrangements which enable the debtor nation to collateralize the new Brady Bonds
or to repurchase outstanding bank debt at a discount. Under these arrangements
with the World Bank or the IMF, debtor nations have been required to agree to
implement certain domestic monetary and fiscal reforms. Such reforms have
included liberalization of trade and foreign investment, privatization of
state-owned enterprises and setting targets for public spending and borrowing.
These policies and programs seek to promote the debtor country's economic growth
and development. Investors should recognize that the Brady Plan only sets forth
general guiding principles for economic reform and debt reduction, emphasizing
that solutions must be negotiated on a case-by-case basis between debtor nations
and their creditors. The Adviser believes that economic reforms undertaken by
countries in connection with the issuance of Brady Bonds make the debt of
countries which have issued or have announced plans to issue Brady Bonds an
attractive opportunity for investment.

Investors should recognize that Brady Bonds have been issued only
recently and, accordingly, do not have a long payment history. The financial
packages offered by each country differ. The types of options have included the
exchange of outstanding commercial bank debt for bonds issued at 100% of face
value of such debt, which carry a below-market stated rate of interest
(generally known as par bonds), bonds issued at a discount of face value of such
debt (generally known as discount bonds), and bonds bearing an interest rate
which increases over time and the advancement of new money by existing lenders.
The principal of certain Brady Bonds

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has been collateralized by U.S. Treasury zero-coupon bonds with a maturity equal
to the final maturity of such Brady Bonds. Collateral purchases are financed by
the IMF, the World Bank and the debtor nations' reserves. In addition, the first
two or three interest payments on certain types of Brady Bonds may be
collateralized by cash or securities agreed upon by creditors. Subsequent
interest payments may be uncollateralized or may be collateralized over
specified periods of time. The Fund may purchase Brady Bonds with no or limited
collateralization, and will be relying for payment of interest and principal
primarily on the willingness of the foreign government to make payment in
accordance with the terms of the Brady Bonds. Brady Bonds issued to date are
generally purchased and sold in secondary markets through U.S. securities
dealers and maintained through European transnational securities depositories. A
substantial portion of Brady Bonds and other sovereign debt securities in which
the Fund may invest are likely to be acquired at a discount.

Investing in foreign sovereign debt securities will expose the Fund to
the direct or indirect consequences of political, social or economic changes in
the LDCs that issue the securities. The ability and willingness of sovereign
obligors in LDCs or the governmental authorities that control repayment of their
external debt to pay principal and interest on such debt when due may depend on
general economic and political conditions within the relevant country. Countries
such as those in which the Fund may invest have historically experienced, and
may continue to experience, high rates of inflation, high interest rates,
exchange rate trade difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political uncertainty or instability.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
size of its debt service burden relative to the economy as a whole, and its
government's policy towards the IMF, the World Bank and other international
agencies.

The ability of a foreign sovereign obligor to make timely payments on
its external debt obligations will also be strongly influenced by the obligor's
balance of payments, including export performance, its access to international
credits and investments, fluctuations in interest rates and the extent of its
foreign reserves. A country whose exports are concentrated in a few commodities
or whose economy depends on certain strategic imports could be vulnerable to
fluctuations in international prices of these commodities or imports. To the
extent that a country receives payment for its exports in currencies other than
dollars, its ability to make debt payments denominated in dollars could be
adversely affected. If a foreign sovereign obligor cannot generate sufficient
earnings from foreign trade to service its external debt, it may need to depend
on continuing loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment. The commitment on
the part of these foreign governments, multilateral organizations and

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others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
result in the cancellation of such third parties' commitments to lend funds,
which may further impair the obligor's ability or willingness to timely service
its debts. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates, because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
sovereign obligor to obtain sufficient foreign exchange to service its external
debt.

As a result of the foregoing, a governmental obligor may default on its
obligations. If such an event occurs, the Fund may have limited legal recourse
against the issuer and/or guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign sovereign debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to the
holders of other foreign sovereign debt obligations in the event of default
under their commercial bank loan agreements.

FOREIGN SECURITIES.

Subject to the Fund's quality and maturity standards, the Fund may
invest without limitation in the securities (payable in U.S. dollars) of foreign
issuers and in the securities of foreign branches of U.S. banks such as
negotiable certificates of deposit (Eurodollars). The Fund may also invest up to
20% of its net assets in non-U.S. dollar-denominated fixed-income securities
principally traded in financial markets outside the United States. Because the
Fund may invest in foreign securities, investment in the Fund involves risks
that are different in some respects from an investment in a fund which invests
only in debt obligations of U.S. domestic issuers. Foreign investments may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies. There may be less
governmental supervision of securities markets, brokers and issuers of
securities. Securities of some foreign companies are less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United States. Settlement
practices may include delays and may differ from those customary in United
States markets. Investments in foreign securities may also be subject to other
risks different from those

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affecting U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, restrictions on foreign investment
and repatriation of capital, imposition of withholding taxes on dividend or
interest payments, currency blockage (which would prevent cash from being
brought back to the United States), and difficulty in enforcing legal rights
outside the United States.

In addition to the foreign securities listed above, the Fund may invest
in foreign sovereign debt securities which involve certain additional risks. See
"Foreign Sovereign Debt Securities" above.

FOREIGN CURRENCY TRANSACTIONS.

A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are principally traded in
the interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.

The Fund may enter into forward foreign currency exchange contracts
under two circumstances. First, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying security transactions, the Fund
will be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.

Second, when the Adviser believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the amount of the
former foreign currency, approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. Alternatively, where
appropriate, the Fund may hedge all or part of its foreign currency exposure
through the use of a basket of currencies or a proxy currency where such
currency or currencies act as an effective proxy for other currencies. In such a
case, the Fund may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities denominated in such
currency. The use of this basket hedging technique may be more efficient and
economical than entering into separate forward contracts for each currency held
in the Fund. The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible since the future value
of

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such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. The Adviser does not intend to
enter into such forward contracts under this second circumstance if, as result,
the Fund will have more than 20% of the value of its net assets committed to the
consummation of such contracts. Other than as set forth above, and immediately
below, the Fund will also not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities or other assets denominated in that
currency. The Fund, however, in order to avoid excess transactions and
transaction costs, may maintain a net exposure to forward contracts in excess of
the value of the Fund's portfolio securities or other assets to which the
forward contracts relate (including accrued interest to the maturity of the
forward on such securities), provided the excess amount is "covered" by liquid,
high-grade debt securities, denominated in any currency, at least equal at all
times to the amount of such excess. For these purposes "the securities or other
assets to which the forward contract relate" may be securities or assets
denominated in a single currency, or where proxy forwards are used, securities
denominated in more than one currency. Under normal circumstances, consideration
of the prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the Adviser believes that it is important to have the flexibility to
enter into such forward contracts when it determines that the best interests of
the Fund will be served. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract obligating it to
purchase, on the same maturity date, the same amount of the foreign currency.

As indicated above, it is impossible to forecast with absolute
precision the market value of portfolio securities at the expiration of the
forward contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver. However, as noted, in order
to avoid excessive transactions and transaction costs, the Fund may use liquid
securities, denominated in any currency, to cover the amount by which the value
of a forward contract exceeds the value of the securities to which it relates.

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If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.

The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is not
required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Adviser. It also should be realized that this method of hedging against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at
a future date. Additionally, although such contracts tend to minimize the risk
of loss due to a decline in the value of the hedged currency, at the same time
they tend to limit any potential gain which might result from an increase in the
value of that currency.

Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.

WARRANTS.

The Fund may invest in warrants; however, not more than 5% of its
total assets (at the time of purchase) will be invested in warrants other than
warrants acquired in units or attached to other securities. Of such 5% not more
than 2% may be invested at the time of purchase in warrants that are not listed
on the New York or American Stock Exchanges. Warrants are pure speculation in
that they have no voting rights, pay no dividends and have no rights with
respect to the assets of the corporation issuing them. Warrants basically are
options to purchase equity securities at a specific price valid for a specific
period of time. They do
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not represent ownership of the securities, but only the right to buy them.
Warrants differ from call options in that warrants are issued by the issuer of
the security which may be purchased on their exercise, whereas call options may
be written or issued by anyone. The prices of warrants do not necessarily move
parallel to the prices of the underlying securities.

LENDING OF PORTFOLIO SECURITIES.

For the purpose of realizing additional income, the Fund may make
secured loans of portfolio securities amounting to not more than one-third of
its total assets. This policy is a fundamental policy. Securities loans are made
to broker-dealers or institutional investors pursuant to agreements requiring
that the loans be continuously secured by collateral at least equal at all times
to the value of the securities lent marked to market on a daily basis. The
collateral received will consist of cash, U.S. Government securities, letters of
credit or such other collateral as may be permitted under its investment
program. While the securities are being lent, the Fund will continue to receive
the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. The Fund has a right to call each loan and obtain the
securities on five business days' notice or, in connection with securities
trading on foreign markets, within such longer period of time which coincides
with the normal settlement period for purchases and sales of such securities in
such foreign markets. The Fund will not have the right to vote securities while
they are being lent, but it will call a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
delay or default in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially. Loans will only be made to
firms deemed by the Adviser to be of good standing, and will not be made unless,
in the judgment of the Adviser, the consideration to be earned from such loans
would justify the risk.

LOAN PARTICIPATIONS AND ASSIGNMENTS.

The Fund may invest in loan participations and assignments
(collectively "participations"). Such participations will typically be
participating interests in loans made by a syndicate of banks, represented by an
agent bank, which has negotiated and structured the loan to corporate borrowers
to finance internal growth, mergers, acquisitions, stock repurchases, leveraged
buy-outs and other corporate activities. Such loans may also have been made to
governmental borrowers, especially governments of LDCs. LDC debt will involve
the risk that the governmental entity responsible for the repayment of the debt
may be unable or unwilling to do so when due. (For a discussion of risks
associated with investing in LDCs, see "Foreign Sovereign Debt Securities"
above.) The loans underlying such participations may be secured or unsecured,
and the Fund may invest in loans collateralized by

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mortgages on real property or which have no collateral. The loan participations
themselves may extend for the entire term of the loan or may extend only for
short "strips" that correspond to a quarterly or monthly floating rate interest
period on the underlying loan. Thus, a term or revolving credit that extends for
several years may be subdivided into shorter periods.

The loan participations in which the Fund will invest will also vary in
legal structure. Occasionally, lenders assign to another institution both the
lender's rights and obligations under a credit agreement. Since this type of
assignment relieves the original lender of its obligations, it is called a
novation. More typically, a lender assigns only its right to receive payments of
principal and interest under a promissory note, credit agreement or similar
document. A true assignment shifts to the assignee the direct debtor-creditor
relationship with the underlying borrower. Alternatively, a lender may assign
only part of its rights to receive payments pursuant to the underlying
instrument or loan agreement. Such partial assignments, which are more
accurately characterized as "participating interests," do not shift the
debtor-creditor relationship to the assignee, who must rely on the original
lending institution to collect sums due and to otherwise enforce its rights
against the agent bank which administers the loan or against the underlying
borrower.

Because the Fund is allowed to purchase debt securities, including debt
securities in a private placement, the Fund will treat loan participations as
securities and not subject to its fundamental investment restriction prohibiting
the Fund from making loans.

There is not a recognizable, liquid public market for loan
participations. Hence, the Fund will consider loan participations as illiquid
securities and subject them to the Fund's restrictions on investing no more than
15% of net assets in illiquid securities.

Where required by applicable SEC positions, the Fund will treat both
the corporate borrower and the bank selling the participation interest as an
issuer for purposes of its fundamental investment restriction which prohibits
investing more than 5% of Fund assets in the securities of a single issuer.

Various service fees received by the Fund from loan participations may
be treated as non-interest income depending on the nature of the fee
(commitment, takedown, commission, service or loan origination). To the extent
the service fees are not interest income, they will not qualify as income under
Section 851(b) of the Code. Thus the sum of such fees plus any other
non-qualifying income earned by the Fund cannot exceed 10% of total income.

SHORT SALES.

The Fund may make short sales for hedging purposes to protect the Fund
against companies whose credit is deteriorating. Short sales are transactions in
which the Fund sells a security it does

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not own in anticipation of a decline in the market value of that security. The
Fund's short sales will be limited to securities listed on a national securities
exchange and to situations where the Fund owns a debt security of a company and
will sell short the common or preferred stock or another debt security at a
different level of the capital structure of the same company. No securities will
be sold short if, after the effect is given to any such short sale, the total
market value of all securities sold short would exceed 2% of the value of the
Fund's net assets.

To complete a short sale transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender amounts equal to any dividends or interest which
accrue during the period of the loan. To borrow the security, the Fund also may
be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is closed
out.

Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will: (a) maintain daily a segregated account, containing cash,
U.S. Government securities or other liquid securities, at such a level that: (i)
the amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short; and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short; or (b) otherwise cover its short position.

The Fund will incur a loss as a result of the short sale if the price
of the security sold short increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund will realize a
gain if the security sold short declines in price between those dates. This
result is the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the amount
of any loss increased, by the amount of any premium, dividends or interest the
Fund may be required to pay in connection with a short sale. Any gain or loss on
the security sold short would be separate from a gain or loss on the Fund
security being hedged by the short sale.

FUTURES CONTRACTS.

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., units of a debt security) at a specified price, date, time and
place designated at the time the contract is made. Brokerage fees are incurred
when a futures contract is bought or sold and margin deposits must be
maintained.

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Entering into a contract to buy is commonly referred to as buying or purchasing
a contract or holding a long position. Entering into a contract to sell is
commonly referred to as selling a contract or holding a short position.

Unlike when the Fund purchases or sells a security, no price will be
paid or received by the Fund upon the purchase or sale of a futures contract.
Upon entering into a futures contract, and to maintain the Fund's open positions
in futures contracts, the Fund will be required to deposit with its custodian in
a segregated account in the name of the futures broker an amount of cash, U.S.
Government securities, suitable money market instruments, or other liquid
securities, known as "initial margin." The margin required for a particular
futures contract is set by the exchange on which the contract is traded, and may
be significantly modified from time to time by the exchange during the term of
the contract. Futures contracts are customarily purchased and sold on margins
that may range upward from less than 5% of the value of the contract being
traded.

If the price of an open futures contract changes (by increase in the
case of a sale or by decrease in the case of a purchase) so that the loss on the
futures contract reaches a point at which the margin on deposit does not satisfy
margin requirements, the broker will require an increase in the margin. However,
if the value of a position increases because of favorable price changes in the
futures contract so that the margin deposit exceeds the required margin, the
broker will pay the excess to the Fund.

These subsequent payments, called "variation margin," to and from the
futures broker are made on a daily basis as the price of the underlying assets
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as "marking to the market." The Fund expects to
earn interest income on its margin deposits.

Although certain futures contracts, by their terms, require actual
future delivery of and payment for the underlying instruments, in practice most
futures contracts are usually closed out before the delivery date. Closing out
an open futures contract sale or purchase is effected by entering into an
offsetting futures contract purchase or sale, respectively, for the same
aggregate amount of the identical securities and the same delivery date. If the
offsetting purchase price is less than the original sale price, the Fund
realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction costs
must also be included in these calculations. There can be no assurance, however,
that the Fund will be able to enter into an offsetting transaction with respect
to a particular futures contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue to be required
to maintain the margin deposits on the futures contract.

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As an example of an offsetting transaction in which the underlying
instrument is not delivered, the contractual obligations arising from the sale
of one contract of September Treasury Bills on an exchange may be fulfilled at
any time before delivery of the contract is required (i.e., on a specified date
in September, the "delivery month") by the purchase of one contract of September
Treasury Bills on the same exchange. In such instance, the difference between
the price at which the futures contract was sold and the price paid for the
offsetting purchase, after allowance for transaction costs, represents the
profit or loss to the Fund.

INTEREST RATE AND STOCK INDEX FUTURES. The Fund may enter into
financial futures contracts, including stock index and interest rate futures.

Stock index futures contracts may be used to provide a hedge for a
portion of the Fund's portfolio, as a cash management tool, or as an efficient
way for the Adviser to implement either an increase or decrease in portfolio
market exposure in response to changing market conditions. Stock index futures
contracts are currently traded with respect to the S&P 500 Index and other broad
stock market indices, such as the New York Stock Exchange Composite Stock Index
and the Value Line Composite Stock Index. The Fund may, however, purchase or
sell futures contracts with respect to any stock index. Nevertheless, to hedge
the Fund's portfolio successfully, the Fund must sell futures contacts with
respect to indices or sub-indices whose movements will have a significant
correlation with movements in the prices of the Fund's portfolio securities.

Interest rate futures contracts may be used as a hedge against changes
in prevailing levels of interest rates in order to establish more definitely the
effective return on securities held or intended to be acquired by the Fund. In
this regard, the Fund could sell interest rate futures as an offset against the
effect of expected increases in interest rates and purchase such futures as an
offset against the effect of expected declines in interest rates.

The Fund will enter into futures contracts which are traded on national
futures exchanges and are standardized as to maturity date and underlying
financial instrument. The principal financial futures exchanges in the United
States are the Board of Trade of the City of Chicago, the Chicago Mercantile
Exchange, the New York Futures Exchange and the Kansas City Board of Trade.
Futures exchanges and trading in the United States are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Although techniques other than the sale and purchase of futures contracts could
be used for the above-referenced purposes, futures contracts offer an effective
and relatively low cost means of implementing the Fund's objectives in these
areas.

REGULATORY LIMITATIONS. The Fund will engage in transactions
in futures contracts and options thereon only for bona fide

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hedging, risk management and other permissible purposes, in each case in
accordance with the rules and regulations of the CFTC, and not for speculation.

The Fund may not enter into futures contracts or options thereon for
other than bona-fide hedging purposes if immediately thereafter the sum of the
amounts of initial margin deposits on the Fund's existing futures and premiums
paid for options on futures would exceed 5% of the market value of the Fund's
total assets; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation.

In instances involving the purchase of futures contracts or call
options thereon or the writing of put options thereon by the Fund, an amount of
cash, U.S. Government securities or other liquid securities, equal to the market
value of the futures contracts and options thereon (less any related margin
deposits), will be deposited in a segregated account with the Fund's custodian
to cover the position, or alternative cover will be employed thereby insuring
that the use of such futures contracts and options is unleveraged.

In addition, CFTC regulations may impose limitations on the Fund's
ability to engage in certain yield enhancement and risk management strategies.
If the CFTC or other regulatory authorities adopt different (including less
stringent) or additional restrictions, the Fund would comply with such new
restrictions.

SPECIAL RISKS OF FUTURES CONTRACTS.

VOLATILITY AND LEVERAGE. The prices of futures contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in the market and interest rates, which in turn are affected by fiscal
and monetary policies and national and international policies and economic
events.

Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the minimum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses.

Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in

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immediate and substantial loss, as well as gain, to the investor. For example,
if at the time of purchase, 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the futures
contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit, if
the contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable losses if, instead
of the futures contract, it had invested in the underlying instrument and sold
it after the decline. Furthermore, in the case of a futures contract purchase,
in order to be certain that the Fund has sufficient assets to satisfy its
obligations under a futures contract, the Fund earmarks to the futures contract
money market instruments equal in value to the current value of the underlying
instrument less the margin deposit.

