Filed On 2/3/03 5:28pm ET · SEC Files 2-90309, 811-04000 · Accession Number 743773-3-2
As Of Filer Filing As/For/On Docs:Pgs
2/03/03 Summit Mutual Funds Inc 485BPOS 2/03/03 3:344
Summit Mutual Funds Inc
Document/Exhibit Description Pages Size
1: 485BPOS Post-Effective Amendment No. 38 to the Fund's 341± 1,344K
Registration Statement on Form N-1a
2: EX-23 Independent Auditor's Consent 1 6K
3: EX-99 Distribution and Shareholder Service Plan 2 14K
485BPOS · Post-Effective Amendment No. 38 to the Fund's Registration Statement on Form N-1a
Document Table of Contents
| Page | (sequential) | | | | (alphabetic) | Top |
|---|
| | |
- Alternative Formats (RTF, XML, et al.)
- Additional Information
- Additional Investment Policies - Money Market Fund
- Advisory Fee
- Appendix A: Ratings
- Appendix A: S&P, Frank Russell, NASDAQ, EAFE and Total Social Impact Disclaimers
- Asset-Backed and Mortgage-Backed Securities
- Automobile Receivable Securities
- Balanced Index Fund Profile
- Bond Fund Profile
- Business and other Connections of Investment Adviser
- Capital Stock
- Certain Risk Factors Relating to High Yield, High Risk Bonds
- Code of Ethics
- Collateralized Mortgage Obligations
- Commercial Paper Ratings
- Corporate Bond Ratings
- Credit Card Receivable Securities
- Determination of Net Asset Value
- Distributor
- Dividends and Capital Gains Distributions
- Eafe International Index Fund Profile
- Everest Fund Profile
- Excessive Trading
- Exhibits
- Expenses
- Federal Taxes
- Financial Highlights
- Foreign Currency Transactions
- Foreign Securities
- Fund Management
- Fund Profiles S&P 500 Index Fund Profile
- Fund Transactions and Brokerage
- Futures Contracts
- Futures Contracts and Options on Futures Contracts
- General Information
- High Yield Bond Fund Profile
- High Yield Bonds
- Hybrid Instruments
- Indemnification
- Independent Auditors
- Introduction
- Investment Adviser
- Investment Advisory Agreement and Administrative Services Agreement
- Investment Policies
- Investment Restrictions
- Investments in Foreign Securities
- Investment Strategies
- Investment Subadvisory Agreements
- Lehman Aggregate Bond Index Fund Profile
- Lending Fund Securities
- Lending Portfolio Securities
- License Agreement
- Loan Participations and Assignments
- Location of Accounts and Records
- Management of the Fund
- Management Services
- Money Market Fund
- Money Market Fund Profile
- Money Market Instruments, Other Securities and Investment Techniques
- Nasdaq
- Nasdaq-100 Index Fund Profile
- Options
- Options on Securities Indices
- Other Information
- Other Investment Policies, Strategies and Risks
- Payment of Expenses
- Persons Controlled by or Under Common Control with Registrant
- Portfolio Turnover
- Pricing of Fund Shares
- Primary Risks
- Principal Underwriters
- Purchase and Redemption of Shares
- Purchase of Shares
- Redemption of Shares
- Repurchase Agreements
- Reverse Repurchase Agreements
- Russell 2000 Small Cap Index Fund Profile
- Securities Activities of Adviser
- Service Agreement
- Shareholder Information
- Short Sales
- Short-Term Government Fund Profile
- S&P, Frank Russell, Nasdaq, Eafe and Total Social Impact Disclaimers
- S&P Midcap 400 Index Fund Profile
- State and Local Taxes
- Table of Contents
- Taxes
- Total Social Impact Fund Profile
- Types of Credit Support
- Undertakings
- Voting Rights
- Warrants
|
| 1 | 1st Page
|
| 5 | Table of Contents
|
| " | Introduction
|
| 6 | Fund Profiles S&P 500 Index Fund Profile
|
| " | Investment Strategies
|
| " | Primary Risks
|
| " | S&P Midcap 400 Index Fund Profile
|
| " | Russell 2000 Small Cap Index Fund Profile
|
| " | Nasdaq-100 Index Fund Profile
|
| " | Eafe International Index Fund Profile
|
| " | Total Social Impact Fund Profile
|
| " | Balanced Index Fund Profile
|
| " | Lehman Aggregate Bond Index Fund Profile
|
| " | Everest Fund Profile
|
| " | Bond Fund Profile
|
| " | Short-Term Government Fund Profile
|
| " | Money Market Fund Profile
|
| " | High Yield Bond Fund Profile
|
| " | Other Investment Policies, Strategies and Risks
|
| " | Foreign Securities
|
| " | Foreign Currency Transactions
|
| " | High Yield Bonds
|
| " | Repurchase Agreements
|
| " | Reverse Repurchase Agreements
|
| " | Futures Contracts and Options on Futures Contracts
|
| " | Options on Securities Indices
|
| " | Collateralized Mortgage Obligations
|
| " | Asset-Backed and Mortgage-Backed Securities
|
| " | Lending Fund Securities
|
| " | Other Information
|
| " | Fund Management
|
| " | Investment Adviser
|
| " | Advisory Fee
|
| " | Expenses
|
| " | Capital Stock
|
| " | Shareholder Information
|
| " | Pricing of Fund Shares
|
| " | Purchase of Shares
|
| " | Redemption of Shares
|
| " | Excessive Trading
|
| " | Dividends and Capital Gains Distributions
|
| " | Federal Taxes
|
| " | State and Local Taxes
|
| " | S&P, Frank Russell, Nasdaq, Eafe and Total Social Impact Disclaimers
|
| 7 | Financial Highlights
|
| 19 | Money Market Fund
|
| 20 | Appendix A: Ratings
|
| " | Corporate Bond Ratings
|
| " | Commercial Paper Ratings
|
| 24 | Investment Policies
|
| " | Money Market Instruments, Other Securities and Investment Techniques
|
| " | Types of Credit Support
|
| " | Automobile Receivable Securities
|
| " | Credit Card Receivable Securities
|
| " | Certain Risk Factors Relating to High Yield, High Risk Bonds
|
| " | Investments in Foreign Securities
|
| " | Futures Contracts
|
| " | Options
|
| " | Warrants
|
| " | Loan Participations and Assignments
|
| " | Short Sales
|
| " | Lending Portfolio Securities
|
| " | Hybrid Instruments
|
| " | Additional Investment Policies - Money Market Fund
|
| " | Investment Restrictions
|
| " | Portfolio Turnover
|
| " | Management of the Fund
|
| " | Payment of Expenses
|
| " | Investment Advisory Agreement and Administrative Services Agreement
|
| " | Investment Subadvisory Agreements
|
| " | Service Agreement
|
| " | License Agreement
|
| " | Securities Activities of Adviser
|
| " | Code of Ethics
|
| " | Determination of Net Asset Value
|
| " | Purchase and Redemption of Shares
|
| " | Taxes
|
| " | Fund Transactions and Brokerage
|
| " | Distributor
|
| " | General Information
|
| " | Voting Rights
|
| " | Additional Information
|
| " | Independent Auditors
|
| " | Appendix A: S&P, Frank Russell, NASDAQ, EAFE and Total Social Impact Disclaimers
|
| " | Nasdaq
|
| 55 | Item 23. Exhibits
|
| " | Item 24. Persons Controlled by or Under Common Control with Registrant
|
| " | Item 25. Indemnification
|
| " | Item 26. Business and other Connections of Investment Adviser
|
| " | Item 27. Principal Underwriters
|
| " | Item 28. Location of Accounts and Records
|
| " | Item 29. Management Services
|
| " | Item 30. Undertakings
|
Registration No. 2-90309
--------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ ___
Post-Effective Amendment No. 38 X
---- ---
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 39 X
---- ---
SUMMIT MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1876 Waycross Road, Cincinnati, Ohio 45240
(Address of Principal Executive Offices)
(513) 595-2600
(Registrant's Telephone Number)
John F. Labmeier, Esq.
