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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4000
--------
SUMMIT MUTUAL FUNDS, INC.
(Exact name of registrant as specified in charter)
1876 Waycross Road, Cincinnati, Ohio 45240
(Address of principal executive offices) (Zip code)
John F. Labmeier, Esq.
The Union Central Life Insurance Company
P.O. Box 40888
1876 Waycross Road
Cincinnati, Ohio 45240
(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 595-2600
Date of fiscal year end: December 31, 2004
Date of reporting period: December 31, 2004
ITEM 1.
<Page>
[GRAPHIC]
SUMMIT MUTUAL FUNDS
DECEMBER 31, 2004
ANNUAL REPORT
SUMMIT PINNACLE SERIES
ZENITH PORTFOLIO
BOND PORTFOLIO
S&P 500 INDEX PORTFOLIO
S&P MIDCAP 400 INDEX PORTFOLIO
BALANCED INDEX PORTFOLIO
NASDAQ-100 INDEX PORTFOLIO
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO
EAFE INTERNATIONAL INDEX PORTFOLIO
LEHMAN AGGREGATE BOND INDEX PORTFOLIO
[SUMMIT MUTUAL FUNDS LOGO]
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
ANNUAL REPORT - TABLE OF
CONTENTS
<Table>
Message from the President
1
Fund Expenses
2
Portfolio Managers' Reports and Financial Statements:
Zenith Portfolio
3
Bond Portfolio
8
S&P 500 Index Portfolio
15
S&P MidCap 400 Index Portfolio
25
Balanced Index Portfolio
34
Nasdaq-100 Index Portfolio
44
Russell 2000 Small Cap Index Portfolio
50
EAFE International Index Portfolio
73
Lehman Aggregate Bond Index Portfolio
83
Notes to Financial Statements
89
Report of Independent Registered Public Accounting Firm
92
</Table>
THE FUND FILES A COMPLETE SCHEDULE OF INVESTMENTS IN SECURITIES WITH
THE SEC FOR
THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE
FUND'S FORM
N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT www.sec.gov. THE FUND'S FORM
N-Q MAY
ALSO BE REVIEWED AND COPIED AT THE SEC'S PUBLIC REFERENCE ROOM IN
WASHINGTON,
DC. INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE
OBTAINED BY
CALLING 1-800-SEC-0330.
THIS REPORT HAS BEEN PREPARED FOR THE INFORMATION OF CONTRACT OWNERS
AND IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE PURCHASERS OF CONTRACTS
UNLESS IT IS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS FOR SUMMIT MUTUAL
FUNDS, INC.
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
MESSAGE FROM THE
PRESIDENT
We are pleased to send you Summit Mutual Funds' 2004 Annual Report for
the
fiscal year ended December 31, 2004. We welcome new and thank existing
investors
that have selected Summit Funds within your insurance and annuity
products. We
strive to help you reach your financial goals.
This year has been marked by fluctuating periods of uncertainty, growth
and
change for the U.S. economy and, as a consequence, investors. Quarterly
growth
during 2004, as measured by gross domestic product, ranged from a high
of 4.5%
in the first quarter to a low of 3.1% in the fourth quarter. Looking
ahead,
consensus estimates anticipate continued growth in the 3.0% to 4.0%
range in
2005. Employment, which had stubbornly avoided a rebound, showed signs
of
strength in the first half before stabilizing and ending the year with
an
unemployment rate of 5.4%. Corporate profits and consumer confidence
followed
the same trend with a strong first half before falling back somewhat in
the
second half and finishing the year with a strong showing. In contrast,
energy
prices spiked upward on supply concerns resulting from regional
tensions,
hurricane-related disruptions and increasing global demand. Add a
stubborn
foreign trade imbalance and a falling dollar into the equation, and
inflation
fears have resurfaced. These conditions weighed in on the Federal
Reserve's
decision to raise interest rates five times to a year-end level of
2.25%. After
four years of downward movements, the Fed has signaled a period of
steady rate
increases.
"OUR MESSAGE RINGS TRUE IN UNCERTAIN TIMES"
This economic news has been accompanied by volatility on the
geopolitical front.
In Iraq, insurgent violence increased in advance of the June handover
of
sovereignty, ebbed a bit and then escalated again as the January
elections
neared. Predictions of domestic terror attacks during the U.S. election
cycle
also exacerbated fears and increased levels of anxiety. All of this
occurred
against a backdrop of another close and contentious presidential
election that
thankfully was settled in a much more normal fashion than 2000. All of
these
factors created fluctuating levels of uncertainty for investors.
Equity markets responded by providing fluctuating returns, slowing the
pace of
the rally during the second and third quarters before posting a strong
finish to
the year. During 2004, the S&P 500 Index advanced 10.9%, the S&P 400
MidCap
Index returned 16.5% and the Russell 2000 Index gained 18.3%. In other
market
sectors, the Nasdaq-100 Index gained 10.7% while, in international
arenas, the
EAFE Index advanced 20.3%. While all of the annual returns were
positive,
uncertainty is never a friend to the markets, and this transitional
period may
remain for some time until managers get a better sense for how these
conditions
are resolved.
Fixed income markets also provided positive returns. The 10 year
Treasury rate
ended 2004 at 4.2%, or virtually unchanged for the year. However,
volatility was
high throughout the period as rates ranged from 3.7% in March to 4.9%
in June
before drifting back through year's end. The Lehman Aggregate Bond
Index's 2004
return was 4.3%. High yield markets rewarded risk takers with an annual
return
of 10.9% in the Merrill Lynch High Yield Master II Index. Money market
returns
rebounded from record lows as a result of the string of rate increases,
but
first tier retail money market funds lagged and returned only 0.7% on
average
for the year.
"...ASSET ALLOCATION AND PORTFOLIO REBALANCING ARE CRITICAL IN PERIODS
OF
VOLATILE RETURNS"
Our message rings true in uncertain times. Maintain the proper
perspective, have
realistic expectations and ensure that your investment strategy is
appropriate
for your risk tolerance and time horizon. Concepts such as asset
allocation and
portfolio rebalancing are critical in periods of volatile returns.
Proper
diversification of your investments, both within and across asset
sectors, (or
specifically stocks, bonds and cash) is an important component of
achieving your
long-term investment goals. Summit Mutual Funds provides a solid
foundation for
diversified investment planning with choices across equity and fixed-
income
styles.
RECENT HIGHLIGHTS:
- - Summit's Zenith Portfolio has demonstrated strong one, three and
five year
performance (with average annual returns of +14.8%, 6.2% and
10.1%). This
ranks it as a top performer by leading rating agencies.
- - Despite the volatility in the fixed-income markets, the Summit
Bond
Portfolio returned +4.3%, right in line with the return on the
Lehman
Aggregate Bond Index.
Thank you for choosing Summit Funds and for the trust that you have
placed in
us.
Best regards,
/s/ Steven R. Sutermeister
Steven R. Sutermeister
President
1
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
2004 ANNUAL REPORT - FUND EXPENSES
As a shareholder of the Portfolio, you incur ongoing costs, including
management
fees and other Portfolio expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the
Portfolio and to
compare these costs with the ongoing costs of investing in other mutual
funds.
Absent limitation of the expenses of certain of the Portfolios, your
expenses
would have been higher.
The Example is based on an investment of $1,000 invested at the
beginning of the
period and held for the entire period July 1, 2004 through December 31,
2004.
ACTUAL EXPENSES
The first section of the table below provides information about actual
account
values and actual net expenses. You may use the information in this
section,
together with the amount you invested, to estimate the expenses that
you paid
over the period. Simply divide your account value by $1,000 (for
example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result
by the
number in the first section under the heading entitled "Expenses Paid"
to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about
hypothetical
account values and hypothetical expenses based on the Portfolio's
actual expense
ratio, net of fee waivers and expense reimbursements, and an assumed
rate of
return of 5% per year before expenses, which is not the Portfolio's
actual
return. The hypothetical account values and expenses may not be used to
estimate
the actual ending account balance or expenses you paid for the period.
You may
use this information to compare the ongoing costs of investing in the
Portfolio
and other funds. To do so, compare this 5% hypothetical example with
the 5%
hypothetical examples that appear in the shareholder reports of other
funds.
Please note that the second section of the table is useful in comparing
ongoing
costs only, and will not help you determine the relative total costs of
owning
different funds.
<Table>
<Caption>
BEGINNING
ENDING ANNUALIZED EXPENSES PAID *
ACCOUNT VALUE
ACCOUNT VALUE NET EXPENSE JULY 1, 2004 TO
PORTFOLIO JUNE 30, 2004
DECEMBER 31, 2004 RATIO DECEMBER 31, 2004
-------------------------------------------------------------------
- ----------------------------------------------------
BASED ON ACTUAL RETURN
Zenith Portfolio $ 1,000
$ 1,093 0.91% $ 5
Bond Portfolio 1,000
1,039 0.75% 4
S&P 500 Index Portfolio 1,000
1,067 0.39% 2
S&P MidCap 400 Index Portfolio 1,000
1,092 0.55% 3
Balanced Index Portfolio 1,000
1,053 0.60% 3
Nasdaq-100 Index Portfolio 1,000
1,065 0.65% 3
Russell 2000 Small Cap Index Portfolio 1,000
1,100 0.75% 4
EAFE International Index Portfolio 1,000
1,134 0.95% 5
Lehman Aggregate Bond Index Portfolio 1,000
1,034 0.60% 3
BASED ON HYPOTHETICAL RETURN
(5% return before expenses)
Zenith Portfolio $ 1,000
$ 1,020 0.91% $ 5
Bond Portfolio 1,000
1,021 0.75% 4
S&P 500 Index Portfolio 1,000
1,023 0.39% 2
S&P MidCap 400 Index Portfolio 1,000
1,022 0.55% 3
Balanced Index Portfolio 1,000
1,022 0.60% 3
Nasdaq-100 Index Portfolio 1,000
1,021 0.65% 3
Russell 2000 Small Cap Index Portfolio 1,000
1,021 0.75% 4
EAFE International Index Portfolio 1,000
1,020 0.95% 5
Lehman Aggregate Bond Index Portfolio 1,000
1,022 0.60% 3
</Table>
* Expenses are equal to the Portfolio's annualized net expense
ratio,
multiplied by the average account value over the period,
multiplied by
184/366 (to reflect the one-half year period).
2
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
ZENITH
PORTFOLIO
OBJECTIVE - Seeks long-term appreciation of capital by investing in
common
stocks and other equity securities with values that are, at present,
not fully
recognized by the market.
STRATEGY - The Summit Pinnacle Zenith Portfolio (the "Portfolio") will
remain in
a highly invested position ranging from 86% to 98%. The cash position
will be
held in highly liquid money market instruments to meet redemptions and
to
provide cash for future stock purchases as new opportunities arise.
MANAGER'S COMMENTS:
The Portfolio fund performance for the year ended December 31, 2004 was
14.77%
(before the impact of any product or contract-level fees) versus 16.49%
for the
Russell 1000 Value and 10.88% for the Standard & Poor's 500 Composite
Stock (the
"S&P 500 Index") Indices.
In the face of stubbornly and surprisingly high energy prices, the
economy
performed very well in 2004 with the gross domestic product ("GDP")
growing
close to 4%. The Federal Reserve's "easy money" policy of low interest
rates and
tax cuts went hand in hand with aiding an incumbent President's re-
election.
Inflation stayed subdued in spite of higher energy costs and a
weakening dollar.
Job growth, which had been non-existent earlier in the Presidential
administration, finally kicked into gear (2.2 million jobs were
created). These
factors stimulated consumer confidence and spending.
High energy prices actually benefited the Portfolio. The Portfolio was
over-weighted in energy securities, the best performing sector in the
Russell
1000 Value and under-weighted in financials, one of the lagging sectors
for the
year. Stocks with high dividend yields, like Equity Residential and
Alliance
Capital, were among the top contributors to the Portfolio's performance
return.
Railroads, an over-weighted sub-sector of transportation stocks, also
aided
performance. Stocks threatened with litigation were among the
detractors. Marsh
McLennan was the latest financial company to find itself in Eliot
Spitzer's
sights, while Merck and Pfizer struggled with the fallout from studies
suggesting that their prescription pain relievers may not be as safe as
once
thought. The Portfolio was also limited by being over-weighted in
technology and
healthcare stocks, the weakest sectors in the Russell 1000 Value, while
being
under-weighted in producer durables, which did better than the Index as
a whole
this year.
The economy recovered nicely in 2004 and gave the Federal Reserve the
opportunity to raise the federal funds rates from 1% to 2.25%. While it
is good
that the economy is doing better, it also forebodes a tougher time for
the fixed
income markets as rates continue to rise. The Federal Reserve has
hinted that
the federal funds could rise to 3-5% this year to retard inflation and
possibly
cool growth. Unless earnings come in strongly for equities, rising
interest
rates could make for a difficult equity environment.
Equity returns last year came in fits and starts. The first half
returns were
tracking at single digit rates of return. The third quarter exhibited a
decline
of similar magnitude. The final quarter had a very robust return as
uncertainty
about terrorism and the presidential election dissipated. In 2005,
company
earnings must grow substantially enough to offset competition from
rising money
market and fixed income rates. The first year of a President's term is
one in
which long-term structural issues are traditionally tackled as opposed
to
spurring short-term economic growth. The increase in interest rates
should slow
housing growth, but this should be offset by increased corporate and
energy
spending. The Portfolio will continue to invest in companies that are
temporarily out-of-favor and pare those which reach full valuation,
particularly
now that the economy has rebounded and the Federal Reserve is becoming
more
restrictive.
FUND DATA
<Table>
Manager: James McGlynn
Inception Date: August 15, 1984
Total Net Assets: $51.86 Million
Number of Holdings: 59
Median Cap Size: $37.48 Billion
Average Price-to-book Ratio: 2.23x
Dividend Yield: 2.33%
Average Price-to-earnings Ratio:
Summit Pinnacle Zenith Portfolio 18.1x
S&P 500 Index 19.1x
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
Time Warner Inc. 2.72%
Sony Corp. 2.61%
Union Pacific Corp. 2.48%
Unilever 2.46%
Equity Residential Properties Trust 2.38%
The Walt Disney Co. 2.34%
Du Pont (E.I.) 2.32%
Coca-Cola Co. 2.28%
St. Paul Travelers Companies 2.25%
Alliance Capital Holdings 2.25%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit Zenith Portfolio - Average Annual Total Return
<Table>
<Caption>
1-YEAR 5-YEAR 10-YEAR
14.77% 10.14% 10.32%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
<Table>
<Caption>
SUMMIT ZENITH PORTFOLIO RUSSELL 1000 VALUE INDEX
RUSSELL 2000 INDEX
12/31/94 $ 10,000 $ 10,000
$ 10,000
1/31/95 $ 10,105 $ 10,308
$ 9,860
2/28/95 $ 10,441 $ 10,715
$ 10,248
3/31/95 $ 10,600 $ 10,950
$ 10,416
4/30/95 $ 10,850 $ 11,297
$ 10,631
5/31/95 $ 11,116 $ 11,772
$ 10,794
6/30/95 $ 11,367 $ 11,931
$ 11,329
7/31/95 $ 11,695 $ 12,347
$ 11,972
8/31/95 $ 11,977 $ 12,521
$ 12,195
9/30/95 $ 12,221 $ 12,974
$ 12,397
10/31/95 $ 11,885 $ 12,845
$ 11,833
11/30/95 $ 12,282 $ 13,496
$ 12,325
12/31/95 $ 12,696 $ 13,835
$ 12,621
1/31/96 $ 12,819 $ 14,266
$ 12,597
2/29/96 $ 13,180 $ 14,374
$ 12,979
3/31/96 $ 13,551 $ 14,618
$ 13,212
4/30/96 $ 13,945 $ 14,674
$ 13,911
5/31/96 $ 14,331 $ 14,858
$ 14,453
6/30/96 $ 14,227 $ 14,870
$ 13,844
7/31/96 $ 13,484 $ 14,308
$ 12,622
8/31/96 $ 14,082 $ 14,717
$ 13,336
9/30/96 $ 14,389 $ 15,302
$ 13,836
10/31/96 $ 14,803 $ 15,894
$ 13,603
11/30/96 $ 15,329 $ 17,046
$ 14,144
12/31/96 $ 15,809 $ 16,829
$ 14,484
1/31/97 $ 16,223 $ 17,645
$ 14,757
2/28/97 $ 16,061 $ 17,904
$ 14,381
3/31/97 $ 15,468 $ 17,260
$ 13,683
4/30/97 $ 15,366 $ 17,985
$ 13,700
5/31/97 $ 16,545 $ 18,990
$ 15,208
6/30/97 $ 17,121 $ 19,805
$ 15,832
7/31/97 $ 17,875 $ 21,294
$ 16,555
8/31/97 $ 18,211 $ 20,536
$ 16,913
9/30/97 $ 19,497 $ 21,777
$ 18,127
10/31/97 $ 18,956 $ 21,168
$ 17,306
11/30/97 $ 18,862 $ 22,104
$ 17,172
12/31/97 $ 19,059 $ 22,749
$ 17,456
1/31/98 $ 18,647 $ 22,428
$ 17,177
2/28/98 $ 19,527 $ 23,937
$ 18,447
3/31/98 $ 20,868 $ 25,401
$ 19,200
4/30/98 $ 21,221 $ 25,571
$ 19,288
5/31/98 $ 20,226 $ 25,192
$ 18,239
6/30/98 $ 19,670 $ 25,515
$ 18,269
7/31/98 $ 18,177 $ 25,065
$ 16,766
8/31/98 $ 14,567 $ 21,335
$ 13,499
9/30/98 $ 15,210 $ 22,559
