Document/Exhibit Description Pages Size
1: 485BPOS Post Effective Amendment No.47 (33 Act) and 136± 543K
Amendment No. 48 (40 Act) to
Registration Statement of Summit Mutual
Funds, Inc.
2: EX-24 Director Michael K. Keating Power of Attorney With 1 5K
Respect to Summit Mutual Funds, Inc.
3: EX-99 Consent of Deloitte & Touche, Independent 1 6K
Registered Public Accounting Firm
485BPOS — Post Effective Amendment No.47 (33 Act) and Amendment No. 48 (40 Act) to Registration Statement of Summit Mutual Funds, Inc.
Document Table of Contents
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. [47] [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [48] [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 October 4, 2005 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on September 30, 2005 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. 47 under the Securities Act of 1933, and Amendment No. 48
under the Investment Company Act of 1940,
to the Registration Statement on Form N-1A of Summit Mutual Funds, Inc. is
filed solely to reflect the addition of a
12b-1 class of shares for the Russell 2000 Small Cap Index Portfolio, 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.
October 4, 2005
SUMMIT MUTUAL FUNDS, INC.
Summit Mutual Funds, Inc. is a mutual fund with fifteen separate Portfolios,
each with its own investment objective. We cannot assure you that any
Portfolio will meet its objective. This Prospectus offers one of the
Portfolios within the SUMMIT PINNACLE SERIES. Its investment objectives are:
THE RUSSELL 2000 SMALL CAP INDEX PORTFOLIO seeks
investment results that correspond to the investment
performance of U.S. common stocks, as represented by the
Russell 2000 Index.
THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE ALLOCATING YOUR
CONTRACT VALUES TO ANY OF THE PORTFOLIOS. IT SHOULD BE READ IN CONJUNCTION
WITH THE SEPARATE ACCOUNT'S PROSPECTUS DESCRIBING THE VARIABLE INSURANCE
CONTRACT. WE SUGGEST THAT YOU READ THIS PROSPECTUS AND KEEP IT FOR FUTURE
REFERENCE.
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.
SMFI 514 - PINNACLE Russell 2000 (10-04-05)
TABLE OF CONTENTS
INTRODUCTION TO THE FUND. . . . . . . . . . . . . . . . . . . 3
PORTFOLIO PROFILE . . . . . . . . . . . . . . . . . . . . . . 3
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO . . . . . . . . . . . 3
PORTFOLIO OPERATING EXPENSES. . . . . . . . . . . . . . . . . 6
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS . . . . . . . 6
FOREIGN SECURITIES . . . . . . . . . . . . . . . . . . . . . 6
REPURCHASE AGREEMENTS. . . . . . . . . . . . . . . . . . . . 7
REVERSE REPURCHASE AGREEMENTS. . . . . . . . . . . . . . . . 7
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS . . . . . 7
OPTIONS ON SECURITIES INDEXES. . . . . . . . . . . . . . . . 9
LENDING PORTFOLIO SECURITIES . . . . . . . . . . . . . . . . 9
MIXED AND SHARED FUNDING . . . . . . . . . . . . . . . . . . 9
INVESTMENT IN OTHER INVESTMENT VEHICLES. . . . . . . . . . .10
TEMPORARY INVESTMENTS. . . . . . . . . . . . . . . . . . . .10
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . .10
FUND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . .10
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . .10
ADVISORY FEE . . . . . . . . . . . . . . . . . . . . . . . .11
OTHER INFORMATION ABOUT MANAGEMENT OF THE PORTFOLIOS . . . .11
SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . .11
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . .11
DISTRIBUTION AND SHAREHOLDER SERVICE (12B-1) PLAN. . . . . .11
VALUATION OF PORTFOLIO SHARES. . . . . . . . . . . . . . . .12
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
EXCESSIVE TRADING . . . . . . . . . . . . . . . . . . . . . .13
FRANK RUSSELL DISCLAIMER. . . . . . . . . . . . . . . . . . .15
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . .16
INTRODUCTION TO THE FUND
This prospectus explains the objectives, risks and strategies of one of the
Portfolios within the Summit Pinnacle Series of Summit Mutual Funds, Inc.
(the "Fund"), which is advised by Summit Investment Partners, Inc. (the
"Adviser"). The Portfolio is a mutual fund used as an investment option for
variable annuity or variable life insurance contracts offered by insurance
companies. Although you cannot purchase shares of the Portfolio directly, you
can instruct your insurance company how to allocate your contract's values to
the Portfolio. This prospectus offers the Class F shares of the Russell 2000
Small Cap Index Portfolio, which are subject to a Distribution and
Shareholder Service (12b-1) Plan fee of 0.20% of the average net assets that
is deducted from the net assets of the Class F shares.
The Portfolio Profile below summarizes important facts about the Portfolio,
including its investment objective, strategy, risks and past investment
performance. Investors should be aware that the investments made by a
Portfolio and the results achieved by a Portfolio at any given time are not
expected to be the same as those made by other mutual funds managed by the
Adviser or a subadviser acting as investment adviser, including mutual funds
with names, investment objectives and policies similar to the Portfolio.
More detailed information about the Portfolio's investment policies and
strategies is provided after the Profile, along with information about
Portfolio expenses, share pricing and Financial Highlights.
The Union Central Life Insurance Company ("Union Central" - parent company of
the Adviser) currently has voting control of Summit Mutual Funds. With
voting control, Union Central may make fundamental and substantial changes
(such as electing a new Board of Directors, changing the investment adviser
or advisory fee, changing the Fund's fundamental investment objectives and
policies, etc) regardless of the views of other shareholders.
PORTFOLIO PROFILE
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO
Investment Objective
The Russell 2000 Small Cap Index Portfolio seeks investment results that
correspond to the investment performance of U.S. common stocks, as
represented by the Russell 2000 Index.
Investment Strategies
The Russell 2000 Small Cap Index Portfolio 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 Index Portfolio 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
Portfolio and Index performance. The correlation of the Portfolio's
performance to that of the Russell 2000 Index should increase as the
Portfolio grows. There can be no assurance that the Portfolio will achieve a
95% correlation.
The Russell 2000 Small Cap Index Portfolio may invest up to 5% of its assets
in Russell 2000 iShares(R). Russell 2000 iShares(R) are units of ownership
in a unit investment trust, representing undivided interests in a portfolio
of securities in substantially the same weighting as the common stocks that
comprise the Russell 2000 Index.
Under normal circumstances, the Portfolio will invest at least 80% of its
assets in investments included in the Russell 2000 Index, or derivative
securities thereof. Although the Adviser will attempt to invest as much of
the Russell 2000 Small Cap Index Portfolio'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 Portfolio
may be invested in money market instruments pending investment or to meet
redemption requests or other needs for liquid assets. The Portfolio may also
temporarily invest in S&P 500 Index futures and/or S&P MidCap 400 Index
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 within the futures markets. In addition, for temporary
defensive purposes, the Portfolio may invest up to 100% of its assets in
government securities, money market instruments, or other fixed-income
securities, or retain cash or cash equivalents.
The Portfolio may invest up to 20% of its assets in Russell 2000 Index
futures contracts or options (or S&P MidCap 400 Index 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 Portfolio may also sell covered calls on futures
contracts or individual securities held in the Portfolio, as described in the
previous paragraph. As a temporary investment strategy, when the Portfolio
totals less than $50 million in net assets, the Portfolio may invest up to
100% of its assets in such futures and/or options contracts.
Primary Risks
An investment in the Portfolio entails investment risk, including possible
loss of the principal amount invested. The Portfolio's primary risks include:
o Market risk: The Russell 2000 Small Cap Index Portfolio's
total return, like stock prices generally, will fluctuate
within a wide range in response to stock market trends,
so a share of the Portfolio 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. While potentially offering greater
opportunities for capital growth than larger, more
established companies, the stocks of small-cap companies
may be more volatile, especially during periods of
economic uncertainty. These companies may face less
certain growth prospects, or depend heavily on a limited
line of products and services or the efforts of a small
number of key management personnel. The securities of
these companies may trade less frequently and in more
limited volume than those of larger, more established
companies. As a result, small- and mid-cap stocks may
fluctuate more in value than larger-cap stocks and funds
that invest in them.
o Investment style risk: Stocks of small capitalization
companies, such as many of the companies represented in
the Russell 2000 Index, occasionally go through periods of
doing worse than the stock markets in general or other
types of investments.
o Correlation risk: Because the Russell 2000 Small Cap
Index Portfolio has expenses, and the Russell 2000 Index
does not, the Portfolio may be unable to replicate
precisely the performance of the Index. While the
Portfolio remains small, it may have a greater risk that
its performance will not match that of the Index.
o Derivatives risk: The Portfolio may for hedging purposes
invest in stock futures and options, and stock index
futures and options. The Portfolio will not use these
investments for speculative purposes or as leveraged
investments that might exacerbate gains or losses. The
Portfolio will invest in derivatives solely to meet
shareholder redemptions, to invest shareholder purchases
while maintaining exposure to the market or as a temporary
investment strategy when the Portfolio totals less than
$50 million in net assets. The portfolio will enter into
futures contracts that are traded on national futures
exchanges or listed options to mitigate any counter party
default risk. The principal risk of derivatives used in
this context is that a derivative instrument might not be
highly correlated with the security or securities for
which it is being used as a substitute.
o Indexing risk: The net asset value of the Portfolio may
be disproportionately affected by short and long-term
changes in the characteristics of the companies whose
securities make up the Portfolio's benchmark
index(indices), the general performance of such companies,
modifications in the criteria for companies selected to
make up the index, suspension or termination of the
operation of the index, and the activities of issuers
whose market capitalization represents a disproportionate
amount of the total market capitalization of the index.
o Temporary defensive risk: The Portfolio may temporarily
invest up to 100% of its assets in government securities,
money market instruments or other fixed-income securities
or retain larger than usual amounts of cash or cash
equivalents during periods of significant uncertainty.
The reasons for the uncertainty may include, but not be
limited to, market reaction to a significant event, such
as a natural disaster or other economic or political
turmoil, or management's reaction to a significant event
within the Portfolio, such as a pending material change
in net assets resulting from of the loss of a large
client. The duration of such an event may be brief or
last for an extended period of time until the Portfolio
Manager believes that it is appropriate to resume the
Portfolio's long-term investment strategies. During such
a temporary defensive period, the Portfolio likely will
not achieve its objective of closely matching the results
of Russell 2000 Index. Its temporary objective will be
to preserve capital.
Bar Chart and Performance Table
The bar chart and table below provide an indication of the risk of investing
in the Russell 2000 Small Cap Index Portfolio. The bar chart shows how the
Portfolio's annual performance has varied from year to year since its
inception. The table shows how the Portfolio's average annual returns for one
year and since inception compare with those of the Russell 2000 Index. Absent
fee waivers and reimbursement of expenses, total returns would have been
lower. The Portfolio's returns are net of its expenses, BUT DO NOT REFLECT
THE ADDITIONAL FEES AND EXPENSES OF YOUR VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACT. If those contract fees and expenses were included, the
returns would be lower. Keep in mind that the Portfolio's past performance
does not indicate how it will perform in the future.
Russell 2000 Small Cap Index Portfolio
Class F Total Returns
50.00% 45.94%
|----|
40.00% | |
| |
30.00% | |
| |
20.00% | | 17.47%
| | |----|
10.00% 1.33% | | | |
|----| | | | |
0.00%--------|----|---|----|---|----|--|----|
2001 |2002| 2003 2004
-10.00% | |
| |
-20.00% |----|
-21.21%
-30.00%
Total return for the most recent calendar year quarter ended June 30, 2005
was 4.09%.
During the period shown in the bar chart, the highest return for a calendar
quarter was 23.45% (quarter ending 06/30/03) and the lowest return for a
quarter was -21.71% (quarter ending 09/30/02).
Average Annual Total Returns for Years Ended December 31, 2004
[Download Table]
1 Year Since Inception*
------ ---------------
Russell 2000 Small Cap Index Portfolio Class F 17.47% 6.54%
Russell 2000 Small Cap Index 18.33% 7.94%
*April 27, 2000
PORTFOLIO OPERATING EXPENSES
This table describes fees and expenses of the Portfolio. The table does not
reflect separate account or insurance contract fees and charges. Therefore,
fees and charges would be higher if separate account and insurance contract
fees and charges were included. All expense ratios are adjusted for current
expenses.
ANNUAL EXPENSES (as a percentage of average net assets)
[Download Table]
Distribution Total
Management And Service Other Operating
Fees (12b-1) fees Expenses Expenses
---------- ------------ -------- --------
Russell 2000 Small Cap Index Portfolio .35% .20% .36%* .91%**
* Other Expenses have been restated to reflect the current
results reported in the June 30, 2005 semi-annual report
to shareholders.
** Total Operating Expenses in excess of .95% are paid by
the investment adviser.
EXAMPLE
The purpose of the table below is to help you understand the Portfolio
expenses that you may bear indirectly through your purchase of an insurance
contract. THIS TABLE DOES NOT INCLUDE ANY CONTRACT OR VARIABLE ACCOUNT
CHARGES, AND IF IT DID, CHARGES WOULD BE HIGHER. Those charges, along with
the Portfolio's expenses, are contained in the prospectus for your contract.
Use the following table to compare fees and expenses of the Portfolio to
other investment companies. It illustrates the amount of fees and expenses an
investor would pay, assuming (1) a $10,000 investment, (2) 5% annual return,
(3) redemption at the end of each time period, and (4) no changes in the
Portfolios' total operating expenses.+ Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
[Download Table]
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Russell 2000 Small Cap Index Portfolio $93 $291 $506 $1,123
---------
+ The 5% annual return is a standardized rate prescribed for the purpose of
this example and does not represent the past or future return of the
Portfolio.
This table should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS
FOREIGN SECURITIES
The Portfolio may invest in foreign securities that are suitable for its
investment objectives and policies. The Portfolio is limited to investing in
those foreign securities included in the respective Index.
Investing in foreign securities involves risks which are not ordinarily
associated with investing in domestic securities, including:
o political or economic instability in the foreign country;
o diplomatic developments that could adversely affect the
value of the foreign security;
o foreign government taxes;
o costs incurred by a Portfolio in converting among various
currencies;
o fluctuation in currency exchange rates;
o the possibility of imposition of currency controls,
expropriation or nationalization measures or withholding
dividends at the source;
o in the event of a default on a foreign debt security,
possible difficulty in obtaining or enforcing a judgment
against the issuer;
o less publicly available information about foreign
issuers than domestic issuers;
o foreign accounting and financial reporting requirements
are generally less extensive than those in the U.S.;
o securities of foreign issuers are generally less liquid
and more volatile than those of comparable domestic
issuers;
o there is often less governmental regulation of foreign
exchanges, broker-dealers and issuers and brokerage costs
may be higher than in the United States.
Foreign securities purchased by the Portfolio may include securities issued
by companies located in countries not considered to be major industrialized
nations. Such countries are subject to more economic, political and business
risk than major industrialized nations, and the securities they issue may be
subject to abrupt or erratic price fluctuations, and are expected to be more
volatile and more uncertain as to payments of interest and principal.
Developing countries may have relatively unstable governments, economies
based only on a few industries, and securities markets that trade only a
small number of securities. The secondary market for such securities is
expected to be less liquid than for securities of major industrialized
nations.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction where a Portfolio buys a security at
one price and simultaneously agrees to sell that same security back to the
original owner at a higher price. The Portfolio may enter into repurchase
agreement transactions from time to time. The Adviser reviews the credit-
worthiness of the other party to the agreement and must find it satisfactory
before entering into the repurchase agreement. A majority of these agreements
will mature in seven days or less. In the event of the bankruptcy of the
other party, a Portfolio could experience delays in recovering its money, may
realize only a partial recovery or even no recovery, and may also incur
disposition costs.
REVERSE REPURCHASE AGREEMENTS
The Portfolio may enter into reverse repurchase agreements. Under reverse
repurchase agreements, the Portfolio transfers possession of portfolio
securities to banks or broker-dealers in return for cash in an amount equal
to a percentage of the portfolio securities' market value and agrees to
repurchase the securities at a future date by repaying the cash with
interest. The Portfolio retains the right to receive interest and principal
payments from the securities while they are in the possession of the
financial institutions. While a reverse repurchase agreement is in effect,
the custodian (when required) will segregate from other Portfolio assets an
amount of cash or liquid high quality debt obligations equal in value to the
repurchase price (including any accrued interest). In the event of the
bankruptcy of the other party, a Portfolio could experience delays in
recovering its securities, may realize only partial recovery or even no
recovery, and may also incur added costs.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
For hedging purposes, including protecting the price or interest rate of
securities that the Portfolio intends to buy, the Portfolio may enter into
futures contracts that relate to securities in which it may directly invest
and indexes comprised of such securities and may purchase and write call and
put options on such contracts. The Portfolio may invest up to 20% of its
assets in such futures and/or options contracts.
A financial futures contract is a contract to buy or sell a specified
quantity of financial instruments (such as U.S. Treasury bills, notes and
bonds, commercial paper and bank certificates of deposit or the cash value of
a financial instrument index at a specified future date at a price agreed
upon when the contract is made). A stock index futures contract is a
contract to buy or sell specified units of a stock index at a specified
future date at a price agreed upon when the contract is made. The value of a
unit is based on the current value of the contract index. Under such
contracts no delivery of the actual stocks making up the index takes place.
Rather, upon expiration of the contract, settlement is made by exchanging
cash in an amount equal to the difference between the contract price and the
closing price of the index at expiration, net of variation margin previously
paid.
Substantially all futures contracts are closed out before settlement date or
called for cash settlement. A futures contract is closed out by buying or
selling an identical offsetting futures contract. Upon entering into a
futures contract, the Portfolio is required to deposit an initial margin with
the custodian for the benefit of the futures broker. The initial margin
serves as a "good faith" deposit that the Portfolio will honor its futures
commitments. Subsequent payments (called "variation margin") to and from the
broker are made on a daily basis as the price of the underlying investment
fluctuates. In the event of the bankruptcy of the futures broker that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the broker's
other customers. The Adviser will attempt to minimize this risk by
monitoring the creditworthiness of the futures brokers with which the
Portfolio does business.
Because the value of index futures depends primarily on the value of its
underlying index, the performance of the broad-based contracts will generally
reflect broad changes in common stock prices. However, because a particular
Portfolio may not be invested in precisely the same proportion as the
particular Index, it is likely that the price changes of the Portfolio's
index futures positions will not match the price changes of the Portfolio's
other investments.
Options on futures contracts give the purchaser the right to assume a
position at a specified price in a futures contract at any time before
expiration of the option contract.
The Russell 2000 Small Cap Index Portfolio may write and purchase covered put
and call options on securities in which it may directly invest. Option
transactions of the Portfolio will be conducted so that the total amount paid
on premiums for all put and call options outstanding will not exceed 5% of
the value of the Portfolio's total assets. Further, the Portfolio will not
write put or call options or combination thereof if, as a result, the
aggregate value of all securities or collateral used to cover its outstanding
options would exceed 25% of the value of the Portfolio's total assets.
A call option is a short-term contract (generally nine months or less) which
gives the purchaser of the option the right to purchase from the seller of
the option (the Portfolio) the underlying security or futures contract at a
fixed exercise price at any time prior to the expiration of the option period
regardless of the market price of the underlying instrument during the
period. A futures contract obligates the buyer to purchase and the seller to
sell a predetermined amount of a security at a predetermined price at a
selected time in the future. A call option on a futures contract gives the
purchaser the right to assume a "long" position in a futures contract, which
means that if the option is exercised the seller of the option (the
Portfolio) would have the legal right (and obligation) to sell the underlying
security to the purchaser at the specified price and future time.
As consideration for the call option, the buyer pays the seller (the
Portfolio) a premium, which the seller retains whether or not the option is
exercised. The selling of a call option will benefit the Portfolio if, over
the option period, the underlying security or futures contract declines in
value or does not appreciate to a price higher than the total of the exercise
price and the premium. The Portfolio risks an opportunity loss of profit if
the underlying instrument appreciates to a price higher than the exercise
price and the premium. When the Adviser anticipates that interest rates will
increase, the Portfolio may write call options in order to hedge against an
expected decline in value of portfolio securities.
The Portfolio may close out a position acquired through selling a call option
by buying a call option on the same security or futures contract with the
same exercise price and expiration date as the option previously sold. A
profit or loss on the transaction will result depending on the premium paid
for buying the closing call option. If a call option on a futures contract is
exercised, the Portfolio intends to close out the position immediately by
entering into an offsetting transaction or by delivery of the underlying
security (or other related securities).
Options transactions may increase the Portfolio's portfolio turnover rate and
attendant transaction costs, and may be somewhat more speculative than other
investment strategies. It may not always be possible to close out an options
position, and with respect to options on futures contracts there is a risk of
imperfect correlation between price movements of a futures contract (or
option thereon) and the underlying security.
OPTIONS ON SECURITIES INDEXES
The Russell 2000 Small Cap Index Portfolio may purchase or sell options on
its respective Index, subject to the limitations set forth above and provided
such options are traded on a national securities exchange or in the over-the-
counter market. Options on securities indexes are similar to options on
securities except there is no transfer of a security and settlement is in
cash. A call option on a securities index grants the purchaser of the call,
for a premium paid to the seller, the right to receive in cash an amount
equal to the difference between the closing value of the index and the
exercise price of the option times a multiplier established by the exchange
upon which the option is traded.
LENDING PORTFOLIO SECURITIES
The Portfolio may lend portfolio securities with a value up to 33 1/3% of its
total assets. Such loans may be terminated at any time. The Portfolio will
continuously maintain collateral equal to not less than 100% of the current
market value (on a daily marked-to-market basis) of the loaned securities
plus declared dividends and accrued interest. The Portfolio will retain most
rights of beneficial ownership, including the right to receive dividends,
interest or other distributions on loaned securities. Should the borrower of
the securities fail financially, the Portfolio may experience delay in
recovering the securities or loss of rights in the collateral. Loans will be
made only to borrowers that the Adviser deems to be of good financial
standing.
MIXED AND SHARED FUNDING
The Fund offers its Pinnacle Series shares, without sales charge, only for
purchase by separate accounts of The Union Central Life Insurance Company
(including advances made by the life insurer in connection with the operation
of the separate account) and other affiliated and unaffiliated insurance
companies to fund benefits under both variable annuity contracts and variable
universal life insurance policies. In the future, the Fund may also offer its
Pinnacle Series shares directly to certain tax-qualified plans. The Fund's
Board of Directors will monitor the Fund for the existence of any material
irreconcilable conflict among the interests of such variable annuity and
variable life insurance contract owners and, if and when applicable, the
interests of participants in such qualified plans investing in the Fund.
Insurance companies whose contracts are funded by investment in the Fund, the
Adviser, and if applicable, trustees of certain qualified plans, will report
any potential or existing conflicts to the Directors of the Fund. If it is
determined by a majority of the Board, or by a majority of its disinterested
directors, that a material irreconcilable conflict exists, the relevant
insurance companies, the Adviser or plan trustees will, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict.
INVESTMENT IN OTHER INVESTMENT VEHICLES
The Portfolio may invest a portion of its assets in other pooled investment
vehicles, and thus will incur its pro rata share of the investment vehicles'
expenses. In addition, these Portfolios will be subject to the effects of
business and regulatory developments that affect the underlying investment
vehicles or the investment company industry generally.
TEMPORARY INVESTMENTS
The Portfolio may temporarily invest up to 100% of its assets in U.S.
Government securities, money market instruments, fixed-income securities, or
cash equivalents if the Adviser/subadviser believes adverse economic or
market conditions, such as excessive volatility or sharp market declines,
justify taking a defensive investment posture. If the Portfolio attempts to
limit investment risk by temporarily taking a defensive investment position,
it may be unable to pursue its investment objective during that time, and it
may miss out on some or all of an upswing in the securities markets.
OTHER INFORMATION
In addition to the investment policies described above, the Portfolio's
investment program is subject to further restrictions which are described in
the Statement of Additional Information. Unless otherwise specified, the
Portfolio's investment objectives, policies and restrictions are not
fundamental policies and may be changed without shareholder approval.
Shareholder inquiries and requests for the Fund's Statement of Additional
Information or annual report should be directed to the Fund at 1-800-999-
1840, or at P.O. Box 40409, Cincinnati, Ohio 45240-0409.
A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's portfolio securities is available in the Fund's
Statement of Additional Information.
FUND MANAGEMENT
INVESTMENT ADVISER
The Adviser is Summit Investment Partners, Inc., 312 Elm Street, Suite 2525,
Cincinnati, Ohio 45202. The Adviser was incorporated under the laws of Ohio on
August 18, 1986, as successor to the advisory business of Carillon Investments,
Inc., the investment adviser for the Fund since 1984. The Adviser is a wholly-
owned subsidiary of The Union Central Life Insurance Company ("Union Central"),
a mutual life insurance company organized in 1867 under the laws of Ohio.
Subject to the direction and authority of the Fund's board of directors, the
Adviser manages the investment and reinvestment of the assets of the Portfolio
and provides administrative services and manages the Fund's business affairs.
On or about January 28, 2005, the boards of directors of Union Central and The
Ameritas Acacia Companies of Lincoln, Nebraska voted to combine at the mutual
holding company level. This transaction is subject to appropriate regulatory
approval and the approval of the members and policyholders of both insurance
companies.
Gary R. Rodmaker, CFA and David M. Weisenburger, CFA lead the team of
analysts primarily responsible for the day-to-day management of the Russell
2000 Small Cap Index Portfolio.
Mr. Rodmaker is Managing Director - Investments of the Adviser and has been
affiliated with the Adviser and Union Central since 1989. Mr. Weisenburger
is the Managing Director, Fixed Income and Derivatives, of the Adviser and
has been affiliated with the Adviser and Union Central since July 1996.
The Statement of Additional Information provides additional information about
the portfolio manager's compensation, other accounts managed, and ownership
of Fund shares.
ADVISORY FEE
During the Fund's last fiscal year, the Fund paid the Adviser, as full
compensation for all facilities and services furnished, a monthly fee
computed for the Portfolio on a daily basis, at an annual rate, as follows:
[Download Table]
Portfolio Advisory Fee
Russell 2000 Small Cap Index Portfolio .35% of the average
daily net assets.
The Adviser or its affiliates may, out of their own resources and at no
additional costs to the Portfolios or shareholders, pay insurance companies,
broker-dealers and other financial intermediaries ("Intermediaries") for
providing services to the Portfolios or to investors. Such payments,
commonly referred to as "revenue sharing," do not increase Portfolio expenses
and are not reflected in the fees and expenses listed in the expense table of
this prospectus. The compensation received by Intermediaries via these
payments may be more or less than the overall compensation received by the
Intermediaries in connection with the sale of other investment products and
may influence the products offered or recommended by the Intermediary,
including the investment options available under your variable insurance
contract. Shareholders may obtain more information about these arrangements,
including associated conflicts of interest, from their Intermediary, and
should so inquire if they would like additional information. Shareholders
also may inquire of an Intermediary how the Intermediary will be compensated
for investments made in the Portfolio.
OTHER INFORMATION ABOUT MANAGEMENT OF THE PORTFOLIOS
A discussion regarding the basis of the board of directors approving any
investment advisory contract of the Fund is available in the Fund's semi-
annual report to shareholders for the six months ended June 30, 2005.
SHAREHOLDER INFORMATION
CAPITAL STOCK
Summit Mutual Funds, Inc. ("the Fund") currently offers fifteen series of
stock, including nine Portfolios that make up the Summit Pinnacle Series
(including the Russell 2000 Small Cap Index Portfolio which has two classes
of stock), and six funds that make up the Summit Apex Series, two of which
have two classes of stock. Shares (including fractional shares) of each
Portfolio have equal rights with regard to voting, redemptions, dividends,
distributions, and liquidations with respect to that Portfolio. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The insurance companies will
vote Fund shares allocated to their registered separate accounts in
accordance with instructions received from their contract owners. It is
anticipated that Union Central will have voting control of the Fund by virtue
of the shares of the Summit Fund allocated to its exempt separate accounts.
With voting control, Union Central can make fundamental changes regardless of
the voting instructions received from its contract owners.
DISTRIBUTION AND SHAREHOLDER SERVICE (12b-1) PLAN
This Portfolio offers Class F shares, which are subject to a Distribution and
Shareholder Service Plan adopted by the Fund under Rule 12b-1 of the
Investment Company Act of 1940.The Portfolio pays the Distributor a fee for
distribution assistance and/or shareholder services in connection with the
Class F shares, and related payments the Distributor makes to banks,
financial planners, retirement plan service providers, broker/dealers and
other institutions. The fee will not exceed, on an annual basis, 0.20% of
the average daily net assets attributable to the Portfolio's Class F shares.
Because the fee is paid out of the assets of the Class F shares on an ongoing
basis, over time, the fee will increase the cost and reduce the return of an
investment and may cost you more than paying other types of sales charges.
The Adviser or Distributor may pay additional fees to financial
intermediaries out of their own assets (and not from the Funds) in exchange
for sales and/or administrative services performed on behalf of the
intermediaries' customers. Such payments and compensation, commonly referred
to as 'revenue sharing,' are in addition to the sales charges, 12b-1 plan
fees and other fees paid to such financial intermediaries, and may be made to
brokers and other financial intermediaries that provide services to the Funds
and/or investors in the Funds, including (without limitation) shareholder
servicing, marketing support and/or access to sales meetings, sales
representatives and management representatives of the broker or other
financial intermediary. Compensation may also be paid to brokers and other
financial intermediaries for inclusion of the Funds on a sales list,
including a preferred or select sales list, in other sales programs, or as an
expense reimbursement in cases where the broker or other financial
intermediary provides shareholder services to fund shareholders. The
compensation received by financial intermediaries through sales charges,
other fees payable with respect to the Funds, and/or revenue sharing
arrangements for selling shares of the Funds may be more or less than the
overall compensation on similar or other products and may influence your
broker or other financial intermediary to present and recommend the Funds
over other investment options available in the marketplace.
Revenue sharing payments are not financed by the Funds, and thus, do not
result in increased Fund expenses. They are not reflected in the "Fees and
Expenses of the Funds" discussion above. Investors may obtain more
information about these arrangements, including the conflicts of interests
that such arrangements may create, from their brokers and other financial
intermediaries, and should so inquire if they would like additional
information.
VALUATION OF PORTFOLIO SHARES
Shares are purchased and redeemed at the net asset value per share of the
Portfolio next determined after receipt and acceptance of a purchase order,
or receipt of a redemption request, by the Fund or its agent. The net asset
value of the shares of the Portfolio of the Fund is determined once daily,
Monday through Friday, as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern Time), on days during which there
are purchases or redemptions of Fund shares, except:
o when the New York Stock Exchange is closed or
o any day on which changes in the value of the securities
held by a Portfolio will not materially affect the
current net asset value of the shares of the Portfolio.
Portfolio shares are valued by:
o adding the values of all securities and other assets of
the Portfolio,
o subtracting liabilities and expenses, and
o dividing the resulting figure by the number of shares
of the Portfolio outstanding.
Expenses, including the investment advisory fee payable to the Adviser, are
accrued daily.
Securities held by the Portfolio, except for money market instruments
maturing in 60 days or less, are valued at their market value if market
quotations are readily available. Otherwise, including instances where a
significant market event may impact the value of a portfolio security after
the close of trading in the security, such securities are valued at fair
value as determined in good faith under policies approved by the Fund's board
of directors, although the actual calculations may be made by persons acting
pursuant to the direction of the board. All money market instruments with a
remaining maturity of 60 days or less are valued on an amortized cost basis.
Valuing securities at fair value involves greater reliance on judgment than
valuing securities that have readily available market quotations. Fair value
determinations can also involve reliance on quantitative models employed by a
fair value pricing service. The Adviser makes such determinations in good
faith in accordance with the Funds' valuation procedures, with the goal of
accurately reflecting the current value of the Portfolio's portfolio holdings
in the Portfolio net asset value per share. There can be no assurance that
the Portfolios could obtain the fair value assigned to a security if it were
to sell the security at approximately the time at which the Portfolio
determines its net asset value per share.
If Portfolio investments are traded in markets on days that are not business
days of the Portfolio, the Portfolio's net asset value may vary on days when
investors cannot purchase or redeem shares.
TAXES
The Portfolio has qualified and has elected to be taxed as a "regulated
investment company" under the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). If a Portfolio qualifies as a
"regulated investment company" and complies with the appropriate provisions
of the Code, the Portfolio will pay no federal income taxes on the amounts
distributed.
Shares of the Portfolio may be purchased only by the separate accounts of
insurance companies. In order to comply with diversification regulations
applicable to variable life insurance, variable annuity, and endowment
contracts, the Portfolio will diversify its investments so that on the last
day of each quarter of a calendar year, no more than 55% of the value of its
total investments is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four
investments. For this purpose, securities of a single issuer are treated as
one investment and each U.S. Government agency or instrumentality is treated
as a separate issuer. Any security issued, guaranteed, or insured (to the
extent so guaranteed or insured) by the U.S. Government or an agency or
instrumentality of the U.S. Government is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.
If the Portfolio fails to meet this diversification requirement, income with
respect to variable insurance contracts invested in the portfolio at any time
during the calendar quarter in which the failure occurred could become
currently taxable to the owners of the contracts. Similarly, income for
prior periods with respect to such contracts also could be taxable, most
likely in the year of the failure to achieve the required diversification.
Other adverse tax consequences could also ensue.
Because insurance companies are currently the only shareholders of the
Portfolios, no discussion is included herein as to the federal income tax
consequences to shareholders. For information about the federal tax
consequences of purchasing the contracts, see the prospectus for your
contract.
See the Statement of Additional Information for further information about tax
matters.
EXCESSIVE TRADING
The Portfolio is not intended for excessive trading or market timing.
Frequent trading into and out of the Portfolio can disrupt portfolio
investment strategies, result in lower portfolio performance and increase
portfolio expenses for all shareholders, including long-term shareholders who
do not generate these costs. In particular, the Portfolio may have
difficulty implementing its long-term investment strategies if forced to
maintain a higher level of its assets in cash to accommodate significant
short-term trading activity resulting from market timing. Excessive
purchases and sales or exchanges of a Portfolio's shares may force the
Portfolio to sell portfolio securities at inopportune times to raise cash to
accommodate short term trading activity. In addition, the Portfolio may
incur increased expenses if one or more investors engage in excessive or
short-term trading. For example, the Portfolio may be forced to liquidate
investments as a result of short-term trading and incur increased brokerage
costs without attaining any investment advantage. Similarly, the Portfolio
may bear increased administrative costs due to asset level and investment
volatility that accompanies patterns of short-term trading activity. If the
Fund in unable to detect those shareholders engaging in market timing and/or
excessive trading, the previously mentioned harms associated with excessive
trading (lower portfolio performance, liquidity risks, increased portfolio
expenses, etc.) may occur.
The Portfolio is not designed to accommodate excessive trading and the Fund's
Board of Directors has adopted policies to discourage excessive trading of
the Portfolio's shares. If you wish to engage in excessive trading, we
request that you do not purchase shares of the Portfolio. The Portfolio
defines 'excessive trading' as exceeding one purchase and sale involving the
Portfolios within any 120-day period. You can move substantial assets from a
Portfolio to another Portfolio and, within the next 120 days, sell your
shares in that Portfolio to return to the first Portfolio.
