<PAGE>
Message From The Chairman Summit High Yield Fund
- -------------------------------------------------------------------------------
Fellow Shareholders:
The year ended May 31, 1997 was another excellent 12-month period for high
yield bond investors. The Salomon Brothers High Yield Market Index had a total
return of 13.54% during the period, handily outpacing the 8.27% return of the
Salomon Brothers Broad Investment Grade Bond Index.
More importantly, the Summit High Yield Fund delivered exceptional performance
during the period. Our 18.15% total return (without the sales charge) easily
outpaced the average total return of 13.13% earned by other high yield funds
in Lipper Analytical Services' High Current Yield category for the 12 months
ended May 31, 1997. The Fund's performance for the period was ranked #10 of
162 competing funds. IN FACT, LIPPER RANKS THE SUMMIT HIGH YIELD FUND'S
PERFORMANCE AS #1 AMONG 103 HIGH CURRENT YIELD FUNDS FOR PERFORMANCE SINCE OUR
JUNE 1994 INCEPTION./1/
Our first three years of operations have produced double-digit annual returns
to shareholders. While it is probably too much to expect a repeat of this
three-year period (cumulative total return of 56.35%), we remain optimistic
that high yield bonds will continue to deliver good results relative to the
risks of this asset class. Furthermore, the inclusion of high yield bonds in
one's portfolio for further diversification is of utmost importance.
HIGH YIELD BONDS--A SEPARATE ASSET CLASS
The question of whether high yield is a separate and distinct asset class can
be answered by determining whether the asset's returns are replicable through
a mix of other existing assets. In fact, 20% to 25% of high yield's behavior
is unique to high yield and is not a function of interest rates or stock
market behavior.* This low correlation argument is particularly important in
attempting to lower risk through diversification. One of the advantages of
adding high yield to one's portfolio is the low interest rate dependence that
high yield exhibits (interest rate dependence is estimated to be 30% of
overall high yield risk). Over the past 15 years, the addition of high yield
to even an intermediate U.S. Treasury portfolio has enhanced returns and
helped reduce risk (the diversification effect). High yield bonds/3/ delivered
12.00% annual returns for the period, nearly double the 6.60% returns
delivered by intermediate U.S. Treasuries./3/ What's more, the high yield bond
market was 13% less volatile than intermediate U.S. Treasuries during the same
period.*
CURRENT TRENDS FAVOR HIGH YIELD BONDS
The high yield sector has experienced a classic bull market since mid-1995
with a couple of pauses along the way. The strong performance that our Fund
has experienced reflects a number of factors that we believe have in the past,
and even today, favor high yield bonds. On the economic front, fears of an
economic slowdown dissipated as the economy did not slip into a recession, or
even a further slowdown. Instead, the high yield market and the economy as a
whole, experienced a rebound that resulted in spread tightening throughout the
high yield market. Corporate profitability remained strong and a number of
high yield issuers took advantage of the strong stock market by raising new
equity with both IPOs and secondary offerings, enhancing the quality of their
balance sheets.
Institutional money managers continue to increase their stake in the high
yield market. Insurance companies continue to be active, as historically tight
spreads in investment grade securities caused many
- ------
* Source: 1996 High Yield Annual Review, Chase Securities, Inc.
/1Performance/rankings are based on total returns for the periods and do not
include the effect of a sales charge. The rankings are based on data from
Lipper Analytical. As of June 30, 1997, the fund also ranked #1 among 103
high yield funds since its inception and 5/163 for the 1 year period. During
the period for which this ranking is based, the fund waived fees. In the
absence of those waivers, the ranking may have been lower.
/2High/Yield Bonds are represented by the CSI High Yield Index: an unmanaged
Index of 1,014 high yield issues.
/3Ibbotson/Associates
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
- 1-
<PAGE>
Message From The Chairman Summit High Yield Fund
- -------------------------------------------------------------------------------
insurers to look for additional returns in high yield bonds. The number of
U.S. pension plans with dedicated high yield managers rose from 92 to 115
during 1996; in aggregate, these managers oversee $9.1 billion of assets, an
increase from $5.9 billion in 1995.* The utilization of securitization
technology has allowed a number of investment advisors to create
Collateralized Bond Obligations ("CBOs"). These transactions reallocate the
principal and interest cash flows from a portfolio of high yield bonds to
investment grade and non-investment grade classes or tranches of securities.
