TOTAL SOCIAL IMPACT FUND
MONEY MARKET FUND
PROSPECTUS
JUNE 26, 2000
SUMMIT MUTUAL FUNDS, INC.
SUMMIT APEX SERIES
SMFI 515APEXtsi/mm 6/00
<PAGE>
JUNE 26, 2000
SUMMIT MUTUAL FUNDS, INC.
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TABLE OF CONTENTS
INTRODUCTION...................................................2
FUND PROFILES
TOTAL SOCIAL IMPACT FUND PROFILE............................2
MONEY MARKET FUND PROFILE...................................4
FEES AND EXPENSES OF THE FUND..................................5
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS................6
FOREIGN SECURITIES..........................................6
REPURCHASE AGREEMENTS.......................................6
REVERSE REPURCHASE AGREEMENTS...............................7
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS..........7
OPTIONS ON SECURITIES INDICES...............................8
LENDING FUND SECURITIES.....................................9
OTHER INFORMATION...........................................9
FUND MANAGEMENT................................................9
INVESTMENT ADVISER..........................................9
ADVISORY FEE...............................................10
SUBADVISER.................................................10
EXPENSES...................................................10
CAPITAL STOCK..............................................10
SHAREHOLDER INFORMATION.......................................10
PRICING OF FUND SHARES.....................................10
PURCHASE OF SHARES.........................................11
REDEMPTION OF SHARES.......................................14
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS....................16
FEDERAL TAXES.................................................16
STATE AND LOCAL TAXES.........................................17
S&P DISCLAIMER................................................18
FINANCIAL HIGHLIGHTS..........................................18
APPENDIX A: RATINGS..........................................19
CORPORATE BOND RATINGS.....................................19
COMMERCIAL PAPER RATINGS...................................20
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.
<PAGE>
INTRODUCTION
This Prospectus explains the objectives, risks and strategies of two of
the twenty-two Funds comprising Summit Mutual Funds, Inc. ("Summit Mutual
Funds"), formerly known as Carillon Fund, Inc. Each Fund Profile below
summarizes important facts about the Fund, including its investment
objective, strategy, risks and past investment performance. More
detailed information about some of the Funds' investment policies and
strategies is provided after the Profiles, along with information about
Fund expenses for each Fund.
The two Funds included in this Prospectus are part of the Summit Mutual
Funds' Summit Apex Series, whose shares are offered without sales charge
to institutional and retail investors. These Funds are also offered to
The Union Central Life Insurance Company ("Union Central") and its exempt
separate accounts. It is anticipated that Union Central will have voting
control of Summit Mutual Funds. With voting control, Union Central could
make fundamental and substantial changes (such as electing a new Board of
Directors, changing the investment adviser or advisory fee, changing a
Fund's fundamental investment objectives and policies, etc.) regardless
of the views of other shareholders.
FUND PROFILES
TOTAL SOCIAL IMPACT FUND PROFILE
Investment Objective
The Fund seeks investment results that closely correspond to the total
return performance of U.S. Common Stocks, as represented by the S&P 500
Index. To pursue this objective, the Fund will invest in all stocks that
are included in the S&P 500 Index.
The Fund also seeks to promote better business practices by investing
more in companies in the Index that conduct their business commendably
with respect to their stakeholders.
Businesses have a role to play in improving the lives
of all their customers, employees, and shareholders
("stakeholders") by sharing with them the wealth they
have created. Suppliers and competitors as well should
expect businesses to honor their obligations in a spirit
of honesty and fairness. As responsible citizens of the
legal, national, regional and global communities in
which they operate, businesses share a part in shaping
the future of their communities.
Attributed to the Caux Institute for Global Responsibility
For example:
Customers deserve high quality products, fair advertising, remedies and
respect.
Employees deserve to be treated with dignity, to be paid a living wage on
a non-discriminatory basis, to work in a safe environment and to
associate freely.
Owner/Investors deserve a fair and competitive return, transparency in
company operations, and a voice in corporate governance.
Suppliers deserve mutual respect and long-term stability in return for
value, quality, competitiveness, reliability and employment practices
that respect human dignity.
Competitors deserve fair and respectful competition.
Communities deserve the support of public policies that promote human
development and raise the standards of health, education, workplace
safety and economic well-being.
The Environment deserves protection and improvement through sustainable
business practices.
Source: The Caux Institute For Global Responsibility
Principles For Business. The Caux Principles For
Business (published in 1994) are the first published
worldwide standard for ethical and responsible business
practices developed by global business leaders. They
are published in sixteen languages.
The use of the Caux principles for business does not in any way
constitute an endorsement by Caux of the financial prospects of the Fund
or its investment strategy.
Investment Strategies
To pursue its goals, the Fund will invest in all the stocks that are
included in the S&P 500 Index. However, the percentage invested in each
stock will vary from the S&P 500 Index weighting to reflect the company's
Total Social Impact(trademark) (TSI) rating. The TSI rating reflects
the company's scoring on a series of benchmarks corresponding to each of
its stakeholders. TSI is a concept developed and trademarked by the The
Total Social Impact Foundation, Inc. The actual TSI ratings are the
product of collaborative research and analytical efforts conducted by The
Total Social Impact Foundation, Inc. in conjunction with a group of
academic institutions. Summit Investment Partners receives and uses the
TSI ratings from The Total Social Impact Foundation, Inc. under an
exclusive licensing agreement. TSI ratings range from 1 to 20.
Companies with high TSI ratings are overweighted in the Fund at the
expense of companies with low TSI ratings, thus encouraging better
business practices.
The Fund will give stocks with a TSI rating of 10 approximately the
weight that a traditional S&P Index fund would give them; stocks with a
TSI rating of 20, about twice that weight, and ones with a TSI rating of
1 about 1/10 of that weight. Summit Investment Partners reserves the
right to modify the weighting scheme based on a proprietary weighting
system.
The Fund may invest up to 5% of its assets in Standard & Poor's
Depositary Receipts ("SPDRs(R)"). SPDRs are units of beneficial interest
in a unit investment trust, representing proportionate undivided
interests in a portfolio of securities in substantially the same
weighting as the common stocks that comprise the S&P 500 Index.
The Fund may invest up to 20% of its assets in S&P 500 Index futures
contracts and options in order to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or minimize trading
costs. The Fund may also sell covered calls on futures contracts or
individual securities held in the Fund. As a temporary investment
strategy, until the Fund reaches $50 million in net assets, the Fund may
invest up to 100% of its assets in such futures and/or options contracts.
Investments in SPDRs, futures and options will not reflect TSI ratings.
Although the Adviser will attempt to invest as much of the Fund's assets
as is practical in stocks included among the S&P 500 Index and futures
contracts and related options, a portion of the Fund may be invested in
money market instruments pending investment or to meet redemption
requests or other needs for liquid assets. In addition, for temporary
defensive purposes, the Fund may invest in government securities, money
market instruments, or other fixed-income securities, or retain cash or
cash equivalents.
Primary Risks
- Market risk: The Fund's total return, like stock prices
generally, will fluctuate within a wide range in response
to stock market trends, so a share of the Fund could drop
in value over short or even long periods. Stock markets
tend to move in cycles, with periods of rising prices and
periods of falling prices.
- Large company stock risk: Stocks of large companies, such
as those listed among the S&P 500 Index occasionally go
through cycles of doing worse (or better) than the stock
markets in general or other types of investments.
- Investment style risk: TSI ratings will result in
overweighting and underweighting most stocks in the S&P 500
Index. These variances might result in worse (or better)
returns.
- Correlation risk: Because the Fund has expenses, and the S&P
500 Index does not, the Fund may be unable to replicate
precisely the performance of the Index. While the Fund
remains small, it may have a greater risk that its
performance will not match that of the Index.
Since this is a new Fund, there is no bar chart or performance table.
MONEY MARKET FUND PROFILE
Investment Objective
The Money Market Fund seeks to maintain stability of capital and,
consistent therewith, to maintain the liquidity of capital and to provide
current income.
Investment Strategies
It does this by investing exclusively in high quality short-term
securities.
The Fund may buy securities from many types of issuers, including the
U.S. government, banks (both U.S. and foreign), corporations and
municipalities. However, everything the Fund buys must meet the rules for
money market fund investments (see Money Fund Rules below). In addition,
the Fund currently intends to only buy securities that are in the top
credit grade for short-term securities.
Working in conjunction with credit analysts, the portfolio managers
screen potential securities and develop a list of those that the Fund may
buy. The managers then decide which securities on this list to buy,
looking for attractive yield and weighing considerations such as credit
quality, economic outlook and possible interest rate movements. The
managers may adjust the Fund's exposure to interest rate risk, typically
seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
Money Fund Rules
To be called a money market fund, a mutual fund must operate within
strict federal rules. Designed to help maintain a stable $1.00 share
price, these rules limit money funds to particular types of securities
and strategies. Some of the rules:
- Individual securities must have remaining maturities of no
more than 397 days.
- The dollar-weighted average maturity of the Fund's holdings
cannot exceed 90 days
- All securities must be in the top two credit grades for
short-term securities and be denominated in U.S. dollars.
Primary Risks
Money market funds are generally considered to have lower risks than
other types of mutual funds. Even so, there are several risk factors that
could reduce the yield you get from the Fund or make it perform less well
than other investments.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
- Market interest rate risk: As with most money market funds,
the most important factor affecting performance is market
interest rates. The Fund's yields tend to reflect current
interest rates, which means that when these rates fall, the
Fund's yield generally falls as well.
- Credit quality risk: If a portfolio security declines in
credit quality or goes into default, it could hurt the
Fund's performance. To the extent that the Fund emphasizes
certain sectors of the short-term securities market, the
portfolio increases its exposure to factors affecting these
sectors. For example, banks' repayment abilities could be
compromised by broad economic declines or sharp rises in
interest rates. Securities from foreign banks may have
greater credit risk than comparable U.S. securities, for
reasons ranging from political and economic uncertainties to
less stringent banking regulations.
- Other risks: Other factors that could affect performance
include:
- The managers could be incorrect in their analysis of
interest rate trends, credit quality or other matters.