The Fund monitors daily cash flows by account to detect possible excessive
trading by individuals or groups. When suspicious activities occur that may
indicate the possibility of excessive trading, the Fund will contact the
insurance company and request that they investigate the activity. If
excessive trading is found, in addition to any action that may be taken by
the insurance company for excessive trading, the Fund will take the following
actions if you exceed the number of trades described above: 1) the first time
the Fund determines that you have traded excessively, the Fund or your
insurance company will notify you in writing that your variable insurance
product will be monitored for additional transactions in excess of the
foregoing limits; 2) upon the second incidence of excessive trading by you,
the Fund or your insurance company will bar you indefinitely from further
purchases of shares of the Portfolio, including purchases in connection with
exchange transactions. Two types of transactions are exempt from the
excessive trading guidelines: (1) redemptions that are not part of exchanges
and (2) systematic purchases or redemptions made through an automatic
investment plan or an automatic withdrawal plan.
The Fund may, in its sole discretion, take any variable insurance contract
off of the list of monitored contracts, or restore suspended transfer
privileges if it determines that the transactions were inadvertent or were
not done with the intent to market time. OTHERWISE, ALL OF THE POLICIES
RELATED TO EXCESSIVE TRADING AND MARKET TIMING AS DESCRIBED IN THIS SECTION
WILL BE APPLIED UNIFORMLY AND WITHOUT EXCEPTION. Other trading activities
may be detrimental to the Portfolio. Therefore, variable insurance contracts
may be placed on the list of monitored contracts despite the fact the
contract owner has not exceeded the established transfer limits.
The Portfolio and its agents reserve the right not to accept in whole or in
part, without prior notice, any purchase request, including exchange
purchases from one Portfolio to another Portfolio, by any investor or group
of investors indefinitely, for any reason, particularly if they believe that
any combination of trading activity in the Portfolio is attributable to
market timing or is otherwise excessive or potentially disruptive to the
Portfolio. Some of the factors that may be considered when determining
whether or not to accept a purchase request may include, but not be limited
to:
o the number of transfers made in a defined period;
o the dollar amount of the transfer;
o the total assets of the Portfolio involved in the
transfer;
o the investment objectives of the particular portfolios
involved in the transfers; and/or
o whether the transfer appears to be a part of a pattern
of transfers to take advantage of short-term market
fluctuations or market inefficiencies.
The Fund currently does not assess a mandatory redemption fee, but may do so
in the future.
The trading history of accounts under common ownership or control may be
considered in enforcing these policies. Transactions placed through the same
insurance company or plan sponsor on an omnibus basis may be rejected in
whole or in part by a Portfolio. Transactions accepted by your insurance
company or plan sponsor in violation of the Fund's excessive trading policy
are not deemed accepted by the Portfolio and may be cancelled or revoked by
the Portfolio on the next business day following the order by the insurance
company.
While the Portfolios discourage excessive short-term trading and intend to
apply their policies uniformly to all shareholders, the Portfolios cannot
always know or reasonably detect such trading, particularly if it is
facilitated by financial intermediaries or done through omnibus account
arrangements. In addition, monitoring and discouraging excessive trading may
require the cooperation of financial intermediaries, which cannot necessarily
be assured.
FRANK RUSSELL DISCLAIMER
The RUSSELL 2000 INDEX is a trademark/service mark of the Frank Russell
Company. Russell is a trademark of the Frank Russell Company. Summit Mutual
Funds and the Russell 2000 Small Cap Index Portfolio are not promoted,
sponsored or endorsed by, nor in any way affiliated with Frank Russell
Company. Frank Russell is not responsible for and has not reviewed the
Prospectus, and Frank Russell makes no representation or warranty, express or
implied, as to its accuracy, or completeness, or otherwise.
Frank Russell Company reserves the right, at any time and without notice, to
alter, amend, terminate or in any way change its Index. Frank Russell has no
obligation to take the needs of any particular fund or its participants or
any other product or person into consideration in determining, composing or
calculating the Index.
Frank Russell Company's publication of the Index in no way suggests or
implies an opinion by Frank Russell Company as to the attractiveness or
appropriateness of the investment in any or all securities upon which the
Index is based. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION, WARRANTY, OR
GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE
INDEX OR DATA INCLUDED IN THE INDEX. FRANK RUSSELL COMPANY MAKES NO
REPRESENTATION OR WARRANTY REGARDING THE USE, OR THE RESULTS OF USE, OF THE
INDEX OR ANY DATA INCLUDED THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF)
COMPRISING THE INDEX. FRANK RUSSELL COMPANY MAKES NO OTHER EXPRESS OR
IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ANY WARRANTY OF ANY KIND,
INCLUDING, WITHOUT MEANS OF LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR ANY
SECURITY (OR COMBINATION THEREOF) INCLUDED THEREIN.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the periods indicated. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Portfolio (assuming reinvestment of all
dividends and distributions). The information for the period ended December
31, 2000 and the years ended December 31, 2001, 2002, 2003 and 2004 have been
audited by Deloitte & Touche LLP, independent auditors, whose report, along
with the Portfolios' financial statements, is incorporated by reference into
the Statement of Additional Information and is available upon request. The
information for the six months ended June 30, 2005 is unaudited, and in
management's opinion reflects all adjustments necessary to a fair statement
of the results of the interim period presented. All such adjustments are
of a normal recurring nature. This information should be read in
conjunction with the December 31, 2004 audited financial statements and
notes thereto incorporated by reference into the Statement of Additional
Information, and the unaudited Russell 2000 Small Cap Index Portfolio
financial statements and notes thereto for the six months ended June 30, 2005
included elsewhere in the registration statement.
Computed on the basis of a share of Class I capital stock outstanding
throughout the period. Class F shares will be offered beginning October 4,
2005, and therefore no financial information is presented below. The results
of the Class F shares will be lower than that of the Class I shares shown
below since the Class F shares have a .20% distribution and service (12b-1)
fee. All share amounts and net asset values have been adjusted as a result
of the 1-for-5 reverse stock split on February 15, 2002.
[Enlarge/Download Table]
Russell 2000 Small Cap Index Portfolio - Class I
Six Months Period From
Ended April 27, 2000(1)
June 30, to
(Unaudited) Year Ended December 31, December 31,
-------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
Net asset value,
beginning of period $63.92 $54.40 $37.52 $48.10 $49.95 $50.00
------ ------ ------ ------ ------ ------
Investment Activities:
Net investment income/(loss) 0.18 0.31(4) 0.22 0.29 0.40 0.40
Net realized and unrealized
gains/(losses) (1.14) 9.32 16.95 (10.31) 0.35 (0.20)
------ ------ ------ ------ ------ ------
Total from Investment Activities (0.96) 9.63 17.17 (10.02) 0.75 0.20
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Net investment income (0.31) (0.11) (0.29) (0.09) (0.45) (0.25)
Net realized gains (0.63) -- -- (0.47) (2.15) --
------ ------ ------ ------ ------ ------
Total Distributions (0.94) (0.11) (0.29) (0.56) (2.60) (0.25)
------ ------ ------ ------ ------ ------
Net asset value,
end of period $62.02 $63.92 $54.40 $37.52 $48.10 $49.95
------ ------ ------ ------ ------ ------
Total return(5) 1.45% 17.72% 46.19% -21.05% 1.54% 0.39%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets - net(2) 0.71%(3) 0.75% 0.75% 0.75% 0.75% 0.74%(3)
Ratio of expenses to
average net assets - gross 0.71%(3) 0.76% 1.12% 1.33% 1.10% 1.35%(3)
Ratio of net investment
income (loss) to
average net assets 0.62%(3) 0.60% 0.57% 0.65% 0.90% 1.11%(3)
Portfolio turnover rate 42.82%(3) 27.27% 23.87% 30.78% 32.70% 82.19%(3)
Net assets,
end of period (000's) $68,313 $68,770 $25,794 $13,863 $21,503 $16,105
-------------
(1) Commencement of operations.
(2) Net expenses represent gross expenses reduced by fees
waived and/or reimbursed by the Adviser.
(3) Annualized.
(4) Per share amounts are based on average shares outstanding.
(5) Total return does not include separate account and insurance
contract fees and charges, which would lower the results.
A Statement of Additional Information dated October 4, 2005, which contains
further information about the Russell 2000 Small Cap Index Portfolio, has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. Additional information about the Fund's
investments is available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. To obtain a copy of the
Statement of Additional Information or the Fund's annual and semi-annual
reports without charge, to request other information about the Fund or to
make shareholder inquiries, please call the Fund at 1-800-999-1840, or write
the Fund at P.O. Box 40409, Cincinnati, Ohio 45240-0409. Since the Russell
2000 Small Cap Index Portfolio is only available as an investment option for
variable insurance products, and the Portfolio's disclosure documents should
be read in connection with the prospectus for the applicable variable
insurance product, the Fund does not make the Fund's Statement of Additional
Information or the Fund's annual and semi-annual reports available on the
Fund's website.
The Fund's Statement of Additional Information, annual and semi-annual
reports and certain other information about the Fund can be reviewed and
copied at the SEC's public reference room (which will send copies of these
documents upon request and for a fee). Information about the operation of
the SEC's public reference room may be obtained by calling the SEC at 1-202-
942-8090. Copies of Fund documents may be requested by writing to the Public
Reference Section of the SEC, Washington, D.C. 20549-6009, or by electronic
request at publicinfo@sec.gov.
These Fund Documents and other information about the Fund are also available
without charge at the SEC's web site: http://www.sec.gov.
File 811-04000
Part B
Information required in a Statement of Additional Information.
SUMMIT MUTUAL FUNDS, INC.
Summit Pinnacle Series
STATEMENT OF ADDITIONAL INFORMATION
Russell 2000 Small Cap Index Portfolio
October 4, 2005
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands
upon subjects discussed in the Prospectus. Accordingly, this Statement
should be read in conjunction with Summit Mutual Funds, Inc.'s ("Fund")
current Prospectus, dated October 4, 2005, which may be obtained by calling
the Fund at 1-800-999-1840, or writing the Fund at P.O. Box 40409,
Cincinnati, Ohio 45240-0409. This Statement of Additional Information
incorporates by reference the financial statements, and related notes and
auditor's reports, relating to the Summit Pinnacle Series from the Fund's
annual report dated December 31, 2004 describing the Summit Pinnacle Series.
---------------------
[Download Table]
Table of Contents Page
Investment Policies (3) . . . . . . . . . . . . . . . . . . . . . . . . .2
Money Market Instruments and Investment Techniques. . . . . . . . . . .2
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Lending Portfolio Securities. . . . . . . . . . . . . . . . . . . . . 10
Pledging of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 11
Disclosure of Portfolio Holdings. . . . . . . . . . . . . . . . . . . . 13
Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Management of the Fund ( ). . . . . . . . . . . . . . . . . . . . . . . 15
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . 15
Investment Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 18
Advisory Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Investment Advisory Agreement and Administrative Services Agreement . . 18
Board Review of Advisory Arrangements . . . . . . . . . . . . . . . . 19
Service Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Securities Activities of Adviser. . . . . . . . . . . . . . . . . . . 21
Code of Ethics. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Portfolio Managers. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Determination of Net Asset Value ( ) . . . . . . . . . . . . . . . . . .23
Purchase and Redemption of Shares ( ) . . . . . . . . . . . . . . . . . 24
Taxes ( ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Custodian, Transfer And Dividend Disbursing Agent . . . . . . . . . . . 26
Portfolio Transactions and Brokerage. . . . . . . . . . . . . . . . . . 27
General Information ( ) . . . . . . . . . . . . . . . . . . . . . . . . 27
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements and Independent Registered Public Accounting Firm. 29
Appendix A: Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . 30
Appendix B: Proxy Voting Procedures . . . . . . . . . . . . . . . . . . 30
( ) indicates page on which the corresponding section appears in the
Prospectus.
SMFI 515 Pinnacle Russell 2000 SAI 9-05
SUMMIT MUTUAL FUNDS, INC.
INVESTMENT POLICIES
The following specific policies supplement the Portfolio's investment
strategies, policies and risks set forth in the Prospectus.
Money Market Instruments and Investment Techniques
The Portfolio may invest in money market instruments whose characteristics
are consistent with the Portfolio's investment program and are described
below unless explicitly excluded in the text.
Small Bank Certificates of Deposit. The Portfolio may invest in certificates
of deposit issued by commercial banks, savings banks, and savings and loan
associations having assets of less than $1 billion, provided that the
principal amount of such certificates is insured in full by the Federal
Deposit Insurance Corporation ("FDIC"). The FDIC presently insures accounts
up to $100,000, but interest earned above such amount is not insured by the
FDIC.
Repurchase Agreements. A repurchase agreement is an instrument under which
the purchaser (i.e., the Portfolio) acquires ownership of the obligation (the
underlying security) and the seller (the "issuer" of the repurchase
agreement) agrees, at the time of sale, to repurchase the obligation at a
mutually agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of return insulated
from market fluctuations during such period. Repurchase agreements usually
are for short periods, normally under one week, and are considered to be
loans under the Investment Company Act of 1940. The Portfolio will not enter
into a repurchase agreement which does not provide for payment within seven
days if, as a result, more than 10% of the value of each Portfolio's net
assets would then be invested in such repurchase agreements and other
illiquid securities. The Portfolio will enter into repurchase agreements
only where: (i) the underlying securities are of the type (excluding
maturity limitations) which the Portfolio's investment guidelines would allow
it to purchase directly, either in normal circumstances or for temporary
defensive purposes; (ii) the market value of the underlying securities,
including interest accrued, will at all times equal or exceed the value of
the repurchase agreement; and (iii) payment for the underlying security is
made only upon physical delivery or evidence of book-entry transfer to the
account of the custodian or a bank acting as agent. The investments by a
Portfolio in repurchase agreements may at times be substantial when, in the
view of the Adviser, unusual market, liquidity, or other conditions warrant.
If the counterparty to the repurchase agreement defaults and does not
repurchase the underlying security, the Portfolio might incur a loss if the
value of the underlying security declines, and the Fund might incur
disposition costs in liquidating the underlying security. In addition, if
the counterparty becomes involved in bankruptcy proceedings, the Portfolio
may be delayed or prevented from obtaining the underlying security for its
own purposes. In order to minimize any such risk, the Portfolio will only
engage in repurchase agreements with recognized securities dealers and banks
determined to present minimal credit risk by the Adviser, under the direction
and supervision of the Board of Directors.
Reverse Repurchase Agreements
The Portfolio may enter into reverse repurchase agreements. Under reverse
repurchase agreements, the Portfolio transfers possession of Portfolio
securities to banks in return for cash in an amount equal to a percentage of
the Portfolio securities' market value and agrees to repurchase the
securities at a future date by repaying the cash with interest. The
Portfolio retains the right to receive interest and principal payments from
the securities while they are in the possession of the financial
institutions. While a reverse repurchase agreement is in effect, the
Custodian will segregate from other Portfolio assets an amount of cash or
liquid high quality debt obligations equal in value to the repurchase price
(including any accrued interest).
U.S. Government Obligations. Securities issued and guaranteed as to
principal and interest by the United States Government include a variety of
Treasury securities, which differ only in their interest rates, maturities
and times of issuance. Treasury bills have a maturity of one year or less.
Treasury notes have maturities of one to ten years at the time they are
issued, and Treasury bonds generally have a maturity of greater than ten
years at the time they are issued.
Government Agency Securities. Government agency securities that are
permissible investments consist of securities either issued or guaranteed by
agencies or instrumentalities of the United States Government. Agencies of
the United States Government which issue or guarantee obligations include,
among others, Export-Import Banks of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association ("GNMA"), Maritime Administration, Small Business Administration
and The Tennessee Valley Authority. Obligations of instrumentalities of the
United States Government include securities issued or guaranteed by, among
others, the Federal National Mortgage Association ("FNMA"), Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate
Credit Banks, Banks for Cooperatives, and the U.S. Postal Service. Some of
these securities, such as those guaranteed by GNMA, are supported by the full
faith and credit of the U.S. Treasury; others, such as those issued by The
Tennessee Valley Authority, are supported by the right of the issuer to
borrow from the Treasury; while still others, such as those issued by the
Federal Land Banks, are supported only by the credit of the instrumentality.
The Fund's primary usage of these types of securities will be GNMA
certificates and FNMA and FHLMC mortgage-backed obligations which are
discussed in more detail below.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time Deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which
a negotiable certificate is not received.
Bankers' Acceptance. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and
are traded in secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at
the time of issuance not exceeding nine months.
Corporate Debt Securities. Corporate debt securities with a remaining
maturity of less than one year tend to become extremely liquid and are traded
as money market securities. Such issues with between one and two years
remaining to maturity tend to have greater liquidity and considerably less
market value fluctuations than longer-term issues.
When-issued and Delayed-delivery Securities. From time to time, in the
ordinary course of business, the Portfolio may acquire securities on a when-
issued or delayed-delivery basis, i.e., delivery and payment can take place a
month or more after the date of the transactions. The securities so
purchased are subject to market fluctuation and no interest accrues to the
purchaser during this period. At the time the Portfolio makes the commitment
to purchase securities on a when-issued or delayed-delivery basis, the Fund
will record the transaction and thereafter reflect the value, each day, of
such security in determining the net asset value of the Portfolio. At the
time of delivery of the securities, the value may be more or less than the
purchase price. The Portfolio will also segregate cash or cash equivalents
or other Portfolio securities equal in value to commitments for such when-
issued or delayed-delivery securities.
Equity Securities. The Russell 2000 Small Cap Index Portfolio may invest in
equity securities without restriction.
Unit Investment Trusts. The Portfolio may invest in shares of a unit
investment trust ("UIT"), which is currently in existence or is created in
the future, that is designed to track the performance of the Portfolio's
underlying Index. UIT shares are units of beneficial interest in a UIT,
representing proportionate undivided interests in a portfolio of securities
in substantially the same weighting as the component common stocks of an
underlying Index. While the investment objective of such a UIT is to provide
investment results that generally correspond to the price and yield
performance of the component common stocks of the underlying Index, there can
be no assurance that this investment objective will be met fully. As UITs
are securities issued by an investment company, non-fundamental restriction
(5) below restricts their purchases to 10% of the Portfolio's assets.
American Depositary Receipts. The Portfolio may invest in American
Depositary Receipts ("ADRs"), which may be issued in sponsored or unsponsored
programs. In sponsored programs, the issuer makes arrangements to have its
securities traded in the form of ADRs; in unsponsored programs, the issuer
may not be directly involved in the creation of the program. Although the
regulatory requirements with respect to sponsored and unsponsored programs
are generally similar, the issuers of unsponsored ADRs are not obligated to
disclose material information in the United States and, therefore, such
information may not be reflected in the market value of the ADRs.
Foreign Markets. Delays in settlement which may occur in connection with
transactions involving foreign securities could result in temporary periods
when a portion of the assets of a portfolio is uninvested and no return is
earned thereon. The inability of a portfolio to make intended security
purchases due to settlement problems could cause the portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a portfolio
due to subsequent declines in values of the portfolio securities or, if the
portfolio has entered into a contract to sell the security, possible
liability to the purchaser. Certain foreign markets, especially emerging
markets, may require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors.
A portfolio could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation of capital, as well as by
the application to the portfolio of any restrictions on investments.
Foreign Securities. The Portfolio may invest in foreign securities .
Because the Portfolio may invest in foreign securities, investments in the
Portfolio involve risks that are different in some respects from investments
in a fund which invests only in securities of U.S. domestic issuers. Foreign
investments may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. There may be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies.
There may be less governmental supervision of securities markets, brokers and
issuers of securities. Securities of some foreign companies are less liquid
or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United
States. Settlement practices may include delays and may differ from those
customary in U.S. markets. Investments in foreign securities may also be
subject to other risks different from those affecting U.S. investments,
including local political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and
repatriation of capital, imposition of withholding taxes on dividend or
interest payments, currency blockage (which would prevent cash from being
brought back to the United States), and difficulty in enforcing legal rights
outside the United States.
Futures Contracts
For hedging purposes, including protecting the price or interest rate of
securities that the Portfolio intends to buy, the Russell 2000 Small Cap
Index Portfolio may enter into futures contracts that relate to securities in
which it may directly invest and indices comprised of such securities and may
purchase and write call and put options on such contracts, subject to the
Portfolio's non-fundamental investment restrictions. As a temporary
investment strategy, until the Portfolio reaches $50 in net assets, the
Portfolio may invest up to 100% of its assets in such futures and/or options
contracts. Thereafter, the Portfolio may invest up to 20% of its assets in
such futures and/or options contracts. The Portfolio does not intend to
enter into futures contracts that are not traded on exchanges or boards of
trade.
A stock index futures contract is a contract to buy or sell specified units
of a stock index at a specified future date at a price agreed upon when the
contract is made. The value of a unit is based on the current value of the
contract index. Under such contracts no delivery of the actual stocks making
up the index takes place. Rather, upon expiration of the contract,
settlement is made by exchanging cash in an amount equal to the difference
between the contract price and the closing price of the index at expiration,
net of variation margin previously paid.
Substantially all futures contracts are closed out before settlement date or
called for cash settlement. A futures contract is closed out by buying or
selling an identical offsetting futures contract. Upon entering into a
futures contract, the Portfolio is required to deposit an initial margin with
the Custodian for the benefit of the futures broker. The initial margin
serves as a "good faith" deposit that the Portfolio will honor its futures
commitments. Subsequent payments (called "variation margin") to and from the
broker are made on a daily basis as the price of the underlying investment
fluctuates. In the event of the bankruptcy of the futures broker that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the broker's
other customers. The Adviser will attempt to minimize this risk by
monitoring the creditworthiness of the futures brokers with which the
Portfolio does business.
Because the value of index futures depends primarily on the value of their
underlying indexes, the performance of the broad-based contracts will
generally reflect broad changes in common stock prices. However, because the
Portfolio may not be invested in precisely the same proportion as the index,
it is likely that the price changes of the Portfolio's index futures
positions will not match the price changes of the Portfolio's other
investments.
Options on futures contracts give the purchaser the right to assume a
position at a specified price in a futures contract at any time before
expiration of the option contract.
The Portfolio will enter into futures contracts which are traded on national
futures exchanges and are standardized as to maturity date and underlying
financial instrument. The principal financial futures exchanges in the
United States are the Board of Trade of the City of Chicago, the Chicago
Mercantile Exchange, the New York Futures Exchange and the Kansas City Board
of Trade. Futures exchanges and trading in the United States are regulated
under the Commodity Exchange Act by the Commodity Futures Trading Commission
("CFTC"). Although techniques other than the sale and purchase of futures
contracts could be used for the above-referenced purposes, futures contracts
offer an effective and relatively low cost means of implementing the
Portfolio's objectives in these areas.
Regulatory Limitations. Pursuant to a claim for exemption filed with the
CFTC and/or the National Futures Association on behalf of the Portfolio and
the Adviser, the Funds and the Adviser are not deemed to be a "commodity
pool" or "commodity pool operator" under the Commodity Exchange Act and are
not subject to registration or regulation as such under the Commodity
Exchange Act. By virtue of changes to CFTC regulations, the substantive
limitations set forth in the Portfolio's exemption filing with respect to its
use of futures contracts are no longer applicable.
The Portfolio will engage in transactions in futures contracts and options
thereon only for hedging risk management and other permissible purposes in
accordance with the rules and regulations of the CFTC or other regulatory
authorities, and not for speculation. If the CFTC or other regulatory
authorities adopt different (including less stringent) or additional
restrictions on the Fund's ability to engage in certain yield inhancement and
risk management strategies, the Funds would comply with such new
restrictions.
In instances involving the purchase of futures contracts or call options
thereon or the writing of put options thereon by the Portfolio, an amount of
cash, U.S. Government securities or other liquid securities, equal to the
notional value of the futures contracts and options thereon (less any related
margin deposits), will be segregated by the Portfolio's custodian to cover
the position, or alternative cover will be employed, thereby insuring that
the use of such futures contracts and options is unleveraged.
SPECIAL RISKS OF FUTURES CONTRACTS
Volatility And Leverage. The prices of futures contracts are volatile and
are influenced, among other things, by actual and anticipated changes in the
market and interest rates, which in turn are affected by fiscal and monetary
policies and national and international policies and economic events.
Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the minimum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular
type of futures contract, no trades may be made on that day at a price beyond
that limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the limit
may prevent the liquidation of unfavorable positions. Futures contract
prices have occasionally moved to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation
of futures positions and subjecting some futures traders to substantial
losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss,
as well as gain, to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total
loss of the margin deposit, before any deduction for the transaction costs,
if the account were then closed out. A 15% decrease would result in a loss
equal to 150% of the original margin deposit, if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. However, a Portfolio
would presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying instrument and sold it after the
decline. Furthermore, in the case of a futures contract purchase, in order
to be certain that a Portfolio has sufficient assets to satisfy its
obligations under a futures contract, the Portfolio earmarks to the futures
contract money market instruments equal in value to the current value of the
underlying instrument less the margin deposit.
Liquidity. The Portfolio may elect to close some or all of its futures
positions at any time prior to their expiration. The Portfolio would do so
to reduce exposure represented by long futures positions or increase exposure
represented by short futures positions. The Portfolio may close its
positions by taking opposite positions which would operate to terminate the
Portfolio's position in the futures contracts. Final determinations of
variation margin would then be made, additional cash would be required to be
paid by or released to the Portfolio, and the Portfolio would realize a loss
or a gain.
Futures contracts may be closed out only on the exchange or board of trade
where the contracts were initially traded. Although the Portfolio intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular
contract at any particular time. In such event, it might not be possible to
close a futures contract, and in the event of adverse price movements, the
Portfolio would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge the underlying instruments, the Portfolio would continue to hold the
underlying instruments subject to the hedge until the futures contracts could
be terminated. In such circumstances, an increase in the price of the
underlying instruments, if any, might partially or completely offset losses
on the futures contract. However, as described below, there is no guarantee
that the price of the underlying instruments will in fact correlate with the
price movements in the futures contract and thus provide an offset to losses
on a futures contract.
Hedging Risk. A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior, or market or interest rate
trends. There are several risks in connection with the use by the Portfolio
of futures contract as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the futures
contracts and movements in the prices of the underlying instruments which are
the subject of the hedge. The Adviser will, however, attempt to reduce this
risk by entering into futures contracts whose movements, in its judgment,
will have a significant correlation with movements in the prices of the
Portfolio's underlying instruments sought to be hedged.
Successful use of futures contracts by the Portfolio for hedging purposes is
also subject to the Adviser's ability to correctly predict movements in the
direction of the market. It is possible that, when a Portfolio has sold
futures to hedge its portfolio against a decline in the market, the index,
indices, or underlying instruments on which the futures are written might
advance and the value of the underlying instruments held in the Portfolio
might decline. If this were to occur, the Portfolio would lose money on the
futures and also would experience a decline in value in its underlying
instruments. However, while this might occur to a certain degree, the
Adviser believes that over time the value of a Portfolio's underlying
instruments will tend to move in the same direction as the market indices
which are intended to correlate to the price movements of the underlying
instruments sought to be hedged. It is also possible that if a Portfolio
were to hedge against the possibility of a decline in the market (adversely
affecting the underlying instruments held in its portfolio) and prices
instead increased, the Portfolio would lose part or all of the benefit of
increased value of those underlying instruments that it has hedged, because
it would have offsetting losses in its futures positions. In addition, in
such situations, if a Portfolio had insufficient cash, it might have to sell
underlying instruments to meet daily variation margin requirements. Such
sales of underlying instruments might be, but would not necessarily be, at
increased prices (which would reflect the rising market). The Portfolio
might have to sell underlying instruments at a time when it would be
disadvantageous to do so.
In addition to the possibility that there might be an imperfect correlation,
or no correlation at all, between price movements in the futures contracts
and the portion of the portfolio being hedged, the price movements of futures
contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions which could distort the normal relationship between the
underlying instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements in the
securities markets, and as a result the futures market might attract more
speculators than the securities markets do. Increased participation by
speculators in the futures market might also cause temporary price
distortions. Due to the possibility of price distortion in the futures
market and also because of the imperfect correlation between price movements
in the underlying instruments and movements in the prices of futures
contracts, even a correct forecast of general market trends by the Adviser
might not result in a successful hedging transaction over a very short time
period.
Options on futures contracts give the purchaser the right to assume a
position at a specified price in a futures contract at any time before
expiration of the option contract.
Options
The Russell 2000 Small Cap Index Portfolio may sell (write) listed options on
equities and may enter into futures contracts that relate to securities in
which it may directly invest and indices comprised of such securities and may
purchase and write call and put options on such contracts. In addition, the
Portfolio may write covered call options on any security in which it is
eligible to invest.
As a writer of a call option, a Portfolio may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing
an option of the same series as the option previously written. However, once
the Portfolio has been assigned an exercise notice, the Portfolio will be
unable to effect a closing purchase transaction. There can be no assurance
that a closing purchase transaction can be effected when the Portfolio so
desires.
The Portfolio will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option;
the Portfolio will realize a loss from a closing transaction if the price of
the transaction is more than the premium received from writing the option.
Since the market value of call options generally reflects increases in the
value of the underlying security, any loss resulting from the closing
transaction may be wholly or partially offset by unrealized appreciation of
the underlying security. Conversely, any gain resulting from the closing
transaction may be wholly or partially offset by unrealized depreciation of
the underlying security. The principal factors affecting the market value of
call options include supply and demand, the current market price and price
volatility of the underlying security, and the time remaining until the
expiration date.
There is no assurance that a liquid secondary market will exist for any
particular option. In the event it is not possible to effect a closing
transaction, the Portfolio will not be able to sell the underlying security,
until the option expires or the option is exercised by the holder.
The Portfolio will effect a closing transaction to realize a profit on an
outstanding call option, to prevent an underlying security from being called,
to permit the sale of an underlying security prior to the expiration date of
the option, or to allow for the writing of another call option on the same
underlying security with either a different exercise price or expiration date
or both.
Possible reasons for the absence of a liquid secondary market on an exchange
include the following: (a) insufficient trading interest in certain options;
(b) restrictions on transactions imposed by an exchange; (c) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (d) inadequacy of the
facilities of an exchange or the Clearing Corporation to handle trading
volume; or (e) a decision by one or more exchanges to discontinue the trading
of options or impose restrictions on types of orders. There can be no
assurance that higher than anticipated trading activity or order flow or
other unforeseen events might not at times render the trading facilities
inadequate and thereby result in the institution of special trading
procedures or restrictions which could interfere with the Portfolio's ability
to effect closing transactions.
The Portfolio may write call options on futures contracts on its respective
index or securities included therein only for hedging purposes to protect the
price of securities it intends to buy and when such transactions enable it to
correlate its investment performance more closely to that of their respective
indexes than would a direct purchase of securities included in their
respective indexes. The Portfolio will not write options on futures
contracts for speculative purposes.
Upon the exercise of a call option on a futures contract, the writer of the
option (the Portfolio) is obligated to sell the futures contract (to deliver
a long position to the option holder) at the option exercise price, which
will presumably be lower than the current market price of the contract in the
futures market. However, as with the trading of futures, most participants
in the options markets do not seek to realize their gains or losses by
exercise of their option rights. Instead, the holder of an option will
usually realize a gain or loss by buying or selling an offsetting option at a
market price that will reflect an increase or a decrease from the premium
originally paid.. There can be no assurance that the Portfolio will be able
to enter into an offsetting transaction with respect to a particular contract
at a particular time, and therefore would be required to settle the contract
with cash.
As a writer of options on futures contracts, the Portfolio will receive a
premium but will assume a risk of adverse movement in the price of the
underlying futures contract. If the option is not exercised, the Portfolio
will gain the amount of the premium, which may partially offset unfavorable
changes in the value of securities held in the Portfolio. If the option is
exercised, the Portfolio might incur a loss in the option transaction which
would be reduced by the amount of the premium it has received.
While the holder or writer of an option on a futures contract may normally
terminate its position by selling or purchasing an offsetting option, the
Portfolio's ability to establish and close out options positions at fairly
established prices will be subject to the maintenance of a liquid market.
The Portfolio will not write options on futures contracts unless, in the
Adviser's opinion, the market for such options has sufficient liquidity that
the risks associated with such options transactions are not at unacceptable
levels.
Risks. While options will be sold in an effort to reduce certain risks,
those transactions themselves entail certain other risks. Thus, while the
Portfolio may benefit from the use of options, unanticipated changes in
interest rates or security price movements may result in a poorer overall
performance for the Portfolio than if it had not entered into any options
transactions. The price of futures is volatile and is influenced, among
other things, by changes in prevailing interest rates and anticipation of
future interest rate changes. The price of Russell 2000 Index is also
volatile and is influenced, among other things, by changes in conditions in
the securities markets in general.
In the event of an imperfect correlation between a futures position (and a
related option) and the Portfolio position which is intended to be protected,
the desired protection may not be obtained. The correlation between changes
in prices of futures contracts and of the securities being hedged is
generally only approximate. The amount by which such correlation is
imperfect depends upon many different circumstances, such as variations in
speculative market demand for futures and for debt securities (including
technical influences in futures trading) and differences between the
financial instruments being hedged and the instruments underlying the
standard options on futures contracts available for trading.
Due to the imperfect correlation between movements in the prices of futures
contracts and movements in the prices of the underlying securities, the price
of a futures contract may move more than or less than the price of the
securities being hedged. If the price of the future moves less than the
price of the securities which are the subject of the hedge, the hedge will
not be fully effective and if the price of the securities being hedged has
moved in an unfavorable direction, the Portfolio would be in a better
position than if it had not hedged at all. If the price of the futures moves
more than the price of the security, the Portfolio will experience either a
gain or loss on the option on the future which will not be completely offset
by movements in the price of the securities which are the subject of the
hedge.
The market prices of futures contracts and options thereon may be affected by
various factors. If participants in the futures market elect to close out
their contracts through offsetting transactions rather than meet margin
deposit requirements, distortions in the normal relationship between the debt
securities and futures markets could result. This could occur, for example,
if there is a lack of liquidity in the futures market. From the point of
view of speculators, the deposit requirements in the futures markets are less
onerous than margins requirements in the securities markets; accordingly,
increased participation by speculators in the futures market could cause
temporary price distortions. A correct forecast of interest rate trends by
the adviser may still not result in a successful hedging transaction because
of possible price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts. A well-conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected trends.
Custodial Procedures and Margins. The Fund's custodian acts as the Fund's
escrow agent as to securities on which the Fund has written call options and
with respect to margin which the Fund must deposit in connection with the
writing of call options on futures contracts. The Clearing Corporation (CC)
will release the securities or the margin from escrow on the expiration of
the call, or when the Fund enters into a closing purchase transaction. In
this way, assets of the Fund will never be outside the control of the Fund's
custodian, although such control might be limited by the escrow receipts
issued.
At the time the Portfolio sells a call option on a contract for future
delivery, it is required to deposit with its custodian, in an escrow account,
a specified amount of cash or U.S. Government securities ("initial margin").
The account will be in the name of the CC. The amount of the margin
generally is a small percentage of the notional contract amount. The margin
required is set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is in the
nature of a performance bond or good faith deposit, and it is released from
escrow upon termination of the option assuming all contractual obligations
have been satisfied. The Portfolio will earn interest income on its initial
margin deposits.
In accordance with the rules of the exchange on which the option is traded,
it might be necessary for the Portfolio to supplement the margin held in
escrow. This will be done by placing additional cash or U.S. Government
securities in the escrow account. If the amount of required margin should
decrease, the CC will release the appropriate amount from the escrow account.