The Union Central Life Insurance Company
P.O. Box 40888
Cincinnati, Ohio 45240
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on February 1, 2003 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on (date) pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
This amendment No. 38 under the Securities Act of 1933, and
Amendment No. 39 under the Investment Company Act of 1940, to
the Registration Statement on Form N-1A of Summit Mutual Funds,
Inc. is filed solely to update the information in the Summit
Apex Funds' prospectus and statement of additional information
and does not otherwise delete, amend, or supersede any
prospectus, statement of additional information, exhibit,
undertaking, or other information contained in the Registration
Statement.
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Summit Prospectus
Mutual
Funds
Summit Apex Series
S&P 500 Index Fund
S&P MidCap 400 Index Fund
Russell 2000 Small Cap Index Fund
Nasdaq-100 Index Fund
EAFE International Index Fund
Total Social Impact Fund
Balanced Index Fund
Lehman Aggregate Bond Index Fund
Everest Fund
Bond Fund
Short-term Government Fund
Money Market Fund
High Yield Bond Fund
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE.
NEITHER THE SEC NOR ANY STATE HAS DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
February 1, 2003 SUMMIT
MUTUAL
FUNDS
February 1, 2003
SUMMIT MUTUAL FUNDS, INC.
TABLE OF CONTENTS
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . 2
FUND PROFILES
S&P 500 INDEX FUND PROFILE. . . . . . . . . . . . . . . . 3
S&P MIDCAP 400 INDEX FUND PROFILE . . . . . . . . . . . . 6
RUSSELL 2000 SMALL CAP INDEX FUND PROFILE . . . . . . . . 8
NASDAQ-100 INDEX FUND PROFILE . . . . . . . . . . . . . . 10
EAFE INTERNATIONAL INDEX FUND PROFILE . . . . . . . . . . 13
TOTAL SOCIAL IMPACT FUND PROFILE. . . . . . . . . . . . . 16
BALANCED INDEX FUND PROFILE . . . . . . . . . . . . . . . 19
LEHMAN AGGREGATE BOND INDEX FUND PROFILE. . . . . . . . . 23
EVEREST FUND PROFILE. . . . . . . . . . . . . . . . . . . 26
BOND FUND PROFILE . . . . . . . . . . . . . . . . . . . . 28
SHORT-TERM GOVERNMENT FUND PROFILE. . . . . . . . . . . . 31
MONEY MARKET FUND PROFILE . . . . . . . . . . . . . . . . 32
HIGH YIELD BOND FUND PROFILE. . . . . . . . . . . . . . . 34
FEES AND EXPENSES OF THE FUND . . . . . . . . . . . . . . . 37
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS . . . . . . 38
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 38
FOREIGN CURRENCY TRANSACTIONS . . . . . . . . . . . . . . 39
HIGH YIELD BONDS. . . . . . . . . . . . . . . . . . . . . 40
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 40
REVERSE REPURCHASE AGREEMENTS . . . . . . . . . . . . . . 40
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. . . . 40
OPTIONS ON SECURITIES INDICES . . . . . . . . . . . . . . 42
COLLATERALIZED MORTGAGE OBLIGATIONS . . . . . . . . . . . 42
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES . . . . . . . 42
LENDING FUND SECURITIES . . . . . . . . . . . . . . . . . 43
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 44
FUND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 44
INVESTMENT ADVISER. . . . . . . . . . . . . . . . . . . . 44
ADVISORY FEE. . . . . . . . . . . . . . . . . . . . . . . 45
SUBADVISORS . . . . . . . . . . . . . . . . . . . . . . . 45
EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . 46
CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . 46
SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . 46
DISTRIBUTION AND SHAREHOLDER SERVICE (12b-1) PLAN . . . . 46
PRICING OF FUND SHARES. . . . . . . . . . . . . . . . . . 47
PURCHASE OF SHARES. . . . . . . . . . . . . . . . . . . . 47
REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . 50
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS . . . . . . . . . 53
FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . 54
STATE AND LOCAL TAXES . . . . . . . . . . . . . . . . . . . 55
S&P, FRANK RUSSELL, NASDAQ, EAFE AND
TOTAL SOCIAL IMPACT DISCLAIMERS. . . . . . . . . . . . . . 55
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . 58
APPENDIX A: RATINGS. . . . . . . . . . . . . . . . . . . . 71
CORPORATE BOND RATINGS. . . . . . . . . . . . . . . . . . 72
COMMERCIAL PAPER RATINGS. . . . . . . . . . . . . . . . . 73
INTRODUCTION
This prospectus explains the objectives, risks and strategies of
thirteen of the twenty-two Funds comprising Summit Mutual Funds,
Inc. ("Summit Mutual Funds"). Each Fund Profile below
summarizes important facts about the Fund, including its
investment objective, strategy, risks and past investment
performance. More detailed information about some of the Funds'
investment policies and strategies is provided after the
Profiles, along with information about Fund expenses for each
Fund.
The thirteen Funds included in this Prospectus are part of the
Summit Mutual Funds' SUMMIT APEX SERIES, whose shares are
offered to institutional and retail investors. These Funds are
also offered to The Union Central Life Insurance Company ("Union
Central") and its exempt separate accounts.
This prospectus offers two classes of shares:
1) Each Fund offers shares without a sales charge, and
2) Three Funds (Everest Fund, Nasdaq-100 Index Fund and
Total Social Impact Fund) also offer shares (Class F
shares) that are subject to a Distribution and Share-
holder Service (12b-1) Plan.
It is anticipated that Union Central will have voting control of
Summit Mutual Funds. With voting control, Union Central could
make fundamental and substantial changes (such as electing a new
Board of Directors, changing the investment adviser or advisory
fee, changing a Fund's fundamental investment objectives and
policies, etc.) regardless of the views of other shareholders.
INDEX FUNDS
The S&P 500 Index Fund seeks investment results that correspond
to the total return performance of U.S. common stocks, as
represented by the S&P 500 Index.
The S&P MidCap 400 Index Fund seeks investment results that
correspond to the total return performance of U.S. common
stocks, as represented by the S&P MidCap 400 Index.
The Russell 2000 Small Cap Index Fund seeks investment results
that correspond to the investment performance of U.S. common
stocks, as represented by the Russell 2000 Index.
The Nasdaq-100 Index Fund seeks investment results that
correspond to the investment performance of U.S. common stocks,
as represented by the Nasdaq-100 Index.