While the first CBO surfaced in 1987, CBOs were significant new buyers of high
yield bonds in the last 12 months. High yield mutual funds continue to see
strong inflows, now even greater than investment grade corporate bond funds.
While improved credit quality and increased demand have led to capital gains
for many high yield bonds, these bonds have also delivered high current income
to help compensate investors for their risk of default (the default rate on
high yield bonds actually declined from 1995 to 1996, according to Moody's
Investor Services). The combination has produced solid total returns for
investors in this sector.
OUR STRATEGY AND DETERMINANTS OF PERFORMANCE
We have found that the asset size of a high yield fund is one factor that
influences performance, at least to a certain degree. Smaller funds are much
more agile than larger funds, in terms of shifting their risk profile, and
have less difficulty adjusting with timely movements their exposure in the
overall market. Once a fund reaches a critical mass (over $1 billion), the
fund--or at that level, the "battleship,"--becomes sort of an index or proxy
for the high yield market. Individual credit or bond selection, at that point,
has significantly less impact on the fund, and the fund's performance is more
greatly influenced by overall market sector performance.
While we would like to grow the assets of the Summit High Yield Fund, we
believe that our major strength is the selection of individual companies and
their securities that have exceptional value within the high yield market.
This "bottom-up" approach to credit selection, combined with our traditional
fully invested position, has allowed us to outperform all competitors for the
three years since the Fund's inception.
Over an extended period of time the most significant determinant of returns is
our risk posture. During the recent 12-month period, the Fund benefited from
excellent individual security selection as well as rising demand from
investors for high yield bonds. The Fund's performance also reflected our
attempts to maximize total returns by combining capital appreciation and
current income.
As portfolio managers, we continue to pursue our goal of maximizing total
returns in three ways. First, we apply contrarian judgment to choose
securities that have been overlooked by other investors. Second, the fund
invests in securities that we expect to benefit from improving credit quality.
Third, the Fund makes strategic "theme-oriented" moves to capture improvements
in sectors within the high yield market.
THANK YOU
In closing, I would like to again thank you for the trust and confidence that
you have placed in our portfolio management team. You, the shareholder, have
entrusted us with a portion of your financial assets. Our responsibility is to
you. As our top performance would indicate, our Fund has had a truly excellent
year. Please feel free to call or write to me with questions or comments about
our Fund.
Sincerely,
/s/ Steven R. Sutermeister
Steven R. Sutermeister
Chairman
- ------
* Source: Merrill Lynch, 1997
-2-
<PAGE>
Message From The Chairman Summit High Yield Fund
- --------------------------------------------------------------------------------
Summit High Yield Fund
Value of $10,000 in the Index
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Dates Salomon High Yield High Yield Shares High Yield Shares* Institutional Service
Market Index (w/out load) (w/load) Shares
- -------------------------------------------------------------------------------------------------
6/27/94 10,000 10,000 9,551 10,000
- -------------------------------------------------------------------------------------------------
5/31/95 11,309 10,997 10,503 10,997
- -------------------------------------------------------------------------------------------------
5/31/96 12,387 13,233 12,639 13,214
- -------------------------------------------------------------------------------------------------
5/31/97 13,411 15,635 14,933 15,645
- -------------------------------------------------------------------------------------------------
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Since
Inception
Period Ended 5/31/97 1 Year (6/27/94)
- -------------------------------------------------------------------
<S> <C> <C>
High Yield w/out load 18.15% 16.47%
- -------------------------------------------------------------------
High Yield w/load* 12.84% 14.66%
- -------------------------------------------------------------------
Institutional Service Shares 18.40% 16.49%
- -------------------------------------------------------------------
</TABLE>
*Reflects the maximu 4.50% sales charge.
The Fund's performance is measured against the Salomon High Yield Market Index,
a broad-based index of the high-yield bond market. The index is unmanaged and
does not reflect the deduction of expenses associated with a mutual fund, such
as investment management and fund accounting fees. The performance of the
Summit High Yield Fund reflects the deduction of fees for these value-added
services.