The assets in the margin account will be released to the CC only if the
Portfolio defaults or fails to honor its commitment to the CC and the CC
represents to the custodian that all conditions precedent to its right to
obtain the assets have been satisfied.
Lending Portfolio Securities
The Russell 2000 Small Cap Index Portfolio may lend portfolio securities with
a value up to 33 1/3% of its total assets. Such loans may be terminated at
any time. The Portfolio will continuously maintain collateral equal to not
less than 100% of the current market value (on a daily marked-to-market
basis) of the loaned securities plus declared dividends and accrued interest.
While portfolio securities are on loan, the borrower will pay the Portfolio
any income accruing thereon, and the Portfolio may invest or reinvest the
collateral (depending on whether the collateral is cash securities) in
portfolio securities, thereby earning additional income. Loans are typically
subject to termination by the Portfolio in the normal settlement time,
currently five business days after notice, or by the borrower on one day's
notice. Borrowed securities must be returned when the loan is terminated.
Any gain or loss in the market price of the borrowed securities which occurs
during the term of the loan inures to the Portfolio and its shareholders.
The Portfolio may pay reasonable finders', borrowers', administrative, and
custodial fees in connection with a loan of its securities. The Adviser will
review and monitor the creditworthiness of such borrowers on an ongoing
basis.
Pledging of Assets
The Russell 2000 Small Cap Index Portfolio may pledge or mortgage assets in
conformance with the Portfolio's fundamental investment restrictions
regarding borrowing and reverse repurchase agreements. Margin deposits for
the purchase and sale of financial futures contracts and related options are
not deemed to be a pledge.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental restrictions relating to the
investment of assets of the Portfolios and other investment activities.
These are Fundamental policies and may not be changed without the approval of
holders of the majority of the outstanding voting shares of each Portfolio
affected (which for this purpose means the lesser of: [i] 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or [ii] more than 50% of the outstanding shares). A change in
policy affecting only one Portfolio may be effected with the approval of the
majority of the outstanding voting shares of that Portfolio only. The Fund's
fundamental investment restrictions provide that no Portfolio of the Fund is
allowed to:
(1) Issue senior securities (except that the Portfolio may borrow money as
described in restriction [9] below).
(2) With respect to 75% of the value of its total assets, invest more than
5% of its total assets in securities (other than securities issued or
guaranteed by the United States Government or its agencies or
instrumentalities) of any one issuer.
(3) Purchase more than either: (i) 10% in principal amount of the
outstanding debt securities of an issuer, or (ii) 10% of the outstanding
voting securities of an issuer, except that such restrictions shall not apply
to securities issued or guaranteed by the United States Government or its
agencies or instrumentalities.
(4) Invest more than 25% of its total assets in the securities of issuers
primarily engaged in the same industry. For purposes of this restriction,
gas, gas transmission, electric, water, and telephone utilities each will be
considered a separate industry. This restriction does not apply to
obligations of banks or savings and loan associations or to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
(5) Purchase or sell commodities, commodity contracts, or real estate,
except that each Portfolio may purchase securities of issuers which invest or
deal in any of the above, and except that each Portfolio may invest in
securities that are secured by real estate. This restriction does not apply
to obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities or to futures contracts or options purchased by
the Russell 2000 Small Cap Index Portfolio in compliance with non-fundamental
restrictions [6 and 7] below.
(6) Purchase any securities on margin (except that the Fund may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities) or make short sales of securities or maintain
a short position.
(7) Make loans, except through the purchase of obligations in private
placements or by entering into repurchase agreements (the purchase of
publicly traded obligations not being considered the making of a loan).
(8) Lend its securities, if, as a result, the aggregate of such loans
would exceed one-third of the Portfolio's total assets.
(9) Borrow amounts in excess of 10% of its total assets, taken at market
value at the time of the borrowing, and then only from banks and by entering
into reverse repurchase agreements, as a temporary measure for extraordinary
or emergency purposes, or to meet redemption requests that might otherwise
require the untimely disposition of securities, and not for investment or
leveraging. For purposes of this restriction, entering into futures
contracts or reverse repurchase agreements will not be deemed a borrowing.
(10) Underwrite securities of other issuers except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in selling shares
of each Portfolio and except as it may be deemed such in a sale of restricted
securities.
(11) Invest more than 10% of its total assets in repurchase agreements
maturing in more than seven days, "small bank" certificates of deposit that
are not readily marketable, and other illiquid investments.
(12) Enter into reverse repurchase agreements if the total of such
investments would exceed 5% of the total assets of the Portfolio.
The Fund has also adopted the following additional investment restrictions
that are not fundamental and may be changed by the Board of Directors without
shareholder approval. Under these restrictions, no Portfolio of the Fund
may:
(1) Participate on a joint (or a joint and several) basis in any trading
account in securities (but this does not prohibit the "bunching" of orders
for the sale or purchase of Portfolio securities with the other Portfolios or
with other accounts advised or sponsored by the Adviser or any of its
affiliates to reduce brokerage commissions or otherwise to achieve best
overall execution).
(2) Purchase or retain the securities of any issuer, if, to the knowledge
of the Fund, officers and directors of the Fund, the Adviser or any affiliate
thereof each owning beneficially more than 1/2% of one of the securities of
such issuer, own in the aggregate more than 5% of the securities of such
issuer.
(3) Purchase or sell interests in oil, gas, or other mineral exploration
or development programs, or real estate mortgage loans, except that each
Portfolio may purchase securities of issuers which invest or deal in any of
the above, and except that each Portfolio may invest in securities that are
secured by real estate mortgages. This restriction does not apply to
obligations or other securities issued or guaranteed by the United States
Government, its agencies or instrumentalities.
(4) Invest in companies for the purpose of exercising control (alone or
together with the other Portfolios).
(5) Purchase securities of other investment companies with an aggregate
value in excess of 5% of the Portfolio's total assets, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase
in the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved, or by purchase of UIT's designed to track an Index
and only if immediately thereafter not more than 10% of such Portfolio's
total assets, taken at market value, would be invested in such securities.
The Fund has also adopted the following additional investment restrictions
that are not fundamental and may be changed by the Board of Directors without
shareholder approval. Under these restrictions:
The Russell 2000 Small Cap Index Portfolio of the Fund may not:
(6) Invest more than 20% of its assets in futures contracts and/or options
on futures contracts, except as a temporary investment strategy until the
Portfolio reaches $50 million in net assets, the Portfolio may invest up to
100% of its assets in such futures and/or options contracts.
(7) Invest in options unless no more than 5% of its assets is paid for
premiums for outstanding put and call options (including options on futures
contracts) and unless no more than 25% of the Portfolio's assets consist of
collateral for outstanding options.
If a percentage restriction (for either fundamental or non-fundamental
policies) is adhered to at the time of investment, a later increase or
decrease in percentage beyond the specified limit resulting from a change in
values of portfolio securities or amount of net assets shall not be
considered a violation.
In addition to the investment restrictions described above, the Fund will
comply with restrictions contained in any current insurance laws in order
that the assets of life insurance company separate accounts may be invested
in Fund shares.
DISCLOSURE OF PORTFOLIO HOLDINGS
It is the policy of the Portfolio to protect the confidentiality of their
holdings and prevent the selective disclosure of non-public information about
their portfolio holdings. The Portfolio's service providers, to which the
Portfolio may disclose non-public information about portfolio holdings, are
required to comply with this policy. No information concerning the portfolio
holdings of a Portfolio may be disclosed to any unaffiliated third party,
except as provided below. The Board has adopted formal procedures governing
compliance with this policy.
A Portfolio or its duly authorized service providers may publicly disclose
holdings of the Portfolio in accordance with regulatory requirements, such as
periodic portfolio disclosure in filings with the Securities and Exchange
Commission. A summary or list of the Portfolio's completed purchases and
sales may only be made available after the public disclosure of its portfolio
holdings.
There are numerous mutual fund evaluation services such as Standard & Poor's,
Morningstar or Lipper Analytical Services, and due diligence departments of
broker-dealers, banks, financial planners and other financial institutions
that regularly analyze the portfolio holdings of mutual funds in order to
monitor and report on various attributes, including style, capitalization,
maturity, yield, beta, etc. These services and departments then distribute
the results of their analysis to the public, paid subscribers and/or in-house
brokers. In order to facilitate the review of the Portfolio by these
services and departments, the Portfolio may, consistent with its policies and
procedures, distribute (or authorize service providers to distribute)
information about the Portfolio's securities holdings to such services and
departments before its public disclosure is required or authorized, provided
that: (i) the recipient does not distribute the portfolio holdings to third
parties, other departments, or persons who are likely to use the information
for purposes of purchasing or selling the Funds (or any other fund that
invests in the Portfolio) before the portfolio holdings become public
information; and (ii) the recipient is willing to sign a written
confidentiality agreement that is designed to preserve the confidentiality of
the information. Persons and entities unwilling to execute an acceptable
confidentiality agreement within a reasonable period of time may only receive
portfolio holdings information that has otherwise been publicly disclosed.
Neither the Portfolio nor its service providers receive any compensation from
such services and departments. Subject to such departures as the Portfolio's
chief compliance officer ("CCO") believes reasonable and consistent with
protecting the confidentiality of the portfolio information, each
confidentiality agreement should generally provide that, among other things:
the portfolio information is the confidential property of the respective
Portfolio (and its service providers, if applicable) and may not be shared or
used directly or indirectly for any purpose except as expressly provided in
the confidentiality agreement; the recipient of the portfolio information
agrees to limit access to the portfolio information to its employees (and
agents) who, on a need to know basis, are (1) authorized to have access to
the portfolio information and (2) subject to confidentiality obligations,
including duties not to trade on non-public information, no less restrictive
than the confidentiality obligations contained in the confidentiality
agreement; and upon written request, the recipient agrees to promptly return
or destroy, as directed, the information.
The CCO may authorize disclosure of the Portfolio's securities holdings and,
in addition to the Board, may, on a case-by-case basis, impose additional
restrictions on the dissemination of portfolio information and waive certain
requirements. To the extent required by law, the CCO reports to the Board
any violations of the Portfolio's policies and procedures on disclosure of
portfolio holdings.
Any disclosure of the Portfolio's securities holdings must serve a legitimate
business purpose of the Portfolio and must be in the best interest of the
Portfolio's shareholders. In making such a determination, the CCO must
conclude that the anticipated benefits and risks to the Portfolio and its
shareholders justify the disclosure. A further determination must be made to
ensure that any conflicts of interest between the Portfolio, its
shareholders, and any third party are resolved prior to disclosure. The
Portfolio reserves the right to request certifications from senior officers
of authorized recipients that the recipient is using the portfolio holdings
information only in a manner consistent with the Portfolio's policy and any
applicable confidentiality agreement.
As an oversight procedure, the CCO reports all arrangements to disclose
portfolio holdings information to the Portfolios' Board of Directors on a
periodic basis. If the Board determines that any such arrangement is or
would be inappropriate, the Portfolio will promptly terminate the disclosure
arrangement.
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of Portfolio turnover,
which is calculated by dividing the lesser of purchases or sales of Portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities,
including options, with maturities at the time of acquisition of one year or
less). A high rate of Portfolio turnover generally involves correspondingly
greater brokerage commission expenses, which must be borne directly by the
Portfolio. Turnover rates may vary greatly from year to year as well as
within a particular year and may also be affected by cash requirements for
redemptions of each Portfolio's shares and by requirements which enable the
Fund to receive certain favorable tax treatments. The Portfolio turnover
rates will, of course, depend in large part on the level of purchases and
redemptions of shares of each Portfolio. Higher Portfolio turnover can
result in corresponding increases in brokerage costs to the Portfolios of the
Fund and their shareholders. However, because rate of Portfolio turnover is
not a limiting factor, particular holdings may be sold at any time, if
investment judgment or Portfolio operations make a sale advisable.
The annual portfolio turnover rates for the Portfolio is set forth in the
Financial Highlights section of the Prospectus.
MANAGEMENT OF THE FUND
Directors and Officers
INDEPENDENT DIRECTORS
[Enlarge/Download Table]
Term of Number of
Office Portfolios
and in Fund
Length Principal Complex
Position(s) of Occupation Overseen Other
with the Time During by Directorships
Name, Address and Age(1) Fund Served Past Five Years Director Held by Director
--------------------- --------- -------- --------------------- -------- ----------------
Theodore H. Emmerich Director Director Consultant; former Partner, 15 American
(79) since Ernst & Whinney, Financial
1987 Accountants Group
Yvonne L. Gray Director Director Executive Vice President/ 15
(54) since COO, United Way of Greater
1999 Cincinnati (Social Services
Provider); prior thereto,
Vice President/ Trust
Operations Officer,
Fifth Third Bank;
former Audit Manager,
Price Waterhouse
(Accounting Firm)
Michael K. Keating* Director Director Managing Director, 15
(50) since Keating, Vollmer & Co.
2005 LLC (Private Equity
Investment Firm)
David C. Phillips Director Director Co-Founder, Cincinnati 15 Meridian
(67) since Works, Inc. (Job . Bioscience, Inc.
2001 Placement); prior Cintas, Inc.
thereto, Chief Executive
Officer, Downtown
Cincinnati Inc. (Economic
revitalization of
Cincinnati)
Mary W. Sullivan Director Director Attorney, Peck, Shaffer & 15 Franklin Savings
(48) since Williams LLP (Law Firm) and Loan Co.;
2001 First Franklin
Corporation
INTERESTED DIRECTORS AND OFFICERS
[Enlarge/Download Table]
Term of Number of
Office Portfolios
and in Fund
Length Principal Complex
Position(s) of Occupation Overseen Other
with the Time During by Directorships
Name, Address and Age(1) Fund Served Past Five Years Director Held by Director
--------------------- --------- -------- --------------------- -------- ----------------
Steven R. Sutermeister* Director, Director Senior Vice President, 15 Carillon
(51) President since Union Central; President Investments, Inc;
and Chief 1999 and Chief Executive Summit Investment
Executive Officer, Adviser. Partners, Inc.;
Officer Union Central
Mortgage Funding
Inc.
John F. Labmeier Vice Officer Vice President, Associate NA NA
1876 Waycross Road President since General Counsel and
Cincinnati, OH 45240 and 1990 Assistant Secretary,
(56) Secretary Union Central; Vice
President and Secretary,
Carillon Investments,
Inc.; Secretary, Adviser
Thomas G. Knipper Vice Officer Treasurer and Chief NA NA
(48) President, since Compliance Officer,
Controller 1995 Adviser
and Chief
Compliance
Officer
Gerald Q. Herbert Treasurer Officer Director of Finance NA NA
(38) since and Accounting,
2005 Adviser; prior thereto
Controller for General
Factory Supplies Co.
John M. Lucas Assistant Officer Second Vice President, NA NA
1876 Waycross Road Secretary since Counsel and Assistant
Cincinnati, OH 45240 1990 Secretary, Union Central
(54)
* Except as otherwise indicated, the business of each
listed person is 312 Elm St., Ste. 1212, Cincinnati,
OH 45202.
(1) Mr. Sutermeister may be considered to be an "interested
person" of the Fund (within the meaning of the Investment
Company Act of 1940) because of his affiliation with the
Adviser.
BOARD OF DIRECTORS
The business and affairs of the Fund are managed under the direction of the
Board of Directors. All powers of the Fund are vested in, and may be
exercised by or under the authority of the Board of Directors except as
conferred on or reserved to the shareholders by the laws of the state of
Maryland or the Fund's Articles of Incorporation or By-laws.
The Board has a standing audit committee, which consists of Theodore H.
Emmerich, Yvonne L. Gray, Michael K. Keating, David C. Phillips and Mary W.
Sullivan, each of whom is not an "interested person" of the Fund as defined in
the 1940 Act ("Independent Director(s)"). The purpose of the audit committee
is to meet with the independent registered accounting firm and officers to
review accounting principles used by the Fund, the adequacy of internal
controls, the responsibilities and fees of the independent accountants, and
other matters. During 2004, the audit committee held three meetings.
The Board has a standing nominating committee, which consists of Yvonne L.
Gray, David C. Phillips and Mary W. Sullivan, each of whom is an Independent
Director. The purpose of the nominating committee is to review and nominate
candidates for positions as Directors to fill vacancies on the Board. During
2004, the nominating committee held one meeting. The nominating committee will
consider Director candidates recommended in writing by shareholders.
Recommendations should be addressed to Summit Mutual Funds, 312 Elm Street,
Suite 2525, Cincinnati, Ohio 45202.
Directors owned outstanding shares of the Fund as follows:
[Download Table]
Aggregate Dollar Range
of Equity Securities
Dollar Range of in ALL Registered Investment
Equity Securities Companies Overseen by Director in
Name of Director in the Fund Family of Investment Companies
---------------- ------------------ --------------------------------
Theodore H. Emmerich NA $50,001 - $100,000
Yvonne L. Gray NA $1 - $50,000
David C. Phillips NA Over $100,000
Mary W. Sullivan NA $50,001 - $100,000
Steven R. Sutermeister NA Over $100,000
*Information regarding ownership is as of December 31, 2004.
As of the date of this Statement of Additional Information, the officers and
directors of the Fund owned less than 1% of any of the outstanding shares of
the Fund. Directors who are not officers or employees of Union Central Life
Insurance Company ("Union Central") or the Fund's investment adviser are paid
a fee plus actual out-of-pocket expenses by the Fund for each meeting of the
Board of Directors attended. Total fees and expenses incurred for 2004 were
$137,467.
As of December 31, 2004, no Director owned beneficially or of record any
securities of the investment adviser or principal underwriter of the Fund, or
a person (other than a registered investment company) directly or indirectly
controlling, controlled by, or under common control with an investment
adviser or principal underwriter of the Fund.
Compensation Table
[Download Table]
(1) (2) (3) (4) (5)
Pension or Total
Retirement Compensation
Benefits Estimated From Fund
Aggregate Accrued as Annual and Fund
Compensation Part of Fund Benefits Upon Complex Paid
Name of Person, Position From Fund Expenses Retirement to Directors
------------------------ ------------ ------------ ------------- ------------
Theodore H. Emmerich $30,600 - - $30,600
Director
Yvonne L. Gray $26,500 - - $26,500
Director
David C. Phillips $26,500 - - $26,500
Director
Mary W. Sullivan $26,000 - - $26,000
Director
Steven R. Sutermeister N/A N/A N/A N/A
Director
Investment Adviser
The Fund has entered into an Investment Advisory Agreement with Summit
Investment Partners, Inc. ("Adviser"), whose principal business address is
312 Elm Street, Suite 1212, Cincinnati, Ohio 45202. The Adviser was
incorporated under the laws of Ohio on August 18, 1986, and is a wholly-owned
subsidiary of Union Central. Executive officers and directors of the Adviser
who are affiliated with the Fund are Steven R. Sutermeister, Director,
President and Chief Executive Officer; Thomas G. Knipper, Chief Compliance
Officer and Treasurer; and John F. Labmeier, Secretary.
Pursuant to the Investment Advisory Agreement, the Fund has retained the
Adviser to manage the investment of the Fund's assets, including the placing
of orders for the purchase and sale of Portfolio securities. The Adviser is
at all times subject to the direction and supervision of the Board of
Directors of the Fund.
The Adviser continuously furnishes an investment program for each Portfolio,
is responsible for the actual management of each Portfolio and has
responsibility for making decisions to buy, sell or hold any particular
security. The Adviser obtains and evaluates such information and advice
relating to the economy, securities markets, and specific securities as it
considers necessary or useful to continuously manage the assets of the
Portfolios in a manner consistent with their investment objectives, policies
and restrictions. The Adviser considers analyses from various sources, makes
necessary investment decisions and effects transactions accordingly. The
Adviser also performs certain administrative functions for the Fund. The
Adviser may utilize the advisory services of subadvisers for one or more of
the Portfolios.
Expenses
The Fund's expenses are deducted from total income before dividends are paid.
These expenses, which are accrued daily, include: the fee of the Adviser;
taxes; legal, dividend disbursing, bookkeeping and transfer agent, custodian
and auditing fees; and printing and other expenses relating to the Fund's
operations which are not expressly assumed by the Adviser under its
investment advisory agreement with the Fund. Certain expenses are paid by the
particular Portfolio that incurs them, while other expenses are allocated
among the Portfolios on the basis of their relative size (i.e., the amount of
their net assets). The Adviser will pay any expenses of the Russell 2000
Small Cap Index Portfolio, other than the advisory fee for that Portfolio and
the .20% distribution and service (12b-1) fees, to the extent that such
expenses exceed .40% of that Portfolio's net assets.
Payment of Expenses
The Fund has also entered into an Administrative Services Agreement with the
Adviser in which the Adviser, at its expense, maintains certain of the Fund's
books and records (other than those provided by U.S.Bancorp Fund Services,
LLC, by agreement) and furnishes such office space, facilities, equipment,
and clerical help as the Fund may reasonably require in the conduct of
business. In addition, the Adviser pays for the services of all executive,
administrative, clerical, and other personnel, including officers of the
Fund, who are employees of Union Central. Expenses not expressly assumed by
the Adviser under the Agreement will be paid by the Fund.
Each Portfolio pays all other expenses incurred in its operation and a
portion of the Fund's general administration expenses allocated on the basis
of the asset size of the respective Portfolios. Expenses other than the
Adviser's fee that are borne directly and paid individually by a Portfolio
include, but are not limited to, brokerage commissions, dealer markups,
expenses incurred in the acquisition of Portfolio securities, transfer taxes,
transaction expenses of the custodian, pricing services used by only one or
more Portfolios, and other costs properly payable by only one or more
Portfolios. Expenses which are allocated on the basis of size of the
respective Portfolios include custodian (portion based on asset size),
dividend disbursing agent, transfer agent, bookkeeping services (except
annual per Portfolio base charge), pricing, shareholder's and directors'
meetings, directors' fees, proxy statement and Prospectus preparation,
registration fees and costs, fees and expenses of legal counsel not including
employees of the Adviser, membership dues of industry associations, postage,
insurance premiums including fidelity bond, and all other costs of the Fund's
operation properly payable by the Fund and allocable on the basis of size of
the respective Portfolios. The Adviser will also pay any expenses of the
Russell 2000 Small Cap Index Portfolio, other than the advisory fee for the
Portfolio and the .20% distribution and service (12b-1) fees, to the extent
that such expenses exceed .40% of that Portfolio's net assets
Depending on the nature of a legal claim, liability or lawsuit, litigation
costs, payment of legal claims or liabilities and any indemnification
relating thereto may be directly applicable to a Portfolio or allocated on
the basis of the size of the respective Portfolios. The directors have
determined that this is an appropriate method of allocation of expenses.
Advisory Fee
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily as described in the Prospectus. The
compensation for the Portfolio for the fiscal years ended December 31, 2004,
2003 and 2002, respectively, were as follows:
[Enlarge/Download Table]
2004 2003 2002
------------------- -------------------- -----------------
Expense Expense Expense
Reimburse- Reimburse- Reimburse-
ments ments ments
and and and
Waivers Waivers Waivers
Advisory Paid Advisory Paid Advisory Paid
Portfolio Fee by Adviser Fee by Adviser Fee by Adviser
--------- -------- ---------- --------- ---------- -------- ----------
Russell 2000 Small Cap Index Portfolio 185,763 8,798 60,471 63,46 57,861 95,987
Investment Advisory Agreement and Administrative Services Agreement
Unless earlier terminated as described below, the Investment Advisory
Agreement will continue in effect from year to year if approved annually: (a)
by the Board of Directors of the Fund or by a majority of the outstanding
shares of the Fund, including a majority of the outstanding shares of each
Portfolio; and (b) by a majority of the directors who are not parties to such
contract or interested persons (as defined by the Investment Company Act of
1940) of any such party. The Agreement is not assignable and may be
terminated without penalty by the Fund on 60 days notice, and by the Adviser
on 90 days notice.
At a shareholders' meeting on November 9, 2001, the shareholders approved an
amendment to the Investment Advisory Agreement that eliminated certain
administrative responsibilities enumerated in the Investment Advisory
Agreement for all of the Portfolios and incorporated them into a separate
administrative services agreement between the Fund and the Adviser. The
Board of Directors previously approved the amendment on September 26, 2001.
Administrative responsibilities including:
o preparing, maintaining, analyzing and reporting on the
Portfolios' expenses,
o authorizing payment of Fund and Portfolio expenses,
o coordinating completion of annual audits,
o drafting semi-annual and annual financial statements,
o preparing tax returns,
o coordinating Board meetings,
o preparing and filing reports to the SEC and states, and
o coordinating and managing procedures for compliance with
federal and state regulations,
are now covered by a separate administrative services agreement between the
Fund and the Adviser. A separate administrative service fee of 0.10% of
average daily net assets on an annual basis, will be imposed for these
services. Administrative service fees paid during the fiscal year ended
December 31, 2004 were $562,853.
The Investment Advisory Agreement provides that the Adviser shall not be
liable to the Fund or to any shareholder for any error of judgment or mistake
of law or for any loss suffered by the Fund or by any shareholder in
connection with matters to which the Investment Advisory Agreement relates,
except a loss resulting from willful misfeasance, bad faith, gross
negligence, or reckless disregard on the part of the Adviser in the
performance of its duties thereunder. In the case of administrative
services, the Adviser will be held to the aforementioned standard of
liability.
The Investment Advisory Agreement in no way restricts the Adviser from acting
as investment manager or adviser to others.
If the question of continuance of the Investment Advisory Agreement (or
adoption of any new Agreement) is presented to shareholders, continuance (or
adoption) with respect to a Portfolio shall be effective only if approved by
a majority vote of the outstanding voting securities of that Portfolio. If
the shareholders of any one or more of the Portfolios should fail to approve
the Agreement, the Adviser may nonetheless serve as an adviser with respect
to any Portfolio whose shareholders approved the Agreement.
Board Review of Advisory Arrangements
The Board of Directors most recently approved the Investment Advisory
Agreement and Administrative Services Agreement at a meeting held on November
8, 2004. In determining whether it was appropriate to approve the Investment
Advisory Agreement, the Board of Directors requested information, provided by
the Adviser, that it believed to be reasonably necessary to reach its
conclusion. The Board of Directors carefully evaluated this information, and
was advised by legal counsel with respect to its deliberations. Based on its
review of the information requested and provided, the Board of Directors
determined that the Investment Advisory Agreement is consistent with the best
interests of each Portfolio to which it applies and its shareholders, and
enables each Portfolio to receive high quality services at a cost that is
appropriate, reasonable, and in the best interests of the Portfolios and
their shareholders. The Board of Directors made these determinations on the
basis of the following considerations, among others:
o THE NATURE, EXTENT AND QUALITY IF THE ADVISORY SERVICES PROVIDED. The
Board concluded that the Adviser provides high quality services to each
Portfolio, as indicated by each Portfolio's competitive investment
performance, the high level of correlation of the index Portfolios to their
benchmarks, and the compliance track record of the Portfolios. The Board
also determined that the Adviser provide investment and related services that
are appropriate in scope and extent in light of the Portfolios' operations,
the competitive landscape of the investment company business and investor
needs. The Board specifically noted that the Adviser provides all facilities
and services necessary to analyze, execute and maintain investments that are
consistent with the Portfolios' objectives, restrictions and limitations.
o THE INVESTMENT PERFORMANCE OF THE PORTFOLIOS. With respect to each
Portfolio, the Board determined that the Adviser has achieved competitive or
superior investment performance relative to its benchmark index and
comparable funds. The managed Portfolios' one-year performance exceeded the
50th percentile in all cases, was in the top quartile for all but two series
of the Fund, and was in the top decile for one series of the Fund. All index
Portfolios achieved the correlation expressed in the prospectus.
o THE COST OF ADVISORY SERVICES PROVIDED AND THE LEVEL OF PROFITABILITY.
The Board reviewed the fees charged by the Adviser for investment advisory
and administrative services, the gross revenues and pre-tax profits earned by
the Adviser for the year ended December 31, 2003 (before allocation of
corporate and other indirect expenses), and the resulting profit margin. The
Board also reviewed comparable information for the nine months ended
September 30, 2004. On the basis of the above information, the Board
concluded that, with respect to each Portfolio, the level of investment
advisory fees is appropriate in light of the management fees and overall
expense ratios of comparable investment companies and the anticipated
profitability of the relationship between each Portfolio and the Adviser and
its affiliates. Further, on the basis of comparative information supplied by
Lipper Analytics, the Board determined that the advisory fees and overall
expense ratio of each Portfolio were consistent with industry averages.
o WHETHER THE ADVISORY FEES REFLECT ECONOMIES OF SCALE. The Board
determined that the Portfolios have yet to achieve meaningful economies of
scale, which, therefore, cannot be reflected in the advisory fees. The Board
concluded that the advisory fees reflect the current economic environment for
the Adviser and the competitive nature of the mutual fund market. The
Directors also noted that Portfolio expenses are managed by the use of fee
caps and waivers, as many of the Portfolios are small and have not reached
the size necessary to provide the Adviser its full fee.
o THE EXTENT TO WHICH ECONOMIES OF SCALE WILL BE REALIZED AS THE
PORTFOLIOS GROW. While the advisory fees do not reduce should Portfolio
assets grow meaningfully, the Board determined that the advisory fees payable
under the advisory arrangements already reflect potential future economies of
scale to some extent by virtue of their relatively low levels (determined
with reference to industry standards as reported by Lipper Analytics) and the
Adviser's profitability at current or foreseeable asset levels. The Board
also noted that it would have the opportunity to periodically re-examine
whether a Portfolio had achieved economies of scale, and the appropriateness
of advisory fees payable to the Adviser, in the future.
o BENEFITS (SUCH AS SOFT DOLLARS) TO THE ADVISER FROM ITS RELATIONSHIP
WITH THE PORTFOLIO (AND ANY CORRESPONDING BENEFITS TO THE PORTFOLIO). The
Board determined that other benefits described by the Adviser from its
relationship with the Portfolio are reasonable and fair, and are consistent
with industry practice and the best interest of the Portfolios and their
shareholders. In this regard, the Directors noted that the Adviser utilizes
soft dollar commissions to a limited degree, and specifically reviewed the
Adviser's accrual and use of soft dollar credits with respect to all accounts
managed by the Adviser for the nine months ended September 30, 2004. The
Board noted that over 80% of the activity was generated from managed equity
trading, and that fixed income and index trading provide limited
opportunities for soft dollars.
o OTHER CONSIDERATIONS: In approving the continuation of the advisory
arrangements, the Board also considered the high quality of existing
portfolio management personnel, who will continue to manage the Portfolio,
and the Adviser's overall portfolio management capabilities. The Board
determined that the Adviser has made a substantial commitment to the
recruitment and retention of high quality personnel, and maintains the
financial and operational resources reasonably necessary to manage the
Portfolio. The Board also favorably considered the Adviser's entrepreneurial
commitment to the management and success of the Portfolio, which could entail
a substantial financial and professional commitment to the successful
operation of the Portfolio.
Service Agreement
Under a Service Agreement between the Adviser and Union Central, Union
Central has agreed to make available to the Adviser the services of certain
employees of Union Central on a part-time basis for the purpose of better
enabling the Adviser to fulfill its obligations to the Fund. Pursuant to the
Service Agreement, the Adviser shall reimburse Union Central for all costs
allocable to the time spent on the affairs of the Adviser by the employees
provided by Union Central. In performing their services for the Adviser
pursuant to the Service Agreement, the specified employees shall report and
be solely responsible to the officers and directors of the Adviser or persons
designated by them. Union Central shall have no responsibility for the
investment recommendations or decisions of the Adviser. The obligation of
performance under the Investment Advisory Agreement is solely that of the
Adviser and Union Central undertakes no obligation in respect thereto except
as otherwise expressly provided in the Service Agreement.
Securities Activities of Adviser
Securities held by the Fund may also be held by Union Central or by other
separate accounts or mutual funds for which the Adviser acts as an adviser.
Because of different investment objectives or other factors, a particular
security may be bought by Union Central or by the Adviser or for one or more
of its clients, when one or more other clients are selling the same security.
If purchases or sales of securities for one or more of the Fund's Portfolios
or other clients of the Adviser or Union Central arise for consideration at
or about the same time, transactions in such securities will be made, insofar
as feasible, for the Fund's Portfolios, Union Central, and other clients in a
manner deemed equitable to all. To the extent that transactions on behalf of
more than one client of the Adviser during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price.
On occasions when the Adviser deems the purchase or sale of a security to be
in the best interests of the Fund as well as other accounts or companies, it
may, to the extent permitted by applicable laws and regulations, but will not
be obligated to, aggregate the securities to be sold or purchased for the
Fund (or for two or more Portfolios) with those to be sold or purchased for
other accounts or companies in order to obtain more favorable execution and
lower brokerage commissions. In that event, allocation of the securities
purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Fund Portfolio(s) and to
such other accounts or companies. In some cases this procedure may adversely
affect the size of the position obtainable for a Portfolio.
Code of Ethics
The Adviser and the Fund have adopted a code of ethics under Rule 17j-1 of
the Investment Company Act of 1940. Carillon Investments, Inc.
("Underwriter") has also adopted a code of ethics. Each code of ethics
applies to the personal investing activities of the directors, officers and
certain employees of the Adviser, the Fund or the Underwriter as applicable.
Employees of the Adviser are permitted to make personal securities
transactions, including securities that may be held or purchased by the
Funds, subject to the requirements and restrictions set forth in the
Adviser's code of ethics. Employees of the Underwriter are also permitted to
make personal securities transactions, including securities that may be held
or purchased by the Funds, subject to the requirements and restrictions set
forth in the Underwriter's code of ethics.
Each code of ethics contains provisions and requirements designed to identify
and address certain conflicts of interest between personal investment
activities and the interests of clients such as the Fund. Among other
things, the code of ethics, which generally complies with standards
recommended by the Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions may not be made in
certain securities, and requires the submission of duplicate broker
confirmations and monthly reporting of securities transactions. Additional
restrictions apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process. Exceptions to these and
other provisions of the code of ethics may be granted in particular
circumstances after review by appropriate personnel.
PORTFOLIO MANAGERS
Russell 2000 Small Cap Index Portfolio
Gary R. Rodmaker and David M. Weisenburger are primarily responsible for the
day-to-day management of the Russell 2000 Small Cap Index Portfolio.
Other Accounts Managed
Mr. Rodmaker and Mr. Weisenburger also manage other registered investment
companies and other accounts, as indicated below. The following tables
identify, as of December 31, 2004 (i) the number of, and total assets of,
other registered investment companies, pooled investment vehicles and other
accounts managed and (ii) the total assets of such companies, vehicles and
accounts with respect to which the advisory fee is based on performance.
[Enlarge/Download Table]
Other Registered Other Pooled
Investment Companies Investment Vehicles Other Accounts
-------------------- ------------------- ----------------------
Total Total Total
Portfolio Manager Number Assets Number Assets Number Assets
----------------- ------ ------ ------ ------ ------ ------
Gary R. Rodmaker 3 $133,103,785 N/A N/A 6 $245,683,887
David M. Weisenburger 2 $114,622,711 N/A N/A 4 $2,362,956,056
As of December 31, 2004, none of these accounts had advisory fee arrangements
based on the performance of the account.