$ 14,523
10/31/98 $ 15,728 $ 24,307
$ 15,105
11/30/98 $ 15,998 $ 25,439
$ 15,887
12/31/98 $ 16,141 $ 26,305
$ 16,871
1/31/99 $ 15,989 $ 26,515
$ 17,095
2/28/99 $ 14,743 $ 26,141
$ 15,710
3/31/99 $ 14,992 $ 26,682
$ 15,955
4/30/99 $ 16,343 $ 29,174
$ 17,385
5/31/99 $ 16,330 $ 28,853
$ 17,639
6/30/99 $ 17,084 $ 29,691
$ 18,436
7/31/99 $ 17,097 $ 28,822
$ 17,931
8/31/99 $ 16,798 $ 27,752
$ 17,267
9/30/99 $ 16,342 $ 26,782
$ 17,271
10/31/99 $ 16,355 $ 28,324
$ 17,342
11/30/99 $ 16,693 $ 28,102
$ 18,377
12/31/99 $ 16,471 $ 28,238
$ 20,457
1/31/2000 $ 16,080 $ 27,317
$ 20,126
2/29/2000 $ 15,233 $ 25,287
$ 23,451
3/31/2000 $ 17,538 $ 28,373
$ 21,908
4/30/2000 $ 17,210 $ 28,042
$ 22,907
5/31/2000 $ 17,820 $ 28,338
$ 21,571
6/30/2000 $ 17,435 $ 27,043
$ 23,456
7/31/2000 $ 17,290 $ 27,381
$ 22,722
8/31/2000 $ 18,138 $ 28,905
$ 24,445
9/30/2000 $ 18,310 $ 29,170
$ 23,721
10/31/2000 $ 19,118 $ 29,886
$ 22,663
11/30/2000 $ 18,906 $ 28,777
$ 20,338
12/31/2000 $ 20,060 $ 30,218
$ 22,095
1/31/2001 $ 20,896 $ 30,335
$ 23,244
2/28/2001 $ 20,603 $ 29,491
$ 21,721
3/31/2001 $ 20,044 $ 28,450
$ 20,659
4/30/2001 $ 21,323 $ 29,844
$ 22,275
5/31/2001 $ 22,001 $ 30,516
$ 22,823
6/30/2001 $ 21,760 $ 29,838
$ 23,610
7/31/2001 $ 22,068 $ 29,776
$ 22,333
8/31/2001 $ 21,158 $ 28,582
$ 21,612
9/30/2001 $ 20,127 $ 26,569
$ 18,703
10/31/2001 $ 20,488 $ 26,341
$ 19,797
11/30/2001 $ 21,614 $ 27,871
$ 21,329
12/31/2001 $ 22,315 $ 28,529
$ 22,645
1/31/2002 $ 22,153 $ 28,309
$ 22,409
2/28/2002 $ 22,436 $ 28,355
$ 21,795
3/31/2002 $ 23,238 $ 29,696
$ 23,546
4/30/2002 $ 22,157 $ 28,677
$ 23,760
5/31/2002 $ 22,030 $ 28,821
$ 22,705
6/30/2002 $ 20,261 $ 27,166
$ 21,579
7/31/2002 $ 17,932 $ 24,640
$ 18,320
8/31/2002 $ 18,211 $ 24,825
$ 18,275
9/30/2002 $ 16,016 $ 22,064
$ 16,962
10/31/2002 $ 16,908 $ 23,699
$ 17,507
11/30/2002 $ 18,493 $ 25,192
$ 19,069
12/31/2002 $ 17,161 $ 24,099
$ 18,006
1/31/2003 $ 16,741 $ 23,516
$ 17,508
2/28/2003 $ 16,508 $ 22,888
$ 16,979
3/31/2003 $ 16,626 $ 22,927
$ 17,198
4/30/2003 $ 18,329 $ 24,944
$ 18,828
5/31/2003 $ 19,567 $ 26,556
$ 20,849
6/30/2003 $ 20,178 $ 26,888
$ 21,226
7/31/2003 $ 20,331 $ 27,288
$ 22,555
8/31/2003 $ 20,547 $ 27,714
$ 23,588
9/30/2003 $ 20,498 $ 27,442
$ 23,151
10/31/2003 $ 21,541 $ 29,122
$ 25,096
11/30/2003 $ 21,826 $ 29,518
$ 25,987
12/31/2003 $ 23,263 $ 31,336
$ 26,515
1/31/2004 $ 23,842 $ 31,888
$ 27,665
2/29/2004 $ 24,064 $ 32,570
$ 27,914
3/31/2004 $ 23,622 $ 32,283
$ 28,174
4/30/2004 $ 23,488 $ 31,496
$ 26,737
5/31/2004 $ 23,575 $ 31,817
$ 27,162
6/30/2004 $ 24,327 $ 32,568
$ 28,306
7/31/2004 $ 23,736 $ 32,109
$ 26,401
8/31/2004 $ 24,038 $ 32,565
$ 26,266
9/30/2004 $ 24,330 $ 33,069
$ 27,498
10/31/2004 $ 24,786 $ 33,618
$ 28,040
11/30/2004 $ 25,807 $ 35,319
$ 30,471
12/31/2004 $ 26,699 $ 36,503
$ 31,373
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
Financials 27.3%
Utilities 9.0%
Consumer Discretionary 11.7%
Energy 12.1%
Consumer Non-Durable 7.9%
Health Care 6.2%
Industrials 5.1%
Technology 8.0%
Materials 5.4%
Short-Term & Other 2.6%
Transportation 4.7%
</Table>
3
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL HIGHLIGHTS ZENITH
PORTFOLIO
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------
- ----------------------------------------------------------
2004
2003 2002 2001 2000
--------
- ----------------------------------------------------------
Net asset value, beginning of period $
80.76 $ 59.67 $ 82.75 $ 75.60 $ 63.10
--------
- -- ---------- ---------- ---------- ----------
Investment Activities:
Net investment income / (loss)
1.47 1.17 1.11 1.40 1.15
Net realized and unrealized gains / (losses)
10.33 20.01 (18.92) 7.05 12.40
--------
- -- ---------- ---------- ---------- ----------
Total from Investment Activities
11.80 21.18 (17.81) 8.45 13.55
--------
- -- ---------- ---------- ---------- ----------
DISTRIBUTIONS:
Net investment income
(1.26) (0.09) (1.39) (1.30) (1.05)
Return of capital
- -- -- (3.88) -- --
--------
- -- ---------- ---------- ---------- ----------
Total Distributions
(1.26) (0.09) (5.27) (1.30) (1.05)
--------
- -- ---------- ---------- ---------- ----------
Net asset value, end of period $
91.30 $ 80.76 $ 59.67 $ 82.75 $ 75.60
========== ========== ========== ========== ==========
Total return
14.77% 35.56% -23.10% 11.24% 21.79%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (1)
0.91% 0.93% 0.93% 0.81% 0.73%
Ratio of expenses to average net assets - gross
0.91% 0.93% 0.93% 0.83% 0.77%
Ratio of net investment income / (loss) to average net assets
1.74% 1.68% 1.52% 1.74% 1.47%
Portfolio turnover rate
68.59% 71.70% 56.53% 102.03% 81.95%
Net assets, end of period (000's) $
51,864 $ 47,104 $ 38,218 $ 54,562 $ 50,485
</Table>
(1) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
4
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
ZENITH PORTFOLIO SCHEDULE OF
INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------
- -----------------
COMMON STOCKS - 97.43%
CONSUMER DISCRETIONARY - 11.65%
Sony Corp. 34,800
$ 1,355,809
Take-Two Interactive Software* 25,800
897,582
Time Warner Inc.* 72,500
1,409,400
The Walt Disney Co. 43,700
1,214,860
Viacom Inc 32,049
1,166,263
- ----------------
6,043,914
- ----------------
CONSUMER NON-DURABLE - 7.94%
Altria Group Inc. 12,500
763,750
Coca-Cola Co. 24,800
1,182,292
Sara Lee Corp. 37,200
898,008
Unilever 19,100
1,274,161
- ----------------
4,118,211
- ----------------
ENERGY -12.15%
Anadarko Petroleum 6,600
427,746
Baker Hughes Inc.* 23,400
998,478
ChevronTexaco Corp. 18,938
994,434
ConocoPhillips 7,771
674,756
Devon Energy Corp 13,800
537,096
Nabors Industries Ltd.* 15,100
774,479
Unocal Corp. 26,500
1,145,860
Weatherford International Ltd.* 14,600
748,980
- ----------------
6,301,829
- ----------------
FINANCIALS - 27.30%
Alliance Capital Holdings 27,800
1,167,600
Bank of America Corp. 14,700
690,753
BB&T Corp. 14,500
609,725
Charles Schwab Corp. 42,800
511,888
Citigroup Inc. 20,500
987,690
Equity Residential Properties Trust 34,100
1,233,738
Freddie Mac 7,100
523,270
Goldman Sachs Group Inc. 5,800
603,432
J.P. Morgan Chase & Co. 24,304
948,099
KeyCorp 18,100
613,590
Marsh & McLennan Co. 23,600
776,440
Mellon Financial Corp. 28,500
886,635
Morgan Stanley Dean Witter & Co.* 14,200
788,384
PNC Financial Services Group 15,000
861,600
St. Paul Travelers Companies 31,500
1,167,705
Washington Mutual Inc.* 18,700
790,636
Wells Fargo 16,000
994,400
- ----------------
14,155,585
- ----------------
HEALTH CARE - 6.24%
Bristol-Meyers Squibb 33,400
855,708
Johnson & Johnson Co. 8,300
526,386
Merck & Co. 22,200
713,508
Pfizer Inc. 42,300
1,137,447
- ----------------
3,233,049
- ----------------
INDUSTRIALS - 5.09%
Deere & Co. 10,000
$ 744,000
General Electric 29,300
1,069,450
SPX Corp. 20,600
825,236
- ----------------
2,638,686
- ----------------
MATERIALS - 5.39%
Alcan Inc. 21,000
1,029,840
Dow Chemical 11,400
564,414
Du Pont (E.I.) 24,500
1,201,725
- ----------------
2,795,979
- ----------------
TECHNOLOGY - 7.97%
Electronic Data Systems Corp. 22,700
524,370
Hewlett-Packard 47,200
989,784
International Business Machines 9,100
897,078
Microsoft Corp. 23,500
627,685
Nokia Corp 69,900
1,095,333
- ----------------
4,134,250
- ----------------
TRANSPORTATION - 4.70%
CSX Corp. 28,800
1,154,304
Union Pacific Corp. 19,100
1,284,475
- ----------------
2,438,779
- ----------------
UTILITIES - 9.00%
ALLTEL Corp. 8,700
511,212
Ameren Corporation 10,400
521,456
Comcast Corporation* 22,300
732,332
Cinergy Corporation 12,800
532,864
SBC Communications Inc 32,300
832,371
Southern Co. 15,400
516,208
Sprint Corp 22,100
549,185
Verizon Communications 11,700
473,967
- ----------------
4,669,595
- ----------------
Total Common Stocks
(cost $44,298,124)
50,529,877
- ----------------
SHORT-TERM INVESTMENTS - 2.40%
NORTHERN TRUST DIVERSIFIED ASSETS
FUND - 2.40% 1,244,022
1,244,022
- ----------------
Total Short-Term Investments
(cost $1,244,022)
1,244,022
- ----------------
TOTAL INVESTMENTS - 99.83%
(cost $45,542,146)(1)
51,773,899
- ----------------
NORTHERN INSTITUTIONAL LIQUID
ASSET PORTFOLIO(2) - 6.40%
3,317,843
- ----------------
OTHER ASSETS AND LIABILITIES - (6.23%)
(3,227,871)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 51,863,871
================
</Table>
* Non-income producing
(1) For federal income tax purposes, cost is $45,569,791 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$7,318,061 and ($1,113,953), respectively, with a net appreciation
/
depreciation of $6,204,108.
(2) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$3,243,934,
$3,317,843, and $0, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
5
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL STATEMENTS ZENITH
PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
51,773,899
Collateral for securities loaned,
at fair value
3,317,843
Receivables:
Shares sold
54,726
Interest and dividends
96,757
Prepaid expenses and other
1,135
--------
- --------
55,244,360
--------
- --------
LIABILITIES
Payables:
Shares redeemed
2,595
Payable upon return of securities loaned
3,317,843
Advisory fees
27,710
Administration expenses
3,330
Directors' fees
1,563
Custodian fees
2,815
Fund accounting fees
5,233
Professional fees
13,341
Other accrued expenses
6,059
--------
- --------
3,380,489
--------
- --------
NET ASSETS*
Paid-in capital
42,644,661
Accumulated undistributed net
investment income
731,107
Accumulated net realized gain / (loss)
on investments and futures contracts
2,256,350
Net unrealized appreciation / (depreciation)
on investments
6,231,753
--------
- --------
$
51,863,871
================
Shares authorized ($.10 par value)
40,000,000
Shares outstanding
568,070
Net asset value, offering and redemption
price per share $
91.30
Investments at cost $
45,542,146
</Table>
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
<Table>
Undistributed ordinary income $
968,853
Undistributed long-term gains $
2,046,249
Unrealized appreciation $
6,204,108
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
14,274
Dividends
1,215,980
Foreign dividend taxes withheld
(14,355)
Other income
59,412
--------
- --------
1,275,311
--------
- --------
EXPENSES
Advisory fees
308,794
Administration expenses
48,249
Custodian fees and expenses
6,894
Fund accounting fees
30,677
Professional fees
18,945
Directors' fees
7,170
Transfer agent fees
8,691
Other expenses
9,632
--------
- --------
439,052
--------
- --------
NET INVESTMENT INCOME / (LOSS)
836,259
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
4,384,098
Net change in unrealized appreciation /
(depreciation) on investments
1,523,293
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
5,907,391
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
6,743,650
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- ---------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE LIMIT(1) WAIVER REIMBURSEMENT
- ----------------------------------------------------------------
0.64% 0.10% 1.00% $ -- $ --
</Table>
(1) If total operating expenses, exclusive of advisory fees and certain
other
expenses, for any fiscal quarter exceed the indicated limit, the
Adviser
will reimburse the portfolio for such excess, up to the amount of
the
advisory fee for that year.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
6
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
836,259 $ 684,382
Net realized gain / (loss) on investments and futures
4,384,098 295,042
Net change in unrealized appreciation / (depreciation)
on investments
1,523,293 11,507,662
--------
- -------- ----------------
6,743,650 12,487,086
--------
- -------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(733,678) (55,856)
--------
- -------- ----------------
(733,678) (55,856)
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
2,389,367 1,766,692
Reinvestment of distributions
733,678 55,856
Payments for shares redeemed
(4,373,494) (5,367,306)
--------
- -------- ----------------
(1,250,449) (3,544,758)
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
4,759,523 8,886,472
NET ASSETS
Beginning of period
47,104,348 38,217,876
--------
- -------- ----------------
End of period $
51,863,871 $ 47,104,348
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $
731,107 $ 628,526
================ ================
FUND SHARE TRANSACTIONS
Sold
28,510 25,129
Reinvestment of distributions
8,845 975
Redeemed
(52,575) (83,327)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
(15,220) (57,223)
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
32,148,124 $ 28,249,943
--------
- -------- ----------------
$
32,148,124 $ 28,249,943
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
33,395,102 $ 30,522,792
--------
- -------- ----------------
$
33,395,102 $ 30,522,792
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income $
733,678 $ 55,856
--------
- -------- ----------------
$
733,678 $ 55,856
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
7
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
BOND PORTFOLIO
OBJECTIVE - Seeks a high level of current income, as is consistent with
a
reasonable investment risk, by investing in long-term, fixed-income,
investment-grade corporate bonds.
STRATEGY - The Summit Pinnacle Bond Portfolio (the "Portfolio") will
invest at
least 80% of its asset value in fixed income securities. The Portfolio
will
normally invest 75% of the value of its assets in publicly traded
straight debt
securities that fall within the four highest grades as rated by a
national
rating agency. Up to 25% of the Portfolio may be invested in below
investment
grade securities, convertible debt, preferred stock and other
securities.
MANAGERS' COMMENTS:
The Portfolio had a total return of 4.29% (after waivers and
reimbursements, but
before the impact of any product or contract-level fees) for the year
ended
December 31, 2004, which was in-line with to the total return of 4.34%
for the
Lehman Brothers Aggregate Bond Index (the "Index").
During 2004, interest rate spreads narrowed between corporate and
mortgage-backed bonds and Treasury securities. With overall rates still
generally low, investors aggressively sought out and bid up prices on
bonds
providing better yields than Treasuries. Lower quality bonds, with
higher
yields, generally outperformed higher quality bonds during the period.
The
Portfolio was positioned to take advantage of these market conditions.
The
strategy of holding a higher percentage of corporate and mortgage-
backed bonds
in the Portfolio, compared to the Index, increased performance during
the
period. Additionally, having a modest exposure to high yield bonds in
the
Portfolio, versus no exposure in the Index, benefited returns.
Likewise, the
strategy of holding a lower percentage of Treasury securities in the
Portfolio
also improved performance.
Also during 2004, the Federal Reserve raised the federal funds rate
five times,
from 1.0% at the beginning of the year, to 2.25% by yearend. As the
economy
continues to improve, and since the inflation rate rose to 3.3% during
2004, it
would not be surprising to see the Federal Reserve continue to increase
short-term interest rates in 2005. Conversely, the rate on longer-term
Treasury
bonds dropped slightly. The Portfolio generally held securities that
were of a
slightly shorter duration as compared to the Index. With short-term
interest
rates rising and long-term rates falling, the yield curve flattened
substantially in 2004. This flattening of the yield curve detracted
from the
Portfolio's overall performance.
Looking ahead, we believe that the economy will continue to improve in
2005,
albeit at a slower rate than in 2003 and 2004. We expect corporate and
mortgage-backed bond spreads to continue tightening versus Treasury
securities,
but again, at a reduced rate. Therefore, the Portfolio will maintain
exposure to
higher yielding bonds, at the expense of holding Treasury bonds. While
the
environment seems conducive for spread tightening in corporate and
mortgage-backed bonds in 2005, we are concerned that a rise in the
general level
of interest rates will undermine an otherwise positive total return
environment.
Therefore, the Portfolio will maintain a defensive posture with a
slightly
shorter duration to take advantage of opportunities to reinvest at the
higher
future interest rates we are anticipating.
FUND DATA
<Table>
Managers: Gary R. Rodmaker
Michael J. Schultz
Dave Weisenburger
Inception Date: August 15, 1984
Total Net Assets: $36.30 Million
Number of Holdings: 136
Average Duration: 4.27 years
Average Maturity: 11.9 years
Average Credit Quality: A2/A
Current Yield: 5.23%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit Bond Portfolio - Average Annual Total Return
<Table>
<Caption>
1-YEAR 5-YEAR 10-YEAR
4.29% 6.48% 7.40%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
Absent limitation of expenses during certain of the periods shown,
performance
would have been lower.