- Securities that rely on outside insurers to raise their
credit quality could fall in price or go into default
if the financial condition of the insurer deteriorates.
Since this is a new Fund, there is no bar chart or performance table.
FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Funds.
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
<TABLE>
<CAPTION>
Total Annual
Management Other Fund Operating
Fees Expenses** Expenses**
------------------------------------------------------------------------
<S> <C> <C> <C>
Total Social Impact Fund 0.45% 0.30% 0.75%*
Money Market Fund 0.35%*** 0.10% 0.45%*
</TABLE>
* Under the Investment Advisory Agreement, Total Annual
Fund Operating Expenses in excess of .75% for the Total
Social Impact Fund, and in excess of .45% for the Money
Market Fund are paid by the investment adviser.
** "Other Expenses" are based on estimates.
*** The Adviser has agreed to reduce its fee from those shown
in the table for a period of one year from the
commencement of operations by .02% percentage points for
the Money Market Fund. The Adviser may not revise or
cancel these waivers during the one year period.
Example
This Example is intended to help you compare the cost of
investing in the Funds with the cost of investing in other
mutual funds.
The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Funds'
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
Total Social Impact Fund $77 $241
Money Market Fund $46 $145
</TABLE>
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 Total Social Impact Fund may invest only in foreign
securities that are included in the S&P 500 Stock Index. The S&P
has indicated that their selection criteria for inclusion in the
S&P 500 Stock Index include that all securities be U.S. publicly
traded stock on the New York or American Stock Exchange or the
Nasdaq National Market System and meet all of the same SEC
disclosure requirements as United States-based companies.
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;
- fluctuation in currency exchange rates;
- the possibility of imposition of currency controls,
expropriation or nationalization measures or withholding
dividends at the source;
- less publicly available information about foreign
operations than domestic operations.
REPURCHASE AGREEMENTS
Each Fund may invest in Repurchase Agreements. A repurchase
agreement is a transaction where a Fund 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 Funds
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 Fund 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
Each Fund may enter into reverse repurchase agreements. Under
reverse repurchase agreements, the Fund transfers possession of
Fund securities to banks in return for cash in an amount equal
to a percentage of the Fund securities' market value and agrees
to repurchase the securities at a future date by repaying the
cash with interest. The Fund 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 Fund 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
The Total Social Impact Fund may enter into futures contracts
for hedging purposes, including protecting the price or interest
rate of securities that the Fund intends to buy, 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 Fund 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 Fund 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 Fund
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 Fund, the Fund 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 Fund does
business.
Because the value of an index future depends primarily on the
value of its underlying index, the performance of the broad-
based contracts will generally reflect broad changes in market
prices. However, because a particular Fund may not be invested
in precisely the same proportion as a particular Index, it is
likely that the price changes of the Fund's index futures
positions will not match the price changes of the Fund'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 Total Social Impact Fund may engage in certain limited
options strategies as hedging techniques as it relates to
options on futures contracts. These options strategies are
limited to selling/writing call option contracts on futures
contracts on such securities held by the Fund (covered calls).
The Fund may purchase call option contracts to close out a
position acquired through the sale of a call option. The Fund
will only write options that are traded on a domestic exchange
or board of trade.
The Total Social Impact Fund may write and purchase covered put
and call options on securities in which it may directly invest.
Option transactions of the eligible Fund 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
Fund's total assets. Further, the Fund 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
Fund'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 Fund) 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 Fund)
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 Fund) a premium, which the seller retains whether or not
the option is exercised. The selling of a call option will
benefit the Fund 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 Fund 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 Fund may
write call options in order to hedge against an expected decline
in value of Fund securities.
The Fund 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 Fund 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 Fund'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 Total Social Impact Fund may purchase or sell options on the
S&P 500 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 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.
LENDING FUND SECURITIES
The Total Social Impact Fund may lend portfolio securities with
a value up to 10% of its total assets. Such loans may be
terminated at any time. The Fund 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 Fund 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 Fund 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.
OTHER INFORMATION
In addition to the investment policies described above, each
Fund's investment program is subject to further restrictions
which are described in the Statement of Additional Information.
Unless otherwise specified, each Fund'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
Summit Mutual Funds, c/o Firstar Mutual Fund Services, LLC,
(888) 259-7565, or at P.O. Box 701, Milwaukee, WI 53201-0701.
FUND MANAGEMENT
INVESTMENT ADVISER
The Adviser is Summit Investment Partners, Inc. (formerly
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 Summit Mutual Funds 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 Summit Mutual Funds' board of
directors, the Adviser manages the investment and reinvestment
of the assets of each Fund and provides administrative services
and manages Summit Mutual Funds' business affairs.
Steven J. Dillenburg, CFA and David M. Weisenburger, CFA lead
the team primarily responsible for the day-to-day management of
the Total Social Impact Fund.
Mr. Dillenburg is a Managing Partner of the Adviser and has been
affiliated with the Adviser and Union Central since November
1999. Prior thereto, he was Director of Socially Responsible
Investing at Scudder Kemper Investments, Inc. 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 Fund on a daily basis, at an annual rate, as
follows:
<TABLE>
<CAPTION>
Fund Advisory Fee
---- ------------
<S> <C>
Total Social Impact Fund .45% of the current value of the net assets.
Money Market Fund .35% of the current value of the net assets.
</TABLE>
The effective rates paid by each Fund are set forth in the "Fees
and Expenses of the Fund" section on page .
SUBADVISER
Scudder Kemper Investments, Inc., 345 Park Avenue, New York, NY,
is the investment Subadviser to the Money Market Fund. Scudder
Kemper has more than 80 years experience managing mutual funds,
and currently has more than $290 billion in assets under
management.
The Subadviser provides, subject to the Adviser's direction, a
portion of the investment advisory services for which the
Adviser is responsible. The services include investment
research and advice with respect to securities, investments and
cash equivalents in the Money Market Fund. As compensation for
its services, the Subadviser receives a monthly fee computed on
a daily basis, at an annual rate, equal to .20% of the first
$50,000,000, .15% of the next $200,000,000, .12% of the next
$750,000,000, and .10% of all over $1 billion of the current
value of the net assets. The fee is paid by the Adviser, not
the Fund.
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 Fund that incurs them, while
other expenses are allocated among the Funds on the basis of
their relative size (i.e., the amount of their net assets). The
Adviser will pay any expenses of the Total Social Impact Fund,
other than the advisory fee for that Fund, to the extent that
such expenses exceed .30% of that Fund's net assets. The
Adviser will pay any expenses of the Money Market Fund, other
than the advisory fee for that Fund, to the extent that such
expenses exceed .10% of that Fund's net assets.
CAPITAL STOCK
Summit Mutual Funds currently has twenty-two classes of stock,
one for each fund, two of which are offered pursuant to this
prospectus. Shares (including fractional shares) of each fund
have equal rights with regard to voting, redemptions, dividends,
distributions, and liquidations with respect to that fund. When
issued, shares are fully paid and nonassessable and do not have
preemptive or conversion rights or cumulative voting rights.
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
The net asset value of the Funds' shares is determined once
daily, Monday through Friday at 4:00 p.m. Eastern Time, on days
there are purchases or redemptions of Fund shares. The net
asset value will not be determined when the New York Stock
Exchange is closed (for example, on national holidays), or on
any day on which changes in the value of the portfolio
securities of the Funds are immaterial. The net asset value is
calculated by adding the values of all securities and other
assets of a Fund, subtracting liabilities and expenses, and
dividing the resulting figure by the number of the Fund's
outstanding shares. Expenses, including the advisory fee
payable to the Adviser, are charged to each Fund daily.
Securities held by each Fund are valued at market price.
Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by, or under procedures adopted by, the Board of
Directors. Money market instruments maturing in 60 days or less
are valued at the amortized cost method.
Sometimes foreign securities markets are open on days when U.S.
markets are closed. Because some Funds holds foreign
securities, there may be days when the net asset value of Fund
shares changes even when the shares are not priced, and Fund
shareholders cannot purchase or redeem shares.
PURCHASE OF SHARES
Shares of the Funds are offered and sold on a continuous basis
by the distributor for the Funds, Carillon Investments, Inc.
(the "Distributor"), which is affiliated with the Adviser. The
Distributor is a registered broker-dealer with offices at 1876
Waycross Road, Cincinnati, Ohio 45240.
MINIMUM INVESTMENTS
The minimum initial investment for shares in a Fund is
1) $5,000; or
2) $1,000 ($500 in the case of an Individual Retirement
Account) if the purchaser of shares is any one of the
following:
a) Directors, officers, current or retired employees
("employees"), or agents of The Union Central Life
Insurance Company ("Union Central"), or affiliates
thereof, or their spouses or dependents; or
b) Directors, officers, employees, or agents of broker-
dealers that have entered into selling agreements
with the Distributor relating to the Funds, or their
spouses or dependents; or
c) Directors, officers, employees, or affiliates of
Summit Mutual Funds or investment advisers or sub-
advisers or distributors thereof, or their spouses
or dependents.
The minimum subsequent investment is $50.
BUYING SHARES
Purchase requests accompanied by a check or wire payment for any
Fund which are received by the transfer agent before 4:00 p.m.
Eastern Time on a business day for the Funds will be
executed the same day, at that day's closing price, provided
that payment is received by the close of regular trading hours.
Orders received after 4:00 p.m. Eastern Time and orders for
which payment is not received by the close of regular trading
hours on the New York Stock Exchange will be executed on the
next business day after receipt of both order and payment in
proper form.
<TABLE>
<C> <C>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY MAIL BY MAIL
Complete an application and mail it Make your check payable to Summit
along with a check payable to Summit Mutual Funds. Please include your
Mutual Funds, to: sixteen-digit account number on your
The Summit Mutual Funds check and mail it to the address at
c/o Firstar Mutual Fund Services, LLC the left.
P.O. Box 701
Milwaukee, WI 53201-0701.
For overnight or express delivery,
mail to:
The Summit Mutual Funds
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207.