Compensation
Mr. Rodmaker's compensation consists of: a fixed base salary based on
industry surveys and the type and size of accounts managed; benefits that are
available generally to all salaried employees at the portfolio manager's
level; an annual bonus based on the profitability of the adviser, total
adviser assets under management, and the performance of his accounts (the
aggregate performance measurement is based on prescribed percentages of each
account, that is not a dollar-weighted compilation) versus specific
benchmarks (benchmarks include: Lehman Intermediate Government/Corporate
Index, Citigroup BBB Corporate Index, Merrill Lynch U.S. High Yield Master II
Index, S&P 500 Index, S&P MidCap 400 Index, Russell 2000 Index, Nasdaq-100
Index, MSCI EAFE Index, Lehman Aggregate Bond Index, and a customized client-
developed benchmark) and the performance of his direct reports' accounts; and
a long-term incentive compensation plan tied to the firm's value.
Mr. Weisenburger's compensation consists of: a fixed base salary based on
industry surveys and the type and size of accounts managed; benefits that are
available generally to all salaried employees at the portfolio manager's
level; an annual bonus based on the profitability of the adviser, total
adviser assets under management, and the performance of his accounts (the
aggregate performance measurement is based on prescribed percentages of each
account, that is not a dollar-weighted compilation) versus specific
benchmarks (benchmarks include: Lehman Intermediate Government/Corporate
Index, Citigroup BBB Corporate Index, S&P 500 Index, S&P MidCap 400 Index,
Russell 2000 Index, Nasdaq-100 Index, MSCI EAFE Index, Lehman Aggregate Bond
Index, and a customized client-developed benchmark); and a long-term
incentive compensation plan tied to the firm's value.
Conflicts of Interest
From time to time, potential conflicts of interest may arise between a
portfolio manager's management of the investments of the Fund on the one
hand, and the management of other registered investment companies and other
accounts (collectively, "other accounts") on the other. The other accounts
might have similar investment objectives or strategies as the Fund, track the
same indexes the Fund tracks or otherwise hold, purchase, or sell securities
that are eligible to be held, purchased or sold by the Fund. The other
accounts might also have different investment objectives or strategies than
the Fund.
Knowledge and Timing of Fund Trades. A potential conflict of interest may
arise as a result of the portfolio manager's day-to-day management of the
Fund. Because of their positions with the Fund, the portfolio managers know
the size, timing and possible market impact of the Fund's trades. It is
theoretically possible that the portfolio manager could use this information
to the advantage of other accounts they manage and to the possible detriment
of the Fund.
Investment Opportunities. A potential conflict of interest may arise as a
result of the portfolio manager's management of a number of accounts with
varying investment guidelines. Often, an investment opportunity may be
suitable for both the Fund and other accounts managed by the portfolio
manager, but may not be available in sufficient quantities for both the Fund
and the other accounts to participate fully. Similarly, there may be limited
opportunity to sell an investment held by the Fund and another account. The
Investment Manager has adopted policies and procedures reasonably designed to
allocate investment opportunities on a fair and equitable basis over time.
Ownership of Fund Shares
The table below sets forth the value of shares beneficially owned by the
portfolio managers in the Portfolios as of December 31, 2004, stated as being
within one of the following dollar ranges: None; $1-$10,000; $10,001-
$50,000; $50,001-$100,000; $100,001-$500,000; $500,001-$1,000,000; or over
$1,000,000.
[Download Table]
Portfolio Manager Dollar Range in Portfolio
Russell 2000 Small Cap Portfolio
------------------------------------------------------------
Gary R. Rodmaker $10,001 to $50,000
David M. Weisenburger None
DETERMINATION OF NET ASSET VALUE
The per share NAV of the Portfolio is determined by dividing the total value
of its securities and other assets, less liabilities, by the total number of
shares outstanding. The offering price for a share of the Portfolio is its
NAV per share. As described in the Prospectus, the NAV of shares of each
Portfolio is determined once daily, Monday through Friday as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
Time), on days during which there are purchases or redemptions of Fund
shares, except: (i) when the New York Stock Exchange is closed (currently New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day); and (ii) any day on which
changes in the value of the portfolio securities of the Portfolio will not
materially affect the current net asset value of the shares of a Portfolio.
Securities held by the Portfolio, except for money market instruments
maturing in 60 days or less, will be valued as follows: Securities which are
traded on stock exchanges (including securities traded in both the over-the-
counter market and on exchange), or listed on the NASDAQ National Market
System, are valued at the last sales price as of the close of the New York
Stock Exchange on the day the securities are being valued, or, lacking any
sales, at the closing bid prices. Alternatively, NASDAQ listed securities may
be valued on the basis of the NASDAQ Official Closing Price. Securities
traded only in the over-the-counter market are valued at the last bid prices
quoted by brokers that make markets in the securities at the close of trading
on the New York Stock Exchange. Securities and assets for which market
quotations are not readily available are valued at fair value as determined
in good faith adopted in accordance with procedures by the Board of
Directors.
Money market instruments with a remaining maturity of 60 days or less are
valued on an amortized cost basis. Under this method of valuation, the
instrument is initially valued at cost (or in the case of instruments
initially valued at market value, at the market value on the day before its
remaining maturity is such that it qualifies for amortized cost valuation);
thereafter, the Fund assumes a constant proportionate amortization in value
until maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price
that would be received upon sale of the instrument.
Generally, trading in foreign securities, corporate bonds, U.S. government
securities and money market instruments is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the NAV of each Fund's shares generally are
determined at such time. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. Occasionally, events affecting
the values of such securities and such exchange rates may occur between the
times at which such values are determined and the close of the NYSE. If
events affecting the value of securities occur during such a period, and a
Fund's NAV is materially affected by such changes in the value of the
securities, then these securities may be valued at their fair value as
determined in good faith by or under the supervision of the Board.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers shares of the Summit Pinnacle Series of Portfolios, without
sales charge, only to separate accounts of The Union Central Life Insurance
Company and other affiliated or unaffiliated life insurance companies. It is
possible that at some later date the Fund may offer shares to other
investors.
The Fund is required to redeem all full and fractional shares of the Fund for
cash at the net asset value per share. Payment for shares redeemed will
generally be made within seven days after receipt of a proper notice of
redemption. The right to redeem shares or to receive payment with respect to
any redemption may only be suspended for any period during which: (a) trading
on the New York Stock Exchange is restricted as determined by the Securities
and Exchange Commission or such exchange is closed for other than weekends
and holidays; (b) an emergency exists, as determined by the Securities and
Exchange Commission, as a result of which disposal of Portfolio securities or
determination of the net asset value of a Portfolio is not reasonably
practicable; and (c) the Securities and Exchange Commission by order permits
postponement for the protection of shareholders.
TAXES
The following is a summary of certain United States federal income tax
consequences relating to the ownership of shares in the Fund by the separate
accounts of The Union Central Life Insurance Company for the purpose of
funding variable insurance policies. Unless otherwise stated, this summary
deals only with the status of each Series as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and the
application of the diversification rules under section 817(h) of the Code.
It does not deal with any other federal, state, local or foreign tax
consequences, including the possible effect of leveraged investments or the
treatment of hedging devices. It also does not deal with insurance companies
that are not domiciled in the United States. This summary is based on the
Code, United States Treasury regulations thereunder (the "Treasury
Regulations") and administrative and judicial interpretations thereof, as of
the date hereof, all of which are subject to change, possibly on a
retroactive basis. Any such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner
of the Fund.
The Portfolio will be treated as a separate entity for federal income tax
purposes. The Portfolio has qualified and has elected to be taxed as a
"regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). If a Portfolio
qualifies as a "regulated investment company" and complies with the
provisions of the Code by distributing substantially all of its net income
(both ordinary income and capital gain), the Portfolio will be relieved from
federal income tax on the amounts distributed.
In order to qualify as a regulated investment company, in each taxable year
the Portfolio must, among other things: (a) derive at least 90 percent of its
gross income from dividends, interest, payments with respect to loans of
securities, and gains from the sale or other disposition of stocks or
securities or foreign currencies (subject to the authority of the Secretary
of the Treasury to exclude certain foreign currency gains) or other income
(including, but not limited to, gains from options, futures, or forward
contracts which are ancillary to the Portfolio's principal business of
investing in stocks or securities or options and futures with respect to
stocks or securities) derived with regard to its investing in such stocks,
securities or currencies; and (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) at least 50% of the value of the Fund's total
assets is represented by cash and cash items, U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities limited, in respect of any one issuer, to an amount not
greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of other regulated
investment companies).
As a regulated investment company, the Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders,
if at least 90% of the Fund's investment company taxable income (which
includes, among other items, dividends, interest and the excess of any net
short-term capital gains over net long-term capital losses) for the taxable
year is distributed. The Fund intends to distribute all or substantially all
of such income.
Amounts not distributed by the Fund on a timely basis in accordance with a
calendar year distribution requirement may be subject to a nondeductible four
percent (4%) excise tax. To avoid the tax, the Fund must distribute during
each calendar year, (1) at least ninety-eight percent (98%) of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) at least ninety-eight percent (98%) of its capital gains in excess
of its capital losses (adjusted for certain ordinary losses) for the twelve-
month period ending on October 31 of the calendar year, and (3) all ordinary
income and capital gains for previous years that were not distributed during
such years. These excise tax provisions do not generally apply to a
regulated investment company, like the Fund, all of whose shareholders are
the segregated asset accounts of life insurance companies funding variable
contracts. (For this purpose, any shares of the Fund attributable to an
investment in the Fund not exceeding $250, 000 made in connection with the
organization of the Fund will not be taken into account.) Accordingly, if
this condition regarding the ownership of shares of the Fund is met, the
excise tax will be inapplicable to the Fund.
Interests in the Fund will be held by insurance company separate accounts
that are subject to the requirements of section 817(h) of the Code and the
Treasury Regulations thereunder, which impose certain investment
diversification requirements (the "Diversification Rules") with respect to
assets held in such separate accounts. These rules apply to the investments
made by separate accounts or their subaccounts (such accounts or subaccounts
are referred to as "segregated asset accounts") that are used to fund
benefits under variable life insurance and annuity contracts. The Fund
intends to comply with the Diversification Rules.
The Diversification Rules generally require that on the last day of each
quarter of a calendar year (or generally within 30 days thereafter) no more
than 55% of the value of the Fund's assets can be represented by any one
investment; no more than 70% can be represented by any two investments; no
more than 80% can be represented by any three investments; and no more than
90% can be represented by any four investments. For purposes of these rules,
all securities of the same issuer generally are treated as a single
investment, but each U.S. government agency or instrumentality is treated as
a separate issuer. Failure by the Fund to both qualify as a regulated
investment company and to satisfy the Diversification Rules would generally
cause the variable contracts to lose their favorable tax status and require a
contract owner to include in ordinary income any income accrued under the
contracts for the current and all prior taxable years. Under certain
circumstances described in the applicable Treasury regulations, inadvertent
failure to satisfy the applicable Diversification Rules may be corrected, but
such a correction would require a payment to the Internal Revenue Service
based on the tax contract owners would have incurred if they were treated as
receiving the income on the contract for the period during which the
Diversification Rules were not satisfied. Any such failure may also result
in adverse tax consequences for the insurance company issuing the contracts.
Failure by the Fund to qualify as a regulated investment company would also
subject it to federal and state income taxation on all of its taxable income
and gain, whether or not distributed to shareholders.
For a variable life insurance contract or a variable annuity contract to
qualify for tax deferral, assets in the separate accounts supporting the
contract must be considered to be owned by the insurance company and not by
the contract owner. Under current U.S. tax law, if a contract owner has
excessive control over the investments made by a separate account, or the
underlying fund, the contract owner will be taxed currently on income and
gains from the account or fund. In other words, in such a case of "investor
control" the contract owner would not derive the tax benefits normally
associated with variable life insurance or variable annuities.
Generally, according to the IRS, there are two ways that impermissible
investor control may exist. The first relates to the design of the contract
or the relationship between the contract and a separate account or underlying
fund. For example, at various times, the IRS has focused on, among other
factors, the number and type of investment choices available pursuant to a
given variable contract, whether the contract offers access to funds that are
available to the general public, the number of transfers that a contract
owner may make from one investment option to another, and the degree to which
a contract owner may select or control particular investments.
With respect to this first aspect of investor control, the Fund believes that
the design of the contracts and the relationship between the contracts and
the Portfolio satisfy the current view of the IRS on this subject, such that
the investor control doctrine should not apply. However, because of some
uncertainty with respect to this subject and because the IRS may issue
further guidance on this subject, the Fund reserves the right to make such
changes as it deem necessary or appropriate to reduce the risk that a
contract might not qualify as a life insurance contract or as an annuity for
tax purposes.
The second way that impermissible investor control might exist concerns your
actions. Under the IRS pronouncements, you may not select or control
particular investments, other than choosing among broad investment choices
such as selecting a particular Portfolio. You may not select or direct the
purchase or sale of a particular investment of a Portfolio. All investment
decisions concerning the Portfolio must be made by the portfolio manager for
such Portfolio in his or her sole and absolute discretion, and not by the
contract owner. Furthermore, under the IRS pronouncements, you may not
communicate directly or indirectly with such a portfolio manager or any
related investment officers concerning the selection, quality, or rate of
return of any specific investment or group of investments held by a
Portfolio.
Finally, the IRS may issue additional guidance on the investor control
doctrine, which might further restrict your actions or features of the
variable contract. Such guidance could be applied retroactively. If any of
the rules outlined above are not complied with, the IRS may seek to tax you
currently on income and gains from a Portfolio such that you would not derive
the tax benefits normally associated with variable life insurance or variable
annuities. Although highly unlikely, such an event may have an adverse
impact on the Fund and other variable contracts.
For information concerning the federal income tax consequences to the owners
of a variable contract or policy, such owners should consult the prospectuses
for their particular contract or policy.
The discussion of "Taxes" in the Prospectus, in conjunction with the
foregoing, is a general and abbreviated summary of the applicable provisions
of the Code and Treasury Regulations currently in effect as interpreted by
the Courts and the Internal Revenue Service.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
The Northern Trust Company, 50 South LaSalle St., Chicago, Illinois 60675,
acts as Custodian of the Fund's assets. U.S. Bancorp Fund Services, LLC, P.O.
Box 701, Milwaukee, Wisconsin 53201-0701, 1-888-259-7565, is the Fund's
bookkeeping, transfer and dividend disbursing agent.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is primarily responsible for the investment decisions of the
Portfolio, including decisions to buy and sell securities, the selection of
brokers and dealers to effect the transactions, the placing of investment
transactions, and the negotiation of brokerage commissions, if any. The
Portfolio has no obligation to deal with any dealer or group of dealers in
the execution of transactions in Portfolio securities. In placing orders, it
is the policy of the Fund to obtain the most favorable net results, taking
into account various factors, including price, dealer spread or commission,
if any, size of the transaction, and difficulty of execution. While the
Adviser generally seeks reasonably competitive spreads or commissions, the
Portfolio will not necessarily be paying the lowest spread or commission
available.
If the securities in which a the Portfolio invests are traded primarily in
the over-the-counter market, where possible the Portfolio will deal directly
with the dealers who make a market in the securities involved unless better
prices and execution are available elsewhere. Such dealers usually act as
principals for their own account. On occasion, securities may be purchased
directly from the issuer. Bonds and money market instruments are generally
traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of Portfolio securities transactions
of the Portfolio will consist primarily of brokerage commission or dealer or
underwriter spreads.
While the Adviser seeks to obtain the most favorable net results in effecting
transactions in the Portfolio securities, brokers who provide supplemental
investment research to the Adviser may receive orders for transactions by the
Fund. Such supplemental research service ordinarily consists of assessments
and analyses of the business or prospects of a company, industry, or economic
sector. If, in the judgment of the Adviser, the Fund will be benefited by
such supplemental research services, the Adviser is authorized to pay
commissions to brokers furnishing such services which are in excess of
commissions which another broker may charge for the same transaction.
Information so received will be in addition to and not in lieu of the
services required to be performed by the Adviser under its Investment
Advisory Agreement. The expenses of the Adviser will not necessarily be
reduced as a result of the receipt of such supplemental information. In some
cases, the Adviser may use such supplemental research in providing investment
advice to its other advisory accounts.
During 2004, 24.5% of the Fund's total brokerage was allocated to brokers who
furnish statistical data or research information. Brokerage commissions paid
during 2004, 2003 and 2002 were $141,776, $195,439 and $232,188,
respectively.
GENERAL INFORMATION
Capital Stock
The Fund is a mutual fund. Its board of directors is responsible for
supervising its business affairs and investments, which are managed on a
daily basis by the Adviser. The Fund was incorporated under the laws of the
State of Maryland on January 30, 1984. The authorized capital stock of the
Fund consists of 890,000,000 shares of common stock, par value ten cents
($0.10) per share. The shares of the authorized capital stock are currently
divided into the following classes:
[Download Table]
Fund Authorized Capital Stock
---- ------------------------
Summit Pinnacle Series
Zenith Portfolio 40,000,000 shares
Bond Portfolio 30,000,000 shares
Capital Portfolio* 30,000,000 shares
S&P 500 Index Portfolio 30,000,000 shares
Micro-Cap Portfolio* 20,000,000 shares
S&P MidCap 400 Index Portfolio 20,000,000 shares
Balanced Index Portfolio 20,000,000 shares
Lehman Aggregate Bond Index Portfolio 20,000,000 shares
Russell 2000 Small Cap Index Portfolio 20,000,000 shares
Nasdaq -100 Index Portfolio 20,000,000 shares
EAFE International Index Portfolio 20,000,000 shares
Russell 2000 Small Cap Index Portfolio Class F 20,000,000 shares
Summit Apex Series
Money Market Fund 200,000,000 shares
S&P 500 Index Fund* 20,000,000 shares
S&P MidCap 400 Index Fund* 20,000,000 shares
Russell 2000 Small Cap Index Fund* 20,000,000 shares
Balanced Index Fund* 20,000,000 shares
Nasdaq-100 Index Fund 20,000,000 shares
Lehman Aggregate Bond Index Fund* 20,000,000 shares
Micro-Cap Fund* 20,000,000 shares
Bond Fund 20,000,000 shares
Everest Fund 20,000,000 shares
Total Stakeholder Impact Fund* 20,000,000 shares
Short-term Government Fund 20,000,000 shares
High Yield Bond Fund 20,000,000 shares
Emerging Markets Bond Fund* 20,000,000 shares
EAFE International Index Fund* 20,000,000 shares
Nasdaq-100 Index Fund Class F 20,000,000 shares
Total Stakeholder Impact Fund Class F* 20,000,000 shares
Everest Fund Class F 20,000,000 shares
Nasdaq-100 Index Fund Class A 20,000,000 shares
Total Stakeholder Impact Fund Class A* 20,000,000 shares
Everest Fund Class A 20,000,000 shares
* The Capital Portfolio, Micro-Cap Portfolio, S&P 500 Index Fund, S&P MidCap
400 Index Fund, Russell 2000 Small Cap Index Fund, Balanced Index Fund,
Lehman Aggregate Bond Index Fund, Micro-Cap Fund, Emerging Markets Bond Fund,
EAFE International Index Fund and Total Stakeholder Impact Fund are no longer
offered to shareholders.
The Board of Directors may change the designation of any Portfolio and may
increase or decrease the number of authorized shares of any Portfolio, but
may not decrease the number of authorized shares of any Portfolio below the
number of shares then outstanding.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective Portfolio and, upon
liquidation or dissolution, in net assets of such Portfolio remaining after
satisfaction of outstanding liabilities.
Voting Rights
In accordance with an amendment to the Maryland General Corporation Law, the
Board of Directors of the Fund has adopted an amendment to its Bylaws
providing that unless otherwise required by the Investment Company Act of
1940, the Fund shall not be required to hold an annual shareholder meeting
unless the Board of Directors determines to hold an annual meeting. The Fund
intends to hold shareholder meetings only when required by law and such other
times as may be deemed appropriate by its Board of Directors.
All shares of common stock have equal voting rights (regardless of the net
asset value per share) except that on matters affecting only one Portfolio,
only shares of the respective Portfolio are entitled to vote. The shares do
not have cumulative voting rights. Accordingly, the holders of more than 50%
of the shares of the Fund voting for the election of directors can elect all
of the directors of the Fund if they choose to do so and in such event the
holders of the remaining shares would not be able to elect any directors.
Matters in which the interests of all Portfolios are substantially identical
(such as the election of directors or the approval of independent public
accountants) will be voted on by all shareholders without regard to the
separate Portfolios. Matters that affect all Portfolios but where the
interests of the Portfolios are not substantially identical (such as approval
of the Investment Advisory Agreement) would be voted on separately by each
Portfolio. Matters affecting only one Portfolio, such as a change in its
fundamental policies, are voted on separately by that Portfolio.
Matters requiring separate shareholder voting by Portfolio shall have been
effectively acted upon with respect to any Portfolio if a majority of the
outstanding voting securities of that Portfolio votes for approval of the
matter, notwithstanding that: (1) the matter has not been approved by a
majority of the outstanding voting securities of any other Portfolio; or (2)
the matter has not been approved by a majority of the outstanding voting
securities of the Fund.
The phrase "a majority of the outstanding voting securities" of a Portfolio
(or of the Fund) means the vote of the lesser of: (1) 67% of the shares of
the Portfolio (or the Fund) present at a meeting if the holders of more than
50% of the outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of the Portfolio (or the Fund).
At a shareholders' meeting on November 9, 2001, the shareholders approved an
amendment to the Funds' articles of incorporation whereby the Board is
permitted, without further shareholder approval, to effect, from time to
time, a stock split or reverse stock split for any or all of the Portfolios
that could affect relative voting power of shares in matters requiring a
company-wide vote. On November 9, 2001, the Board of Directors authorized a
1-for-5 reverse stock split for all of the Funds and Portfolios except the
Money Market Fund. The effective date of the reverse stock split was
February 19, 2002.
It is anticipated that Union Central will have voting control of the Fund.
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 Portfolio's fundamental investment
objectives and policies, etc.) regardless of the views of Contract Owners.
However, under current interpretations of presently applicable law, Contract
Owners are entitled to give voting instructions with respect to Fund shares
held in registered separate accounts and therefore all Contract Owners would
receive advance notice before any such changes could be made.
Additional Information
This Statement of Additional Information and the Prospectus do not contain
all the information set forth in the registration statement and exhibits
relating thereto, which the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.
FINANCIAL STATEMENTS AND INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
This Statement of Additional Information incorporates by reference the Summit
Pinnacle Series financial statements dated December 31, 2004, including notes
thereto and auditor's report thereon, from the Summit Mutual Funds annual
report dated December 31, 2004. The financial statements of the Fund for the
fiscal year ended December 31, 2004 have been audited by Deloitte & Touche
LLP, 111 South Wacker Drive, Chicago, Illinois 60606-4301, which provides
auditing and related tax services to the Funds.
APPENDIX A
FRANK RUSSELL DISCLAIMER
The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company. Russell is a trademark of the Frank Russell Company. Summit Mutual
Funds and the Russell 2000 Small Cap Index Portfolio are not promoted,
sponsored or endorsed by, nor in any way affiliated with Frank Russell
Company. Frank Russell is not responsible for and has not reviewed the
Prospectus, and Frank Russell makes no representation or warranty, express or
implied, as to its accuracy, or completeness, or otherwise.
Frank Russell Company reserves the right, at any time and without notice, to
alter, amend, terminate or in any way change its Index. Frank Russell has no
obligation to take the needs of any particular fund or its participants or
any other product or person into consideration in determining, composing or
calculating the Index.
Frank Russell Company's publication of the Index in no way suggests or
implies an opinion by Frank Russell Company as to the attractiveness or
appropriateness of the investment in any or all securities upon which the
Index is based. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION, WARRANTY, OR
GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE
INDEX OR DATA INCLUDED IN THE INDEX. FRANK RUSSELL COMPANY MAKES NO
REPRESENTATION OR WARRANTY REGARDING THE USE, OR THE RESULTS OF USE, OF THE
INDEX OR ANY DATA INCLUDED THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF)
COMPRISING THE INDEX. FRANK RUSSELL COMPANY MAKES NO OTHER EXPRESS OR
IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ANY WARRANTY OF ANY KIND,
INCLUDING, WITHOUT MEANS OF LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR ANY
SECURITY (OR COMBINATION THEREOF) INCLUDED THEREIN.
APPENDIX B: PROXY VOTING PROCEDURES
SUMMIT MUTUAL FUNDS, INC.
PROXY VOTING GUIDELINES
(REVISED 2/21/05)
Summit will vote each proxy based on our duty to act on behalf of our
client's best interests and to comply with SEC rules governing proxy voting
and documenting and reporting. Any material conflicts between the interests
of the Adviser and those of the Funds' shareholders will be resolved to
protect the shareholders' interest. Potential material conflicts should be
reported to the Funds' officers as Portfolio Managers become aware of them.
The officers will resolve these conflicts (consulting with the Chair of the
Audit Committee of the Board of Directors as necessary) and report them to
the Directors. The following general guidelines, approved by the Fund's Board
of Directors will be used to judge the appropriateness of individual
proposals.
Passively Managed Funds
In most circumstances, proxies will be voted FOR management's recommended
position on each proposal*. If voted otherwise, the circumstance will be
explained and documented; and the decision process will follow the same
general guidelines as those applicable to Actively Managed Funds.
Actively Managed Funds
Proxies will be normally voted under the general guidelines listed below.
Individual cases will be considered in unusual circumstances.
CORPORATE STRUCTURE AND SHAREHOLDER RIGHTS
Summit will typically vote AGAINST the following:
o Supermajority provisions specifying more than two-thirds
of voting shares.
o Efforts to make takeover activities more difficult.
o Fair price provisions entrenching management to the
disadvantage of shareholders.
o Stock authorizations if used as an anti-takeover device.
o Reincorporation if used strictly as an anti-takeover
device.
o Two-tier voting plans adopted for defensive purposes.
o Greenmail payments.
Summit will typically vote FOR the following:
o Stock authorizations if used for additional financing
activity with a specific business purpose.
o Efforts to make takeover activity easier.
o Redeeming or submitting poison pills to shareholder vote.
o Seeking shareholder approval for issuing a large block
of stock to one investor.
*Management has engaged the custodian to vote proxies in the passive funds.
CORPORATE GOVERNANCE, DIRECTORS,
EXECUTIVES AND COMPENSATION
Summit will typically vote AGAINST the following:
o Stock option plans diluting ownership by more than 10%.
o Issuance of discounted options.
o Provisions to re-price options.
o Director stock option plans.
o Authority granted to the Board to amend the plan without
prior shareholder approval.
o Requiring outside directors to own a specified number of
shares.
o Excessive "golden parachute" proposals.
Summit will typically vote FOR the following:
o Requiring a majority of independent Directors.
o Formation of an executive compensation committee that is
composed entirely of Independent Directors.
o Election of proposed directors.
o Re-Election of current auditors; a change in auditors
will be more closely analyzed.
DOCUMENTATION & REPORTING
Management will review and ask for approval of the Policy with the Board at
least annually. The Policy statement will be included in Statements of
Additional Information, posted on the Funds' website and available upon
request.
Summit will compile and maintain records of votes as necessary to comply with
governing regulations, including the annual filing of Form N-PX with the SEC.
Summit plans to post proxy voting records on the Funds' website.
Votes that are inconsistent with a Fund's written policies and procedures
will be reported and explained at Board of Directors meetings.
Summit
Mutual
Funds
Semiannual Report
SUMMIT PINNACLE SERIES
-----------------------------------------------
---
Russell 2000 Small Cap Index Portfolio
JUNE 30, 2005
Logo: SUMMIT MUTUAL FUNDS
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
SEMIANNUAL REPORT - TABLE OF
CONTENTS
Message from the President...................................................
1
Fund Expenses...........................................................
2
Portfolio Managers' Reports and Financial Statements:
Russell 2000 Small Cap Index Portfolio..................................
3
Notes to Financial Statements................................................
25
This Fund files a complete Schedule of Investments in Securities with the SEC
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Form N-Q is available on the SEC's website at WWW.SEC.GOV. The Fund's Form N-
Q
may also be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may
be
obtained by calling 1-800-SEC-0330.
This report has been prepared for the information of Contract owners and is
not
authorized for distribution to prospective purchasers of contracts unless it
is
preceded or accompanied by an effective prospectus for Summit Mutual Funds,
Inc.
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
MESSAGE FROM THE
PRESIDENT
We are pleased to send you Summit Mutual Funds' 2005 Semiannual Report for
the
period ended June 30, 2005. We welcome new and thank existing investors that
have selected Summit Funds within insurance and annuity products. We strive
to
help you reach your financial goals.
The first half of 2005 was somewhat of a conundrum for investors. Nearly all
equity markets traded lower despite strong corporate profits, real gross
domestic product increases of 3.8% and 3.4% in the 1st and 2nd quarters and
increased consumer confidence. Meanwhile, overall bond returns were positive
in
spite of the Federal Reserve's continued policy of measured short-term
interest
rate increases designed to control inflation. The strong corporate profits
and
real GDP growth mentioned above were factors that weighed in on the Federal
Reserve's decision to raise the Federal Funds rate four times to a June 30th
level of 3.25%.
"...MAINTAIN THE PROPER PERSPECTIVE AND HAVE REALISTIC EXPECTATIONS . . ."
Global markets have also been affected by the continued uncertainty in Iraq
and
the threat of terrorist attacks both domestically and abroad. Sadly, the
threat
became real shortly after the semi-annual period ended. Terrorists targeted
London's transportation system on July 7th and again on a smaller scale two
weeks later. In a stark contrast to the global markets' reaction after the
9/11
terrorist attacks on the United States, the markets have responded positively
with all major indices posting positive returns for the month of July.
Nevertheless, these factors will no doubt continue to cast uncertainty for
investors.
Equity markets responded to the U.S. economic and geopolitical news with
predominantly negative returns. For the six month period, the large cap S&P
500
Index declined 0.81% and the small cap Russell 2000 Index slumped 1.25%.
Other
market sectors had the large cap growth Nasdaq-100 Index dropping 7.69% and
the
international EAFE Index falling 0.85%. The one bright spot for the period
was
the S&P MidCap 400 Index which rose 3.84%.
Fixed income markets provided positive returns, despite higher interest rates
and downgrades of debt from both GM and Ford to high yield or "junk bond"
status. Higher interest rates continue to have more effect on the shorter end
of
the yield curve as spreads between the 3-month Treasury Bill and the 10-year
Treasury Note have closed to 0.79% at June 30th versus 2.0% at year end. The
10-year Treasury Note ended the period yielding 3.92%. The Lehman Aggregate
Bond
Index's period total return was 2.51%. High yield markets slowed from their
heady returns of the last several years with a return of 1.14% in the Merrill
Lynch High Yield Master II Index. Money market returns continued to rebound
from
record lows as a result of the string of rate increases with first tier
retail
money market funds posting a 2.34% seven-day yield as of June30, 2005.
Despite the positive U.S. economic news reported earlier, concern about the
strength, and more importantly the durability, of the economic expansion in
the
face of swelling oil prices seemed to weigh on the markets. Crude oil prices
started the period in the mid $40/barrel range only to surge to the high
$50/barrel range by the end of the period. As a result, the market
uncertainty
and volatility will likely continue as investors ponder inflation, the
strength
of the U.S. economy and the ability of corporations and consumers alike to
endure both higher interest rates and energy prices.
"PROPER DIVERSIFICATION OF YOUR INVESTMENTS . . . (IS) AN IMPORTANT COMPONENT
OF
ACHIEVING YOUR LONG-TERM INVESTMENT GOALS."
We believe that maintaining the proper perspective and having realistic
expectations will ensure that your investment strategy is appropriate for
your
risk tolerance and time horizon. Vigilance over asset allocation and
portfolio
rebalancing are critical in periods of volatile returns. Proper
diversification
of your investments, both within and across asset sectors (or specifically
stocks, bonds and cash) remains an important component of achieving your
long-term investment goals. Summit Mutual Funds provides a solid foundation
for
diversified investment planning with choices across equity and fixed-income
styles.
RECENT HIGHLIGHTS:
o Summit's Zenith Portfolio has demonstrated strong one, three and five
year
performance (with average annual returns of 11.25%, 10.13% and 9.19%).
This
ranks it as a top performer by leading rating agencies.
o Summit continues to provide low cost mutual funds. While the industry
average for stock mutual fund expense ratios is 1.25%, Summit's average
stock fund expense ratio is 0.70%
Thank you for choosing Summit Funds and for the trust that you have placed in
us.
Best regards,
/s/ Steven R. Sutermeister
Steven R. Sutermeister
President
1
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
2005 SEMIANNUAL REPORT - FUND EXPENSES
As a shareholder of the Portfolio, you incur ongoing costs, including
management
fees and other Portfolio expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the Portfolio and
to
compare these costs with the ongoing costs of investing in other mutual
funds.
The Example is based on an investment of $1,000 invested at the beginning of
the
period and held for the entire period January 1, 2005 through June 30, 2005.
ACTUAL EXPENSES
The first section of the table below provides information about actual
account
values and actual net expenses. You may use the information in this section,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by
the
number in the first section under the heading entitled "Expenses Paid" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on the Portfolio's actual
expense
ratio, net of fee waivers and expense reimbursements, and an assumed rate of
return of 5% per year before expenses, which is not the Portfolio's actual
return. The hypothetical account values and expenses may not be used to
estimate
the actual ending account balance or expenses you paid for the period. You
may
use this information to compare the ongoing costs of investing in the
Portfolio
and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the second section of the table is useful in comparing
ongoing
costs only, and will not help you determine the relative total costs of
owning
different funds.
[Download Table]
-----------------------------------------------------------------------------
---------------------------------------------
Beginning
Ending Annualized Expenses Paid *
Account Value
Account Value Net Expense January 1, 2005 to
Portfolio December 31, 2004
June 30, 2005 Ratio June 30, 2005
-----------------------------------------------------------------------------
---------------------------------------------
BASED ON ACTUAL RETURN
Zenith Portfolio $1,000 $
1,009 0.89% $4
Bond Portfolio 1,000
1,013 0.75% 4
S&P 500 Index Portfolio 1,000
989 0.39% 2
S&P MidCap 400 Index Portfolio 1,000
1,033 0.53% 3
Balanced Index Portfolio 1,000
998 0.60% 3
Nasdaq-100 Index Portfolio 1,000
917 0.65% 3
Russell 2000 Small Cap Index Portfolio 1,000
982 0.71% 3
EAFE International Index Portfolio 1,000
980 0.95% 5
Lehman Aggregate Bond Index Portfolio 1,000
1,018 0.60% 3
BASED ON HYPOTHETICAL RETURN
(5% return before expenses)
Zenith Portfolio $1,000 $
1,020 0.89% $4
Bond Portfolio 1,000
1,021 0.75% 4
S&P 500 Index Portfolio 1,000
1,023 0.39% 2
S&P MidCap 400 Index Portfolio 1,000
1,022 0.53% 3
Balanced Index Portfolio 1,000
1,022 0.60% 3
Nasdaq-100 Index Portfolio 1,000
1,021 0.65% 3
Russell 2000 Small Cap Index Portfolio 1,000
1,021 0.71% 4
EAFE International Index Portfolio 1,000
1,020 0.95% 5
Lehman Aggregate Bond Index Portfolio 1,000
1,022 0.60% 3
* Expenses are equal to the Portfolio's annualized net expense ratio,
multiplied by the average account value over the period, multiplied by
181/365 (to reflect the one-half year period).