<Table>
<Caption>
SUMMIT BOND PORTFOLIO LEHMAN BROTHERS AGGREGATE
BOND INDEX
Dec-1994 $ 10,000 $ 10,000
Jan-1995 $ 10,189 $ 10,198
Feb-1995 $ 10,428 $ 10,441
Mar-1995 $ 10,497 $ 10,504
Apr-1995 $ 10,649 $ 10,651
May-1995 $ 11,076 $ 11,064
Jun-1995 $ 11,138 $ 11,144
Jul-1995 $ 11,179 $ 11,120
Aug-1995 $ 11,293 $ 11,254
Sep-1995 $ 11,396 $ 11,364
Oct-1995 $ 11,564 $ 11,511
Nov-1995 $ 11,721 $ 11,684
Dec-1995 $ 11,903 $ 11,848
Jan-1996 $ 12,075 $ 11,926
Feb-1996 $ 11,946 $ 11,718
Mar-1996 $ 11,924 $ 11,636
Apr-1996 $ 11,891 $ 11,571
May-1996 $ 11,913 $ 11,548
Jun-1996 $ 12,070 $ 11,703
Jul-1996 $ 12,104 $ 11,734
Aug-1996 $ 12,138 $ 11,714
Sep-1996 $ 12,401 $ 11,918
Oct-1996 $ 12,620 $ 12,183
Nov-1996 $ 12,827 $ 12,391
Dec-1996 $ 12,759 $ 12,276
Jan-1997 $ 12,829 $ 12,314
Feb-1997 $ 12,934 $ 12,345
Mar-1997 $ 12,784 $ 12,208
Apr-1997 $ 12,915 $ 12,391
May-1997 $ 13,082 $ 12,509
Jun-1997 $ 13,260 $ 12,657
Jul-1997 $ 13,648 $ 12,999
Aug-1997 $ 13,539 $ 12,889
Sep-1997 $ 13,794 $ 13,079
Oct-1997 $ 13,929 $ 13,269
Nov-1997 $ 14,016 $ 13,330
Dec-1997 $ 14,165 $ 13,465
Jan-1998 $ 14,391 $ 13,637
Feb-1998 $ 14,391 $ 13,626
Mar-1998 $ 14,689 $ 13,672
Apr-1998 $ 14,766 $ 13,744
May-1998 $ 14,856 $ 13,874
Jun-1998 $ 14,959 $ 13,992
Jul-1998 $ 15,012 $ 14,021
Aug-1998 $ 14,972 $ 14,250
Sep-1998 $ 15,197 $ 14,583
Oct-1998 $ 14,849 $ 14,506
Nov-1998 $ 15,050 $ 14,589
Dec-1998 $ 15,089 $ 14,633
Jan-1999 $ 15,170 $ 14,736
Feb-1999 $ 14,926 $ 14,479
Mar-1999 $ 15,075 $ 14,558
Apr-1999 $ 15,103 $ 14,605
May-1999 $ 14,951 $ 14,476
Jun-1999 $ 14,924 $ 14,430
Jul-1999 $ 14,882 $ 14,369
Aug-1999 $ 14,854 $ 14,362
Sep-1999 $ 14,938 $ 14,529
Oct-1999 $ 14,924 $ 14,583
Nov-1999 $ 14,935 $ 14,581
Dec-1999 $ 14,921 $ 14,511
Jan-2000 $ 14,820 $ 14,464
Feb-2000 $ 14,978 $ 14,638
Mar-2000 $ 15,155 $ 14,831
Apr-2000 $ 15,066 $ 14,789
May-2000 $ 14,907 $ 14,782
Jun-2000 $ 15,279 $ 15,090
Jul-2000 $ 15,432 $ 15,226
Aug-2000 $ 15,703 $ 15,447
Sep-2000 $ 15,652 $ 15,544
Oct-2000 $ 15,601 $ 15,647
Nov-2000 $ 15,787 $ 15,903
Dec-2000 $ 16,025 $ 16,198
Jan-2001 $ 16,330 $ 16,464
Feb-2001 $ 16,534 $ 16,607
Mar-2001 $ 16,619 $ 16,690
Apr-2001 $ 16,568 $ 16,620
May-2001 $ 16,672 $ 16,720
Jun-2001 $ 16,619 $ 16,783
Jul-2001 $ 16,992 $ 17,159
Aug-2001 $ 17,169 $ 17,357
Sep-2001 $ 17,081 $ 17,560
Oct-2001 $ 17,454 $ 17,927
Nov-2001 $ 17,294 $ 17,679
Dec-2001 $ 17,116 $ 17,566
Jan-2002 $ 17,205 $ 17,708
Feb-2002 $ 17,273 $ 17,880
Mar-2002 $ 17,169 $ 17,583
Apr-2002 $ 17,470 $ 17,924
May-2002 $ 17,592 $ 18,077
Jun-2002 $ 17,515 $ 18,233
Jul-2002 $ 17,577 $ 18,453
Aug-2002 $ 17,810 $ 18,765
Sep-2002 $ 17,910 $ 19,068
Oct-2002 $ 17,669 $ 18,982
Nov-2002 $ 17,832 $ 18,977
Dec-2002 $ 18,097 $ 19,368
Jan-2003 $ 18,085 $ 19,385
Feb-2003 $ 18,403 $ 19,653
Mar-2003 $ 18,456 $ 19,638
Apr-2003 $ 18,740 $ 19,800
May-2003 $ 19,106 $ 20,169
Jun-2003 $ 19,188 $ 20,129
Jul-2003 $ 18,699 $ 19,452
Aug-2003 $ 18,816 $ 19,581
Sep-2003 $ 19,396 $ 20,100
Oct-2003 $ 19,290 $ 19,912
Nov-2003 $ 19,385 $ 19,960
Dec-2003 $ 19,583 $ 20,163
Jan-2004 $ 19,798 $ 20,326
Feb-2004 $ 20,008 $ 20,545
Mar-2004 $ 20,174 $ 20,700
Apr-2004 $ 19,655 $ 20,161
May-2004 $ 19,508 $ 20,080
Jun-2004 $ 19,591 $ 20,194
Jul-2004 $ 19,795 $ 20,394
Aug-2004 $ 20,145 $ 20,783
Sep-2004 $ 20,212 $ 20,839
Oct-2004 $ 20,363 $ 21,014
Nov-2004 $ 20,237 $ 20,846
Dec-2004 $ 20,423 $ 21,038
</Table>
QUALITY BREAKDOWN
<Table>
<Caption>
(% OF PORTFOLIO)
----------------
AAA 41%
AA 2%
A 7%
BBB 38%
BB 4%
B 5%
CCC 2%
D 1%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
U.S. Treasuries & Agency Obligations 12.6%
Mortgage & Asset Backed Securities 37.8%
Corporate Bonds & Notes 47.8%
Short-Term & Other 1.8%
</Table>
8
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
BOND PORTFOLIO FINANCIAL
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------
- ----------------------------------------------------------
2004
2003 2002 2001 2000
--------
- ----------------------------------------------------------
Net asset value, beginning of period $
48.41 $ 47.93 $ 48.15 $ 47.30 $ 51.80
--------
- -- ---------- ---------- ---------- ----------
Investment Activities:
Net investment income / (loss)
1.67 3.25 2.70 3.15 5.20
Net realized and unrealized gains / (losses)
0.36 0.56 (0.04) -- (1.95)
--------
- -- ---------- ---------- ---------- ----------
Total from Investment Activities
2.03 3.81 2.66 3.15 3.25
--------
- -- ---------- ---------- ---------- ----------
DISTRIBUTIONS:
Net investment income
(2.18) (3.33) (2.88) (2.30) (5.75)
In excess of net investment income
- -- -- -- -- (0.30)
Return of capital
- -- -- -- -- (1.70)
--------
- -- ---------- ---------- ---------- ----------
Total Distributions
(2.18) (3.33) (2.88) (2.30) (7.75)
--------
- -- ---------- ---------- ---------- ----------
Net asset value, end of period $
48.26 $ 48.41 $ 47.93 $ 48.15 $ 47.30
========== ========== ========== ========== ==========
Total return
4.29% 8.21% 5.73% 6.81% 7.40%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (1)
0.75% 0.75% 0.76% 0.79% 0.61%
Ratio of expenses to average net assets - gross
0.82% 0.81% 0.85% 0.87% 0.68%
Ratio of net investment income / (loss) to average net assets
4.05% 6.72% 5.86% 6.37% 6.85%
Portfolio turnover rate
66.03% 109.52% 54.27% 65.14% 60.19%
Net assets, end of period (000's) $
36,300 $ 37,197 $ 35,415 $ 29,147 $ 22,802
</Table>
(1) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
9
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS BOND
PORTFOLIO
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
PREFERRED STOCKS - 0.37%
MEDIA & CABLE - 0.37%
Paxson Communications 21,143
$ 133,853
- ----------------
Total Preferred Stocks
(cost $149,350)
133,853
- ----------------
COMMON STOCKS - 0.28%
COMMUNICATIONS & MEDIA - 0.28%
MCI Inc. 5,067
102,151
- ----------------
Total Common Stocks
(cost $95,679)
102,151
- ----------------
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY OBLIGATIONS - 12.55%
U.S. TREASURY NOTES & BONDS - 12.55%
5.875% due 11/15/05 $ 1,650,000
$ 1,693,893
3.125% due 09/15/08 500,000
495,020
5.500% due 05/15/09 750,000
811,172
3.500% due 11/15/09 250,000
248,828
5.000% due 02/15/11 250,000
265,947
5.000% due 08/15/11 350,000
372,600
4.000% due 11/15/12 200,000
199,664
3.625% due 05/15/13 225,000
218,030
4.250% due 08/15/14 250,000
250,557
- ----------------
Total U.S. Treasury Obligations
(cost $4,508,650)
4,555,711
- ----------------
MORTGAGE-BACKED SECURITIES - 17.99%
FHLMC 5.000% due 05/01/18 177,099
179,993
FHLMC 4.500% due 09/01/18 2,591,967
2,589,481
FNMA 5.500% due 08/01/09 224,020
228,926
FNMA 5.000% due 11/01/09 499,014
507,781
FNMA 5.500% due 01/01/10 253,601
259,154
FNMA 5.500% due 02/01/10 116,324
118,871
FNMA 5.500% due 05/01/12 206,339
215,265
FNMA 6.000% due 06/01/16 206,623
216,650
FNMA 4.500% due 03/01/17 816,559
816,888
FNMA 5.500% due 08/01/18 1,070,558
1,107,330
FNMA 6.500% due 02/01/29 83,913
88,178
FNMA 5.000% due 02/01/33 77,843
77,465
GNMA 6.500% due 10/15/28 119,181
125,698
- ----------------
Total Mortgage-Backed Securities
(cost $6,461,015)
6,531,680
- ----------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 17.97%
AGENCY SECTOR - 9.06%
FHR 2439 SC
(13.674% due 07/15/28) 131
131
FHR 2810 YA
(5.500% due 06/15/34) 856,008
875,643
FNR 1994-19 B
(5.000% due 01/25/24) 250,810
253,312
FNR 2002-48 GF
(6.500% due 10/25/31) $ 2,083,000
$ 2,158,497
- ----------------
3,287,583
- ----------------
PRIVATE SECTOR - 8.91%
BAFC 2003-2 B3
(6.366% due 06/25/32) 216,751
218,172
BOAA 2003-6 2B3
(4.750% due 08/25/18) 337,599
313,734
BOAA 2003-8 3B3
(4.750% due 10/25/18) 142,695
132,890
BOAMS 01-4 2B2
(6.750% due 04/20/31) 492,622
497,672
BOAMS 2004-6 1A11
(5.500% due 07/25/34) 230,182
234,747
CS First Boston
(6.250% due 09/25/32) 157,841
158,704
CXHE 2001-B M2
(7.360% due 07/25/32) 98,669
101,092
GMACM 2004-J1 A16
(5.250% due 04/25/34) 283,876
287,781
MASTR 2003-9 2a12
(5.500% due 10/25/33) 95,687
97,686
RALI 2001-QS15 M3
(6.750% due 09/25/31) 178,050
177,702
RALI 2002-QS16 M2
(5.750% due 10/25/17) 90,233
92,512
RALI 2002-QS16 M3
(5.750% due 10/25/17) 90,233
91,129
SASC 2003-20 B2
(5.378% due 07/25/33) 300,162
291,546
Salomon Brothers
(4.139% due 09/25/33) 197,740
190,984
WAMMS 2001-MS14 5A9
(6.500% due 12/25/31) 16,628
16,599
WAMU 2002-S3 2B3
(6.000% due 06/25/17) 328,795
331,705
- ----------------
3,234,655
- ----------------
Total Collateralized Mortgage Obligations
(cost $6,559,000)
6,522,238
- ----------------
ASSET-BACKED SECURITIES - 1.86%
COMMERCIAL MORTGAGE-BACKED SECURITIES - 1.86%
Chase Commercial Mortgage Sec
(6.600% due 12/19/07) 627,885
673,570
- ----------------
Total Asset-Backed Securities
(cost $616,962)
673,570
- ----------------
CORPORATE BONDS AND NOTES - 47.85%
AIR TRANSPORTATION - 2.07%
America West Airlines, AMBAC Insured(2)
(7.100% due 04/02/21) 216,627
229,998
Continental Airlines Inc.
(7.875% due 07/02/18) 249,877
241,166
Jet Equipment(2)+(4)
(7.630% due 08/15/12) 201,406
129,907
NWA Trust No. 2 Class B
(10.230% due 06/21/14) 164,677
151,503
- ----------------
752,574
- ----------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
10
<Page>
<Table>
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
CONSUMER CYCLICAL - 6.91%
American Axle & Mfg Inc.
(5.250% due 02/11/14) $ 450,000
$ 432,053
DaimlerChrysler AG
(6.500% due 11/15/13) 250,000
271,154
General Motors
(8.250% due 07/15/23) 300,000
312,502
Hertz Corp.
(7.625% due 06/01/12) 250,000
273,793
ICI Wilmington
(5.625% due 12/01/13) 250,000
258,923
Lear Corp
(8.110% due 05/15/09) 450,000
510,368
MDC Holdings Inc.
(5.500% due 05/15/13) 150,000
152,297
Service Corp. International
(7.700% due 04/15/09) 125,000
135,000
Tech Olympic USA Inc.
(9.000% due 07/01/10) 125,000
133,750
Tenneco Automation(2)
(8.625% due 11/15/14) 25,000
26,000
- ----------------
2,505,840
- ----------------
CONSUMER NON-DURABLE - 7.79%
American Restaurant Group Inc.+(4)*
(11.500% due 11/01/06) 250,000
145,000
Amerigas Partner
(8.875% due 05/20/11) 63,000
68,670
Ametek Inc.
(7.200% due 07/15/08) 250,000
271,050
Block Financial Corp.
(5.125% due 10/30/14) 210,000
205,290
Boise Cascade(2)
(5.005% due 10/15/12) 13,000
13,488
Bunge Ltd
(7.800% due 10/15/12) 300,000
356,228
Cadmus Corp.
(8.375% due 06/15/14) 63,000
68,591
Chiquita Brands(2)
(7.500% due 11/01/14) 125,000
126,563
Dial Corp.
(7.000% due 08/15/06) 250,000
263,903
Hexcel Corp.
(9.750% due 01/15/09) 125,000
130,000
Hexcel Corp.
(9.875% due 10/01/08) 13,000
14,430
Hughes Supply Inc.(2)
(5.500% due 10/15/14) 360,000
355,419
Landry's Restaurant(2)
(7.500% due 12/15/14) 125,000
124,063
MGM Mirage
(6.750% due 09/01/12) 125,000
131,563
Miller Brewing Co.(2)
(5.500% due 08/15/13) 300,000
313,574
Mirage Resorts Inc.
(6.750% due 02/01/08) 70,000
73,588
Station Casinos
(6.000% due 04/01/12) 62,000
63,163
Werner Holdings Co. Inc.
(10.000% due 11/15/07) 125,000
103,750
- ----------------
2,828,333
- ----------------
ELECTRIC UTILITIES - 1.98%
AES Corporation
(9.375% due 09/15/10) $125,000 $
145,313
First Energy Corp.
(6.450% due 11/15/11) 240,000
260,753
Nevada Power Co.
(6.500% due 04/15/12) 31,000
32,782
Sierra Power
(6.250% due 04/15/12) 31,000
32,356
TXU Corp(2)
(5.550% due 11/15/14) 250,000
248,353
- ----------------
719,557
- ----------------
ENERGY - 7.16%
Aventine Renewable Energy(2)
(8.501 due 12/15/11) 62,000
62,620
Calpine Corp.
(10.500% due 05/15/06) 125,000
125,000
Canadian Oil Sands(2)
(5.800% due 08/15/13) 300,000
311,988
Chesapeake Energy
(9.000% due 08/15/12) 125,000
142,813
Citgo Pertoleum(2)
(6.000% due 10/15/11) 63,000
62,685
Constellation Energy Group
(7.000% due 04/01/12) 250,000
284,963
Enterprise Productions(2)
(5.600% due 10/15/14) 300,000
302,661
Kaneb Pipeline
(5.875% due 06/01/13) 300,000
312,242
Kern River Funding Corp.(2)
(6.676% due 07/31/16) 60,541
66,763
Northwest Pipeline Corp.
(8.125% due 03/01/10) 63,000
69,694
Pemex Master Trust
(8.000% due 11/15/11) 250,000
287,750
Plains All American Pipline
(5.625% due 12/15/13) 300,000
308,582
Stone Energy(2)
(6.750% due 12/15/14) 125,000
124,688
Williams Co.
(7.125% due 09/01/11) 125,000
136,563
- ----------------
2,599,012
- ----------------
FINANCE - 2.81%
Captial One Bank
(5.750% due 09/15/10) 300,000
318,242
Ford Motor Credit Co.
(5.700% due 01/15/10) 300,000
302,731
GMAC
(5.850% due 01/14/09) 250,000
253,292
RH Donnelley Finance Corp.(2)
(8.875% due 12/15/10) 63,000
70,245
RH Donnelley Finance Corp.(2)
(10.875% due 12/15/12) 63,000
74,813
- ----------------
1,019,323
- ----------------
HEALTH CARE - 2.68% Beckman Coulter Inc.
(6.875% due 11/15/11) 300,000
337,628
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
11
<Page>
<Table>
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
HEALTH CARE - 2.68% (CONTINUED)
Genesis Healthcare Corp.
(8.000% due 10/15/13) $ 62,000
$ 67,270
Medco Health Solutions
(7.250% due 08/15/13) 150,000
167,797
WellPoint Inc.(2)
(5.000% due 12/15/14) 400,000
398,741
- ----------------
971,436
- ----------------
INSURANCE - 3.38%
American Financial Group
(7.125% due 04/15/09) 250,000
275,691
Farmers Exchange Capital(2)
(6.000% due 08/01/14) 300,000
304,237
Nationwide Financial Services
(5.625% due 02/13/15) 375,000
381,857
USF&G Capital
(8.470% due 01/10/27) 240,000
265,619
- ----------------
1,227,404
- ----------------
MEDIA & CABLE - 2.37%
Dex Media West
(9.875% due 08/15/13) 60,000
69,150
Emmis Operating Co.
(6.875% due 05/15/12) 125,000
130,781
Paxson Communications
(0.000% due 01/15/09) 62,000
57,970
TCI Communications Inc.
(8.750% due 08/01/15) 240,000
306,110
Univision Comm Inc.
(7.850% due 07/15/11) 250,000
294,963
- ----------------
858,974
- ----------------
MEDIA CONGLOMERATE - 2.06%
AOL Time Warner Inc.
(6.875% due 05/01/12) 240,000
273,325
Comcast Corp.
(5.850% due 01/15/10) 100,000
107,197
News American Holdings Nts.
(4.750% due 03/15/10) 361,000
367,856
- ----------------
748,378
- ----------------
METALS & MINING - 0.39%
Falconbridge LTD
(7.350% due 06/05/12) 125,000
142,040
- ----------------
REAL ESTATE - 0.99%
Health Care REIT
(8.000% due 09/12/12) 250,000
292,919
La Quinta Properties
(7.000% due 08/15/12) 62,000
65,565
- ----------------
358,484
- ----------------
TECHNOLOGY - 1.91% Jabil Circuit Inc.
(5.875% due 07/15/10) $ 450,000
$ 473,680
Thomson Corp.
(6.200% due 01/05/12) 200,000
219,757
- ----------------
693,437
- ----------------
TELECOMMUNICATIONS - 5.35%
America Movil
(5.500% due 03/01/14) 250,000
246,976
AT&T Wireless Services
(7.875% due 03/01/11) 125,000
147,326
Charter Communications(2)
(8.000% due 04/30/12) 63,000
65,520
Charter Communications Inc.
(4.750% due 06/01/06) 63,000
63,000
Cox Communications Inc.(2)
(5.450% due 12/15/14) 300,000
299,989
Iwo Escrow Co.(2)
(0.000% due 01/15/15) 62,000
38,440
MCI Inc.
(5.908% due 05/01/07) 125,000
127,968
Nextel Communications
(7.375% due 08/01/15) 125,000
137,500
Qwest Communications International(2)
(7.250% due 02/15/11) 125,000
128,125
Qwest Communications(2)
(7.875% due 09/01/11) 63,000
68,355
Rogers Wireless Inc.(2)
(7.500% due 03/15/15) 31,000
32,705
Sprint Capital Corp.
(7.625% due 01/30/11) 250,000
290,260
Telus Corp.
(8.000% due 06/01/11) 250,000
296,270
- ----------------
1,942,434
- ----------------
Total Corporate Bonds & Notes
(cost $16,870,124)
17,367,226
- ----------------
<Caption>
SHARES
VALUE
------------------
- -----------------
SHORT-TERM INVESTMENTS - 0.45%
NORTHERN TRUST DIVERSIFIED ASSETS
FUND - 0.45% 164,311
$ 164,311
- ----------------
Total Short-Term Investments
(cost $164,311)
164,311
- ----------------
TOTAL INVESTMENTS - 99.32%
(cost $35,425,092)(1)
36,050,740
- ----------------
NORTHERN INSTITUTIONAL LIQUID ASSET
PORTFOLIO(3) - 25.28%
9,176,482
- ----------------
OTHER ASSETS AND LIABILITIES - (24.60%)
(8,927,621)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 36,299,601
================
</Table>
* Non-income producing
+ Illiquid
(1) For federal income tax purposes, cost is $35,425,092 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$963,324 and ($337,676), respectively, with a net appreciation /
depreciation of $625,648.
(2) Security exempt from registration under Rule 144(a) of the
Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(3) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$8,995,790,
$9,176,482, and $12,746, respectively.