LIQUIDITY. The Fund may elect to close some or all of its
futures positions at any time prior to their expiration. The Fund would do so to
reduce exposure represented by long futures positions or increase exposure
represented by short futures positions. The Fund may close its positions by
taking opposite positions which would operate to terminate the Fund's position
in the futures contracts. Final determinations of variation margin would then be
made, additional cash would be required to be paid by or released to the Fund,
and the Fund would realize a loss or a gain.

Futures contracts may be closed out only on the exchange or board of
trade where the contracts were initially traded. Although the Fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid market
on an exchange or board of trade will exist for any particular contract at any
particular time. In such event, it might not be possible to close a futures
contract, and in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. However, in the
event futures contracts have been used to hedge the underlying instruments, the
Fund would continue to hold the underlying instruments subject to the hedge
until the futures contracts could be terminated. In such circumstances, an
increase in the price of the underlying instruments, if any, might partially or
completely offset losses on the futures contract. However, as described below,
there is no guarantee that the price of the underlying instruments will in fact
correlate with the price movements in the futures contract and thus provide an
offset to losses on a futures contract.

HEDGING RISK. A decision of whether, when, and how to hedge
involves skill and judgment, and even a well-conceived hedge may be unsuccessful
to some degree because of unexpected market behavior, or market or interest rate
trends. There are several risks in connection with the use by the Fund of
futures contract as a

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hedging device. One risk arises because of the imperfect correlation between
movements in the prices of the futures contracts and movements in the prices of
the underlying instruments which are the subject of the hedge. The Adviser will,
however, attempt to reduce this risk by entering into futures contracts whose
movements, in its judgment, will have a significant correlation with movements
in the prices of the Fund's underlying instruments sought to be hedged.

Successful use of futures contracts by the Fund for hedging purposes is
also subject to the Adviser's ability to correctly predict movements in the
direction of the market. It is possible that, when the Fund has sold futures to
hedge its portfolio against a decline in the market, the index, indices, or
underlying instruments on which the futures are written might advance and the
value of the underlying instruments held in the Fund's portfolio might decline.
If this were to occur, the Fund would lose money on the futures and also would
experience a decline in value in its underlying instruments. However, while this
might occur to a certain degree, the Adviser believes that over time the value
of the Fund's portfolio will tend to move in the same direction as the market
indices which are intended to correlate to the price movements of the underlying
instruments sought to be hedged. It is also possible that if the Fund were to
hedge against the possibility of a decline in the market (adversely affecting
the underlying instruments held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value of those
underlying instruments that it has hedged, because it would have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
had insufficient cash, it might have to sell underlying instruments to meet
daily variation margin requirements. Such sales of underlying instruments might
be, but would not necessarily be, at increased prices (which would reflect the
rising market). The Fund might have to sell underlying instruments at a time
when it would be disadvantageous to do so.

In addition to the possibility that there might be an imperfect
correlation, or no correlation at all, between price movements in the futures
contracts and the portion of the portfolio being hedged, the price movements of
futures contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors might close futures contracts through offsetting transactions which
could distort the normal relationship between the underlying instruments and
futures markets. Second, the margin requirements in the futures market are less
onerous than margin requirements in the securities markets, and as a result the
futures market might attract more speculators than the securities markets do.
Increased participation by speculators in the futures market might also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market and also because of the imperfect correlation between price
movements in the underlying instruments and movements

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in the prices of futures contracts, even a correct forecast of general market
trends by the Adviser might not result in a successful hedging transaction over
a very short time period.

OPTIONS ON FUTURES CONTRACTS.

Options on futures are similar to options on underlying instruments
except that options on futures give the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put), rather than to
purchase or sell the futures contract, at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by the delivery of the accumulated balance in the writer's
futures margin account which represents the amount by which the market price of
the futures contract, at exercise, exceeds (in the case of a call) or is less
than (in the case of a put) the exercise price of the option on the futures
contract. Alternatively, settlement may be made totally in cash. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.

As an alternative to writing or purchasing call and put options on
interest rate futures, the Fund may write or purchase call and put options on
financial indices. Such options would be used in a manner similar to the use of
options on futures contracts.

SPECIAL RISKS OF OPTIONS ON FUTURES CONTRACTS.

The Fund may seek to close out an option position by writing or buying
an offsetting option covering the same index, underlying instruments or contract
and having the same exercise price and expiration date. The ability to establish
and close out positions on such options will be subject to the maintenance of a
liquid secondary market. Reasons for the absence of a liquid secondary market on
an exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed will respect to particular
classes or series of options, or underlying instruments; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in the class or series
of options) would cease to exist, although outstanding options on the exchange
that had been issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms. There
is no assurance that higher than anticipated trading activity or

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other unforeseen events might not, at times, render certain of the facilities of
any of the clearing corporations inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with the
timely execution of customers' orders.

ADDITIONAL FUTURES AND OPTIONS ON FUTURES CONTRACTS.

Although the Fund has no current intention of engaging in financial
futures or options on futures transactions other than those described above, it
reserves the right to do so to the extent consistent with applicable law and the
Fund's investment objectives and restrictions as in effect at such time.

OPTIONS.

Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below.

A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
The Fund's purchase of a put option on a security, for example, might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
of such instrument by giving the Fund the right to sell the instrument at the
option exercise price. A call option, upon payment of a premium, gives the
purchaser of the option the right to buy, and the seller the obligation to sell,
the underlying instrument at the exercise price. The Fund's purchase of a call
option on a security, financial futures contract, index, currency or other
instrument might be intended to protect the Fund against an increase in the
price of the underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase the instrument. An "American" style
put or call option may be exercised at any time during the option period,
whereas a "European" style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration. Exchange-listed options
are issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
the options. The discussion below uses the OCC as an example, but is also
applicable to other similar financial intermediaries.

OCC-issued and exchange-listed options, with certain exceptions,
generally settle by physical delivery of the underlying security or currency,
although in the future, cash settlement may become available. Index options are
cash settled for the net amount, if any, by which the option is "in-the-money"
(that is, the amount by which the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put

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option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.

The Fund's ability to close out its position as a purchaser or seller
of an OCC-issued or exchange-listed put or call option is dependent, in part,
upon the liquidity of the particular option market. Among the possible reasons
for the absence of a liquid option market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions imposed
by an exchange; (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities, including reaching daily price limits; (iv) interruption of the
normal operations of the OCC or an exchange; (v) inadequacy of the facilities of
an exchange or the OCC to handle current trading volume; or (vi) a decision by
one or more exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the relevant market for that option
on that exchange would cease to exist, although any such outstanding options on
that exchange would continue to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that would not be reflected in the corresponding option
markets.

WRITING COVERED CALL OPTIONS. The Fund may write (sell) "covered" call
options and purchase options to close out options previously written by the
Fund. In writing covered call options, the Fund expects to generate additional
premium income which should serve to enhance the Fund's total return and reduce
the effect of any price decline of the security or currency involved in the
option. Covered call options will generally be written on securities or
currencies which, in the Adviser's opinion, are not expected to have any major
price increases or moves in the near future but which, over the long term, are
deemed to be attractive investments for the Fund.

A call option gives the holder (buyer) the "right to purchase" a
security or currency at a specified price (the exercise price) at expiration of
the option (European style) or at any time until a certain date (the expiration
date) (American style). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring him to deliver the underlying security or
currency against payment of the exercise price. This obligation terminates upon
the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by repurchasing an option identical to
that previously sold. To

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secure his obligation to deliver the underlying security or currency in the case
of a call option, a writer is required to deposit in escrow the underlying
security, currency or other assets in accordance with the rules of a clearing
corporation. In order to comply with the requirements of several states, the
Fund will not write a covered call option if, as a result, the aggregate market
value of all portfolio securities or currencies covering call or put options
exceeds 25% of the market value of the Fund's net assets. Should these state
laws change or should the Fund obtain a waiver of their application, the Fund
reserves the right to increase this percentage. In calculating the 25% limit,
the Fund will offset, against the value of assets covering written calls and
puts, the value of purchased calls and puts on identical securities or
currencies with identical maturity dates.

Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations consistent
with the Fund's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked or uncovered options, which the Fund has no
current intention of doing), but capable of enhancing the Fund's total return.
When writing a covered call option, the Fund, in return for the premium, gives
up the opportunity for profit from a price increase in the underlying security
or currency above the exercise price, but conversely retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
securities or currencies not subject to an option, the Fund has no control over
when it may be required to sell the underlying securities or currencies, since
it may be assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which the Fund has written expires, the
Fund will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security or currency
during the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency. The Fund
does not consider a security or currency covered by a call to be "pledged" as
that term is used in the Fund's policy which limits the pledging or mortgaging
of its assets.

The premium received is the market value of an option. The premium the
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security or currency, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying security or currency, and the length of the option
period. Once the decision to write a call option has been made, the Adviser, in
determining whether a particular call option should be written on a particular
security or currency, will consider the reasonableness of the anticipated
premium and the likelihood that a liquid secondary market will exist for those
options. The premium received by the Fund for writing covered call options will
be recorded as a liability of the Fund. This liability will be adjusted daily to
the option' s current market value, which will be

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the latest sale price at the time at which the net asset value per share of the
Fund is computed (close of the New York Stock Exchange), or, in the absence of
such sale, the latest asked price. The option will be terminated upon expiration
of the option, the purchase of an identical option in a closing transaction, or
delivery of the underlying security or currency upon the exercise of the option.

Closing transactions will be effected in order to realize a profit on
an outstanding call option to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to sell
a particular security or currency from its portfolio on which it has written a
call option or purchased a put option it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the security or
currency. There is, of course, no assurance that the Fund will be able to effect
such closing transactions at favorable prices. If the Fund cannot enter into
such a transaction, it may be required to hold a security or currency that it
might otherwise have sold. When the Fund writes a covered call option, it runs
the risk of not being able to participate in the appreciation of the underlying
securities or currencies above the exercise price as well as the risk of being
required to hold onto securities or currencies that are depreciating in value.
This could result in higher transaction costs. The Fund will pay transaction
costs in connection with the writing of options to close out previously written
options. Such transaction costs are normally higher than those applicable to
purchases and sales of portfolio securities.

Call options written by the Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to time,
the Fund may purchase an underlying security or currency for delivery in
accordance with an exercise notice of a call option assigned to it, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs may be incurred.

The Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.

The Fund considers an option to be covered if, as long as the Fund is
obligated as a writer of a call option, it will: (i) own the securities or
currencies subject to the option; (ii) have an

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absolute and immediate right to acquire securities or currencies without
additional cash consideration upon conversion or exchange of other securities or
currencies held in its portfolio; (iii) hold a call option on the same
securities or currencies with an exercise price no higher than the exercise
price of the call sold or, if higher, the Fund deposits and maintains the
differential in cash, U.S. Government securities or other liquid securities
("liquid assets") in a segregated account with its custodian, or; (iv) deposit
and maintain with its custodian in a segregated account liquid assets having a
value that, when added to any amounts deposited with a broker as margin, equal
the market value of the instruments underlying the call.

WRITING COVERED PUT OPTIONS. Although the Fund has no current
intention, in the foreseeable future, of writing American or European style
covered put options, the Fund reserves the right to do so. A put option gives
the purchaser of the option the right to sell, and the writer (seller) has the
obligation to buy, the underlying security or currency at the exercise price
during the option period (American style) or at the expiration of the option
(European style). So long as the obligation of the writer continues, he may be
assigned an exercise notice by the broker-dealer through whom such option was
sold, requiring him to make payment of the exercise price against delivery of
the underlying security or currency. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.

The Fund would write put options only on a covered basis, which means
that the Fund would maintain in a segregated account cash, U.S. Government
securities or other liquid securities in an amount not less than the exercise
price or the Fund will own an option to sell the underlying security or currency
subject to the option having an exercise price equal to or greater than the
exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such
assets be deposited in escrow to secure payment of the exercise price.) The Fund
would generally write covered put options in circumstances where the Adviser
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event the Fund would write a put option at an exercise price which, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received. Such
a decline could be substantial and result in a significant loss to the Fund. In
addition, the Fund, because it does not own the specific securities or
currencies which it may be required to purchase in exercise of the put, cannot
benefit from appreciation, if any, with respect to such specific securities or

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<PAGE> 119

currencies. In order to comply with the requirements of several states, the Fund
will not write a covered put option if, as a result, the aggregate market value
of all portfolio securities or currencies covering put or call options exceeds
25% of the market value of the Fund's net assets. Should these state laws change
or should the Fund obtain a waiver of their application, the Fund reserves the
right to increase this percentage. In calculating the 25% limit, the Fund will
offset, against the value of assets covering written puts and calls, the value
of purchased puts and calls on identical securities or currencies with identical
maturity dates.

PURCHASING PUT OPTIONS. The Fund may purchase American or European
style put options. As the holder of a put option, the Fund has the right to sell
the underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European
style). The Fund may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may purchase put
options for defensive purposes in order to protect against an anticipated
decline in the value of its securities or currencies. An example of such use of
put options is provided below.

The Fund may purchase a put option on an underlying security or
currency (a "protective put") owned by the Fund as a defensive technique in
order to protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the Fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange value.
For example, a put option may be purchased in order to protect unrealized
appreciation of a security or currency where the Adviser deems it desirable to
continue to hold the security or currency because of tax considerations. The
premium paid for the put option and any transaction costs would reduce any
capital gain otherwise available for distribution when the security or currency
is eventually sold.

The Fund may also purchase put options at a time when the Fund does not
own the underlying security or currency. By purchasing put options on a security
or currency it does not own, the Fund seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is not
sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price during
the life of the put option, the Fund will lose its entire investment in the put
option. In order for the purchase of a put option to be profitable, the market
price of the underlying security or currency must decline sufficiently below the
exercise price to cover the premium and transaction costs, unless the put option
is sold in a closing sale transaction.

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<PAGE> 120

To the extent required by the laws of certain states, the Fund may not
be permitted to commit more than 5% of its total assets to premiums when
purchasing call and put options. Should these state laws change or should the
Fund obtain a waiver of their application, the Fund may commit more than 5% of
its total assets to premiums when purchasing call and put options. The premium
paid by the Fund when purchasing a put option will be recorded as an asset of
the Fund. This asset will be adjusted daily to the option's current market
value, which will be the latest sale price at the time at which the net asset
value per share of the Fund is computed (close of New York Stock Exchange), or,
in the absence of such sale, the latest bid price. This asset will be terminated
upon expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security or currency upon
the exercise of the option.

PURCHASING CALL OPTIONS. The Fund may purchase American or European
style call options. As the holder of a call option, the Fund has the right to
purchase the underlying security or currency at the exercise price at any time
during the option period (American style) or at the expiration of the option
(European style). The Fund may enter into closing sale transactions with respect
to such options, exercise them or permit them to expire. The Fund may purchase
call options for the purpose of increasing its current return or avoiding tax
consequences which could reduce its current return. The Fund may also purchase
call options in order to acquire the underlying securities or currencies.
Examples of such uses of call options are provided below.

Call options may be purchased by the Fund for the purpose of acquiring
the underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the securities
or currencies at the exercise price of the call option plus the premium paid. At
times the net cost of acquiring securities or currencies in this manner may be
less than the cost of acquiring the securities or currencies directly. This
technique may also be useful to the Fund in purchasing a large block of
securities or currencies that would be more difficult to acquire by direct
market purchases. So long as it holds such a call option rather than the
underlying security or currency itself, the Fund is partially protected from any
unexpected decline in the market price of the underlying security or currency
and in such event could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.

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<PAGE> 121

where tax considerations make it inadvisable to realize such gains through a
closing purchase transaction. Call options may also be purchased at times to
avoid realizing losses.

DEALER OPTIONS. The Fund may engage in transactions involving dealer
options. Certain risks are specific to dealer options. While the Fund would look
to a clearing corporation to exercise exchange-traded options, if the Fund were
to purchase a dealer option, it would rely on the dealer from whom it purchased
the option to perform if the option were exercised. Failure by the dealer to do
so would result in the loss of the premium paid by the Fund as well as loss of
the expected benefit of the transaction. Thus, the Adviser must assess the
creditworthiness of each such dealer or any guarantor or credit enhancement of
the dealer's credit to determine the likelihood that the terms of the dealer
option will be met.

Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Fund originally wrote the option. While the Fund will seek to enter
into dealer options only with dealers who will agree to and which are expected
to be capable of entering into closing transactions with the Fund, there can be
no assurance that the Fund will be able to liquidate a dealer option at a
favorable price at any time prior to expiration. Until the Fund, as a covered
dealer call option writer, is able to effect a closing purchase transaction, it
will not be able to liquidate securities (or other assets) or currencies used as
cover until the option expires or is exercised. In the event of insolvency of
the contra party, the Fund may be unable to liquidate a dealer option. With
respect to options written by the Fund, the inability to enter into a closing
transaction may result in material losses to the Fund. For example, since the
Fund must maintain a secured position with respect to any call option on a
security it writes, the Fund may not sell the assets which it has segregated to
secure the position while it is obligated under the option. This requirement may
impair the Fund's ability to sell portfolio securities or currencies at a time
when such sale might be advantageous.

The staff of the SEC has taken the position that purchased dealer
options and the assets used to secure the written dealer options are illiquid
securities. The Fund may treat the cover used for written OTC options as liquid
if the dealer agrees that the Fund may repurchase the OTC option it has written
for a maximum price to be calculated by a predetermined formula. In such cases,
the OTC option would be considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the Fund's
limitation prohibiting investment of more than 15% of its net assets in illiquid
securities. If the

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<PAGE> 122

SEC changes its position on the liquidity of dealer options, the Fund will
change its treatment of such instruments accordingly.

SPREAD OPTION TRANSACTIONS. The Fund may purchase from and sell to
securities dealers covered spread options. Such covered spread options are not
presently exchange listed or traded. The purchase of a spread option gives the
Fund the right to put, or sell, a security that it owns at a fixed dollar spread
or fixed yield spread in relationship to another security that the Fund does not
own, but which is used as a benchmark. The risk to the Fund in purchasing
covered spread options is the cost of the premium paid for the spread option and
any transaction costs. In addition, there is no assurance that closing
transactions will be available. The purchase of spread options will be used to
protect the Fund against adverse changes in prevailing credit quality spreads,
i.e., the yield spread between high-quality and lower quality securities. Such
protection is only provided during the life of the spread option. The security
covering the spread option will be maintained in a segregated account by the
Fund's custodian. The Fund does not consider a security covered by a spread
option to be "pledged" as that term is used in the Fund's policy limiting the
pledging or mortgaging of its assets.

OPTIONS ON SECURITIES AND OTHER FINANCIAL INDICES. The Fund may
purchase and sell call and put options on securities indices and other financial
indices. In so doing, the Fund can achieve many of the same objectives it would
achieve through the sale or purchase of options on individual securities or
other instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, options on indices
settle by cash settlement; that is, an option on an index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of the index upon which the option is based exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
(except if, in the case of an OTC option, physical delivery is specified). This
amount of cash is equal to the excess of the closing price of the index over the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount. The gain or loss on an option on an index depends
on price movements in the instruments comprising the market, market segment,
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities.

OTHER OPTIONS. Although it has no current intention of entering into
options transactions other than those described herein, the Fund reserves the
right to purchase or sell options on instruments and indices which may be
developed in the future to the extent consistent with applicable law and the
Fund's investment objectives and restrictions as in effect at such time.

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<PAGE> 123

FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND FORWARD FOREIGN EXCHANGE
CONTRACTS.

The discussion herein may refer to transactions in which the Fund does
not engage.

The Fund may enter into certain option, futures and forward foreign
exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.