Past performance is not predictive of future performance and the composition of
the Fund's holdings is subject to change. Investment return and principal value
of the Summit High Yield Fund will fluctuate so that the shares, when redeemed,
may be worth more or less than their original cost.
During the period, investment advisory and administration fees were voluntarily
reduced, resulting in a higher total return than would have occurred if full
fees had been charged.
Although the Fund's yield may be significantly higher than that of other fixed-
income funds that purchase higher rated securities, this yield is generally
accompanied by greater risk that the Fund's share price will decline. For
further information regarding this and other risks, please consult the
prospectus.
The Summit High Yield Fund is distributed by BISYS Fund Services.
This report is authorized for distribution only when preceded or accompanied by
a current prospectus.
-3-
<PAGE>
TABLE OF CONTENTS
Message From the Chairman
Page 1
Report of Independent Accountants
Page 5
Statement of Assets and Liabilities
Page 6
Statement of Operations
Page 7
Statements of Changes in Net Assets
Page 8
Schedule of Portfolio Investments
Page 9
Notes to Financial Statements
Page 12
Financial Highlights
Page 18
-4-
<PAGE>
Report of Independent Accountants Summit High Yield Fund
- -------------------------------------------------------------------------------
To the Shareholders and Trustees of
Summit Investment Trust
We have audited the accompanying statements of assets and liabilities of the
Summit High Yield Fund, including the schedule of portfolio investments, as of
May 31, 1997, and the related statement of operations, statement 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
audits.
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, 1997 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 each
of the Summit High Yield Fund as of May 31, 1997, and the results of their
operations and the changes in their net assets and the financial highlights
for the periods referred to above in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
July 21, 1997
-5-
<PAGE>
SUMMIT HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $36,205,704).......................... $38,099,470
Cash.............................................................. 478
Interest receivable............................................... 771,064
Receivable for capital shares issued............................ 52,730
Receivable from Investment Adviser.............................. 3,773
Receivable from brokers for investments sold.................... 1,015,000
Income and other receivable..................................... 31,540
Prepaid expenses................................................ 20,490
-----------
Total Assets.................................................. 39,994,545
-----------
LIABILITIES:
Payable for investments purchased................................. 1,000,000
Payable for capital shares redeemed............................... 93
Accrued expenses and other payables:
Investment advisory fees........................................ 16,446
Administration fees............................................. 636
12b-1 fees (High Yield shares).................................. 7,208
12b-1 fees (Institutional Service shares)....................... 458
Legal and audit fees............................................ 11,343
Transfer agent fees............................................. 8,996
Trustees' fees.................................................. 5,636
-----------
Total Liabilities............................................. 1,050,816
-----------
NET ASSETS:
Capital........................................................... 35,254,495
Undistributed net investment income............................... 48,225
Net unrealized appreciation on investments........................ 1,893,766
Accumulated undistributed net realized gains on investment trans-
actions.......................................................... 1,747,243
-----------
Net Assets.................................................... $38,943,729
===========
Net Assets
High Yield shares............................................... $34,706,789
Institutional Service shares.................................... 4,236,940
-----------
Total........................................................... $38,943,729
===========
Outstanding units of beneficial interest (shares)
High Yield shares............................................... 3,064,624
Institutional Service shares.................................... 374,948
-----------
Total........................................................... 3,439,572
===========
Net asset value
Redemption price per share--High Yield shares................... $11.32
Offering and Redemption price per share--Institutional Service
shares......................................................... $11.30
===========
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........... $11.85
===========
</TABLE>
See notes to financial statements.