(4) Security in default.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
12
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
BOND PORTFOLIO FINANCIAL
STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
36,050,740
Collateral for securities loaned,
at fair value
9,176,482
Receivables:
Shares sold
3,321
Interest and dividends
385,253
Prepaid expenses and other
7,859
--------
- --------
45,623,655
--------
- --------
LIABILITIES
Payables:
Investment securities purchased
36,633
Shares redeemed
7,514
Payable upon return of securities loaned
9,176,482
Bank overdraft
623
Advisory fees
14,485
Directors' fees
1,630
Custodian fees
2,906
Fund accounting fees
8,146
Professional fees
13,020
Deferred director's compensation
58,692
Other accrued expenses
3,923
--------
- --------
9,324,054
--------
- --------
NET ASSETS*
Paid-in capital
41,777,812
Accumulated undistributed net
investment income
892
Accumulated net realized gain / (loss)
on investments and futures contracts
(6,104,751)
Net unrealized appreciation / (depreciation)
on investments
625,648
--------
- --------
$
36,299,601
================
Shares authorized ($.10 par value)
30,000,000
Shares outstanding
752,165
Net asset value, offering and redemption
price per share $
48.26
Investments at cost $
35,425,092
</Table>
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
<Table>
Undistributed ordinary income $
59,584
Unrealized appreciation $
625,648
</Table>
<Table>
<Caption>
CAPITAL LOSS CARRYFORWARD EXPIRING DECEMBER 31:
- -----------------------------------------------------------------------
- --------
2008 2009 2010 2011
2012
- ------------- ------------ -------------- ------------- -----
- --------
$ (4,635,701) $ (119,441) $ (1,273,958) $ -- $
(75,650)
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
1,741,742
Dividends
3,827
Other income
15,044
--------
- --------
1,760,613
--------
- --------
EXPENSES
Advisory fees
172,910
Administration expenses
36,789
Custodian fees and expenses
7,094
Fund accounting fees
48,517
Professional fees
16,931
Directors' fees
5,019
Transfer agent fees
8,528
Other expenses
5,703
--------
- --------
301,491
Reimbursements and waivers
(25,289)
--------
- --------
276,202
--------
- --------
NET INVESTMENT INCOME / (LOSS)
1,484,411
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
(56,701)
Net change in unrealized appreciation /
(depreciation) on investments
126,523
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
69,822
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
1,554,233
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- -----------------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE(2) LIMIT(1) WAIVER
REIMBURSEMENT
- -----------------------------------------------------------------------
- --------
0.47% 0.10% 1.00% $ 25,289 $
- --
</Table>
(1) If total operating expenses, exclusive of advisory fees and certain
other
expenses, for any fiscal quarter exceed the indicated limit, the
Adviser
will reimburse the portfolio for such excess, up to the amount of
the
advisory fee for that year.
(2) The Advisor has agreed to temporarily waive administration fees for
the Bond
Portfolio, to the extent that the Portfolio's total expense ratio
exceeds
.75%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
13
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
- ------------------------------------
OPERATIONS
Net investment income / (loss)
$ 1,484,411 $ 2,522,301
Net realized gain / (loss) on investments and futures
(56,701) 427,740
Net change in unrealized appreciation / (depreciation) on
investments 126,523 14,057
- ---------------- ----------------
1,554,233 2,964,098
- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(1,554,233) (2,562,272)
Distribution in excess
(78,593) --
- ---------------- ----------------
(1,632,826) (2,562,272)
- ---------------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
5,277,021 5,892,089
Reinvestment of distributions
1,632,826 2,562,272
Payments for shares redeemed
(7,728,669) (7,074,608)
- ---------------- ----------------
(818,822) 1,379,753
- ---------------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
(897,415) 1,781,579
NET ASSETS
Beginning of period
37,197,016 35,415,437
- ---------------- ----------------
End of period
$ 36,299,601 $ 37,197,016
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
$ 892 $ 392,742
================ ================
FUND SHARE TRANSACTIONS
Sold
110,220 122,015
Reinvestment of distributions
33,999 53,566
Redeemed
(160,360) (146,128)
- ---------------- ----------------
Net increase / (decrease) from fund share transactions
(16,141) 29,453
================ ================
TOTAL COST OF PURCHASES OF:
Preferred and Common Stocks
$ 249,083 $ 125,000
U.S. Government Securities
4,650,050 14,239,719
Corporate Bonds
19,357,047 26,229,778
- ---------------- ----------------
$ 24,256,180 $ 40,594,497
================ ================
TOTAL PROCEEDS FROM SALES OF:
Preferred and Common Stocks
$ 88,977 $ --
U.S. Government Securities
3,504,710 14,548,061
Corporate Bonds
19,504,866 25,368,093
- ---------------- ----------------
$ 23,098,553 $ 39,916,154
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income
$ 1,632,826 $ 2,562,272
Long-term capital gains
- -- --
- ---------------- ----------------
$ 1,632,826 $ 2,562,272
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
14
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
S&P 500 INDEX
PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the total
return
performance of U.S. common stocks, as represented by the Standard &
Poor's 500
Composite Stock Price Index (the "Index").
STRATEGY - The Summit Pinnacle S&P 500 Index Portfolio (the
"Portfolio") will
attempt to achieve, in both rising and falling markets, a correlation
of at
least 95% between the total return of its net asstes before expenses
and the
total return of the Index.
MANAGERS' COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return was
10.37%
(after waivers and reimbursements, but before the impact of any product
or
contract-level fees). This compares to a 10.87% total return for the
Index. The
difference of 0.50% is referred to as "tracking error" and is largely
attributed
to the Portfolio's operating expenses. These expenses represent the
Portfolio's
costs for advisory, administration, accounting, custody and other
services. The
remaining difference can be caused by a number of factors, including
the timing
and size of cash flows into and out of the Portfolio; brokers'
commissions or
other trading costs; and holding security positions in amounts that are
different than the weightings in the Index, among others. While an
exact
replication of the capitalization weightings of securities in the Index
is not
feasible, the Portfolio's objectives and strategies call for a
correlation of at
least 95% between the Portfolio's pre-expense total return and that of
the
Index. The Portfolio achieved this level of correlation for the period
presented.
FUND DATA
<Table>
Manager: Team Managed
Inception Date: December 29, 1995
Total Net Assets: $279.88 Million
Number of Equity Holdings: 500
Median Cap Size: $10.57 Billion
Average Price-to-book Ratio: 2.99x
Dividend Yield: 1.71%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit S&P 500 Index Portfolio - Average Annual Total Return
<Table>
<Caption>
1-YEAR 5-YEAR SINCE INCEPTION
10.37% -2.77% 9.17%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
Absent limitation of expenses during certain of the periods shown,
performance
would have been lower.
<Table>
<Caption>
SUMMIT S&P 500 INDEX PORTFOLIO S&P 500 INDEX
Dec-1995 $ 10,000 $ 10,000
Jan-1996 $ 10,400 $ 10,340
Feb-1996 $ 10,490 $ 10,436
Mar-1996 $ 10,600 $ 10,537
Apr-1996 $ 10,740 $ 10,692
May-1996 $ 11,021 $ 10,968
Jun-1996 $ 11,072 $ 11,010
Jul-1996 $ 10,598 $ 10,523
Aug-1996 $ 10,820 $ 10,745
Sep-1996 $ 11,405 $ 11,350
Oct-1996 $ 11,739 $ 11,663
Nov-1996 $ 12,600 $ 12,545
Dec-1996 $ 12,337 $ 12,296
Jan-1997 $ 13,110 $ 13,065
Feb-1997 $ 13,221 $ 13,167
Mar-1997 $ 12,669 $ 12,626
Apr-1997 $ 13,421 $ 13,379
May-1997 $ 14,224 $ 14,195
Jun-1997 $ 14,852 $ 14,830
Jul-1997 $ 16,040 $ 16,009
Aug-1997 $ 15,110 $ 15,113
Sep-1997 $ 15,947 $ 15,941
Oct-1997 $ 15,419 $ 15,408
Nov-1997 $ 16,124 $ 16,121
Dec-1997 $ 16,373 $ 16,398
Jan-1998 $ 16,570 $ 16,579
Feb-1998 $ 17,756 $ 17,774
Mar-1998 $ 18,662 $ 18,684
Apr-1998 $ 18,855 $ 18,872
May-1998 $ 18,523 $ 18,548
Jun-1998 $ 19,274 $ 19,300
Jul-1998 $ 19,081 $ 19,095
Aug-1998 $ 16,322 $ 16,337
Sep-1998 $ 17,361 $ 17,384
Oct-1998 $ 18,773 $ 18,797
Nov-1998 $ 19,916 $ 19,936
Dec-1998 $ 21,050 $ 21,084
Jan-1999 $ 21,914 $ 21,965
Feb-1999 $ 21,233 $ 21,283
Mar-1999 $ 22,065 $ 22,134
Apr-1999 $ 22,905 $ 22,991
May-1999 $ 22,349 $ 22,449
Jun-1999 $ 23,582 $ 23,695
Jul-1999 $ 22,850 $ 22,955
Aug-1999 $ 22,740 $ 22,843
Sep-1999 $ 22,117 $ 22,217
Oct-1999 $ 23,517 $ 23,623
Nov-1999 $ 23,975 $ 24,103
Dec-1999 $ 25,369 $ 25,523
Jan-2000 $ 24,074 $ 24,241
Feb-2000 $ 23,616 $ 23,782
Mar-2000 $ 25,920 $ 26,108
Apr-2000 $ 25,145 $ 25,323
May-2000 $ 24,624 $ 24,803
Jun-2000 $ 25,227 $ 25,415
Jul-2000 $ 24,825 $ 25,017
Aug-2000 $ 26,356 $ 26,571
Sep-2000 $ 24,959 $ 25,168
Oct-2000 $ 24,858 $ 25,062
Nov-2000 $ 22,892 $ 23,086
Dec-2000 $ 23,004 $ 23,199
Jan-2001 $ 23,808 $ 24,023
Feb-2001 $ 21,623 $ 21,834
Mar-2001 $ 20,250 $ 20,452
Apr-2001 $ 21,823 $ 22,039
May-2001 $ 21,955 $ 22,187
Jun-2001 $ 21,407 $ 21,648
Jul-2001 $ 21,194 $ 21,435
Aug-2001 $ 19,858 $ 20,096
Sep-2001 $ 18,242 $ 18,474
Oct-2001 $ 18,576 $ 18,827
Nov-2001 $ 19,993 $ 20,271
Dec-2001 $ 20,154 $ 20,449
Jan-2002 $ 19,846 $ 20,151
Feb-2002 $ 19,462 $ 19,762
Mar-2002 $ 20,181 $ 20,505
Apr-2002 $ 18,950 $ 19,262
May-2002 $ 18,801 $ 19,122
Jun-2002 $ 17,452 $ 17,760
Jul-2002 $ 16,083 $ 16,377
Aug-2002 $ 16,183 $ 16,483
Sep-2002 $ 14,420 $ 14,693
Oct-2002 $ 15,681 $ 15,985
Nov-2002 $ 16,593 $ 16,924
Dec-2002 $ 15,610 $ 15,931
Jan-2003 $ 15,195 $ 15,515
Feb-2003 $ 14,960 $ 15,282
Mar-2003 $ 15,102 $ 15,431
Apr-2003 $ 16,335 $ 16,701
May-2003 $ 17,186 $ 17,579
Jun-2003 $ 17,397 $ 17,804
Jul-2003 $ 17,699 $ 18,117
Aug-2003 $ 18,035 $ 18,471
Sep-2003 $ 17,836 $ 18,275
Oct-2003 $ 18,835 $ 19,307
Nov-2003 $ 18,993 $ 19,477
Dec-2003 $ 19,978 $ 20,498
Jan-2004 $ 20,336 $ 20,875
Feb-2004 $ 20,611 $ 21,165
Mar-2004 $ 20,293 $ 20,846
Apr-2004 $ 19,967 $ 20,518
May-2004 $ 20,233 $ 20,800
Jun-2004 $ 20,616 $ 21,203
Jul-2004 $ 19,932 $ 20,501
Aug-2004 $ 20,005 $ 20,583
Sep-2004 $ 20,211 $ 20,806
Oct-2004 $ 20,512 $ 21,124
Nov-2004 $ 21,332 $ 21,977
Dec-2004 $ 22,049 $ 22,724
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
General Electric 3.38%
Exxon Mobil Corp. 2.91%
Microsoft Corporation 2.56%
Citigroup Inc. 2.19%
Wal-Mart Stores 1.97%
Pfizer, Inc. 1.79%
Bank of America Corp. 1.67%
Johnson & Johnson 1.66%
American International Group 1.51%
International Business Machines 1.47%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
Consumer Discretionary 11.9%
Consumer Staples 10.5%
Energy 7.1%
Financials 20.5%
Health Care 12.6%
Industrials 11.7%
Information Technology 16.0%
Materials 3.0%
Telecommunication Services 3.2%
Utilities 2.9%
Short-Term, Futures, & Other 0.6%
</Table>
"Standard & Poor's", "S&P", "S&P 500", "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, Inc. The product is not sponsored, endorsed, sold or
promoted
by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the product.
15
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL HIGHLIGHTS S&P 500 INDEX
PORTFOLIO
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------
- -------------------------------------------------------
2004
2003 2002 2001 2000
--------
- -------------------------------------------------------
Net asset value, beginning of period $
73.21 $ 57.82 $ 75.15 $ 102.95 $ 115.60
--------
- - --------- --------- --------- ---------
Investment Activities:
Net investment income / (loss)
1.16(2) 0.81 0.69 0.80 1.05
Net realized and unrealized gains / (losses)
6.41 15.17 (17.53) (12.15) (11.75)
--------
- - --------- --------- --------- ---------
Total from Investment Activities
7.57 15.98 (16.84) (11.35) (10.70)
--------
- - --------- --------- --------- ---------
DISTRIBUTIONS:
Net investment income
(0.30) (0.59) (0.38) (0.55) (1.15)
Net realized gains -
- - -- (0.11) (15.90) (0.80)
--------
- - --------- --------- --------- ---------
Total Distributions
(0.30) (0.59) (0.49) (16.45) (1.95)
--------
- - --------- --------- --------- ---------
Net asset value, end of period $
80.48 $ 73.21 $ 57.82 $ 75.15 $ 102.95
========= ========= ========= ========= =========
Total return
10.37% 27.98% -22.55% -12.39% -9.32%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (1)
0.40% 0.52% 0.57% 0.46% 0.41%
Ratio of expenses to average net assets - gross
0.51% 0.54% 0.61% 0.47% 0.43%
Ratio of net investment income / (loss) to average net assets
1.69% 1.25% 1.04% 0.88% 0.81%
Portfolio turnover rate
1.59% 0.84% 10.51% 3.30% 21.36%
Net assets, end of period (000's) $
279,875 $ 79,766 $ 64,338 $ 92,639 $ 114,103
</Table>
(1) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(2) PER SHARE AMOUNTS ARE BASED ON AVERAGE SHARES OUTSTANDING.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
16
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
S&P 500 INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
COMMON STOCKS - 99.37%
CONSUMER DISCRETIONARY - 11.88%
AutoNation, Inc. 6,769
$ 130,032
AutoZone Inc.* 2,229
203,530
Bed Bath & Beyond Inc.* 7,290
290,361
Best Buy Co., Inc. 7,966
473,340
Big Lots, Inc. 2,876
34,886
Black & Decker Corp. 1,914
169,064
Brunswick Corp. 2,252
111,474
Carnival Corp.* 15,505
893,553
Centex Corp. 3,058
182,196
Circuit City Group 5,159
80,687
Clear Channel Communications* 15,156
507,574
Coach, Inc.* 4,600
259,440
Comcast Corporation* 55,396
1,843,579
Cooper Tire & Rubber 1,817
39,156
Dana Corp. 3,659
63,410
Darden Restaurants 4,058
112,569
Delphi Corporation* 13,801
124,485
Dillard Inc. 2,049
55,057
Dollar General 8,297
172,329
Dow Jones & Co. 2,008
86,464
Eastman Kodak 7,057
227,588
eBay Inc.* 15,898
1,848,619
Family Dollar Stores 4,244
132,540
Federated Dept. Stores 4,449
257,108
Ford Motor 45,094
660,176
Fortune Brands, Inc. 3,590
277,076
Gannett Co.* 6,674
545,266
Gap (The) 22,046
465,612
General Motors 13,797
552,708
Genuine Parts 4,283
188,709
Goodyear Tire & Rubber 4,319
63,317
Harley-Davidson 7,456
452,952
Harrah's Entertainment 2,722
182,075
Hasbro Inc. 4,294
83,218
Hilton Hotels 9,336
212,301
Home Depot 54,723
2,338,861
International Game Technology 8,522
292,986
Interpublic Group 10,210
136,814
Johnson Controls 4,446
282,054
Jones Apparel Group 3,110
113,733
KB Home 1,140
119,016
Knight-Ridder Inc.* 1,966
131,604
Kohl's Corp. 8,367
411,405
Leggett & Platt* 4,729
134,445
Limited Brands, Inc. 10,134
233,285
Liz Claiborne, Inc. 2,687
113,418
Lowe's Cos. 19,352
1,114,482
Marriott International 5,693
358,545
Mattel, Inc. 10,579
206,185
May Dept. Stores 7,104
208,858
Maytag Corp. 1,933
40,786
McDonald's Corp. 31,245
1,001,715
McGraw-Hill 4,717
431,794
Meredith Corp.* 1,234
66,883
New York Times* 3,666
$ 149,573
Newell Rubbermaid Co. 6,753
163,355
News Corporation 64,450
1,202,637
NIKE Inc. 6,459
585,767
Nordstrom* 3,384
158,134
Office Depot 7,710
133,846
OfficeMax Inc.* 2,129
66,808
Omnicom Group 4,676
394,280
Penney (J.C.) 6,721
278,249
Pulte Homes, Inc. 3,055
194,908
RadioShack Corp* 4,037
132,737
Reebok International 1,449
63,756
Sears, Roebuck & Co.* 5,476
279,440
Sherwin-Williams 3,588
160,132
Snap-On Inc. 1,433
49,238
Stanley Works 1,994
97,685
Staples, Inc. 12,162
409,981
Starbucks Corporation* 9,697
604,705
Starwood Hotels & Resorts* 4,972
290,365
Target Corp. 22,436
1,165,101
Tiffany & Co.* 3,612
115,476
Time Warner Inc. 111,282
2,163,322
TJX Companies Inc.* 12,390
311,361
Toys R Us, Inc. 5,257
107,611
Tribune Co.* 7,686
323,888
Univision Communications 7,941
232,433
V.F. Corp. 2,660
147,311
Viacom Inc. 43,060
1,566,953
Visteon Corp. 3,217
31,430
Walt Disney Co. 50,356
1,399,897
Wendy's International 2,803
110,046
Whirlpool Corp. 1,714
118,626