The EAFE International Index Fund seeks investment results that
correspond to the total return performance of common stocks as
represented by the Morgan Stanley Capital International ("MSCI")
EAFE Index ("Index"). The EAFE Index emphasizes the stocks of
companies in major markets in Europe, Australasia, and the Far
East.
The Total Social Impact Fund seeks investment results that
closely correspond to the total return performance of U.S.
common stocks, as represented by the S&P 500 Index. To pursue
this objective, the Fund will invest in ALL stocks that are
included in the S&P 500 Index. The Fund also seeks to promote
better business practices by investing more in companies in the
Index that conduct their business commendably with respect to
their stakeholders.
The Balanced Index Fund seeks investment results, with respect
to 60% of its assets, that correspond to the total return
performance of U.S. common stocks, as represented by the S&P 500
Index and, with respect to 40% of its assets, that correspond to
the total return performance of investment grade bonds, as
represented by the Lehman Brothers Aggregate Bond Index.
The Lehman Aggregate Bond Index Fund seeks investment results
that correspond to the total return performance of the bond
market, as represented by the Lehman Brothers Aggregate Bond
Index ("Lehman Brothers Index").
MANAGED FUNDS
The Everest Fund seeks primarily long-term appreciation of
capital, without incurring unduly high risk, by investing
primarily in common stocks and other equity securities. Current
income is a secondary objective.
The Bond Fund seeks as high a level of current income as is
consistent with reasonable investment risk, by investing
primarily in long-term, fixed-income, investment-grade corporate
bonds.
The Short-term Government Fund seeks to provide a high level of
current income and preservation of capital by investing 100% of
its total assets in bonds issued by the U.S. government and its
agencies.
The Money Market Fund seeks to maintain stability of capital
and, consistent therewith, to maintain the liquidity of capital
and to provide current income.
The High Yield Bond Fund seeks high current income and capital
appreciation, secondarily.
FUND PROFILES
S&P 500 INDEX FUND PROFILE
Investment Objective
The S&P 500 Index Fund seeks investment results that correspond
to the total return performance of U.S. common stocks, as
represented by the S&P 500 Index.
Investment Strategies
The S&P 500 Index Fund seeks to substantially replicate the
total return of the securities comprising the S&P 500 Index,
taking into consideration redemptions, sales of additional
shares, and other adjustments described below. Precise
replication of the capitalization weighting of the securities in
the S&P 500 Index is not feasible. The Index Fund will attempt
to achieve, in both rising and falling markets, a correlation of
at least 95% between the total return of its net assets before
expenses and the total return of the S&P 500 INDEX. A
correlation of 100% would represent perfect correlation between
the Fund and index performance. The correlation of the Fund's
performance to that of the S&P 500 INDEX should increase as the
Fund grows. There can be no assurance that the Fund will
achieve a 95% correlation.
The S&P 500 Index Fund may invest up to 5% of its assets in
Standard & Poor's Depositary Receipts(R) ("SPDRs(R)"). SPDRs(R)
are units of beneficial interest in a unit investment trust,
representing proportionate undivided interests in a portfolio of
securities in substantially the same weighting as the common
stocks that comprise the S&P 500 Index .
The Fund may invest up to 20% of its assets in S&P 500 Index
futures contracts and options in order to invest uncommitted
cash balances, to maintain liquidity to meet shareholder
redemptions, or minimize trading costs. The Fund may also sell
covered calls on futures contracts or individual securities held
in the Fund.
Under normal circumstances, the Fund will invest at least 80% of
its assets in investments with economic characteristics similar
to the stocks represented in the S&P 500 Index. Although the
Adviser will attempt to invest as much of the S&P 500 Index
Fund's assets as is practical in stocks included among the S&P
500 Index and futures contracts and related options under normal
market conditions, a portion of the Fund may be invested in
money market instruments pending investment or to meet
redemption requests or other needs for liquid assets. In
addition, for temporary defensive purposes, the Fund may invest
in government securities, money market instruments, or other
fixed-income securities, or retain cash or cash equivalents.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Market risk: The S&P 500 Index Fund's total return, like
stock prices generally, will fluctuate within a wide range
in response to stock market trends, so a share of the Fund
could drop in value over short or even long periods. Stock
markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
o Investment style risk: Stocks of large companies, such
as those listed among the S&P 500 Index occasionally go
through cycles of doing worse (or better) than the stock
markets in general or other types of investments.
o Correlation risk: Because the S&P Index Fund has expenses,
and the S&P 500 Index does not, the Fund may be unable to
replicate precisely the performance of the Index. While
the Fund remains small, it may have a greater risk that
its performance will not match that of the Index.
o Derivatives Risk: The Fund may invest in stock futures
and options, and stock index futures and options. The Fund
will not use these investments for speculative purposes or
as leveraged investments that might exacerbate gains or
losses. The Fund will invest in derivatives solely to meet
shareholder redemptions or to invest shareholder purchases
while maintaining exposure to the market. The principal
risks to derivatives used in this context is that it might
not be highly correlated with the security for which it is
being used as a substitute.
Bar Chart and Performance Table
The bar chart and table below provide some indication of the
risk of investing in the S&P 500 Index Fund. The bar chart shows
how the Fund's annual performance has varied from year to year
since its inception. The table shows how the Fund's average
annual returns for one year and since inception compare with
those of the S&P 500. The Fund's past performance (before and
after taxes) is not necessarily indicative of future
performance.
[GRAPHIC OMITTED]
S&P 500 Index Fund Total Returns
2001 2002
7.00%-
0.00%- ------/----/----/----/
/ / / /
-7.00%- / / / /
/----/ / /
-14.00%- -12.32% / /
/ /
-21.00%- / /
/----/
-28.00%- -22.49%
*Total return for the most recent fiscal year quarter ended
December 31, 2002 was 8.28%.
During the period shown in the bar chart, the highest return for
a calendar quarter was 10.5% (quarter ending 12/31/01) and the
lowest return for a quarter was -17.3% (quarter ending
09/30/02).
Average Annual Total Returns for Periods Ended December 31, 2002
[Download Table]
Life of the Fund
1 Year (since April 3, 2000
------ --------------------
Return Before Taxes -22.5% -16.8%
Return After Taxes on Distributions(1)(2) -22.9% -17.1%
Return After Taxes on Distributions
and Sale of Fund Shares(1)(2) -13.8% -13.1%
S&P 500 Index(3) -22.1% -16.4%
__________
(1) After-tax returns are calculated using the historical
highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes.
(2) Actual after-tax returns depend on an investor's tax
situation and may differ from those shown, and after-tax returns
shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.
(3) Reflects no deduction for fees, expenses or taxes.
S&P MIDCAP 400 INDEX FUND PROFILE
Investment Objective
The S&P MidCap 400 Index Fund seeks investment results that
correspond to the total return performance of U.S. common
stocks, as represented by the S&P MidCap 400 Index.
Investment Strategies
The S&P MidCap 400 Index Fund seeks to substantially replicate
the total return of the securities comprising the S&P MidCap 400
Index, taking into consideration redemptions, sales of
additional shares, and other adjustments described below.
Precise replication of the capitalization weighting of the
securities in the S&P MidCap 400 Index is not feasible. The S&P
MidCap 400 Index Fund will attempt to achieve, in both rising
and falling markets, a correlation of at least 95% between the
total return of its net assets before expenses and the total
return of the S&P MidCap 400 Index. A correlation of 100% would
represent perfect correlation between the Fund and index
performance. The correlation of the Fund's performance to that
of the S&P MidCap 400 Index should increase as the Fund grows.