2
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the investment
performance of U.S. common stocks, as represented by the Russell 2000 Index
(the
"Index").
STRATEGY - The Summit Pinnacle Russell 2000 Small Cap Index Portfolio (the
"Portfolio") 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 Index.
MANAGERS' COMMENTS:
For the six-month period ended June 30, 2005, the Portfolio's total return
was
-1.45% (before the impact of any product or contract-level fees). This
compares
to a -1.25% total return for the Index. The difference of 0.20% is referred
to
as "tracking error". One component of the difference is attributed to the
Portfolio's operating expenses. These expenses represent the Portfolio's
costs
for advisory, administration, accounting, custody and other services. The
remaining difference can be caused by a number of factors, including the
timing
and size of cash flows into and out of the Portfolio; brokers' commissions or
other trading costs; and holding security positions in amounts that are
different than the weightings in the Index, among others. While an exact
replication of the capitalization weightings of securities in the Index is
not
feasible, the Portfolio's objectives and strategies call for a correlation of
at
least 95% between the Portfolio's pre-expense total return and that of the
Index. The Portfolio achieved this level of correlation for the period
presented.
FUND DATA
Manager: Team Managed
Inception Date: April 27, 2000
Total Net Assets: $68.31 Million
Number of Equity Holdings: 2,001
Median Capitalization Size: $556 Million
Average Price-to-book Ratio: 2.28x
Dividend Yield: 1.12%
[LINE CHART]
Comparison of Change in Value of $10,000 Investment
Summit Russell 2000 Small Cap Index Portfolio - Total Return
[Download Table]
1-Year 3 -Year Since Inception
8.83% 12.07% 6.19%
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a
shareholder would pay on fund distributions or redemption of
fund shares.
Separate account expenses are not included.
Russell 2000 SC Index Portfolio
[Download Table]
Summit Russell 2000
Small Cap
Index Portfolio Russell 2000 Index
3/31/2000 $ 10,000 $ 10,000
4/30/2000 $ 10,440 $ 10,456
5/31/2000 $ 9,850 $ 9,846
6/30/2000 $ 10,650 $ 10,707
7/31/2000 $ 10,330 $ 10,372
8/31/2000 $ 11,101 $ 11,158
9/30/2000 $ 10,770 $ 10,828
10/31/2000 $ 10,299 $ 10,345
11/30/2000 $ 9,265 $ 9,283
12/31/2000 $ 10,039 $ 10,086
1/31/2001 $ 10,562 $ 10,610
2/28/2001 $ 9,886 $ 9,915
3/31/2001 $ 9,412 $ 9,430
4/30/2001 $ 10,128 $ 10,168
5/31/2001 $ 10,369 $ 10,418
6/30/2001 $ 10,718 $ 10,777
7/31/2001 $ 10,105 $ 10,194
8/31/2001 $ 9,767 $ 9,865
9/30/2001 $ 8,437 $ 8,537
10/31/2001 $ 8,933 $ 9,036
11/30/2001 $ 9,610 $ 9,736
12/31/2001 $ 10,193 $ 10,337
1/31/2002 $ 10,087 $ 10,229
2/28/2002 $ 9,812 $ 9,949
3/31/2002 $ 10,590 $ 10,748
4/30/2002 $ 10,689 $ 10,846
5/31/2002 $ 10,209 $ 10,364
6/30/2002 $ 9,697 $ 9,850
7/31/2002 $ 8,218 $ 8,363
8/31/2002 $ 8,188 $ 8,342
9/30/2002 $ 7,597 $ 7,743
10/31/2002 $ 7,826 $ 7,991
11/30/2002 $ 8,523 $ 8,704
12/31/2002 $ 8,047 $ 8,219
1/31/2003 $ 7,818 $ 7,992
2/28/2003 $ 7,580 $ 7,750
3/31/2003 $ 7,673 $ 7,850
4/30/2003 $ 8,399 $ 8,594
5/31/2003 $ 9,299 $ 9,517
6/30/2003 $ 9,478 $ 9,689
7/31/2003 $ 10,060 $ 10,295
8/31/2003 $ 10,508 $ 10,767
9/30/2003 $ 10,302 $ 10,568
10/31/2003 $ 11,163 $ 11,455
11/30/2003 $ 11,546 $ 11,862
12/31/2003 $ 11,766 $ 12,103
1/31/2004 $ 12,264 $ 12,628
2/29/2004 $ 12,376 $ 12,742
3/31/2004 $ 12,491 $ 12,860
4/30/2004 $ 11,856 $ 12,204
5/31/2004 $ 12,038 $ 12,399
6/30/2004 $ 12,541 $ 12,920
7/31/2004 $ 11,689 $ 12,051
8/31/2004 $ 11,626 $ 11,989
9/30/2004 $ 12,166 $ 12,552
10/31/2004 $ 12,398 $ 12,799
11/30/2004 $ 13,464 $ 13,909
12/31/2004 $ 13,849 $ 14,320
1/31/2005 $ 13,266 $ 13,723
2/28/2005 $ 13,496 $ 13,955
3/31/2005 $ 13,107 $ 13,556
4/30/2005 $ 12,348 $ 12,779
5/31/2005 $ 13,155 $ 13,616
6/30/2005 $ 13,648 $ 14,142
TOP 10 EQUITY HOLDINGS
(% of net assets)
iShare Russell 2000 Index Fund 0.83%
Cimarex Energy Co. 0.26%
Amylin Pharmaceuticals Inc. 0.18%
Cal Dive International Inc. 0.17%
Gaylord Entertainment Co. 0.15%
Hughes Supply Inc. 0.15%
Aeropostale Inc. 0.15%
Valassis Communication 0.15%
BancorpSouth Inc. 0.15%
Acxiom Corp. 0.15%
SECTOR ALLOCATIONS
Materials 8.5%
Capital Goods 10.5%
Consumer Cyclical 18.2%
Consumer Staples 1.9%
Energy 4.8%
Financial 22.3%
Technology 12.5%
Health Care 11.3%
Utilities 3.6%
Short-Term, Futures, & Other 6.4%
The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company.
Russell is a trademark of the Frank Russell Company. Summit Mutual Funds and
the
Russell 2000 Small Cap Index Portfolio are not promoted, sponsored or
endorsed
by, nor in any way affiliated with Frank Russell Company. Frank Russell is
not
responsible for and has not reviewed the Prospectus, and Frank Russell makes
no
representation or warranty, express or implied, as to its accuracy, or
completeness, or otherwise.
3
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL HIGHLIGHTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding throughout the
period. Share amounts and net asset values have been adjusted as a result of
the
1-for-5 reverse stock split on February 15, 2002.
[Download Table]
SIX MONTHS
PERIOD FROM
ENDED JUNE 30,
APRIL 27, 2000(1)
(UNAUDITED)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
-----------------------------------
---------------------------------------------------
2005 2004
2003 2002 2001 2000
-----------------------------------
---------------------------------------------------
Net asset value, beginning of period $ 63.92 $ 54.40 $
37.52 $ 48.10 $ 49.95 $ 50.00
------- ------- ---
---- ------- ------- -------
Investment Activities:
Net investment income / (loss) 0.18 0.31(4)
0.22 0.29 0.40 0.40
Net realized and unrealized gains / (losses) (1.14) 9.32
16.95 (10.31) 0.35 (0.20)
------- ------- ---
---- ------- ------- -------
Total from Investment Activities (0.96) 9.63
17.17 (10.02) 0.75 0.20
------- ------- ---
---- ------- ------- -------
DISTRIBUTIONS:
Net investment income (0.31) (0.11)
(0.29) (0.09) (0.45) (0.25)
Net realized gains (0.63) --
-- (0.47) (2.15) --
------- ------- ---
---- ------- ------- -------
Total Distributions (0.94) (0.11)
(0.29) (0.56) (2.60) (0.25)
------- ------- ---
---- ------- ------- -------
Net asset value, end of period $ 62.02 $ 63.92 $
54.40 $ 37.52 $ 48.10 $ 49.95
======= =======
======= ======= ======= =======
Total return -1.45% 17.72%
46.19% -21.05% 1.54% 0.39%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets - net (2) 0.71%(3) 0.75%
0.75% 0.75% 0.75% 0.74%(3)
Ratio of expenses to average
net assets - gross 0.71%(3) 0.76%
1.12% 1.33% 1.10% 1.35%(3)
Ratio of net investment income / (loss)
to average net assets 0.62%(3) 0.60%
0.57% 0.65% 0.90% 1.11%(3)
Portfolio turnover rate 42.82%(3) 27.27%
23.87% 30.78% 32.70% 82.19%(3)
Net assets, end of period (000's) $68,313 $68,770
$25,794 $13,863 $21,503 $16,105
(1) Commencement of operations.
(2) Net expenses represent gross expenses reduced by fees waived and/or
reimbursed by the Adviser.
(3) Annualized.
(4) Per share amounts are based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
4
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
JUNE 30, 2005 (UNAUDITED)
SHARES VALUE
---------------------------------------------------------------
COMMON STOCKS - 94.07%
CAPITAL GOODS - 10.47%
A O Smith Corp. 929 $ 24,814
AAR Corp.* 1,804 28,341
ABX Air Inc.* 3,240 26,406
Accuride Corp.* 610 6,484
Actuant Corp.* 1,488 71,335
Ade Corp* 554 15,540
Advanced Energy Industries Inc.* 1,176 9,242
Aftermarket Technology Corp.* 1,191 20,759
AGCO Corp.* 5,020 95,982
Airtran Holdings Inc.* 4,813 44,424
Alamo Group Inc. 340 6,347
Alaska Air Group* 1,510 44,923
America West Holding Corp.* 1,974 11,844
American Axle & Manufacturing
Holdings Inc. 2,380 60,143
American Ecology Corp. 670 11,993
American Superconductor Corp.* 1,774 16,232
Applied Films Corp.* 830 21,248
Applied Industrial 1,671 53,957
Applied Signal Technolgy 633 12,052
Arctic Cat Inc. 749 15,377
Argon St Inc.* 490 17,395
Arkansas Best Corp. 1,410 44,852
Arris Group Inc.* 4,892 42,609
Artesyn Technologies Inc.* 2,085 18,140
Arvinmeritor Inc. 3,883 69,079
Astec Industries Inc* 878 20,361
A.S.V. Inc.* 487 19,743
Asyst Technologies Inc.* 2,643 11,788
ATMI Inc.* 2,060 59,761
Audiovox Corp* 949 14,710
August Technology Corp.* 1,007 11,732
Aviall Inc.* 1,863 58,852
Axcelis Technologies Inc.* 5,542 38,017
Badger Meter Inc. 310 12,803
Baldor Electric Co. 1,850 44,992
Bandag, Inc. 626 28,827
Be Aerospace Inc.* 3,193 49,906
Belden CDT Inc. 2,616 55,459
Blount International Inc.* 1,653 27,589
Briggs & Stratton 2,870 99,359
Brooks Automation Inc.* 2,508 37,243
Bucyrus International Inc. 1,130 42,917
C&D Technologies Inc 1,407 12,930
Cascade Corp. 676 29,237
C-COR Inc.* 2,646 18,125
Champion Enterprises Inc.* 4,208 41,828
China Energy Savings Technology Inc.* 70 697
Coachmen Industries Inc. 786 9,849
Cognex Corp. 2,305 60,368
Cohu Inc. 1,210 24,261
Color Kinetics Inc.* 720 7,661
Commercial Vehicle Group Inc.* 690 12,248
Comstock Homebuilding Co Inc.* 230 5,571
Continental Airlines Inc.* 3,677 48,831
Cooper Tire & Rubber 3,553 65,979
Covenant Transport Inc.* 465 6,138
Crane Company 2,880 75,744
SHARES VALUE
---------------------------------------------------------------
CAPITAL GOODS - 10.47% (Continued)
Credence Systems* 4,566 $ 41,322
CTS Corp. 2,034 24,998
Cuno Inc.* 955 68,225
Curtiss-Wright Corp. 1,206 65,064
Cymer Inc.* 2,010 52,964
Darling International Inc.* 3,544 13,290
Delta Air Lines* 6,973 26,218
Dionex Corp.* 1,129 49,236
Duratek Inc.* 772 17,895
Dynamex Inc.* 640 10,906
EGL Inc.* 2,347 47,691
Electro Scientific Industries* 1,587 28,376
Emcore Corp.* 2,060 8,508
Engineered Support Systems Inc. 2,304 82,552
Enpro Industries Inc.* 1,163 33,576
Entegris Inc.* 3,336 33,026
ESCO Technologies Inc.* 706 71,165
Esterline Technologies Corp.* 1,396 55,952
Expressjet Holdings Inc.* 2,436 20,730
Faro Technologies Inc.* 632 17,228
Federal Signal Corp. 2,693 42,011
FEI Co.* 1,335 30,451
Flanders Corp.* 733 6,597
Fleetwood Enterprises Inc.* 3,091 31,374
Florida East Coast Ind Inc. 1,805 78,157
Flowserve Corporation* 3,063 92,686
Forward Air Corp. 1,789 50,575
Franklin Electric Co Inc. 1,229 47,501
Freightcar America Inc.* 460 9,122
Frontier Airlines Inc.* 1,975 20,402
Frozen Food Express Industries Inc.* 830 9,396
Gardner Denver Inc.* 1,392 48,831
Gehl Co.* 380 14,797
General Binding Corp.* 342 7,497
General Cable Corp.* 2,202 32,656
Genesee & Wyoming Inc.* 1,296 35,264
Genlyte Group Inc.* 1,328 64,727
Gorman-Rupp Co. 508 10,876
Greenbrier Cos 346 9,377
GulfMark Offshore Inc.* 825 22,531
Hayes Lemmerz International* 2,110 15,023
Headwaters Inc.* 2,303 79,177
Heartland Express Inc. 2,520 48,964
Heico Corp. 1,197 28,022
Helix Technology Corp. 1,454 19,309
Hub Group Inc.* 1,088 27,254
Imagistics International Inc.* 910 25,480
Interdigital Communications* 2,961 51,818
Intevac Inc.* 1,134 11,873
Itron Inc.* 1,289 57,593
JLG Industries Inc. 2,842 78,098
Kadant Inc.* 777 17,040
Kansas City Southern* 4,552 91,859
Keithley Instruments Inc. 717 11,049
Kennametal Inc. 2,105 96,514
Keystone Automotive Inds Inc.* 873 21,589
Kimball International Inc. 1,241 16,381
Kirby Corp.* 1,212 54,661
Knight Transportation Inc. 2,112 51,385
The accompanying notes are an integral part of the financial statements.
5
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
CAPITAL GOODS - 10.47% (Continued)
Knoll Inc. 610 $ 10,437
Kulicke & Soffa Industries Inc.* 2,874 22,733
Levitt Corp. 910 27,227
Lincoln Electric Holdings Inc. 2,035 67,460
Lindsay Manufacturin 654 15,421
Littelfuse Inc.* 1,242 34,590
LTX Corp.* 3,440 17,062
M/I Homes Inc. 693 37,491
Mair Holdings Inc.* 680 6,011
Manitowoc Co. 1,675 68,709
Marine Products Corp. 728 10,592
Maritrans Inc. 470 12,714
Marten Transport Ltd* 547 11,482
MasTec Inc.* 1,506 13,253
Mattson Technology Inc.* 2,363 16,919
Measurement Specialties Inc.* 658 15,272
Mesa Air Group Inc.* 1,666 11,179
Metrologic Instruments Inc.* 658 8,251
Middleby Corp.* 283 14,959
Mine Safety Appliances Co. 1,606 74,197
MKS Instruments Inc.* 1,813 30,622
Modine Manufacturing Co. 1,930 62,841
Monaco Coach Corp. 1,443 24,805
Moog Inc.* 1,893 59,611
MTC Technologies Inc.* 558 20,551
MTS Systems Corp. 1,096 36,804
Mykrolis Corp.* 2,325 33,038
Nacco Industries Inc. 285 30,558
Noble International Ltd. 411 9,679
Nordson Corporation 1,546 52,997
Northwest Airlines Corp.* 4,845 22,093
Odyssey Marine Exploration Inc.* 1,980 9,860
Offshore Logistics Inc.* 1,295 42,528
Old Dominion Fght Lines Inc. Co.* 1,040 27,903
Orbital Sciences Corp* 3,082 30,512
Orleans Homebuilders Inc. 227 5,325
Overnite Corp. 1,483 63,739
Pacer International Inc.* 2,063 44,953
Palm Harbor Homes Inc.* 536 10,093
Pam Transportation Services Inc.* 343 5,766
Paxar Corp.* 1,955 34,701
Photon Dynamics Inc.* 939 19,353
Photronics Inc.* 1,828 42,666
Pinnacle Airlines Corp.* 1,083 9,303
Plantronics Inc. 2,720 98,899
Polycom Inc.* 5,440 81,110
Powell Inds Inc.* 375 7,076
Power-One Inc.* 4,145 26,155
Powerwave Technologies* 5,534 56,557
Preformed Line Products Inc. 140 5,712
Presstek Inc.* 1,622 18,361
Quantum Fuel Sys Technologies* 2,510 12,550
R&B Inc.* 550 7,722
Railamerica Inc.* 2,096 24,942
Regal Beloit 1,367 39,862
Republic Airways Holdings Inc.* 681 9,840
Robbins & Myers Inc. 648 13,938
Rofin-Sinar Technologies Inc.* 839 27,519
Rudolph Technologies Inc.* 721 10,332
SHARES VALUE
---------------------------------------------------------------
CAPITAL GOODS - 10.47% (Continued)
Sauer-Danfoss Inc. 565 $ 10,040
SBA Communications Corp.* 4,086 55,161
Scs Transportation Inc.* 846 15,059
Seabulk International Inc.* 333 7,076
Semitool Inc.* 920 8,777
Skyline Corp. 376 15,014
Skywest Inc. 3,202 58,212
Sonic Solutions* 1,351 25,129
Spatialight Inc.* 1,606 9,106
SpectraLink Corp. 1,064 11,193
Standard Motor Products Inc. 826 10,903
Standex International Corp. 687 19,518
Stewart & Stevenson Services Inc. 1,610 36,483
Strattec Security Corp.* 210 11,437
Sun Hydraulics Corp. 250 9,098
Superior Industries International Inc. 1,236 29,293
Symmetricom Inc.* 2,554 26,485
Taser International Inc.* 3,416 34,297
TBC Corp.* 1,253 33,994
Technical Olympic Usa Inc. 830 20,152
Technitrol Inc. 2,247 31,750
Tecumseh Products Co. 919 25,217
Teledyne Technologies Inc.* 1,845 60,110
Tennant Co. 437 15,474
Tenneco Automotive Inc.* 2,428 40,402
Terayon Communication Systems* 4,228 13,065
Thomas Industries Inc. 838 33,486
Thor Industries 1,920 60,346
Titan International Inc. 720 10,066
Triumph Group Inc.* 888 30,867
U S Xpress Enterprises Inc.* 560 6,670
Ultratech Inc.* 1,327 24,284
United Industrial Corp. 574 20,515
Universal Truckload Services* 310 5,236
USA Truck Inc.* 290 7,178
Varian Semiconductor Equipment* 2,036 75,332
Veeco Instruments Inc.* 1,469 23,915
Vicor Corp. 1,068 14,525
Viisage Technology Inc.* 1,794 8,037
Visteon Corp. 7,130 42,994
Wabash National Corp. 1,725 41,797
Wabtec Corp. 2,604 55,934
Watts Water Technologies Inc. 1,392 46,618
WCI Communities Inc.* 1,927 61,722
Werner Enterprises 2,834 55,660
William Lyon Homes Inc.* 139 13,483
Winnebago Industries Inc. 1,856 60,784
Woodward Governor Co. 547 45,964
World Air Holdings Inc.* 1,310 15,353
X-Rite Inc. 1,173 13,501
---------
7,153,430
---------
CONSUMER CYCLICALS - 18.24%
1-800 Contacts Inc.* 470 9,104
1-800-Flowers.Com Inc.* 1,407 9,905
4 Kids Entertainment Inc.* 742 14,751
99(Cents) Only Stores* 2,357 29,957
A C Moore & Crafts Inc.* 807 25,509
Aaron Rents Inc. 2,160 53,762
ABM Industries Inc. 2,191 42,725
The accompanying notes are an integral part of the financial statements.
6
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
Administaff Inc. 1,090 $ 25,898
Advisory Board Co.* 1,064 51,858
Advo Inc. 1,734 55,227
Aeropostale Inc.* 3,065 102,984
AFC Enterprises Inc.* 1,100 14,497
Alderwoods Group Inc.* 2,229 32,030
Alliance Gaming Corp.* 2,836 39,761
Alloy Inc.* 1,879 9,658
Ambassadors Group Inc. 468 17,405
Amerco* 566 30,309
American Woodmark Corp. 630 18,906
America's Car-Mart Inc.* 499 11,232
Ameristar Casinos Inc. 682 17,793
AMN Healthcare Services Inc.* 639 9,604
Angelica Corp. 506 12,402
Aquantive Inc.* 3,139 55,623
Arbitron Inc. 1,745 74,861
Argosy Gaming Co.* 1,641 76,487
Asbury Automotive Group Inc.* 725 11,172
Atari Inc.* 2,701 7,509
Autobytel Inc.* 2,319 11,201
Aztar Corp.* 1,934 66,240
Banta Corp. 1,380 62,597
Bassett Furniture Ind Inc. 578 10,901
Beasley Broadcast Group Inc.* 411 5,955
Big 5 Sporting Goods Corp. 1,131 32,098
Big Lots, Inc.* 6,310 83,543
BJ's Restaurants Inc.* 801 16,291
Blair Corp. 455 17,973
Blockbuster Inc. 10,570 96,398
Blue Nile Inc.* 826 27,002
Blyth Inc. 1,475 41,374
Bob Evans Farms 1,959 45,684
Bombay Co Inc.* 2,006 11,434
Bon-Ton Stores Inc. 360 6,966
Bowne & Company Inc. 1,897 27,431
Bright Horizons Family* 1,498 60,999
Brightpoint Inc.* 1,008 22,368
Brookstone Inc.* 1,127 21,278
Brown Shoe Co. Inc. 1,015 39,737
Buckle Inc. 426 18,889
Buffalo Wild Wings Inc.* 387 12,074
Build-A-Bear Workshop Inc.* 530 12,429
Burlington Coat Factory 926 39,485
Cabelas Inc.* 1,710 36,526
Cache Inc.* 683 11,351
California Pizza Kitchen Inc.* 1,069 29,152
Callaway Golf Co. 4,242 65,454
Carmike Cinemas Inc. 680 20,862
Carter Holdings* 1,024 59,781
Casella Waste Systems Inc.* 1,076 12,911
Casual Male Retail Group* 1,448 10,585
Catalina Marketing Corp. 2,903 73,765
Cato Corp. 1,692 34,940
CDI Corp. 693 15,191
CEC Entertainment Inc.* 1,951 82,118
Central Euro Distribution Corp.* 760 28,371
Central Garden & Pet Co.* 1,070 52,558
Central Parking Corp. 1,116 15,345
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
Century Business Services Inc.* 3,380 $ 13,689
Cenveo Inc.* 2,730 20,639
Changs (PF) China Bistro Inc.* 1,456 85,875
Charles & Colvard Ltd 683 16,755
Charlotte Russe Holding Inc.* 826 10,292
Charming Shoppes Inc.* 6,608 61,653
Charter Communications Inc.* 15,314 18,071
Chemed Corp. 1,406 57,477
Cherokee Inc. 394 13,640
Childrens Place Retail Stores* 1,164 54,324
Christopher & Banks Corp. 1,982 36,191
Churchill Downs Inc. 429 18,228
Citadel Broadcasting Co.* 2,440 27,938
Citi Trends Inc.* 220 3,977
CKE Restaurants Inc. 3,282 45,685
Clark Inc. 902 12,925
CMGI Inc.* 26,679 50,423
CNET Networks Inc.* 7,179 84,281
CNS Inc. 790 18,052
Cogent Inc.* 1,250 35,688
Coinstar Inc.* 1,413 32,061
Coldwater Creek Inc.* 1,974 49,172
Conns Inc.* 262 6,411
Consolidated Graphics Inc.* 629 25,644
Corinthian Colleges* 5,050 64,489
Corrections Corp Of America* 2,175 85,369
Cost Plus Inc.* 1,221 30,452
CoStar Group Inc.* 908 39,589
Courier Corp. 555 21,318
Cox Radio Inc.* 2,130 33,548
CRA International Inc.* 561 30,210
Cross Country Healthcare Inc.* 1,789 30,413
Crown Media Holdings Inc.* 809 7,629
CSK Auto Corp. Com* 2,499 41,683
CSS Industries Inc. 323 10,930
Cumulus Media Inc.* 3,162 37,248
Dave & Busters Inc.* 780 14,383
Deb Shops Inc. 242 7,011
Deckers Outdoor Corp.* 568 13,973
Dennys Corp.* 5,040 25,200
Design Within Reach Inc.* 660 11,946
DeVRY Inc.* 3,230 64,277
Diamond Cluster International Inc.* 1,625 18,363
Dollar Thrifty Automotive* 1,398 53,096
Dominos Pizza Inc. 1,770 39,400
Doubleclick Inc.* 6,994 58,680
Dover Downs Gaming and Entertainment 530 7,028
Dover Motorsports Inc. 955 5,730
Dress Barn Inc* 1,191 26,952
drugstore.com Inc.* 3,812 15,896
DTS Inc.* 958 17,081
Earthlink Inc.* 7,043 60,992
Educate Inc.* 1,020 14,433
Electronics Boutique Holdings* 647 41,078
Elizabeth Arden Inc.* 1,411 33,003
Emmis Communications* 2,749 48,575
Entercom Communications* 2,000 66,580
Entravision Communications* 4,248 33,092
Escalade Inc. 440 6,085
The accompanying notes are an integral part of the financial statements.
7
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
Ethan Allen Interiors Inc. 1,941 $ 65,043
Exponent Inc.* 444 12,690
Finish Line Inc. 2,330 44,084
First Advantage Corp.* 191 4,452
Fisher Companies Inc.* 370 17,497
Forrester Research Inc.* 723 12,891
Fossil Inc.* 2,690 61,063
Freds Inc. 2,213 36,692
FTD Group Inc.* 740 8,399
FTI Consulting Inc.* 2,393 50,014
Furniture Brands International 2,720 58,779
G & K Services Inc. 1,081 40,786
Gamestop Corp.* 2,510 75,049
Gaylord Entertainment Co.* 2,232 103,766
Gemstar-TV Guide International Inc.* 13,680 49,111
Genesco Inc.* 1,248 46,288
Gevity Hr Inc. 1,537 30,786
Global Imaging Sys Inc.* 1,305 41,577
Goody's Family Clothing Inc. 1,053 7,766
Gray Television Inc. 2,413 29,101
Great Wolf Resorts Inc.* 1,420 29,025
Greenfield Online* 920 11,178
Group 1 Automotive Inc.* 1,167 28,055
GSI Commerce Inc.* 1,720 28,810
Guess? Inc.* 898 14,889
Guitar Center Management* 1,441 84,111
Gymboree Corp.* 1,735 23,700
Handleman Co. 1,216 20,076
Harris Interactive Inc.* 2,838 13,821
Hartmarx Corp.* 1,444 14,541
Haverty Furniture Cos Inc. 1,079 15,948
Heidrick & Struggles International Inc.* 1,084 28,271
Hibbett Sporting Goods Inc.* 1,262 47,754
Hollinger International Inc. 3,267 32,703
Hooker Furniture Corp. 578 10,098
Hot Topic Inc.* 2,479 47,398
Hudson Highland Group Inc.* 1,150 17,929
IHOP Corp. 1,118 48,510
Ikon Office Solutions Inc. 6,410 60,959
Infospace Inc.* 1,846 60,789
InfoUSA Inc.* 1,810 21,177
Insight Communications Co Inc.* 2,785 30,774
Insight Enterprises Inc.* 2,686 54,203
Inter Parfums Inc. 244 4,731
Intermix Media Inc.* 1,490 12,471
Ipass Inc.* 2,987 18,101
Isle Of Capri Casinos Inc.* 784 20,541
Ivillage Inc.* 2,629 15,721
J. Jill Group Plc* 1,117 15,359
Jack In The Box Inc.* 2,026 76,826
Jackson Hewitt Tax Service Inc. 2,090 49,408
JAKKS Pacific Inc.* 1,393 26,760
Jamdat Mobile Inc.* 660 18,269
Jarden Corp.* 1,630 87,890
Jo-Ann Stores Inc.* 1,275 33,647
Jorgensen Earle M Co.* 1,010 8,131
Jos A Bank Clothiers Inc.* 753 32,605
Journal Communications Inc. 1,554 26,107
Journal Register Co.* 2,310 40,448
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
K-Swiss Inc. 1,381 $ 44,662
K2 Inc.* 2,636 33,424
Kellwood Co. 1,538 41,372
Kelly Services 1,019 29,184
Kenneth Cole Productions Inc. 505 15,716
Kforce Inc.* 1,793 15,169
Korn/Ferry International* 1,893 33,601
Krispy Kreme Doughnuts* 3,076 21,409
Labor Ready Inc.* 2,371 55,268
Lakes Entertainment Inc.* 850 13,090
Landrys Restaurants Inc. 914 27,502
Lawson Products 256 9,938
La-Z Boy Inc. 2,896 42,195
Leapfrog Enterprises Inc.* 1,794 20,272
Learning Tree International Inc.* 500 6,010
LECG Corporation* 821 17,454
Libbey Inc. 773 12,221
Liberty Corp.(The) 860 31,657
Life Time Fitness Inc.* 1,300 42,653
Lifeline Systems Inc.* 678 21,777
Lifetime Hoan Corp.* 403 7,871
LIN TV Corp.* 1,512 21,002
Linens' N Things Inc.* 2,495 59,032
Lithia Motors Inc. 855 24,667
LKQ Corp.* 782 21,230
Lo Jack Corp.* 940 16,506
Lodgenet Entertainment Corp.* 903 14,981
Lodgian Inc.* 1,360 13,967
Lone Star Steakhouse Saloon 989 30,075
Luby's Inc.* 1,260 15,057
Madden Steven Ltd.* 726 12,894
Magna Entertainment Corp.* 2,088 11,776
Majesco Holdings Inc.* 900 5,886
Mannatech Inc. 881 16,757
Manning Greg Auctions Inc.* 333 3,979
Marchex Inc.* 1,104 16,604
Marcus Corp.Cil 1,130 23,979
Marinemax Inc.* 748 23,375
Martha Stewart Living* 1,248 36,417
Matthews International Corp. 1,781 69,388
Maximus Inc. 1,064 37,549
Maytag Corp. 4,430 69,374
McCormick & Schmick's Seafood* 420 6,632
Media General 1,190 77,064
Midas Group Inc.* 887 20,401
Midway Games Inc.* 992 10,872
Mikohn Gaming Corp* 1,270 18,701
Monarch Casino & Resort Inc.* 510 11,240
Monro Muffler Brake Inc.* 580 17,116
Movado Group Inc. 1,014 19,144
Movie Gallery Inc. 1,389 36,711
MPS Group, Inc.* 5,769 54,344
MTR Gaming Group Inc.* 1,302 15,155
Multimedia Games Inc.* 1,525 16,790
National Presto Industries Inc. 265 11,679
Nautilus Group Inc. 1,855 52,868
Navarre Corp.* 1,422 11,369
Navigant Consulting Co.* 2,727 48,159
Navigant International Inc.* 864 12,692
The accompanying notes are an integral part of the financial statements.
8
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
Nelson Thomas Inc. 634 $ 13,796
Netflix Inc.* 2,030 33,312
NetRatings Inc.* 781 10,622
New York & Co Inc.* 720 15,163
NIC Inc.* 1,876 8,667
Nu Skin Enterprises Inc. 3,124 72,789
Nutri/System Inc.* 1,230 18,155
Oakley Inc. 1,350 22,991
O'Charleys Inc.* 1,228 21,686
Oshkosh B'Gosh Inc. 438 11,384
Outdoor Channel Holdings Inc.* 320 4,403
Overstock.Com Inc.* 628 22,357
Oxford Industries Inc. 773 33,278
Pacific Sunwear of California* 4,190 96,328
Pantry Inc.* 946 36,639
Papa Johns International Inc.* 607 24,262
Parlux Fragrances Inc.* 350 9,685
Party City Corp.* 656 7,872
Payless Shoesource* 3,723 71,482
Pegasus Solutions Inc.* 1,144 12,756
Pep Boys Manny Moe & Jack 3,075 41,636
Perry Ellis International* 533 12,467
Petco Animal Supplies Inc.* 3,200 93,824
PHH Corporation* 2,920 75,102
Phillips-Van Heusen Corp. 1,476 48,250
Pier 1 Imports 4,780 67,828
Pinnacle Entertainment Inc.* 2,245 43,912
Playboy Enterprises Inc.* 1,140 14,752
Playtex Products Inc.* 2,256 24,275
Prepaid Legal Services Inc. 546 24,378
Prestige Brands Holdings Inc.* 1,550 30,225
Priceline.Com Inc.* 1,386 32,335
PRIMEDIA Inc.* 8,281 33,537
ProQuest Co.* 1,409 46,201
Providence Service Corp.* 520 12,912
Radio One Inc.* 4,650 59,381
Rare Hospitality International Inc.* 1,905 58,045
RC2 Corp.* 992 37,269
Reader's Digest Association 5,520 91,080
Red Robin Gourmet Burgers* 785 48,654
Regent Communications Inc.* 2,130 12,503
Regis Corp. 2,500 97,700
Renaissance Learning Inc. 417 8,465
Rent Way Inc.* 1,459 14,357
Resources Connection Inc.* 2,646 61,467
Restoration Hardware Inc.* 1,473 12,049
Retail Ventures Inc.* 921 12,562
Revlon Inc.* 8,031 24,655
Riviera Holdings Ltd.* 470 10,646
Rollins, Inc. 1,600 32,064
Ruby Tuesday, Inc. 3,580 92,722
Rush Enterprises Inc.* 1,100 14,751
Russ Berrie & Co Inc. 658 8,429
Russell Corp. 1,823 37,280
Ryan's Restaurant Group Inc.* 2,326 32,587
Saga Communications Inc.* 943 13,202
Salem Communications Corp.* 661 13,114
Schawk Inc. 694 17,350
Scholastic Corp.* 1,826 70,392
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
School Specialty Inc.* 1,262 $ 58,683
Select Comfort Corp.* 2,001 42,881
Sharper Image Corp.* 652 8,300
Shoe Carnival Inc.* 415 9,030
Shopko Stores Inc.* 1,653 40,184
Shuffle Master Inc.* 1,986 55,668
Sinclair Broadcast Group Inc. 2,448 22,228
Sirva Inc.* 1,300 11,063
Six Flags Inc.* 5,169 24,036
Skechers USA Inc.* 1,246 17,768
Sohu.Com Inc.* 1,373 30,096
Sonic Automatic Inc. 1,626 34,569
Source Interlink Cos Inc.* 1,837 22,724
SourceCorp.* 871 17,263
Spanish Broadcasting Systems Inc.* 2,140 21,379
Speedway Motorsports Inc. 853 31,186
Spherion Corp.* 3,393 22,394
Sports Authority Inc.(The)* 1,433 45,569
Stage Stores Inc.* 1,019 44,428
Stamps.Com Inc.* 897 16,819
Stanley Furniture Co Inc. 724 17,781
Startek Inc. 618 10,148
Steak N Shake Co.* 1,549 28,842
Stein Mart Inc. 1,432 31,504
Steinway Musical Intruments Inc.* 391 11,480
Stewart Enterprises Inc. 5,918 38,704
Strayer Education Inc. 817 70,474
Stride Rite Corp. 2,010 27,718
Sturm Ruger & Co Inc. 1,176 9,843
Syms Corp. 360 5,288
Systemax Inc.* 533 3,582
Talbots Inc. 1,270 41,237
Teletech Hldgs Inc.* 1,985 16,178
Tetra Tech Inc.* 2,929 39,629
Texas Roadhouse Inc.* 1,170 40,658
THQ Inc.* 2,178 63,750
TiVo Inc.* 3,163 21,129
Too Inc.* 1,898 44,356
Topps Co Inc. (The) 1,971 19,769
Tractor Supply Co.* 1,824 89,558
Trans World Entertainment* 1,073 12,694
Travelzoo Inc.* 191 6,271
Triarc Companies Inc. 2,124 31,563
TRM Corp.* 600 10,092
Tuesday Morning Corp. 1,434 45,200
Tupperware Corp. 2,954 69,035
Tupperware Corp. 710 12,723
Unifirst Corp. 512 20,756
United Auto Group Inc. 1,490 44,402
United Natural Foods Inc.* 2,268 68,879
United Online Inc. 3,410 37,033
United Stationers Inc.* 1,848 90,737
Universal Electronics Inc.* 754 12,509
Universal Technical Institute* 1,188 39,442
Usana Inc.* 569 24,069
Vail Resorts Inc.* 1,705 47,911
Valassis Communication* 2,771 102,666
ValueClick Inc.* 4,609 56,829
Valuevision Media Inc.* 1,518 18,231
The accompanying notes are an integral part of the financial statements.