Yum* 7,243
341,725
- ----------------
33,270,096
- ----------------
CONSUMER STAPLES - 10.49%
Alberto-Culver 2,171
105,445
Albertson's 9,033
215,708
Altria Group, Inc.* 50,356
3,076,752
Anheuser-Busch* 20,051
1,017,187
Archer-Daniels-Midland* 15,914
355,041
Avon Products 11,646
450,700
Brown-Forman Corp.* 2,989
145,505
Campbell Soup 10,102
301,949
Clorox Co. 3,921
231,065
Coca Cola Co.* 60,381
2,513,661
Coca-Cola Enterprises 11,200
233,520
Colgate-Palmolive 13,224
676,540
ConAgra Foods, Inc.* 13,218
389,270
Coors (Adolph) 895
67,725
Costco Wholesale Corporation 11,268
545,484
CVS Corp. 9,719
438,035
General Mills 9,190
456,835
Gillette Co.* 24,911
1,115,514
Heinz (H.J.) 8,661
337,692
Hershey Foods* 6,406
355,789
Kellogg Co. 10,047
448,699
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
17
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CONSUMER STAPLES - 10.49% (CONTINUED)
Kimberly-Clark 12,418
$ 817,229
Kroger Co.* 18,337
321,631
McCormick & Co. 3,416
131,858
Pepsi Bottling Group 6,469
174,922
PepsiCo Inc. 42,249
2,205,398
Procter & Gamble 62,992
3,469,599
Reynolds American Inc. 3,685
289,641
Safeway Inc. 10,890
214,969
Sara Lee Corp.* 19,458
469,716
Supervalu Inc. 3,301
113,951
Sysco Corp. 15,930
608,048
UST Inc. 4,081
196,337
Walgreen Co. 25,230
968,075
Wal-Mart Stores 104,626
5,526,345
Wrigley (Wm) Jr. 5,534
382,897
- ----------------
29,368,732
- ----------------
ENERGY - 7.07%
Amerada Hess 2,211
182,142
Anadarko Petroleum 6,175
400,202
Apache Corp. 7,979
403,498
Ashland Inc. 1,688
98,545
Baker Hughes 8,245
351,814
BJ Services 3,896
181,320
Burlington Resources 9,776
425,256
ChevronTexaco Corp. 52,626
2,763,391
ConocoPhillips 16,754
1,454,750
Devon Energy Corp.* 11,448
445,556
El Paso Corp. 14,968
155,667
EOG Resources 2,832
202,092
Exxon Mobil Corp.* 158,979
8,149,264
Halliburton Co. 10,784
423,164
Kerr-McGee 3,632
209,893
Kinder Morgan 3,034
221,876
Marathon Oil Corp. 7,637
287,228
Nabors Industries Ltd. 3,608
185,054
Noble Corporation 3,293
163,794
Occidental Petroleum* 9,480
553,253
Rowan Cos 2,562
66,356
Schlumberger Ltd. 14,412
964,883
Sunoco., Inc.* 1,901
155,331
Transocean Inc.* 7,872
333,694
Unocal Corp.* 6,376
275,698
Valero Energy 6,250
283,750
Williams Cos 12,778
208,154
XTO Energy Inc. 6,400
226,432
- ----------------
19,772,057
- ----------------
FINANCIALS - 20.54%
ACE Limited 6,871
293,735
AFLAC Inc.* 12,624
502,940
Allstate Corp.* 17,319
895,739
Ambac Financial Group 2,629
215,920
American Express 31,661
1,784,731
American International Group 64,182
4,214,832
AmSouth Bancorporation* 8,643
223,854
Aon Corp. 7,718
184,151
Apartment Investment & Management 2,319
89,374
Archstone-Smith Trust 4,830
$ 184,989
Bank of America Corp. 99,514
4,676,163
Bank of New York 19,038
636,250
BB&T Corporation 13,441
565,194
Bear Stearns Cos 2,414
246,976
Capital One Financial 5,685
478,734
Charles Schwab 33,413
399,619
Chubb Corp.* 4,621
355,355
Cincinnati Financial 4,147
183,546
CIT Group* 5,000
229,100
Citigroup Inc. 127,122
6,124,738
Comerica Inc.* 4,316
263,362
Compass Bancshares 3,030
147,470
Countrywide Financial Corp. 13,598
503,262
E*Trade Financial Corp.* 9,100
136,045
Equity Office Properties 9,841
286,570
Equity Residential 6,785
245,481
Fannie Mae 23,925
1,703,699
Federal Home Loan Mtg 17,129
1,262,407
Federated Investors Inc. 2,676
81,350
Fifth Third Bancorp 14,011
662,440
First Horizon National 3,089
133,167
Franklin Resources 6,177
430,228
Golden West Financial 7,480
459,422
Goldman Sachs Group 11,896
1,237,660
Hartford Financial ServicesGroup 7,172
497,091
Huntington Bancshares* 5,632
139,561
Janus Capital Group* 5,923
99,566
Jefferson-Pilot* 3,472
180,405
JPMorgan Chase & Co. 86,958
3,392,232
KeyCorp 10,318
349,780
Lehman Bros. 6,682
584,541
Lincoln National 4,380
204,458
Loews Corp. 4,565
320,920
M&T Bank Corp.* 2,954
318,559
Marsh & McLennan 13,057
429,575
Marshall & Ilsley Corp. 5,575
246,415
MBIA Inc. 3,547
224,454
MBNA Corp. 31,455
886,716
Mellon Bank Corp. 10,591
329,486
Merrill Lynch 23,877
1,427,128
MetLife Inc. 18,713
758,064
MGIC Investment 2,423
166,969
Moody's Corp* 3,662
318,045
Morgan Stanley 26,988
1,498,374
National City Corp.* 16,640
624,832
North Fork Bancorporation 11,446
330,217
Northern Trust Corp. 5,424
263,498
Plum Creek Timber Co. 4,503
173,095
PNC Bank Corp.* 6,823
391,913
Principal Financial Group 7,948
325,391
Progressive Corp. 5,315
450,925
ProLogis 4,429
191,909
Providian Financial Corp. 7,142
117,629
Prudential Financial* 13,307
731,353
Regions Financial Corp. 11,389
405,335
SAFECO Corp. 3,411
178,191
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
18
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FINANCIALS - 20.54% (CONTINUED)
Simon Property Group, Inc 4,708
$ 304,466
SLM Corporation 11,092
592,202
Sovereign Bancorp 7,550
170,253
St. Paul Travelers Cos.* 16,316
604,834
State Street Corp. 8,225
404,012
SunTrust Banks 8,780
648,666
Synovus Financial 7,426
212,235
T. Rowe Price Group 3,063
190,519
Torchmark Corp. 2,785
159,135
U.S. Bancorp 47,483
1,487,168
UnumProvident Corp. 7,291
130,801
Wachovia Corp. 39,845
2,095,847
Washington Mutual 21,233
897,731
Wells Fargo* 41,648
2,588,423
XL Capital 3,378
262,302
Zions Bancorp* 2,212
150,482
- ----------------
57,494,206
- ----------------
HEALTH CARE - 12.61%
Abbott Labs 38,483
1,795,232
Aetna Inc.* 3,757
468,686
Allergan, Inc. 3,211
260,317
AmerisourceBergen Corp.* 2,754
161,605
Amgen Inc.* 31,736
2,035,864
Applera Corp-Applied Biosystems Group* 5,115
106,955
Bard (C.R.) Inc. 2,552
163,277
Bausch & Lomb 1,291
83,218
Baxter International Inc. 15,029
519,102
Becton, Dickinson 6,249
354,943
Biogen Idec Inc* 8,064
537,143
Biomet, Inc. 6,293
273,053
Boston Scientific 20,168
716,972
Bristol-Myers Squibb* 47,743
1,223,176
Cardinal Health, Inc. 10,654
619,530
Caremark Rx 11,100
437,673
Chiron Corporation* 4,619
153,951
CIGNA Corp.* 3,459
282,151
Express Scripts, Inc.* 1,932
147,682
Fisher Scientific* 2,800
174,664
Forest Laboratories 9,004
403,919
Genzyme Corp. 5,531
321,185
Gilead Sciences, Inc.* 10,400
363,896
Guidant Corp. 7,653
551,781
HCA Inc. 12,197
487,392
Health Management Assoc. 5,904
134,139
Hospira Inc. 3,848
128,908
Humana Inc.* 3,966
117,751
IMS Health Inc. 5,895
136,823
Johnson & Johnson 73,060
4,633,465
King Pharmaceuticals 5,937
73,619
Laboratory Corp. of America Holding 3,400
169,388
Lilly (Eli) & Co.* 27,638
1,568,457
Manor Care Inc. 2,245
79,540
McKesson Corp. 7,174
225,694
Medco Health Solutions Inc. 6,656
276,890
MedImmune, Inc.* 6,094
165,208
Medtronic Inc.* 29,829
1,481,606
Merck & Co. 54,769
$ 1,760,276
Millipore Corp. 1,201
59,822
Mylan Laboratories 6,300
111,384
PerkinElmer 3,123
70,236
Pfizer, Inc. 186,214
5,007,294
Quest Diagnostics 2,558
244,417
Schering-Plough 36,183
755,501
St Jude Medical 8,494
356,153
Stryker Corp. 9,818
473,719
Tenet Healthcare Corp. 11,438
125,589
Thermo Electron 4,008
121,002
United Health Group Inc.* 16,401
1,443,780
Waters Corporation 2,989
139,855
Watson Pharmaceuticals* 2,657
87,176
WellPoint Inc.* 7,144
821,560
Wyeth 32,792
1,396,611
Zimmer Holdings 5,953
476,954
- ----------------
35,286,184
- ----------------
INDUSTRIALS - 11.70%
3M Company* 19,321
1,585,674
Allied Waste Industries 7,880
73,126
American Power Conversion Corporation 4,886
104,560
American Standard 5,376
222,136
Apollo Group, Inc.* 4,338
350,120
Avery Dennison Corp.* 2,719
163,058
Block H&R 4,389
215,061
Boeing Company* 20,703
1,071,794
Burlington Northern Santa Fe 9,141
432,461
Caterpillar Inc. 8,545
833,223
Cendant Corporation 25,846
604,279
Cintas Corporation 4,201
184,256
Cooper Industries, Ltd.* 2,298
156,011
CSX Corp. 5,267
211,101
Cummins Inc. 1,042
87,309
Danaher Corp. 7,558
433,905
Deere & Co. 5,906
439,406
Delta Air Lines 3,038
22,724
Donnelley (R.R.) & Sons 5,272
186,049
Dover Corp. 4,985
209,071
Eaton Corp. 3,740
270,626
Emerson Electric* 10,359
726,166
Equifax Inc. 3,422
96,159
FedEx Corporation 7,342
723,114
Fluor Corp.* 2,019
110,056
General Dynamics* 4,868
509,193
General Electric 259,545
9,473,393
Goodrich Corporation 2,895
94,493
Grainger (W.W.) Inc.* 2,246
149,629
Honeywell International Inc. 21,227
751,648
Illinois Tool Works 7,583
702,792
Ingersoll-Rand Co. Ltd. 4,270
342,881
ITT Industries, Inc.* 2,270
191,703
L-3 Communications Holdings* 2,450
179,439
Lockheed Martin Corp. 11,098
616,494
Masco Corp. 11,398
416,369
Monster Worldwide 2,775
93,351
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
19
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
INDUSTRIALS - 11.70% (CONTINUED)
Navistar International Corp. 1,691
$ 74,370
Norfolk Southern Corp. 9,612
347,858
Northrop Grumman Corp. 9,012
489,892
PACCAR Inc. 4,307
346,627
Pall Corp.* 3,078
89,108
Parker-Hannifin* 2,918
221,009
Pitney-Bowes 5,750
266,110
Power-One Inc. 2,049
18,277
Raytheon Co. 10,240
397,619
Robert Half International 4,215
124,047
Rockwell Automation, Inc. 4,591
227,484
Rockwell Collins 4,356
171,801
Ryder System* 1,578
75,381
Southwest Airlines 19,386
315,604
Textron Inc. 3,347
247,009
Tyco International 49,214
1,758,908
Union Pacific 6,282
422,465
United Parcel Service 27,672
2,364,849
United Technologies 12,682
1,310,685
Waste Management Inc. 14,344
429,459
- ----------------
32,731,392
- ----------------
INFORMATION TECHNOLOGY - 15.96%
ADC Telecommunications 19,807
53,083
Adobe Systems Incorporated 5,759
361,320
Advanced Micro Devices 8,584
189,020
Affiliated Computer 3,325
200,132
Agilent Technologies 11,702
282,018
Altera Corporation* 9,358
193,711
Analog Devices 9,039
333,720
Andrew Corp. 3,781
51,535
Apple Computer, Inc.* 8,924
574,706
Applied Materials, Inc.* 40,930
699,903
Applied Micro Circuits* 7,555
31,807
Autodesk, Inc. 5,490
208,346
Automatic Data Processing Inc. 14,632
648,929
Avaya Inc.* 10,266
176,575
BMC Software 5,573
103,658
Broadcom Corporation* 7,454
240,615
Ciena Corp. 11,660
38,944
Cisco Systems, Inc.* 161,494
3,116,834
Citrix Systems, Inc.* 4,041
99,126
Computer Associates International 14,256
442,791
Computer Sciences Corp. 4,611
259,922
Compuware Corp.* 9,464
61,232
Comverse Technology, Inc.* 4,750
116,138
Convergys Corp. 3,907
58,566
Corning Inc. 32,751
385,479
Dell Inc.* 62,132
2,618,242
Electronic Arts Inc.* 7,330
452,114
Electronic Data Systems* 11,827
273,204
EMC Corp. 59,143
879,456
First Data 22,114
940,730
Fiserv, Inc.* 4,769
191,666
Freescale Semiconductor Inc. 9,728
178,606
Gateway Inc. 7,997
48,062
Hewlett-Packard 75,073
1,574,281
Intel Corporation 156,800
$ 3,667,552
International Business Machines 41,804
4,121,038
Intuit Inc.* 4,885
214,989
Jabil Circuit 4,915
125,726
JDS Uniphase Corporation* 35,314
111,945
KLA-Tencor Corporation* 4,793
223,258
Lexmark International Inc 3,162
268,770
Linear Technology Corporation 7,690
298,064
LSI Logic 9,337
51,167
Lucent Technologies* 103,455
388,991
Maxim Integrated Products, Inc. 8,090
342,935
Mercury Interactive Corporation* 2,215
100,893
Micron Technology 15,036
185,695
Microsoft Corporation 267,909
7,155,849
Molex Incorporated 4,686
140,580
Motorola Inc. 57,318
985,870
National Semiconductor 9,122
163,740
NCR Corp.* 2,328
161,167
Network Appliance, Inc.* 8,495
282,204
Novell Inc. 9,198
62,087
Novellus Systems, Inc.* 3,751
104,615
NVIDIA Corp. 4,003
94,311
Oracle Corporation* 128,639
1,764,927
Parametric Technology 6,566
38,674
Paychex, Inc. 9,281
316,296
PeopleSoft Inc.* 9,236
244,568
PMC-Sierra Inc. 4,254
47,858
QLogic Corporation* 2,326
85,434
QUALCOMM Incorporated 39,386
1,669,966
Sabre Holding Corp. 3,532
78,269
Sanmina-SCI Corporation* 12,741
107,916
Scientific-Atlanta 3,740
123,457
Siebel Systems, Inc.* 12,203
128,132
Solectron 23,606
125,820
Sun Microsystems, Inc.* 80,422
432,670
SunGard Data Systems* 7,072
200,350
Symantec Corporation* 15,158
390,470
Symbol Technologies* 5,674
98,160
Tektronix Inc. 2,080
62,837
Tellabs, Inc.* 11,278
96,878
Teradyne Inc.* 4,710
80,400
Texas Instruments* 42,604
1,048,910
Unisys Corp. 8,137
82,835
VERITAS Software Corporation* 10,522
300,403
Xerox Corp. 19,487
331,474
Xilinx, Inc. 8,425
249,801
Yahoo! Inc.* 32,360
1,219,325
- ----------------
44,661,747
- ----------------
MATERIALS - 3.03%
Air Products & Chemicals* 5,591
324,110
Alcoa Inc 21,302
669,309
Allegheny Technologies Inc* 1,983
42,972
Ball Corp. 2,774
122,001
Bemis Company 2,615
76,070
Dow Chemical 22,686
1,123,184
Du Pont (E.I.) 24,536
1,203,491
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
20
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
MATERIALS - 3.03% (CONTINUED)
Eastman Chemical* 1,904
$ 109,918
Ecolab Inc.* 6,340
222,724
Engelhard Corp. 3,090
94,770
Freeport-McMoran Copper & Gold 4,802
183,580
Georgia-Pacific Group* 6,254
234,400
Great Lakes Chemical 1,245
35,470
Hercules, Inc. 2,731
40,555
International Flavors & Fragrances 2,306
98,789
International Paper 11,829
496,818
Louisiana Pacific 2,607
69,711
MeadWestvaco Corporation 4,937
167,315
Monsanto Co. 6,449
358,242
Newmont Mining Corp. 10,635
472,300
Nucor Corp.* 3,854
201,718
Pactiv Corp. 3,871
97,898
Phelps Dodge* 2,198
217,427
PPG Industries* 4,182
285,045
Praxair, Inc. 8,004
353,377
Rohm & Haas 5,479
242,336
Sealed Air Corp. 2,092
111,441
Sigma-Aldrich Corporation 1,707
103,205
Temple-Inland* 1,336
91,383
United States Steel Corp. 2,740
140,425
Vulcan Materials 2,504
136,743
Weyerhaeuser Corp. 5,408
363,526
- ----------------
8,490,253
- ----------------
TELECOMMUNICATION SERVICES - 3.23%
ALLTEL Corp. 7,680
451,277
AT&T Corp. 19,448
370,679
BellSouth 45,498
1,264,389
Century Telephone 3,548
125,848
Citizens Communications 6,994
96,447
Nextel Communications, Inc.* 27,059
811,770
Qwest Communications International 43,611
193,632
SBC Communications Inc. 81,476
2,099,637
Sprint Corp. FON 34,994
869,601
Verizon Communications* 67,962
2,753,141
- ----------------
9,036,421
- ----------------
UTILITIES - 2.86%
AES Corp.* 15,342
209,725
Allegheny Energy 3,124
61,574
Ameren Corporation 4,468
224,026
American Electric Power 9,724
333,922
Calpine Corp. 10,186
40,133
CenterPoint Energy 7,539
85,191
CINergy Corp. 4,384
182,506
CMS Energy 3,965
41,434
Consolidated Edison 5,548
242,725
Constellation Energy Group 4,117
179,954
Dominion Resources 7,985
540,904
DTE Energy Co. 4,143
$ 178,688
Duke Energy 22,334
565,720
Dynegy Inc. 9,299
42,961
Edison International 8,014
256,688
Entergy Corp. 5,634
380,802
Exelon Corp. 16,100
709,527
FirstEnergy Corp. 8,117
320,703
FPL Group 4,527
338,393
Keyspan Energy 3,914
154,407
NICOR Inc.* 1,083
40,005
NiSource Inc. 6,465
147,273
Peoples Energy 905
39,775
PG&E Corp. 10,214
339,921
Pinnacle West Capital 2,246
99,745
PPL Corp. 4,364
232,514
Progress Energy, Inc. 6,032
272,887
Public Serv. Enterprise Inc. 5,788
299,645
Sempra Energy 5,569
204,271
Southern Co.* 18,025
604,198
TECO Energy 4,625
70,948
TXU Corp. 5,976
385,811
Xcel Energy Inc 9,815
178,633
- ----------------
8,005,609
- ----------------
Total Common Stocks
(cost $236,933,373)
278,116,697
- ----------------
UNIT INVESTMENT TRUST - 0.09%
S&P 500 Depositary Receipts* 2,100
253,827
- ----------------
Total Unit Investment Trust
(cost $236,112)
253,827
- ----------------
SHORT-TERM INVESTMENTS(3) - 0.74%
NORTHERN TRUST DIVERSIFIED ASSETS
PORTFOLIO - 0.63% 1,775,556
1,775,556
- ----------------
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY BILL - 0.11%
(.870% due 12/31/31) $ 300,000
$ 298,727
- ----------------
Total Short-Term Investments
(cost $2,074,203)
2,074,283
- ----------------
TOTAL INVESTMENTS - 100.20%
(cost $239,243,688)(1)
280,444,807
- ----------------
NORTHERN INSTITUTIONAL LIQUID ASSET
PORTFOLIO(2) - 4.55%
12,723,681
- ----------------
OTHER ASSETS AND LIABILITIES - (4.75%)
(13,293,040)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 279,875,448
================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
21
<Page>
* Non-income producing
(1) For federal income tax purposes, cost is $239,605,699 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$54,769,929 and ($13,930,821), respectively, with a net
appreciation /
depreciation of $40,839,108.
(2) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$13,538,155,
$12,723,681, and $1,183,230, respectively.