There can be no assurance that the Fund will achieve a 95%
correlation.
The S&P MidCap 400 Index Fund may invest up to 5% of its assets
in Standard & Poor's MidCap Depositary Receipts(R) ("MidCap
SPDRs(R)"). MidCap SPDRs(R) are units of beneficial interest in
a unit investment trust, representing proportionate undivided
interests in a portfolio of securities in substantially the same
weighting as the common stocks that comprise the S&P MidCap 400
Index.
The Fund may invest up to 20% of its assets in S&P MidCap 400
Index futures contracts and options in order to invest
uncommitted cash balances, to maintain liquidity to meet
shareholder redemptions, or minimize trading costs. The Fund
may also sell covered calls on futures contracts or individual
securities held in the Fund. As a temporary investment
strategy, until the Fund reaches $50 million in net assets, the
Fund may invest up to 100% of its assets in such futures and/or
options contracts.
Under normal circumstances, the fund will invest at least 80% of
its assets in investments with economic characteristics similar
to the stocks represented in the S&P MidCap 400 Index. Although
the Adviser will attempt to invest as much of the S&P MidCap 400
Index Fund's assets as is practical in stocks included among the
S&P MidCap 400 Index and futures contracts and options relating
thereto under normal market conditions, a portion of the Fund
may be invested in money market instruments pending investment
or to meet redemption requests or other needs for liquid assets.
In addition, for temporary defensive purposes, the Fund may
invest in government securities, money market instruments, or
other fixed-income securities, or retain cash or cash
equivalents.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Market risk: The S&P MidCap 400 Index Fund's total return,
like stock prices generally, will fluctuate within a wide
range in response to stock market trends, so a share of the
Fund could drop in value over short or even long periods.
Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
o Investment style risk: Stocks of medium sized (mid-cap)
companies, such as those listed among the S&P MidCap 400
Index occasionally go through cycles of doing worse (or
better) than the stock markets in general or other types
of investments.
o Correlation risk: Because the S&P MidCap 400 Index Fund
has expenses, and the S&P MidCap 400 Index does not, the
Fund may be unable to replicate precisely the performance
of the Index. While the Fund remains small, it may have a
greater risk that its performance will not match that of
the Index.
o Derivatives Risk: The Fund may invest in stock futures
and options, and stock index futures and options. The Fund
will not use these investments for speculative purposes or
as leveraged investments that might exacerbate gains or
losses. The Fund will invest in derivatives solely to meet
shareholder redemptions or to invest shareholder purchases
while maintaining exposure to the market. The principal
risks to derivatives used in this context is that it might
not be highly correlated with the security for which it is
being used as a substitute.
Bar Chart and Performance Table
The bar chart and table below provide some indication of the
risk of investing in the S&P MidCap 400 Index Fund. The bar
chart shows how the Fund's annual performance has varied from
year to year since its inception. The table shows how the
Fund's average annual returns for one year and since inception
compare with those of the S&P MidCap 400 Index. The Fund's past
performance (before and after taxes) is not necessarily
indicative of future performance.
[GRAPHIC OMITTED]
S&P MidCap 400 Index Fund Total Returns
8.00%-
4.00%- 2001 2002
0.00%- ------/-----/----------
/-----/ / /
-4.00%- / /
-1.70% / /
-8.00%- / /
/ /
-12.00%- / /
/----/
-16.00%- -15.13%
*Total return for the most recent fiscal year quarter ended
December 31, 2002 was 5.69%.
During the period shown in the bar chart, the highest return for
a calendar quarter was 17.8% (quarter ending 12/31/01) and the
lowest return for a quarter was -16.7% (quarter ending
09/30/02).
Average Annual Total Returns for Periods Ended December 31, 2002
[Download Table]
Life of the Fund
1 Year (since December 28, 1999)
------ -------------------------
Return Before Taxes -15.1% -5.3%
Return After Taxes on Distributions(1)(2) -15.4% -5.7%
Return After Taxes on Distributions
and Sale of Fund Shares(1)(2) -9.3% -4.4%
S&P MidCap 400 Index(3) -14.5% -4.3%
__________
(1) After-tax returns are calculated using the historical
highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes.
(2) Actual after-tax returns depend on an investor's tax
situation and may differ from those shown, and after-tax returns
shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.
(3) Reflects no deduction for fees, expenses or taxes.
RUSSELL 2000 SMALL CAP INDEX FUND PROFILE
Investment Objective
The Russell 2000 Small Cap Index Fund seeks investment results
that correspond to the investment performance of U.S. commons
stocks, as represented by the Russell 2000 Index.
Investment Strategies
The Russell 2000 Small Cap Index Fund seeks to substantially
replicate the total return of the securities comprising the
Russell 2000 Index, taking into consideration redemptions, sales
of additional shares, and other adjustments described below.
Precise replication of the capitalization weighting of the
securities in the Russell 2000 Index is not feasible. The
Russell 2000 Small Cap Index Fund will attempt to achieve, in
both rising and falling markets, a correlation of at least 95%
between the total return of its net assets before expenses and
the total return of the Russell 2000 Index. A correlation of
100% would represent perfect correlation between the Fund and
index performance. The correlation of the Fund's performance to
that of the Russell 2000 Index should increase as the Fund
grows. There can be no assurance that the Fund will achieve a
95% correlation.
Under normal circumstances, the fund will invest at least 80% of
its assets in investments with economic characteristics similar
to the stocks represented in the Russell 2000 Index. Although
the Adviser will attempt to invest as much of the Russell 2000
Small Cap Index Fund's assets as is practical in stocks included
among the Russell 2000 Index and futures contracts and options
relating thereto under normal market conditions, a portion of
the Fund may be invested in money market instruments pending
investment or to meet redemption requests or other needs for
liquid assets. The Fund may also temporarily invest in S&P 500
Index futures and/or S&P MidCap 400 futures if, in the opinion
of the Adviser, it is not practical to invest in Russell 2000
Index futures at a particular time due to liquidity or price
considerations. In addition, for temporary defensive purposes,
the Fund may invest in government securities, money market
instruments, or other fixed-income securities, or retain cash or
cash equivalents.
The Fund may invest up to 20% of its assets in Russell 2000
Index futures contracts or options (or S&P MidCap 400 or S&P 500
Index futures contracts and options if, in the opinion of the
Adviser, it is not practical to invest in Russell 2000 Index
futures at a particular time due to liquidity or price
considerations) in order to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or minimize
trading costs. The Fund may also sell covered calls on futures
contracts or individual securities held in the Fund. As a
temporary investment strategy, until the Fund reaches $50
million in net assets, the Fund may invest up to 100% of its
assets in such futures and/or options contracts.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Market risk: The Russell 2000 Small Cap Index Fund's total
return, like stock prices generally, will fluctuate within
a wide range in response to stock market trends, so a share
of the Fund could drop in value over short or even long
periods. Stock markets tend to move in cycles, with periods
of rising prices and periods of falling prices.
o Investment style risk: Stocks of small sized (small-cap)
companies, such as those listed among the Russell 2000
Index occasionally go through cycles of doing worse (or
better) than the stock markets in general or other types
of investments.
o Correlation risk: Because the Russell 2000 Small Cap Index
Fund has expenses, and the Russell 2000 Index does not, the
Fund may be unable to replicate precisely the performance of
the Index. While the Fund remains small, it may have a
greater risk that its performance will not match that of the
Index.
o Derivatives Risk: The Fund may invest in stock futures
and options, and stock index futures and options. The Fund
will not use these investments for speculative purposes or
as leveraged investments that might exacerbate gains or
losses. The Fund will invest in derivatives solely to meet
shareholder redemptions or to invest shareholder purchases
while maintaining exposure to the market. The principal
risks to derivatives used in this context is that it might
not be highly correlated with the security for which it is
being used as a substitute.