AUTOMATICALLY AUTOMATICALLY
Call 1-888-259-7565 to obtain a Complete a Periodic Investment Plan
purchase application, which includes Application to automatically purchase
information for a Periodic Investment more shares.
Plan.
BY WIRE BY WIRE
Call 1-888-259-7565 prior to sending Call 1-888-259-7565 prior to sending
the wire in order to obtain a the wire in order to obtain a
confirmation number and to ensure confirmation number and to ensure
prompt and accurate handling of funds. prompt and accurate handling of
funds.
Ask your bank to transmit immediately Ask your bank to transmit immediately
available funds by wire in the amount available funds by wire as descrobed
of your purchase to: at the left.
Firstar Bank, N.A.
777 East Wisconsin Avenue Please include your sixteen-digit
Milwaukee, WI 53202 account number.
ABA Number: 075000022
Credit to: Firstar Mutual Fund The Summit Mutual Funds and its
Services, LLC transfer agent are not responsible
for
Account Number: 112-952-137 the consequences of delays resulting
Further credit to: Summit Mutual Funds from the banking or Federal Reserve
(account name and account number) Wire system, or from incomplete
Summit Mutual Funds and its transfer wiring instructions.
agent are not responsible for the
consequences of delays resulting from
the banking or Federal Reserve Wire
system, or from incomplete wiring
instructions.
INTERNET INTERNET
Not available at this time Not available at this time
BY TELEPHONE EXCHANGE BY TELEPHONE EXCHANGE
Call 1-888-259-7565 to exchange Call 1-888-259-7565 to exchange
from another Summit Mutual Funds from another Summit Mutual Funds
account with the same registration account with the same registration
including name, address and taxpayer including name, address and taxpayer
ID number. ID number.
</TABLE>
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PLEASE NOTE: All checks must be drawn on a bank located within
the United States and must be payable in U.S. dollars to Summit
Mutual Funds. A $25 fee will be imposed by the Funds' transfer
agent if any check used for investment in an account does not
clear, and the investor involved will be responsible for any
loss incurred by a Fund. Prior to the transfer agent receiving a
completed application, investors may make an initial investment.
However, redemptions will not be paid until the transfer agent
has received the completed application.
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ADDITIONAL INFORMATION ON BUYING SHARES
The Funds will not accept payment in cash or third party
checks for the purchase of shares.
Federal regulations require that each investor provide a
Social Security number or other certified taxpayer
identification number upon opening or reopening an account.
The Funds reserve the right to reject applications without
such a number or an indication that a number has been
applied for. If a number has been applied for, the number
must be provided and certified within sixty days of the
date of the application. Any accounts opened without a
proper number will be subject to backup withholding at
a rate of 31% on all liquidations and dividend and capital
gain distributions.
Payment for shares of a Fund in the amount of $1,000,000
or more may, at the discretion of the Adviser, be made in
the form of securities that are permissible investments
for the respective Fund.
REDEMPTION OF SHARES
SELLING SHARES
Redemption requests for any of the Funds received by the
transfer agent before 4:00 p.m. Eastern Time on a business day
for the Funds will be executed the same day, at that day's
closing price. Orders received after 4:00 p.m. Eastern Time
will be executed on the next business day.
BY TELEPHONE
Call 1-888-259-7565 with your account name, sixteen-digit
account number and amount of redemption (minimum $500).
Redemption proceeds will only be sent to a shareholder's address
or bank account of a commercial bank located within the United
States as shown on the transfer agent's records. (Available only
if telephone redemptions have been authorized on the account
application and if there has been no change of address by
telephone within the preceding 15 days).
BY MAIL
Mail your instructions to Summit Mutual Funds, P.O. Box 3011,
Milwaukee, WI 53201-3011 (via overnight delivery to 615 E.
Michigan Street, Milwaukee, WI 53202).Include the number of
shares or the amount to be redeemed, your sixteen-digit account
number and Social Security number or other taxpayer
identification number. Your instructions must be signed by all
persons required to sign for transactions exactly as their names
appear on the account. If the redemption amount exceeds $50,000,
or if the proceeds are to be sent elsewhere than the address of
record, or the address of record has been changed by telephone
within the preceding 15 days, each signature must be guaranteed
in writing by either a commercial bank that is a member of the
FDIC, a trust company, a credit union, a
savings association, a member firm of a national securities
exchange or other eligible guarantor institution.
INTERNET
Not available at this time.
AUTOMATICALLY
Call 1-888-259-7565 for a Systematic Withdrawal Plan application
($5,000 account minimum and $50 minimum per transaction).
----------------------------------------------------------------
Guarantees must be signed by an eligible guarantor institution
and "Signature Guaranteed" must appear with the signature.
----------------------------------------------------------------
The Funds may require additional supporting documents for
redemptions made by corporations, executors, administrators,
trustees and guardians. A redemption request will not be deemed
to be properly received until the transfer agent receives all
required documents in proper form.
----------------------------------------------------------------
ADDITIONAL TRANSACTION INFORMATION
TELEPHONE REQUESTS
In order to arrange for telephone redemptions after you have
opened your account or to change the bank or account designated
to receive redemption proceeds, send a written request to the
Firstar Mutual Fund Services, LLC or contact your registered
representative. Each shareholder of the account must sign the
request. The Funds may request further documentation from
corporations, executors, administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if
they believe it is advisable to do so. Procedures for redeeming
shares by telephone may be modified or terminated by the Funds
at any time upon notice to shareholders.
DURING PERIODS OF SUBSTANTIAL ECONOMIC OR MARKET CHANGE,
TELEPHONE REDEMPTIONS MAY BE DIFFICULT TO IMPLEMENT. IF A
SHAREHOLDER IS UNABLE TO CONTACT THE TRANSFER AGENT BY
TELEPHONE, SHARES MAY ALSO BE REDEEMED BY DELIVERING THE
REDEMPTION REQUEST TO THE TRANSFER AGENT.
In an effort to prevent unauthorized or fraudulent purchase and
redemption requests by telephone, Firstar employs reasonable
procedures to confirm that such instructions are genuine. Among
the procedures used to determine authenticity, investors
electing to transact by telephone will be required to provide
their account number (unless opening a new account). All
telephone transactions will be recorded and confirmed in
writing. Statements of accounts shall be conclusive if not
objected to in writing within 10 days after transmitted by mail.
Summit Mutual Funds may implement other procedures from time to
time. If reasonable procedures are not implemented, Summit
Mutual Funds may be liable for any loss due to unauthorized or
fraudulent transactions. In all other cases, the shareholder is
liable for any loss for unauthorized transactions.
ADDITIONAL REDEMPTION INFORMATION
The Funds will make payment for redeemed shares typically within
one or two business days, but no later than the seventh day
after receipt by the transfer agent of a request in proper form,
except as provided by SEC rules. HOWEVER, IF ANY PORTION OF THE
SHARES TO BE REDEEMED REPRESENTS AN INVESTMENT MADE BY CHECK,
THE FUNDS WILL DELAY THE PAYMENT OF THE REDEMPTION PROCEEDS
UNTIL THE TRANSFER AGENT IS REASONABLY SATISFIED THAT THE CHECK
HAS BEEN COLLECTED, WHICH MAY TAKE TWELVE DAYS FROM THE PURCHASE
DATE. An investor must have filed a purchase application before
any redemption requests can be paid.
ACCOUNTS BELOW THE MINIMUM BALANCE
If your account falls below $1,000, the Funds may redeem your
account. The Fund will impose no charge and will give you sixty
days' written notice prior to any redemption.
REDEMPTION IN KIND
Each Fund intends to pay cash for all shares redeemed, unless
the redemption request is for more than $250,000 or 1% of the
net assets of a Fund by a single shareholder over any 90-day
period. If such a redemption request is presented and the Fund
deems it to be detrimental to existing shareholders, to pay the
redemption in cash, the Fund may pay all or part of the
redemption in the Fund's portfolio securities at their
then-current market value equal to the redemption price. If you
received securities in kind and converted them to cash, you
would incur brokerage costs. Redemptions in kind are taxable
transactions.
EXCHANGE OF SHARES
Without a sales charge, you may exchange shares of a Fund for
shares of another Fund.Telephone exchange privileges
automatically apply to each shareholder of record unless the
transfer agent receives written instructions canceling the
privilege.
For federal income tax purposes, an exchange of shares is a
taxable event and, accordingly, an investor may realize a
capital gain or loss. Before making an exchange request, an
investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange. No
exchange fee is currently imposed by Summit Mutual Funds on
exchanges. However, Summit Mutual Funds reserves the right to
impose a charge in the future. Summit Mutual Funds reserves the
right to reject any exchange request with prior notice to a
shareholder and the exchange privilege may be modified or
terminated at any time. At least sixty days' notice will be
given to shareholders of any material modification or
termination except where notice is not required under SEC
regulations. Also keep in mind:
Exchanges are available only in states where exchanges may
be legally made.
The minimum amount which may be exchanged is the lesser of
$1,000 or all the shares of that Fund.
If any portion of the shares to be exchanged represents an
investment made by check, a Fund will delay the acquisition
of new shares in an exchange until the transfer agent is
reasonably satisfied that the check has been collected,
which may take up to twelve days from the purchase date.
It may be difficult to make telephone exchanges in times of
drastic economic or market changes.
EXCESSIVE TRADING
The Adviser may bar excessive traders from purchasing shares of
a Fund. Frequent trades, involving either substantial Fund
assets or a substantial portion of your account or accounts
controlled by you, can disrupt management of the Fund and raise
its expenses. The Fund defines "excessive trading" as exceeding
one purchase and sale involving the Funds within any 120-day
period. For example, assume you are invested in a Fund. You can
move substantial assets from that Fund to another Fund and,
within the next 120 days, sell your shares in that Fund to
return to the first Fund. If you exceed the number of trades
described above, you may be barred indefinitely from further
purchases of shares of the Funds. 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.
SHAREHOLDER REPORTS
Shareholders will be provided with a report showing portfolio
investments and other information at least semiannually; and
after the close of a Fund's fiscal year with an annual report
containing audited financial statements. To eliminate
unnecessary duplication, only one copy of shareholder reports
will be sent to shareholders with the same mailing address.