(3) Securities and other assets with an aggregate value of $1,517,125
have been
segregated with the custodian or designated to cover margin
requirements for
the open futures contracts as of December 31, 2004:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
TYPE CONTRACTS (DEPRECIATION)
- ------------------------------------------------------------
S&P 500 Index (03/05) 5 $ 10,375
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
22
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
S&P 500 INDEX PORTFOLIO FINANCIAL
STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
280,444,807
Collateral for securities loaned,
at fair value
12,723,681
Receivables:
Shares sold
42,414
Interest and dividends
371,291
Prepaid expenses and other
6,233
--------
- --------
293,588,426
--------
- --------
LIABILITIES
Payables:
Shares redeemed
830,737
Payable upon return of securities loaned
12,723,681
Advisory fees
38,502
Administration expenses
23,598
Directors' fees
8,809
Custodian fees
13,576
Fund accounting fees
9,279
Professional fees
22,682
Royalty fees
26,761
Variation margin
1,973
Other accrued expenses
13,380
--------
- --------
13,712,978
--------
- --------
NET ASSETS*
Paid-in capital
237,308,361
Accumulated undistributed net
investment income
3,687,795
Accumulated net realized gain / (loss)
on investments and futures contracts
(2,332,202)
Net unrealized appreciation / (depreciation)
on investments and futures contracts
41,211,494
--------
- --------
$
279,875,448
================
Shares authorized ($.10 par value)
30,000,000
Shares outstanding
3,477,397
Net asset value, offering and redemption
price per share $
80.48
Investments at cost $
239,243,688
</Table>
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
<Table>
Undistributed ordinary income $
3,687,795
Unrealized appreciation $
40,839,108
</Table>
<Table>
<Caption>
CAPITAL LOSS CARRYFORWARD EXPIRING DECEMBER 31:
- -----------------------------------------------
2010 2011 2012
- ------------- ------------ --------------
$ (1,959,815) $ -- $ --
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
31,360
Dividends
4,879,173
Other income
3,708
--------
- --------
4,914,241
--------
- --------
EXPENSES
Advisory fees
705,838
Administration expenses
235,279
Custodian fees and expenses
28,682
Fund accounting fees
54,110
Professional fees
52,822
Directors' fees
40,238
Transfer agent fees
9,587
Royalty fee
22,834
Other expenses
46,971
--------
- --------
1,196,361
Reimbursements and waivers
(246,464)
--------
- --------
949,897
--------
- --------
NET INVESTMENT INCOME / (LOSS)
3,964,344
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
409,715
Net realized gain / (loss) on futures contracts
558,300
--------
- --------
968,015
--------
- --------
Net change in unrealized appreciation /
(depreciation) on investments
and futures contracts
15,716,193
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
16,684,208
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
20,648,552
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- --------------------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE LIMIT(1)(2) WAIVER
REIMBURSEMENT
- -----------------------------------------------------------------------
- --------
0.30% 0.10% 0.30% $ 246,464 $
- --
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
(2) Effective July 1, 2003, the Adviser has voluntarily agreed to waive
its fees
and/or reimburse expenses of the portfolio to the extent necessary,
to limit
all expenses to 0.48% of the average daily net assets of the
portfolio until
March 31, 2004, then to 0.39% of the average daily net assets
effective
April 1, 2004 until December 31, 2004.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
23
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
3,964,344 $ 857,853
Net realized gain / (loss) on investments and futures
968,015 (76,498)
Net change in unrealized appreciation / (depreciation)
on investments and futures contracts
15,716,193 16,453,104
--------
- -------- ----------------
20,648,552 17,234,459
--------
- -------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(1,045,466) (639,600)
--------
- -------- ----------------
(1,045,466) (639,600)
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
202,761,935 5,202,483
Reinvestment of distributions
1,045,466 639,600
Payments for shares redeemed
(23,301,175) (7,008,986)
--------
- -------- ----------------
180,506,226 (1,166,903)
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
200,109,312 15,427,956
NET ASSETS
Beginning of period
79,766,136 64,338,180
--------
- -------- ----------------
End of period $
279,875,448 $ 79,766,136
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $
3,687,795 $ 768,917
================ ================
FUND SHARE TRANSACTIONS
Sold
2,685,520 80,322
Reinvestment of distributions
13,866 11,667
Redeemed
(311,497) (115,207)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
2,387,889 (23,218)
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
190,706,551 $ 549,229
--------
- -------- ----------------
$
190,706,551 $ 549,229
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
3,661,882 $ 3,535,197
--------
- -------- ----------------
$
3,661,882 $ 3,535,197
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income $
1,045,466 $ 639,600
--------
- -------- ----------------
$
1,045,466 $ 639,600
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
24
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
S&P MIDCAP 400 INDEX
PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the total
return
performance of U.S. common stocks, as represented by the Standard &
Poor's
MidCap 400 Composite Stock Index (the "Index").
STRATEGY - The Summit Pinnacle S&P MidCap 400 Index Portfolio (the
"Portfolio")
will attempt to achieve, in both rising and falling markets, a
correlation of at
least 95% between the total return of its net assets before expenses
and the
total return of the Index.
MANAGER'S COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return was
15.76%
(before the impact of any product or contract-level fees). This
compares to a
16.47% total return for the Index. The difference of 0.71% is referred
to as
"tracking error" and is largely attributed to the Portfolio's operating
expenses. These expenses represent the Portfolio's costs for advisory,
administration, accounting, custody and other services. The remaining
difference
can be caused by a number of factors, including the timing and size of
cash
flows into and out of the Portfolio; brokers' commissions or other
trading
costs; and holding security positions in amounts that are different
than the
weightings in the Index, among others. While an exact replication of
the
capitalization weightings of securities in the Index is not feasible,
the
Portfolio's objectives and strategies call for a correlation of at
least 95%
between the Portfolio's pre-expense total return and that of the Index.
The
Portfolio achieved this level of correlation for the period presented.
FUND DATA
<Table>
Manager: Team Managed
Inception Date: May 3, 1999
Total Net Assets: $99.77 Million
Number of Equity Holdings: 400
Median Cap Size: $2.36 Billion
Average Price-to-book Ratio: 2.54x
Dividend Yield: 1.25%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit S&P MidCap 400 Index Portfolio - Average Annual Total Return
<Table>
<Caption>
1-YEAR 5-YEAR SINCE INCEPTION
15.76% 8.68% 9.64%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
<Table>
<Caption>
SUMMIT S&P MIDCAP 400 INDEX PORTFOLIO S&P MIDCAP
400 INDEX
Apr-1999 $ 10,000 $
10,000
May-1999 $ 9,930 $
10,043
Jun-1999 $ 10,430 $
10,580
Jul-1999 $ 10,180 $
10,354
Aug-1999 $ 9,830 $
9,999
Sep-1999 $ 9,500 $
9,691
Oct-1999 $ 9,960 $
10,184
Nov-1999 $ 10,480 $
10,719
Dec-1999 $ 11,114 $
11,355
Jan-2000 $ 10,782 $
11,036
Feb-2000 $ 11,556 $
11,808
Mar-2000 $ 12,513 $
12,796
Apr-2000 $ 11,992 $
12,349
May-2000 $ 11,851 $
12,196
Jun-2000 $ 12,003 $
12,375
Jul-2000 $ 12,187 $
12,570
Aug-2000 $ 13,551 $
13,974
Sep-2000 $ 13,443 $
13,878
Oct-2000 $ 12,966 $
13,408
Nov-2000 $ 12,003 $
12,396
Dec-2000 $ 12,891 $
13,343
Jan-2001 $ 13,172 $
13,641
Feb-2001 $ 12,405 $
12,863
Mar-2001 $ 11,480 $
11,908
Apr-2001 $ 12,731 $
13,221
May-2001 $ 13,029 $
13,529
Jun-2001 $ 12,961 $
13,475
Jul-2001 $ 12,756 $
13,274
Aug-2001 $ 12,334 $
12,840
Sep-2001 $ 10,807 $
11,243
Oct-2001 $ 11,271 $
11,741
Nov-2001 $ 12,102 $
12,614
Dec-2001 $ 12,729 $
13,265
Jan-2002 $ 12,661 $
13,198
Feb-2002 $ 12,666 $
13,213
Mar-2002 $ 13,561 $
14,158
Apr-2002 $ 13,487 $
14,092
May-2002 $ 13,254 $
13,854
Jun-2002 $ 12,270 $
12,839
Jul-2002 $ 11,067 $
11,595
Aug-2002 $ 11,116 $
11,653
Sep-2002 $ 10,215 $
10,715
Oct-2002 $ 10,658 $
11,179
Nov-2002 $ 11,271 $
11,825
Dec-2002 $ 10,801 $
11,339
Jan-2003 $ 10,482 $
11,008
Feb-2003 $ 10,226 $
10,746
Mar-2003 $ 10,307 $
10,836
Apr-2003 $ 11,049 $
11,622
May-2003 $ 11,961 $
12,584
Jun-2003 $ 12,104 $
12,744
Jul-2003 $ 12,527 $
13,197
Aug-2003 $ 13,085 $
13,794
Sep-2003 $ 12,880 $
13,583
Oct-2003 $ 13,848 $
14,610
Nov-2003 $ 14,321 $
15,119
Dec-2003 $ 14,553 $
15,374
Jan-2004 $ 14,860 $
15,708
Feb-2004 $ 15,209 $
16,085
Mar-2004 $ 15,258 $
16,152
Apr-2004 $ 14,756 $
15,623
May-2004 $ 15,053 $
15,946
Jun-2004 $ 15,388 $
16,308
Jul-2004 $ 14,659 $
15,548
Aug-2004 $ 14,615 $
15,508
Sep-2004 $ 15,039 $
15,967
Oct-2004 $ 15,275 $
16,222
Nov-2004 $ 16,179 $
17,187
Dec-2004 $ 16,847 $
17,907
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
Washington Post 0.84%
D.R. Horton 0.84%
Lennar Corp 0.79%
Harman International Industries 0.76%
Foot Locker Inc. 0.75%
Fidelity National Financial 0.71%
Murphy Oil 0.66%
Legg Mason 0.66%
Lyondell Chemical Co. 0.62%
Weatherford International Ltd. 0.62%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
Consumer Discretionary 19.0%
Consumer Staples 4.4%
Energy 6.5%
Financials 17.8%
Health Care 10.3%
Industrials 12.3%
Information Technology 14.1%
Materials 5.1%
Utilities 6.6%
Short-Term, Futures, & Other 3.9%
</Table>
25
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL HIGHLIGHTS S&P MIDCAP 400 INDEX
PORTFOLIO
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------
- ----------------------------------------------------------
2004
2003 2002 2001 2000
--------
- ----------------------------------------------------------
Net asset value, beginning of period $
52.62 $ 39.29 $ 46.70 $ 59.55 $ 55.20
--------
- -- ---------- ---------- ---------- ----------
Investment Activities:
Net investment income / (loss)
0.35(2) 0.29 0.22 0.30 1.10
Net realized and unrealized gains / (losses)
7.93 13.28 (7.25) (1.00) 7.20
--------
- -- ---------- ---------- ---------- ----------
Total from Investment Activities
8.28 13.57 (7.03) (0.70) 8.30
--------
- -- ---------- ---------- ---------- ----------
DISTRIBUTIONS:
Net investment income
(0.14) (0.24) (0.23) (0.20) (1.20)
Net realized gains
- -- -- (0.15) (11.95) (2.75)
--------
- -- ---------- ---------- ---------- ----------
Total Distributions
(0.14) (0.24) (0.38) (12.15) (3.95)
--------
- -- ---------- ---------- ---------- ----------
Net asset value, end of period $
60.76 $ 52.62 $ 39.29 $ 46.70 $ 59.55
========== ========== ========== ========== ==========
Total return
15.76% 34.74% -15.15% -1.25% 15.99%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (1)
0.56% 0.60% 0.60% 0.60% 0.60%
Ratio of expenses to average net assets - gross
0.56% 0.67% 0.81% 0.82% 0.77%
Ratio of net investment income / (loss) to average net assets
0.68% 0.58% 0.53% 0.65% 1.44%
Portfolio turnover rate
15.08% 8.54% 27.73% 18.57% 146.33%
Net assets, end of period (000's) $
99,775 $ 39,944 $ 23,180 $ 20,588 $ 15,054
</Table>
(1) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(2) PER SHARE AMOUNTS ARE BASED ON AVERAGE SHARES OUTSTANDING.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
26
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
S&P MIDCAP 400 INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
COMMON STOCKS - 96.62%
CONSUMER DISCRETIONARY - 19.00%
99(Cents) Only Stores* 6,190
$ 100,030
Abercrombie & Fitch Co. 7,733
363,064
Advance Auto Parts* 6,500
283,920
Aeropostale Inc.* 4,958
145,914
American Eagle Outfitters 6,562
309,070
American Greetings 6,111
154,914
AnnTaylor Stores Corp.* 6,294
135,510
Applebee's International 7,227
191,154
Arvinmeritor Inc 6,185
138,358
Bandag, Inc. 1,727
86,022
Barnes & Noble* 6,242
201,429
Belo Corp. 10,251
268,986
Blyth Inc 3,653
107,983
Bob Evans Farms 3,159
82,576
Borders Group 6,687
169,850
Borg Warner Inc. 5,003
271,013
Boyd Gaming Corp. 7,768
323,537
Brinker International* 7,705
270,214
Caesars Entertainment, Inc.* 27,881
561,523
Callaway Golf Co. 6,794
91,719
CarMax Inc.* 9,279
288,113
Catalina Marketing 4,663
138,165
CBRL Group 4,295
179,746
Cheesecake Factory* 6,932
225,082
Chico's FAS* 7,955
362,191
Claire's Stores 8,810
187,213
D.R. Horton 20,782
837,722
Dollar Tree Stores, Inc.* 10,074
288,922
Emmis Communications* 5,005
96,046
Entercom Communications* 4,442
159,423
Foot Locker Inc. 27,868
750,485
Furniture Brands International 4,735
118,612
Gentex Corp 6,916
256,030
GTECH Holdings Corp. 10,321
267,830
Harman International Industries 5,969
758,063
Harte-Hanks, Inc. 7,599
197,422
Hovanian Enterprises Inc.* 5,442
269,488
International Speedway 4,744
250,483
Krispy Kreme Doughnuts* 5,510
69,426
Lear Corporation 6,009
366,609
Lee Enterprises 4,023
185,380
Lennar Corp 13,911
788,475
Mandalay Resort Group 6,013
423,496
Media General 2,114
137,008
Michaels Stores 12,075
361,889
Modine Mfg 3,080
104,012
Mohawk Industries* 5,943
542,299
Neiman-Marcus Group 4,349
311,128
O'Reilly Automotive* 4,921
221,691
Outback Steakhouse 6,576
301,049
Pacific Sunwear of California* 6,603
146,983
Payless ShoeSource* 6,082
74,809
PETsMART, Inc. 12,936
459,616
Pier 1 Imports 7,650
150,705
Reader's Digest Association 8,871
$ 123,396
Regis Corp. 3,951
182,339
Rent-A-Center* 6,777
179,591
Ross Stores, Inc. 13,142
379,410
Ruby Tuesday, Inc. 5,786
150,899
Ryland Group 4,241
244,027
SAKS Inc.* 12,418
180,185
Scholastic Corp.* 3,539
130,801
Thor Industries 5,062
187,547
Timberland Co* 3,066
192,146
Toll Brothers* 6,656
456,668
Tupperware Corp. 5,218
108,117
Urban Outfitters Inc.* 7,211
320,168
Valassis Communication* 4,566
159,856
Washington Post 854
839,499
Westwood One, Inc.* 8,551
230,278
Williams-Sonoma Inc.* 10,382
363,785
- ----------------
18,961,109
- ----------------
CONSUMER STAPLES - 4.37%
BJ's Wholesale Club* 6,189
180,286
Church & Dwight 5,566
187,129
Constellation Brands* 9,612
447,054
Dean Foods* 13,269
437,214
Energizer Holdings Inc.* 6,462
321,097
Hormel Foods Corp. 12,371
387,830
Lancaster Colony 3,134
134,355
PepsiAmericas, Inc. 12,333
261,953
Ruddick Corp. 4,167
90,382
Smithfield Foods* 9,889
292,616
Smucker (J.M.) 5,203
244,905
Tootsie Roll 4,656
161,237
Tyson Foods 31,531
580,170
Universal Corp. 2,274
108,788
Whole Foods Market, Inc. 5,545
528,716
- ----------------
4,363,732
- ----------------
ENERGY - 6.54%
Cooper Cameron Corp* 4,891
263,185
ENSCO International 13,456
427,094
FMC Technologies* 6,090
196,098
Forest Oil* 5,281
167,513
Grant Prideco* 11,005
220,650
Hanover Compressor* 6,957
98,302
Helmerich & Payne 4,490
152,840
Murphy Oil 8,203
659,931
National-Oilwell Inc.* 7,655
270,145
Newfield Exploration* 5,543
327,314
Noble Energy, Inc 5,240
323,098
Overseas Shipholding Group 3,509
193,697
Patterson UTI-Energy 14,923
290,252
Pioneer Natural Resources 12,986
455,809
Plains Exploration & Production* 6,885
179,010
Pogo Producing 5,739
278,285
Pride International* 12,136
249,273
Smith International* 9,342
508,298
Tidewater Inc. 5,401
192,330
Varco International* 8,728
254,421
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
27
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
ENERGY - 6.54% (CONTINUED)
Weatherford International Ltd.* 12,101
$ 620,781
Western Gas Resources 6,589
192,728
- ----------------
6,521,054
- ----------------
FINANCIALS - 17.82%
A.G. Edwards 6,812
294,347
Allmerica Financial* 4,740
155,614
AMB Property Corp 7,393
298,603
American Financial Group 6,572
205,769
AmeriCredit Corp.* 13,833
338,217
AmerUs Group Co. 3,494
158,278
Associated Banc-Corp 11,548
383,509
Astoria Financial 6,630
265,001
Bank of Hawaii Corp. 4,717
239,341
Banknorth Group Inc 15,668
573,449
Brown & Brown Inc. 6,167
268,573
City National Corp. 4,380
309,447
Colonial BancGroup 11,900
252,637
Commerce Bancorp. 7,076
455,694
Cullen Frost Bankers 4,640
225,504
Developers Diversified Rlty 9,121
404,699
Dime Bancorp Inc. 1,500
285
Eaton Vance 5,980
311,857
Everest Re Group 4,998
447,621
Fidelity National Financial 15,538
709,620
First American Corp. 7,982
280,487
FirstMerit Corp. 7,509
213,931
Gallagher (Arthur J.) 8,243
267,898
GATX Corp. 4,405
130,212
Greater Bay Bancorp 4,543
126,659
HCC Insurance Holdings 6,042
200,111
Hibernia Corp. 13,815
407,681
Highwoods Properties 4,778
132,351
Horace Mann Educators 3,812
72,733
Hospitality Properties Trust 5,985
275,310
Independence Community Bank 7,540
321,053
IndyMac Bancorp 5,527
190,405
Investors Financial Services 5,920
295,882
Jefferies Group, Inc. 5,092
205,106
LaBranche & Co.* 5,347
47,909
Legg Mason 8,975
657,509
Leucadia National Corp. 6,387
443,769
Liberty Property Trust 7,627