-6-
<PAGE>
SUMMIT HIGH YIELD FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income.................................................... $3,486,114
Dividend income.................................................... 35,148
----------
Total Income..................................................... 3,521,262
----------
EXPENSES:
Investment advisory fees........................................... 367,253
Administration fees................................................ 68,088
12b-1 fees--High Yield shares...................................... 78,445
12b-1 fees--Institutional Service shares........................... 6,665
Custodian and accounting fees...................................... 51,392
Legal and audit fees............................................... 48,404
Organization costs................................................. 328
Trustees' fees..................................................... 27,023
Transfer agent fees................................................ 58,479
Registration and filing fees....................................... 11,933
Printing costs..................................................... 52,140
Other.............................................................. 20,831
----------
Total expenses before voluntary reductions....................... 790,981
Expenses voluntarily reduced..................................... (249,151)
----------
Total Expenses................................................... 541,830
----------
Net investment income.............................................. 2,979,432
----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions...................... 2,908,478
Net change in unrealized appreciation (depreciation) on invest-
ments............................................................. (160,322)
----------
Net realized/unrealized gains on investments....................... 2,748,156
----------
Change in net assets resulting from operations..................... $5,727,588
==========
</TABLE>
See notes to financial statements.
-7-
<PAGE>
SUMMIT HIGH YIELD FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, MAY 31,
1997 1996
------------ ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................ $ 2,979,432 $ 2,580,722
Net realized gains on investment transactions.... 2,908,478 1,021,588
Net change in unrealized appreciation (deprecia-
tion) on investments............................ (160,322) 1,498,333
----------- -----------
Change in net assets resulting from operations.... 5,727,588 5,100,643
----------- -----------
DISTRIBUTIONS TO HIGH YIELD SHAREHOLDERS FROM:
Net investment income............................ (2,754,994) (2,515,712)
In excess of net investment income............... (353,047)
Net realized gains............................... (1,369,117) (66,947)
DISTRIBUTIONS TO INSTITUTIONAL SERVICE
SHAREHOLDERS FROM:
Net investment income............................ (231,725) (52,460)(a)
In excess of net investment income............... (48,995) (5,333)(a)
Net realized gains............................... (100,079)
----------- -----------
Change in net assets from shareholder distribu-
tions............................................ (4,857,957) (2,640,452)
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...................... 8,216,321 3,568,045
Dividends reinvested............................. 4,761,817 2,865,386
Cost of shares redeemed.......................... (5,304,586) (6,168,600)
----------- -----------
Change in net assets from capital transactions.... 7,673,552 264,831
----------- -----------
Change in net assets.............................. 8,543,183 2,725,022
NET ASSETS:
Beginning of period.............................. 30,400,546 27,675,524
----------- -----------
End of period.................................... $38,943,729 $30,400,546
=========== ===========
SHARE TRANSACTIONS:
Issued........................................... 733,390 333,322
Reinvested....................................... 426,459 272,922
Redeemed......................................... (472,411) (591,773)
----------- -----------
Change in shares.................................. 687,438 14,471
=========== ===========
</TABLE>
- --------
(a) For the period from January 19, 1996 (commencement of operations) to May
31, 1996.
See notes to financial statements.
-8-
<PAGE>
SUMMIT HIGH YIELD FUND
SCHEDULE OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (0.2%):
Transportation (0.2%):
279,669 Central Transport Rental Group
PLC-ADR............................................... $ 78,665
-----------
Total Common Stocks............................................. 78,665
-----------
CORPORATE BONDS (96.0%):
Consumer (4.8%):
Consumer Goods & Services (2.9%):
1,000,000 Coleman Escrow Corp.,
0.00%, 5/15/01**...................................... 648,750
500,000 Coleman Holding,