Shareholders may request duplicate copies free of charge.
Account statements will be mailed after each purchase,
reinvestment of dividends and redemption. Statements of
accounts shall be conclusive if not objected to in writing
within 10 days after transmitted by mail. Generally, the Fund
does not send statements for Funds held in brokerage, retirement
or other similar accounts.
AUTOMATED TELERESPONSE SERVICE
Shareholders using a touch-tone telephone can access information
on the Funds twenty four hours a day, seven days a week. When
calling Firstar Mutual Fund Services, LLC at 1-888-259-7565,
shareholders may choose to use the automated information feature
or, during regular business hours (8:00 a.m. to 7:00 p.m.
Central time, Monday through Friday), speak with a Firstar
representative.
RETIREMENT PLANS
The Fund offers individual retirement accounts including SIMPLE
and SEP IRAs. For details concerning Retirement Accounts
(including service fees), please call Firstar Mutual Fund
Services, LLC at 1-888-259-7565.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Dividends from net investment income of the Total Social Impact
Fund are declared and paid quarterly. Dividends from net
investment income of the Money Market Fund are declared daily
and paid monthly.
Any capital gains are distributed annually. Your dividends and
capital gains distributions will be reinvested automatically in
additional shares unless you notify Summit Mutual Funds that you
elect to receive distributions in cash.
If you have elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service
is unable to deliver checks to your address of record, your
distribution option will automatically be converted to having
all dividend and other distributions reinvested in additional
shares. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all, or
substantially all, of its taxable income, including its net
capital gain (the excess of long-term capital gain over
short-term capital loss). You will be subject to income tax on
these distributions regardless of whether they are paid in cash
or reinvested in additional Fund shares. Distributions
attributable to the net capital gain of a Fund will be taxable
to you as long-term capital gain, regardless of how long you
have held your Fund shares. Other Fund distributions will
generally be taxable as ordinary income. You will be notified
annually of the tax status of distributions to you.
You should note that if you purchase Fund shares just prior to a
capital gain distribution, the purchase price will reflect the
amount of the upcoming distribution, but you will be taxable on
the entire amount of the distribution received, even though, as
an economic matter, the distribution simply constitutes a return
of capital. This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or
redemption of your Fund shares, including an exchange for Fund
shares of another Fund, based on the difference between your tax
basis in the Fund shares and the amount you receive for them.
(To aid in computing your tax basis, you generally should retain
your account statements for the periods during which you held
Fund shares.) Any loss realized on Fund shares held for six
months or less will be treated as a long-term capital loss to
the extent of any capital gain dividends that were received on
the Fund shares.
The one major exception to these tax principles is that
distributions on, and sales, exchanges and redemptions of, Fund
shares held in an IRA (or other tax-qualified plan) will not be
currently taxable.
The foregoing is only a summary of certain tax considerations
under current law, which may be subject to change in the future.
You should consult your tax adviser for further information
regarding federal, state, local and/or foreign tax consequences
relevant to your specific situation.
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on
distributions and redemptions. State income taxes may not apply,
however, to the portions of each Fund's distributions, if any,
that are attributable to interest on Federal securities or
interest on securities of the particular state. Shareholders
should consult their tax advisers regarding the tax status of
distributions in their state and locality.
<PAGE>
S&P 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.
FINANCIAL HIGHLIGHTS
Since these are new funds, no financial highlights are
available.
APPENDIX A: RATINGS
CORPORATE BOND RATINGS
Moody's Investors Services, Inc.
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium-
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds which are rated Baa are considered as medium-
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
Standard & Poor's Rating Services
AAA This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong
capacity to pay principal and interest.
AA Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in a small degree.
A Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat more susceptible to the
adverse effect of changes in circumstances and economic
conditions.
BBB Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally
exhibit protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB, B, CCC, CC Bonds rated BB, B, CCC, and CC are
regarded, on balance, as predominately speculative with respect
to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
COMMERCIAL PAPER RATINGS
Moody's Investors Services, Inc.
A Prime rating is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. Issuers rated Prime are
further referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification. Among the
factors considered by Moody's in assigning ratings for an issuer
are the following:
- management;
- economic evaluation of the industry and an appraisal
of speculative type
risks which may be inherent in certain areas;
- competition and customer acceptance of products;
- liquidity;
- amount and quality of long-term debt;
- ten-year earnings trends;
- financial strength of a parent company and the
relationships
which exist with the issuer; and
- recognition by management of obligations which may be
present
or may arise as a result of public interest questions and
preparations to meet such obligations.
Standard & Poor's Rating Services
Commercial paper rated A by Standard & Poor's Rating Services
has the following characteristics:
- Liquidity ratios are better than the industry average.
- Long-term senior debt rating is "A" or better. In some
cases, BBB credits may be acceptable.
- The issuer has access to at least two additional channels
of borrowing.
- Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances.
- Typically, the issuer's industry is well established, the
issuer has a strong position within its industry and the
reliability and quality of management is unquestioned.
Issuers rated A are further referred to by use of numbers 1, 2
and 3 to denote relative strength within this classification.
<PAGE>
[Back Cover Page]
A Statement of Additional Information dated June 26, 2000, which
contains further information about the Funds, has been filed
with the Securities and Exchange Commission and is incorporated
by reference into this Prospectus. Additional information about
the Funds' investments is available in Summit Mutual Funds'
annual and semi-
annual reports to shareholders. In Summit Mutual Funds' annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Funds'
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 Summit
Mutual Funds, c/o Firstar Mutual Fund Services, LLC, (888) 259-
7565, or by writing Summit Mutual Funds, c/o Firstar Mutual
Fund Services, LLC, at P.O. Box 701, Milwaukee, WI 53201-0701.
Summit Mutual Funds' Statement of Additional Information, annual
and semi-annual reports and certain other information about the
Funds 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 Funds are
also available without charge at the SEC's web site:
http://www.sec.gov.
File 811-04000
(page)
SUMMIT MUTUAL FUNDS, INC.
Summit Apex Series
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STATEMENT OF ADDITIONAL INFORMATION
June 26, 2000
This Statement of Additional Information regarding two of
the twenty-two Funds of Summit Mutual Funds, Inc. ("Summit
Mutual Funds"), formerly Carillon Fund, Inc., 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' current Prospectus, dated
June 26, 2000, which may be obtained by calling Summit Mutual
Funds, c/o Firstar Mutual Fund Services, LLC, (888) 259-7565, or
by writing Summit Mutual Funds, c/o Firstar Mutual Fund
Services, LLC, at P.O. Box 701, Milwaukee, WI 53201-0701.
Summit Mutual Funds is an open-end management investment
company.
TABLE OF CONTENTS
Page
Investment Policies (7)........................................2
Money Market Instruments, Other Securities and
Investment Techniques.................................2
Futures Contracts...........................................4
Options.....................................................8
Lending Portfolio Securities...............................12
Additional Investment Policies - Money Market Fund............12
Investment Restrictions.......................................14
Portfolio Turnover............................................17
Management of the Fund (10)...................................18
Directors and Officers.....................................18
Investment Adviser.........................................20
Payment of Expenses........................................21
Advisory Fee ..............................................21
Investment Advisory Agreement..............................22
Investment Subadvisory Agreement...........................22
Service Agreement..........................................23
License Agreement..........................................22
Securities Activities of Adviser...........................23
Code of Ethics.............................................24
Determination of Net Asset Value (11).........................24
Purchase and Redemption of Shares (12)........................25
Taxes (18)....................................................25
Fund Transactions and Brokerage...............................25
Distributor...................................................26
General Information (2).......................................27
Capital Stock..............................................27
Voting Rights..............................................28
Additional Information.....................................28
Independent Auditors..........................................29
Appendix A: S&P Disclaimer....................................30
Appendix A: TSI Disclaimer....................................31
( ) indicates page on which the corresponding section appears in
the Prospectus.
SMFI 516 APEX 6/00
<page)
SUMMIT MUTUAL FUNDS, INC.
INVESTMENT POLICIES
The following specific policies supplement the Fund's
"Investment Objectives and Policies" set forth in the
Prospectus.
Money Market Instruments, Other Securities and Investment
Techniques
Each Fund may invest in money market instruments whose
characteristics are consistent with the Fund's investment
program and are described below unless explicitly excluded in
the text.
Small Bank Certificates of Deposit. Each Fund 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., one of the Funds) 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. Funds 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
Fund's net assets would then be invested in such repurchase
agreements and other illiquid securities. The Funds will enter
into repurchase agreements only where: (I) the underlying
securities are of the type (excluding maturity limitations)
which the Funds' 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 Fund in repurchase agreements may at times be
substantial when, in the view of the Adviser, unusual market,
liquidity, or other conditions warrant.
If the issuer of the repurchase agreement defaults and does not
repurchase the underlying security, the Fund 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 issuer becomes involved in
bankruptcy proceedings, the Fund may be delayed or prevented
from obtaining the underlying security for its own purposes. In
order to minimize any such risk, the Fund 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
Each Fund may enter into reverse repurchase agreements. Under
reverse repurchase agreements, the Fund transfers possession of
Fund securities to banks in return for cash in an amount equal
to a percentage of the Fund securities' market value and agrees
to repurchase the securities at a future date by repaying the
cash with interest. The Fund 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 Fund 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. Each Fund may invest in 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. Each Fund may invest in 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. Each Fund may invest in bankers'
acceptances. 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. Each Fund may invest in 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.
Short Term Corporate Debt Securities. Each Fund may invest in
investment grade short term corporate debt securities with a
remaining maturity of one year or less. 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 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, each Fund may purchase
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 a Fund 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 such Fund. At the time of
delivery of the securities, the value may be more or less than
the purchase price. Each Fund will also establish a segregated
account with the Summit Mutual Funds' custodian bank in which
it will maintain cash or cash equivalents or other Fund
securities equal in value to commitments for such when-issued or
delayed-delivery securities.