329,486
Mack-Cali Realty 5,424
249,667
Mercantile Bankshares 7,057
368,375
MoneyGram International 7,894
166,879
New Plan Excel Realty Trust 9,148
247,728
New York Community Bancorp 23,616
485,781
Ohio Casualty* 5,523
128,189
Old Republic International 16,240
410,872
PMI Group 8,504
355,042
Protective Life Corp. 6,194
264,422
Radian Group 8,197
436,408
Raymond James Financial 6,578
203,786
Rayonier Inc. 4,442
217,258
SEI Investments 9,127
382,695
Silicon Valley Bancshares* 3,205
143,648
StanCorp Financial Group 2,531
$ 208,808
TCF Financial 12,358
397,186
United Dominion Realty Trust 11,819
293,111
Unitrin, Inc. 6,124
278,336
W. R. Berkley Corp. 7,496
353,586
Waddell & Reed Financial Investment 7,382
176,356
Washington Federal Inc. 7,016
186,205
Webster Financial Corp. 4,724
239,223
Weingarten Realty SBI 7,928
317,913
Westamerica Bancorp 2,836
165,367
Wilmington Trust Corp. 6,005
217,081
- ----------------
17,790,479
- ----------------
HEALTH CARE - 10.35%
Apria Healthcare Group* 4,311
142,047
Barr Pharmaceuticals, Inc.* 9,137
416,099
Beckman Coulter Inc. 5,415
362,750
Cephalon Inc* 5,141
261,574
Charles River Labs* 5,775
265,708
Community Health Systems* 7,767
216,544
Covance Inc.* 5,561
215,489
Coventry Health Care Inc.* 7,994
424,322
Cytyc Corp.* 9,948
274,266
DENTSPLY International Inc. 7,195
404,359
Edwards Lifesciences Corp.* 5,298
218,595
First Health Group* 8,190
153,235
Health Net, Inc.* 9,903
285,900
Hillenbrand Industries 5,513
306,192
INAMED Corp.* 3,193
201,957
Invitrogen Corporation* 4,562
306,247
IVAX Corp.* 22,331
353,276
LifePoint Hospitals* 3,449
120,094
Lincare Holdings Inc.* 8,937
381,163
Millennium Pharmaceuticals, Inc.* 27,251
330,282
Omnicare, Inc. 9,284
321,412
PacifiCare Health Systems Inc.* 7,504
424,126
Par Pharmaceutical Cos.* 3,018
124,885
Patterson Companies Inc.* 12,230
530,660
Perrigo Co. 6,439
111,202
Protein Design Labs* 8,514
175,899
Renal Care Group* 6,003
216,048
Schein (Henry) Inc.* 3,854
268,393
Sepracor Inc.* 9,361
555,763
STERIS Corp.* 6,171
146,376
Techne Corp.* 3,681
143,191
Triad Hospitals* 6,856
255,112
Universal Health Services Cl B 5,196
231,222
Valeant Pharmaceuticals International 7,498
197,572
Varian Inc.* 3,094
126,885
Varian Medical Systems* 12,113
523,766
VCA Antech* 7,327
143,609
Vertex Pharmaceuticals* 7,159
75,671
VISX Inc.* 4,418
114,294
- ----------------
10,326,185
- ----------------
INDUSTRIALS - 12.29%
ADESA Inc. 8,168
173,325
AGCO Corp.* 8,035
175,886
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
28
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
INDUSTRIALS - 12.29% (CONTINUED)
Airtran Holdings Inc.* 7,635
$ 81,695
Alaska Air Group* 2,402
80,443
Alexander & Baldwin 3,807
161,493
Alliant Techsystems* 3,355
219,350
Ametek, Inc. 6,104
217,730
Banta Corp. 2,220
99,367
C.H. Robinson Worldwide, Inc. 7,603
422,122
Career Education Corporation* 9,126
365,040
Carlisle Companies 2,775
180,153
ChoicePoint Inc.* 7,901
363,367
CNF Inc. 4,602
230,560
Copart Inc.* 8,020
211,086
Corinthian Colleges* 8,063
151,947
Crane Company 4,887
140,941
Deluxe Corp. 4,456
166,342
DeVRY Inc.* 6,270
108,847
Donaldson Co. 7,411
241,450
Dun & Bradstreet* 6,188
369,114
Dycom Industries* 4,328
132,091
Education Management* 6,553
216,315
Expeditors International of Washington, Inc. 9,500
530,860
Fastenal Company 6,760
416,146
Federal Signal 4,286
75,691
Flowserve Corporation* 4,937
135,965
Graco Inc. 6,164
230,225
Granite Construction 3,712
98,739
Harsco Corp. 3,680
205,123
HNI Corporation 5,004
215,422
Hubbell Inc. Cl B 5,434
284,198
Hunt(J.B.) Transport Service Inc. 7,235
324,490
ITT Educational Services* 4,091
194,527
Jacobs Engineering Group* 5,017
239,762
JetBlue Airways Corp.* 9,232
214,367
Kelly Services 3,141
94,795
Kennametal Inc. 3,389
168,671
Korn/Ferry International* 3,475
72,106
Laureate Education Inc.* 4,316
190,292
Manpower Inc. 8,038
388,235
Miller (Herman) 6,295
173,931
Nordson Corporation 3,235
129,626
Pentair Inc. 8,983
391,299
Precision Castparts 5,856
384,622
Quanta Services* 10,467
83,736
Republic Services 13,438
450,711
Rollins, Inc. 4,085
107,517
Sequa Corp.* 942
57,603
Sotheby's Holdings* 5,669
102,949
SPX Corp. 6,692
268,082
Stericycle Inc.* 4,011
184,305
Swift Transportation* 6,795
145,957
Tecumseh Products Co. 1,645
78,631
Teleflex 3,592
186,568
The Brink's Company 5,062
200,050
Thomas & Betts* 5,268
161,991
Trinity Industries 4,239
144,465
United Rentals* 6,933
131,034
Werner Enterprises 7,034
159,250
York International 3,706
128,005
- ----------------
12,258,610
- ----------------
INFORMATION TECHNOLOGY - 14.09%
3Com Corp.* 33,884
$ 141,296
Activision, Inc.* 12,393
250,091
Axiom Corp. 7,685
202,116
Adtran Inc. 6,809
130,324
Advent Software, Inc.* 2,918
59,761
Alliance Data Systems* 7,282
345,749
Amphenol Corp.* 7,885
289,695
Arrow Electronics* 10,319
250,752
Ascential Software Corp.* 5,233
85,350
Atmel Corp.* 42,516
166,663
Avnet, Inc* 10,732
195,752
Avocent Corp* 4,437
179,787
BISYS Group* 10,701
176,031
Cabot Micro-Electronics* 2,209
88,470
Cadence Design Systems* 24,095
332,752
CDW Corporation 7,403
491,189
Ceridian Corp.* 13,256
242,320
Certegy, Inc. 5,570
197,902
Checkfree Corp* 7,735
294,549
Cognizant Technology Solutions Corporation* 11,860
502,034
CommScope, Inc.* 5,185
97,997
Credence Systems* 8,491
77,693
Cree Inc.* 6,581
263,766
CSG Systems International* 4,554
85,160
Cypress Semiconductor* 11,220
131,611
Diebold, Inc. 6,361
354,499
DST Systems Inc.* 7,460
388,815
Fair, Isaac Corporation 6,264
229,764
Fairchild Semiconductor* 10,644
173,071
Gartner, Inc.* 10,116
126,045
Harris Corp. 5,965
368,577
Henry (Jack) & Assoc. 8,053
160,335
Imation Corp. 3,033
96,540
Integrated Circuit Systems Inc.* 6,275
131,273
Integrated Device Technology* 9,508
109,912
Intersil Corporation 13,406
224,416
Intl Rectifier* 5,946
265,013
Keane Inc.* 5,527
81,247
KEMET Corp.* 7,706
68,969
Lam Research Corporation* 12,139
350,938
Lattice Semconductor* 10,141
57,804
LTX Corp.* 5,447
41,887
Macromedia Inc.* 6,325
196,834
Macrovision Corporation* 4,436
114,094
McAfee, Inc.* 14,273
412,918
McData Corp.* 10,536
62,795
Mentor Graphics* 6,798
103,941
Micrel Inc.* 8,029
88,480
Microchip Technology Incorporated 18,391
490,304
MPS Group, Inc.* 9,149
112,167
National Instruments 7,062
192,440
Newport Corporation* 3,829
53,989
Plantronics Inc. 4,310
178,736
Plexus Corp* 3,844
50,010
Polycom Inc.* 8,748
204,003
Powerwave Technologies* 9,313
78,974
Retek Inc.* 4,988
30,676
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
29
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
INFORMATION TECHNOLOGY - 14.09% (CONTINUED)
Reynolds & Reynolds 5,762
$ 152,751
RF Micro Devices, Inc.* 16,663
113,975
RSA Security Inc.* 6,203
124,432
SanDisk Corporation* 14,510
362,315
Semtech Corp* 6,595
144,233
Silicon Laboratories Inc.* 4,626
163,344
Storage Technology* 9,500
300,295
Sybase Inc.* 8,471
168,996
Synopsys, Inc.* 13,569
266,224
Tech Data Corp.* 5,178
235,081
Titan Corp.* 7,545
122,229
Transaction Systems* 3,338
66,259
TriQuint Semiconductor* 12,279
54,642
UTStarcom* 10,187
225,642
Vishay Intertechnology* 14,794
222,206
Wind River Systems* 7,342
99,484
Zebra Technologies* 6,401
360,248
- ----------------
14,060,632
- ----------------
MATERIALS - 5.11%
Airgas Inc. 6,680
177,087
Albemarle Corp. 3,716
143,845
Arch Coal 5,559
197,567
Bowater Inc. 4,956
217,915
Cabot Corp. 5,496
212,585
Crompton Corporation 10,222
120,620
Cytec Industries 3,530
181,513
Ferro Corp. 3,740
86,731
FMC Corp.* 3,284
158,617
Glatfelter 3,909
59,730
Longview Fibre 4,557
82,664
Lubrizol Corp. 5,947
219,206
Lyondell Chemical Co. 21,556
623,400
Martin Marietta 4,279
229,611
Minerals Technologies 1,828
121,928
Olin Corp. 6,254
137,713
Packaging Corp. of America 9,525
224,314
Peabody Energy 5,757
465,799
Potlatch Corp. 2,648
133,936
RPM International Inc. 10,398
204,425
Scotts Co* 2,930
215,414
Sensient Technologies 4,185
100,398
Sonoco Products 8,767
259,941
Steel Dynamics 4,031
152,694
Valspar Corp 4,576
228,846
Worthington Ind. 7,080
138,626
- ----------------
5,095,125
- ----------------
TELECOMMUNICATIONS SERVICES - 0.49%
Cincinnati Bell Inc.* 21,901
90,889
Telephone & Data Systems 5,119
393,907
- ----------------
484,796
- ----------------
UTILITIES - 6.56%
AGL Resources 6,676
221,910
Alliant Energy 10,297
294,494
Aqua America, Inc. 8,309
204,318
Aquila, Inc.* 21,529
$ 79,442
Black Hills 2,892
88,727
DPL Incorporated 11,267
282,914
Duquesne Light Holdings, Inc. 6,847
129,066
Energy East 13,089
349,215
Equitable Resources 5,481
332,477
Great Plains Energy Inc. 6,621
200,484
Hawaiian Electric Industries 7,182
209,355
IDACORP Inc. Holding Co. 3,711
113,445
MDU Resources 10,518
280,620
National Fuel Gas 7,359
208,554
Northeast Utilities 11,434
215,531
NSTAR 4,739
257,233
OGE Energy Corp. 7,925
210,092
ONEOK Inc. 9,217
261,947
Pepco Holdings, Inc. 16,753
357,174
PNM Resources, Inc. 5,385
136,187
Puget Energy, Inc. 8,878
219,287
Questar Corp. 7,517
383,066
SCANA Corp . 10,013
394,512
Sierra Pacific* 10,459
109,820
Vectren Corporation 6,780
181,704
Westar Energy, Inc 7,649
174,933
WGL Holdings, Inc. 4,334
133,661
Wisconsin Energy 10,423
351,359
WPS Resources 3,331
166,417
- ----------------
6,547,944
- ----------------
Total Common Stocks
(cost $82,801,345)
96,409,666
- ----------------
UNIT INVESTMENT TRUST(3) - 0.60%
S&P MidCap 400 Depositary Receipts 4,913
594,473
- ----------------
Total Unit Investment Trust
(cost $431,981)
594,473
- ----------------
SHORT-TERM INVESTMENTS(3) - 2.65%
NORTHERN TRUST DIVERSIFIED ASSETS
PORTFOLIO - 2.15% 2,140,790
2,140,790
- ----------------
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY BILL - 0.50%
(1.000% due 09/16/04) $ 500,000
$ 497,878
- ----------------
Total Short-Term Investments
(cost $2,638,535)
2,638,668
- ----------------
TOTAL INVESTMENTS - 99.87%
(cost $85,871,861)(1)
99,642,807
- ----------------
NORTHERN INSTITUTIONAL LIQUID
ASSET PORTFOLIO(2) - 25.70%
25,645,560
- ----------------
OTHER ASSETS AND LIABILITIES - (25.57%)
(25,513,541)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 99,774,826
================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
30
<Page>
* Non-income producing
(1) For federal income tax purposes, cost is $86,489,836 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$18,027,162 and ($4,874,191), respectively, with a net appreciation
/
depreciation of $13,152,971.
(2) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$28,018,408,
$25,645,560, and $3,133,449, respectively.
(3) Securities and other assets with an aggregate value of $2,395,260
have been
segregated with the custodian or designated to cover margin
requirements for
the open futures contracts as of December 31, 2004:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
TYPE CONTRACTS (DEPRECIATION)
- ----------------------------------------------------------------
S&P MidCap 400 Index (03/05) 6 $ 21,968
S&P MidCap 400 Index Mini (03/05) 6 $ 6,744
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
31
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL STATEMENTS S&P MIDCAP 400 INDEX
PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
99,642,807
Collateral for securities loaned,
at fair value
25,645,560
Receivables:
Shares sold
114,571
Securities sold
56,066
Interest and dividends
71,272
Variation margin
6,660
Prepaid expenses and other
1,946
--------
- --------
125,538,882
--------
- --------
LIABILITIES
Payables:
Shares redeemed
22,496
Payable upon return of securities
loaned
25,645,560
Advisory fees
42,921
Administration expenses
6,012
Directors' fees
3,888
Custodian fees
10,231
Fund accounting fees
6,046
Professional fees
16,017
Royalty fees
5,095
Other accrued expenses
5,790
--------
- --------
25,764,056
--------
- --------
NET ASSETS*
Paid-in capital
83,837,622
Accumulated undistributed net
investment income
470,579
Accumulated net realized gain / (loss)
on investments and futures contracts
1,666,967
Net unrealized appreciation / (depreciation)
on investments and futures contracts
13,799,658
--------
- --------
$
99,774,826
================
Shares authorized ($.10 par value)
20,000,000
Shares outstanding
1,642,169
Net asset value, offering and redemption
price per share $
60.76
Investments at cost $
85,871,861
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $
885,992
Undistributed long-term gains $
1,898,240
Unrealized appreciation $
13,152,971
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
49,036
Dividends
899,334
Other income
16,794
--------
- --------
965,164
--------
- --------
EXPENSES
Advisory fees
235,020
Administration expenses
78,340
Custodian fees and expenses
22,926
Fund accounting fees
35,202
Professional fees
24,613
Directors' fees
14,111
Transfer agent fees
10,875
Royalty fee
948
Other expenses
16,065
--------
- --------
438,100
--------
- --------
NET INVESTMENT INCOME / (LOSS)
527,064
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
2,589,848
Net realized gain / (loss) on futures contracts
559,578
--------
- --------
3,149,426
--------
- --------
Net change in unrealized appreciation /
(depreciation) on investments and
futures contracts
8,212,941
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
11,362,367
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
11,889,431
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- -----------------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE LIMIT(1) WAIVER
REIMBURSEMENT
- -----------------------------------------------------------------------
- --------
0.30% 0.10% 0.30% $ -- $
- --
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
32
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
527,064 $ 164,286
Net realized gain / (loss) on investments and futures
3,149,426 427,834
Net change in unrealized appreciation / (depreciation)
on investments and futures contracts
8,212,941 8,257,240
--------
- -------- ----------------
11,889,431 8,849,360
--------
- -------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(200,651) (145,257)
--------
- -------- ----------------
(200,651) (145,257)
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
55,815,686 11,661,518
Reinvestment of distributions
200,651 145,257
Payments for shares redeemed
(7,874,765) (3,746,612)
--------
- -------- ----------------
48,141,572 8,060,163
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
59,830,352 16,764,266
NET ASSETS
Beginning of period
39,944,474 23,180,208
--------
- -------- ----------------
End of period $
99,774,826 $ 39,944,474
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $
470,579 $ 144,166
================ ================
FUND SHARE TRANSACTIONS
Sold
1,024,349 254,665
Reinvestment of distributions
3,608 3,648
Redeemed
(144,961) (89,109)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
882,996 169,204
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
58,859,625 $ 12,157,278
--------
- -------- ----------------
$
58,859,625 $ 12,157,278
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
11,122,997 $ 2,216,071
--------
- -------- ----------------
$
11,122,997 $ 2,216,071
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income $
200,651 $ 145,257
--------
- -------- ----------------
$
200,651 $ 145,257
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
33
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
BALANCED INDEX PORTFOLIO
OBJECTIVE - Seeks investment results, with respect to 60% of its
assets, that
correspond to the total return performance of U.S. common stocks, as
represented
by the Standard & Poor's 500 Composite Stock Price Index (the "Index")
and, with
respect to 40% of its assets, that correspond to the total return
performance of
investment grade bonds, as represented by the Lehman Brothers Aggregate
Bond
Index.
STRATEGY - The Summit Pinnacle Balanced Index Portfolio (the
"Portfolio") will
invest approximately 60% of its net assets in a portfolio of stocks
included in
the Index and in futures of the Index, and approximately 40% of its net
assets
in a portfolio of investment grade bonds designed to track the Lehman
Brothers
Aggregate Bond Index.
MANAGERS' COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return was
7.59%
(after waivers and reimbursements, but before the impact of any product
or
contract-level fees). This compares to a 8.40% total return for the
hypothetical
Balanced Index. The difference of 0.81% is referred to as "tracking
error" and
is largely attributed to the Portfolio's operating expenses. These
expenses
represent the Portfolio's costs for advisory, administration,
accounting,
custody and other services. The remaining difference can be caused by a
number
of factors, including the timing and size of cash flows into and out of
the
Portfolio; brokers' commissions or other trading costs; and holding
security
positions in amounts that are different than the weightings in the
Index, among
others. While an exact replication of the capitalization weightings of
securities in the Index is not feasible, the Portfolio's objectives and
strategies call for a correlation of at least 95% between the
Portfolio's
pre-expense total return and that of the Index. The Portfolio achieved
this
level of correlation for the period presented.