Transactions which are considered Section 1256 contracts will be
considered to have been closed at the end of the Fund's fiscal year and any
gains or losses will be recognized for tax purposes at that time. Such gains or
losses from the normal closing or settlement of such transactions will be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss regardless of the holding period of the instrument. The Fund will
be required to distribute net gains on such transactions to shareholders even
though it may not have closed the transaction and received cash to pay such
distributions.

Options, futures and forward foreign exchange contracts, including
options and futures on currencies, which offset a foreign dollar denominated
bond or currency position may be considered straddles for tax purposes in which
case a loss on any position in a straddle will be subject to deferral to the
extent of unrealized gain in an offsetting position. The holding period of the
securities or currencies comprising the straddle will be deemed not to begin
until the straddle is terminated. For securities offsetting a purchased put,
this adjustment of the holding period may increase the gain from sales of
securities held less than three months. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an equity security
will not include the period of time the option is outstanding.

Losses on written covered calls and purchased puts on securities,
excluding certain "qualified covered call" options on equity securities, may be
long-term capital losses, if the security covering the option was held for more
than twelve months prior to the writing of the option.

In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualified income, i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Pending tax regulations could limit the extent that
net gain realized from option, futures or foreign forward exchange contracts on
currencies is qualifying income for purposes of the 90% requirement. In
addition, gains realized on the sale or other disposition of securities,
including option, futures or foreign forward exchange contracts on securities or
securities indices and, in some cases, currencies, held for less than three
months, must be limited to less than 30% of the Fund's annual gross income. In

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<PAGE> 124

order to avoid realizing excessive gains on securities or currencies held less
than three months, the Fund may be required to defer the closing out of option,
futures or foreign forward exchange contracts beyond the time when it would
otherwise be advantageous to do so. It is anticipated that unrealized gain on
Section 1256 option, futures and foreign forward exchange contracts, which have
been open for less than three months as of the end of the Fund's fiscal year and
which are recognized for tax purposes, will not be considered gains on
securities or currencies held less than three months for purposes of the 30%
test.

INVESTMENT RESTRICTIONS

Restrictions (1) through (10) below are fundamental. Fundamental
policies may not be changed without the approval of the lesser of: (i) 67% of
the Fund's shares present at a meeting of shareholders if the holders of more
than 50% of the outstanding shares are present in person or by proxy; or (ii)
more than 50% of the Fund's outstanding shares. All other restrictions are
operating policies and are subject to change by the Trustees without shareholder
approval. Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
of securities or assets of, or borrowings by, the Fund.

FUNDAMENTAL POLICIES OR RESTRICTIONS:

As a matter of fundamental policy, the Fund may not:

(1) BORROWING. Borrow money, except the Fund may borrow from banks as a
temporary measure for extraordinary or emergency purposes in amounts not
exceeding 15% of its total assets valued at market. The Fund will not borrow in
order to increase income (leveraging), but only to facilitate redemption
requests which might otherwise require untimely disposition of portfolio
securities. The Fund will not purchase additional securities when money borrowed
exceeds 5% of total assets. For purposes of this restriction, entering into
futures contracts or reverse repurchase agreements will not be deemed a
borrowing;

(2) COMMODITIES. Purchase or sell commodities or commodity
contracts, except that it may enter into futures contracts and
options thereon;

(3) PERCENT LIMIT ON ASSETS INVESTED IN ANY ONE ISSUER. Purchase the
securities of any issuer (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if, as a result, more than
5% of the value of the Fund's total assets would be invested in the securities
of a single issuer (including repurchase agreements with any one issuer), except
that up to 25% of the value of the Fund's total assets may be invested without
regard to these restrictions;

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<PAGE> 125

(4) PERCENT LIMIT ON SHARE OWNERSHIP OF ANY ONE ISSUER. Purchase the
securities of any issuer (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if, as a result, more than
10% of the outstanding voting securities of any issuer would be held by the
Fund, except that up to 25% of the value of the Fund's total assets may be
invested without regard to these restrictions;

(5) INDUSTRY CONCENTRATION. Purchase the securities of any
issuer (other than obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, 25%
or more of the value of the Fund's total assets would be invested
in the securities of issuers having their principal business
activities in the same industry;

(6) REAL ESTATE. Purchase or sell real estate or real estate
limited partnerships (although it may purchase securities secured
by real estate or interests therein, or issued by companies which
invest in real estate or interests therein);

(7) LOANS. Make loans, although the Fund may: (i) purchase obligations
in which it is authorized to invest and enter into repurchase agreements; and
(ii) lend portfolio securities provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed one-third of the value of the
Fund's total assets. For purposes of this restriction, collateral arrangements
with respect to options and futures transactions shall not be deemed to be a
loan;

(8) SENIOR SECURITIES. Issue any class of securities senior
to any other class of securities, except to the extent that the
borrowing of money in accordance with restriction 1. or the
entering into reverse repurchase agreements as described in
restriction 10. may constitute the issuance of a senior security.
For purposes of this restriction, purchasing forward commitments
and engaging in options or futures transactions will not be deemed
to constitute the issuance of a senior security;

(9) UNDERWRITING. Underwrite securities issued by other persons,
except: (i) to the extent that the Fund may be deemed to be an underwriter
within the meaning of the 1933 Act in connection with the purchase of securities
directly from the issuer in accordance with the Fund's investment objectives,
policies, and restrictions; and (ii) the later disposition of restricted
securities;

(10) REVERSE REPURCHASE AGREEMENTS. Enter into reverse
repurchase agreements if the total of such investments would exceed
5% of the total assets of the Fund.

NON-FUNDAMENTAL POLICIES OR RESTRICTIONS:

As a matter of non-fundamental policy, the Fund will not:

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<PAGE> 126

(11) CONTROL OF PORTFOLIO COMPANIES. Invest in companies for
the purpose of exercising management or control;

(12) EQUITY SECURITIES. Invest more than 10% of the Fund's
total assets in common stocks (including up to 5% in warrants);

(13) FUTURES CONTRACTS. Enter into futures contracts or options thereon
if, as a result thereof, more than 5% of the Fund's total assets (taken at
market value at the time of entering into the contract) would be committed to
initial margin and premiums on such contracts or options thereon, provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount, as defined in certain CFTC regulations, may
be excluded in computing such 5%;

(14) INVESTMENT COMPANIES. Purchase securities of other investment
companies if the purchase would cause more than 10% of the value of the Fund's
total assets to be invested in investment company securities, provided that: (i)
no investment will be made in the securities of any one investment company if
immediately after such investment more than 3% of the outstanding voting
securities of such company would be owned by the Fund or more than 5% of the
value of the Fund's total assets would be invested in such company; and (ii) no
restrictions shall apply to a purchase of investment company securities in
connection with a merger, consolidation or reorganization. For purposes of this
restriction, privately issued collateralized mortgage obligations will not be
treated as investment company securities if issued by "Exemptive Issuers."
Exemptive Issuers are defined as unmanaged, fixed-asset issuers that: (i) invest
primarily in mortgage-backed securities; (ii) do not issue redeemable securities
as defined in section 2(a)(32) of the Investment Company Act of 1940 as amended
(the "1940 Act"); (iii) operate under general exemptive orders exempting them
from "all provisions of the Investment Company Act of 1940;" and (iv) are not
registered or regulated under the 1940 Act as investment companies;

(15) MORTGAGING. Mortgage, pledge, hypothecate or, in any other manner,
transfer as security for indebtedness any security owned by the Fund, except as
may be necessary in connection with permissible borrowings, in which event such
mortgaging, pledging, or hypothecating may not exceed 10% of the Fund's net
assets, valued at market. For purposes of this restriction, collateral
arrangements with respect to options and futures transactions shall not be
deemed to involve a pledge;

(16) OIL AND GAS PROGRAMS. Purchase participations or other
direct interests or enter into leases with respect to oil, gas,
other mineral exploration or development programs;

(17) OPTIONS, ETC. Invest in options except in furtherance
of the Fund's investment objectives and policies, and in this
connection the Fund may: (i) buy and sell covered and uncovered
put, call and spread options on securities, securities and other
financial indices, and currencies; and (ii) purchase, hold, and

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<PAGE> 127

sell contracts for the future delivery of securities and currencies
and warrants where the grantor of the warrants is the issuer of the
underlying securities;

(18) OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES.
Purchase or retain the securities of any issuer if, to the knowledge of the
Trust's management, those officers and Trustees of the Trust, and of the
Adviser, who each owns beneficially more than 0.5% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
securities;

(19) PURCHASES ON MARGIN. Purchase securities on margin, except for use
of short-term credit necessary for clearance of purchases of portfolio
securities. For purposes of this restriction, collateral arrangements with
respect to options and futures transactions shall not be deemed to involve the
use of margin;

(20) ILLIQUID SECURITIES. Invest more than 15% of the value
of its net assets in illiquid securities; or

(21) UNSEASONED ISSUERS. Purchase the securities of any issuer (other
than obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the Fund's
total assets would be invested in the securities of issuers which at the time of
purchase had been in operation for less than three years, including predecessors
and unconditional guarantors.

MANAGEMENT OF THE TRUST

The Trustees and officers of the Trust, together with information as to
their principal occupations during the past five years, are listed below. The
Trustees who are considered "interested persons" of the Adviser, of Carillon
Advisers, Inc., the sub-adviser of the Fund (the "Sub-Adviser") or of the Trust
as defined under Section 2(a)(19) of the 1940 Act, are noted with an
asterisk (*).

<TABLE>
<CAPTION>
(3)
PRINCIPAL
(1) (2) OCCUPATION(S)
NAME, ADDRESS AND POSITION(S) HELD DURING PAST 5
AGE WITH REGISTRANT YEARS
- -------------------- ---------------- ------------------
<S> <C> <C>
Theodore H. Emmerich* Trustee Consultant;
1201 Edgecliff Place Director of
Cincinnati, OH 45206 Carillon Fund,
70 years old Inc. and Trustee
of Carillon
Investment Trust
(investment
companies);
formerly partner,
Ernst & Whinney
(Certified Public
Accountants).
</TABLE>

-40-
<PAGE> 128

<TABLE>
<CAPTION>
(3)
PRINCIPAL
(1) (2) OCCUPATION(S)
NAME, ADDRESS AND POSITION(S) HELD DURING PAST 5
AGE WITH REGISTRANT YEARS
- -------------------- ---------------- ------------------
<S> <C> <C>
Scott A. Englehart Treasurer Director of Client
3435 Stelzer Road Services, BISYS
Columbus, OH 43219 Fund Services,
34 years old Limited Partnership.

Frederick Moss Trustee Chairman of the
37 Riverside Drive Board of Trustees,
New York, NY 10023 Cincinnati Stock
67 years old Exchange;
Director, Margo
Nursery Farms
Puerto Rico
(tropical plants).

Dr. Bruce H. Olson Trustee Professor of
120 Upham Hall Finance, Miami
Miami University University
Oxford, OH 45056 (Oxford, OH).
60 years old
</TABLE>

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<PAGE> 129

<TABLE>
<CAPTION>
(3)
PRINCIPAL
(1) (2) OCCUPATION(S)
NAME, ADDRESS AND POSITION(S) HELD DURING PAST 5
AGE WITH REGISTRANT YEARS
- -------------------- ---------------- ------------------
<S> <C> <C>
James F. Smith* Trustee and Director,
30 Montgomery Street President President and
Jersey City, NJ Chief Financial
07302 Officer of Freeman
52 years old Securities
Company, Inc.
(broker-dealer).

Steven R. Trustee and Representative of
Sutermeister* Chairman the Adviser
1876 Waycross Road (January, 1994-
Cincinnati, OH 54240 present); Vice
42 years old President of The
Union Central Life
Insurance Company
(August, 1991-
present), Vice
President of the
Sub-Adviser.

Gregory A. Sullivan Vice President Senior Vice President,
30 Montgomery Street Freeman Securities
Jersey City, NJ 07302 Company, Inc.
47 years old (broker-dealer).

Craig C. Rudesill Secretary Associate Manager of
3435 Stelzer Road Client Services and
Columbus, Ohio 43219 employee, BISYS Fund
27 years old Services, Limited
Partnership (since
September, 1994);
formerly, employee of
Merrill Lynch & Co.
(January 1993 through
August 1994).
</TABLE>

COMPENSATION OF TRUSTEES. The Trust does not pay any remuneration to
its Trustees who are officers or employees of the Trust's Adviser, BISYS Fund
Services, Limited Partnership, the Trust's administrator or their affiliates.
Trustees not so affiliated receive an annual retainer of $6,000 and a fee of
$500 for each meeting of the Trustees which they attend in person or by
telephone. Trustees are reimbursed for travel and other out-of-pocket expenses.

For the period ended May 31, 1996, the Trustees received the following
compensation from the Trust:

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<PAGE> 130

<TABLE>
<CAPTION>
(1) (2) (3)
Total
Compensation
Aggregate from Trust
Named Compensation and Fund
Position from Complex to
with the Trust the Trust Trustee+
-------------- --------- --------
<S> <C> <C>
Theodore H. Emmerich $8,000 $8,000
Trustee

Frederick Moss $8,000 $8,000
Trustee

Dr. Bruce H. Olsen $8,000 $8,000
Trustee

James F. Smith 0 0
Trustee and President

Steven R. Sutermeister 0 0
Trustee and Chairman

- -------
<FN>

+ The "Fund Complex" presently consists of one investment company, the
Trust, and its sole portfolio, the Fund.
</TABLE>

The officers listed above are furnished to the Trust by the Adviser or
the Administrator (see "Management-Related Services -- Administrator") and
receive no compensation from the Trust. These officers spend only a portion of
their time on the affairs of the Trust. As of August 30, 1996, the officers and
Trustees, individually and as a group, owned beneficially less than 1% of the
outstanding shares of the Summit High Yield Shares Class and of the Summit High
Yield Institutional Service Shares Class.

PRINCIPAL HOLDERS OF SECURITIES

As of August 30, 1996, The Union Central Life Insurance Company ("Union
Central Life"), an Ohio mutual insurance company having its principal offices at
1876 Waycross Road, Cincinnati, Ohio 45240, owned of record and beneficially
2,591,923 outstanding shares of the Summit High Yield Shares class of the
Fund (97.43% of the outstanding shares of the class).

As of August 30, 1996, Leland S. Zaubler owned of record 36,654
outstanding shares of the Summit High Yield Institutional Service Shares class
(20.78% of the outstanding shares of the class), and Union Central Life owned
139,671 outstanding shares of Summit High Yield Institutional Service shares
class (79.17% of the outstanding shares of the class).

Under the 1940 Act, Union Central Life is deemed a controlling person
of the Fund. A controlling person possesses the ability to control the outcome
of matters submitted for stockholder vote.

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<PAGE> 131

INVESTMENT ADVISORY SERVICES

THE INVESTMENT ADVISER.

First Summit Capital Management ("FSCM," the "Adviser" or the "Joint
Venture"), a joint venture having its principal offices at 1876 Waycross Road,
Cincinnati, OH 45240, is the investment adviser to the Fund. FSCM was organized
principally for purposes of sponsoring and managing the investments of the Trust
pursuant to a Joint Venture Agreement dated January 4, 1994 (the "Joint Venture
Agreement") between Carillon Advisers, Inc. ("Carillon" or the Sub-Adviser),
an Ohio corporation, and Freeman Holding Company, Inc. ("Freeman"), a Delaware
corporation (collectively, the "Parties"). Under the Joint Venture Agreement,
Carillon serves as the general manager of the Adviser and is responsible for
maintaining its books of account and other financial records and for preparing
its quarterly financial statements. Carillon has full authority to act on behalf
of the Adviser except with respect to matters involving single commitments in
excess of $10,000 which must be approved by both Carillon and Freeman. Each of
Carillon and Freeman is authorized to appoint two representatives to serve, in
effect, as officers of the Adviser. Pursuant to the provisions of the Joint
Venture Agreement, Carillon and Freeman agreed that the initial number of
Trustees of the Trust would be six, of which three would be designated
by Carillon and three would be designated by Freeman. If the vacancy on the
Board increases for any reason, including any increase in the number of
Trustees, is to be filled by action of the Trustees, no recommendation of
candidates to fill such vacancy will be made by the Joint Venture, Freeman or
Carillon without the consent of both the Carillon and Freeman.

Carillon and Freeman are general partners of First Summit, Carillon,
which is located at 1876 Waycross Road, Cincinnati, OH 45240, is a
wholly-owned subsidiary of Union Central Life. Union Central Life is a mutual
company owned by its policyholders, none of which owns ten percent or more of
Union Central Life. Freeman is the parent corporation of Freeman Securities
Company, Inc. ("Freeman Securities"), a New Jersey corporation which is
registered as a broker-dealer under the 1934 Act and a member of the National
Association of Securities Dealers, Inc. While Freeman Securities qualifies as
an "Affiliated Broker" under the proxy rules under the Securities Exchange Act
of 1934, the Fund did not pay any brokerage commissions to Freeman Securities
during the fiscal year ended May 31, 1996. Freeman has its principal offices at
30 Montgomery Street, Jersey City, NJ 07302. Freeman is, in turn,
majority-owned by the Freeman Securities' Savings and Investment Plan and
Employee Stock Ownership Plan. The trustees of both such plans are Malcolm B.
Sheldrick, Jr. and James F. Smith. Mr. Smith is also a Trustee of the Trust.

Under the terms of the Joint Venture Agreement, Freeman initially agreed
to make an aggregate capital contribution to the Joint Venture not exceeding
$500,000, and Carillon agreed to arrange for the investment by its parent,
Union Central Life, of $25 million in shares of the Fund. Carillon and Freeman
will share in the profits and losses of the Joint Venture in the ratio of 51%
to 49%, except that Freeman alone will bear the initial $500,000 in losses. The
Joint Venture may be terminated and dissolved: (i) at any time upon the
agreement of the parties; (ii) 90 days after receipt by one party of written
notice from the other confirming the parties' failure to agree on a matter
requiring their agreement; (iii) on the occurrence of an event of dissolution
under Ohio laws; (iv) on the imposition on either party of any sanction
resulting in the suspension or revocation of its authorization to do business
by any state or Federal securities regulatory authority or on the conviction of
either for any criminal conduct constituting a felony; (v) on the filing by or
with respect to either party of any petition under applicable Federal or state
law regarding their bankruptcy, insolvency or other relief for debtors, the
adjudication of either as bankrupt or insolvent, or the appointment for either
of a trustee or liquidator of any substantial portion of its property; or (vi)
on December 1, 2003, unless the Parties extend such date for periods not
exceeding five years. In the event of termination and dissolution of the Joint
Venture, Carillon, or any affiliate thereof, would have the first right to
purchase all of the interest of Freeman in the Joint Venture. If such right
were not exercised, Freeman, or any

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affiliate thereof, would have the right to purchase all of the interest of
Carillon in the Joint Venture. In 1996, each general partner contributed
$150,000 in additional capital to the Joint Venture. In addition, the general
partners have informally agreed to futher increase their capital commitments to
the Adviser prior to December 31, 1997.

THE ADVISORY AGREEMENT.

The Adviser serves pursuant to an Investment Advisory Agreement with
the Trust dated June 27, 1994 (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser, subject to the supervision of the Trustees, provides a
continuous investment program for the Fund, including investment research and
management with respect to all securities, investments and cash equivalents, in
accordance with the Fund's investment objectives, policies and restrictions as
set forth in its prospectuses, this Combined Statement of Additional Information
and the resolutions of the Trustees. The Adviser is responsible for effecting
all security transactions on behalf of the Fund, including the allocation of
principal business and portfolio brokerage and the negotiation of commissions.
It also maintains books and records with respect to the securities transactions
of the Fund and furnishes to the Trustees such periodic or other reports as the
Trustees may request.