Equity Securities. The Total Social Impact Fund may invest in
equity securities without restriction.
Unit Investment Trusts. The Total Social Impact Fund may invest
in Standard & Poor's Depositary Receipts ("SPDRs(R)"). SPDRs
are units of beneficial interest in a unit investment trust
("UIT"), representing proportionate undivided interests in a
portfolio of securities in substantially the same weighting as
the component common stocks of the S&P 500 Index. While the
investment objective of SPDRs is to provide investment results
that generally correspond to the price and yield performance of
the component common stocks of the S&P 500 Index, there can be
no assurance that this investment objective will be met fully.
As SPDRs are securities issued by an investment company, non-
fundamental restriction (5) below restricts their purchases to
10% of the Fund's assets.
Futures Contracts
For hedging purposes, including protecting the price or interest
rate of securities that the Fund intends to buy, the Total
Social Impact Fund may enter into futures contracts that relate
to securities in which it may directly invest and indices
comprised of such securities and may purchase. As a temporary
investment strategy, until the Fund reaches $50 million in net
assets, the Total Social Impact Fund may invest up to 100% of
its assets in such futures and/or options contracts.
Thereafter, the Fund may invest up to 20% of the Fund's assets
in such futures and/or options contracts. The Fund does not
intend to enter into futures contracts that are not traded on
exchanges or boards of trade.
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 Fund 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 Fund
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 Fund, the Fund 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 Fund 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 Fund may not be invested in
precisely the same proportion as an Index, it is likely that the
price changes of the Fund's index futures positions will not
match the price changes of the Fund'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 Fund will enter into futures contracts which are traded on
national futures exchanges and are standardized as to maturity
date and underlying financial instrument. The principal
financial futures exchanges in the United States are the Board
of Trade of the City of Chicago, the Chicago Mercantile
Exchange, the New York Futures Exchange and the Kansas City
Board of Trade. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"). Although
techniques other than the sale and purchase of futures contracts
could be used for the above-referenced purposes, futures
contracts offer an effective and relatively low cost means of
implementing the Fund's objectives in these areas.
Regulatory Limitations. The Total Social Impact Fund will
engage in transactions in futures contracts and options thereon
only for bona fide hedging, risk management and other
permissible purposes, in each case in accordance with the rules
and regulations of the CFTC, and not for speculation.
In instances involving the purchase of futures contracts or call
options thereon or the writing of put options thereon by the
Fund, an amount of cash, U.S. Government securities or other
liquid securities, equal to the market value of the futures
contracts and options thereon (less any related margin
deposits), will be deposited in a segregated account with the
Fund's custodian to cover the position, or alternative cover
will be employed thereby insuring that the use of such futures
contracts and options is unleveraged.
In addition, CFTC regulations may impose limitations on the
Fund's ability to engage in certain yield enhancement and risk
management strategies. If the CFTC or other regulatory
authorities adopt different (including less stringent) or
additional restrictions, the Fund would comply with such new
restrictions.
SPECIAL RISKS OF FUTURES CONTRACTS
Volatility And Leverage. The prices of futures contracts are
volatile and are influenced, among other things, by actual and
anticipated changes in the market and interest rates, which in
turn are affected by fiscal and monetary policies and national
and international policies and economic events.
Most United States futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the minimum amount
that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage. As a result, a
relatively small price movement in a futures contract may result
in 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 Fund would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in
the underlying instrument and sold it after the decline.
Furthermore, in the case of a futures contract purchase, in
order to be certain that a Fund has sufficient assets to satisfy
its obligations under a futures contract, the Fund earmarks to
the futures contract money market instruments equal in value to
the current value of the underlying instrument less the margin
deposit.
Liquidity. The Fund may elect to close some or all of its
futures positions at any time prior to their expiration. A Fund
would do so to reduce exposure represented by long futures
positions or increase exposure represented by short futures
positions. A Fund may close its positions by taking opposite
positions which would operate to terminate the Fund's position
in the futures contracts. Final determinations of variation
margin would then be made, additional cash would be required to
be paid by or released to the Fund, and the Fund would realize a
loss or a gain.
Futures contracts may be closed out only on the exchange or
board of trade where the contracts were initially traded.
Although the Fund intends to purchase or sell futures contracts
only on exchanges or boards of trade where there appears to be
an active market, there is no assurance that a liquid market on
an exchange or board of trade will exist for any particular
contract at any particular time. In such event, it might not be
possible to close a futures contract, and in the event of
adverse price movements, the Fund would continue to be required
to make daily cash payments of variation margin. However, in
the event futures contracts have been used to hedge the
underlying instruments, the Fund would continue to hold the
underlying instruments subject to the hedge until the futures
contracts could be terminated. In such circumstances, an
increase in the price of the underlying instruments, if any,
might partially or completely offset losses on the futures
contract. However, as described below, there is no guarantee
that the price of the underlying instruments will in fact
correlate with the price movements in the futures contract and
thus provide an offset to losses on a futures contract.
Hedging Risk. A decision of whether, when, and how to hedge
involves skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of unexpected market
behavior, or market or interest rate trends. There are several
risks in connection with the use by the Fund of futures contract
as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures
contracts and movements in the prices of the underlying
instruments which are the subject of the hedge. The Adviser
will, however, attempt to reduce this risk by entering into
futures contracts whose movements, in its judgment, will have a
significant correlation with movements in the prices of the
Fund's underlying instruments sought to be hedged.
Successful use of futures contracts by the Fund for hedging
purposes is also subject to the Adviser's ability to correctly
predict movements in the direction of the market. It is
possible that, when a Fund has sold futures to hedge its
portfolio against a decline in the market, the index, indices,
or underlying instruments on which the futures are written might
advance and the value of the underlying instruments held in the
Fund's portfolio might decline. If this were to occur, the Fund
would lose money on the futures and also would experience a
decline in value in its underlying instruments. However, while
this might occur to a certain degree, the Adviser believes that
over time the value of a Fund's portfolio will tend to move in
the same direction as the market indices which are intended to
correlate to the price movements of the underlying instruments
sought to be hedged. It is also possible that if a Fund were to
hedge against the possibility of a decline in the market
(adversely affecting the underlying instruments held in its
portfolio) and prices instead increased, the Fund would lose
part or all of the benefit of increased value of those
underlying instruments that it has hedged, because it would have
offsetting losses in its futures positions. In addition, in
such situations, if a Fund had insufficient cash, it might have
to sell underlying instruments to meet daily variation margin
requirements. Such sales of underlying instruments might be,
but would not necessarily be, at increased prices (which would
reflect the rising market). The Fund might have to sell
underlying instruments at a time when it would be
disadvantageous to do so.
In addition to the possibility that there might be an imperfect
correlation, or no correlation at all, between price movements
in the futures contracts and the portion of the portfolio being
hedged, the price movements of futures contracts might not
correlate perfectly with price movements in the underlying
instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit
and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors might close futures
contracts through offsetting transactions which could distort
the normal relationship between the underlying instruments and
futures markets. Second, the margin requirements in the futures
market are less onerous than margin requirements in the
securities markets, and as a result the futures market might
attract more speculators than the securities markets do.
Increased participation by speculators in the futures market
might also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and also
because of the imperfect correlation between price movements in
the underlying instruments and movements 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
The Total Social Impact Fund may sell (write) listed options on
U.S. Treasury Securities and options on contracts for the future
delivery of U.S. Treasury Securities as a means of hedging the
value of such securities owned by the Fund. The Fund may enter
into options on 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 Fund may write covered call
options on any security in which it is eligible to invest.
As a writer of a call option, a Fund 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 Fund has been
assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction. There can be no assurance that a
closing purchase transaction can be effected when the Fund so
desires.
The Fund 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 Fund 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.
Although the Fund will write only options and options on futures
contracts with respect to such securities which are traded on a
national exchange or Board of Trade, 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 Fund will not be able to sell the underlying security, until
the option expires or the option is exercised by the holder.
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 Fund's ability to effect closing transactions.
The Total Social Impact Fund may write call options on futures
contracts on U.S. Treasury Securities as a hedge against the
adverse effect of expected increases in interest rates on the
value of Portfolio securities, in order to establish more
definitely the effective return on securities held by the
Portfolio. The Fund may write call options on futures contracts
on the S&P 500 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 better meet its
investment objectives. The Fund will not write options on
futures contracts for speculative purposes.
A futures contract on a debt security is a binding contractual
commitment which will result in an obligation to make or accept
delivery, during a specified future time, of securities having
standardized face value and rate of return. Selling a futures
contract on debt securities (assuming a short position) would
give the Portfolio a legal obligation and right as seller to
make future delivery of the security against payment of the
agreed price.
Upon the exercise of a call option on a futures contract, the
writer of the option (the Fund) 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.
Nevertheless, if an option on a futures contract written by the
Fund is exercised, the Fund intends to either close out the
futures contract by purchasing an offsetting futures contract,
or deliver the underlying securities immediately, in order to
avoid assuming a short position. There can be no assurance that
the Fund will be able to enter into an offsetting transaction
with respect to a particular contract at a particular time, but
it may always deliver the underlying security.
As a writer of options on futures contracts, the Fund 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 Fund. If the option is
exercised, the Fund 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 Fund's ability to establish and close out
options positions at fairly established prices will be subject
to the maintenance of a liquid market. The Fund 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 Fund 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 Fund than if it had not entered into any options
transactions. The price of U.S. Treasury Securities futures are
volatile and are influenced, among other things, by changes in
prevailing interest rates and anticipation of future interest
rate changes. The price of S&P 500 Index futures 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 debt 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 Fund
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 Fund 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. Price distortions
could also result if investors in futures contracts make or take
delivery of underlying securities rather than engage in closing
transactions. 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
debt 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 interest rate
trends.
Limitations on the Use of Options on Futures. The Fund will
only write options on futures that are traded on exchanges and
are standardized as to maturity date and underlying financial
instrument. The principal exchanges in the United States for
trading options on Treasury Securities are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange. These
exchanges and trading options on futures are regulated under the
Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC").