Bar Chart and Performance Table
The bar chart and table below provide some indication of the
risk of investing in the Russell 2000 Small Cap Index Fund. The
bar chart shows how the Fund's annual performance has varied
from year to year since its inception. The table shows how the
Fund's average annual returns for one year and since inception
compare with those of the Russell 2000 Index. The Fund's past
performance (before and after taxes) is not necessarily
indicative of future performance.
[GRAPHIC OMITTED]
Russell 2000 Small Cap Index Fund Total Returns
12.00%-
6.00%- 1.79%
/----/
0.00%- ------/----/-----------------/----/
/----/ / /
-6.00%- -2.63% / /
/ /
-12.00%- / /
/ /
-18.00%- / /
/----/
-24.00%- -20.88%
2000 2001 2002
*Total return for the most recent fiscal year quarter ended
December 31, 2002 was 5.97%.
During the period shown in the bar chart, the highest return for
a calendar quarter was 20.7% (quarter ending 12/31/01) and the
lowest return for a quarter was -21.6% (quarter ending
09/30/02).
Average Annual Total Return for Periods Ended December 31, 2002
[Download Table]
Life of the Fund
1 Year (since December 29, 1999)
------ -------------------------
Return Before Taxes -20.9% -6.8%
Return After Taxes on Distributions(1)(2) -21.1% -7.1%
Return After Taxes on Distributions
and Sale of Fund Shares(1)(2) -12.8% -5.5%
Russell 2000 Index(3) -20.5% -6.5%
__________
(1) After-tax returns are calculated using the historical
highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes.
(2) Actual after-tax returns depend on an investor's tax
situation and may differ from those shown, and after-tax returns
shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.
(3) Reflects no deduction for fees, expenses or taxes.
NASDAQ-100 INDEX FUND PROFILE
Investment Objective
The Nasdaq-100 Index Fund seeks investment results that
correspond to the investment performance of U.S. common stocks,
as represented by the Nasdaq-100 Index.
Investment Strategies
The Nasdaq-100 Index Fund seeks to substantially replicate the
total return of the securities comprising the Nasdaq-100 Index,
taking into consideration redemptions, sales of additional
shares, and other adjustments described below. Precise
replication of the capitalization weighting of the securities in
the Nasdaq-100 Index is not feasible. The Nasdaq-100 Index Fund
will attempt to achieve, in both rising and falling markets, a
correlation of at least 95% between the total return of its net
assets before expenses and the total return of the Nasdaq-100
Index. A correlation of 100% would represent perfect
correlation between the Fund and index performance. The
correlation of the Fund's performance to that of the Nasdaq-100
Index should increase as the Fund grows. There can be no
assurance that the Fund will achieve a 95% correlation.
The Nasdaq-100 Index Fund may invest up to 5% of its assets in
Nasdaq-100 Shares(R). Nasdaq-100 Shares(R) are units of
beneficial interest in a unit investment trust, representing
proportionate undivided interests in a portfolio of securities
in substantially the same weighting as the common stocks that
comprise the Nasdaq-100 Index.
The Fund may invest up to 20% of its assets in Nasdaq-100 Index
futures contracts and options in order to invest uncommitted
cash balances, to maintain liquidity to meet shareholder
redemptions, or minimize trading costs. The Fund may also sell
covered calls on futures contracts or individual securities held
in the Fund. As a temporary investment strategy, until the Fund
reaches $50 million in net assets, the Fund may invest up to
100% of its assets in such futures and/or options contracts.
Under normal circumstances, the fund will invest at least 80% of
its assets in investments with economic characteristics similar
to the stocks represented in the Nasdaq-100 Index. Although the
Adviser will attempt to invest as much of the Nasdaq-100 Index
Fund's assets as is practical in stocks included among the
Nasdaq-100 Index and futures contracts and options relating
thereto under normal market conditions, a portion of the Fund
may be invested in money market instruments pending investment
or to meet redemption requests or other needs for liquid assets.
In addition, for temporary defensive purposes, the Fund may
invest in government securities, money market instruments, or
other fixed-income securities, or retain cash or cash
equivalents.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Market risk: The Nasdaq-100 Index Fund's total return,
like stock prices generally, will fluctuate within a wide
range in response to stock market trends, so a share of
the Fund could drop in value over short or even long
periods. Stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
o Investment style risk: Stocks of companies or industries
that are heavily weighted in the Nasdaq-100 Index, such
as technology, telecommunications, internet and biotechnology
companies, occasionally go through cycles of doing worse
(or better) than the stock markets in general, as measured
by other more broad-based stock indexes, or other types of
investments.
o Concentration risk: The Nasdaq-100 Index Fund is subject
to the risk of an investment portfolio that may be highly
concentrated in a particular industry or related industries
(e.g., Technology) and, due to concentration in sectors
characterized by relatively higher volatility in price
performance, may be more volatile when compared to other
broad-based stock indexes. The Nasdaq-100 Index Fund is
also subject to the risks specific to the performance of
a few individual component securities that currently
represent a highly concentrated weighting in the Index
(e.g. Microsoft Corporation, Intel Corporation, Cisco
Systems Inc., etc.).
o Correlation risk: Because the Nasdaq-100 Index Fund has
expenses, and the Nasdaq-100 Index does not, the Fund may
be unable to replicate precisely the performance of the
Index. While the Fund remains small, it may have a greater
risk that its performance will not match that of the Index.
o Nondiversification risk: Under securities laws, the Fund is
considered a "nondiversified investment company." The Fund
is, however, subject to diversification limits under federal
tax law that permit it to invest more than 5%, but not more
than 25%, of its assets in a single issuer with respect to up
to 50% of its total assets as of the end of each of the
Fund's tax quarters. Consequently, the Fund could become
somewhat riskier because it would have the ability to hold
a larger position in a fewer number of securities than if
it were a diversified investment company. At any point in
time, if following the investment strategy outlined above
would put the Fund in jeopardy of failing the tax rules on
diversification, the Fund intends to immediately alter its
investment strategy to comply with the tax rules. Such
alteration could include reducing investment exposure, pro-
rata, to those investments causing the Fund to be in
jeopardy of violating the tax rules.
o Derivatives Risk: The Fund may invest in stock futures
and options, and stock index futures and options. The Fund
will not use these investments for speculative purposes or
as leveraged investments that might exacerbate gains or
losses. The Fund will invest in derivatives solely to meet
shareholder redemptions or to invest shareholder purchases
while maintaining exposure to the market. The principal
risks to derivatives used in this context is that it might
not be highly correlated with the security for which it is
being used as a substitute.