During the term of the Advisory Agreement, the Adviser pays all
expenses incurred by it in connection with its activities thereunder except the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The advisory services furnished by the Adviser under the Advisory
Agreement are not exclusive, and the Adviser is free to perform similar services
for others.

Unless sooner terminated in accordance with its terms, the Advisory
Agreement will continue in effect until June 27, 1996, and may be continued from
year to year thereafter, provided that such continuance is approved at least
annually by vote of the holders of a "majority" (as defined in the 1940 Act) of
the outstanding voting securities of the Trust, or by the Trustees, and in
either event by vote of a majority of the Trustees who are not parties to the
Advisory Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval of any continuance will be effective
with respect to the Fund if a majority of the outstanding voting securities of
the Fund votes to approve such continuance, notwithstanding that continuance may
not have been approved by other portfolios, if any, of the Trust or by a
majority of the voting securities of the Trust.

If the shareholders of the Fund fail to approve any continuance of the
Advisory Agreement, the Adviser will continue to act as such with respect to the
Fund pending the required approval of the continuance of such agreement, of a
new contract with the Adviser or different investment adviser, or other
definitive action. The compensation received by the Adviser during such period
will be no more than its actual costs incurred in furnishing investment advisory
and management services to the Fund or the amount it would have received under
the Advisory Agreement, whichever is less.

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<PAGE> 133

The Advisory Agreement will automatically terminate if assigned and may
be terminated without penalty at any time: (i) by the majority vote of all the
Trustees or by majority vote of the outstanding shares of the Fund; or (ii) by
the Adviser.

The Advisory Agreement may be amended by the parties provided that such
amendment is specifically approved by the vote of a majority of the outstanding
voting securities of the Fund and by the vote of a majority of the Trustees who
are not interested persons of the Fund or of the Adviser, cast in person at a
meeting called for the purpose of voting upon such approval. The required
shareholder approval of any amendment shall be effective with respect to the
Fund if a majority of the outstanding voting securities of the Fund vote to
approve the amendment, notwithstanding that the amendment may not be approved by
a majority of the outstanding voting securities of the Trust.

Under the terms of the Advisory Agreement, the Adviser will be liable
to the Fund or the Trust only for losses resulting from willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty.

THE ADVISORY FEE.

As full compensation for services furnished to the Fund and expenses of
the Fund assumed by the Adviser, the Fund pays the Adviser an advisory fee which
increases or decreases based on the

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<PAGE> 134

total return investment performance of the Fund for the prior twelve-month
period relative to the percentage change in the Salomon Brothers High Yield
Market Index (the "Index") for the same period (the "Index Return"). A general
description of the Index is set forth in Appendix II to each of the
prospectuses.

<TABLE>
<CAPTION>
ADVISORY FEE
FUND PERFORMANCE (AS % OF AVERAGE
(NET OF FEES AND EXPENSES) NET ASSETS)
-------------------------- -----------------
<S> <C>
Index Return + 10 percentage points or more. 1.15%
Index Return + 9 .......................... 1.11
Index Return + 8 .......................... 1.07
Index Return + 7 .......................... 1.03
Index Return + 6 .......................... 0.99
Index Return + 5 .......................... 0.95
Index Return + 4 .......................... 0.91
Index Return + 3 .......................... 0.87
Index Return + 2 .......................... 0.83
Index Return + 1 .......................... 0.79
Index Return 0 .......................... 0.75
Index Return - 1 .......................... 0.71
Index Return - 2 .......................... 0.67
Index Return - 3 .......................... 0.63
Index Return - 4 .......................... 0.59
Index Return - 5 .......................... 0.55
Index Return - 6 .......................... 0.51
Index Return - 7 .......................... 0.47
Index Return - 8 .......................... 0.43
Index Return - 9 .......................... 0.39
Index Return - 10 percentage points or more. 0.35
</TABLE>

Pursuant to the provisions of the Advisory Agreement,

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<PAGE> 135

the Adviser will receive one twelfth of the performance-related portion of the
fee computed for the preceding twelve-month period. For the fiscal year ended
May 31, 1996, the Adviser received an investment advisory fee of $73,369
(0.27%), following certain voluntary waivers. Pursuant to the provisions of the
Advisory Agreement, the Adviser was entitled to recieve an advisory fee of
$95,827 (0.35%) for the fiscal year ended May 31, 1996. Absent this provision
in the Advisory Agreement and the voluntary waivers undertaken by the Adviser,
the Adviser would have been entitled to recieve an advisory fee of $238,006
(0.87%), based on the Funds performance for the fiscal year ended May 31, 1996,
pursuant to the performance schedule above. The Adviser has agreed to waive a
portion of its advisery fee to limit the Fund's expenses to 1.60%.

The advisory fee paid by the Fund may exceed the advisory fees paid by
most other investment companies, even if the investment performance of the Fund
is less than the Index Return. In addition, the "fulcrum fee" of 0.75% is higher
than the fees paid by most other investment companies, although it is not
necessarily higher than the fees paid by most fund portfolios having the same
investment objectives and policies. Investors may pay higher advisory fees under
the performance arrangement even though the Fund's performance may have
declined. For example, if the market declined, the Index dropped by 27
percentage points and the Fund's performance declined by 17%, the Fund would pay
the maximum advisory fee.

In the event the Index is no longer published or available or becomes
an inappropriate measure of the Fund's performance, the Trustees will meet to
approve another appropriate index or will negotiate a fixed advisory fee with
the Adviser.

THE SUB-ADVISER.

Carillon Advisers, Inc., an Ohio corporation with offices at 1876
Waycross Road, Cincinnati, Ohio 45246, is registered as an investment adviser
under the Investment Advisers Act of 1940. The Sub-Adviser is a wholly-owned
subsidiary of Union Central Life. Carillon and its affiliates currently act as
an investment adviser to Carillon Group of Mutual Funds, which consist of the
Carillon Fund, Inc. and the Carillon Investment Trust.

THE SUB-ADVISORY AGREEMENT.

The Sub-Adviser serves pursuant to an Investment Sub-Advisory
Agreement with the Adviser dated September 18, 1996 (the "Sub-Advisory
Agreement").

Under the Sub-Advisory Agreement, Carillon provides, subject to the
Adviser's direction, a portion of the investment advisory services for which
the Adviser is responsible pursuant to the Advisory Agreement relating to the
Fund. The Sub-Adviser provides investment research and advice with respect to
securities and investments and cash equivalents in the Fund. Research services
provided by the Sub-Adviser include information, analytical reports, computer
screening studies, statistical data and factual resumes pertaining to high
yield securities. Such supplemental research may be subject to additional
analysis by the Adviser.

The Sub-Advisory Agreement, which became effective on September 18,
1996, shall continue in effect for two years. It is renewable annually
thereafter for successive periods not to exceeds one year each (i) by a vote of
the Trustees or by a vote of a majority of the outstanding voting shares of the
Fund, and (ii) by the vote of a majority of the Trustees of the Trust who are
not parties to the Sub-Advisory Agreement or "interested persons" (as such term
is defined in the 1940 Act) thereof, cast in person at a meeting called for the
purpose of voting on such approval.

The Sub-Advisory Agreement may be terminated at any time, without
payment of any penalty, by the Trustees or by a vote of a majority of the
outstanding voting securities of the Fund, upon sixty (60) days' written notice
to the Adviser and Carillon, and by the Adviser or Carillon, upon ninety (90)
days' written notice to the other party and the Fund. The Sub-Advisory
Agreement shall also terminate automatically in the event of any transfer or
assignment thereof, as defined in the 1940 Act, and in the event of any act or
event that terminates the Advisory Agreement between the Adviser and the Fund.

Prior to the implementation of the Sub-Advisory Agreement, the Adviser
had entered into an Investment Service Agreement (the "Service Agreement") with
the Trust and Union Central Life, which permitted the Adviser to have access to
and to utilize Union Central Life's advisory personnel, administrative
services, supplies and equipment in the performance of its advisory services
and functions under the Advisory Agreement. In consideration for such services,
the Adviser paid Union Central Life for the costs, direct or indirect, fairly
attributable thereto, but in no event less than $65,000 per year or such other
amount as was agreed to by the Adviser and Union Central Life. For the fiscal
year ended May 31, 1996, the Adviser paid Union Central Life $65,000 pursuant
to the Service Agreement. The Service Agreement was terminated on September 18,
1996.

MANAGEMENT-RELATED SERVICES

BISYS SERVICE AGREEMENTS. As more fully described below, the Trust has
entered into a number of agreements with affiliates of BISYS Fund Services,
Inc., a Delaware corporation, pursuant to which management-related and other
services are performed for the Fund. BISYS Fund Services, Limited Partnership
(d.b.a. "BISYS Fund Services"), an Ohio limited partnership of which BISYS Fund
Services, Inc. is the General Partner, serves as the Administrator of the Fund
(the "Administrator"), and as the Fund's distributor or principal underwriter
(the "Distributor") (see "Distribution Plans -- The Distributor"). BISYS Fund
Services, Inc. is a wholly-owned subsidiary of The BISYS Group Inc. WC
Subsidiary Corporation, also a wholly-owned subsidiary of BISYS Fund Services,
Inc., is the sole limited partner of BISYS Fund Services.

BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio corporation and also
a wholly-owned subsidiary of The BISYS Group, Inc., serves as Fund Accountant to
the Fund (the "Fund Accountant") and additionally acts as the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"). Each of the "BISYS
Companies" has its principal offices at 3435 Stelzer Road, Columbus, OH 43219.

ADMINISTRATOR. Pursuant to an Amended and Restated Management and
Administration Agreement with the Trust dated September 27, 1995 (the
"Administration Agreement"), BISYS Fund Services, as Administrator of the Fund
and subject to the direction and control of the Trustees, supervises all aspects
of the operation of the Fund except those performed by the Fund's Adviser, the
Sub-Adviser, custodian,

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<PAGE> 136

Transfer Agent and Fund Accountant pursuant to their respective agreements with
the Trust. The Administrator is obligated to maintain office facilities for the
Trust; furnish statistical and research data, clerical and certain bookkeeping
services, and stationery and office supplies; prepare periodic reports to the
SEC on Form N-SAR; assist the Trust or its designee in the preparation of, and
file, the Fund's federal and state tax returns; assist the Trust in preparing
Annual and Semi-Annual Reports to Shareholders and its Registration Statements;
and keep and maintain certain financial accounts and records of the Fund.
Partners, officers or employees of the Administrator may serve as officers or
employees of the Trust and, under such circumstances, will be compensated by the
Administrator. (See "Compensation of Trustees.")

For services rendered and expenses borne by the Administrator pursuant
to the Administration Agreement, the Fund pays the Administrator a fee, computed
daily and paid monthly, at the annual rate of 0.20% of the average daily net
assets of each class of the Fund. Currently, the Administrator is waiving that
portion of such fee which exceeds 0.15%. For the fiscal year ended May 31, 1996,
the Administrator received administration fees of $54,750, of which the
Administrator voluntarily reduced $13,693.

The Administration Agreement further provides that the Administrator
will not be liable for losses suffered by the Fund except for any loss resulting
from willful misfeasance, bad faith, gross negligence or reckless disregard in
the performance by the Administrator of its obligations under such agreement.

Following an initial three-year term expiring May 31, 1997, the
Administration Agreement is renewable automatically for successive one-year
terms, unless terminated by mutual agreement of the parties or by either party
for "cause," in either such case by written notice of non-renewal given to the
other party at least 60 days prior to expiration of the then-current term. Such
annual continuance is subject to annual review (as to "cause") and approval (a)
by vote of a majority of the Trustees or of a majority of the Fund's outstanding
voting securities and (b) by vote of a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust or the
Administrator. "Cause" for purposes of the foregoing means, with respect to a
party: (i) willful misfeasance, bad faith, gross negligence or reckless
disregard; (ii) a final judgment or administrative order finding guilt of
criminal or unethical business conduct; (iii) financial difficulties evidenced
by bankruptcy, liquidation or reorganization proceedings; or (iv) circumstances
of substantial impairment of ability to perform the Administration Agreement.
Termination or replacement of the Administrator other than for such "cause"
would entitle the Administrator to receive from the Trust as liquidated damages
the balance of the fees due under the Administration Agreement for the remainder
of the term in which such termination or replacement takes place.

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<PAGE> 137

FUND ACCOUNTANT.

Pursuant to an Amended and Restated Fund Accounting Agreement with the
Trust dated September 27, 1995 (the "Accounting Agreement"), BISYS, the Fund
Accountant, is responsible for accounting relating to the Fund and its
investment transactions; maintaining certain books and records of the Fund;
determining daily the net asset value per share of the Fund and calculating
yield, dividends and capital gain distributions; and preparing security
position, transaction and cash position reports.

For such services, the Fund reimburses the Fund Accountant for all out-of-pocket
expenses incurred by it (including all charges for delivery of materials,
telephone and other communications expenses, and costs of pricing portfolio
securities) and pays it a fee, computed daily and paid monthly, at the annual
rate of 0.03% of the Fund's average daily net assets, provided, however, that
such fee will not be less than $30,000. For the fiscal year ended May 31, 1996,
the Fund Accountant received fees of $30,002.

Following an initial one-year term expiring May 31, 1995, the Fund
Accounting Agreement is renewable automatically for successive one-year terms,
unless terminated by mutual agreement of the parties or by either party with or
without "cause," in each case by written notice of non-renewal given to the
other party at least 60 days prior to expiration of the then-current term.
"Cause" for such purpose means, with respect to a party: (i) willful
misfeasance, bad faith, gross negligence or reckless disregard of duty; (ii) a
final judgment or administrative order finding guilt of criminal or unethical
business conduct; (iii) financial difficulties evidenced by bankruptcy,
liquidation or reorganization proceedings; or (iv) circumstances of substantial
impairment of ability to perform the Accounting Agreement.

TRANSFER AGENT.

Pursuant to an Amended and Restated Transfer Agency Agreement with the
Trust dated September 27, 1995 (the "Transfer Agency Agreement"), BISYS also
acts as the Trust's transfer, dividend disbursing and redemption agent. BISYS
provides certain shareholder and other services to the Trust, including:
furnishing account and transaction information; providing mailing labels for the
distribution to Fund shareholders of financial reports, prospectuses, proxy
statements and other such materials; providing compliance reporting; calculating
distribution plan and marketing expenses; and maintaining shareholder account
records.

For such services, the Trust reimburses the Transfer Agent for all
out-of-pocket expenses incurred by it (including all charges

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<PAGE> 138

for delivery of materials, telephone and other communications expenses, and
costs of postage, supplies, and the microfilm or microfiche reproduction and
storage of records) and pays the Transfer Agent annual fees calculated in
accordance with a schedule of charges set forth in the Transfer Agency
Agreement. For the fiscal year ended May 31, 1996, the Transfer Agent received
fees of $36,415.

The Transfer Agency Agreement continues in effect through May 31, 1995 and
thereafter unless terminated at any time by either party upon 90-days' written
notice. To the extent BISYS continues to furnish services to the Trust beyond
the date of any such termination, it shall continue to be paid its fees and
expenses as provided in the Transfer Agency Agreement. In the event of
termination, BISYS will be entitled to collect from the Trust a fee equal to
102% of its actual costs incurred in effecting such termination. Under the
Transfer Agency Agreement, BISYS will be liable to the Trust only for losses
resulting from willful misfeasance, bad faith, gross negligence, or reckless
disregard in performing its duties. The Trust has otherwise agreed to indemnify
BISYS and its officers, directors, nominees, employees and agents against
claims, damages and liabilities, including counsel fees and other expenses,
arising out of its performance of the Transfer Agency Agreement or based upon
its reasonable reliance upon information furnished by the Trust, the Adviser,
the Administrator, the Fund Accountant or another custodian of Trust or Fund
records.

DISTRIBUTION PLANS

The Trust's Distribution and Shareholder Service Plans (the "Plans"),
one dated June 27, 1994, on behalf of the Summit High Yield Shares class, and
one dated September 27, 1995, on behalf of the Summit High Yield Institutional
Service Shares class, are written plans contemplated by Rule 12b-1 (the "Rule")
promulgated under the 1940 Act. The Fund is authorized under the Plans to use
the assets of each class to finance certain activities relating to the
distribution of shares of that class to investors. The Plans are "compensation"
plans providing for the payment of a fixed percentage of each class's average
net assets to finance distribution expenses. Under the Plans, each class of the
Fund pays monthly to BISYS Fund Services, as its principal underwriter, a
distribution fee which may not exceed, on an annual basis, 0.25% of each class's
average daily net assets.

On July 7, 1992, the SEC approved amendments to Article III, Section 26
of the National Association of Securities Dealers, Inc. ("NASD") Rules of Fair
Practice, the NASD's maximum sales charge rule relating to mutual fund shares.
The amendments, which took effect July 7, 1993, establish limits on all types of
sales charges, whether front-end, deferred or asset-based. These amendments may
operate to limit the aggregate distribution fees to which shareholders may be
subject under the terms of the Plans. BISYS Fund Services will monitor the Fund
for compliance with the amended NASD rule.

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<PAGE> 139

The Plans authorize BISYS Fund Services to use the distribution fee to
pay, or reimburse expenses incurred by, banks, broker/dealers and other
institutions which, pursuant to agreements with the Distributor, provide
distribution assistance and/or shareholder services including, but not limited
to, printing and distributing prospectuses to persons other than class
shareholders, printing and distributing advertising and sales literature and
reports to shareholders used in connection with selling shares of each class,
furnishing personnel and communications equipment to service shareholder
accounts and prospective shareholder inquiries. Such services may be performed
by the Distributor or any of its affiliates.

The Plans require that any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to the Plans or any related
agreement prepare and furnish to the Trustees for their review, at least
quarterly, written reports complying with the requirements of the Rule and
setting out the amounts expended under the Plans and the purposes for which
those expenditures were made. The Plans provide that so long as they are in
effect the selection and nomination of Trustees who are not interested persons
of the Trust will be committed to the discretion of the Trustees then in office
who are not interested persons of the Trust.

Neither the Plans nor any related agreements can take effect until
approved by a majority vote of both all the Trustees and those Trustees who are
not interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plans or in any agreements related to them,
cast in person at a meeting called for the purpose of voting on the Plans and
the related agreements. Such approval of the Plan on behalf of the Summit High
Yield Shares class was obtained on May 24, 1994, and the Plan was also approved
by the sole shareholder of the class on May 24, 1994. The necessary approval of
the Plan by the Trustees and by the sole shareholder of the class on behalf of
the Institutional Service Shares class of the Plan was obtained on September
27, 1995.

The Plans will continue in effect only so long as their continuance is
specifically approved at least annually by the Trustees in the manner described
above for Trustee approval of the Plans. The Plans may be terminated at any time
by a majority vote of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operations of the
Plans or in any agreement related to the Plans or by vote of a majority of the
outstanding voting securities of each class.

The Plans may not be amended so as to materially increase the amount of
the distribution fees unless the amendment is approved by a vote of at least a
majority of the outstanding voting securities of the Summit High Yield Shares
class or the Institutional Service Shares class, as appropriate. In addition, no
material amendment may be made unless approved by the Trustees in the manner
described above for Trustee approval of the Plans.