9
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
Ventiv Health Inc.* 1,484 $ 28,612
Vertrue Inc.* 427 16,636
Viad Corp. 1,240 35,142
Volt Information Sciences Inc.* 443 10,512
Wackenhut Corrections Corp.* 533 13,352
Warnaco Group Inc.* 2,567 59,683
Waste Connections Inc.* 2,599 96,917
Waste Industries USA Inc. 330 4,666
Waste Services Inc.* 3,540 13,594
Water Pik Technologies Inc.* 678 12,916
Watson Wyatt & Co. Holdings 1,812 46,442
Websidestory Inc.* 500 7,330
Wesco International Inc.* 1,776 55,731
West Marine Inc.* 761 13,744
Wet Seal Inc.* 2,380 16,148
Weyco Group Inc. 324 6,384
Wilsons The Leather Experts* 1,050 6,972
Wireless Facilities Inc.* 3,124 19,775
WMS Industries Inc.* 1,184 39,960
Wolverine World Wide Inc. 3,229 77,528
World Fuel Services Corp. 1,272 29,778
World Wrestling Entertainment 1,137 12,985
WPT Enterprises Inc.* 320 6,237
Yankee Candle Co. Inc. 2,516 80,764
Zale Corp.* 2,810 89,049
Zumiez Inc.* 170 4,956
----------
12,465,190
----------
CONSUMER STAPLES - 1.85%
Alliance One Internation Inc. 4,807 28,890
American Italian Pasta Co. 1,028 21,609
Arden Group Inc. 73 5,787
Boston Beer Inc.* 541 12,140
Casey's General Stores Inc. 2,791 55,318
Chiquita Brands International Inc. 2,307 63,350
Coca-Cola Bottling Co. 257 12,989
Farmer Bros Co. 371 8,258
Flowers Foods Inc. 1,855 65,593
Great Atlantic & Pacific Tea* 973 28,275
Green Mountain Coffee Roaster* 250 8,483
Hain Celestial Group Inc.* 1,622 31,629
Hansen Natural Corp.* 424 35,921
Ingles Markets Inc. 623 8,579
J & J Snack Foods Corp. 346 18,113
Lance Inc. 1,660 28,569
Longs Drug Stores Corp. 1,708 73,529
M & F Worldwide Corp.* 601 8,029
Maui Land & Pineapple Co. Inc.* 188 7,159
Nash Finch Co. 712 26,159
National Beverage Corp.* 416 3,320
Natures Sunshine Prods Inc. 621 10,830
NBTY Inc.* 3,090 80,155
Pathmark Stores Inc.* 1,670 14,629
Peet's Coffee & Tea Inc.* 753 24,879
Performance Food Group Co.* 2,611 78,878
Provide Commerce Inc.* 448 9,672
RalCorp Holdings Inc. 1,646 67,733
Ruddick Corp. 1,895 48,379
Sanderson Farms Inc. 998 45,349
Sanfilippo (John B) & Son Inc.* 439 10,123
SHARES VALUE
---------------------------------------------------------------
CONSUMER STAPLES - 1.85%(Continued)
Schweitzer-Mauduit International Inc. 844 $ 26,274
Seaboard Corp. 18 29,952
Sensient Technologies 2,613 53,854
Smart & Final Inc.* 742 9,090
Spartan Stores Inc.* 1,150 16,871
Star Scientific Inc.* 2,009 8,980
Tiens Biotech Group Inc.* 230 1,474
Tootsie Roll Industries Inc. 1,390 40,658
Universal Corp. 1,423 62,299
Vector Group Ltd. 1,386 25,738
Weis Markets Inc. 796 30,877
Wild Oats Markets Inc.* 1,584 18,137
----------
1,266,530
----------
ENERGY - 4.83%
Alpha Natural Resources Inc.* 1,640 39,163
Atlas America Inc.* 140 5,207
ATP Oil & Gas Corp.* 1,010 23,634
Atwood Oceanics Inc.* 737 45,370
Berry Petroleum Co. 955 50,500
Bill Barrett Corp.* 730 21,592
Bois D'Arc Energy Inc.* 750 11,063
Brigham Exploration Co.* 1,419 12,955
Cabot Oil & Gas Corp. 2,727 94,627
Cal Dive International Inc.* 2,156 112,910
Callon Petroleum Co.* 697 10,302
Calpine Corp.* 29,808 101,347
Carbo Ceramics Inc. 723 57,088
Carrizo Oil & Gas Inc.* 1,040 17,742
Cheniere Energy Inc.* 2,662 82,788
Cimarex Energy Co.* 4,517 175,756
Clayton Williams Energy Inc.* 311 9,327
Comstock Resources Inc.* 2,271 57,434
Crosstex Energy Inc. 344 16,615
Delta Petroleum Corp.* 1,699 23,990
Dril-Quip Inc.* 390 11,314
Edge Petroleum Corp.* 956 14,933
Encore Acquisition Co.* 1,830 75,030
Endeavor International Corp.* 3,120 11,326
Energy Partners Ltd.* 1,861 48,777
Evergreen Solar Inc.* 2,190 14,082
Foundation Coal Holdings Inc. 1,320 34,241
Frontier Oil Corp. 3,032 88,988
Fuelcell Energy Inc.* 2,675 27,312
FX Energy Inc.* 1,926 21,244
Gasco Energy Inc.* 3,570 13,208
Giant Industries Inc.* 745 26,820
Global Industries Ltd.* 4,612 39,202
Global Power Equipment Group* 1,986 15,789
Goodrich Petroleum Corp.* 570 11,731
Grey Wolf Inc.* 10,600 78,546
Gulf Island Fabrication Inc. 518 10,298
Hanover Compressor* 4,342 49,976
Harvest Natural Resources Inc.* 2,087 22,811
Holly Corp. 1,222 57,031
Hornbeck Offshore Services Inc.* 797 21,591
Houston Exploration Co.* 1,589 84,296
Hydril Co.* 1,052 57,176
Input/Output Inc.* 3,872 24,316
James River Coal Co.* 730 25,295
The accompanying notes are an integral part of the financial statements.
10
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
ENERGY - 4.83% (Continued)
KCS Energy Inc.* 2,763 $ 47,993
KFX Inc.* 3,253 46,485
Lufkin Industries Inc. 786 28,280
Markwest Hydrocarbon Inc. 310 7,192
McMorRan Exploration Co.* 1,151 22,456
Meridian Resource Corp.* 4,856 23,212
Mission Resources Corp.* 2,309 18,634
Newpark Resources Inc.* 4,687 35,152
Oceaneering International Inc.* 1,443 55,772
Oil States International Inc.* 2,267 57,060
Ormat Technologies Inc. 400 7,640
Pacific Ethanol Inc.* 170 1,695
Parallel Petroleum Corp.* 1,730 15,311
Parker Drilling Co.* 5,304 37,181
Penn Virginia Corp. 1,032 46,099
Petrohawk Energy Corp.* 1,320 14,256
Petroleum Development Corp.* 918 29,238
Petroquest Energy Inc.* 2,260 14,848
Pioneer Drilling Company* 1,100 16,786
Plug Power Inc.* 2,439 16,707
Remington Oil & Gas Corp.* 1,298 46,339
Resource America Inc. 886 34,138
RPC Inc. 817 13,824
Seacor Holdings Inc.* 909 58,449
Spinnaker Exploration Co.* 1,390 49,331
St Mary Land & Exploration Co. 3,172 91,925
Stone Energy Corp.* 1,333 65,184
Superior Energy Services Inc.* 4,322 76,932
Swift Energy Co.* 1,577 56,488
Syntroleum Corp.* 2,176 22,326
Tetra Technologies Inc.* 1,255 39,972
Tipperary Corp.* 1,000 6,250
Todco* 2,630 67,512
Toreador Resources Corp.* 790 19,189
Transmontaigne Inc.* 2,034 21,357
Tri-Valley Corp.* 1,240 17,273
Universal Compression Holdings* 988 35,805
Veritas Dgc Inc.* 1,886 52,318
W&T Offshore Inc. 700 16,849
Warren Resources Inc.* 1,030 10,764
W-H Energy Services Inc.* 1,557 38,815
Whiting Petroleum Corp.* 1,658 60,202
----------
3,297,982
----------
FINANCIAL - 22.29%
21st Century Insurance Group 1,786 26,504
Aames Investment Corp. 2,310 22,453
ABC Bancorp 662 11,969
Acadia Realty Trust 1,540 28,721
Accredited Home Lenders* 974 42,856
Ace Cash Express Inc.* 631 16,128
Advance America Cash Advance Centers 3,780 60,480
Advanta Corp. 1,056 29,737
Advent Software, Inc.* 1,193 24,170
Affirmative Insurance Holdings 540 8,559
Affordable Residential 1,440 19,224
Agree Realty Corp. 430 13,008
Alabama National Bancorp 754 49,289
Alexander's Inc.* 110 27,363
Alexandria Real Estate Equity 1,172 86,083
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29% (Continued)
Alfa Corp. 1,804 $ 26,555
Amcore Financial Inc. 1,180 35,258
Amegy Bancorporation Inc. 3,894 87,148
American Campus Communities 700 15,876
American Equity Investment Life
Holding Co. 1,820 21,622
American Home Mortgage Investment Corp. 1,963 68,626
American Physicans Capital Inc.* 414 15,380
Americanwest Bancorp* 573 11,431
Ames National Corp. 160 17,690
AMLI Residential Properties Trust 1,421 44,420
Anchor Bancorp Wis Inc. 1,258 38,067
Anthracite Capital Inc. 2,961 35,088
Anworth Mortgage Asset Corp. 2,621 25,791
Apollo Investment Corp. 3,456 63,694
Arbor Realty Trust Inc. 716 20,549
Archipelago Holdings Llc* 1,640 63,944
Ares Capital Corp. 1,288 22,965
Argonaut Group Inc.* 1,552 35,836
Arrow Financial Corp. 562 15,646
Ashford Hospitality Trust . 1,926 20,801
Asset Acceptance Capital Corp.* 500 12,955
Asta Funding Inc. 575 15,974
Baldwin & Lyons Inc. 418 10,074
Banc Corp.* 740 7,829
BancFirst Corp. 217 18,877
Bancorp Inc.* 502 8,755
BancorpSouth Inc. 4,342 102,471
Banctrust Financial Group Inc. 516 10,077
Bank Granite Corp. 737 14,106
Bank Mutual Corp. 3,185 35,226
Bank Of The Ozarks Inc. 626 20,558
BankAtlantic Bancorp Inc. 2,432 46,086
Bankrate Inc.* 530 10,674
BankUnited Financial Corp. 1,439 38,911
Banner Corp. 578 16,190
Bedford Property Investors Inc. 816 18,784
Berkshire Hills Bancorp Inc. 288 9,596
Beverly Hills Bancorp Inc. 770 8,432
BFC Financial Corporation* 1,101 9,392
Bimini Mortgage Management Inc. 1,170 16,497
Biomed Realty Trust Inc. 1,750 41,738
BKF Capital Group Inc. 380 14,406
Boston Private Financial Holdings Inc. 1,556 39,211
Boykin Lodging Co.* 970 12,998
Brandywine Realty Trust 3,107 95,230
Bristol West Holdings Inc. 960 17,568
Brookline Bancorp Inc. 3,422 55,642
Calamos Asset Management Inc. 1,280 34,867
Camden National Corp. 424 13,886
Capital Automotive REIT 2,165 82,638
Capital Bancorp Ltd. 691 23,225
Capital City Bank Group Inc. 513 20,725
Capital Corp Of The West 513 14,236
Capital Crossing Bank* 330 11,253
Capital Lease Funding Inc. 1,342 14,561
Capital Southwest Corp. 153 13,720
Capital Trust 661 22,084
Cardinal Financial Corp.* 1,280 12,019
Cascade Bancorp 939 19,757
The accompanying notes are an integral part of the financial statements.
11
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29% (Continued)
Cash America International Inc. 1,610 $ 32,393
Cathay Bancorp Inc. 2,524 85,084
CCC Information Services Group* 462 11,065
Cedar Shopping Centers Inc. 1,119 16,505
Center Financial Corp. 623 15,469
Central Coast Bancorp* 645 11,675
Central Pacific Financial Co. 1,681 59,844
Ceres Group Inc.* 1,925 11,704
Charter Financial Corp. 217 7,582
Chartermac 2,242 49,234
Chemical Financial Corp. 1,402 46,420
Chittenden Corp. 2,582 70,230
Citizens & Northern Corp. 460 14,370
Citizens Banking Corp Michigan 2,393 72,316
Citizens Inc.* 1,758 10,724
City Bank Lynnwood 433 13,432
City Holding Co. 923 33,708
Clifton Savings Bancorp Inc. 758 8,004
CNA Surety Corp.* 873 12,964
Coastal Financial Corp. 805 11,866
CoBiz Inc. 813 14,740
Cohen & Steers Inc. 460 9,481
Collegiate Funding Services* 820 11,956
Colonial Properties Trust 2,190 96,360
Colony Bankcorp Inc. 300 9,012
Columbia Bancorp 303 11,044
Columbia Banking Systems Inc. 873 21,493
Commercial Bankshares Inc. 260 10,091
Commercial Capital Bancorp Inc. 2,457 41,056
Commercial Federal Corp. 2,128 71,671
Commercial Net Lease Realty 2,897 59,302
Community Bancorp* 270 8,375
Community Bank System Inc. 1,686 41,122
Community Banks Inc. 598 15,500
Community Trust Bancorp Inc. 821 26,863
CompuCredit Corp.* 1,155 39,593
Corporate Office Properties Trust 1,614 47,532
Correctional Properties Trust 613 17,348
Corus Bankshares Inc. 1,043 57,876
Cousins Properties Inc. 2,186 64,662
Crawford & Co. 1,292 9,587
Credit Acceptance Corp.* 547 8,145
Criimi Mae Inc.* 870 19,010
Crt Properties Inc. 1,772 48,376
CVB Financial Corp. 2,620 51,562
Cybersource Corp.* 1,487 10,870
Danielson Holding Corp.* 5,983 72,813
Delphi Financial Group Inc. 1,550 68,433
Delta Financial Corp. 600 5,706
Diamondrock Hospitality Co. 1,370 15,481
Digital Insight Corp.* 1,942 46,453
Digital Realty Trust Inc. 490 8,516
Dime Community Bancshares 1,485 22,572
Direct General Corp. 887 16,507
Donegal Group Inc. 523 10,439
Doral Financial Corp. 4,780 79,061
Eastgroup Propties Inc. 1,224 51,543
ECC Capital Corp. 3,170 21,112
Education Realty Trust Inc. 1,220 22,326
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29% (Continued)
eFunds Corp.* 2,519 $ 45,317
Electro Rent Corp.* 1,001 14,555
E-Loan Inc.* 3,050 10,187
EMC Insurance Group Inc. 346 6,256
Encore Capital Group Inc.* 813 13,821
Enstar Group Inc.* 176 11,929
Enterprise Financial Service* 430 10,170
Entertainment Properties Trust 1,419 65,274
Equity Inns Inc. 2,983 39,674
Equity Lifestyle Properties 1,053 41,867
Equity One Inc. 2,054 46,626
eSpeed Inc.* 1,158 10,318
Eurobancshares Inc.* 510 8,186
Euronet Worldwide Inc.* 1,725 50,146
Extra Space Storage Inc. 1,730 24,791
Factset Research Systems Inc. 1,909 68,419
Farmer Mac 610 13,451
Farmers Capital Bank Corp. 336 11,639
FBL Financial Group Inc. 720 19,879
FelCor Lodging Trust Inc.* 2,776 40,196
Fidelity Bankshares Inc. 1,242 32,938
Fieldstone Investment Corp. 2,710 39,024
Financial Federal Corp. 971 37,519
Financial Institutions Inc. 500 9,010
First Acceptance Corporation* 948 8,968
First Bancorp (NorthCarolina) 632 13,986
First Bancorp (Puerto Rico) 1,896 76,124
First Busey Corp. 781 15,081
First Cash Inc.* 713 15,237
First Charter Corp. 1,684 36,997
First Citizens Bancshares Inc. 337 48,713
First Commonwealth Financial Corp. 3,872 53,046
First Community Bancorp 729 34,628
First Community Bancshares Inc. 564 18,330
First Defiance Financial Corp. 390 10,409
First Financial Bancorp 1,951 36,874
First Financial Corp. 746 21,433
First Financial Bankshares, Inc. 1,022 34,584
First Financial Holdings Inc. 687 20,548
First Indiana Corp. 597 17,713
First Industrial Realty Trust Inc. 2,383 95,082
First Merchants Corp. 1,028 25,546
First Midwest Bancorp Inc. 2,541 89,367
First Niagara Financial Group 6,415 93,531
First Oak Brook Bancshares Inc. 370 10,441
First Place Financial Corp. 839 16,856
First Potomac Realty Trust 910 22,568
First Regional Bancorp* 130 8,600
First Republic Bank 1,198 42,325
First Source Corp. 655 15,026
First South Bancorp Inc. 270 8,608
First State Bancorp 858 16,551
Firstfed Financial Corp.* 916 54,603
Flagstar Bancorp Inc. 1,922 36,383
Flushing Financial Corp. 1,073 19,743
FNB Corp. (Pennsylvania) 3,127 61,446
FNB Corp. (Virginia) 409 11,452
FPIC Ins Group Inc.* 569 16,689
Franklin Bank Corp.* 1,125 21,105
Fremont General Corp. 3,610 87,831
The accompanying notes are an integral part of the financial statements.
12
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29% (Continued)
Frontier Financial Corp. 1,369 $ 34,581
Gabelli Asset Management Inc. 394 17,411
Gables Residential Trust 1,628 70,378
GATX Corp. 2,444 84,318
GB&T Bancshares Inc. 705 16,751
Getty Rlty Corp. 975 27,008
GFI Group Inc.* 330 11,748
Glacier Bancorp Inc. 1,736 45,362
Gladstone Capital Corp. 632 14,789
Glenborough Realty Trust Inc. 1,794 36,938
Glimcher Realty Trust 1,984 55,056
GMH Communities Trust 1,680 23,268
Gold Banc Corp. Inc. 2,173 31,617
Government Properties Trust Inc. 1,148 11,159
Gramercy Capital Corp. 760 18,590
Great American Financial 469 9,291
Great Southern Bancorp Inc. 582 18,211
Greater Bay Bancorp 2,842 74,944
Greene County Bancshares Inc. 360 9,835
Greenhill & Co. 662 26,818
Hancock Holding Co. 1,482 50,981
Hanmi Financial Corp. 2,216 37,007
Harbor Florida Bancshares Inc. 1,156 43,281
Harland (John H) Co. 1,531 58,178
Harleysville Group 735 15,354
Harleysville National Corp. 1,457 33,744
Harris & Harris Group Inc.* 959 11,422
Healthextras Inc.* 1,177 23,622
Heartland Financial Usa Inc. 590 11,523
Henry (Jack) & Assoc. 4,030 73,789
Heritage Commerce Corp.* 660 12,118
Heritage Property Investment 1,528 53,511
Hersha Hospitality Trust 1,130 10,780
Highland Hospitality Corp. 2,236 23,366
Highwoods Properties 2,991 89,012
Hilb Rogal & Hobbs Co. 1,778 61,163
Home Properties Inc. 1,749 75,242
Homebanc Corp. 3,140 28,543
Homestore Inc.* 8,203 16,652
Horace Mann Educators 2,381 44,810
Horizon Financial Corp. 564 12,521
Hudson United Bancorp 2,490 89,889
Huron Consulting Group Inc.* 370 8,714
Hypercom Corp.* 2,912 18,841
IBERIABANK Corp. 427 26,307
IMPAC Mortgage Holdings Inc. 4,183 78,013
Independence Holding Co. 259 4,571
Independent Bank Corp. 1,173 33,360
Independent Bank Corp Massachusetts 857 24,176
Infinity Property & Casuality 1,149 40,077
Inland Real Estate Corporation 3,730 59,978
Innkeepers USA Trust 2,367 35,363
Integra Bank Corp. 849 19,204
Interchange Financial Services Corp. 954 17,506
International Securities Exch* 630 15,819
Interpool Inc. 450 9,621
Investment Technology Group* 2,209 46,433
Investors Real Estate Trust* 2,468 23,841
Ipayment Inc.* 678 24,761
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29% (Continued)
Irwin Financial Corp. 1,014 $ 22,501
ITLA Capital Corp.* 319 17,194
Jones Lang Lasalle Inc.* 1,895 83,816
Kansas City Life Insurance Co. 202 9,706
Kearr Financial Corp. 1,210 14,278
Kilroy Realty Corp. 1,603 76,126
Kite Realty Group Trust 1,070 16,050
KMG America Corp.* 1,170 11,630
KNBT Bancorp Inc. 1,825 27,539
Knight Capital Group Inc.* 5,969 45,484
Kronos Inc.* 1,782 71,975
La Quinta Properties Inc.* 10,080 94,046
LaBranche & Co.* 3,002 18,913
Lakeland Bancorp Inc. 967 15,095
Lakeland Financial Corp. 324 13,180
Landamerica Financial Group 1,008 59,845
LaSalle Hotel Properties 1,667 54,694
Lexington Corp Properties Trust 2,734 66,464
LTC Properties Inc. 1,200 24,840
Luminent Mortgage Capital Inc. 2,125 22,929
Macatawa Bank Corp. 569 19,739
MAF Bancorp Inc. 1,794 76,477
Maguire Properties Inc. 1,933 54,780
Main Street Banks Inc. 869 22,124
Mainsource Financial Group 570 10,311
Marketaxess Holdings Inc.* 1,280 14,464
Marlin Business Services Inc.* 360 7,236
MB Financial Inc. 1,221 48,632
MBT Financial Corp. 824 15,862
MCG Capital Corp. 2,630 44,920
McGrath Rent Corp. 1,146 27,160
Mercantile Bank Corp. 405 17,807
Meristar Hospitality Corp.* 4,861 41,804
Metris Companies Inc.* 3,235 46,778
MFA Mortgage Investments Inc. 4,571 34,054
Mid-America Apartment Communities Inc. 1,050 47,690
Midland Co. 594 20,903
Mid-State Bancshares 1,272 35,322
Midwest Banc Holdings Inc. 633 12,210
MoneyGram International 4,800 91,776
Morningstar Inc.* 470 13,231
Mortgageit Holdings Inc. 940 17,155
Nara Bancorp 1,030 15,120
NASB Financial Inc. 171 7,498
Nasdaq Stock Market Inc.* 2,480 46,773
National Financial Partners 1,953 76,440
National Health Investors Inc. 1,303 36,575
National Health Realty Inc. 400 7,444
National Interstate Corp.* 250 5,018
National Penn Bancshares Inc. 1,917 47,887
National Western Life Ins Co.* 124 24,042
Nationwide Health Properties Inc. 3,732 88,113
Navigators Group Inc.* 497 17,181
NBC Capital Corp. 381 9,274
NBT Bancorp Inc. 1,798 42,505
NCO Group Inc.* 1,782 38,545
NDCHealth Corp. 2,001 35,958
Net Bank Inc. 2,570 23,952
Newalliance Bancshares Inc. 6,340 89,077
The accompanying notes are an integral part of the financial statements.
13
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29%(Continued)
Newcastle Investment Corp. 2,424 $ 73,084
NGP Capital Resources Co. 960 14,333
Northern Empire Bancshares* 440 13,614
Northstar Realty Finance Corp. 1,060 11,119
Northwest Bancorp Inc. 1,094 23,258
Novastar Financial Inc. 1,465 57,355
OceanFirst Financial Corp. 498 11,210
Ocwen Financial Corp.* 1,908 12,898
Odyssey Re Holdings Corp. 660 16,289
Ohio Casualty Corp. 3,483 84,219
Old National Bancorp 3,785 80,999
Old Second Bancorp Inc. 750 21,818
Omega Financial Corp. 699 21,704
Omega Healthcare Investors Inc. 2,830 36,394
One Liberty Properties Inc. 430 8,905
Optionsxpress Holdings Inc. 1,150 17,480
Oriental Financial Group Inc. 1,183 18,053
Origen Financial Inc. 950 7,030
Pacific Capital Bancorp 2,542 94,257
Park National Corp. 680 75,140
Parkway Properties Inc. 784 39,208
Partners Trust Financial Group 2,766 29,541
Peapack Gladstone Financial Corp. 461 12,770
Pennfed Financial Services Inc. 504 8,508
Pennrock Financial Services Corp.* 430 15,433
Pennsylvania Commerce Bancorp* 240 7,860
Pennsylvania Real Estate
Investment Trust 2,030 96,425
Peoples Bancorp Inc. 525 14,044
PFF Bancorp Inc. 1,080 32,713
Phoenix Companies Inc. 5,281 62,844
Pico Holdings Inc.* 447 13,303
Pinnacle Financial Partners* 400 9,600
Piper Jaffray Companies Inc.* 1,136 34,568
Placer Sierra Bancshares 370 10,090
PMA Capital Corp.* 1,781 15,726
Portfolio Recovery Associates* 863 36,263
Post Properties Inc. 2,217 80,056
Preferred Bank Los Angeles 230 9,131
Premierwest Bancorp* 730 10,819
Prentiss Properties Trust 2,513 91,574
Presidential Life Corp. 1,142 19,540
PRG-Schultz International Inc.* 2,302 6,492
PrivateBancorp Inc. 917 32,443
ProAssurance Corp.* 1,457 60,843
Prosperity Bancshares Inc. 1,184 33,874
Provident Bankshares Corp. 1,828 58,331
Provident Financial Holdings 272 7,646
Provident Financial Services 4,032 70,842
Provident New York Bancorp Inc. 2,259 27,356
PS Business Parks Inc. 912 40,538
QC Holdings Inc.* 410 5,920
R&G Financial Corp. 1,552 27,455
RAIT Investment Trust 1,423 42,619
Ramco-Gershenson Properties Trust 805 23,570
Redwood Trust Inc. 1,095 56,502
Renasant Corp. 578 17,779
Republic Bancorp Inc. (Kentucky) 396 8,597
Republic Bancorp Inc. 3,897 58,377
RLI Corp. 1,250 55,750
SHARES VALUE
---------------------------------------------------------------
FINANCIAL - 22.29% (Continued)
Rockville Financial Inc.* 490 $ 5,988
Royal Bancshares Pa Inc. 248 5,890
S & T Bancorp Inc. 1,477 53,320
S1 Corp.* 3,894 18,341
Safety Insurance Group Inc. 644 21,741
Sanders Morris Harris Group Inc. 713 12,264
Sandy Spring Bancorp Inc. 818 28,655
Santander Bancorp 295 7,393
Saul Centers Inc. 613 22,283
Saxon Capital Inc. 2,770 47,284
SCBT Financial Corp. 443 14,021
Seabright Insurance Holdings* 450 5,144
Seacoast Banking Corp. 644 12,680
Security Bank Corp. 538 12,320
Selective Insurance Group Inc. 1,568 77,694
Senior Housing Property Trust 3,311 62,611
Sierra Bancorp 300 6,804
Signature Bank* 652 15,909
Simmons First National Corp. 796 21,580
Sizeler Property Investors Inc. 1,030 13,596
Sotheby's Holdings* 2,265 31,031
Sound Federal Bancorp Inc. 620 10,019
Southside Bancshares Inc. 540 11,070
Southwest BanCorp Inc. Oklahoma 759 15,544
Sovran Self Storage Inc. 897 40,778
Spirit Finance Corp. 3,750 44,063
State Auto Financial Corp. 783 24,304
State Bancorp Inc. 452 10,224
State Financial Services Corp. 320 12,883
Sterling Bancorp 1,013 21,628
Sterling Bancshares Inc. 2,517 39,165
Sterling Financial Corp. (Pennsylvania) 1,420 30,260
Sterling Financial Corp. (Washington)* 1,280 47,872
Stewart Information Services Corp. 949 39,858
Stifel Finl Corp.* 467 11,283
Strategic Hotel Capital Inc. 1,670 30,060
Suffolk Bancorp 589 19,019
Summit Banshares Inc. 570 9,861
Summit Financial Group Inc. 290 9,480
Sun Bancorp Inc.* 626 12,939
Sun Communities Inc. 902 33,545
Sunstone Hotel Investors Inc. 1,320 32,023
Susquehanna Bancshares Inc. 2,585 63,565
SVB Financial Group* 1,975 94,603
SWS Group Inc. 858 14,740
SY Bancorp Inc. 667 15,241
Tanger Factory Outlet Ctrs Inc. 1,530 41,203
Taubman Centers Inc. 2,816 95,997
Taylor Capital Group Inc. 223 8,753
Technology Investment Capital Corp. 740 10,952
Texas Capital Bancshares Inc.* 1,243 24,537
Texas Regional Bancshares 2,283 69,586
Tierone Corp. 1,005 27,266
TNS Inc.* 722 16,873
Tompkins Trustco Inc. 355 15,407
Tower Group Inc. 930 14,536
Town & Country Trust 980 27,940
Tradestation Group Inc.* 1,100 9,438
Triad Guaranty Inc.* 497 25,044
The accompanying notes are an integral part of the financial statements.
14
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
CONSUMER CYCLICALS - 18.24% (Continued)
TriCo Bancshares 675 $ 15,080
TrustCo Bank Corp. 4,186 54,669
Trustmark Corp. 2,627 76,866
Trustreet Properties Inc. 3,218 53,451
U-Store-It Trust 1,590 30,290
UCBH Holdings Inc. 5,080 82,499
UICI 1,961 58,379
UMB Financial Corp. 868 49,502
Umpqua Holdings Corp. 2,464 58,003
Union Bankshares Corp. 489 18,885
United Bankshares Inc. 2,076 73,926
United Community Banks Inc. 1,755 45,665
United Community Financial Corp. 1,500 16,410
United Fire & Casualty Co. 852 37,846
United Panam Financial Corp.* 281 7,701
United Rentals* 3,732 75,424
United Security Bancshares Inc. 320 9,843
Universal American Financial* 1,391 31,464
Universal Health Realty Trust 653 24,885
Univest Corp Of PA 634 18,995
Unizan Financial Corp. 1,226 32,845
Urstadt Biddle Properties 1,168 20,230
USB Holding Co. Inc. 611 14,297
USI Holdings Corp.* 2,531 32,599
Value Line Inc. 71 2,787
Vineyard Natl Bancorp Co. 430 13,571
Virginia Commerce BanCorp Inc.* 510 12,408
Virginia Financial Group Inc. 394 13,825
W Holding Co. Inc. 6,070 62,035
Waddell & Reed Financial Investment 4,230 78,255
Washington Real Estate Investment Trust 2,331 72,727
Washington Trust BanCorp Inc. 651 18,013
Wesbanco Inc. 1,261 37,855
West Bancorp 930 17,484
West Coast Bancorp 825 20,138
Westamerica Bancorp 1,818 96,009
Western Sierra Bancorp* 364 12,321
Westfield Financial Inc. 245 5,939
Wilshire Bancorp Inc. 856 12,266
Winston Hotels Inc. 1,471 16,563
Wintrust Financial Corp. 1,307 68,421
World Acceptance Corp.* 1,051 31,583
Wright Express Corp.* 2,230 41,188
WSFS Financial Corp. 324 17,726
Yardville National Bancorp 469 16,767
Zenith National Insurance Corp. 886 60,124
Ziprealty Inc.* 390 5,008
----------
15,224,245
----------
HEALTH CARE - 11.31%
Aastrom Biosciences Inc.* 5,650 17,685
Abaxis Inc.* 1,102 11,990
Abegenix Inc.* 4,974 42,677
Abiomed Inc.* 1,056 9,029
Acadia Pharmaceuticals Inc.* 910 7,643
Adeza Biomedical Corp.* 240 4,075
Adolor Corp.* 2,167 20,045
Advanced Neuromod Systems Inc.* 1,099 43,608
Albany Molecular Research Inc.* 1,323 18,522
Alexion Pharmaceuticals Inc.* 1,547 35,643
SHARES VALUE
---------------------------------------------------------------
HEALTH CARE - 11.31% (Continued)
Align Technology Inc.* 3,418 $ 25,191
Alkermes Inc.* 5,022 66,391
Alliance Imaging Inc.* 766 8,012
Allied Healthcare International Inc.* 1,690 11,965
Allscripts Healthcare Solution* 1,859 30,878
Alpharma Inc. 2,201 31,848
Amedisys Inc.* 859 31,594
Amercan Healthway Inc.* 1,840 77,777
America Service Group Inc.* 605 9,589
American Dental Partners Inc.* 440 10,740
American Medical Systems* 3,836 79,213
American Retirement Corp.* 1,540 22,515
Amsurg Corp.* 1,639 45,384
Amylin Pharmaceuticals Inc.* 5,790 121,185
Analogic Corp. 758 38,143
Andrx Group* 4,060 82,459
Angiodynamics Inc.* 130 2,826
Animas Corp.* 682 13,742
Antigenics Inc.* 1,605 8,683
Applera Corp-Celera Genomics* 4,100 44,977
Apria Healthcare Group* 2,726 94,429
Arena Pharmaceuticals Inc.* 1,960 13,367
Ariad Pharmaceuticals Inc.* 2,951 19,654
Arquile Inc.* 1,750 11,340
Array Biopharma Inc.* 1,747 11,006
Arrow International Inc. 1,180 37,642
Arthrocare Corp.* 1,340 46,820
Aspect Medical Systems Inc.* 901 26,796
Atherogenics Inc.* 2,093 33,446
Avanir Pharmaceuticals* 5,970 16,716
Barrier Therapeutics Inc.* 812 6,439
Bentley Pharmaceuticals Inc.* 1,022 11,191
Beverly Enterprises Inc.* 6,081 77,472
Bio-Rad Laboratries Inc.* 978 57,907
Bioenvision Inc.* 2,253 16,402
Biomarin Pharmaceutical Inc.* 3,582 26,829
Bio-Reference Labs Inc.* 562 7,801
Bioscrip Inc.* 2,050 12,300
Biosite Inc.* 936 51,471
Bone Care International Inc.* 1,117 36,827
Bruker Biosciences Corp.* 2,077 8,287
Caliper Life Sciences Inc.* 1,520 8,512
Candela Corp.* 1,254 13,104
Cantel Industries Inc.* 630 10,307
Caraco Pharm Labs Inc.* 534 4,582
Cell Genesys Inc.* 2,533 13,552
Cell Therapeutics Inc.* 3,620 9,810
Centene Corp.* 2,326 78,107
Cepheid Inc.* 2,368 17,381
Chattem Inc.* 984 40,738
Computer Programs & Systems 427 15,914
Conmed Corp.* 1,642 50,524
Connetics Corp.* 1,931 34,063
Conor Medsystems Inc.* 460 7,061
Corixa Corp.* 3,318 14,533
Corvel Corp.* 341 8,566
Cotherix Inc.* 700 7,133
Cubist Pharmaceuticals Inc.* 2,981 39,260
Curagen Corp.* 2,399 12,331
The accompanying notes are an integral part of the financial statements.