Bar Chart and Performance Table
The bar chart and table below provide some indication of the
risk of investing in the Nasdaq-100 Index Fund. The bar chart
shows how the Fund's annual performance has varied from year to
year since its inception. The table shows how the Fund's average
annual returns for one year and since inception compare with
those of the Nasdaq-100 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of future
performance.
[GRAPHIC OMITTED]
Nasdaq-100 Index Fund Total Returns
2000 2001 2002
10.00%-
0.00%- ------/-----/-----/-----/-----/-----/
/ / / / / /
-10.00%- / / / / / /
/ / / / / /
-20.00%- / / / / / /
/ / / / / /
-30.00%- / / / / / /
/ / /-----/ / /
/-----/ /-----/
-40.00%-
-36.84% -34.06% -38.08%
*Total return for the most recent fiscal year quarter ended
December 31, 2002 was 17.98%.
During the period shown in the bar chart, the highest return for
a calendar quarter was 34.4% (quarter ending 12/31/01) and the
lowest return for a quarter was -36.4% (quarter ending
09/30/01).
Average Annual Total Returns for Periods Ended December 31, 2002
[Download Table]
Life of the Fund
1 Year (since December 29, 1999)
------ ------------------------
Return Before Taxes -38.1% -35.6%
Return After Taxes on Distributions(1)(2) -38.1% -35.7%
Return After Taxes on Distributions
and Sale of Fund Shares(1)(2) -23.4% -25.5%
Nasdaq 100 Index(3) -37.5% -34.9%
__________
(1) After-tax returns are calculated using the historical
highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes.
(2) Actual after-tax returns depend on an investor's tax
situation and may differ from those shown, and after-tax returns
shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.
(3) Reflects no deduction for fees, expenses or taxes.
Since shares of the Nasdaq-100 Index Fund Class F were first
available on July 1, 2002, comparable results for this class of
shares are shown.
EAFE INTERNATIONAL INDEX FUND PROFILE
Investment Objective
The EAFE International Index Fund seeks investment results that
correspond to the total return performance of common stocks as
represented by the Morgan Stanley Capital International ("MSCI")
EAFE Index ("Index"). The EAFE Index emphasizes the stocks of
companies in major markets in Europe, Australasia, and the Far
East.
Investment Strategies
The Fund will invest primarily in common stocks of the companies
that compose the EAFE Index. The EAFE Index is capitalization-
weighted, meaning that a company whose securities have a high
market capitalization will contribute more to the Index's value
than a company whose securities have a low market
capitalization.
The Fund will typically not hold all of the companies in the
EAFE Index. The Fund will typically choose to hold the stocks
that make up the largest portion of the Index's value in
approximately the same proportion as the Index. When choosing
the smaller stocks, the Fund will attempt to select a sampling
of stocks that will match the industry and risk characteristics
of all of the smaller companies in the EAFE Index without buying
all of those stocks. This attempts to maximize liquidity while
minimizing costs.
At such time as the Adviser believes the Fund has achieved
sufficient size, the Adviser may attempt to fully replicate the
Index. Full replication would be achieved when the Fund holds
all of the securities in the Index in the exact weightings as
the Index. Under normal circumstances, the fund will invest at
least 80% of its assets in investments with economic
characteristics similar to the stocks represented in the EAFE
Index. Although the Adviser will attempt to invest as much of
the Fund's assets as is practical in stocks included among the
EAFE Index and futures contracts and options relating thereto
under normal market conditions, a portion of the Fund may be
invested in money market instruments pending investment or to
meet redemption requests or other needs for liquid assets. In
addition, for temporary defensive purposes, the Fund may invest
in government securities, money market instruments, or other
fixed-income securities, or retain cash or cash equivalents.
The Fund may invest up to 20% of its assets in futures contracts
and options that provide exposure to the stocks in the Index.
The Fund may also sell covered calls on futures contracts or
individual securities held in the Fund. As a temporary
investment strategy, until the Fund reaches $50 million in net
assets, the Fund may invest up to 100% of its assets in such
futures and/or options contracts.
The Adviser may choose to invest in a foreign security
indirectly by purchasing American Depository Receipts ("ADRs").
ADRs are U.S. dollar-denominated receipts representing shares of
foreign corporations. ADRs are issued by U.S. banks or trust
companies and entitle the holder to all dividends and capital
gains on the underlying shares. ADRs offer the exposure to the
foreign security while reducing transaction, custody, and other
expenses.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Market Risk: Deteriorating market conditions might cause
an overall decline in the prices of stocks in the market,
including those held by the Fund.
o Tracking Error Risk: The Fund may not track the performance
of the Index for various reasons, including, but not limited
to the following:
- The Fund incurs administrative expenses and trading costs.
The EAFE Index does not.
- The Fund may not hold all of the stocks in the Index or
may weight them differently than the Index.
- The composition of the Index and Fund may diverge.
- The timing and magnitude of cash inflows and outflows
from investor's purchases and redemptions may create
balances of uninvested cash.
o Foreign Stock Market Risk: Foreign stock markets may exhibit
periods of higher volatility than those in the United States.
Trading stocks on many foreign exchanges can be more
difficult, and costly, than trading stocks in the United
States. Taxes can also be imposed by foreign governments.
o Political Risk: Foreign governments have occasionally
limited the outflows of capital or profits to investors
abroad.
o Information Risk: Financial reporting and accounting
standards for companies in many foreign markets differ from
those of the United States and may present an incomplete,
or inaccurate picture of a foreign company.
o Liquidity Risk: On the whole, foreign exchanges are smaller
and less liquid than the U.S. markets. Stocks that trade
infrequently, or in lower volumes, can be more difficult or
costly to buy or sell. Relatively small transactions can
have a disproportionately large effect on the price of
stocks. In some situations, it may be impossible to sell a
stock in an orderly fashion.
o Regulatory Risk: There is typically less government
regulation of foreign markets, companies, and securities.
o Currency Risk: The Fund invests in foreign securities
denominated in foreign currencies. Thus, changes in foreign
exchange rates will affect the value of foreign securities
denominated in U.S. dollars.
o Derivatives Risk: The Fund may invest in stock futures and
options, and stock index futures and options. The Fund will
not use these investments for speculative purposes or as
leveraged investments that might exacerbate gains or losses.
The Fund will invest in derivatives solely to meet share-
holder redemptions or to invest shareholder purchases while
maintaining exposure to the market. The principal risks to
derivatives used in this context is that it might not be
highly correlated with the security for which it is being
used as a substitute.
Bar Chart and Performance Table
The bar chart and table below provide some indication of the
risk of investing in the EAFE International Index Fund. The bar
chart shows how the Fund's annual performance has varied from
year to year since its inception. The table shows how the
Fund's average annual returns for one year and since inception
compare with those of the EAFE Index. The Fund's past
performance (before and after taxes) is not necessarily
indicative of future performance.
[GRAPHIC OMITTED]
EAFE International Index Fund Total Returns
2001 2002
12.00%-
0.00% ------/-----/-----/-----/-----
/ / / /
/ / /
-12.00% / / / /
/ / /-----/
/-----/ -17.30%
-24.00%- -21.53%
*Total return for the most recent fiscal year quarter ended
December 31, 2002 was 6.28%.