0.00%, 5/27/98*....................................... 462,500
-----------
1,111,250
-----------
Food Processors (2.0%):
1,000,000 PM Holdings Corp.,
0.00%, 9/1/00 (b)..................................... 770,000
-----------
Total Consumer.................................................. 1,881,250
-----------
Energy (2.9%):
Oil/Gas Exploration (2.9%):
1,000,000 TransTexas Gas Corp.,
11.50%, 6/15/02....................................... 1,113,750
-----------
Total Energy.................................................... 1,113,750
-----------
Manufacturing (25.2%):
Apparel/Textile (3.8%):
1,000,000 Anvil Knitwear, Inc.,
10.88%, 3/15/07**..................................... 1,011,250
500,000 CMI Industries,
9.50%, 10/1/03........................................ 485,000
-----------
1,496,250
-----------
Auto & Related (5.4%):
1,000,000 Venture Holdings,
9.75%, 4/1/04......................................... 975,000
1,000,000 Collins & Aikman Products Corp., 11.50%, 4/15/06....... 1,118,750
-----------
2,093,750
-----------
Chemicals (1.3%):
500,000 Tri Polyta Finance, Inc.,
11.38%, 12/1/03....................................... 487,500
-----------
General Industrial (13.5%):
1,000,000 Gulf States Steel,
13.50% 4/15/03........................................ 972,500
500,000 IMO Industries,
11.75%, 5/1/06........................................ 502,500
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Manufacturing, continued:
General Industrial, continued:
1,000,000 International Knife & Saw Corp.,
11.38%, 11/5/06....................................... $ 1,057,500
1,000,000 International Wire Group,
11.75%, 6/1/05........................................ 1,075,000
500,000 Telex Communications, Inc.,
10.50%, 5/1/07**...................................... 517,500
1,000,000 Terex Corp.,
13.25%, 5/15/02....................................... 1,120,000
-----------
5,245,000
-----------
Paper Products (1.3%):
500,000 Florida Coast Paper,
12.75%, 6/1/03........................................ 505,000
-----------
Total Manufacturing............................................. 9,827,500
-----------
Service (42.3%):
Discount Stores (1.2%):
500,000 Pamida, Inc.,
11.75%, 3/15/03....................................... 470,000
-----------
Drug Stores (2.7%):
1,000,000 Duane Reade Corp.,
12.00%, 9/15/02....................................... 1,042,500
-----------
Gaming/Hotels (4.2%):
1,000,000 Alliance Gaming Corp.,
12.88%, 6/30/03....................................... 1,085,000
500,000 Majestic Star Casino,
12.75%, 5/15/03....................................... 545,000
-----------
1,630,000
-----------
Grocery (2.4%):
1,000,000 Pueblo Xtra International,
9.50%, 8/1/03**....................................... 955,000
-----------
Media & Cable (19.0%):
1,000,000 Adelphia Communication Corp., 12.50%, 5/15/02.......... 1,053,750
1,000,000 Globalstar, L.P.,
11.38%, 2/15/04**..................................... 1,005,000
1,000,000 Kabelmedia Holdings,
0.00%, 8/1/06 (e)..................................... 590,000
500,000 Mobile Telecommunications, 13.50%, 12/5/02............. 515,000
1,000,000 People's Choice TV Corp.,
0.00%, 6/1/04 (c)..................................... 365,000
500,000 Phonetel Technologies, Inc.,
12.00%, 12/15/06...................................... 500,000
</TABLE>
Continued
-9-
<PAGE>
SUMMIT HIGH YIELD FUND
SCHEDULE OF INVESTMENTS, CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Service, continued:
Media & Cable, continued:
1,000,000 Spanish Broadcasting System,
11.00%, 3/15/04**.................................... $ 1,045,000
500,000 Tevecap SA,
12.63%, 11/26/04**................................... 530,000
750,000 TV Azteca SA,
10.50%, 2/15/07**.................................... 769,688
1,000,000 TV Filme, Inc.,
12.88%, 12/15/04**................................... 1,042,500
-----------
7,415,938
-----------
Other Services (12.7%):
1,000,000 Affinity Group Holdings, Inc.,
11.00%, 4/1/07**..................................... 1,045,000
500,000 Allied Waste North America, Inc.,
10.25%, 12/1/06**.................................... 531,250
1,000,000 Chief Auto Parts, Inc.,
10.50%, 5/15/05...................................... 1,011,250
500,000 Iron Mountain, Inc.,
10.13%, 10/1/06...................................... 527,500
800,000 Neodata Services, Inc.,
12.00%, 5/1/03....................................... 856,000
500,000 Speedy Muffler King, Inc.,
10.88%, 10/1/06...................................... 523,125
500,000 Stuart Entertainment,
12.50%, 11/15/04..................................... 445,000
-----------
4,939,125
-----------
Total Service.................................................. 16,452,563
-----------
Transportation (12.4%):
Air Transportation/Related (7.1%):
1,000,000 Airplanes Pass Through Trust, 10.88%, 3/15/19**....... 1,112,500
