May 1, 2000
SUMMIT MUTUAL FUNDS, INC.
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Summit Mutual Funds, Inc., formerly known as Carillon Fund, Inc.,
is a mutual fund with twenty-two separate Portfolios, each with its own
investment objective. We cannot assure you that any Portfolio will
meet its objective. This Prospectus offers three of the Portfolios
within the Summit Pinnacle Series. Their investment objectives are:
The S&P MidCap 400 Index Portfolio seeks investment
results that correspond to the total return performance
of U.S. common stocks, as represented by the S&P MidCap
400 Index.
The Russell 2000 Small Cap Index Portfolio seeks investment
results that correspond to the investment performance of U.S.
common stocks, as represented by the Russell 2000 Index.
The Nasdaq-100 Index Portfolio seeks investment results that
correspond to the investment performance of U.S. common
stocks, as represented by the Nasdaq-100 Index.
This prospectus contains information you should know before allocating
your contract values to any of the Portfolios. We suggest that you
read it 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 514-3-PINNACLE 4-00
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TABLE OF CONTENTS
INTRODUCTION TO THE FUND.............................................3
PORTFOLIO PROFILES...................................................3
S&P MIDCAP 400 INDEX PORTFOLIO.....................................3
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO.............................4
NASDAQ-100 INDEX PORTFOLIO.........................................5
PORTFOLIO OPERATING EXPENSES.........................................7
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS......................8
FOREIGN SECURITIES.................................................8
REPURCHASE AGREEMENTS..............................................8
REVERSE REPURCHASE AGREEMENTS......................................9
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.................9
OPTIONS ON SECURITIES INDICES.....................................10
LENDING PORTFOLIO SECURITIES......................................11
MIXED AND SHARED FUNDING..........................................11
OTHER INFORMATION.................................................11
FUND MANAGEMENT.....................................................11
INVESTMENT ADVISER................................................11
ADVISORY FEE......................................................12
EXPENSES..........................................................12
CAPITAL STOCK.....................................................12
VALUATION OF PORTFOLIO SHARES.....................................13
DIVIDENDS AND DISTRIBUTIONS.........................................13
TAXES...............................................................13
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT...................14
S&P, FRANK RUSSELL AND NASDAQ DISCLAIMER............................14
FINANCIAL HIGHLIGHTS................................................16
SMFI-2
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INTRODUCTION TO THE FUND
This prospectus explains the objectives, risks and strategies of three
of the Portfolios within the Summit Pinnacle Series of Summit Mutual
Funds, Inc. (the "Fund"). The Portfolios are mutual funds used solely
as investment options for variable annuity or variable life insurance
contracts offered by insurance companies. Although you cannot purchase
shares of the Portfolios directly, you can instruct your insurance
company how to allocate your contract's values among the Portfolios.
Each Portfolio Profile below summarizes important facts about the
Portfolio, including its investment objective, strategy, risks and past
investment performance. More detailed information about some of the
Portfolios' investment policies and strategies is provided after the
Profiles, along with information about Portfolio expenses, share
pricing and Financial Highlights for each Portfolio.
S&P MIDCAP 400 INDEX PORTFOLIO PROFILE
Investment Objective
The S&P MidCap 400 Index Portfolio seeks investment results that
correspond to the total return performance of U.S. common stocks, as
represented by the S&P MidCap 400 Index.
Investment Strategies
The S&P MidCap 400 Index Portfolio seeks to substantially replicate the
total return of the securities comprising the S&P MidCap 400 Index,
taking into consideration redemptions, sales of additional shares, and
other adjustments described below. Precise replication of the
capitalization weighting of the securities in the S&P MidCap 400 Index
is not feasible. The S&P MidCap 400 Index 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 S&P MidCap 400 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 S&P MidCap 400 Index should increase as the Portfolio grows. There
can be no assurance that the Portfolio will achieve a 95% correlation.
The S&P MidCap 400 Index Portfolio may invest up to 5% of its assets in
Standard & Poor's MidCap Depositary Receipts(R) ("MidCap SPDR's(R)").
MidCap SPDR's are units of beneficial interest in a unit investment
trust, representing proportionate undivided interests in a portfolio of
securities in substantially the same weighting as the common stocks
that comprise the S&P MidCap 400 Index.
Although the Adviser will attempt to invest as much of the S&P MidCap
400 Index Portfolio's assets as is practical in stocks included among
the S&P MidCap 400 Index and futures contracts and options relating
thereto, 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. In addition, for temporary defensive
purposes, the Portfolio may invest in government securities, money
market instruments, or other fixed-income securities, or retain cash or
cash equivalents.