15
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
HEALTH CARE - 11.31% (Continued)
Curtis Inc.* 2,654 $ 10,351
CV Therapeutics Inc.* 2,004 44,930
Cyberonics Inc.* 1,175 50,983
Cypress Bioscience Inc.* 1,694 22,361
Datascope Corp. 649 21,644
Decode Genetics Inc.* 3,028 28,433
Dendreon Corp.* 3,287 17,191
Dexcom Inc.* 260 3,247
Diagnostic Products Corp. 1,272 60,204
Digene Corp.* 833 23,057
Discovery Laboratories Inc.* 2,971 21,659
Diversa Corp.* 1,304 6,794
dj Orthopedics Inc.* 1,203 32,998
DOV Pharmaceutical Inc.* 1,269 23,680
Durect Corp.* 2,025 10,307
Dusa Pharmaceuticals Inc.* 942 8,761
Eclipsys Corp.* 2,116 29,772
Encore Medical Corp.* 2,236 12,410
Encysive Pharmaceuticals Inc.* 3,227 34,884
Enzo Biochem Inc.* 1,523 27,307
Enzon Pharmaceuticals Inc.* 2,440 15,811
Epix Pharmaceuticals Inc.* 1,290 11,417
eResarch Technology Inc.* 2,812 37,653
Exelixis Inc.* 4,249 31,570
Eyetech Pharmaceuticals Inc.* 1,880 23,763
First Horizon Pharmaceutical* 1,531 29,150
Foxhollow Technologies Inc.* 770 29,468
Genesis Healthcare Corp.* 1,096 50,723
Genitope Corp.* 1,320 16,949
Gentiva Health Services Inc.* 1,300 23,218
Geron Corp.* 3,085 23,878
GTX Inc.* 423 4,205
Haemonetics Corp.* 1,439 58,481
Healthcare Services Group Inc. 1,474 29,598
Healthronics Surgical Services Inc.* 1,880 24,421
Hi-Tech Pharmacal Co. Inc.* 290 9,239
Hologic Inc.* 1,215 48,296
Hooper Holmes Inc. 3,650 15,148
Horizon Health Corp.* 580 13,566
Human Genome Sciences Inc.* 7,266 84,140
ICOS Corporation* 3,550 75,154
ICU Medical Inc.* 771 24,803
Idenix Pharmaceuticals Inc.* 690 14,959
IDX Systems Corp.* 1,393 41,985
I-Flow Corp.* 1,107 18,420
Illumina Inc.* 1,999 24,128
Immucor Inc.* 2,525 73,099
Immunogen Inc.* 2,282 13,213
Impax Laboratories Inc.* 2,710 42,547
Incyte Corp.* 4,608 32,947
Inspire Pharmaceuticals Inc.* 2,329 19,610
Integra Lifesciences Holdings* 1,139 33,259
Intermune Inc.* 1,379 17,982
Intralase Corp.* 720 14,126
Introgen Therapeutics Inc.* 1,020 6,569
Intuitive Surgical Inc.* 1,920 89,549
Invacare Corp. 1,695 75,190
Inverness Medical Innovations* 951 25,962
IRIS International Inc.* 910 16,198
SHARES VALUE
---------------------------------------------------------------
HEALTH CARE - 11.31% (Continued)
ISIS Pharmaceuticals Inc.* 3,197 $ 12,500
Ista Pharmaceuticals Inc.* 755 6,282
Kensey Nash Corp.* 517 15,634
Keryx Biopharmaceuticals Inc.* 1,330 17,556
Kindred Healthcare Inc.* 1,586 62,821
KV Pharmaceutical Co.* 1,995 33,416
Kyphon Inc.* 1,605 55,838
Labone Inc.* 970 38,616
Landauer Inc. 495 25,695
Laserscope* 1,104 45,750
LCA-Vision Inc. 1,135 55,002
Lexicon Genetics Inc.* 3,528 17,428
Lifecell Corp.* 1,624 25,675
Ligand Pharmaceutical Inc.* 4,108 28,551
Luminex Corp.* 1,421 13,983
Magellan Health Services Inc.* 1,496 52,824
Mannkind Corp.* 920 9,246
Marshall Edwards Inc.* 415 2,963
Martek Biosciences* 1,740 66,033
Matria Healthcare Inc.* 897 28,910
Maxygen Inc.* 1,416 9,714
Medarex Inc.* 6,151 51,238
Medcath Corp.* 405 11,255
Medicines Co.* 2,741 64,112
Medicis Pharmaceuticals Corp. 3,010 95,507
Mentor Corp. 1,786 74,083
Meridian Bioscience Inc. 620 11,749
Merit Medical Systems Inc.* 1,474 22,714
MGI Pharma Inc.* 3,990 86,822
Micro Therapeutics Inc.* 592 2,356
Molecular Devices Corp.* 938 20,289
Molina Healthcare Inc.* 621 27,485
Momenta Pharmaceuticals Inc.* 440 8,699
Myogen Inc.* 1,019 7,123
Myriad Genetics Inc.* 1,708 26,730
Nabi Biopharmaceuticals* 3,266 49,741
Nanogen Inc.* 2,667 10,241
Nastech Pharmaceutical Co. Inc.* 1,000 14,230
National Healthcare Corp. 351 12,394
Neighborcare Inc.* 2,112 70,055
Nektar Therapeutics* 4,720 79,485
Neopharm Inc.* 959 9,580
Neurocrine Biosciences Inc.* 2,040 85,802
Neurogen Corp.* 1,265 8,627
Neurometrix Corp.* 320 6,410
New River Pharmaceuticals Inc.* 340 10,207
Nitromed Inc.* 514 9,997
Northfield Laboratories Inc.* 1,303 18,646
Noven Pharmaceuticals Inc.* 1,301 22,741
NPS Pharmaceuticals Inc.* 2,154 24,448
Nuvasive Inc.* 849 14,110
Nuvelo Inc.* 2,329 18,003
OCA Inc.* 2,016 3,790
Occulogix Inc.* 660 5,537
Odyssey Healthcare Inc.* 1,912 27,571
Onyx Pharmaceuticals Inc.* 1,960 46,805
Option Care Inc. 1,206 17,005
Orasure Technologies Inc.* 2,473 24,705
Orchid Cellmark Inc.* 1,360 14,702
The accompanying notes are an integral part of the financial statements.
16
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
HEALTH CARE - 11.31% (Continued)
Owens & Minor Inc. 2,201 $ 71,202
Pain Therapeutics Inc.* 1,556 10,503
Paincare Holdings Inc.* 2,400 10,392
Palomar Medical Technologies* 937 22,413
Par Pharmaceutical Cos.* 1,898 60,375
Parexel International Corp.* 1,453 28,842
Pediatrix Medical Group Inc.* 1,269 93,322
Penwest Pharmaceuticals Co.* 1,207 14,267
Perrigo Co. 4,666 65,044
Per-Se Technologies Inc.* 1,194 25,098
Pharmion Corp.* 1,362 31,612
Pharmos Corp.* 1 1
Phase Forward Inc.* 1,230 8,364
Polymedica Corp. 1,542 54,988
Pozen Inc.* 1,322 10,840
PRA International* 620 16,604
Priority Healthcare Corp.* 1,944 49,300
Progenics Pharmaceuticals Inc.* 974 20,318
PSS World Medical Inc.* 3,591 44,708
Psychiatric Solutions Inc.* 1,138 55,432
Quality Systems Inc.* 422 19,994
Radiation Therapy Services Inc.* 610 16,196
Regeneron Pharmaceuticals Inc.* 1,942 16,293
Rehabcare Group Inc.* 926 24,752
Renovis Inc.* 1,071 16,354
Res-Care Inc.* 1,120 15,187
Rigel Pharmaceuticals Inc.* 1,102 21,952
Salix Pharmaceuticals Ltd.* 2,039 36,009
Savient Pharmaceuticals Inc.* 3,380 14,906
Seattle Genetics Inc.* 1,470 7,879
Serologicals Corp.* 1,934 41,098
SFBC International Inc.* 1,011 39,055
Somanetics Corp.* 570 12,808
Sonosite Inc.* 869 26,974
Specialty Laboratories Inc.* 427 3,591
Stemcells Inc.* 3,470 14,609
Stereotaxis Inc.* 790 6,344
Steris Corp. 3,866 99,627
Stratagene Corp.* 410 3,563
Sunrise Assisted Living Inc.* 918 49,554
Supergen Inc.* 2,833 13,995
Surmodics Inc.* 841 36,474
Sybron Dental Specialties Inc.* 2,223 83,629
Symbion Inc.* 962 22,944
Symmetry Medical Inc.* 460 10,828
Tanox Inc.* 1,359 15,927
Telik Inc.* 2,892 47,024
Tercica Inc.* 617 5,362
Thermogenesis Corp.* 2,530 11,006
Thoratec Corp.* 2,676 41,050
Threshold Pharmaceuticals Inc.* 310 2,558
Transkaryotic Therapies Inc.* 1,610 58,894
Trimeris Inc.* 985 9,830
Tripath Imaging Inc.* 1,676 14,347
U.S. Physical Therepy Inc.* 660 12,659
United Surgical Partners International* 1,598 83,224
United Therapeutics Corp.* 1,257 60,587
Ventana Medical Systems Inc.* 1,728 69,517
Vertex Pharmaceuticals* 5,255 88,494
SHARES VALUE
---------------------------------------------------------------
HEALTH CARE - 11.31% (Continued)
Viacell Inc.* 440 $ 4,686
Viasys Healthcare Inc.* 1,728 39,036
Vicuron Pharmaceuticals Inc.* 3,377 94,218
Virologic Inc.* 6,760 16,765
Vistacare Inc.* 610 11,267
Vital Images Inc.* 680 12,206
Vital Signs Inc. 303 13,126
Vnus Medical Technologies* 290 3,489
Wellcare Group Inc.* 1,030 36,575
West Pharmaceutical Services Inc. 1,728 48,470
Wilson Greatbatch Tech Inc.* 1,196 28,584
Wright Medical Group Inc.* 1,607 42,907
Young Innovations Inc. 265 9,892
Zoll Medical Corp.* 530 13,489
Zymogenetics Inc.* 1,493 26,277
----------
7,724,153
----------
INDUSTRIAL - 0.50%
GenCorp Inc.* 3,027 58,300
Kaman Corp. 1,233 22,243
Lancaster Colony 1,432 61,461
Raven Industries Inc. 868 20,329
Sequa Corp.* 346 22,895
Trinity Industries 2,285 73,189
United Capital Corp.* 160 4,152
Walter Industries Inc. 2,011 80,842
----------
343,411
----------
MATERIALS - 8.53%
AAON Inc.* 485 8,627
Acuity Brands Inc. 2,454 63,043
AK Steel Holding Corp.* 6,107 39,146
Albany International Corp. 1,579 50,702
Aleris International Inc.* 1,712 38,606
Alico Inc.* 207 10,646
A.M. Castle & Co.* 580 8,967
AMCOL International Corp. 1,205 22,642
American Vanguard Corp. Com 592 12,379
Ameron International Corp. 469 17,541
Andersons Inc. 370 13,250
Apogee Enterprises Inc. 1,544 23,731
Arch Chemicals Inc. 1,315 32,822
Armor Holdings Inc.* 1,921 76,091
Avatar Holdings Inc.* 320 16,086
Balchem Corp. 430 12,922
Barnes Group Inc. 970 32,107
Beacon Roofing Supply Inc.* 920 24,196
Bluegreen Corp.* 1,149 20,004
Bluelinx Holdings Inc. 540 5,713
Bowater Inc. 3,110 100,671
Brady Corp. 2,290 70,990
Brookfield Homes Corp. 809 36,890
Brush Engineered Materials* 1,066 15,200
Buckeye Technologies Inc.* 1,714 13,661
Building Material Holding Corp. 770 53,353
Cabot Micro-Electronics* 1,376 39,890
Calgon Carbon Corp. 1,880 16,638
California Coastal Commnty Inc.* 440 15,123
Cambrex Corp. 1,464 27,888
Caraustar Inds Inc.* 1,595 16,748
The accompanying notes are an integral part of the financial statements.
17
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
MATERIALS - 8.53% (Continued)
Carpenter Technology Corp. 1,371 $ 71,017
Century Alumimum Co.* 1,258 25,663
Ceradyne Inc.* 1,359 32,711
Chesapeake Corp. 1,089 22,804
Circor International Inc. 871 21,488
CLARCOR Inc. 2,860 83,655
Clean Harbors Inc.* 840 18,211
Cleveland-Cliffs Inc. 1,218 70,352
Coeur D'Alene Mines Corp.* 13,292 48,250
Comfort Systems USA* 2,188 14,397
Commercial Metals Co. 3,382 80,559
Compass Minerals International Inc. 1,118 26,161
CompX International Inc. 107 1,792
Consolidated-Tomoka Land Co. 314 27,004
Corn Products International Inc. 4,168 99,032
Delta & Pine Land Co. 2,104 52,726
Deltic Timber Corp. 557 21,183
DHB Industries Inc.* 1,536 12,979
Dixie Group Inc.* 600 10,566
Drew Industries Inc.* 423 19,204
Dycom Industries* 2,713 53,745
Dynamic Materials Corp. 150 5,804
Eagle Materials Inc. 1,023 94,720
ElkCorp. 1,119 31,946
EMCOR Group Inc.* 850 41,565
Encore Wire Corp.* 888 10,291
Energy Conversion Devices Inc.* 1,282 28,690
Enersys Inc.* 2,560 34,893
Ennis Business Forms Inc. 1,416 25,658
Ferro Corp. 2,328 46,234
H.B. Fuller Co. 1,588 54,087
Georgia Gulf Corp. 1,888 58,622
Gibraltar Industries Inc. 1,337 24,788
Glatfelter 2,447 30,343
Gold Kist Holdings Inc.* 2,860 61,719
Grace W R & Co.* 3,737 29,111
Graftech International Ltd.* 5,419 23,302
Granite Construction 1,918 53,896
Graphic Packaging Corp.* 3,622 13,220
Great Lakes Chemical 2,880 90,634
Greif Inc. 850 51,935
Griffon Corp.* 1,625 36,075
Hecla Mining Co.* 6,577 29,991
Hercules, Inc.* 6,263 88,621
Hexcel Corp.* 2,590 43,823
Housevalues Inc.* 360 6,509
Hughes Supply Inc. 3,690 103,689
Huttig Building Products Inc.* 780 8,510
Infrasource Services Inc.* 720 7,502
Innovo Group Inc.* 1,410 3,017
Insituform Technologies Inc.* 1,485 23,805
Interface Inc.* 2,531 20,375
Interline Brands Inc.* 690 13,662
Jacuzzi Brands Inc.* 4,256 45,667
Kaydon Corp. 1,563 43,530
Kronos Worlwide Inc. 194 5,857
Layne Christensen Co.* 525 10,429
Lennox International Inc. 2,753 58,281
Lone Star Technologies Inc.* 1,652 75,166
SHARES VALUE
---------------------------------------------------------------
MATERIALS - 8.53% (Continued)
Longview Fibre 2,838 $ 58,321
LSI Industries Inc. 1,101 15,348
MacDermid Inc. 1,680 52,349
Maverick Tube Corp.* 2,391 71,252
Medis Technologies Ltd.* 839 13,927
Mercer International Inc.* 1,590 11,591
Mestek Inc.* 170 4,333
Metal Management Inc. 1,210 23,414
Metals USA Inc.* 1,124 21,378
Minerals Technologies 1,143 70,409
Mobile Mini Inc.* 820 28,274
Mueller Industries Inc. 2,027 54,932
Myers Industries Inc. 1,463 18,288
NCI Building Systems Inc.* 1,157 37,950
Neenah Paper Inc. 820 25,395
Newmarket Corp.* 947 14,006
NL Industries Inc. 442 6,802
NN Inc. 943 11,957
NS Group Inc.* 1,237 40,215
Nuco2 Inc.* 599 15,376
Octel Corp. 690 12,420
Olin Corp. 3,958 72,194
OM Group Inc.* 1,591 39,282
Oregon Steel Mills Inc.* 1,976 34,007
Perini Corp.* 1,076 17,668
Pioneer Companies Inc.* 630 13,854
PolyOne Corp.* 5,103 33,782
Potlatch Corp. 1,609 84,199
Quanex Corp. 1,397 74,055
Quanta Services* 6,492 57,130
Reliance Steel & Aluminum Co. 1,592 59,015
Roanoke Electric Steel Corp. 620 10,242
Rock-Tenn Co. 1,646 20,822
Rogers Corp.* 905 36,698
Royal Gold Inc. 957 19,255
RTI International Metals Inc.* 1,237 38,854
Ryerson Tull Inc. 1,398 19,949
Schnitzer Steel Industries Inc. 1,214 28,772
Schulman A Inc. 1,705 30,502
Senomyx Inc.* 1,170 19,317
Shaw Group Inc.* 4,312 92,751
Silgan Holdings Inc. 622 34,981
Simpson Manufacturing Inc. 2,008 61,344
Spartech Corp. 1,790 31,862
Standard Register Co. 952 15,051
Steel Dynamics 2,254 59,168
Steel Technologies Inc. 624 10,546
Stepan Co. 296 6,542
Stillwater Mining Co.* 2,269 16,836
Sunterra Corp.* 1,079 17,491
Superior Essex Inc.* 950 16,825
Symyx Technologies Inc.* 1,819 50,896
Tarragon Corp.* 583 14,721
Tejon Ranch Co.* 486 25,014
Terra Industries Inc.* 5,168 35,194
Texas Industries Inc. 1,256 70,625
Titanium Metals Corp.* 310 17,605
Trammell Crow Co.* 1,948 47,220
Tredegar Industries Inc. 1,587 24,757
The accompanying notes are an integral part of the financial statements.
18
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
MATERIALS - 8.53% (Continued)
Trex Company Inc.* 647 $ 16,628
UAP Holding Corp. 1,850 30,710
Ultralife Batteries Inc.* 803 12,968
Universal Forest Products Inc. 883 36,600
URS Corp.* 2,268 84,710
USEC Inc. 4,829 70,697
Valence Technology Inc.* 2,331 6,527
Valmont Industries Inc. 951 24,536
Washington Group International Inc.* 1,447 73,971
Watsco Inc. 1,193 50,822
Wausau Paper Corp. 2,355 28,213
WD-40 Co. 921 25,724
Wellman Inc. 1,805 18,393
Westlake Chemical Corp. 750 18,375
Wheeling-Pittsburgh Corp.* 493 7,582
Worthington Industries 3,850 60,830
Xerium Technologies Inc. 740 8,769
York International 2,329 88,502
Zoltek Cos. Inc.* 600 6,738
----------
5,823,997
----------
TECHNOLOGY - 12.50%
3Com Corp.* 21,310 77,567
3d Systems Corp.* 670 16,120
Actel Corp.* 1,394 19,377
Acxiom Corp. 4,880 101,894
Adaptec Inc.* 6,197 24,044
Adtran Inc. 3,650 90,484
Advanced Digital Information* 3,541 26,912
Aeroflex Inc.* 4,146 34,826
Agile Software Corp.* 2,964 18,673
Agilysys Inc. 1,600 25,120
Airspan Networks Inc.* 2,100 11,655
Altiris Inc.* 1,225 17,983
American Repographics Co.* 740 11,907
American Science And Eng Inc.* 450 19,962
Amicas Inc.* 2,500 11,325
Amis Holdings Inc.* 2,440 32,550
Amkor Technologies Inc.* 5,570 25,065
Anaren Inc.* 1,040 13,676
Anixter International Inc.* 1,768 65,717
Ansoft Corp.* 364 8,794
Ansys Inc.* 1,754 62,285
Anteon International Corp.* 1,538 70,164
Applied Digital Solutions Inc.* 3,470 11,416
Applied Micro Circuits* 17,110 43,802
Arbinet-Thexchange Inc.* 370 2,479
Ariba Inc.* 3,682 21,356
Asiainfo Holdings Inc.* 2,063 11,367
Aspect Communications Corp.* 2,403 26,986
Aspen Technology Inc.* 2,386 12,407
Atheros Communications* 1,905 15,354
Atmel Corp.* 23,350 55,340
Audible Inc.* 1,340 23,276
Avocent Corp.* 2,760 72,146
Bearingpoint Inc.* 10,190 74,693
BEI Technologies Inc. 649 17,315
Bel Fuse Inc. 635 19,406
Bell Microproducts Inc.* 1,610 15,134
Benchmark Electronics Inc.* 2,314 70,392
SHARES VALUE
---------------------------------------------------------------
TECHNOLOGY - 12.50% (Continued)
Black Box Corp. 933 $ 33,028
Blackbaud Inc. 570 7,695
Blackboard Inc.* 1,010 24,159
Blue Coat Systems Inc.* 578 17,271
Borland Software Corp.* 4,407 30,232
Bottomline Technologies Inc.* 720 10,777
Broadwing Corp.* 3,622 16,733
Brocade Communications Systems* 14,877 57,722
Catapult Communications Corp.* 542 9,247
Checkpoint Systems Inc.* 2,102 37,205
Ciber Inc.* 2,943 23,485
Ciena Corp.* 31,780 66,420
Cirrus Logic Inc.* 4,706 24,989
Click Commerce Inc.* 460 10,566
Cogent Communications Group Inc.* 390 2,590
Coherent Inc.* 1,706 61,433
CommScope, Inc.* 3,032 52,787
Comsys IT Partners Inc.* 700 11,942
Comtech Telecommunications* 1,203 39,254
Concur Technologies Inc.* 1,596 16,806
Conexant Systems Inc.* 26,170 42,134
Covansys Corp.* 1,708 21,948
CSG Systems International* 2,797 53,087
Cubic Corp. 866 15,363
Cyberguard Corp.* 1,176 6,991
Cypress Semiconductor* 7,320 92,159
Daktronics Inc. 832 16,648
Dendrite International Inc.* 2,365 32,637
Digi International Inc.* 1,260 14,944
Digital River Inc.* 1,904 60,451
Digitas Inc.* 4,923 56,171
Diodes Inc.* 543 16,942
Ditech Communications Corp.* 1,775 11,520
Dot Hill Systems Corp.* 2,445 12,812
DRS Technologies Inc. 1,516 77,740
DSP Group Inc.* 1,573 37,548
E Piphany Inc.* 4,297 14,954
Echelon Corp.* 1,641 11,290
Ecollege.Com Inc.* 980 11,662
EDO Corp. 878 26,261
Electronics For Imaging Inc.* 3,008 63,288
Emageon Inc.* 800 11,208
Emulex Corp.* 4,612 84,215
Endwave Corp.* 380 18,088
Entrust Inc.* 3,440 16,478
Epicor Software Corp.* 2,959 39,059
EPIQ System Inc.* 742 12,139
Equinix Inc.* 857 37,142
Essex Corp.* 950 21,736
Exar Corp.* 2,316 34,485
Excel Technology Inc.* 666 16,184
Extreme Networks Inc.* 6,779 27,794
Fairchild Semiconductor* 6,650 98,088
Falconstor Software Inc.* 1,338 8,737
Fargo Electronics* 700 13,993
FileNet Corp.* 2,284 57,420
Finisar Corp.* 10,417 10,938
Formfactor Inc.* 1,878 49,617
Foundry Networks Inc.* 6,800 58,684
The accompanying notes are an integral part of the financial statements.
19
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
TECHNOLOGY - 12.50% (Continued)
Gartner, Inc.* 3,088 $ 32,795
Gateway Inc.* 14,330 47,289
Genesis Microchip Inc.* 1,856 34,262
Glenayre Technologies Inc.* 3,720 14,024
Harmonic Inc.* 4,060 19,610
Herley Industries Inc.* 716 13,060
Hutchinson Technology Inc.* 1,402 53,991
iGATE Corp.* 1,178 4,217
Imation Corp. 1,862 72,227
Indentix InCorp.* 4,937 24,833
Infocrossing Inc.* 1,129 14,079
Informatica Corp.* 4,828 40,507
Innovative Solutions & Support* 494 16,584
Inphonic Inc.* 860 13,227
Integral Systems Inc. 580 13,125
Integrated Circuit Systems Inc.* 3,890 80,290
Integrated Device Technology* 5,835 62,726
Integrated Silicon Solution* 2,053 15,213
Intergraph Corp.* 1,567 53,999
Intermagnetics General Corp.* 1,558 47,924
International Displayworks Inc.* 1,750 14,000
Internet Capital Group Inc.* 2,128 15,598
Internet Security Systems Inc.* 2,173 44,090
Inter-Tel Inc. 1,184 22,034
Intervideo Inc.* 567 8,153
Intervoice Inc.* 2,106 18,175
Interwoven Inc.* 2,301 17,327
Ionatron Inc.* 1,340 11,511
Ixia* 1,860 36,158
Ixys Corp.* 1,371 19,441
j2 Global Communications Inc.* 1,313 45,220
JDA Software Group Inc.* 1,613 18,356
Jupitermedia Corp.* 1,126 19,288
Kanbay International Inc.* 1,370 31,661
Keane Inc.* 2,657 36,401
Kemet Corp.* 4,804 30,265
Keynote Systems Inc.* 993 11,588
Komag Inc.* 1,616 45,846
Kopin Corp.* 3,899 19,885
Labarge Inc.* 560 10,164
Lattice Semconductor* 6,298 27,963
Lawson Software Inc.* 3,443 17,731
Leadis Technology Inc.* 1,010 8,131
Lecroy Corp.* 687 9,446
Lexar Media Inc.* 4,437 21,786
Lionbridge Technologies Inc.* 2,363 16,021
Li-Vi Inc.* 1,282 23,576
Macrovision Corporation* 2,805 63,225
Magma Design Automation* 1,946 16,269
Manhattan Associates Inc.* 1,626 31,235
Mantech International Corp.* 869 26,974
MapInfo Corp.* 1,145 12,034
Matrixone Inc.* 2,860 14,300
Maxtor Corp.* 14,060 73,112
McData Corp.* 6,685 26,740
Mentor Graphics* 4,338 44,465
Mercury Computer Systems Inc.* 1,168 31,968
Merge Technologies Inc.* 663 12,431
Methode Electronics Inc. 2,023 24,013
SHARES VALUE
---------------------------------------------------------------
TECHNOLOGY - 12.50% (Continued)
Micrel Inc.* 3,453 $ 39,779
Micromuse Inc.* 4,478 25,345
Micros Systems Inc.* 2,112 94,512
Microsemi Corp.* 3,435 64,578
Microstrategy Inc.* 906 48,054
Microtune Inc.* 2,870 14,393
MIPS Technologies Inc.* 2,339 16,841
Mobility Electronics Inc.* 1,490 13,634
Monolithic Power Systems* 950 8,436
Motive Inc.* 1,220 12,115
MRO Software Inc.* 1,111 16,232
MRV Communications Inc.* 5,795 12,575
Multi-Fineline Electronix Inc.* 450 8,280
Ness Technologies Inc.* 1,050 11,151
Netgear Inc.* 1,770 32,922
NetIQ Corp.* 3,009 34,152
Netlogic Microsystems Inc.* 580 10,283
Netscout Systems Inc.* 1,319 8,692
Newport Corporation* 2,215 30,700
Niku Corp.* 520 10,780
Novatel Wireless Inc.* 1,613 20,114
Omnivision Technologies Inc.* 3,155 42,876
ON Semiconductor Corp.* 7,924 36,450
Online Resources & Comm Corp.* 1,170 13,233
Open Solutions Inc.* 1,081 21,955
Openwave Systems Inc.* 3,817 62,599
Oplink Communications Inc.* 5,743 9,821
Opsware Inc.* 4,139 21,192
Optical Communication Products* 859 1,632
OSI Systems Inc.* 837 13,216
Packeteer Inc.* 1,884 26,564
Palmone Inc.* 2,323 69,156
Par Technology Corp.* 220 7,040
Parametric Technology* 15,040 95,955
Park Electrochemical Corp. 1,113 28,048
PDF Solutions Inc.* 1,022 13,409
Pegasystem Inc.* 730 4,307
Pericom Semiconductor Corp.* 1,467 11,941
Perot Systems Corp.* 4,541 64,573
Phoenix Technologies Ltd.* 1,380 10,736
Pinnacle Systems Inc.* 4,003 22,017
Pixelworks Inc.* 2,595 22,265
Plexus Corp.* 2,398 34,124
PLX Technology Inc.* 1,292 13,127
PMC-Sierra Inc.* 10,020 93,487
Portalplayer Inc.* 850 17,697
Power Integrations Inc.* 1,630 35,159
Progress Software Corp.* 2,073 62,501
QAD Inc. 679 5,228
Quantum Corp-Dlt & Storage Systems* 10,270 30,502
Quest Software Inc.* 3,567 48,618
Radiant Systems Inc.* 1,270 14,478
Radisys Corp.* 1,109 17,910
Rambus Inc.* 5,530 73,991
RealNetworks Inc.* 6,395 31,783
Redback Networks Inc.* 2,330 14,865
RF Micro Devices, Inc.* 10,394 56,439
Rightnow Technologies Inc.* 600 7,212
Rimage Corp.* 530 11,252
The accompanying notes are an integral part of the financial statements.
20
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
SHARES VALUE
---------------------------------------------------------------
TECHNOLOGY - 12.50% (Continued)
RSA Security Inc.* 3,945 $ 45,289
SafeNet Inc.* 1,371 46,696
Sapient Corp.* 4,493 35,629
ScanSoft Inc.* 4,655 17,596
ScanSource Inc.* 705 30,273
SeaChange International Inc.* 1,407 9,877
Secure Computing Corp.* 1,988 21,629
SeeBeyond Technology Corp.* 3,040 12,707
Semtech Corp.* 4,100 68,265
SERENA Software Inc.* 1,551 29,934
SI International Inc.* 542 16,238
Sigmatel Inc.* 1,984 34,045
Silicon Image Inc.* 4,396 45,103
Silicon Laboratories Inc.* 2,370 62,118
Silicon Storage Technology Inc.* 4,880 19,666
Sirf Technology Holdings Inc.* 1,952 34,511
Skyworks Solutions Inc.* 8,727 64,318
SonicWALL Inc.* 2,955 15,927
Sonus Networks Inc.* 13,780 65,868
SPSS Inc.* 989 18,999
SS&C Technologies Inc. 889 28,164
SSA Global Technologies Inc.* 510 6,120
Standard Microsystems Corp.* 1,161 27,144
Stellent Inc.* 1,330 9,975
Stratasys Inc.* 579 18,922
Supertex Inc.* 556 9,819
Supportsoft Inc.* 2,385 12,378
Sycamore Networks Inc.* 9,806 33,831
Sykes Enterprises Inc.* 1,436 13,613
Synaptics Inc.* 1,299 27,747
Syniverse Holdings Inc.* 970 13,580
Synnex Corp.* 482 8,440
Syntel Inc. 433 6,941
Sypris Solutions Inc. 493 6,098
TALX Corp. 1,058 30,587
Tekelec* 3,141 52,769
Telkonet Inc.* 1,970 9,712
Terremark Worldwide Inc.* 1,667 11,669
Tessera Technologies Inc.* 2,438 81,454
Tibco Software Inc.* 11,990 78,415
Transaction Systems* 2,092 51,526
Transwitch Corp.* 5,760 11,808
Trident Microsystems Inc.* 1,409 31,970
TriQuint Semiconductor* 7,738 25,768
TriZetto Group Inc.* 2,367 33,162
TTM Technologies Inc.* 2,278 17,336
Tyler Technologies Inc.* 1,947 14,719
Ulticom Inc.* 720 7,639
Ultimate Software Group Inc.* 1,268 20,795
Universal Display Corp.* 1,306 13,426
Unova Inc.* 2,704 72,008
UTStarcom* 5,560 41,644
Varian Inc.* 1,901 71,839
Vasco Data Security International* 1,330 12,901
Verifone Holdings Inc.* 1,380 22,425
Verint Systems Inc.* 730 23,476
Verity Inc.* 2,085 18,285
Viasat Inc.* 1,198 24,355
Vignette Corp.* 1,618 18,201
SHARES VALUE
---------------------------------------------------------------
TECHNOLOGY - 12.50% (Continued)
Virage Logic Corp.* 760 $ 7,828
Vitesse Semiconductor Corp.* 12,176 25,448
Volterra Semiconductor Corp.* 850 12,657
WebEx Communications Inc.* 1,833 48,410
WebMethods Inc.* 2,956 16,554
Websense Inc.* 1,328 63,810
Westell Technoligies Inc.* 3,010 18,000
Wind River Systems* 3,928 61,591
Witness Systems Inc.* 1,502 27,381
Zhone Technologies Inc.* 3,242 10,861
Zoran Corp.* 2,421 32,175
----------
8,537,418
----------
UTILITIES - 3.55%
Alaska Comm Systems Holdings Inc. 723 7,165
Allete Inc. 1,410 70,359
American States Water Co. 936 27,490
Aquila, Inc.* 13,436 48,504
Avitsa Corp. 2,697 50,136
Black Hills Corp. 1,803 66,441
California Water Service Group 959 36,001
Cascade Natural Gas Corp. 636 13,038
Centennial Communications Corp.* 1,219 16,920
Central Vermont Public Services Corp. 682 12,617
CH Energy Group Inc. 873 42,454
Cincinnati Bell Inc.* 13,577 58,381
Cleco Corp. 2,773 59,814
Commonwealth Tel Enterprises 1,176 49,286
Connecticut Water Service Inc. 447 11,171
CT Communications Inc. 1,056 13,781
Dobson Communications Corp.* 6,239 26,578
Duquesne Light Holdings, Inc. 4,309 80,492
El Paso Electric Co.* 2,645 54,090
Empire District Electric Company 1,435 34,383
Energysouth Inc. 374 10,364
Fairpoint Communications Inc. 1,500 24,225
General Communication Inc.* 3,082 30,419
Globetel Communications Corp.* 3,540 9,877
Golden Telecom Inc. 1,199 36,785
Hungarian Tel & Cable Corp.* 210 3,612
IDACORP Inc. Holding Co. 2,344 71,797
IDT Corp.* 3,230 42,507
Intrado Inc.* 982 14,691
Iowa Telecommunications 1,250 23,438
Laclede Group Inc. 1,172 37,223
Level 3 Communications, Inc.* 38,560 78,277
Mediacom Communications Corp.* 3,424 23,523
MGE Energy Inc. 1,132 41,182
Middlesex Water Co. 633 12,293
New Jersey Resources Corp. 1,529 73,774
NICOR Inc. 2,451 100,908
North Pittsburgh Systems Inc. 834 16,313
Northwest Natural Gas Co. 1,536 58,737
Northwestern Corp. 1,980 62,410
Otter Tail Corp. 1,621 44,302
Peoples Energy Corp. 2,111 91,744
Premiere Global Services Inc.* 3,988 45,025
Price Communications Corp.* 2,544 44,010
RCN Corp.* 1,270 29,324
Shenandoah Telecom Co. 383 15,224
The accompanying notes are an integral part of the financial statements.