For the fiscal year ended May 31, 1996, BISYS Fund Services, as the
Fund's principal underwriter, received $67,104 in distribution fees payable
pursuant to the Plan adopted on behalf of the Summit High Yield Shares class.
The following is a breakdown of the expenses paid for by the Summit High Yield
Shares class of the Fund out of distribution fees for the period: (i)
advertising, $0; (ii) printing and mailing of prospectuses to other
shareholders, $0; (iii) compensation to underwriters, $67,104; (vi)
compensation to sale personnel, $0 and (v) other, $0. For the period from
January 19, 1996 (the commencement of the offering of the class) to May 31,
1996, BISYS Fund Services received $820 in distribution fees payable pursuant
to the Plan adopted on behalf of Summit High Yield Institutional Service
Shares class. The following is a breakdown of the expenses paid by the Summit
High Yield Institutional Service Shares class of the Fund out of distribution
fees for the period from January 19, 1996 to May 31, 1996: (i) advertising, $0;
(ii) printing and mailing of prospectuses to other shareholders, $0; (iii)
compensation to underwriters, $820; (iv) compensation to sales personnel, $0;
and (v) other, $0.

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<PAGE> 140

THE DISTRIBUTOR.

BISYS Fund Services serves as the Fund's Distributor or principal
underwriter (the "Distributor") pursuant to an Amended and Restated Distribution
Agreement with the Trust dated September 27, 1995 (the "Distribution
Agreement"). BISYS Fund Services is registered as a broker-dealer under the 1934
Act and is a member of the NASD. The offering of the Fund's shares is
continuous. The Distribution Agreement provides that the Distributor, as agent
in connection with the distribution of Fund shares, will use appropriate efforts
to solicit orders for the sale of Fund's shares and undertake such advertising
and promotion as it deems reasonable, including, but not limited to,
advertising, compensation to underwriters, dealers and sales personnel,
printing and mailing prospectuses to persons other than current Fund
shareholders, and printing and mailing sales literature. For the period of June
27, 1994 through May 31, 1995, and for the fiscal year ended May 31, 1996, the
Distributor received $262 and $11,717, respectively, in underwriting
commissions for the sale of the Summit High Yield Shares class of the Fund, all
of which commissions were retained by the Distributor. The Distributor did not
receive any underwriting commissions for sale of the Summit High Yield
Institutional Services Shares class of the Fund. Aside from the receipt of
these underwriting commissions and the payment of distribution fees as
described earlier in this Consolidated Statement of Additional Information, the
Distributor did not receive any other compensation from the Fund.

In addition, the Distributor has the right, as principal, to purchase
Fund shares at their net asset value and to sell such shares to the public, or
to dealers who have entered into selected dealer agreements with the
Distributor, in both cases against orders for such shares, at the public
offering price (i.e., net asset value, in the case of shares of the
Institutional Service Shares class, and net asset value plus a sales charge of
4.50%, in the case of shares of the Summit High Yield Shares class) or, in the
case of sales to dealers, at the public offering price, less a concession
determined by the Distributor which may not exceed the amount of the sales
charge or underwriting discount (for the Summit High Yield Shares class).

PORTFOLIO TRANSACTIONS

INVESTMENT OR BROKERAGE DISCRETION.

Decisions with respect to the purchase and sale of portfolio securities
on behalf of the Fund are made by the Adviser. The Adviser is also responsible
for implementing these decisions, including the negotiation of commissions and
the allocation of

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portfolio brokerage and principal business. The Fund's purchases and sales of
portfolio securities are normally done on a principal basis and do not involve
the payment of a commission although they may involve the designation of selling
concessions. That part of the discussion below relating solely to brokerage
commissions would not normally apply to the Fund. For the fiscal year ended May
31, 1996, the Fund did not pay any brokerage commissions on brokerage
transactions.

HOW BROKERS AND DEALERS ARE SELECTED.

FIXED-INCOME SECURITIES. Fixed-income securities are generally
purchased from the issuer or a primary market-maker acting as principal for the
securities on a net basis, with no brokerage commission being paid by the
client, although the price usually includes an undisclosed compensation.
Transactions placed through dealers serving as primary market-makers reflect the
spread between the bid and asked prices. Securities may also be purchased from
underwriters at prices which include underwriting fees.

The Adviser may effect principal transactions on behalf of the Fund
with a broker or dealer who furnishes brokerage and/or research services,
designate any such broker or dealer to receive selling concessions, discounts or
other allowances, or otherwise deal with any such broker or dealer in connection
with the acquisition of securities in an underwriting. The Fund may receive
brokerage and research services in connection with such designations in a fixed
priced underwriting.

In purchasing and selling the Fund's portfolio securities, it is the
Adviser's policy to obtain quality execution at the most favorable prices
through responsible brokers and dealers and, in the case of agency transactions
(in which the Fund does not generally engage), at competitive commission rates.
However, under certain conditions, the Fund may pay higher brokerage commissions
in return for brokerage and research services. In selecting broker-dealers to
execute the Fund's portfolio transactions, consideration is given to such
factors as the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing brokers and dealers,
and brokerage and research services provided by them. It is not the policy of
the Adviser to seek the lowest available commission rate where it is believed
that a broker or dealer charging a higher commission rate would offer greater
reliability or provide better price or execution.

HOW EVALUATIONS ARE MADE OF THE OVERALL REASONABLENESS OF BROKERAGE
COMMISSIONS PAID.

On a continuing basis, the Adviser seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed on
behalf of the Fund. In evaluating the reasonableness of commission rates, the
Adviser considers: (i) historical commission rates; (ii) rates which other
institutional

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investors are paying based on available public information; (iii) rates quoted
by brokers and dealers; (iv) the size of a particular transaction in terms of
the number of shares, dollar amount, and number of clients involved; (v) the
complexity of a particular transaction in terms of both execution and
settlement; (vi) the level and type of business done with a particular firm over
a period of time; and (vii) the extent to which the broker or dealer has capital
at risk in the transaction.

DESCRIPTION OF RESEARCH SERVICES RECEIVED FROM BROKERS AND DEALERS.

The Adviser receives a wide range of research services from brokers and
dealers. These services include information on the economy, industries, groups
of securities, individual companies, statistical information, accounting and tax
law interpretations, political developments, legal developments affecting
portfolio securities, technical market action, pricing and appraisal services,
credit analysis, risk measurement analysis, performance analysis and analysis of
corporate responsibility issues. These services provide both domestic and
international perspective. Research services are received primarily in the form
of written reports, computer-generated services, telephone contacts and personal
meetings with security analysts. In addition, such services may be provided in
the form of meetings arranged with corporate and industry spokespersons,
economists, academicians and government representatives. In some cases, research
services are generated by third parties but are provided to the Adviser by or
through broker-dealers.

Research services received from brokers and dealers are supplemental to
the Adviser's own research effort and, when utilized, are subject to internal
analysis before being incorporated by the Adviser into its investment process.
As a practical matter, it would not be possible for the Adviser to generate all
of the information presently provided by brokers and dealers. The Adviser also
allocates brokerage for research services which are available for cash. While
receipt of research services from brokerage firms may not reduce the Adviser's
normal research activities, the expenses of the Adviser could be materially
increased if it attempted to generate such additional information through its
own staff. To the extent that research services of value are provided by brokers
or dealers, the Adviser may be relieved of expenses which it might otherwise
bear.

The Adviser has a policy of not allocating brokerage business in return
for products or services other than brokerage or research services. In
accordance with the provisions of Section 28(e) of the 1934 Act, the Adviser may
from time-to-time receive services and products which serve both research and
non-research functions. In such event, the Adviser makes a good faith
determination of the anticipated research and non-research use of the product or
service and allocates brokerage only with respect to the research component.

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<PAGE> 143

COMMISSIONS TO BROKERS WHO FURNISH RESEARCH SERVICES.

With regard to the payment of brokerage commissions, the Adviser has
adopted a brokerage allocation policy embodying the concepts of Section 28(e) of
the 1934 Act which permits an investment adviser to cause an account to pay
commission rates in excess of those another broker or dealer would have charged
for effecting the same transaction, if the Adviser determines in good faith that
the commission paid is reasonable in relation to the value of the brokerage and
research services provided. The determination may be viewed in terms of either
the particular transaction involved or the overall responsibilities of the
Adviser with respect to the accounts over which it exercises investment
discretion. Accordingly, while the Adviser cannot readily determine the extent
to which commission rates charged by broker-dealers reflect the value of their
research services, the Adviser would expect to assess the reasonableness of
commissions in light of the total brokerage and research services provided by
each particular broker.

INTERNAL ALLOCATION PROCEDURES.

The Adviser will follow a policy of not precommitting a specific amount
of business to any broker or dealer over any specific time period. The Adviser
expects that the majority of brokerage placement will be determined by the needs
of a specific transaction such as market-making availability of a buyer or
seller of a particular security, or specialized execution skills. However, the
Adviser may adopt an internal brokerage allocation procedure for that portion of
its discretionary client brokerage or selling concessions business where special
needs do not exist, or where the business may be allocated among several brokers
or dealers which are able to meet the needs of the transaction.

PORTFOLIO TURNOVER.

The Fund is free to dispose of its portfolio securities at any time,
subject to complying with the Internal Revenue Code and the 1940 Act, when
changes in circumstances or market conditions make such a move desirable in
light of the Fund's investment objectives. The Fund will not attempt to achieve
or be limited to a predetermined rate of portfolio turnover, and transactions
will be undertaken with a view to achieving the Fund's investment objectives.

The Fund does not intend to use short-term trading as a primary means
of achieving its investment objectives. The rate of portfolio turnover shall be
calculated by dividing: (a) the lesser of purchases and sales of portfolio
securities for the particular fiscal year by (b) the monthly average of the
value of the portfolio securities owned by the Fund during the particular fiscal
year. Such monthly average shall be calculated by totaling the values of the
portfolio securities as of the beginning and end of

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the first month of the particular fiscal year and as of the end of each of the
succeeding eleven months and dividing the sum by 13.

Under normal market circumstances, the portfolio turnover rate for the
Fund is not expected to exceed 100%. High portfolio turnover rates may involve
corresponding greater brokerage commissions and other transaction costs, which
will be borne directly by the Fund and ultimately, by the Fund's shareholders.
In addition, high portfolio turnover rates may result in increased short-term
capital gains, which, when distributed to shareholders, are treated as ordinary
income.

For the fiscal year ended May 31, 1996, the portfolio turnover rate for
the Fund was 91.43%; for the period from June 27, 1994 (commencement of
operations) to May 31, 1995, the portfolio turnover rate for the Fund was
158.36%. The significant variation in portfolio turnover rates over such periods
was due to an increase in the assets of the Fund, which caused the Fund to
reposition its portfolio holdings in order to meet its investment objectives and
policies.

MISCELLANEOUS.

From time to time, orders for clients may be placed through a
computerized transaction network.

The Fund does not allocate business to any broker-dealer on the basis
of its sales of the Fund's shares. However, this does not mean that
broker-dealers who purchase Fund shares for their clients will not receive
business from the Fund.

The Adviser currently manages only the Fund. However, the Sub-Adviser
and Union Central Life manage a variety of investment portfolios and accounts,
some of which have investment objectives and programs similar to those of the
Fund. Although investment recommendations or determinations for the Fund will be
made by the Adviser independently from recommendations or determinations made by
such other entities for their respective portfolios and accounts, the latter may
occasionally make recommendations to their clients which result in their
purchasing, or selling, the same securities simultaneously with the Fund. As a
result, the demand for securities being purchased or the supply of securities
being sold may increase, and this could have an adverse effect on the price of
those securities. In such circumstances, the Adviser and the Sub-Adviser may
determine or agree that orders for the purchase or sale of the same security
for the Fund and one or more other portfolios should be combined, in which
event the transactions will be averaged as to price and normally allocated as
nearly as practicable in proportion to the amounts desired to be purchased or
sold for each portfolio.

CAPITAL STOCK

The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate

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beneficial interests in the Trust. The Trust presently offers two classes of
shares; each share represents an interest in the Fund portfolio proportionately
equal to the interest of each other share of such portfolio. Shareholders of
each class vote on matters affecting their respective class, and neither class
may vote on matters that affect only the other class. Upon the Trust's
liquidation, all shareholders of the Fund would share pro-rata in the net assets
of such portfolio available for distribution to shareholders.

If they deem it advisable and in the best interests of shareholders,
the Trustees may create additional classes of shares which may differ from each
other only as to expenses and dividends or additional series of shares, each of
which may have separate assets and liabilities (in which case any such series
would have a designation including the word "Trust" or "Fund"). If additional
series of shares or classes are created, shares of each series or class are
entitled to vote as a series or class only to the extent required by the 1940
Act or as permitted by the Trustees. Upon the Trust's liquidation, all
shareholders of a portfolio would share pro-rata in the net assets of such
portfolio available for distribution to shareholders of the portfolio, but, as
shareholders of such portfolio, would not be entitled to share in the
distribution of assets belonging to any other portfolio.

As of the date of this Combined Statement of Additional Information,
the Trustees have designated one portfolio of the Trust: the Summit High Yield
Fund, and the Trustees have created three classes of shares in the Fund: the
Summit High Yield Shares class, the Summit High Yield Institutional Service
Shares class, and the Summit High Yield Institutional Shares class. This
Combined Statement of Additional Information relates to the Summit High Yield
Shares class and the Summit High Yield Institutional Service Shares class.
Shares of the Summit High Yield Institutional Shares class are not presently
offered to the public.

PRICING OF SECURITIES

Securities which are traded on stock exchanges are valued at the last
sales price as of the close of the Exchange, or lacking any sales, at the
closing bid prices. Securities traded only in the "over-the-counter" market are
valued at the last bid prices quoted by brokers that make markets in the
securities at the close of trading on the Exchange. Fixed-income securities are
generally traded in the over-the-counter market. Securities and assets for which
market quotations are not readily available or not obtained from a pricing
service are valued at fair value as determined in good faith by the Trustees,
although the actual calculations may be made by persons acting pursuant to the
direction of the Trustees. If approved by the Trustees, the Fund may make use of
a pricing service or services in determining the net asset value of the Fund.
Debt securities with a remaining maturity of 60 days or less are valued on an
amortized cost basis, which the Trustees have determined reflects fair value.

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<PAGE> 146

There are a number of pricing services available, and the Trustees, on
the basis of ongoing evaluation of these services, may use or may discontinue
the use of any pricing service in whole or in part.

For the purposes of determining the Fund's net asset value per share,
all assets and liabilities initially expressed in foreign currencies are
converted into U.S. dollars at the mean of the bid and offer prices of such
currency against U.S. dollars quoted by any major bank.

Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value,
as determined in good faith by the Adviser, as authorized by the Trustees.

DIVIDENDS

A shareholder will automatically receive all income dividends and
capital gain distributions in additional full and fractional shares of the Fund
at their net asset value as of the date of payment unless the shareholder elects
to receive such dividends or distributions in cash. The reinvestment date
normally precedes the payment date by about seven days although the exact timing
is subject to change.

TAX STATUS

The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended ("Code").

Dividends and distributions paid by the Fund are not eligible for the
dividends received deduction for corporate shareholders. For tax purposes, it
does not make any difference whether dividends and capital gain distributions
are paid in cash or in additional shares. The Fund must declare dividends equal
to at least 98% of ordinary income (as of December 31) and capital gains (as of
October 31) in order to avoid a federal excise tax and distribute 100% of
ordinary income and capital gains as of its tax year-end to avoid federal income
tax.

At the time of your purchase, the Fund's net asset value may reflect
undistributed capital gains or net unrealized appreciation of securities held by
the Fund. A subsequent distribution to you of such amounts, although
constituting a return of your investment, would be taxable as either dividends
or capital gain distributions. For federal income tax purposes, the Fund is
permitted to carry forward its net realized capital losses, if any, for eight
years, and realize net capital gains up to the amount of such losses without
being required to pay taxes on or distribute such gains.

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<PAGE> 147

If, in any taxable year, the Fund should not qualify as a regulated
investment company under the Code: (i) the Fund would be taxed at normal
corporate rates on the entire amount of its taxable income without deduction for
dividends or other distributions to shareholders; and (ii) the Fund's
distributions to the extent made out of the Fund's current or accumulated
earnings and profits would be taxable to shareholders as ordinary dividends
(regardless of whether they would otherwise have been considered capital
dividends).

To the extent the Fund invests in foreign securities, the Fund may be
required to pay withholding or other taxes to foreign governments. Foreign tax
withholding from dividends and interest, if any, is generally from 10% to 35%,
although lesser and greater amounts may be incurred. The investment yield of the
Fund will be reduced by these foreign taxes. Shareholders will bear the cost of
any foreign taxes but may not be able to claim a foreign tax credit or deduction
for these foreign taxes. If the Fund is eligible for and makes an election to
allow its shareholders to claim a foreign tax credit or deduction for these
taxes for any taxable year, the shareholders will be notified. In addition, if
the Fund invests in securities of passive foreign investment companies, it may
be subject to U.S. federal income taxes (and interest on such taxes) as a result
of such investments. The investment yield of the Fund will be reduced by such
taxes and interest. Shareholders will bear the cost of these taxes and interest
but will not be able to claim a deduction for these amounts.

FOREIGN CURRENCY GAINS AND LOSSES.

Foreign currency gains and losses, including the portion of gain or
loss on the sale of debt securities attributable to foreign exchange rate
fluctuations, are taxable as ordinary income. If the net effect of these
transactions is a gain, the dividend paid by the Fund will be increased; if the
result is a loss, the income dividend paid by the Fund will be decreased.
Adjustments, to reflect these gains and losses will be made at the end of the
Fund's taxable year.

INVESTMENT PERFORMANCE

For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to relevant indices in advertisements or in
reports to shareholders, performance will be stated in terms of total return and
yield. Both "total return" and "yield" figures are based on the historical
performance of the Fund, show the performance of a hypothetical investment and
are not intended to indicate future performance.

YIELD INFORMATION.

From time to time, the Fund may advertise a yield figure. A portfolio's
yield is a way of showing the rate of income the portfolio earns on its
investments as a percentage of the

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portfolio's share price. Under the rules of the SEC, yield must be
calculated according to the following formula:

a-b 6
YIELD = 2[(--- + 1) - 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 maximum offering price per share on the last
day of the period.

Yields for the Fund used in advertising are computed by dividing the Fund's
interest and dividend income for a given 30 day period, net of expenses, by the
average number of shares entitled to receive distributions during the period,
dividing this figure by the Fund's offering price (including the 4.50% sales
charge, in the case of shares of the Summit High Yield Shares class) at the end
of the period and annualizing the result (assuming compounding of income) in
order to arrive at an annual percentage rate. Income is calculated for purposes
of yield quotations in accordance with standardized methods applicable to all
stock and bond mutual funds. Dividends from equity investments are treated as if
they were accrued on a daily basis, solely for the purposes of yield
calculations. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to bonds
trading at a discount by adding a portion of the discount to daily income.
Capital gains and losses generally are excluded from the calculation. Income
calculated for the purposes of calculating the Fund's yield differs from income
as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for the Fund may differ from the rate of
distributions the Fund paid over the same period or the rate of income reported
in the Fund's financial statements. For the 30-day period ended May 31, 1996,
the Fund's yield for the shares of the Summit High Yield Shares class was
10.13%. For the 30-day period ended May 31, 1996, the Fund's yield for the
shares of the Summit High Yield Institutional Service Shares class was 10.36%.

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<PAGE> 149

TOTAL RETURN PERFORMANCE.