During the period shown in the bar chart, the highest return for
a calendar quarter was 7.1% (quarter ending 12/31/01) and the
lowest return for a quarter was -20.6% (quarter ending
09/30/02).
Average Annual Total Returns for Periods Ended December 31, 2002
[Download Table]
Life of the Fund
1 Year (since December 29, 2000)
------ ------------------------
Return Before Taxes -17.3% -19.0%
Return After Taxes on Distributions(1)(2) -17.6% -19.2%
Return After Taxes on Distributions
and Sale of Fund Shares(1)(2) -10.6% -15.0%
EAFE International Index(3) -15.9% -18.3%
__________
(1) After-tax returns are calculated using the historical
highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes.
(2) Actual after-tax returns depend on an investor's tax
situation and may differ from those shown, and after-tax returns
shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.
(3) Reflects no deduction for fees, expenses or taxes.
TOTAL SOCIAL IMPACT FUND PROFILE
Investment Objective
The Total Social Impact Fund seeks investment results that
closely correspond to the total return performance of U.S.
common stocks, as represented by the S&P 500 Index. To pursue
this objective, the Fund will invest in ALL stocks that are
included in the S&P 500 Index.
The Fund also seeks to promote better business practices by
investing more in companies in the Index that conduct their
business commendably with respect to their stakeholders.
Businesses have a role to play in improving the lives
of all their customers, employees, and shareholders
("stakeholders") by sharing with them the wealth they
have created. Suppliers and competitors as well should
expect businesses to honor their obligations in a spirit
of honesty and fairness. As responsible citizens of the
legal, national, regional and global communities in which
they operate, businesses share a part in shaping the
future of their communities.
Attributed to the Caux Institute for Global Responsibility
For example:
CUSTOMERS deserve high quality products, fair advertising,
remedies and respect.
EMPLOYEES deserve to be treated with dignity, to be paid a
living wage on a non-discriminatory basis, to work in a safe
environment and to associate freely.
OWNER/INVESTORS deserve a fair and competitive return,
transparency in company operations, and a voice in corporate
governance.
SUPPLIERS deserve mutual respect and long-term stability in
return for value, quality, competitiveness, reliability and
employment practices that respect human dignity.
COMPETITORS deserve fair and respectful competition.
COMMUNITIES deserve the support of public policies that promote
human development and raise the standards of health, education,
workplace safety and economic well-being.
The ENVIRONMENT deserves protection and improvement through
sustainable business practices.
Source: The Caux Institute For Global Responsibility Principles
For Business. The Caux Principles For Business
(published in 1994) are the first published worldwide
standard for ethical and responsible business practices
developed by global business leaders. They are
published in sixteen languages.
The use of the Caux principles for business does not in any way
constitute an endorsement by Caux of the financial prospects of
the Fund or its investment strategy.
Investment Strategies
To pursue its goals, the Fund will invest in all the stocks that
are included in the S&P 500 Index. However, the percentage
invested in each stock will vary from the S&P 500 Index
weighting to reflect the company's Total Social Impact (TSI)
rating. The TSI rating reflects the company's scoring on a
series of benchmarks corresponding to each of its stakeholders.
TSI is a concept developed and trademarked by The Total Social
Impact Foundation, Inc. The actual TSI ratings are the product
of collaborative research and analytical efforts conducted by
The Total Social Impact Foundation, Inc. in conjunction with a
group of academic institutions. Summit Investment Partners
receives and uses the TSI ratings from The Total Social Impact
Foundation, Inc. under an exclusive licensing agreement. TSI
ratings range from 1 to 20. Companies with high TSI ratings are
overweighted in the Fund at the expense of companies with low
TSI ratings, thus encouraging better business practices.
The Fund will give stocks with a TSI rating of 10 approximately
the weight that a traditional S&P 500 Index fund would give
them; stocks with a TSI rating of 20, about twice that weight
and ones with a TSI rating of 1 about 1/10 of that weight.
Summit Investment Partners reserves the right to modify the
weighting scheme based on a proprietary weighting system.
The Fund may invest up to 5% of its assets in Standard & Poor's
Depositary Receipts(R) ("SPDRs(R)"). SPDRs(R) are units of
beneficial interest in a unit investment trust, representing
proportionate undivided interests in a portfolio of securities
in substantially the same weighting as the common stocks that
comprise the S&P 500 Index.
The Fund may invest up to 20% of its assets in S&P 500 Index
futures contracts and options in order to invest uncommitted
cash balances, to maintain liquidity to meet shareholder
redemptions, or minimize trading costs. The Fund may also sell
covered calls on futures contracts or individual securities held
in the Fund. As a temporary investment strategy, until the Fund
reaches $50 million in net assets, the Fund may invest up to
100% of its assets in such futures and/or options contracts.
Investments in SPDRs(R), futures and options will not reflect
TSI ratings.
Under normal circumstances, the fund will invest at least 80% of
its assets in investments with economic characteristics similar
to the stocks represented in the S&P 500 Index. Although the
Adviser will attempt to invest as much of the Fund's assets as
is practical in stocks included among the S&P 500 Index and
futures contracts and related options under normal market
conditions, a portion of the Fund may be invested in money
market instruments pending investment or to meet redemption
requests or other needs for liquid assets. In addition, for
temporary defensive purposes, the Fund may invest in government
securities, money market instruments, or other fixed-income
securities, or retain cash or cash equivalents.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Market risk: The Fund's total return, like stock prices
generally, will fluctuate within a wide range in response
to stock market trends, so a share of the Fund could drop
in value over short or even long periods. Stock markets
tend to move in cycles, with periods of rising prices and
periods of falling prices.
o Large company stock risk: Stocks of large companies, such
as those listed among the S&P 500 Index occasionally go
through cycles of doing worse (or better) than the stock
markets in general or other types of investments.
o Investment style risk: TSI ratings will result in
overweighting and underweighting most stocks in the
S&P 500 Index. These variances might result in worse
(or better) returns.
o Correlation risk: Because the Fund has expenses, and
the S&P 500 Index does not, the Fund may be unable to
replicate precisely the performance of the Index. While
the Fund remains small, it may have a greater risk that
its performance will not match that of the Index.
o Derivatives Risk: The Fund may invest in stock futures
and options, and stock index futures and options. The Fund
will not use these investments for speculative purposes or
as leveraged investments that might exacerbate gains or
losses. The Fund will invest in derivatives solely to meet
shareholder redemptions or to invest shareholder purchases
while maintaining exposure to the market. The principal
risks to derivatives used in this context is that it might
not be highly correlated with the security for which it is
being used as a substitute.
Bar Chart and Performance Table
The bar chart and table below provide some indication of the
risk of investing in the Total Social Impact Fund. The bar chart
shows how the Fund's annual performance has varied from year to
year since its inception. The table shows how the Fund's average
annual returns for one year and since inception compare with
those of the S&P 500 Index. The Fund's past performance (before
and after taxes) is not necessarily indicative of future
performance.
[GRAPHIC OMITTED]
Total Social Impact Fund Total Returns
2001 2002
12.00%-
0.00%- ------/-----/-----/-----/-----
/ / / /
-12.00%- /-----/ / /
-12.75% /-----/
-24.00%- -22.23%
*Total return for the most recent fiscal year quarter ended
December 31, 2002 was 8.20%.