It is the Fund's opinion that it is not a "commodity pool" as
defined under the Commodity Exchange Act and in accordance with
rules promulgated by the CFTC.
The Fund will not write options on futures contracts for which
the aggregate premiums exceed 5% of the fair market value of the
Fund's assets, after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into
(except that, in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount generally may be
excluded in computing the 5%).
All of the futures options transactions employed by a Fund will
be bona fide hedging transactions, as that term is used in the
Commodity Exchange Act and has been interpreted and applied by
the CFTC. To ensure that its futures options transactions meet
this standard, the Fund will enter into such transactions only
for the purposes and with the intent that CFTC has recognized to
be appropriate.
Custodial Procedures and Margins. Summit Mutual Funds'
Custodian acts as its escrow agent as to securities on which a
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 Summit Mutual Funds' custodian,
although such control might be limited by the escrow receipts
issued.
At the time the Fund sells a call option on a contract for
future delivery of U.S. Treasury Securities ("Treasury futures
contract"), 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 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
Fund 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 Fund 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 Fund 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 Total Social Impact Fund may lend portfolio securities with
a value up to 10% of their total assets. Such loans may be
terminated at any time. The Fund 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. While portfolio securities are on loan,
the borrower will pay the Fund any income accruing thereon, and
the Fund may invest or reinvest the collateral (depending on
whether the collateral is cash or U.S. Government securities) in
portfolio securities, thereby earning additional income. Loans
are typically subject to termination by the Fund 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 Fund and its shareholders.
The Fund 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.
ADDITIONAL INVESTMENT POLICIES - MONEY MARKET FUND
The Money Market Fund seeks to maintain the stability of
capital and, consistent therewith, to maintain the liquidity of
capital and to provide current income. The Fund seeks to
maintain a constant net asset value of $1.00 per share, although
there can be no assurance that this will be achieved. The Fund
uses the amortized cost method of securities valuation.
The Money Market Fund purchases U.S. Treasury bills, notes
and bonds; obligations of agencies and instrumentalities of the
U.S. Government; domestic and foreign bank certificates of
deposit; bankers' acceptances; finance company and corporate
commercial paper; and repurchase agreements and corporate
obligations. Investments are limited to those that are U.S.
dollar-denominated and at the time of purchase are rated, or
judged by the Adviser, subject to the supervision of the
Directors, to be equivalent to those rated high quality (i.e.,
rated in the two highest short-term rating categories) by any
two nationally-recognized statistical rating services such as
Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P"). In addition, the Adviser seeks
through its own credit analysis to limit investments to high
quality instruments presenting minimal credit risks. Securities
eligible for investment by Money Market Fund which are rated in
the highest short-term rating category by at least two rating
services (or by one rating service, if no other rating service
has issued a rating with respect to that security) are known as
"first tier securities." Securities eligible for investment by
Money Market Fund rated in the top two categories which are not
first tier securities are known as "second tier securities."
Investments in commercial paper and finance company paper will
be limited to securities which, at the time of purchase, will be
rated A-1 or A-2 by S&P or Prime 1 or Prime 2 by Moody's or the
equivalent by any nationally-recognized statistical rating
service or judged to be equivalent by the Adviser. Obligations
which are subject to repurchase agreements will be limited to
those of the type and quality described above. The Money Market
Fund may also hold cash. Shares of the Fund are not insured by
an agency of the U.S. Government. Securities and instruments in
which the Fund may invest may be issued by the U.S. Government,
its agencies and instrumentalities, corporations, trusts, banks,
finance companies and other business entities.
The Money Market Fund may invest in certificates of deposit
and bankers' acceptances of large domestic or foreign banks
(i.e., banks which at the time of their most recent annual
financial statements show total assets in excess of $1 billion)
including foreign branches of such domestic banks, which involve
different risks than those associated with investments in
certificates of deposit of domestic banks, and of smaller banks
as described below. The Fund will invest in U.S. dollar-
denominated certificates of deposit and bankers' acceptances of
foreign banks if such banks meet the stated qualifications.
Although the Fund recognizes that the size of a bank is
important, this fact alone is not necessarily indicative of its
creditworthiness. Investment in certificates of deposit and
bankers' acceptances issued by foreign banks and foreign
branches of domestic banks involves investment risks that are
different in some respects from those associated with
investments in certificates of deposit and bankers' acceptances
issued by domestic banks.
The Money Market Fund may also invest in certificates of
deposit issued by banks and savings and loan institutions which
had at the time of their most recent annual financial statements
total assets of less than $1 billion, provided that (I) the
principal amounts of such certificates of deposit are insured by
an agency of the U.S. Government, (ii) at no time will the Fund
hold more than $100,000 principal amount of certificates of
deposit of any one such bank, and (iii) at the time of
acquisition, no more than 10% of the Fund's assets (taken at
current value) are invested in certificates of deposit of such
banks having total assets not in excess of $1 billion.
The assets of the Money Market Fund consist entirely of
cash items and investments having a remaining maturity date of
397 calendar days or less from date of purchase. The Fund will
be managed so that the average maturity of all instruments in
the portfolio (on a dollar-weighted basis) will be 90 days or
less. The average maturity of the Fund's investments varies
according to the Adviser's appraisal of money market conditions.
The Fund may invest more than 5% but not more than 25% of
its total assets in the first tier securities of a single issuer
for a period of up to three business days after purchase,
although the Fund may not make more than one such investment at
any time. The Fund may not invest more than 5% of its total
assets in securities which were second tier securities when
acquired by the Fund. Further, the Fund may not invest more
than the greater of (1) 1% of its total assets, or (2) one
million dollars, in the securities of a single issuer which were
second tier securities when acquired by the Fund.
The Money Market Fund may occasionally purchase securities
other than in the open market. While such purchases may often
offer attractive opportunities for investment not otherwise
available on the open market, the securities so purchased are
often "restricted securities", i.e., securities which cannot be
sold to the public without registration under the Securities Act
of 1933 or the availability of an exemption from registration
(such as Rules 144 or 144A), or which are "not readily
marketable" because they are subject to other legal or
contractual delays in or restrictions on resale. It is the
Fund's policy that illiquid securities (including repurchase
agreements of more than seven days duration, certain restricted
securities, and other securities which are not readily
marketable) may not constitute, at the time of purchase, more
than 10% of the value of the Fund's net assets. Summit Mutual
Funds' Board of Directors has approved guidelines for use by the
Adviser in determining whether a security is illiquid.
Generally speaking, restricted securities may be sold (i)
only to qualified institutional buyers; (ii) in a privately
negotiated transaction to a limited number of purchasers; or
(ii) in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant
to an exemption from registration. Issuers of restricted
securities may not be subject to the disclosure and other
investor protection requirements that would be applicable if
their securities were publicly traded. If adverse market
conditions were to develop during the period between the Fund's
decision to sell a restricted or illiquid security and the point
at which the Fund is permitted or able to sell such security,
the Fund might obtain a price less favorable than the price that
prevailed when it decided to sell. Where a registration
statement is required for the resale of restricted securities,
the Fund may be required to bear all or part of the registration
expenses. The Fund may be deemed to be an "underwriter" for
purposes of the 1933 Act when selling restricted securities to
the public and, in such event, the Fund may be liable to
purchasers of such securities if the registration statement
prepared by the issuer is materially inaccurate or misleading.
The Adviser will monitor the liquidity of such restricted
securities subject to the supervision of Summit Mutual Funds'
Board of Directors. In reaching liquidity decisions, the
Adviser will consider the following factors: (1) the frequency
of trades and quotes for the security, (2) the number of dealers
wishing to purchase or sell the security and the number of their
potential purchasers; (3) dealer undertakings to make a market
in the security; and (4) the nature of the security and the
nature of the marketplace trades (i.e., the time needed to
dispose of the security, the method of soliciting offers and the
mechanics of transfer).
The Money Market Fund may also invest in asset back
securities, which may include pools of mortgages, loans,
receivables or other assets. Payment of principal and interest
may be largely dependent upon the cash flows generated by the
assets backing the securities.
For purposes of determining the percentage of the Fund's
total assets invested in securities of issuers having their
principal business activities in a particular industry, asset
backed securities will be classified separately, based on the
nature of the underlying assets, according to the following
categories: captive auto, diversified, retail and consumer
loans, captive equipment and business, business trade
receivables, nuclear fuel and capital and mortgage lending.
The net investment income of the Fund is declared as a
dividend to shareholders daily and distributed monthly in cash
or reinvested in additional shares.
INVESTMENT RESTRICTIONS
Summit Mutual Funds has adopted the following fundamental
restrictions relating to the investment of assets of the Funds
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 Fund 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 Fund
may be effected with the approval of the majority of the
outstanding voting shares of that Fund only. Summit Mutual
Funds' fundamental investment restrictions provide that no Fund
is allowed to:
(1) Issue senior securities (except that each Fund 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 Fund may purchase securities of
issuers which invest or deal in any of the above, and except
that each Fund 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 Total Social Impact Fund in compliance with non-
fundamental restrictions [7 and 8] 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, except that the Fund may lend
securities in compliance with non-fundamental restriction [6]
below.
(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. The Fund will not purchase
additional securities when money borrowed exceeds 5% of total
assets. For purposes of this restriction, entering into futures
contracts or reverse repurchase agreements will not be deemed a
borrowing.
(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 Fund 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
Fund.
Summit Mutual Funds 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 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 Fund
securities with the other Funds 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 Fund may purchase securities of
issuers which invest or deal in any of the above, and except
that each Fund 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 Funds).
(5) Purchase securities of other investment companies with
an aggregate value in excess of 5% of the Fund'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
UITs designed to track an Index and only if immediately
thereafter not more than 10% of such Fund's total assets, taken
at market value, would be invested in such securities.
Summit Mutual Funds 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 Total Social Impact Fund may not:
(6) Lend portfolio securities with an aggregate value of
more than 10% of its total assets.
(7) Invest more than 20% of its assets in futures
contracts and/or options on futures contracts, except as a
temporary investment strategy until the Fund reaches $50 million
in net assets, the Fund may invest up to 100% of its assets in
such futures and/or options contracts.