500,000 CHC Helicopter,
11.50%, 7/15/02...................................... 517,500
1,000,000 SC International,
13.00%, 10/1/05...................................... 1,135,000
-----------
2,765,000
-----------
Trucking/Other (5.3%):
1,000,000 Ameritruck Distribution,
12.25%, 11/15/05..................................... 1,000,000
500,000 Atlantic Express Transportation Corp., 10.75%,
2/1/04**............................................. 520,000
<PAGE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Transportation, continued:
Trucking/Other, continued:
569,131 Central Transport Rental Group
PLC-ADR, 9.50%, 4/30/03.............................. $ 542,097
-----------
2,062,097
-----------
Total Transportation........................................... 4,827,097
-----------
Utilities (8.5%):
Gas & Electric (2.3%):
1,000,000 Empire Gas Corp.,
7.00%, 7/15/04....................................... 900,000
-----------
Telecommunications (6.2%):
750,000 Call-Net Enterprises, Inc.,
0.00%, 12/1/04 (f)................................... 640,313
1,000,000 Intermedia Communications,
0.00%, 5/15/01 (d)................................... 685,000
1,000,000 Qwest Communications, Inc., 10.88%, 4/1/07**.......... 1,070,000
-----------
2,395,313
-----------
Total Utilities................................................ 3,295,313
-----------
Total Corporate Bonds.......................................... 37,397,473
-----------
RIGHTS/WARRANTS (0.4%):
Broadcast, Radio & Television (0.0%):
200 American Telecastings, 5 Warrant Package, expire
6/15/99**............................................ 20
-----------
Consumer (0.3%):
2,000 Renaissance Cosmetics, Inc.,
Warrants, expire 8/15/01**........................... 100,000
-----------
Hotels/Gaming (0.0%):
500 Boomtown Warrants, expire 11/98**..................... 5
-----------
Machinery-Construction & Mining (0.0%):
4,000 Terex Corp. Rights, expire 5/15/02.................... 10,000
-----------
Paper Products (0.1%):
10,000 S.D. Warren Warrants, expire 12/15/04**............... 47,500
-----------
Total Warrants................................................. 157,525
-----------
</TABLE>
Continued
-10-
<PAGE>
SUMMIT HIGH YIELD FUND
SCHEDULE OF INVESTMENTS, CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (1.2%):
465,807 Fountain Square Money Market Fund...................... $ 465,807
-----------
Total Investment Companies...................................... 465,807
-----------
TOTAL INVESTMENTS
(Cost--$36,205,704)(a).......................................... $38,099,470
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $38,943,729.
(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........... $2,274,438
Unrealized depreciation........... (380,672)
----------
Net unrealized appreciation....... $1,893,766
==========
</TABLE>
(b) Interest rate increases to 11.50% on September 1, 2000.
(c) Interest rate increases to 13.13% on June 1, 2000.
(d) Interest rate increases to 12.5% on May 15, 2001.
(e) Interest rate increases to 13.63% on August 1, 2001.
(f) Interest rate increases to 13.25% on December 1, 1999.
* Represents discount note.
** Represents private placement securities.
PLC = Public Limited Company
ADR = American Depositary Receipt
See notes to financial statements.
-11-
<PAGE>
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
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 an
Agreement and Declaration of Trust dated March 8, 1994, as amended. 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 without par value. During the fiscal year ended
May 31, 1997, the Fund was authorized to issue two classes of shares, the
High Yield Shares and Institutional Service Shares. 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 including 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
fiscal year ended May 31, 1997. 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 price. Securities
traded only in the "over-the-counter" market are valued at the last bid
price 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. As approved by the
Board of Trustees, the Fund uses a pricing service or services in
determining the net asset value of shares of the Fund. Fixed income
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
-12-
<PAGE>
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1997
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 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 of 1986, as amended, 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, as
amended, were paid by the Fund. Such expenses were amortized over a
period of two years commencing with the date of the initial public
offering.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities for the Fund (excluding short-term
securities) for the year ended May 31, 1997 were $94,455,956 and $88,215,652
respectively.