SMFI-3
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Since this Portfolio has not been in effect for at least one calendar
year, there is no bar chart or performance table.
Primary Risks
- Market risk: The S&P MidCap 400 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.
- Investment style risk: Stocks of medium sized (MidCap) companies,
such as those listed among the S&P MidCap 400 Index occasionally go
through cycles of doing worse (or better) than the stock markets in
general or other types of investments.
- Correlation risk: Because the S&P MidCap 400 Index Portfolio has
expenses, and the S&P MidCap 400 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.
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO PROFILE
Investment Objective
The Russell 2000 Small Cap Index Portfolio seeks investment results
that correspond to the investment performance of U.S. commons stocks,
as represented by the Russell 2000 Index.
Investment Strategies
The Russell 2000 Small Cap Index 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 Small Cap 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.
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, 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. In addition, for temporary defensive purposes, the
Portfolio may invest in government securities, money market
instruments, or other fixed-income securities, or retain cash or cash
equivalents.
SMFI-4
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The Portfolio may invest up to 20% of its assets in Russell 2000
futures contracts or options (or S&P MidCap 400 or S&P 500 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 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.
Primary Risks
- 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.
- Investment style risk: Stocks of small sized (small-cap)
companies, such as those listed among the Russell 2000 Index
occasionally go through cycles of doing worse (or better) than
the stock markets in general or other types of investments.
- 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.
Since this is a new Portfolio, there is no bar chart or performance
table.
NASDAQ-100 INDEX PORTFOLIO PROFILE
Investment Objective
The Nasdaq-100 Index Portfolio seeks investment results that correspond
to the investment performance of U.S. common stocks, as represented by
the Nasdaq-100 Index.
Investment Strategies
The Nasdaq-100 Index Portfolio seeks to substantially replicate the
total return of the securities comprising the Nasdaq-100 Index, taking
into consideration redemptions, sales of additional shares, and other
adjustments described below. Precise replication of the capitalization
weighting of the securities in the Nasdaq-100 Index is not feasible.
The Nasdaq-100 Index 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
Nasdaq-100 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 Nasdaq-100
Index should increase as the Portfolio grows. There can be no
assurance that the Portfolio will achieve a 95% correlation.
The Nasdaq-100 Index Portfolio may invest up to 5% of its assets in
Nasdaq-100 Shares(R). Nasdaq-100 Shares are units of beneficial
interest in a unit investment trust, representing proportionate
undivided interests in a portfolio of securities in substantially the
same weighting as the common stocks that comprise the Nasdaq-100 Index.
SMFI-5
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The Portfolio may invest up to 20% of its assets in Nasdaq-100 futures
contracts and options 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 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.
Although the Adviser will attempt to invest as much of the Nasdaq-100
Index Portfolio's assets as is practical in stocks included among the
Nasdaq-100 Index and futures contracts and options relating thereto, 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. In addition, for temporary defensive purposes, the
Portfolio may invest in government securities, money market
instruments, or other fixed-income securities, or retain cash or cash
equivalents.
Primary Risks
- Market risk: The Nasdaq-100 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.
- Investment style risk: Stocks of companies or industries that
are heavily weighted in the Nasdaq-100 Index, such as technology,
telecommunications, internet and biotechnology companies,
occasionally go through cycles of doing worse (or better) than
the stock markets in general, as measured by other more broad-
based stock indexes, or other types of investments.
- Concentration risk: The Nasdaq-100 Index Portfolio is subject
to the risk of an investment portfolio that may be highly
concentrated in a particular industry (e.g., Technology) and,
due to concentration in sectors characterized by relatively
higher volatility in price performance, may be more volatile
when compared to other broad-based stock indexes. The
Nasdaq-100 Index Portfolio is also subject to the risks
specific to the performance of a few individual component
securities that currently represent a highly concentrated
weighting in the Index (e.g. Microsoft Corporation, Intel
Corporation, Cisco Systems Inc., etc.).
- Correlation risk: Because the Nasdaq-100 Index Portfolio has
expenses, and the Nasdaq-100 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.
- Nondiversification risk: Under securities laws, the Portfolio
is, however, subject to diversification limits under federal tax
law that permit it to invest more than 5%, but not more than 25%,
of its assets in a single issuer with respect to up to 50% of
its total assets as of the end of each of the Portfolio's tax
quarters.