(8) 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 Fund's assets consist of collateral for outstanding
options.
If a percentage restriction (for either fundamental or
nonfundamental 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.
PORTFOLIO TURNOVER
Portfolio turnover is calculated by dividing the lesser of
purchases or sales of Fund securities during the fiscal year by
the monthly average of the value of the Fund's securities
(excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year
or less). Under the above definition, the Money Market Fund
will have no portfolio turnover.
A high rate of portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which
must be borne directly by the Fund. 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
a Fund'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 the Fund.
Higher portfolio turnover can result in corresponding increases
in brokerage costs to a Fund and its shareholders. However,
because rate of portfolio turnover is not a limiting factor,
particular holdings may be sold at any time, if investment
judgment or Fund operations make a sale advisable. The annual
portfolio turnover rate for the Total Social Impact Fund is
expected to be 20%.
MANAGEMENT OF THE FUND
Directors and Officers
The directors and executive officers of Summit Mutual Funds and
their principal occupations during the past five years are set
forth below. Unless otherwise noted, the address of each
executive officer and director is 1876 Waycross Road,
Cincinnati, Ohio 45240.
Directors and Officers
The directors and executive officers of the Fund and their
principal occupations during the past five years are set forth
below. Unless otherwise noted, the address of each executive
officer and director is 1876 Waycross Road, Cincinnati, Ohio
45240.
<TABLE>
<CAPTION>
Position(s)
Name, Address with Principal Occupation(s)
and Age the Fund During Past Five Years
------------- ----------- -----------------------
<S> <C> <C>
George M. Callard, M.D. Director Professor of Clinical Surgery,
3021 Erie Avenue University of Cincinnati
Cincinnati, Ohio 45208
(Age 66)
Theodore H. Emmerich Director Consultant; former Partner,
1201 Edgecliff Place Ernst & Whinney, Accountants
Cincinnati, Ohio 45206
(73)
Richard H. Finan Director Attorney at Law; President of
11137 Main Street the Ohio State Senate
Cincinnati, Ohio 45241
(65)
Yvonne L. Gray Director Chief Operating Officer, United
2400 Reading Road Way and Community Chest; prior
Cincinnati, Ohio 45202 thereto, Vice President/Trust
(49) Operations Officer, Fifth Third
Bank
Jean Patrice Director Former Interim President, Cincinnati
Harrington, S.C. State Technical and Community
College;
3217 Whitfield Avenue Former Executive Director,
Cincinnati
Cincinnati, Ohio 45220 Youth Collaborative; President
(77) Emeritus (formerly, President)
College
of Mount St. Joseph
John H. Jacobs* Director President and Chief Executive
Officer,
(53) Union Central; Director, Summit
Investment Partners, Inc.
("Adviser") and Carillon
Investments, Inc.;
prior to May, 2000, Officer and
employee, Union Central
Charles W. McMahon Director Retired Senior Vice President and
19 Iron Woods Drive Director, Union Central
Cincinnati, Ohio 45239
(80)
Harry Rossi* Director Director Emeritus, Union Central;
8548 Wyoming Club Drive Director, Adviser and Carillon
Cincinnati, Ohio 45215 Investments, Inc.; former Chairman,
(80) President and Chief Executive
Officer,
Union Central
Steven R. Sutermeister* Director, Senior Vice President,Union Central;
(47) President President, Director and Chief
and Chief Executive Officer, Adviser;
Executive Director, Carillon
Officer Investments, Inc.
John F. Labmeier Vice President Vice President, Associate General
(51) and Secretary Counsel and Assistant Secretary,
Union
Central; Vice President and
Secretary,
Carillon Investments, Inc.;
Secretary,
Adviser
Thomas G. Knipper Controller Treasurer, Adviser; prior to July,
(43) and Treasurer 1995, Treasurer of The Gateway Trust
and Vice President and Controller of
Gateway Advisers, Inc.
John M. Lucas Assistant Counsel and Assistant to Secretary,
(49) Secretary Union Central
</TABLE>
---------------
* Messrs. Jacobs, Rossi and Sutermeister are considered to be
"interested persons" of Summit Mutual Funds, Inc.(within the
meaning of the Investment Company Act of 1940) because of
their affiliation with the Adviser.
All directors who are not "interested persons" of the Company
are members of the Audit Committee.
As of the date of this Statement of Additional Information, no
officers and directors of Summit Mutual Funds owned 5% or more
of any of the outstanding shares of any Fund. Directors who
are not officers or employees of Union Central or Adviser are
paid a fee plus actual out-of-pocket expenses by Summit Mutual
Funds for each meeting of the Board of Directors attended.
Total fees and expenses incurred for 1999 were $68,200.
<TABLE>
<CAPTION>
Compensation Table
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
From Benefits Benefits From
Registrant Accrued As Upon Registrant
Part of Fund Retirement and Fund
Expenses Complex*
Paid to
Directors
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George M. Callard, $14,800** -- -- $14,800
M.D.
Director
Theodore H. Emmerich $15,900 -- -- $15,900
Director
James M. Ewell $15,300 -- -- $15,300
Director
Richard H. Finan $15,300 -- -- $15,300
Director
Jean Patrice
Harrington, S.C. $15,500 -- -- $15,500
Director
John H. Jacobs N/A N/A N/A N/A
Director
Charles W. McMahon $14,800 -- -- $14,800
Director
Harry Rossi N/A N/A N/A N/A
Director
</TABLE>
** Messrs. Callard and McMahon have deferred their compensation in past
years. As of December 31, 1999, the total amount deferred, including
interest, was as follows: Dr. Callard - $100,978; Mr. McMahon - $29,371.
Investment Adviser
Summit Mutual Funds has entered into an Investment Advisory
Agreement ("Agreement") with Summit Investment Partners, Inc.
("Adviser"), formerly known as Carillon Advisers, Inc., whose
principal business address is 312 Elm Street, Suite 2525,
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;
John H. Jacobs, Director; Harry Rossi, Director; Thomas G.
Knipper, Treasurer; and John F. Labmeier, Secretary. Pursuant
to the Agreement, Summit Mutual Funds has retained the Adviser
to manage the investment of each Fund's assets, including the
placing of orders for the purchase and sale of Fund securities.
The Adviser is at all times subject to the direction and
supervision of the Board of Directors of Summit Mutual Funds.
The Adviser continuously furnishes an investment program for
each Fund, is responsible for the actual management of each Fund
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 Funds 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 Summit Mutual Funds. The Adviser
may utilize the advisory services of subadvisers for one or more
of the Funds.
Payment of Expenses
Under the terms of the Agreement, in addition to managing Summit
Mutual Funds' investments, the Adviser, at its expense,
maintains certain of Summit Mutual Funds' books and records
(other than those provided by Firstar Mutual Fund Services, LLC,
by agreement) and furnishes such office space, facilities,
equipment, and clerical help as Summit Mutual Funds 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 Summit
Mutual Funds, who are employees of Union Central. The Adviser
also bears the cost of telephone service, heat, light, power and
other utilities provided to Summit Mutual Funds. Expenses not
expressly assumed by the Adviser under the Agreement will be
paid by Summit Mutual Funds.
Each Fund pays all other expenses incurred in its operation and
a portion of Summit Mutual Funds' general administration
expenses allocated on the basis of the asset size of the
respective Funds. Expenses other than the Adviser's fee that
are borne directly and paid individually by a Fund include, but
are not limited to, brokerage commissions, dealer markups,
expenses incurred in the acquisition of Fund securities,
transfer taxes, transaction expenses of the custodian, royalty
or license fees, pricing services used by only one or more
Funds, and other costs properly payable by only one or more
Funds. Expenses which are allocated on the basis of size of the
respective Funds include custodian (portion based on asset
size), dividend disbursing agent, transfer agent, bookkeeping
services (except annual per Fund 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 Summit Mutual Funds' operation
properly payable by Summit Mutual Funds and allocable on the
basis of size of the respective Funds. The Adviser will pay any
expenses of the Total Social Impact Fund, other than the
advisory fees for the Fund, to the extent that such expenses
exceed .30% of that Fund's net assets. The Adviser will pay any
expenses of the Money Market Fund, other than the advisory fee
for the Fund, to the extent that such expenses exceed .10% of
that Fund'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
Fund or allocated on the basis of the size of the respective
Funds. 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 Funds and expenses of the Funds assumed by the Adviser,
the Funds pay the Adviser monthly compensation calculated daily
as described on page 10 of the Prospectus.
Investment Advisory Agreement
The Investment Advisory Agreement was initially approved by
Summit Mutual Funds' Board of Directors, including a majority
of the directors who are not interested persons of the Adviser,
on March 22, 1984. Unless earlier terminated as described
below, the Agreement will continue in effect from year to year
if approved annually: (a) by the Board of Directors of Summit
Mutual Funds or by a majority of the outstanding shares of
Summit Mutual Funds, including a majority of the outstanding
shares of each Fund; 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 Summit Mutual Funds on 60 days notice, and by
the Adviser on 90 days notice. On February 25, 2000 the
Agreement was approved for continuance for one (1) year by the
Board of Directors by unanimous vote of those present, including
a majority of the directors who are not parties to such contract
or interested persons of any such party.
On August 30, 1999, the Board of Directors took steps to
activate the Total Social Impact Fund and the Money Market Fund
by authorizing the issuance of shares of those Funds. On May 8,
2000, the Board of Directors also approved an amendment to the
Investment Advisory Agreement making the Agreement applicable to
these Funds, and specifying the advisory fee payable by it. The
board determined that the amendment did not affect the interests
of the classes of Summit Mutual Funds shares other than the
shares of the Total Social Impact Fund and Money Market Fund and
that therefore only the holders of shares of those Funds were
entitled to vote on the amendment. It is anticipated that the
sole shareholder of those Funds will approve the Agreement as
amended on or about June 30, 2000.
The Investment Advisory Agreement provides that the Adviser
shall not be liable to Summit Mutual Funds or to any shareholder
for any error of judgment or mistake of law or for any loss
suffered by Summit Mutual Funds 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 administration services, the Adviser
will be held to a normal standard of liability.