21
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
SHARES VALUE
---------------------------------------------------------------
TECHNOLOGY - 12.50% (Continued)
Sierra Pacific Resources* 6,534 $ 81,348
SJW Corp. 427 20,073
South Jersey Industries Inc. 777 47,490
Southwest Gas Corp. 2,091 53,340
Southwest Water Co. 1,085 12,836
Surewest Communications 811 20,802
Talk America Holdings Inc.* 1,514 15,155
Time Warner Telecom Inc.* 2,772 16,410
Ubiquitel Inc.* 4,304 35,121
UIL Holdings Corp. 811 43,640
Unisource Energy Corp. 1,923 59,131
US Unwired Inc.* 7,210 41,962
USA Mobility Inc.* 1,493 43,834
Valor Communications Group Inc. 1,630 22,494
WGL Holdings, Inc. 2,701 90,862
-----------
2,425,583
-----------
Total Common Stocks
(cost $57,235,166) 64,261,939
-----------
PRINCIPAL VALUE
---------------------------------------------------------------
CORPORATE BONDS - 0.02%
MATERIALS - 0.02%
Mueller Industries Inc.
(6.000% due 11/01/14) $ 15,000 $ 14,850
-----------
Total Corporate Bonds
(cost $15,000) 14,850
-----------
SHARES VALUE
---------------------------------------------------------------
UNIT INVESTMENT TRUST - 0.83%
iShares Russell 2000 Index Fund 8,910 $ 567,567
-----------
Total Unit Investment Trust
(cost $350,833) 567,567
-----------
SHORT-TERM INVESTMENTS(2) - 7.02%
NORTHERN TRUST DIVERSIFIED
ASSETS PORTFOLIO - 4.91% 3,354,396 3,354,396
-----------
PRINCIPAL VALUE
---------------------------------------------------------------
U.S. TREASURY BILL - 2.11%
(3.078% due 09/15/05) $ 1,450,000 1,440,822
-----------
Total Short-Term Investments
(cost $4,795,246) 4,795,218
-----------
TOTAL INVESTMENTS - 101.94%
(cost $62,396,245)(1) 69,639,574
-----------
OTHER ASSETS AND LIABILITIES - (1.94%) (1,326,958)
-----------
TOTAL NET ASSETS - 100.00% $68,312,616
===========
* Non-income producing
(1) For federal income tax purposes, cost is $62,653,564 and gross
unrealized
appreciation and depreciation of securities as of June 30, 2005 was
$11,468,608 and ($4,482,598), respectively, with a net appreciation /
depreciation of $6,986,010.
(2) Securities and other assets with an aggregate value of $3,537,050 have
been
segregated with the custodian or designated to cover margin requirements
for the open futures contracts as of June 30, 2005:
UNREALIZED
APPRECIATION/
TYPE CONTRACTS (DEPRECIATION)
--------------------------------------------------------------
Russell 2000 Index (09/05) 5 $59,920
Russell 2000 Index Mini (09/05) 5 $4,260
The accompanying notes are an integral part of the financial statements.
22
SUMMIT MUTUAL FUNDS, INC. - PINNACLE
SERIES
STATEMENT OF ASSETS AND LIABILITIES FINANCIAL
STATEMENTS
JUNE 30, 2005 (UNAUDITED)
ASSETS
Investments in securities, at value $69,639,574
Receivables:
Shares sold 27,601
Securities sold 25,276
Interest and dividends 72,179
Prepaid expenses and other 1,413
-----------
69,766,043
-----------
LIABILITIES
Payables:
Investment securities purchased 754,511
Shares redeemed 283,022
Bank overdraft 324,536
Advisory fees 24,453
Administration expenses 5,559
Directors' fees 2,790
Custodian fees 12,728
Fund accounting fees 13,739
Professional fees 14,365
Royalty fees 5,100
Variation margin 4,833
Other accrued expenses 7,791
-----------
1,453,427
-----------
NET ASSETS*
Paid-in capital 59,280,431
Accumulated undistributed net
investment income 173,806
Accumulated net realized gain / (loss)
on investments and futures contracts 1,550,870
Net unrealized appreciation /
(depreciation) on
investments and futures contracts 7,307,509
-----------
$68,312,616
===========
Shares authorized ($.10 par value) 20,000,000
Shares outstanding 1,101,452
Net asset value, offering and redemption
price per share $ 62.02
Investments at cost $62,396,245
------------------------------------------------------------
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $ 684,003
Undistributed long-term gains $ 303,283
Unrealized appreciation $ 9,993,820
------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2005 (UNAUDITED)
INVESTMENT INCOME
Interest $ 32,610
Dividends 396,104
Other income 1,157
-----------
429,871
-----------
EXPENSES
Advisory fees 113,771
Administration expenses 32,506
Custodian fees and expenses 22,310
Fund accounting fees 27,962
Professional fees 12,319
Directors' fees 3,216
Transfer agent fees 5,834
Royalty fee 4,960
Other expenses 6,922
-----------
229,800
-----------
NET INVESTMENT INCOME / (LOSS) 200,071
-----------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options 1,808,048
Net realized gain / (loss) on
futures contracts 21,620
-----------
1,829,668
-----------
Net change in unrealized appreciation /
(depreciation) on investments and
futures contracts (2,965,380)
-----------
NET REALIZED AND UNREALIZED
GAIN / (LOSS) (1,135,712)
-----------
NET INCREASE / (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (935,641)
===========
-----------------------------------------------------------------------------
---
TRANSACTIONS WITH AFFILIATES:
Percent of Current
Net Asset Value
-------------------------------------
Advisory Administration Expense
Fee Fee Limit(1) Waiver Reimbursement
-----------------------------------------------------------------------------
---
0.35% 0.10% 0.40% $-- $--
(1) The Adviser has agreed to pay other expenses of the portfolio, other
than
the advisory fees, to the extent that such expenses exceed the stated
percentage of their average net assets.
-----------------------------------------------------------------------------
---
The accompanying notes are an integral part of the financial statements.
23
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL STATEMENTS RUSSELL 2000 SMALLCAP INDEX
POTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
[Download Table]
FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
-----------------------------
2005 2004
-----------------------------
OPERATIONS
Net investment income / (loss)
$ 200,071 $ 318,497
Net realized gain / (loss) on investments and futures
1,829,668 1,686,705
Net change in unrealized appreciation / (depreciation) on investments
and futures contracts
(2,965,380) 6,889,992
------------- -------------
(935,641) 8,895,194
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(335,674) (105,479)
Net realized gain on investments
(677,888) --
------------- -------------
(1,013,562) (105,479)
------------- -------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
9,263,560 42,380,445
Reinvestment of distributions
1,013,562 105,479
Payments for shares redeemed
(8,785,617) (8,299,247)
------------- -------------
1,491,505 34,186,677
------------- -------------
NET INCREASE / (DECREASE) IN NET ASSETS
(457,698) 42,976,392
NET ASSETS
Beginning of period
68,770,314 25,793,922
------------- -------------
End of period
$ 68,312,616 $ 68,770,314
============= =============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
$ 173,806 $ 309,409
============= =============
-----------------------------------------------------------------------------
-------------------------------------------------
FUND SHARE TRANSACTIONS
Sold
154,549 747,513
Reinvestment of distributions
16,963 1,826
Redeemed
(145,976) (147,549)
------------- -------------
Net increase / (decrease) from fund share transactions
25,536 601,790
============= =============
TOTAL COST OF PURCHASES OF:
Common Stocks
$ 13,362,121 $ 47,154,645
Corporate Bonds
-- 18,679
------------- -------------
$ 13,362,121 $ 47,173,324
============= =============
TOTAL PROCEEDS FROM SALES OF:
Common Stocks
$ 14,100,045 $ 13,128,769
Corporate Bonds
-- 3,679
------------- -------------
$ 14,100,045 $ 13,132,448
============= =============
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income
$ 710,279 $ 105,479
Long-term capital gains
303,283 --
------------- -------------
$ 1,013,562 $ 105,479
============= =============
-----------------------------------------------------------------------------
-------------------------------------------------
The accompanying notes are an integral part of the financial statements.
24
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
NOTES TO FINANCIAL
STATEMENTS
JUNE 30, 2005 (UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Summit Mutual Funds, Inc., ("Summit Mutual Funds"), is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment
company. Summit Mutual Funds is offered in two series, the Pinnacle Series
and
the Apex Series. The shares of the Pinnacle Series (the "Series") are sold to
insurance companies and their separate accounts to fund the benefits under
certain variable insurance products. The results of the Series presented
exclude
the additional fees and expenses of variable annuity or variable life
insurance
contracts. The Series' shares are offered in nine different portfolios -
Zenith
Portfolio, Bond Portfolio, S&P 500 Index Portfolio, S&P MidCap 400 Index
Portfolio, Balanced Index Portfolio, Nasdaq-100 Index Portfolio, Russell 2000
Small Cap Index Portfolio, EAFE International Index Portfolio, and Lehman
Aggregate Bond Index Portfolio (individually "Portfolio", collectively
"Portfolios"). The Zenith Portfolio seeks long-term appreciation of capital
by
investing primarily in common stocks and other equity securities. The Bond
Portfolio seeks a high level of current income as is consistent with
reasonable
investment risk by investing primarily in long-term, fixed-income,
investment-grade corporate bonds. The S&P 500 Index Portfolio, S&P MidCap 400
Index Portfolio, Russell 2000 Small Cap Index Portfolio, Nasdaq-100 Index
Portfolio, and EAFE International Index Portfolio seek investment results
that
correspond to the total return performance of common stocks as represented by
their respective index. The Balanced Index Portfolio 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 Portfolio seeks investment results
that
correspond to the total return performance of the bond market, as represented
by
the Lehman Brothers Aggregate Bond Index. The results of the Portfolio(s) for
your investment product are included herein.
The financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America which require
management to make certain estimates and assumptions at the date of the
financial statements. Actual results may differ from these estimates.
These unaudited interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are of a
normal recurring nature. The following summarizes the significant accounting
policies of the Fund:
SECURITIES VALUATION - Securities held in each Portfolio, except for money
market instruments maturing in 60 days or less, are valued as follows:
Securities traded on stock exchanges (including securities traded in both the
over-the-counter market and on an exchange), or listed on the NASDAQ National
Market System, are valued at the last sales price as of the close of the New
York Stock Exchange on the day the securities are being valued, or, lacking
any
sales, at the closing bid prices. Alternatively, NASDAQ listed securities may
be
valued on the basis of the NASDAQ Official Closing Price. Securities traded
only
in the over-the-counter market are valued at the last bid price, as of the
close
of trading on the New York Stock Exchange, quoted by brokers that make
markets
in the securities. Other securities for which market quotations are not
readily
available are valued at fair value as determined in good faith under
procedures
adopted by the Board of Directors. Money market instruments with a remaining
maturity of 60 days or less held in each Portfolio are valued at amortized
cost
which approximates market.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME - Securities transactions are
recorded on the trade date (the date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. All amortization of discount and premium is
recognized currently under the effective interest method. Gains and losses on
sales of investments are calculated on the identified cost basis for
financial
reporting and tax purposes. Paydown gains and losses on mortgage and
asset-backed securities are presented as interest income.
FEDERAL TAXES - It is the intent of Summit Mutual Funds to comply with the
requirements under Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its net investment
income and any net realized capital gains. Regulated investment companies
owned
by the segregated asset accounts of a life insurance company, held in
connection
with variable insurance products, are exempt from excise tax on undistributed
income. Therefore, no provision for income or excise taxes has been recorded.
DISTRIBUTIONS - Distributions from net investment income in all fixed income
Portfolios generally are declared and paid quarterly. Equity Portfolios
generally declare and pay dividends annually. Net realized capital gains are
distributed periodically, no less frequently than annually. Distributions are
recorded on the ex-dividend date. All distributions are reinvested in
additional
shares of the respective Portfolio at the net asset value per share.
25
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The amount of distributions are determined in accordance with federal income
tax
regulations which may differ from generally accepted accounting principles in
the United States of America. These "book/tax" differences are either
considered
temporary or permanent in nature. To the extent these differences are
permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes
are reported as distributions in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed
net investment income and net realized capital gains for tax purposes, they
are
reported as distributions of paid-in-capital.
EXPENSES - Allocable expenses of Summit Mutual Funds are charged to each
Portfolio based on the ratio of the net assets of each Portfolio to the
combined
net assets of Summit Mutual Funds. Nonallocable expenses are charged to each
Portfolio based on specific identification.
FOREIGN CURRENCY - Summit Mutual Funds' accounting records are maintained in
U.S. dollars. All Portfolios may purchase foreign securities within certain
limitations set forth in the Prospectus. Amounts denominated in or expected
to
settle in foreign currencies are translated into U.S. dollars at the spot
rate
at the close of the London Market. Summit Mutual Funds does not isolate that
portion of the results of operations resulting from changes in foreign
exchange
rates on investments from the underlying fluctuation in the securities
resulting
from market prices. All are included in net realized and unrealized gain or
loss
for investments.
Foreign security and currency transactions may involve certain risks not
typically associated with those of U.S. companies including the level of
governmental supervision and regulations of foreign securities markets and
the
possibility of political and economic instability.
FUTURES CONTRACTS - S&P 500 Index Portfolio, S&P MidCap 400 Index Portfolio,
Balanced Index Portfolio, Nasdaq-100 Index Portfolio, Russell 2000 Small Cap
Index Portfolio, and EAFE International Index Portfolio (collectively, the
"Index Portfolios") may enter into futures contracts that relate to
securities
in which it may directly invest and indices comprised of such securities and
may
purchase and write call and put options on such contracts. The Index
Portfolios
may invest up to 20% of their assets in such futures and/or options, except
that
until each Portfolio reaches $25 million (or $50 million in the case of the
Nasdaq-100 Index Portfolio, the Russell 2000 Small Cap Index Portfolio, and
the
EAFE International Index Portfolio), it may invest up to 100% in such futures
and/or options. These contracts provide for the sale of a specified quantity
of
a financial instrument at a fixed price at a future date. When the Index
Portfolios enter into a futures contract, they are required to deposit and
maintain as collateral such initial margin as required by the exchange on
which
the contract is traded. Under terms on the contract, the Index Portfolios
agree
to receive from or pay to the broker an amount equal to the daily fluctuation
in
the value of the contract (known as the variation margin). The variation
margin
is recorded as unrealized gain or loss until the contract expires or is
otherwise closed, at which time the gain or loss is realized. The Index
Portfolios invest in futures as a substitute to investing in the common stock
positions in the Index that they intend to match. The potential risk to the
Index Portfolios is that the change in the value in the underlying securities
may not correlate to the value of the contracts.
PORTFOLIO SECURITIES LOANED - The Portfolios currently lend their securities
to
approved brokers to earn additional income and receive cash and/or securities
as
collateral to secure the loans. Income from securities lending is included in
"Other Income" on the Statement of Operations. Collateral is maintained at
not
less than 100% of the value of loaned securities. Although the risk of
lending
is mitigated by the collateral, the Portfolios could experience a delay in
recovering its securities and a possible loss of income or value if the
borrower
fails to return them. In addition to cash collateral, the Portfolios may
accept
noncash collateral consisting of government securities and irrevocable
letters
of credit from domestically domiciled banks.
26
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
NOTES TO FINANCIAL
STATEMENTS
NOTE 2 - TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEES - Summit Mutual Funds pays investment advisory fees
to
Summit Investment Partners, Inc. (the "Adviser") under terms of an Investment
Advisory Agreement (the "Agreement"). Certain officers and directors of the
Adviser are affiliated with the Fund. The Fund pays the Adviser, as full
compensation for all services and facilities furnished, a monthly fee
computed
separately for each Portfolio on a daily basis.
SELECTION AND APPROVAL FACTORS - At its November 8, 2004 meeting, the Board
of
Directors renewed the Adviser's contract and approved the advisory fees at
the
same level as in the prior year. The following factors, among others, were
considered in the Board's decision: (1) The nature, extent and quality of the
services provided by the Adviser have been consistent and continue to meet
the
standards established by the Board; (2) The investment performance of the
Funds,
when compared to industry rankings and other criteria, in all cases exceeded
the
50th percentile; (3) The costs and profitability of the services provided by
the
Adviser were analyzed, and the Board determined that staff compensation (the
largest cost component) was appropriate to maintain continuity in service,
and
that the Adviser's profitability was in line with industry standards; (4) The
Board discussed economies of scale and determined that they have not been
achieved and are not expected in the near term because of the relatively
small
size of the Funds; and (5) Fee levels were determined to be competitive and
reflective of current industry and Adviser conditions. The structure and
level
of fees will be addressed as economies of scale are realized to the benefit
of
shareholders.
ADMINISTRATION FEES - Summit Mutual Funds pays the Adviser to perform certain
administration services. The Fund shall pay the Adviser as full compensation
for
all facilities and services furnished a fee computed separately for each
portfolio of the Fund.
DIRECTORS' FEES - Each director who is not affiliated with the Adviser
receives
fees from Summit Mutual Funds for service as a director. Members of the Board
of
Directors who are not affiliated with the Adviser are eligible to participate
in
a deferred compensation plan. The value of each director's deferred
compensation
account will increase or decrease at the same rate as if it were invested in
shares of the Scudder Money Market Fund.
Summit Investment Partners, Inc. is a wholly-owned subsidiary of Union
Central.
On or about January 28, 2005, the boards of directors of Union Central and
The
Ameritas Acacia Companies of Lincoln, Nebraska voted to combine at the mutual
holding company level. This transaction is subject to appropriate regulatory
approval and the approval of the members and policyholders of both insurance
companies
27
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SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
MANAGEMENT OF THE
FUND
[Download Table]
DIRECTORS AND OFFICERS
INDEPENDENT DIRECTORS
NUMBER OF
TERM OF
PORTFOLIOS IN OTHER
POSITION(S) OFFICE AND
FUND COMPLEX DIRECTORSHIPS
WITH THE LENGTH OF PRINCIPAL
OCCUPATION(S) OVERSEEN BY HELD BY
NAME, AGE AND ADDRESS(1) FUND TIME SERVED DURING PAST
FIVE YEARS DIRECTOR DIRECTOR
-----------------------------------------------------------------------------
-------------------------------------------------------
Theodore H. Emmerich Director Director Consultant; former
Partner, Ernst & 15 American Financial
(78) since 1987 Whinney,
Accountants Group
Yvonne L. Gray Director Director Chief Operating
Officer, United Way of 15
(54) since 1999 Greater Cincinnati
(Social Services
Provider); prior
thereto, Vice President /
Trust Operations
Officer, Fifth Third
Bank; former Audit
Manager, Price
Waterhouse
(Accounting Firm)
David C. Phillips Director Director Co-Founder,
Cincinnati Works Inc. (Job 15 Meridian Bioscience,
(66) since 2001 Placement); prior
thereto, Chief Executive Inc.; Cintas, Inc.
Officer, Downtown
Cincinnati Inc.
(Economic
Revitalization of Cincinnati)
Mary W. Sullivan Director Director Attorney, Peck,
Shaffer & Williams LLP 15 Franklin Savings and
(48) since 2001 (Law Firm)
Loan Co.; First
Franklin Corporation
INTERESTED DIRECTORS AND OFFICERS
NUMBER OF
TERM OF
PORTFOLIOS IN OTHER
POSITION(S) OFFICE AND
FUND COMPLEX DIRECTORSHIPS
WITH THE LENGTH OF PRINCIPAL
OCCUPATION(S) OVERSEEN BY HELD BY
NAME, AGE AND ADDRESS(1) FUND TIME SERVED DURING PAST
FIVE YEARS DIRECTOR DIRECTOR
-----------------------------------------------------------------------------
-------------------------------------------------------
Steven R. Sutermeister* Director, Director Senior Vice
President, Union Central; 15 Carillon Investments,
(51) President and since 1999 President and
Chief Executive Officer, Inc.; Summit
Chief Executive Adviser.
Investment Partners,
Officer
Inc.; Union Central
Mortgage Funding,
Inc.
John F. Labmeier Vice President Officer Vice President,
Associate General NA NA
876 Waycross Rd. and Secretary since 1990 Counsel and
Assistant Secretary, Union
Cincinnati, OH 45240 Central; Vice
President and Secretary,
(56) Carillon
Investments, Inc.; Secretary,
Adviser
Thomas G. Knipper Vice President, Officer Treasurer, and
Chief Compliance NA NA
(47) Controller and since 1995 Officer, Adviser
Chief
Compliance
Officer
Gerald Q. Herbert Treasurer Officer Director of
Finance and NA NA
(38) since 2005 Accounting,
Adviser; prior
thereto,
Controller, General
Factory Supplies
Co.
John M. Lucas Assistant Officer Second Vice
President, Counsel and NA NA
876 Waycross Rd. Secretary since 1990 Assistant
Secretary, Union Central
Cincinnati, OH 45240
(54)
----------------
(1) Except as otherwise indicated, the business of each listed person is 312
Elm St., Ste. 1212, Cincinnati, OH 45202
* Mr. Sutermeister may be considered to be an "interested person" of the
Fund
(within the meaning of the Investment Company Act of 1940) because of
his
affiliation with the Adviser.
The Summit Pinnacle Series is distributed to insurance company separate
accounts
available in variable annuity and variable universal life insurance products.
Summit Pinnacle Series is distributed by Carillon Investments, Inc.,
Cincinnati,
Ohio, Member SIPC. The Pinnacle Series consists of the following Portfolios:
EQUITY INDEX ACCOUNTS
S&P 500 Index Portfolio
S&P MidCap 400 Index Portfolio
Russell 2000 Small Cap Index
Portfolio Nasdaq-100 Index Portfolio
EAFE International Index Portfolio
FIXED INCOME & BALANCED INDEX ACCOUNT
Balanced Index Portfolio
Lehman Aggregate Bond Index Portfolio
MANAGED ACCOUNTS
Zenith Portfolio
Bond Portfolio
The Summit Apex Series is a family of Mutual Funds intended for institutional
and retail accounts. For more complete information about the Summit Mutual
Funds' Apex Series, including charges and expenses, call 888-259-7565 for a
prospectus. Please read it carefully before you invest or send money. Summit
Apex Series is distributed by Quasar Distributors, LLC., Milwaukee,
Wisconsin,
Member SIPC.
The Apex Series consists of the following Funds:
EQUITY INDEX ACCOUNTS
Nasdaq-100 Index Fund
MANAGED ACCOUNTS
Everest Fund
Bond Fund
Short-term Government Fund
High Yield Bond Fund
STABLE VALUE ACCOUNT
Money Market Fund
Please visit our Website at www.summitfunds.com to learn more about the
Summit
Mutual Funds.
SMF6311PINNACLE 605
Logo: SUMMIT MUTUAL FUNDS
PART C
OTHER INFORMATION
SUMMIT MUTUAL FUNDS, INC.
PART C - OTHER INFORMATION
Item 23. Exhibits
All references are to Registrant's Registration Statement on Form N-1A
(Registration No. 2-90309)
(a) Articles of Incorporation of Summit Mutual Funds, Inc.
- previously filed (initial filing on April 3, 1984)
(b) By-laws of Summit Mutual Funds, Inc. - previously filed
(initial filing on April 3 1984)
(c) Not Applicable
(d) (1) Investment Advisory Agreement - previously filed
(initial filing on April 3, 1984)
(2) Amendment to Investment Advisory Agreement -
previously filed (Post-Effective Amendment No. 3
- May 1, 1987)
(3) Amendment to Investment Advisory Agreement -
previously filed (Post-Effective Amendment No. 15
- May 1, 1996)
(4) Subadvisory Agreement - Scudder Kemper Investments,
Inc. agreement: previously filed (Post-Effective
Amendment No. 29 - June 26, 2000); World Asset
Management, L.L.C. agreement: previously filed
(Post-Effective Amendment No. 31 - January 31, 2001
(5) Amendment and Restatement of Investment Advisory
Agreement - previously filed (Post-Effective
Amendment No. 33 - November 30, 2001)
(e) (1) Distribution Agreement with Carillon Investments,
Inc. - previously filed (Post - Effective Amendment
No. 26 - April 12, 2000)
(2) Distribution Agreement with Quasar Distributors, LLC
- previously filed (Post-Effective Amendment No. 44
- February 1, 2005)
(f) Not Applicable
(g) (1) Custody Agreement - previously filed (Post-Effective
Amendment No. 43 - September 30, 2004)
(2) Portfolio Accounting Agreement - previously filed
(Post-Effective Amendment No. 6 - May 1, 1990)
(h) (1) Transfer Agency Agreement - previously filed (Post-
Effective Amendment No. 6 - May 1, 1990)
(2) Service Agreement - previously filed (Post-Effective
Amendment No. 9 - May 1, 1992)
(3) Administrative Services Agreement - previously filed
(Post-Effective Amendment No. 33 - November 30, 2001)
(i) Opinion and consent of counsel - previously filed (Pre-
Effective Amendment No. 1 - July 2, 1984)
(j) Consent of Deloitte & Touche, LLC - filed herewith
(k) Not Applicable
(l) Letter regarding initial capital - previously filed
(Pre-Effective Amendment No. 1 - July 2, 1984)
(m) Distribution and Shareholder Service Plan - previously
filed (Post-Effective Amendment No. 38 - February 28,
2002)
(n) Not applicable
(o) Not Applicable
(p) Code of Ethics for Summit Mutual Funds, Inc. and Summit
Investment Partners, Inc. - previously filed (Post-
Effective Amendment No. 45 - April 29, 2005)
Item 24. Persons Controlled by or Under Common Control with Registrant
The Union Central Life Insurance Company ("Union Central") provided the
initial investment in Summit Mutual Funds, Inc. Union Central votes the
shares of the Fund held with respect to registered variable contracts in
accordance with instructions received from such variable contract owners.
Shares of the Fund held in unregistered separate accounts and in its general
assets are voted by Union Central in its discretion.
Set forth below is a chart showing the entities controlled by Union Central,
the jurisdictions in which such entities are organized, and the percentage of
voting securities owned by the person immediately controlling each such
entity.
THE UNION CENTRAL LIFE INSURANCE COMPANY,
its Subsidiaries and Affiliates
I. The Union Central Life Insurance Company (Ohio)
A. Carillon Investments, Inc. (Ohio) -100% owned
B. Carillon Marketing Agency, Inc. (Delaware) -100% owned
a. Carillon Marketing Agency of Alabama, Inc.
(Alabama) - 100% owned
b. Carillon Marketing Agency of Idaho, Inc. (Idaho)
- 100% owned
c. Carillon Marketing Agency of Kentucky, Inc.
(Kentucky) - 100 owned
d. Carillon Marketing Agency of Maine, Inc. (Maine)
- 100% owned
e. Carillon Insurance Agency of Massachusetts, Inc.
(Massachusetts) - 100% owned
f. Carillon Marketing Agency of New Mexico, Inc.
(New Mexico) - 100% owned
g. Carillon Marketing Agency of Ohio, Inc. (Ohio)
- 100% owned
h. Carillon Marketing Agency of Pennsylvania, Inc.
(Pennsylvania) - 100% owned
i. Carillon Marketing Agency of Texas, Inc. (Texas)
- 100% owned
j. Carillon Marketing Agency of Wyoming, Inc.
(Wyoming) - 100% owned
k. Carillon Marketing Agency of Nevada, Inc. (Nevada)
- 100% owned
C. Summit Investment Partners, Inc. (Ohio) - 100% owned
D. PRBA, Inc. (California) - 100% owned
a. Price, Raffel & Browne Administrators, Inc.
(Delaware) - 100% owned
E. Summit Investment Partners, LLC (Ohio) - 100% owned
F. Union Central Mortgage Funding, Inc. (Ohio) - 100% owned
II. Summit Mutual Funds, Inc. (Maryland) - At March 31, 2005,
The Union Central Life Insurance Company owned more than
90% of the outstanding shares of Summit Mutual Funds,
Inc.
Item 25. Indemnification
See Exhibits (a) and (b).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. Business and other Connections of Investment Adviser
Information regarding the officers and directors of Summit Investment
Partners, Inc. ("SIPI") and their business, profession or employment of a
substantial nature during the last two years is set forth below.
[Download Table]
Name and Position with Principal Occupation(s)
Address the Adviser During Past Two Years
------- ----------- ---------------------
Steven R. Director, Senior Vice President, Union Central;
Sutermeister President Director, President and Chief
and Chief Executive Officer, Summit Group of
Executive Mutual Funds; Director,
Officer Carillon Investments, Inc.
Gary T. Huffman Director Executive Vice President, Union Central
Dale D. Johnson Director Senior Vice President and Corporate
Actuary, Union Central
D. Stephen Cole Vice President Vice President, Adviser
Thomas G. Knipper Treasurer Vice President, Controller,
and Chief and Chief Compliance Officer,
Compliance Summit Group of Mutual Funds
Officer
John F. Labmeier Secretary Vice President, Associate General
Counsel and Assistant Secretary, Union
Central; Vice President and Secretary
Summit Group of Mutual Funds
and Carillon Investments, Inc.
John M. Lucas Assistant Second Vice President, Counsel and
Secretary Assistant Secretary, Union Central
The business address of Messrs. Sutermeister, Cole, and Knipper is 312 Elm
Street, Cincinnati, Ohio 45202. The business address of Messrs. Huffman,
Johnson, Labmeier and Lucas is 1876 Waycross Road, Cincinnati, Ohio 45240.
Item 27. Principal Underwriters
(a) Carillon Investments, Inc., the principal underwriter
for the Pinnacle Portfolios of Summit Mutual Funds,
Inc., also acts as principal underwriter for Carillon
Account and Carillon Life Account.
(b) The officers and directors of Carillon Investments,
Inc. and their positions, if any, with Registrant are
shown below. The business address of each is 1876
Waycross Road, Cincinnati, Ohio 45240, except for Mr.
Sutermeister, whose address is 312 Elm Street,
Cincinnati, Ohio 45202.
[Download Table]
Name and Position with
Carillon Investments, Inc. Position with Registrant
-------------------------- ------------------------
Gary T. Huffman None
Director
Elizabeth G. Monsell None
Director and President
Steven R. Sutermeister Director, President and
Director Chief Executive Officer
Kevin W. O'Toole None
Vice President
Connie S. Grosser None
Vice President, Operations
and Treasurer
Bernard A. Breton None
Vice President and
Compliance Officer
Andrew VanErp None
Vice President
John F. Labmeier Vice President and Secretary
Vice President and Secretary
John M. Lucas Assistant Secretary
Assistant Secretary
Jennifer A. Elliott None
Assistant Vice President,
Operations
John R. Feldman None
Assistant Vice President
Amy D. Starkey None
Assistant Vice President,
Compliance
Melissa A. MacKendrick None
Assistant Treasurer
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the
offices of the Fund, U.S. Bancorp Fund Services, LLC, P.O. Box 701,
Milwaukee, WI 53201-0701, or The Northern Trust Company, 50 South LaSalle
Street, Chicago, Illinois 60675.
Item 29. Management Services
All management-related service contracts are discussed in Part A or B of this
Registration Statement.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of its latest annual report to shareholders, upon
request and without charge.
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Summit Mutual Funds, Inc.,
certifies that it meets all of the requirements for effectiveness of this Post-
effective Amendment to the Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Post-effective Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cincinnati, State of Ohio on the 3rd
day of October, 2005.
SUMMIT MUTUAL FUNDS, INC.
(SEAL)
Attest: /s/ John F. Labmeier By: /s/ Steven R. Sutermeister
Steven R. Sutermeister
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
[Download Table]
Signature Title Date
--------- ----- ----
/s/Steven R. Sutermeister President and 10/03/2005
Steven R. Sutermeister Director
(Principal
Executive Officer)
/s/Thomas G. Knipper Vice President, 10/03/2005
Thomas G. Knipper Controller and
Chief Compliance
Officer (Principal
Financial and
Accounting Officer
*/s/Theodore H. Emmerich Director 10/03/2005
Theodore H. Emmerich
*/s/Yvonne L. Gray Director 10/03/2005
Yvonne L. Gray
*/s/Michael K. Keating Director 10/03/2005
Michael K. Keating
*/s/David C. Phillips Director 10/03/2005
David C. Phillips
*/s/Mary W. Sullivan Director 10/03/2005
Mary W. Sullivan
* By John F. Labmeier, pursuant to Power of Attorney previously
filed, except for that of Michael K. Keating, which is filed
herewith.
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TABLE OF EXHIBITS
(j) Consent of Deloitte & Touche
Power of Attorney for Michael K. Keating
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘485BPOS’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on / Effective on: | | 10/4/05 | | 1 | | 9 |
| | 9/30/05 | | 1 | | | | | 24F-2NT, 24F-2NT/A, N-CSR, N-Q, NSAR-B |
| | 6/30/05 | | 6 | | 37 | | | N-CSR, N-PX, N-Q, NSAR-A |
| | 4/29/05 | | 46 | | | | | 485BPOS |
| | 3/31/05 | | 46 | | | | | N-CSR, N-Q, NSAR-A |
| | 2/1/05 | | 46 | | | | | 485BPOS |
| | 1/28/05 | | 6 | | 39 |
| | 1/1/05 | | 14 |
| | 12/31/04 | | 6 | | 35 | | | 24F-2NT, N-CSR, N-Q/A, NSAR-B |
| | 11/8/04 | | 10 | | 39 |
| | 9/30/04 | | 10 | | 46 | | | 24F-2NT, 485BPOS, N-CSR, N-Q, NSAR-B |
| | 12/31/03 | | 6 | | 10 | | | 24F-2NT, N-CSR, NSAR-B |
| | 12/31/02 | | 6 | | 10 | | | 24F-2NT, N-30D, NSAR-B |
| | 2/28/02 | | 46 |
| | 2/19/02 | | 10 |
| | 2/15/02 | | 6 | | 16 |
| | 12/31/01 | | 6 | | | | | 24F-2NT, N-30D, NSAR-B |
| | 11/30/01 | | 46 |
| | 11/9/01 | | 10 | | | | | DEFS14A, PRES14A |
| | 9/26/01 | | 10 |
| | 1/31/01 | | 46 | | | | | 485BPOS |
| | 12/31/00 | | 6 | | | | | 24F-2NT, N-30D, NSAR-B |
| | 6/26/00 | | 46 | | | | | 485BPOS, 497 |
| | 4/27/00 | | 6 | | 16 |
| | 4/12/00 | | 46 | | | | | 485APOS |
| | 5/1/96 | | 46 |
| | 5/1/92 | | 46 |
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