Under the rules of the Commission, funds advertising performance must
include total return quotes, "T" below, calculated according to the following
formula:

n
P(1 + T) = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years (1, 5 or 10)

ERV = ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year
periods (or fractional portion
thereof).

The average annual total return will be calculated under the foregoing
formula and the time periods used in advertising will be based on rolling
calendar quarters, updated to the last day of the most recent quarter prior to
submission of the advertising for publication, and will cover prescribed
periods. When the period since inception is less than one year, the total return
quoted will be the aggregate return for the period. In calculating the ending
redeemable value, the maximum sales load is deducted from the initial $1,000
payment (in the case of shares of the Summit High Yield Shares class) and all
dividends and distributions by the Fund are assumed to have been reinvested at
net asset value as described in the prospectus on the reinvestment dates during
the period. Total return, or "T" in the formula above, is computed by finding
the average annual compounded rates of return over the prescribed periods (or
fractional portions thereof) that would equate the initial amount invested to
the ending redeemable value. Any sales loads that might in the future be made
applicable at the time to reinvestments would be included as would any recurring
account charges that might be imposed by the Fund. Based on the foregoing
calculation, the aggregate total returns for the fiscal year ended May 31, 1996
and the average annual total return for the period from June 27, 1994 to May
31, 1995 for the Summit High Yield Shares class were 20.34% and 9.97%,
respectively. The total return figures do not reflect the deduction of the
maximum 4.50% front-end sales charge which may be assessed purchasers of shares
of the Summit High Yield Shares class. The aggregate total return, after the
deduction of the front-end slales charge for the same period, for the Summit
High Yield Shares class were 14.88% and 5.03%, respectively. Based on the
foregoing calculation, the aggregate total return for the period from January
19, 1995 for the Summit High Yield Institutional Service Shares class was
20.16%.

The Fund may also from time to time include in such advertising an
aggregate total return figure or an average annual total return figure that is
not calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. The
Fund may quote an aggregate total return figure in comparing the Fund's total
return with data published by Lipper Analytical Services, Inc. or with the
performance of various indices including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Value Line
Composite Index, the Lehman Brothers Bond, Government Corporate, Corporate and
Aggregate Indices, Merrill Lynch Government & Agency Index, Merrill Lynch
Intermediate Agency Index, Morgan Stanley Capital International

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<PAGE> 150

Europe, Australia, Far East Index or the Morgan Stanley Capital International
World Index. For such purposes, the Fund calculates its aggregate total return
for the specified periods of time by assuming the investment of $1,000 in Fund
shares and assuming the reinvestment of each dividend or other distribution at
net asset value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. The Fund does not, for these
purposes, deduct from the initial value invested any amount representing sales
charges. The Fund would, however, disclose the maximum sales charge and would
also disclose that the performance data does not reflect sales charges and that
the inclusion of sales charges would reduce the performance quoted, if a sales
charge is in effect. To calculate its average annual total return, the aggregate
return is then annualized according to the Commission's formula for total return
quotes, outlined above. When the period since inception is less than one year,
the total return quoted will be the aggregate return for the period.

The Fund may also advertise the performance rankings assigned by
various publications and statistical services, including but not limited to SEI,
Lipper Mutual Performance Analysis, Intersec Research Survey of Non-U.S. Equity
Fund Returns, Frank Russell International Universe, and any other data which may
be presented from time to time by such analysis as Dow Jones, Morningstar, Inc.,
Chase Investment Performance, Wilson Associates, Stanger, CDA Investment
Technologies, Inc., the Consumer Price Index ("CPI"), The Bank Rate Monitor
National Index, IBC/Donaghue's Average/U.S. Government and Agency, or as they
appear in various publications including but not limited to The Wall Street
Journal, Forbes, Barron's, Fortune, Money Magazine, The New York Times,
Financial World, Financial Services Week, USA Today and other regional
publications.

GENERAL

REDEMPTION-IN-KIND.

Although it is the Fund's present policy to make payment of redemption
proceeds in cash, if the Trustees determine it appropriate, redemption proceeds
may be paid in whole or in part by a distribution in kind of securities held by
the Fund. If a redemption-in-kind is made, a shareholder might be required to
bear transaction costs, including brokerage commissions, to dispose of such
securities.

REPURCHASE OF SHARES.

The Distributor is authorized to repurchase Fund shares through certain
securities dealers who have entered into selected dealer agreements with the
Distributor. The offer to repurchase may be suspended by the Distributor at any
time. Dealers may charge for their services in connection with a repurchase, but
neither the Fund nor the Distributor makes any such charge. Repurchase

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arrangements differ from redemptions in that the dealer buys the shares as
principal from his customer in lieu of tendering shares to the Fund for
redemption as agent for the customer. The proceeds to the shareholder will be
the net asset value of the shares repurchased as next determined after receipt
of the repurchase order by the dealer. By a repurchase, the customer should be
able to receive the sale proceeds from the dealer more quickly. Shareholders
should contact their dealers for further information as to how to effect a
repurchase and the dealer's charges applicable thereto.

PAYMENT FOR SHARES PRESENTED.

Payment for shares presented for redemption will be based on the Fund's
net asset value next computed after a request is received in proper form at the
Transfer Agent's office. Payment proceeds will be mailed within seven days
following receipt of all required documents. However, payment may be postponed
or the right of redemption suspended: (i) for any period during which the New
York Stock Exchange is closed for other than customary weekend and holiday
closing or during which trading on the New York Stock Exchange is restricted;
(ii) for any period during which an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets; or (iii) for such other periods as the SEC may by order permit
for the protection of shareholders, provided that applicable rules and
regulations of the SEC shall govern as to whether the conditions described in
(i) and (ii) exist. Payment of proceeds may also be delayed if the shares to be
redeemed or repurchased were purchased by check and that check has not cleared
(which may be up to 15 days or more).

CUSTODIAN.

The Fifth Third Bank (the "Custodian"), a banking company organized
under the laws of Ohio, is the Custodian for the Fund's securities and cash, but
it does not participate in the Fund's investment decisions. Portfolio securities
purchased in the U.S. are maintained in the custody of the Custodian and may be
entered into the Federal Reserve Book Entry System or the security depository
system of the Depository Trust Corporation. The Custodian's principal offices
are located at 38 Fountain Square Plaza, Cincinnati, OH 45263. Foreign
securities are held with selected foreign sub-custodians through arrangements
with State Street Bank & Trust Co. N.A.

INDEPENDENT ACCOUNTANTS.

The Trust's independent accountants, Coopers & Lybrand L.L.P., 100
East Broad Street, Columbus, OH 43215, audits the Trust's annual financial
statements, assist in the preparation of certain reports to the SEC and prepare
the Trust's tax returns.

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FINANCIAL INFORMATION

The Fund's Financial Statements for the year ended May 31, 1996, for
the Summit High Yield Shares class and for the period ended May 31, 1996 for the
Summit High Yield Institutional Service Shares class, including the Report of
Independent Accountants, are incorporated into this Combined Statement of
Additional Information. The Report may be obtained free of charge by calling the
Trust at 1-800-272-3442, or writing to the Trust at its address listed on the
cover of this Combined Statement of Additional Information.

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<PAGE> 153
REPORT OF INDEPENDENT ACCOUNTANTS Summit High Yield Fund
- -------------------------------------------------------------------------------

To the Shareholders and Board of Trustees of
Summit Investment Trust

We have audited the accompanying statement of assets and liabilities of the
Summit High Yield Fund, including the schedule of portfolio investments, as of
May 31, 1996, and the related statement of operations, statements of changes
in net assets, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
Summit Investment Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.

We conducted our audit in accordance with 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 securities
owned as of May 31, 1996 by correspondence with the custodian and brokers or
other auditing procedures where confirmations from brokers were not received.
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 audit provides 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 the
Summit High Yield Fund as of May 31, 1996, and the results of its operations
and the changes in its net assets and the financial highlights for the periods
presented in conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Columbus, Ohio
July 16, 1996

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<PAGE> 154
SUMMIT HIGH YIELD FUND

STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996

<TABLE>
<S> <C>
ASSETS:

Investments, at value (Cost $27,549,472).......................... $29,603,560
Interest receivable............................................... 839,558
Unamortized organization costs.................................... 381
-----------
Total Assets.................................................. 30,443,499
-----------
LIABILITIES:
Accrued expenses and other payables:
Investment advisory fees........................................ 124
Administration fees............................................. 1,241
12b-1 fees (High Yield shares).................................. 5,986
12b-1 fees (Institutional Service shares)....................... 38
Custodian and accounting fees................................... 1,411
Legal and audit fees............................................ 13,225
Transfer agent fees............................................. 5,253
Printing costs.................................................. 14,532
Other........................................................... 1,143
-----------
Total Liabilities............................................. 42,953
-----------
NET ASSETS:
Capital........................................................... 27,583,681
Undistributed net investment income............................... 7,287
Net unrealized appreciation on investments........................ 2,054,088
Accumulated undistributed net realized gains on investment
transactions..................................................... 755,490
-----------
Net Assets.................................................... $30,400,546
===========
Net Assets
High Yield shares............................................... $28,627,871
Institutional Service shares.................................... 1,772,675
-----------
Total........................................................... $30,400,546
===========
Outstanding units of beneficial interest (shares)
High Yield shares............................................... 2,591,388
Institutional Service shares.................................... 160,746
-----------
Total........................................................... 2,752,134
===========
Net asset value
Redemption price per share--High Yield shares................... $11.05
Offering and Redemption price per share--Institutional Service
shares......................................................... $11.03
===========
Maximum Sales Charge--High Yield shares........................... 4.50%
===========
Maximum Offering Price--High Yield shares (100%/(100%-Maximum
Sales Charge) of net asset value adjusted to nearest cent)
per share........................................................ $11.57
===========
</TABLE>

See notes to financial statements.

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<PAGE> 155

SUMMIT HIGH YIELD FUND

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income..................................................... $3,015,442
Dividend income..................................................... 2,750
----------
Total Income...................................................... 3,018,192
----------
EXPENSES:
Investment advisory fees............................................ 238,006
Administration fees................................................. 54,750
12b-1 fees--High Yield shares....................................... 67,104
12b-1 fees--Institutional Service shares (a)........................ 820
Custodian and accounting fees....................................... 46,695
Legal and audit fees................................................ 61,064
Organization costs.................................................. 5,319
Trustees' fees...................................................... 29,024
Transfer agent fees................................................. 36,415
Registration and filing fees........................................ 24,093
Printing costs...................................................... 30,886
Other............................................................... 21,624
Expenses waived..................................................... (178,330)
----------
Total Expenses.................................................... 437,470
----------
Net investment income............................................... 2,580,722
----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions....................... 1,021,588
Net change in unrealized appreciation on investments................ 1,498,333
----------
Net realized/unrealized gains on investments........................ 2,519,921
----------
Change in net assets resulting from operations...................... $5,100,643
==========
</TABLE>

- ------
(a) For the period from January 19, 1996 to May 31, 1996.

See notes to financial statements.

-7-
<PAGE> 156
SUMMIT HIGH YIELD FUND

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FROM JUNE 27, 1994
ENDED TO
MAY 31, 1996 MAY 31, 1995(a)
------------ ------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income......................... $ 2,580,722 $ 2,169,841
Net realized gains (losses) on investment
transactions................................. 1,021,588 (199,151)
Net change in unrealized appreciation on
investments.................................. 1,498,333 555,755
----------- -----------
Change in net assets resulting from operations. 5,100,643 2,526,445
----------- -----------
DISTRIBUTIONS TO HIGH YIELD SHAREHOLDERS FROM:
Net investment income......................... (2,515,712) (2,169,771)
Net realized gains............................ (66,947)
DISTRIBUTIONS TO INSTITUTIONAL SHAREHOLDERS FROM(B):
Net investment income......................... (52,460)
In excess of net investment income............ (5,333)
----------- -----------
Change in net assets from shareholder
distributions................................ (2,640,452) (2,169,771)
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued................... 3,568,045 25,414,219
Dividends reinvested.......................... 2,865,386 1,904,681
Cost of shares redeemed....................... (6,168,600) (50)
----------- -----------
Change in net assets from capital
transactions................................. 264,831 27,318,850
----------- -----------
Change in net assets.......................... 2,725,022 27,675,524
NET ASSETS:
Beginning of period........................... 27,675,524
----------- -----------
End of period................................. $30,400,546 $27,675,524
=========== ===========
SHARE TRANSACTIONS:
Sold.......................................... 333,322 2,542,739
Reinvested.................................... 272,922 194,929
Redeemed...................................... (591,773) (5)
----------- -----------
Change in shares............................... 14,471 2,737,663
=========== ===========
</TABLE>

- ------
(a) Period from commencement of operations.
(b) For the period from January 19, 1996 to May 31, 1996.

See notes to financial statements.

-8-
<PAGE> 157

SUMMIT HIGH YIELD FUND

SCHEDULE OF INVESTMENTS
MAY 31, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS (96.6%):
Consumer (8.5%):
Consumer Goods & Services (3.3%):
1,000,000 Renaissance Cosmetics, Inc.,
13.75%, 8/15/01........................................ $ 1,000,000
-----------
Food Processors (5.2%):
1,000,000 Foodbrands America,
10.75%, 5/15/06........................................ 1,017,500
1,000,000 PM Holdings Corp.,
0.00%, 9/1/00 (b)...................................... 558,750
-----------
1,576,250
-----------
Total Consumer.................................................. 2,576,250
-----------
Energy (6.6%):
Oil/Gas Exploration (4.9%):
1,000,000 Mesa Capital Corp.,
12.75%, 6/30/98 ....................................... 1,000,000
500,000 Trans Texas Gas Corp.,
11.50%, 6/15/02........................................ 486,250
-----------
1,486,250
-----------
Oilfield Service (1.7%):
500,000 Energy Ventures, Inc.,
10.25%, 3/15/04........................................ 518,750
-----------
Total Energy.................................................... 2,005,000
-----------
Financial Sector (2.5%):
Leasing (2.5%):
1,000,000 Tiphook Finance,
7.13%, 5/1/98.......................................... 750,000
-----------
Total Financial Sector.......................................... 750,000
-----------
Manufacturing (37.1%):
Apparel/Textile (6.5%):
500,000 CMI Industries,
9.50%, 10/1/03......................................... 390,000
1,000,000 Synthetic Industries, Inc.,
12.75%, 12/1/02........................................ 1,055,000
500,000 Tultex Corp.,
10.63%, 3/15/05 ....................................... 518,125
-----------
1,963,125
-----------
Auto & Related (6.0%):
1,000,000 Great Dane Holdings,
14.50%, 1/1/06......................................... 960,000
</TABLE>

<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Manufacturing, continued:
Auto & Related, continued:
1,000,000 Venture Holdings,
9.75%, 4/1/04......................................... $ 875,000
-----------
1,835,000
-----------
Chemical (3.3%):
1,000,000 Carlisle Plastics, Inc.,
10.25%, 6/15/97....................................... 1,001,250
-----------
General Industrial (11.6%):
1,000,000 Haynes International, Inc.,
13.50%, 8/15/99....................................... 1,000,000
500,000 IMO Industries,
11.75%, 5/1/06**...................................... 518,750
1,000,000 International Wire,
11.75%, 6/1/05........................................ 995,000
1,000,000 Terex Corp.,
13.75%, 5/15/02....................................... 1,025,000
-----------
3,538,750
-----------
Information Services/Technology (3.4%):
1,000,000 Computervision Industries Corp.,
11.38%, 8/15/99....................................... 1,040,000
-----------
Paper Products (6.3%):
500,000 Florida Coast Paper,
12.75%, 6/1/03........................................ 511,250
1,000,000 Gaylord Container Corp.,
12.75%, 5/15/05....................................... 1,051,250
10,000 S.D. Warren Co.,*
14.00%, 12/15/06***................................... 350,000
-----------
1,912,500
-----------
Total Manufacturing............................................ 11,290,625
-----------
Service (26.5%):
Gaming/Hotels (9.4%):
500,000 Casino Magic Finance,
11.50%, 10/15/01...................................... 525,000
500,000 Harveys Casino Resorts,
10.63%, 6/1/06........................................ 503,750
500,000 Majestic Star Casino,
12.75%, 5/15/03....................................... 526,250
500,000 Riviera Holdings,
11.00%, 12/31/02...................................... 490,000
</TABLE>

Continued

-9-
<PAGE> 158
SUMMIT HIGH YIELD FUND

SCHEDULE OF INVESTMENTS, CONTINUED
MAY 31, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Service, continued:
Gaming/Hotels, continued:
1,000,000 Santa Fe Hotel, Inc.,
11.00%, 12/15/00...................................... $ 795,000
-----------
2,840,000
-----------
Grocery (2.8%):
1,000,000 Eagle Food Centers,
8.63%, 4/15/00........................................ 860,000
-----------
Health Care (3.2%):
1,000,000 Regency Health Services,
9.88%, 10/25/02....................................... 975,000
-----------
Media & Cable (6.3%):
1,000,000 Chancellor Broadcasting,
9.38%, 10/1/04........................................ 940,000
1,000,000 Helicon Group, Inc.,
9.00%, 11/1/03 (c).................................... 987,500
-----------
1,927,500
-----------
Retail Stores (3.1%):
1,000,000 Parisian, Inc.,
9.88%, 7/15/03........................................ 952,500
-----------
Other Services (1.7%):
500,000 The Knoll Group, Inc.,
10.88%, 3/15/06**..................................... 510,000
-----------
Total Service.................................................. 8,065,000
-----------
Transportation (13.6%):
Air Transportation/Related (8.6%):
1,000,000 Airplanes Pass Through Trust,
10.88%, 3/15/19....................................... 1,060,000
500,000 CHC Helicopter,
11.50%, 7/15/02....................................... 472,500
1,000,000 SC International,
13.00%, 10/1/05....................................... 1,085,000
-----------
2,617,500
-----------
</TABLE>

<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Transportation, continued:
Trucking/Other (5.0%):
1,000,000 Ameritruck Distribution,
12.25%, 11/15/05..................................... $ 988,750
500,000 TNT Transport PLC, TNT USA,
11.50%, 4/15/04...................................... 517,500
-----------
1,506,250
-----------
Total Transportation.......................................... 4,123,750
-----------
Utilities (1.8%):
Telecommunications (1.8%):
1,000,000 Intermedia Communications,
0.00%, 5/15/01 (d)................................... 557,500
-----------
Total Utilities............................................... 557,500
-----------
Total Corporate Bonds......................................... 29,368,125
-----------
WARRANTS (0.1%):
Broadcast, Radio & Television (0.0%):
200 American Telecastings, 5 Warrant Package, Expire
6/15/99.............................................. 7,400
-----------
Consumer (0.1%):
2,000 Renaissance Cosmetics, Inc., Warrants,
Expire 8/15/01....................................... 45,000
-----------
Hotels/Gaming (0.0%):
500 Boomtown Warrants, Expire 11/98....................... 5
-----------
Total Warrants................................................ 52,405
-----------
INVESTMENT COMPANIES (0.6%):
183,030 Fountain Square Money Market Fund..................... 183,030
-----------
Total Investment Companies.................................... 183,030
-----------
TOTAL INVESTMENTS
(Cost--$27,549,472)(a)......................................... $29,603,560
===========
</TABLE>

- ------
Percentages indicated are based on net assets of $30,400,546.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........... $2,146,750
Unrealized depreciation........... (92,662)
----------
Net unrealized appreciation....... $2,054,088
==========
</TABLE>
(b) Interest rate increases to 11.50% on September 1, 2000.
(c) Interest rate increases to 11.00% on November 1, 1996.
(d) Interest rate increases to 12.50% on May 15, 2001.
* Represents paid-in-kind securities.
** Represents private placement securities.
*** 1 warrant attached to each preferred share.