During the period shown in the bar chart, the highest return for
a calendar quarter was 10.5% (quarter ending 12/31/01) and the
lowest return for a quarter was -17.1% (quarter ending
09/30/02).
Average Annual Total Returns for Periods Ended December 31, 2002
[Download Table]
Life of the Fund
1 Year (since December 28, 2000)
------ -------------------------
Return Before Taxes -22.2% -18.0%
Return After Taxes on Distributions(1)(2) -22.5% -18.3%
Return After Taxes on Distributions
and Sale of Fund Shares(1)(2) -13.7% -14.2%
S&P 500 Index(3) -22.1% -17.5%
__________
(1) After-tax returns are calculated using the historical
highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes.
(2) Actual after-tax returns depend on an investor's tax
situation and may differ from those shown, and after-tax returns
shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.
(3) Reflects no deduction for fees, expenses or taxes.
Since shares of the Total Social Impact Fund Class F were first
available on July 1, 2002, comparable results for this class of
shares are not shown.
BALANCED INDEX FUND PROFILE
Investment Objective
The Balanced Index Fund seeks investment results, with respect
to 60% of its assets, that correspond to the total return
performance of U.S. common stocks, as represented by the S&P 500
Index and, with respect to 40% of its assets, that correspond to
the total return performance of investment grade bonds, as
represented by the Lehman Brothers Aggregate Bond Index.
Investment Strategies
The Fund will invest approximately 60% of its net assets in a
Fund of common stocks, futures (in combination with the
appropriate amount of U.S. Treasury securities or other liquid
assets as collateral), and Standard & Poor's Depositary
Receipts(R) ("SPDRs(R)") to track the S&P 500 Index and
approximately 40% of its net assets in a portfolio of investment
grade bonds designed to track the Lehman Brothers Aggregate Bond
Index (the "Lehman Brothers Index"). The Fund may also hold
cash or cash equivalent securities, although the amount of cash
and cash equivalent securities is expected to represent a small
percentage of the Fund's assets.
The Fund's common stock portfolio seeks to substantially
replicate the total return of the securities comprising the S&P
500 Index, taking into consideration redemptions, sales of
additional shares, and other adjustments described below.
Precise replication of the S&P 500 Index is not feasible. The
Fund will attempt to achieve, in both rising and falling
markets, a correlation of at least 95% between the total return
of its common stock portfolio before expenses and the total
return of the S&P 500 INDEX. A correlation of 100% would
represent perfect correlation between the Fund and index
performance. There can be no assurance that the Fund will
achieve a 95% correlation.
The Fund may invest up to 5% of its assets in SPDRs(R), which
are units of beneficial interest in a unit investment trust,
representing proportionate undivided interests in a portfolio of
securities in substantially the same weighting as the common
stocks that comprise the S&P 500 Index.
The Fund's bond portfolio seeks to substantially replicate the
total return of the securities comprising the Lehman Brothers
Index taking into consideration redemptions, sales of additional
shares, and other adjustments described below. Precise
replication of the Lehman Brothers Index is not feasible due to
the large number of securities in the index. The Fund will
invest in a representative sample of fixed income securities,
which, taken together, are expected to perform similarly to the
Lehman Brothers Index. The Fund will attempt to achieve, in
both rising and falling markets, a correlation of at least 95%
between the total return of its bond portfolio before expenses
and the total return of the Lehman Brothers Index. A
correlation of 100% would represent perfect correlation between
the Fund and index performance. There can be no assurance that
the Fund will achieve a 95% correlation.
Under normal circumstances, the fund will invest at least 80% of
its assets in investments with economic characteristics similar
to the stocks represented in the S&P 500 Index and the bonds
represented in the Lehman Brothers Index.
The Fund may invest up to 20% of its assets in financial futures
contracts and options and S&P 500 Index futures and options
contracts in order to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or minimize
trading costs. The Fund may also sell covered calls on futures
contracts or individual securities held in the Fund. As a
temporary investment strategy, until the Fund reaches $50
million in net assets, the Fund may invest up to 100% of its
assets in such futures and/or options contracts.
Primary Risks
An investment in the Fund entails investment risk, including
possible loss of the principal amount invested. The Fund's
primary risks include:
o Stock market risk: The Fund's common stock portfolio, like
stock prices generally, will fluctuate within a wide range
in response to stock market trends, so a share of the Fund
could drop in value over short or even long periods. Stock
markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
o Investment style risk: Stocks of large companies, such as
those listed among the S&P 500 Index occasionally go through
cycles of doing worse (or better) than the stock markets in
general or other types of investments.
o Interest rate risk: The Fund's bond portfolio is subject
to interest rate risk. Interest rate risk is the potential
for fluctuation in bond prices due to changing interest
rates. Bond prices generally fall when interest rates
rise. Furthermore, the price of bonds with a longer
maturity generally fluctuates more than bonds with a shorter
maturity. To compensate investors for larger fluctuations,
longer maturity bonds usually offer higher yields than
shorter maturity bonds. Interest rate risk is a risk
inherent in all bonds, regardless of credit quality. The
Fund's bond portfolio has an intermediate-term average
maturity (5 to 15 years), and is therefore expected to have
a moderate to high level of interest rate risk. The value
of the Fund's stock portfolio also may be affected by
changes of interest rates.
o Credit risk: The Fund's bond portfolio is subject to
credit risk. Credit risk is the risk that an issuer of a
security will be unable to make payments of principal and/
or interest on a security held by the Fund. When an issuer
fails to make a scheduled payment of principal or interest
on a security, or violates other terms and agreements of a
security, the issuer and security are in default. A default
by the issuer of a security generally has a severe
negative affect on the market value of that security.
The credit risk of the Fund is a function of the credit
quality of its underlying securities. The average credit
quality of the Fund is expected to be very high. Therefore,
the credit risk of the Fund is expected to be low. The
average quality of the Lehman Brothers Index, which the
Fund attempts to replicate, was AA2 using Moody's Investors
Service (See Appendix A: Ratings - Corporate Bond Ratings).
Other factors, including interest rate risk and prepayment
risk cause fluctuation in bond prices.
o Income risk: The Fund's bond portfolio is subject to
income risk. Income risk is the risk of a decline in the
Fund's income due to falling market interest rates. Income
risk is generally higher for portfolios with short term
average maturities and lower for portfolios with long term
average maturities. Income risk is also generally higher
for portfolios that are actively traded and lower for
portfolios that are less actively traded. The Fund's bond
portfolio is expected to maintain an intermediate average
maturity and have moderate trading activity. Therefore,
income risk is expected to be moderate.
o Prepayment risk: Prepayment risk is the risk that, during
periods of declining interest rates, the principal of
mortgage-backed securities and callable bonds will be
repaid earlier than scheduled, and the portfolio manager
will be forced to reinvest the unanticipated repayments
at generally lower interest rates. The Fund's exposure to
mortgage-backed securities and currently callable bonds is
generally low to moderate. Therefore, the prepayment risk
of the Fund is expected to be low to moderate.
Correlation risk: Because the Balanced Index Fund has
expenses, and the S&P 500 Index and Lehman Brothers
Index do not, the Fund may be unable to replicate
precisely the performance of the Index. In addition,
the Fund 