Continued
-13-
<PAGE>
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1997
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 (the"
Joint Venture"). 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 is a wholly-owned subsidiary of Union Central
Life, an Ohio mutual insurance company, which owns as of May 31, 1997 more
than 91% of the High Yield Shares class and more than 73% of the
Institutional Service Shares Class of 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, as amended, and is a member of the National Association
of Securities Dealers, Inc.
Under the terms of the Investment Advisory Agreement between the Trust and
FSCM (the "Advisory Agreement"), FSCM is entitled to receive fees based on a
percentage of the average net assets of the Fund. 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 annual
expenses to 1.60%. For the year ended May 31, 1997, FSCM voluntarily reduced
$227,432 of investment advisory fees.
Carillon with offices at 1876 Waycross Road, Cincinnati, Ohio 45240, serves
as investment sub-adviser (the "Sub-Adviser") to the Fund 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. Under the Sub-Advisory Agreement,
the Sub-Adviser receives from the Adviser 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 of less than twelve months in length,
the Sub-Adviser is entitled to a pro-rata portion of such fee, or such other
fees 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.
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.
Continued
-14-
<PAGE>
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1997
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 between the Trust and BISYS, BISYS'
fees are computed daily and paid monthly as a percentage of the average daily
net assets of the Fund at an annual rate of 0.20%. For the year ended May 31,
1997, BISYS voluntarily reduced $17,134 of administration fees of the Fund.
BISYS also serves as distributor of the Fund's shares. BISYS receives fees
for providing distribution services under the Distribution Agreement between
the Trust and BISYS and the Trust's Distribution and Shareholders Service
Plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under the
Plans, the Fund pays BISYS a fee not to exceed, on an annual basis, 0.25% of
the average daily net assets of the shares of the High Yield Shares class and
of the Institutional Service Shares class 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, 1997 BISYS waived
$4,585 in 12b-1 fees. In addition, BISYS 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. BISYS may sell
such shares at the public offering price, which for Institutional Service
Shares Class shares is net asset value, and for High Yield Shares class
shares is 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 BISYS which may not exceed the amount of the sales charge or
the underwriting discount. For the year ended May 31, 1997, BISYS received
$26,909 from commissions earned on sales of High Yield Shares class shares of
the Fund, $24,202 of which was reallowed to unaffiliated 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 between the
Trust and BISYS Ohio, the fund accountant is entitled to receive fees based
on a percentage of the average daily 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,
1997 were $58,479 and $44,994 respectively.
Continued
-15-
<PAGE>
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1997
5. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
SUMMIT HIGH YIELD
BOND FUND
------------------------
FOR THE FOR THE
YEAR YEAR
ENDED ENDED
MAY 31, MAY 31,
1997 1996
----------- -----------
<S> <C> <C>
CAPITAL TRANSACTIONS:
HIGH YIELD SHARES:
Proceeds from shares issued..................... $ 4,256,939 $ 573,171
Dividends reinvested............................ 4,423,689 2,820,631
Shares redeemed................................. (3,409,061) (4,848,104)
----------- -----------
Change in net assets from High Yield share
transactions................................. $ 5,271,567 $(1,454,302)
=========== ===========
INSTITUTIONAL SERVICE SHARES:
Proceeds from shares issued..................... $ 3,959,382 $ 2,994,874 (a)
Dividends reinvested............................ 338,128 44,755 (a)
Shares redeemed................................. (1,895,525) (1,320,496)(a)
----------- -----------
Change in net assets from Institutional
Service share transactions................... $ 2,401,985 $ 1,719,133 (a)
=========== ===========
SHARE TRANSACTIONS:
HIGH YIELD SHARES:
Issued.......................................... 379,660 54,443
Reinvested...................................... 396,115 268,810
Redeemed........................................ (302,538) (469,528)
----------- -----------
Change in High Yield shares................... 473,237 (146,275)
=========== ===========
INSTITUTIONAL SERVICE SHARES
Issued.......................................... 353,730 278,879 (a)
Reinvested...................................... 30,344 4,112 (a)
Redeemed........................................ (169,873) (122,245)(a)
----------- -----------
Change in Institutional Service shares........ 214,201 160,746 (a)
=========== ===========
</TABLE>
- --------
(a) For the period from January 19, 1996 (commencement of operations) to May
31, 1996.