See notes to financial statements.

-10-
<PAGE> 159

SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND

NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996

1.ORGANIZATION:

Summit Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act") as an open-end management
investment company established as a Massachusetts business trust under a
Declaration of Trust dated March 8, 1994. The Trust is currently comprised
of one investment portfolio, the Summit High Yield Fund (the "Fund").
Between the date of organization and the date of commencement of operations
of the Fund (June 27, 1994), the Trust had no operations other than those
relating to organizational matters, including the issuance on May 24, 1994
of 10,000 shares at $10.00 per share, to The Union Central Life Insurance
Company ("Union Central Life").

The Fund's investment objective is high current income with capital
appreciation as a secondary goal. The Fund invests primarily in lower-
quality, intermediate to long-term corporate bonds.

The Fund is authorized to issue an unlimited number of shares, which are
units of beneficial interest with par value of $0.001 per share. The Fund is
authorized to issue two classes of shares, High Yield and Institutional
Service. The High Yield shares are subject to an initial sales charge
imposed at the time of purchase, in accordance with the Fund's prospectus.
Each class of shares has identical rights and privileges except with respect
to voting rights on matters affecting a single class of shares and the
exchange privileges of each class of shares.

2.SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses for
the period. Actual results could differ from those estimates.

SECURITIES VALUATION:

Securities which are traded on stock exchanges are valued at the last
sales price as of the close of the New York Stock Exchange (the
"Exchange"), or lacking any sales, at the closing bid prices. Securities
traded only in the "over-the-counter" market are valued at the last bid
prices quoted by brokers that make markets in the securities at the close
of trading on the Exchange. Fixed income securities are generally traded
in the over-the-counter market. Securities and assets for which market
quotations are not readily available or not obtained from a pricing
service are valued at fair value as determined in good faith by the Board
of Trustees, although the actual calculations may be made by persons
acting pursuant to the direction of the Trustees. The Fund uses a pricing
service or services in determining the net asset value of the Fund. Debt
securities with a remaining maturity of 60 days or less are valued on an
amortized cost basis, which the Trustees have determined reflects fair
value.

Continued

-11-
<PAGE> 160
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND

NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1996

The Fund may invest its assets in intermediate to long-term, high yield,
medium and lower-quality, fixed income securities. Because the market for
lower-rated securities may be thinner and less active than for higher-
rated securities, there may be market price volatility for these
securities and limited liquidity in the resale market. If market
quotations are not readily available for the Fund's lower-rated or non-
rated securities, these securities will be valued by a method that the
Trustees believe accurately reflects fair value. Judgment plays a greater
role in valuing lower-rated debt securities than with respect to
securities for which external sources of quotations and last sale
information are more available.

SECURITIES TRANSACTIONS AND RELATED INCOME:

Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization
of premium or discount. Dividend income is recorded on the ex-dividend
date. Gains or losses realized on sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.

DIVIDENDS TO SHAREHOLDERS:

Dividends from net investment income are declared and paid monthly.
Distributable net realized capital gains, if any, are declared and
distributed at least annually.

Dividends from net investment income and from net realized capital gains
are determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for organization costs and
deferrals of certain losses.

FEDERAL INCOME TAXES:

It is the policy of the Fund to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or
substantially all, Federal income taxes.

OTHER:

All expenses in connection with the Trust's organization and registration
under the 1940 Act and the Securities Act of 1933 were paid by the Fund.
Such expenses are being amortized over a period of two years commencing
with the date of the initial public offering. In the event that any of
the initial shares of the fund are redeemed during the amortization
period by any holder thereof, the redemption proceeds will be reduced by
any unamortized organizational expenses of the trust in the same
proportion as the number of said shares being redeemed bears to the
number of initial shares that are outstanding at the time of redemption.
Other operating expenses of the Trust are prorated to the Fund on the
basis of relative net assets.

Continued

-12-
<PAGE> 161
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND

NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1996

3.PURCHASES AND SALES OF SECURITIES:

Purchases and sales of securities for the Fund (excluding short-term
securities) for the year ended May 31, 1996 were $54,041,391 and $48,633,003
respectively.

4.RELATED PARTY TRANSACTIONS:

First Summit Capital Management ("FSCM" or the "Adviser"), a joint venture
having its principal offices at 1876 Waycross Road, Cincinnati, Ohio 45240,
is the investment adviser to the Fund. FSCM was organized principally for
purposes of sponsoring and managing the Trust pursuant to a Joint Venture
Agreement between Carillon Advisers, Inc. ("Carillon"), an Ohio corporation,
and Freeman Holding Company, Inc. ("Freeman"), a Delaware corporation.
Carillon is a wholly-owned subsidiary of Union Central Life, an Ohio mutual
insurance company, which owns more than 96% of the shares of the Fund.
Freeman is the parent corporation of Freeman Securities Company, Inc., a New
Jersey corporation which is registered as a broker-dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc.

Under the terms of the Investment Advisory Agreement, FSCM is entitled to
receive fees based on a percentage of the average net assets of the Fund.
FSCM has agreed to limit the investment advisory fee for the first year of
the Fund's operations to an annual rate of 0.35% of the Fund's average net
assets. Effective July 1, 1995, the investment advisory fee is based on the
total return investment performance of the Fund for the prior twelve-month
period relative to the percentage change in the Salomon Brothers High Yield
Market Index for the same period. The advisory fee is paid monthly at an
annual rate which varies between 0.35% and 1.15% of the Fund's average daily
net assets. The adviser has agreed to waive a portion of its advisory fee so
as to limit the Fund's total expenses to 1.60%. For the year ended May 31,
1996, FSCM voluntarily reduced $164,637 of investment advisory fees.

BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS are subsidiaries of The BISYS Group, Inc.

Certain officers of the Trust are affiliated with BISYS or with FSCM. Such
officers are not paid any fees directly by the Fund for serving as officers
of the Trust.

BISYS serves the Trust as manager and administrator. Under the terms of the
Management and Administration Agreement, BISYS' fees are computed daily as a
percentage of the average net assets of the Fund at an annual rate of 0.20%.
For the year ended May 31, 1996, BISYS voluntarily reduced $13,693 of
administration fees.

Continued

-13-
<PAGE> 162
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND

NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1996

BISYS also serves as distributor of the Fund's shares. BISYS receives fees
for providing distribution services under the Distribution Agreement (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund
shall pay BISYS a fee not to exceed, on an annual basis, 0.25% of the
average daily net assets of certain shares of the Fund for payments BISYS
makes to financial institutions, including FSCM, and broker/dealers, and for
expenses BISYS and any of its affiliates incur for providing distribution or
shareholder service assistance. For the year ended May 31, 1996, BISYS
received $11,717 from commissions earned on sales of shares of the Fund,
$1,167 of which was reallowed to affiliated broker/dealers.

BISYS Ohio, serves as the Trust's transfer agent and is entitled to receive
fees based upon a contractually specified amount per shareholder with
specified minimum per portfolio amounts and surcharges. In addition, the
transfer agent is reimbursed for certain out-of-pocket expenses incurred in
providing transfer agency services. BISYS Ohio, also serves as fund
accountant for the Trust. Under the terms of the Fund Accounting Agreement,
the fund accountant is entitled to receive fees based on a percentage of the
average net assets of the Fund and is reimbursed for certain out-of-pocket
expenses incurred in providing such fund accounting services. Transfer agent
and fund accounting fees for the year ended May 31, 1996 totaled $83,110.

Continued

-14-
<PAGE> 163
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND

NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1996
5.CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for the Fund were as follows:

<TABLE>
<CAPTION>
SUMMIT HIGH YIELD
BOND FUND
-----------------
FOR THE YEAR
ENDED
MAY 31,
1996
-----------------
<S> <C>
CAPITAL TRANSACTIONS:
HIGH YIELD SHARES:
Proceeds from shares isssued............................... $ 573,171
Dividends reinvested....................................... 2,820,631
Shares redeemed............................................ (4,848,104)
-----------
Change in net assets from High Yield share transactions.. $(1,454,302)
===========
INSTITUTIONAL SERVICE SHARES (A):
Proceeds from shares isssued............................... $ 2,994,874
Dividends reinvested....................................... 44,755
Shares redeemed............................................ (1,320,496)
-----------
Change in net assets from Institutional Service share
transactions............................................ $ 1,719,133
===========
SHARE TRANSACTIONS:
HIGH YIELD SHARES:
Issued..................................................... 54,443
Reinvested................................................. 268,810
Redeemed................................................... (469,528)
-----------
Change in High Yield shares.............................. (146,275)
===========
INSTITUTIONAL SERVICE SHARES (A):
Issued..................................................... 278,879
Reinvested................................................. 4,112
Redeemed................................................... (122,245)
-----------
Change in Institutional Service shares................... 160,746
===========
</TABLE>

- ------
(a) For the period from January 19, 1996 (commencement of operations) to May
31, 1996.

6.FEDERAL INCOME TAXES (UNAUDITED):

For federal income tax purposes, the Fund had no capital loss carryforwards,
as of May 31, 1996.

-15-
<PAGE> 164

SUMMIT HIGH YIELD FUND

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
INSTITUTIONAL
HIGH YIELD SERVICE
SHARES SHARES
---------- ---------------------
YEAR FOR THE PERIOD FOR THE PERIOD
ENDED FROM JANUARY 19, 1996 FROM JUNE 27, 1994
MAY 31, TO TO
1996 MAY 31, 1996(D) MAY 31, 1995(A)
---------- --------------------- ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 10.11 $10.59 $ 10.00
------- ------ -------
INVESTMENT ACTIVITIES:
Net investment income.... 1.01 0.40 0.83
Net realized and
unrealized gains on
investments............. 0.95 0.47 0.11
------- ------ -------
Total from Investment
Activities............ 1.96 0.87 0.94
------- ------ -------
DISTRIBUTIONS:
Net investment income.... (1.01) (0.40) (0.83)
In excess of net
investment income....... (0.03)
Net realized gains....... (0.01)
------- ------ -------
Total Distributions.... (1.02) (0.43) (0.83)
------- ------ -------
NET ASSET VALUE, END OF
PERIOD.................... $ 11.05 $11.03 $ 10.11
======= ====== =======
Total Return (excludes
sales charges)............ 20.34% 20.16%(b) 9.97%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of
period (000)............ $28,628 $1,773 $27,676
Ratio of expenses to
average net assets...... 1.60% 1.52%(c) 1.56%(c)
Ratio of net investment
income to average net
assets.................. 9.42% 9.86%(c) 9.13%(c)
Ratio of expenses to
average net assets*..... 2.24% 2.76%(c) 1.61%(c)
Ratio of net investment
income to average net
assets*................. 8.78% 8.62%(c) 9.08%(c)
Portfolio turnover....... 187.61% 187.61% 158.36%
</TABLE>

- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) On January 19, 1996, the Fund issued a second series of shares and
designated such shares as "Institutional Service" shares.

See notes to financial statements.

-16-
<PAGE> 165
PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

Included in Part A:
(a) Financial Statements:
(1) Financial Highlights for the period from
June 27, 1994 (commencement of operations)
to May 31, 1996 (audited) for the Summit
High Yield Shares of the Summit High Yield
Fund, and for the period January 19, 1996
(commencement of operations) to May 31, 1996
for the Summit High Yield Institutional
Service Shares of the Summit High Yield
Fund.
Part B: To be filed by post-effective amendment
(2) Report of Independent Accountants relating
to the Financial Statements at May 31, 1996
and for the year then ended.

(3) Statement of Assets and Liabilities for the
year ended May 31, 1996 (audited).

(4) Statement of Operations for the period from
June 27, 1994 (commencement of operations)
to May 31, 1996 (audited).

(4) Statement of Changes in Net Assets for the
period from June 27, 1994 (commencement of
operations) to May 31, 1996 (audited).

(5) Schedule of Portfolio Investments at
May 31, 1996 (audited).

(6) Notes to Financial Statements at May 31,
1996 (audited).

The Financial Statements of the Summit High Yield
Fund series (the "Fund") of the Summit Investment
Trust, as noted above, were filed on approximately
August 1, 1996 with the Securities and Exchange
Commission in the Fund's Annual Report to
Shareholders for the period ended May 31, 1996
pursuant to Rule 30b2-1 under the Investment Company
Act of 1940, as amended, and are incorporated into
the Combined Statement of Additional Information.

(b) Exhibits:

(1) Agreement and Declaration of Trust of the
Summit Investment Trust is incorporated
herein by reference to the Registrant's
Initial Registration Statement No. 33-76250,
Exhibit No. (1), as filed on April 7, 1994.

(a) Amendment to Declaration of Trust of
the Summit Investment Trust is
incorporated herein by reference to
Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement
No. 33-76250, Exhibit (1)(a), as
filed on June 15, 1994.

(2) By-laws of the Summit Investment Trust are
incorporated herein by reference to the
Registrant's Initial Registration Statement
No. 33-76250, Exhibit No. (2), as filed on
April 7, 1994.

(3) Not Applicable.

(4) Not Applicable.

<PAGE> 166

(5) Investment Advisory Agreement between the
Summit Investment Trust and First Summit
Capital Management is incorporated herein by
reference to Pre-Effective Amendment No. 2
to the Registrant's Registration Statement
No. 33-76250, Exhibit No. (5), as filed on
June 15, 1994.

(a)(1) Investment Service Agreement among
the Summit Investment Trust, First
Summit Capital Management and The
Union Central Life Insurance Company
is incorporated herein by reference
to Pre-Effective Amendment No. 2 to
the Registrant's Registration
Statement No. 33-76250, Exhibit No.
(5)(a), as filed on June 15, 1994.

(a)(2) "Form of" Investment Sub-Advisory
Agreement between First Summit
Capital Management and Carillon
Advisers, Inc. is attached hereto
as Exhibit No. (5)(a)(2).

(6) (a)(1) Distribution Agreement between the
Summit Investment Trust and The
Winsbury Company, Limited
Partnership is incorporated herein
by reference to the Registrant's
Initial Registration Statement No.
33-76250, Exhibit No. (6)(a), as
filed on April 7, 1994.

(a)(2) "Form of" Amended and Restated
Distribution Agreement between the
Summit Investment Trust and BISYS
Fund Services Limited Partnership is
incorporated herein by reference to
Post-Effective Agreement No. 3 to
the Registrant's Registration
Statement No. 33-76250
Exhibit (6)(a)(2), as filed on
October 12, 1995.

(b)(1) "Form of" Dealer Agreement on behalf
of the Summit Investment Trust is
incorporated herein by reference to
Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement
No. 33-76250, Exhibit No. (6)(b), as
filed on June 15, 1994.

(b)(2) "Form of" Selling Agreement between
BISYS Fund Services Limited
Partnership and McDonald & Co., on
behalf of the Summit Investment
Trust incorporated herein by
reference to Post-Effective
Agreement No. 3 to the Registrant's
Registration Statement No. 33-76250
Exhibit (6)(b)(2), as filed on
October 12, 1995.

(c)(1) "Form of" Servicing Agreement on
behalf of the Summit Investment
Trust is incorporated herein by
reference to the Registrant's
Initial Registration Statement No.
33-76250, Exhibit No. (6)(c), as
filed on April 7, 1994.

(c)(2) "Form of" Servicing Agreement on
behalf of the Summit High Yield
Institutional Service Shares class
of the Summit High Yield Fund to
be filed by amendment.

(7) Not Applicable.

(8) Custodian Agreement between the Summit
Investment Trust and The Fifth Third Bank is
incorporated herein by reference to the
Registrant's Initial Registration Statement
No. 33-76250, Exhibit No. (8), as filed on
April 7, 1994.

(9) (a)(1) Management and Administration
Agreement between the Summit
Investment Trust and The Winsbury
Company, Limited Partnership
is incorporated herein by reference
to the Registrant's Initial
Registration Statement No. 33-76250,
Exhibit No. (9)(a), as filed on
April 7, 1994.
<PAGE> 167

(a)(2) "Form of" Amended and Restated
Management and Administration
Agreement between Summit Investment
Trust and BISYS Fund Services
Limited Partnership is incorporated
herein by reference to
Post-Effective Amendment No. 3 to
the Registrant's Registration
Statement No. 33-76250, Exhibit No.
(9)(a)(2), as filed on October 12,
1995.

(b)(1) Transfer and Dividend Disbursing
Agent Agreement between the
Summit Investment Trust and The
Winsbury Service Corporation is
incorporated herein by reference to
the Registrant's Initial
Registration Statement No. 33-76250,
Exhibit No. (9)(b), as filed on
April 7, 1994.

(b)(2) "Form of" Amended and Restated
Transfer Agency Agreement between
the Summit Investment Trust and
BISYS Fund Services Ohio, Inc. is
incorporated herein by reference to
Post-Effective Amendment No. 3 to
the Registrant's Registration
Statement No. 33-76250, Exhibit No.
(9)(b)(2), as filed on October 12,
1995.

(c)(1) Fund Accounting Agreement between
the Summit Investment Trust and The
Winsbury Service Corporation is
incorporated herein by reference to
the Registrant's Initial
Registration Statement No. 33-76250,
Exhibit No. (9)(c), as filed on
April 7, 1994.

(c)(2) "Form of" Amended and Restated Fund
Accounting Agreement between the
Summit Investment Trust and BISYS
Fund Services Ohio, Inc. is
incorporated herein by reference to
Post-Effective Amendment No. 3 to
the Registrant's Registration
Statement No. 33-76250, Exhibit No.
(9)(c)(2), as filed on October 12,
1995.

(d) Joint Venture Agreement between
Carillon Advisers, Inc., and Freeman
Holding Company, Inc. is
incorporated herein by reference
to Pre-Effective Amendment No. 2 to
the Registrant's Registration
Statement No. 33-76250, Exhibit No.
(9)(d), as filed on June 15,
1994.

(10) (a) Opinion and consent of Stradley,
Ronon, Stevens & Young is
incorporated herein by reference
to Registrant's Notice pursuant to
Rule 24f-2, as filed on
July 24, 1996.

(11) (a) Consent of Coopers & Lybrand, L.L.P.

(12) Incorporated into Part B by reference to the
Fund's Annual Report to Shareholders dated
May 31, 1996.

(13) Letter Containing Investment Undertaking is
incorporated herein by reference to
Pre-Effective Amendment No. 2 to
Registrant's Registration Statement No.
33-76250, Exhibit No. (13), as filed on
June 15, 1994.

(14) Not Applicable.

(15) Reference Item 24(b)(6).

(16) Schedule for Computation of Performance
Quotation on behalf of the Summit High
Yield Fund is attached hereto as Exhibit
No. (16).

(17) Not Applicable.

<PAGE> 168

(18) Powers-of-Attorney are incorporated herein
by reference to Pre-Effective Amendment No.
2 to the Registrant's Registration Statement
No. 33-76250, as filed on June 15, 1994.

(19) "Form of" Multiple Class Plan relating to
the Summit High Yield Shares Class and the
Summit High Yield Institutional Service
Shares Class as presented to the Board of
Trustees is incorporated herein by reference
to Post-Effective Amendment No.3 to the
Registrant's Registration Statement No.
33-76250, Exhibit No.(19), as filed on
October 12, 1995.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
REGISTRANT.