In an effort to closely replicate the performance of the Nasdaq-
100-Index, the Portfolio will invest its assets in the individual
stocks comprised in the Nasdaq-100 Index.
SMFI-6
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Furthermore, the investment in the individual stocks in the
Portfolio will be weighted so that their percentage weighting in
the Portfolio is approximately the same as their percentage
weighting in the underlying Nasdaq-100 Index. As a result of
this investment strategy, the Nasdaq-100 Index Portfolio is a
nondiversified Portfolio.
Notwithstanding the above, the Nasdaq-100 Index Portfolio intends
to qualify as a Registered Investment Company ("RIC") under
federal tax law. At any point in time, if following the
investment strategy outlined above, of properly weighting the
Portfolio's investments in individual securities to substantially
replicate the performance of the Nasdaq-100 Index, would put the
Portfolio in jeopardy of failing the RIC rule on diversification,
the Portfolio intends to immediately alter its investment
strategy to comply with the RIC rules. Such alteration would
include reducing investment exposure, pro-rata, to those
investments causing the Portfolio to be in jeopardy of violating
the RIC rules.
Since this is a new Portfolio, there is no bar chart or performance
table.
PORTFOLIO OPERATING EXPENSES
This table describes fees and expenses of the Portfolios:
EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
Russell 2000
S&P MidCap 400 Small Cap Nasdaq-100
Index Portfolio Index Portfolio Index Portfolio
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<S> <C> <C> <C>
Management Fees .30% .35% .35%
Other Expenses .30% .40%** .30%**
---- ---- ----
Total Operating Expenses* .60% .75% .65%
</TABLE>
* Total Operating Expenses in excess of .75% for the Russell 2000
Small Cap Portfolio, in excess of .65% for the Nasdaq-100 Index
Portfolio, and in excess of .60% for the S&P MidCap 400 Index
Portfolio are paid by the investment adviser.
** "Other Expenses" for the Russell 2000 Small Cap Index and Nasdaq-
100 Index Portfolios are based on estimates.
EXAMPLE
The table below shows the amount of expenses a Shareholder would pay on
a $10,000 investment assuming a 5% annual return.+
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
S&P MidCap 400 Index Portfolio $62 $193 $336 $752
Russell 2000 Small Cap Index Portfolio $77 $241 N/A N/A
Nasdaq-100 Index Portfolio $67 $209 N/A N/A
</TABLE>
The purpose of this table is to help you understand the Fund expenses
that you may bear indirectly through your purchase of an insurance
contract. THIS TABLE DOES NOT INCLUDE ANY CONTRACT OR VARIABLE ACCOUNT
CHARGES. Those charges, along with the Fund's expenses, are contained
in the prospectus for your contract.
This table should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
-----------
+ 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 Fund.
SMFI-7
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OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS
FOREIGN SECURITIES
Each Portfolio may invest in foreign securities that are suitable for
the Portfolio's investment objectives and policies. The S&P MidCap 400
Index Portfolio, Russell 2000 Small Cap Index Portfolio and Nasdaq-100
Index Portfolio are limited to investing in those foreign securities
included in the respective Indexes.
Investing in foreign securities involves risks which are not ordinarily
associated with investing in domestic securities, including:
- political or economic instability in the foreign country;
- diplomatic developments that could adversely affect the value of
the foreign security;
- foreign government taxes;
- costs incurred by a Portfolio in converting among various
currencies;
- fluctuation in currency exchange rates;
- the possibility of imposition of currency controls, expropriation
or nationalization measures or withholding dividends at the
source;
- in the event of a default on a foreign debt security, possible
difficulty in obtaining or enforcing a judgment against the
issuer;
- less publicly available information about foreign issuers than
domestic issuers;
- foreign accounting and financial reporting requirements are
generally less extensive than those in the U.S.;
- securities of foreign issuers are generally less liquid and more
volatile than those of comparable domestic issuers;
- there is often less governmental regulation of exchanges, broker-
dealers and issuers and brokerage costs may be higher than in the
United States.
Foreign securities purchased by the Portfolios 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. None of the
Portfolios engage extensively in repurchase agreements, but each may
engage in them from time to time. The Adviser reviews the credit
worthiness of the other party to the agreement and must find it
satisfactory before engaging in a 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.
SMFI-8
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REVERSE REPURCHASE AGREEMENTS
The S&P MidCap 400 Index Portfolio, Russell 2000 Small Cap Index
Portfolio and Nasdaq-100 Index 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).