Continued
-16-
<PAGE>
SUMMIT INVESTMENT TRUST
SUMMIT HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
MAY 31, 1997
6. SUBSEQUENT EVENTS:
At the regular quarterly meeting on June 18, 1997, the Board of Trustees
authorized and directed the officers of the Trust to effectuate the exchanges
of all the shares of the Institutional Service Shares class into shares of
the High Yield Shares class and, upon completion of such exchanges, to
effectuate the abolishment of the Institution Service Class. The exchange of
the shares and abolishment of the Institution Service Class is scheduled to
be completed by the end of July, 1997. At that time, the Fund will have only
one class of shares, the High Yield Shares class, which will continue to have
substantially the same expenses as prior to the abolishment of the
Institutional Service Class.
-17-
<PAGE>
SUMMIT HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INSTITUTIONAL
HIGH YIELD SHARES SERVICE SHARES
------------------ --------------------
FOR THE FOR THE
PERIOD FROM PERIOD
YEAR YEAR YEAR JANUARY 19, JUNE 27,
ENDED ENDED ENDED 1996 TO 1994 TO
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1997 1996(D) 1995(A)
-------- -------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN NING OF PERIOD.......... $ 11.05 $ 10.11 $ 11.03 $10.59 $ 10.00
-------- -------- ------- ------ -------
INVESTMENT ACTIVITIES:
Net investment income......................... 0.99 1.01 1.04 0.40 0.83
Net realized and unrealized gains (losses)
on investments............................... 0.90 0.95 0.87 0.47 0.11
-------- -------- ------- ------ -------
Total from Investment Activities............ 1.89 1.96 1.91 0.87 0.94
-------- -------- ------- ------ -------
DISTRIBUTIONS:
Net investment income......................... (0.99) (1.01) (1.04) (0.40) (0.83)
In excess of net in vestment income........... (0.13) (0.10) (0.03)
Net realized gains............................ (0.50) (0.01) (0.50)
-------- -------- ------- ------ -------
Total Distributions......................... (1.62) (1.02) (1.64) (0.43) (0.83)
-------- -------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD.................. $ 11.32 $ 11.05 $ 11.30 $11.03 $ 10.11
======== ======== ======= ====== =======
Total Return (excludes sales charges)........... 18.15% 20.34% 18.40% 20.16%(b) 9.97%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)............. $ 34,707 $28,628 $4,237 $1,773 $27,676
Ratio of expenses to average net assets....... 1.60% 1.60% 1.43% 1.52%(c) 1.56%(c)
Ratio of net investment income to average
net assets................................... 8.73% 9.42% 8.89% 9.86%(c) 9.13%(c)
Ratio of expenses to average net assets*...... 2.32% 2.24% 2.32% 2.76%(c) 1.61%(c)
Ratio of net investment income to average
net assets*.................................. 8.01% 8.78% 8.01% 8.62%(c) 9.08%(c)
Portfolio turnover (e)........................ 271.68% 187.61% 271.68% 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.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to financial statements.
-18-
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
Steven R. Sutermeister, Chairman and Trustee
James F. Smith, President and Trustee
Theodore H. Emmerich, Trustee
Frederick Moss, Trustee
Bruce H. Olson, Trustee
Scott A. Englehart, Vice President
Craig C. Rudesill, Secretary
Thresa Dewar, Treasurer
-----------
Investment Adviser
First Summit Capital Management
1876 Waycross Road
Cincinnati, Ohio 45240
Administrator and Distributor
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
Legal Counsel
Stradley, Ronon, Stevens & Young LLP
2600 Commerce Square
Philadelphia, PA 19103-7098
Auditors
Coopers & Lybrand LLP
100 East Broad Street
Columbus, Ohio 43215
7/97
- --------------------------------------------------------------------------------
[Summit logo appears here]
A PORTFOLIO OF SUMMIT INVESTMENT TRUST
MANAGED BY
FIRST SUMMIT CAPITAL MANAGEMENT
ANNUAL REPORT
TO
SHAREHOLDERS
MAY 31, 1997
- --------------------------------------------------------------------------------