No person is directly or indirectly controlled by the
Registrant. With respect to the Summit High Yield Fund, as of
August 30, 1996, The Union Central Life Insurance Company
("Union Central Life"), a mutual insurance company organized
under the laws of Ohio, owned 97.43% of the outstanding shares
of the Summit High Yield Shares class, and owned 79.17% of the
outstanding shares of the Summit High Yield Institutional
Service class. While the Summit Investment Trust disclaims any
such control relationship, it may be deemed to be controlled
by its investment adviser by virtue of the advisory
relationship. The Registrant's investment adviser, First
Summit Capital Management ("FSCM"), is a joint venture of
Carillon Advisers, Inc. ("Carillon") and Freeman Holding
Company, Inc. ("Freeman"). Carillon is an Ohio corporation
which is a wholly-owned subsidiary of Union Central Life.
Freeman is a Delaware corporation which is majority-owned by
the employee benefit plans of its wholly-owned, broker-dealer
subsidiary, Freeman Securities Company, Inc., a New Jersey
corporation. Set forth below is a chart showing the entities
controlled by Union Central Life, the jurisdictions in which
such entities are organized, and the percentage of voting
securities owned by the person immediately controlling each
such entity.

THE UNION CENTRAL LIFE INSURANCE COMPANY,
ITS SUBSIDIARIES AND AFFILIATES

I. The Union Central Life Insurance Company (Ohio)

A. Carillon Life Insurance Company (Ohio) -
100% owned.

B. Carillon Investments, Inc. (Ohio) - 100%
owned.

C. Carillon Marketing Agency, Inc. (Delaware) -
100% owned.

a. Carillon Marketing Agency of
Alabama, Inc. (Alabama) - 100%
owned.

b. Carillon Marketing Agency of
Arkansas, Inc. (Arkansas) - 100%
owned.

c. Carillon Marketing Agency of Hawaii,
Inc. (Hawaii) - 100% owned.

d. Carillon Marketing Agency of Idaho,
Inc. (Idaho) - 100% owned.

e. Carillon Marketing Agency of
Kentucky, Inc. (Kentucky) - 100%
owned.

f. Carillon Marketing Agency of
Massachusetts, Inc. (Massachusetts)
- 100% owned.

<PAGE> 169

g. Carillon Marketing Agency of New
Mexico, Inc. (New Mexico) -
100% owned.

h. Carillon Marketing Agency of Ohio,
Inc. (Ohio) - 100% owned.

i. Carillon Marketing Agency of Texas,
Inc. (Texas) - 100% owned.

D. Carillon Advisers, Inc. (Ohio) - 100% owned.

E. The Manhattan Life Insurance Company (New
York) - 73% owned.

II. Mutual Funds of the Carillon Group.

A. Carillon Fund, Inc.* (Maryland).

B. Carillon Investment Trust** (Massachusetts).

III. Summit Investment Trust (Massachusetts).

A. Summit High Yield Fund Shares Class
- 97.43% owned.

B. Summit High Yield Institutional
Service Class - 79.17% owned.

------
* At June 30, 1996, Union Central owned 100% of the
outstanding shares of Carillon Fund, Inc.

** At June 30, 1996, Union Central owned 34% of the
outstanding shares of Carillon Investment Trust.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

(2)
(1) NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF AUGUST 30, 1996
------------------- ----------------------
<S> <C> <C>
Shares of beneficial interest,
no par value of:

Summit High Yield Shares 30
Summit High Yield Institutional Service Shares 3
</TABLE>

ITEM 27. INDEMNIFICATION.
Sections 6.4 and 6.5 of the Agreement and Declaration of Trust
of the Registrant provide that the Registrant shall indemnify
each of its Trustees and officers against all liabilities,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and
against all expenses, including but not limited to accountants
and counsel fees, reasonably incurred in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Trustee or
officer may be or may have been involved as a party or
otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being
or having been such a Trustee or officer, except that
indemnification shall not be provided if it shall have been
finally adjudicated in a decision on the merits by the court
or other body before which the proceeding was brought that
such Trustee or officer: (i) did not act in good faith in the
reasonable belief that his or her action was in the best
interests of the Registrant; or (ii) is liable to the
Registrant or its shareholders by reason of willful

<PAGE> 170

misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office.

Indemnification of the Registrant's Distributor, Transfer
Agent, Fund Accountant and Administrator against certain
stated liabilities is provided for in the following documents:

(a) Sections 1.11 and 1.12 of the Amended and Restated
Distribution Agreement between the Summit Investment
Trust and BISYS Fund Services, Limited Partnership,
incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration
Statement No. 33-76250, as Exhibit (6)(a)(2);

(b) Section 4 of the Amended and Restated Management and
Administration Agreement between the Summit
Investment Trust and BISYS Fund Services Limited
Partnership, incorporated herein by reference to
Post-Effective Amendment No. 3 to the Registrant's
Registration Statement No. 33-76250, as Exhibit
(9)(a)(2), as filed on October 12, 1995;

(c) Section 9 of the Amended and Restated Transfer Agency
Agreement between the Summit Investment Trust and
BISYS Fund Services Ohio, Inc., incorporated herein
by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement No.
33-76250, as Exhibit (9)(b)(2), as filed on
October 12, 1995;

(d) Section 7 of the Amended and Restated Fund Accounting
Agreement between the Summit Investment Trust and
BISYS Fund Services Ohio, Inc., incorporated herein
by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement No.
33-76250, as Exhibit (9)(c)(2), as filed on
October 12, 1995; and

(e) Sections 8.1 and 8.2 of the Custodian Agreement
between the Summit Investment Trust and The Fifth
Third Bank, incorporated herein by reference to the
Registrant's Initial Registration Statement No.
33-76250, Exhibit No. (8), as filed on April 7,
1994.

Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of
such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
First Summit Capital Management ("FSCM") is a joint venture of
Carillon Advisers, Inc. ("Carillon"), an Ohio corporation, and
Freeman Holding Company, Inc. ("Freeman"), a Delaware
corporation. Information regarding the Representatives of FSCM
and their business, profession or employment of a substantial
nature during the last two years is set forth below. For
information as to the business, profession, vocation or
employment of a substantial nature of Carillon and Freeman,
reference is made to the respective Forms ADV of Carillon and
Freeman's wholly-owned subsidiary, Freeman Securities Company,
Inc. ("Freeman Securities"), as amended, filed under the
Investment Advisers Act of 1940, which are herein incorporated
by reference.

<PAGE> 171

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE ADVISER DURING PAST TWO YEARS
- ---------------- ------------- ---------------------
<S> <C> <C>
James F. Smith Representative President and Chief Financial Officer, Freeman Securities.
30 Montgomery Street
Jersey City, NJ 07302

Gregory A. Sullivan Representative Senior Vice President, Freeman Securities.
30 Montgomery Street
Jersey City, NJ 07302

Steven R. Sutermeister Representative Vice President of Union Central Life and Carillon.
1876 Waycross Road
Cincinnati, OH 45240
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITER.
(a) BISYS Fund Services, Limited Partnership ("BISYS"),
the Distributor of shares of the Registrant, also
distributes the securities of the following open-end
management investment companies:

The Coventry Group;
The Riverfront Funds, Inc.;
The Victory Portfolios;
The HighMark Group;
The Parkstone Group of Funds;
The B B & T Mutual Funds Group;
M S D & T Funds, Inc.;
The ARCH Fund, Inc.;
American Performance Funds;
The Sessions Group;
Pacific Capital Funds;
AmSouth Mutual Funds;
MarketWatch Funds;
M M A Praxis Mutual Funds; and
Qualivest Funds.

(b) Officers and Directors of Principal Underwriter
Set forth below is information with respect to the
partners of BISYS as of September 18, 1996.

<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITION AND OFFICES OFFICES WITH
BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT
------------------ -------------------- --------------
<S> <C> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Rd.
Columbus, OH 43219
</TABLE>

<PAGE> 172

<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITION AND OFFICES OFFICES WITH
BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT
------------------ -------------------- --------------
<S> <C> <C> <C>
WC Subsidiary Corporation Sole Limited Partner None
3435 Stelzer Rd.
Columbus, OH 43219
</TABLE>

Each of these corporations is a subsidiary of The BISYS Group,
Inc., 150 Clove Road, Little Falls, NJ 07424.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act, as amended [15
U.S.C. 80a-30(a)] and the Rules promulgated thereunder, [17
CFR 270.31a-1 to 31a-3] are maintained by the Registrant's
investment adviser, First Summit Capital Management, 1876
Waycross Road, Cincinnati, OH 45240, except for those
maintained by the Registrant's Custodian, The Fifth Third
Bank, 38 Fountain Square Plaza, Cincinnati, OH 45263, the
Registrant's Administrator and Distributor, BISYS Fund
Services Limited Partnership or the Registrant's Transfer
Agent and Fund Accountant, BISYS Fund Services Ohio, Inc.
BISYS Fund Services Limited Partnership and BISYS Fund
Services Ohio, Inc. are located at 3435 Stelzer Road,
Columbus, OH 43219.

ITEM 31. MANAGEMENT SERVICES.
All management-related service contracts are discussed in Part
A or B of this Registration Statement.

ITEM 32. UNDERTAKINGS

(a) Registrant hereby undertakes to furnish each person
to whom a prospectus is delivered with a copy of the
Registrant's Combined Statement of Additional
Information and the latest Annual Report, upon
request and without charge.

<PAGE> 173

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Cincinnati, and State of Ohio on the 30th day of
September, 1996.

SUMMIT INVESTMENT TRUST
(The Registrant)

By:
------------------------------------
Steven R. Sutermeister
Chairman of the Board and
Trustee

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

Chairman of the September 30, 1996
- ----------------- Board and Trustee ------------------
Steven R. Sutermeister (Chief Executive Officer) (Date)

* Trustee September 30, 1996
- ----------------- ------------------
Theodore H. Emmerich (Date)

* Trustee September 30, 1996
- ----------------- ------------------
Frederick Moss (Date)

* Trustee September 30, 1996
- ----------------- ------------------
Dr. Bruce H. Olson (Date)

* Trustee September 30, 1996
- ----------------- ------------------
James F. Smith (Date)

Treasurer (Principal September 30, 1996
- ----------------- Financial and ------------------
Scott A. Englehart Accounting Officer) (Date)

* By September 30, 1996
------------------------- ------------------
Scott A. Englehart, pursuant to (Date)
Power-of-Attorney

<PAGE> 174

EXHIBITS
EXHIBIT INDEX

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
5 (a)(2) "Form of" Investment Sub-Advisory Agreement between
First Summit Capital Management and Carillon Advisers, Inc.

11 (a) Consent of Coopers & Lybrand, L.L.P.

16 Schedule for Computation of Performance Quotation

</TABLE>

<PAGE> 1

Exhibit (5)(a)(2)

"FORM OF" INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN FIRST SUMMIT
CAPITAL MANAGEMENT AND CARILLON ADVISERS, INC.
<PAGE> 2

INVESTMENT SUB-ADVISORY AGREEMENT

THIS AGREEMENT, made as of the 18th day of September, 1996, between
FIRST SUMMIT CAPITAL MANAGEMENT (the "Adviser"), an Ohio general partnership,
and CARILLON ADVISERS, INC. (the "Sub-Adviser"), an Ohio corporation;

WHEREAS, the Adviser has entered into an Investment Advisory Agreement,
dated June 27, 1994, with Summit Investment Trust (the "Fund"), an open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS, as the Adviser to the Fund, the Adviser furnishes the Fund
with certain advisory services and management services, and furnishes and pays
the expenses of the Fund for certain other services; and

WHEREAS, the Sub-Adviser is willing to make available to the Adviser, on
a part-time basis, certain employees of the Sub-Adviser for the purpose of
better enabling the Adviser to fulfill its obligations under the Investment
Advisory Agreement with the Fund, provided that the Adviser bears all the costs
allocable to the time spent by such employees on the affairs of the Adviser, and
the Adviser and the Fund believe that such an arrangement will be to their
mutual benefits;

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:

1. The Adviser shall have the right to use on a part-time basis
and the Sub-Adviser shall make available on such basis employees of the
Sub-Adviser for such periods as may be agreed upon by the Adviser and the
Sub-Adviser as may be reasonably needed by the Adviser in the performance of
its advisory and management functions. It is anticipated that most such
employees will be persons employed in the investment or administrative
operations of the Sub-Adviser, in addition to such clerical, stenographic and
administrative services as the Adviser may reasonably request.

2. The employees of the Sub-Adviser in performing services for the
Adviser hereunder may, to the full extent that they deem appropriate, have
access to and utilize economic, statistical and investment research reports and
other material prepared for or contained in the files of the Sub-Adviser which
are relevant to the making of investment
<PAGE> 3
decisions within the investment objectives of the Fund and make such material
available to the Adviser; provided that, any such material prepared or obtained
in connection with a private placement or other nonpublic transaction need not
be made available to the Adviser if the Sub-Adviser deems such material
confidential.

3. The employees of the Sub-Adviser performing services for the
Adviser pursuant hereto shall report and be solely responsible to the officers
and representatives of the Adviser or persons designated by them. The
Sub-Adviser shall have no responsibility for investment recommendations or
decisions of the Adviser based upon information or advice given or obtained by
or through such employees of the Sub-Adviser.

4. The Sub-Adviser will, to the extent requested by the Adviser,
supply to officers and representatives of the Adviser and employees of the
Sub-Adviser serving the Adviser, such clerical, stenographic and administrative
services and such office supplies and equipment as may reasonably be required
in order that they may properly perform their respective functions on behalf of
the Adviser in connection with the performance of this Agreement.

5. The obligation of performance under the Investment Advisory
Agreement with the Fund is solely that of the Adviser, and the Sub-Adviser
undertakes no obligation in respect thereto except as otherwise expressly
provided herein.

6. In consideration of services to be rendered by the Sub-Adviser
and its employees pursuant to this Agreement, the Adviser agrees to compensate
the Sub-Adviser in the amount of $150,000 per year. If the Sub-Adviser renders
services to the Adviser under this Agreement for any period that is less than
twelve months in length, the Sub-Adviser shall be entitled to a pro-rata
portion of the fee identified in this paragraph, or such other fee as shall be
agreed to by the Adviser and the Sub-Adviser, not to exceed the equivalent of
the pro-rata portion of such fee.

7. (a) This Agreement shall become effective as of the date
first above written, and shall continue in effect for two years from such
initial date and thereafter for successive periods of one year, subject to the
provisions for termination contained herein and all of the other terms and
conditions hereof, if: (i) such continuation shall be specifically approved at
least annually by the vote of the majority of the Trustees of the Fund,
including a majority of the Trustees who are not parties to this Agreement or
interested persons of any
<PAGE> 4
such party, cast in person at a meeting called for the purpose of voting on
such approval; and (ii) the Adviser shall not have notified the Sub-Adviser in
writing as provided in subsection (b) below that it does not desire such
continuation with respect to the Fund. This Agreement may also be approved by
the affirmative vote of a majority of the outstanding voting securities of the
Fund, provided, however, that if the continuance of this Agreement is submitted
to the shareholders of the Fund for their approval, and should shareholders
fail to approve such continuance of this Agreement as provided herein, the
Sub-Adviser may continue to serve hereunder as to the Fund in a manner
consistent with the 1940 Act and the rules and regulations thereunder.

(b) The Fund may at any time terminate this Agreement,
without payment of any penalty, by sixty (60) days' written notice delivered or
mailed by registered mail, postage prepaid, to the Adviser and the Sub-
Adviser. Action of the Fund under this subsection may be taken either (i)
by vote of its Trustees or (ii) by the affirmative vote of a majority of the
outstanding voting securities of the Fund. The Adviser or the Sub-Adviser may
at any time terminate this Agreement by not less than ninety (90) days' written
notice delivered or mailed by registered mail, postage prepaid, to the other
party and to the Fund.

8. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed postage prepaid to the other party at such address as
such other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Fund, the
Adviser and the Sub-Adviser for this purpose shall be P.O. Box 40407,
Cincinnati, Ohio 45240.

9. This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts. The names "Summit Investment Trust" and
"Trustees of Summit Investment Trust" refer respectively to the Massachusetts
business trust created by the Trustees, as trustees but not individually or
personally acting from time to time under the Agreement and Declaration of
Trust, dated as of March 8, 1994, to which reference is hereby made and a copy
of which is on file at the office of the Secretary of The Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all

<PAGE> 5
amendments thereto so filed or hereafter filed. The obligations of "Summit
Investment Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Fund personally, but bind only the assets of the Fund,
and all persons dealing with any series of shares of the Fund must look solely
to the assets of the Fund belonging to such series for the enforcement of any
claims against the Fund.

10. The parties to this Agreement hereby acknowledge that:

(a) The Union Central Life Insurance Company ("Union Central")
shall have no responsibility for investment recommendations or decisions made by
the Adviser or the Sub-Adviser for the Fund under this Agreement;

(b) Employees of Union Central may, to the full extent that
they deem appropriate, have access to and utilize economic, statistical and
investment research reports and other material prepared pursuant to this
Agreement which are relevant to the making of investment decisions for the Fund;
provided however, that any such material prepared or obtained in connection with
a private placement or other non-public transaction shall not be made available
to Union Central if the Adviser or the Sub-Adviser deems such material
confidential; and

(c) Union Central shall have no responsibility for investment
recommendations or decisions of the Sub-Adviser that are based upon information
or advice given or obtained through Union Central employees.

FIRST SUMMIT CAPITAL MANAGEMENT

By:
-------------------------------

Name:
---------------------------

Title:
---------------------------

CARILLON ADVISERS, INC.

By:
-------------------------------

Name:
---------------------------

<PAGE> 6
Title:
-----------------------------

Union Central hereby acknowledges and agrees to the provisions of
paragraph 10 of this Agreement.

THE UNION CENTRAL LIFE
INSURANCE COMPANY

By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------

<PAGE> 1
EXHIBIT 11(a)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Amendment No. 7 to the Registration
Statement on Form N-1A (File No. 33-76250) of Summit Investment Trust of our
report dated July 16, 1996 on our audit of the financial statements of the
Summit High Yield Fund as of May 31, 1996 and for the periods then ended
referred to in our report included in the Statement of Additional Information.
We also consent to the reference to our firm under the captions "Independent
Accountants" and "Financial Information" in the Statement of Additional
Information of Summit Investment Trust.

/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.

Columbus, Ohio
September 30, 1996

<PAGE> 1
SUMMIT INVESTMENT TRUST
EXHIBIT 16
TOTAL RETURN
VARIABLE FUNDS
LOAD CALCULATIONS
SUMMIT HIGH YIELD FUND

AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.75%
- --------------------------

T=(ERV/P)-1

WHERE: T= TOTAL RETURN

ERV= ENDING REDEEMABLE VALUE AT THE END OF THE
PERIOD OF A HYPOTHETICAL $1,000 INVESTMENT
MADE AT THE BEGINNING OF THE PERIOD.

P= A HYPOTHETICAL INITIAL PAYMENT OF $1,000.

EXAMPLE:

SINCE INCEPTION: (06/27/94 TO 11/30/94):
(954.8/1,000)-1= -4.52%
YEAR TO DATE: (06/27/94 TO 11/30/94):
(954.8/1,000)-1= -4.52%
QUARTERLY: (09/01/94 TO 11/30/94):
(952.6/1,000)-1= -4.74%
MONTHLY: (11/01/94 TO 11/30/94):
(949.9/1,000)-1= -5.01%