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 S&P MidCap 400
Index Portfolio, Russell 2000 Small Cap Index Portfolio and Nasdaq-100
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. 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 their 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 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.
SMFI-9
<PAGE>
The S&P MidCap 400 Index, Russell 2000 Small Cap Index and Nasdaq-100
Index Portfolios 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 INDICES
The S&P MidCap 400 Index, Russell 2000 Small Cap Index and Nasdaq-100
Index Portfolios may purchase or sell options on their respective
Indexes, 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 indices 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.
SMFI-10
<PAGE>
LENDING PORTFOLIO SECURITIES
The S&P MidCap 400 Index, Russell 2000 Small Cap Index and Nasdaq-100
Index Portfolios may lend portfolio securities with a value up to 10%
of its total assets. Such loans may be terminated at any time. The
Portfolio will continuously maintain as collateral cash or obligations
issued by the U.S. government, its agencies or instrumentalities in an
amount 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 and other affiliated or 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.
OTHER INFORMATION
In addition to the investment policies described above, each
Portfolio's investment program is subject to further restrictions which
are described in the Statement of Additional Information. Unless
otherwise specified, each 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 annual report should be directed to the Fund at
(513) 595-2600, or at P.O. Box 40409, Cincinnati, Ohio 45240-0409.
FUND MANAGEMENT
INVESTMENT ADVISER
The Adviser is Summit Investment Partners, Inc. (formerly known as
Carillon Advisers, 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, 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 each Portfolio and provides
administrative services and manages the Fund's business affairs.
SMFI-11
<PAGE>
Gary R. Rodmaker, CFA and David M. Weisenburger, CFA lead the team
primarily responsible for the day-to-day management of the S&P MidCap
400 Index Portfolio, Russell 2000 Small Cap Index Portfolio and Nasdaq-
100 Index Portfolio.
Mr. Rodmaker is Managing Director - Fixed Income of the Adviser and has
been affiliated with the Adviser and Union Central since 1989. Mr.
Weisenburger is the Assistant Fund Manager of the Adviser and has been
affiliated with the Adviser and Union Central since July, 1996. Prior
thereto, Mr. Weisenburger was a general securities trader for Ohio
National Equity Sales Corp. and a registered representative for
Fidelity Investments.
ADVISORY FEE
The Fund pays the Adviser, as full compensation for all facilities and
services furnished, a monthly fee computed separately for each
Portfolio on a daily basis, at an annual rate, as follows:
<TABLE>
<CAPTION>
Portfolio Advisory Fee
--------- ------------
<S> <C>
S&P MidCap 400 Portfolio .30% of the current value of the net assets
Russell 2000 Small Cap
Index Portfolio .35% of the current value of the net assets
Nasdaq-100 Index Portfolio .35% of the current value of the net assets
</TABLE>
The effective rates paid by each Portfolio are set forth in the
"Portfolio Operating Expenses" section on page 7.
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 S&P MidCap 400 Index Portfolio and
Nasdaq-100 Index Portfolio, other than the advisory fee for that
Portfolio, to the extent that such expenses exceed .30% of that
Portfolio's net assets. The Adviser will pay any expenses of the
Russell 2000 Small Cap Index Portfolio, other than the advisory fee for
that Portfolio, to the extent that such expenses exceed .40% of that
Portfolio's net assets.
CAPITAL STOCK
The Fund currently has twenty-two classes of stock, one for each
Portfolio, three of which are offered pursuant to this prospectus.
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 The Union Central Life Insurance Company will have
voting control of the Fund by virtue of the shares of the Summit Apex
Series of Funds 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.
SMFI-12
<PAGE>
VALUATION OF PORTFOLIO SHARES
The net asset value of the shares of each 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), when there are purchases or redemptions of Fund shares,
except:
- when the New York Stock Exchange is closed and
- any day on which changes in the value of the Portfolio securities
of the Fund will not materially affect the current net asset value
of the shares of a Portfolio.
Portfolio shares are valued by:
- adding the values of all securities and other assets of the
Portfolio,
- subtracting liabilities and expenses, and
- dividing 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 Portfolios, except for money market instruments
maturing in 60 days or less, are valued at their market value if market
quotations are readily available. Otherwise, such securities are valued
at fair value as determined in good faith 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.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of the net investment
income, if any, of each Portfolio. For dividend purposes, net
investment income of each Portfolio consists of all dividends or
interest earned by that Portfolio, minus estimated expenses (including
the investment advisory fee). All net realized capital gains, if any,
of each Portfolio are distributed periodically, no less frequently than
annually. All dividends and distributions of a Portfolio are reinvested
in additional shares of the Portfolio at net asset value.