The Agreement in no way restricts the Adviser from acting as
investment manager or adviser to others.
If the question of continuance of the Agreement (or adoption of
any new Agreement) is presented to shareholders, continuance (or
adoption) with respect to a Fund shall be effective only if
approved by a majority vote of the outstanding voting securities
of that Fund. If the shareholders of any one or more of the
Funds should fail to approve the Agreement, the Adviser may
nonetheless serve as an adviser with respect to any Fund whose
shareholders approved the Agreement.
Investment Subadvisory Agreement
The Agreement between the Adviser and Scudder Kemper
Investments, Inc. as subadviser for the Money Market Fund was
approved by the Fund's Board of Directors on May 8, 2000,
including an affirmative vote of a majority of the disinterested
directors. Although the Fund is not a party to this Subadvisory
Agreement, the Agreement provides that continuation and
termination are subject to the same requirements as the
Investment Advisory Agreement between the Adviser and the Fund.
Scudder is subject to the same control and supervision by the
Fund's Board of Directors as is the Adviser. The Adviser will
pay Scudder a monthly fee computed on a daily basis, at an
annual rate, equal to .20% of the first $50,000,000, .15% of the
next $200,000,000, .12% of the next $750,000,000, and .10% of
all over $1 billion of the current value of the net assets. The
fee is paid by the Adviser, not the Fund.
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 Summit Mutual Funds under the Agreement.
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 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. The Service
Agreement was approved by the shareholders of the Funds on June
30, 2000.
License Agreement
As stated in the Prospectus, the Total Social Impact(trademark)
(TSI) ratings are the product of collaborative research and
analytical efforts conducted by The Total Social Impact
Foundation, Inc. in conjunction with a group of academic
institutions. The Adviser receives and uses the TSI ratings
from The Total Social Impact Foundation, Inc. under an exclusive
licensing agreement, and has agreed to pay The Total Social
Impact Foundation, Inc. an initial one-time license fee not to
exceed $100,000, plus an annual fee equal to .10% of the average
net assets of the Total Social Impact Fund. The fee is paid by
the Adviser, not the Fund.
Securities Activities of Adviser
Securities held by Summit Mutual Funds 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 Funds 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
Funds, 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 Funds) with those to be sold or purchased
for other accounts or companies in order to obtain more
favorable execution and low 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(s) and to
such other accounts or companies. In some cases this procedure
may adversely affect the size of the position obtainable for a
Fund.
Code of Ethics
The Adviser, as well as Summit Mutual Funds, Inc., has adopted a
code of ethics under Rule 17j-1 of the Investment Company Act of
1940. Employees of the Adviser are permitted to make personal
securities transactions, subject to the requirements and
restrictions set forth in the Adviser's code of ethics. The
code of ethics contains provisions and requirements designed to
identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the Funds. 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.
DETERMINATION OF NET ASSET VALUE
As described on page 11 of the Prospectus, the net asset
value of shares 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: (I)
when the New York Stock Exchange is closed (currently New Year's
Day, President's 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 Fund securities of
the Fund will not materially affect the current net asset value
of the shares of a Fund.
Securities held by the Funds, 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.
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 by or under the direction of 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.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, to Union
Central and its exempt separate accounts, as well as to other
investors.
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 Fund securities or
determination of the net asset value of a Fund is not reasonably
practicable; and the Securities and Exchange Commission by order
permits postponement for the protection of shareholders.
TAXES
Each Fund of the Fund will be treated as a separate entity
for federal income tax purposes. Each Fund 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 Fund 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 Fund will be
relieved from federal income tax on the amounts distributed.
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.
FUND TRANSACTIONS AND BROKERAGE
The Adviser is primarily responsible for the investment
decisions of each Fund, 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. No Fund has any
obligation to deal with any dealer or group of dealers in the
execution of transactions in Fund securities. In placing
orders, it is the policy of the Funds 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 Funds will not necessarily be paying the lowest spread or
commission available.
If the securities in which a particular Fund of Summit
Mutual Funds invests are traded primarily in the over-the-
counter market, where possible the Fund 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 Fund securities transactions of
each Fund 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 Fund securities,
brokers who provide supplemental investment research to the
Adviser may receive orders for transactions by the Funds. 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 Funds 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.
DISTRIBUTOR
Carillon Investments, Inc. serves as the Funds' Distributor
or principal underwriter pursuant to a Distribution Agreement
with Summit Mutual Funds dated February 25, 2000. Carillon
Investments, a wholly owned subsidiary of Union Central and an
affiliate of the Adviser, is registered as a broker-dealer under
the 1934 Act and is a member of the NASD. The offering of Fund
shares is continuous. The Distribution Agreement provides that
Carillon Investments, as agent in connection with the
distribution of Fund shares, will use appropriate efforts to
solicit orders for the sale of Fund shares and undertake such
advertising and promotion as it deems reasonable.
Carillon Investments has also entered into a shareholder
services agreement with the Adviser under which it supervises
and monitors shareholder fulfillment services provided by
Firstar Mutual Fund Services, LLC ("Firstar"), and provides
certain shareholder services relative to the Summit Apex Series
of Funds. In consideration for its services, the Adviser pays
Carillon Investments an annual fee of $12,000, and pays or
reimburses it for any actual out-of-pocket expenses, as well as
for the fees charged by Firstar for providing shareholder
fulfillment services.
GENERAL INFORMATION
Capital Stock
Summit Mutual Funds 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.
Summit Mutual Funds was incorporated under the laws of the State
of Maryland on January 30, 1984. Summit Mutual Funds is a
series fund with twenty two classes of stock, one for each Fund.
The authorized capital stock of Summit Mutual Funds consists of
490,000,000 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:
<TABLE>
<CAPTION>
Fund Authorized Capital Stock
---- ------------------------
<S> <C>
Summit Pinnacle Series
Zenith Portfolio 40,000,000 shares
Bond Portfolio 30,000,000 shares
S&P 500 Index Portfolio 30,000,000 shares
Total Social Impact 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
Summit Apex Series
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
Bond Fund 20,000,000 shares
Everest Fund 20,000,000 shares
Total Social 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
Money Market Fund 150,000,000 shares
</TABLE>
The Board of Directors may change the designation of any Fund
and may increase or decrease the number of authorized shares of
any Fund, but may not decrease the number of authorized shares
of any Fund 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 Fund and, upon liquidation or dissolution, in net
assets of such Fund remaining after satisfaction of outstanding
liabilities.
Voting Rights
In accordance with an amendment to the Maryland General
Corporation Law, the Board of Directors of Summit Mutual Funds
has adopted an amendment to its Bylaws providing that unless
otherwise required by the Investment Company Act of 1940, Summit
Mutual Funds shall not be required to hold an annual shareholder
meeting unless the Board of Directors determines to hold an
annual meeting. Summit Mutual Funds 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 Fund, only shares of the respective Fund are
entitled to vote. The shares do not have cumulative voting
rights. Accordingly, the holders of more than 50% of the shares
of Summit Mutual Funds voting for the election of directors can
elect all of the directors of Summit Mutual Funds 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 Funds 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 Funds. Matters that
affect all Funds but where the interests of the Funds are not
substantially identical (such as approval of the Investment
Advisory Agreement) would be voted on separately by each Fund.
Matters affecting only one Fund, such as a change in its
fundamental policies, are voted on separately by that Fund.
Matters requiring separate shareholder voting by Fund shall have
been effectively acted upon with respect to any Fund if a
majority of the outstanding voting securities of that Fund 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 Fund; or (2) the matter has not been
approved by a majority of the outstanding voting securities of
Summit Mutual Funds.
The phrase "a majority of the outstanding voting securities" of
a Fund (or of Summit Mutual Funds) means the vote of the lesser
of: (1) 67% of the shares of the Fund (or Summit Mutual Funds)
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 Fund (or Summit
Mutual Funds).
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 Fund's fundamental investment objectives and
policies, etc.) regardless of the views of shareholders.
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 Summit Mutual
Funds 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.
INDEPENDENT AUDITORS
The financial statements of Summit Mutual Funds have been
audited by Deloitte & Touche LLP, 1700 Courthouse Plaza NE,
Dayton, Ohio 45402.
<PAGE>
APPENDIX A: S&P 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. The Funds are 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 the
Funds or any member of the public regarding the advisability of
investing in securities generally or in the 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, 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 the 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 the Funds.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P 500 OR S&P 400 INDEX OR ANY DATA INCLUDED THEREIN AND
S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY SUMMIT MUTUAL FUNDS,
BENEFICIAL OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500 INDEX, S&P MIDCAP 400 INDEX OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 OR S&P 400 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
<PAGE>
APPENDIX B: TSI DISCLAIMER
The Product is not sponsored, endorsed, sold or promoted by the
Total Social Impact Foundation ("TSIF"). TSIF makes no
representation or warranty, express or implied, to the owners of
the Product or any member of the public regarding the
advisability of investing in securities generally or in the
Product particularly or the ability of the Total Social Impact
Ratings ("TSI Ratings") to track general stock market
performance. TSIF's only relationship to Summit Mutual Funds is
the licensing of certain trademarks and trade names of the TSIF
and of the TSI Ratings which is determined, composed and
calculated by TSIF without regard to the Licensee or the
Product. TSIF has no obligation to take the needs of the Summit
Mutual Funds or the owners of the Product into consideration in
determining, encompassing or calculating the TSI Ratings. TSIF
is not responsible for and has not participated in the
determination of the prices and amount of the Product or the
timing of the issuance or sale of the Product or in the
determination or calculation of the equation by which the
Product is to be converted into cash. TSIF has no obligation or
liability in connection with the administration, marketing or
trading of the Product.
TSIF DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE TSI RATINGS OR ANY DATA INCLUDED THEREIN AND TSIF SHALL HAVE
NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. TSIF MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE TSI RATINGS OR
ANY DATA INCLUDED THEREIN. TSIF MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE TSI RATINGS OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL TSIF HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