TAXES
Each 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.
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.
SMFI-13
<PAGE>
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin
53201-0701, acts as Custodian of the Fund's assets, and is its
bookkeeping, transfer and dividend disbursing agent.
S&P, FRANK RUSSELL AND NASDAQ DISCLAIMER
The S&P 500 is an unmanaged index of common stocks comprised of 500
industrial, financial, utility and transportation companies. "Standard
& Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", "500",
"S&P MidCap 400 Index", and "Standard & Poor's MidCap 400 Index" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by Summit Mutual Funds. Summit Mutual Funds is not sponsored,
endorsed, sold or promoted by Standard & Poor's ("S&P"). S&P makes no
representation or warranty, express or implied, to the beneficial
owners of Summit Mutual Funds or any member of the public regarding the
advisability of investing in securities generally or in Summit Mutual
Funds particularly or the ability of the S&P 500 Index or the S&P
MidCap 400 Index to track general stock market performance. S&P's only
relationship to Summit Mutual Funds is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index and the S&P
MidCap 400 Index which is determined, composed and calculated by S&P
without regard to Summit Mutual Funds or the Funds. S&P has no
obligation to take the needs of Summit Mutual Funds or the beneficial
owners of the Funds into consideration in determining, composing or
calculating the S&P 500 Index and the S&P MidCap 400 Index. S&P is not
responsible for and has not participated in the determination of the
prices and amount of the Funds or the timing of the issuance or sale of
the Funds or in the determination or calculation of the equation by
which the Funds are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading
of Summit Mutual Funds.
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
SMFI-14
<PAGE>
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.
"Nasdaq" and related marks are trademarks or service marks of The
Nasdaq Stock Market, Inc. ("Nasdaq") and have been licensed for use for
certain purposes by Summit Mutual Funds, Inc. and the Nasdaq-100 Index
Portfolio. The Nasdaq-100 Index is composed and calculated by Nasdaq
without regard to Summit Mutual Funds. Nasdaq makes no warranty,
express or implied, and bears no liability with respect to the Nasdaq-
100 Index Fund. Nasdaq makes no warranty, express or implied, and
bears no liability with respect to Summit Mutual Funds, its use, or any
data included therein.
SMFI-15
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 years (or, if shorter, the
period of the Portfolio's operations). 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 Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte &
Touche LLP, whose report, along with the Fund's financial statements
are included in the annual report which is available upon request. The
Russell 2000 Small Cap Index Portfolio and Nasdaq-100 Index Portfolio
were not in effect during the period.
<TABLE>
<CAPTION>
S&P MidCap 400 Index Portfolio
Period from May 3, 1999
to December 31, 1999<F1>
-------------------------------
<S> <C>
Net Asset Value,
Beginning of Period $10.00
Investment Activities:
Net investment income .10
Net realized and unrealized gains/(losses) 1.01
-----
Total from Investment Activities 1.11
-----
Distributions:
Net investment income (.07)
Net realized gains --
-----
Total Distributions (.07)
-----
Net Asset Value,
End of Year $11.04
=====
Total Return, not annualized<F4> 11.14%
Ratios/Supplemental Data
Ratio of Net Expenses to Average Net Assets<F2> .60%<F3>
Ratio of Net Investment
Income to Average Net Assets<F2> 1.69%<F3>
Portfolio Turnover Rate 47.55%<F3>
Net Assets, End of Year (000's) $23,963
______________
<FN>
<F1> The portfolio commenced operation on May 3, 1999.
<F2> The ratios of net expenses to average net assets would have increased and net
investment income to average net assets would have decreased by .09% for the
year ended December 31, 1999, had the Adviser not reimbursed expenses.
<F3> The ratios are annualized.
<F4> Total Return does not reflect expenses that apply to the separate account or
the related insurance policies. Inclusion of these charges would reduce the
Total Return figures for all periods shown.
</FN>
</TABLE>
SMFI-16
<PAGE>
A Statement of Additional Information dated May 1, 2000, which contains
further information about the Fund, 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. A copy of the
Statement of Additional Information or its annual and semi-annual
reports may be obtained without charge by calling the Fund at (513)
595-2600, or by writing the Fund at P.O. Box 40409, Cincinnati, Ohio
45240-0409.
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 1-800-SEC-0330. Copies of Fund documents may be requested
by writing to the Public reference Section of the SEC, Washington, D.C.
20549-6009.
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