FUND DATA
<Table>
Manager: Team Managed
Inception Date: May 3, 1999
Total Net Assets: $33.36 Million
Number of Equity Holdings: 500
Median Cap Size: $10.57 Billion
Average Price-to-book Ratio: 2.99x
Dividend Yield: 1.71%
Number of Fixed Income Holdings: 37
Average Duration: 4.60 years
Average Maturity 13.1 years
Average Credit Quality AAA/Aaa
Current Yield 4.27%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit Balanced Index Portfolio - Average Annual Total Return
<Table>
<Caption>
1-YEAR 5-YEAR SINCE INCEPTION
7.59% 1.18% 1.97%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
<Table>
<Caption>
SUMMIT BALANCED INDEX PORTFOLIO S&P 500 INDEX
LEHMAN BROTHERS AGGREGATE BOND INDEX
Apr-1999 $ 10,000 $ 10,000
$ 10,000
May-1999 $ 9,740 $ 9,764
$ 9,912
Jun-1999 $ 10,050 $ 10,306
$ 9,880
Jul-1999 $ 9,840 $ 9,985
$ 9,839
Aug-1999 $ 9,810 $ 9,936
$ 9,834
Sep-1999 $ 9,690 $ 9,663
$ 9,948
Oct-1999 $ 10,076 $ 10,275
$ 9,985
Nov-1999 $ 10,197 $ 10,484
$ 9,984
Dec-1999 $ 10,531 $ 11,101
$ 9,936
Jan-2000 $ 10,187 $ 10,544
$ 9,903
Feb-2000 $ 10,108 $ 10,344
$ 10,023
Mar-2000 $ 10,743 $ 11,356
$ 10,155
Apr-2000 $ 10,559 $ 11,014
$ 10,126
May-2000 $ 10,418 $ 10,788
$ 10,121
Jun-2000 $ 10,678 $ 11,054
$ 10,332
Jul-2000 $ 10,613 $ 10,881
$ 10,426
Aug-2000 $ 11,067 $ 11,557
$ 10,577
Sep-2000 $ 10,743 $ 10,947
$ 10,643
Oct-2000 $ 10,743 $ 10,901
$ 10,714
Nov-2000 $ 10,299 $ 10,041
$ 10,889
Dec-2000 $ 10,397 $ 10,090
$ 11,091
Jan-2001 $ 10,678 $ 10,449
$ 11,273
Feb-2001 $ 10,112 $ 9,497
$ 11,371
Mar-2001 $ 9,742 $ 8,896
$ 11,428
Apr-2001 $ 10,168 $ 9,586
$ 11,380
May-2001 $ 10,234 $ 9,650
$ 11,448
Jun-2001 $ 10,088 $ 9,416
$ 11,492
Jul-2001 $ 10,133 $ 9,323
$ 11,749
Aug-2001 $ 9,793 $ 8,741
$ 11,884
Sep-2001 $ 9,363 $ 8,035
$ 12,023
Oct-2001 $ 9,544 $ 8,189
$ 12,274
Nov-2001 $ 9,907 $ 8,817
$ 12,105
Dec-2001 $ 9,941 $ 8,894
$ 12,028
Jan-2002 $ 9,884 $ 8,765
$ 12,125
Feb-2002 $ 9,807 $ 8,595
$ 12,243
Mar-2002 $ 9,939 $ 8,919
$ 12,039
Apr-2002 $ 9,599 $ 8,378
$ 12,273
May-2002 $ 9,581 $ 8,317
$ 12,377
Jun-2002 $ 9,141 $ 7,725
$ 12,484
Jul-2002 $ 8,763 $ 7,123
$ 12,635
Aug-2002 $ 8,854 $ 7,169
$ 12,848
Sep-2002 $ 8,319 $ 6,391
$ 13,056
Oct-2002 $ 8,723 $ 6,953
$ 12,997
Nov-2002 $ 9,060 $ 7,361
$ 12,993
Dec-2002 $ 8,820 $ 6,929
$ 13,262
Jan-2003 $ 8,674 $ 6,748
$ 13,273
Feb-2003 $ 8,641 $ 6,647
$ 13,457
Mar-2003 $ 8,689 $ 6,712
$ 13,446
Apr-2003 $ 9,154 $ 7,264
$ 13,557
May-2003 $ 9,503 $ 7,646
$ 13,810
Jun-2003 $ 9,553 $ 7,744
$ 13,782
Jul-2003 $ 9,527 $ 7,880
$ 13,319
Aug-2003 $ 9,659 $ 8,034
$ 13,408
Sep-2003 $ 9,683 $ 7,949
$ 13,762
Oct-2003 $ 9,966 $ 8,398
$ 13,634
Nov-2003 $ 10,024 $ 8,472
$ 13,667
Dec-2003 $ 10,381 $ 8,916
$ 13,806
Jan-2004 $ 10,531 $ 9,080
$ 13,917
Feb-2004 $ 10,654 $ 9,206
$ 14,068
Mar-2004 $ 10,583 $ 9,067
$ 14,173
Apr-2004 $ 10,375 $ 8,925
$ 13,804
May-2004 $ 10,439 $ 9,047
$ 13,749
Jun-2004 $ 10,577 $ 9,222
$ 13,827
Jul-2004 $ 10,390 $ 8,917
$ 13,964
Aug-2004 $ 10,484 $ 8,953
$ 14,230
Sep-2004 $ 10,557 $ 9,049
$ 14,269
Oct-2004 $ 10,679 $ 9,188
$ 14,388
Nov-2004 $ 10,904 $ 9,559
$ 14,274
Dec-2004 $ 11,169 $ 9,884
$ 14,405
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
General Electric 1.97%
Exxon Mobil Corp. 1.72%
Microsoft Corporation 1.49%
Citigroup Inc. 1.28%
Wal-Mart Stores 1.15%
Pfizer, Inc. 1.04%
Bank of America Corp. 0.98%
Johnson & Johnson 0.96%
American International Group 0.88%
International Business Machines 0.85%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
U.S. Stocks 57.9%
Treasuries & Agency Notes 15.9%
Mortgage-Backed Securities 12.5%
Corporate Bonds 9.3%
Short-Term, Futures, & Other 4.4%
</Table>
34
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
BALANCED INDEX PORTFOLIO FINANCIAL
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------
- ----------------------------------------------------------
2004
2003 2002 2001 2000
--------
- ----------------------------------------------------------
Net asset value, beginning of period $
43.05 $ 37.50 $ 43.85 $ 48.05 $ 52.05
--------
- -- ---------- ---------- ---------- ----------
Investment Activities:
Net investment income / (loss)
0.95(2) 0.95 1.13 1.10 1.95
Net realized and unrealized gains / (losses)
2.27 5.57 (6.01) (3.15) (2.65)
--------
- -- ---------- ---------- ---------- ----------
Total from Investment Activities
3.22 6.52 (4.88) (2.05) (0.70)
--------
- -- ---------- ---------- ---------- ----------
DISTRIBUTIONS:
Net investment income
(0.72) (0.97) (1.47) (0.60) (2.30)
Net realized gains
- -- -- -- (1.55) (1.00)
--------
- -- ---------- ---------- ---------- ----------
Total Distributions
(0.72) (0.97) (1.47) (2.15) (3.30)
--------
- -- ---------- ---------- ---------- ----------
Net asset value, end of period $
45.55 $ 43.05 $ 37.50 $ 43.85 $ 48.05
========== ========== ========== ========== ==========
Total return
7.59% 17.70% -11.27% -4.38% -1.28%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (1)
0.60% 0.60% 0.60% 0.60% 0.60%
Ratio of expenses to average net assets - gross
0.71% 1.01% 1.10% 0.81% 0.68%
Ratio of net investment income / (loss) to average net assets
2.23% 2.31% 2.78% 2.47% 2.95%
Portfolio turnover rate
21.20% 25.45% 15.34% 35.84% 9.60%
Net assets, end of period (000's) $
33,356 $ 11,667 $ 10,638 $ 13,004 $ 14,334
</Table>
(1) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(2) PER SHARE AMOUNTS ARE BASED ON AVERAGE SHARES OUTSTANDING.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
35
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS BALANCED INDEX
PORTFOLIO
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
COMMON STOCKS - 57.88%
CONSUMER DISCRETIONARY - 6.88%
AutoNation, Inc. 457
$ 8,779
AutoZone Inc.* 143
13,057
Bed Bath & Beyond Inc.* 513
20,433
Best Buy Co., Inc. 554
32,919
Big Lots, Inc. 197
2,390
Black & Decker Corp. 136
12,013
Brunswick Corp. 162
8,019
Carnival Corp.* 1,080
62,240
Centex Corp. 211
12,571
Circuit City Group 340
5,318
Clear Channel Communications* 1,049
35,131
Coach, Inc.* 320
18,048
Comcast Corporation* 3,827
127,363
Cooper Tire & Rubber 127
2,737
Dana Corp. 255
4,419
Darden Restaurants 275
7,629
Delphi Corporation* 958
8,641
Dillard Inc. 143
3,842
Dollar General 563
11,694
Dow Jones & Co. 140
6,028
Eastman Kodak 490
15,803
eBay Inc.* 1,120
130,234
Family Dollar Stores 293
9,150
Federated Dept. Stores 308
17,799
Ford Motor 3,125
45,750
Fortune Brands, Inc. 250
19,295
Gannett Co.* 466
38,072
Gap (The) 1,537
32,461
General Motors 965
38,658
Genuine Parts 298
13,130
Goodyear Tire & Rubber 300
4,398
Harley-Davidson 504
30,618
Harrah's Entertainment 193
12,910
Hasbro Inc. 302
5,853
Hilton Hotels 655
14,895
Home Depot 3,795
162,198
International Game Technology 596
20,490
Interpublic Group 650
8,710
Johnson Controls 325
20,618
Jones Apparel Group 216
7,899
KB Home 80
8,352
Knight-Ridder Inc.* 135
9,037
Kohl's Corp. 582
28,617
Leggett & Platt* 328
9,325
Limited Brands, Inc. 805
18,531
Liz Claiborne, Inc. 190
8,020
Lowe's Cos 1,342
77,286
Marriott International 387
24,373
Mattel, Inc. 722
14,072
May Dept. Stores 497
14,612
Maytag Corp. 135
2,849
McDonald's Corp. 2,151
68,961
McGraw-Hill 326
29,842
Meredith Corp.* 86
4,661
New York Times* 254
$ 10,363
Newell Rubbermaid Co. 469
11,345
News Corporation 4,050
75,573
NIKE Inc. 451
40,901
Nordstrom* 238
11,122
Office Depot 534
9,270
OfficeMax Inc.* 124
3,891
Omnicom Group 323
27,235
Penney (J.C.) 482
19,955
Pulte Homes, Inc. 178
11,356
RadioShack Corp* 275
9,042
Reebok International 103
4,532
Sears, Roebuck & Co.* 364
18,575
Sherwin-Williams 245
10,934
Snap-On Inc. 100
3,436
Stanley Works 140
6,859
Staples, Inc. 850
28,654
Starbucks Corporation* 677
42,218
Starwood Hotels & Resorts* 354
20,674
Target Corp. 1,559
80,959
Tiffany & Co.* 251
8,024
Time Warner Inc. 7,786
151,360
TJX Companies Inc.* 845
21,235
Toys R Us, Inc. 366
7,492
Tribune Co.* 560
23,598
Univision Communications 459
13,435
V.F. Corp. 188
10,411
Viacom Inc. 2,959
107,678
Visteon Corp. 222
2,169
Walt Disney Co. 3,504
97,410
Wendy's International 195
7,656
Whirlpool Corp. 118
8,167
Yum* 494
23,307
- ----------------
2,299,586
- ----------------
CONSUMER STAPLES - 6.12%
Alberto-Culver 156
7,577
Albertson's 628
14,997
Altria Group, Inc.* 3,502
213,972
Anheuser-Busch* 1,373
69,652
Archer-Daniels-Midland* 1,110
24,764
Avon Products 806
31,192
Brown-Forman Corp.* 208
10,125
Campbell Soup 702
20,983
Clorox Co. 363
21,392
Coca Cola Co.* 4,157
173,056
Coca-Cola Enterprises 803
16,743
Colgate-Palmolive 909
46,504
ConAgra Foods, Inc.* 903
26,593
Coors (Adolph) 64
4,843
Costco Wholesale Corporation 784
37,953
CVS Corp. 679
30,603
General Mills 645
32,063
Gillette Co.* 1,714
76,753
Heinz (H.J.) 602
23,472
Hershey Foods* 443
24,604
Kellogg Co. 701
31,307
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
36
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CONSUMER STAPLES - 6.12% (CONTINUED)
Kimberly-Clark 856
$ 56,333
Kroger Co.* 1,269
22,258
McCormick & Co. 235
9,071
Pepsi Bottling Group 440
11,898
PepsiCo Inc. 2,914
152,111
Procter & Gamble 4,388
241,691
Reynolds American Inc. 246
19,336
Safeway Inc. 762
15,042
Sara Lee Corp.* 1,350
32,589
Supervalu Inc. 231
7,974
Sysco Corp. 1,092
41,682
UST Inc. 283
13,615
Walgreen Co. 1,749
67,109
Wal-Mart Stores 7,261
383,526
Wrigley (Wm) Jr. 384
26,569
- ----------------
2,039,952
- ----------------
ENERGY - 4.11%
Amerada Hess 154
12,687
Anadarko Petroleum 430
27,868
Apache Corp. 555
28,066
Ashland Inc. 121
7,064
Baker Hughes 569
24,279
BJ Services 276
12,845
Burlington Resources 677
29,450
ChevronTexaco Corp. 3,654
191,872
ConocoPhillips 1,171
101,678
Devon Energy Corp.* 520
20,238
El Paso Corp. 1,065
11,076
EOG Resources 200
14,272
Exxon Mobil Corp.* 11,166
572,369
Halliburton Co. 752
29,508
Kerr-McGee 194
11,211
Kinder Morgan 212
15,504
Marathon Oil Corp. 589
22,152
Nabors Industries Ltd. 254
13,028
Noble Corporation 231
11,490
Occidental Petroleum* 668
38,984
Rowan Cos. 181
4,688
Schlumberger Ltd. 1,006
67,352
Sunoco., Inc.* 129
10,540
Transocean Inc.* 548
23,230
Unocal Corp.* 450
19,458
Valero Energy 442
20,067
Williams Cos. 888
14,466
XTO Energy Inc. 400
14,152
- ----------------
1,369,594
- ----------------
FINANCIALS - 11.95%
ACE Limited 484
20,691
AFLAC Inc.* 869
34,621
Allstate Corp.* 1,200
62,064
Ambac Financial Group 186
15,276
American Express 2,182
122,999
American International Group 4,452
292,363
AmSouth Bancorporation* 602
15,592
Aon Corp. 537
12,813
Apartment Investment & Management 161
6,205
Archstone-Smith Trust 300
$ 11,490
Bank of America Corp. 6,960
327,050
Bank of New York 1,328
44,382
BB&T Corporation 895
37,635
Bear Stearns Cos. 180
18,416
Capital One Financial 409
34,442
Charles Schwab 2,332
27,891
Chubb Corp.* 324
24,916
Cincinnati Financial 288
12,747
CIT Group* 350
16,037
Citigroup Inc. 8,830
425,429
Comerica Inc.* 296
18,062
Compass Bancshares 190
9,247
Countrywide Financial Corp. 952
35,234
E*Trade Financial Corp.* 624
9,329
Equity Office Properties 689
20,064
Equity Residential 479
17,330
Fannie Mae 1,655
117,853
Federal Home Loan Mtg. 1,176
86,671
Federated Investors Inc. 185
5,624
Fifth Third Bancorp 961
45,436
First Horizon National 212
9,139
Franklin Resources 427
29,741
Golden West Financial 522
32,061
Goldman Sachs Group 824
85,729
Hartford Financial ServicesGroup 464
32,160
Huntington Bancshares* 392
9,714
Janus Capital Group* 409
6,875
Jefferson-Pilot* 239
12,417
JPMorgan Chase & Co. 6,080
237,181
KeyCorp 702
23,798
Lehman Bros. 473
41,378
Lincoln National 305
14,237
Loews Corp. 317
22,285
M&T Bank Corp.* 203
21,891
Marsh & McLennan 894
29,413
Marshall & Ilsley Corp. 380
16,795
MBIA Inc. 247
15,630
MBNA Corp. 2,180
61,454
Mellon Bank Corp. 725
22,555
Merrill Lynch 1,640
98,023
MetLife Inc. 1,291
52,298
MGIC Investment 169
11,646
Moody's Corp* 256
22,234
Morgan Stanley 1,877
104,211
National City Corp.* 1,157
43,445
North Fork Bancorporation 789
22,763
Northern Trust Corp. 377
18,315
Plum Creek Timber Co. 313
12,032
PNC Bank Corp.* 482
27,686
Principal Financial Group 545
22,312
Progressive Corp. 372
31,560
ProLogis 310
13,432
Providian Financial Corp. 498
8,202
Prudential Financial* 898
49,354
Regions Financial Corp. 788
28,045
SAFECO Corp. 238
12,433
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
37
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FINANCIALS - 11.95% (CONTINUED)
Simon Property Group, Inc 355
$ 22,958
SLM Corporation 750
40,043
Sovereign Bancorp 575
12,966
St. Paul Travelers Cos.* 1,139
42,223
State Street Corp. 574
28,195
SunTrust Banks 607
44,845
Synovus Financial 521
14,890
T. Rowe Price Group 217
13,497
Torchmark Corp. 191
10,914
U.S. Bancorp 3,237
101,383
UnumProvident Corp. 506
9,078
Wachovia Corp. 2,746
144,440
Washington Mutual 1,477
62,448
Wells Fargo* 2,881
179,054
XL Capital 236
18,325
Zions Bancorp* 153
10,409
- ----------------
3,986,021
- ----------------
HEALTH CARE - 7.33%
Abbott Labs 2,663
124,229
Aetna Inc.* 261
32,560
Allergan, Inc. 225
18,241
AmerisourceBergen Corp.* 192
11,266
Amgen Inc.* 2,170
139,205
Applera Corp-Applied Biosystems Group* 345
7,214
Bard (C.R.) Inc. 179
11,452
Bausch & Lomb 91
5,866
Baxter International Inc. 1,047
36,163
Becton, Dickinson 433
24,594
Biogen Idec Inc* 580
38,634
Biomet, Inc. 435
18,875
Boston Scientific 1,427
50,730
Bristol-Myers Squibb* 3,319
85,033
Cardinal Health, Inc. 735
42,740
Caremark Rx 781
30,795
Chiron Corporation* 323
10,766
CIGNA Corp.* 242
19,740
Express Scripts, Inc.* 133
10,167
Fisher Scientific* 200
12,476
Forest Laboratories 632
28,352
Genzyme Corp. 387
22,473
Gilead Sciences, Inc.* 732
25,613
Guidant Corp. 536
38,645
HCA Inc. 830
33,167
Health Management Assoc. 416
9,452
Hospira Inc. 267
8,945
Humana Inc.* 276
8,193
IMS Health Inc. 402
9,330
Johnson & Johnson 5,066
321,285
King Pharmaceuticals 413
5,121
Laboratory Corp. of America Holding 225
11,210
Lilly (Eli) & Co.* 1,929
109,471
Manor Care Inc. 152
5,385
McKesson Corp. 500
15,730
Medco Health Solutions Inc. 463
19,261
MedImmune, Inc.* 425
11,522
Medtronic Inc.* 2,070
102,817
Merck & Co. 3,793
$ 121,907
Millipore Corp. 85
4,234
Mylan Laboratories 459
8,115
PerkinElmer 212
4,768
Pfizer, Inc. 12,923
347,499
Quest Diagnostics 177
16,912
Schering-Plough 2,514
52,492
St Jude Medical 602
25,242
Stryker Corp. 684
33,003
Tenet Healthcare Corp. 796
8,740
Thermo Electron 283
8,544
United Health Group Inc.* 1,052
92,608
Waters Corporation 205
9,592
Watson Pharmaceuticals* 186
6,103
WellPoint Inc.* 503
57,845
Wyeth 2,276
96,935
Zimmer Holdings 417
33,410
- ----------------
2,444,667
- ----------------
INDUSTRIALS - 6.80%
3M Company 1,335
109,563
Allied Waste Industries 408
3,786
American Power Conversion Corporation 342
7,319
American Standard 368
15,206
Apollo Group, Inc.* 302
24,374
Avery Dennison Corp.* 189
11,334
Block H&R 299
14,651
Boeing Company* 1,440
74,549
Burlington Northern Santa Fe 633
29,947
Caterpillar Inc. 584
56,946
Cendant Corporation 1,742
40,728
Cintas Corporation 293
12,851
Cooper Industries, Ltd.* 158
10,727
CSX Corp. 367
14,709
Cummins Inc. 74
6,200
Danaher Corp. 526
30,198
Deere & Co. 426
31,694
Delta Air Lines 214
1,601
Donnelley (R.R.) & Sons 371
13,093
Dover Corp. 347
14,553
Eaton Corp. 258
18,669
Emerson Electric* 721
50,542
Equifax Inc. 234
6,575
FedEx Corporation 511
50,328
Fluor Corp.* 142
7,740
General Dynamics* 340
35,564
General Electric 18,016
657,584
Goodrich Corporation 201
6,561
Grainger (W.W.) Inc.* 155
10,326
Honeywell International Inc. 1,467
51,946
Illinois Tool Works 529
49,028
Ingersoll-Rand Co. Ltd. 296
23,769
ITT Industries, Inc.* 159
13,428
L-3 Communications Holdings* 175
12,817
Lockheed Martin Corp. 766
42,551
Masco Corp. 748
27,324
Monster Worldwide 200
6,728
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
38
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
INDUSTRIALS - 6.80% (CONTINUED)
Navistar International Corp. 120
$ 5,278
Norfolk Southern Corp. 670
24,247
Northrop Grumman Corp. 584
31,746
PACCAR Inc. 300
24,144
Pall Corp.* 214
6,195
Parker-Hannifin* 205
15,527
Pitney-Bowes 395
18,281
Power-One Inc. 143
1,276
Raytheon Co. 734
28,501
Robert Half International 293
8,624
Rockwell Automation, Inc. 318
15,757
Rockwell Collins 303
11,950
Ryder System* 112
5,350
Southwest Airlines 1,350
21,978
Textron Inc. 235
17,343
Tyco International 3,425
122,410
Union Pacific 443
29,792
United Parcel Service 1,924
164,425
United Technologies 877
90,638
Waste Management Inc. 991
29,671
- ----------------
2,268,642
- ----------------
INFORMATION TECHNOLOGY - 9.33%
ADC Telecommunications 1,382
3,704
Adobe Systems Incorporated 408
25,598
Advanced Micro Devices 605
13,322
Affiliated Computer 233
14,024
Agilent Technologies 822
19,810
Altera Corporation* 640
13,248
Analog Devices 642
23,703
Andrew Corp. 174
2,372
Apple Computer, Inc.* 649
41,796
Applied Materials, Inc.* 2,877
49,197
Applied Micro Circuits* 532
2,240
Autodesk, Inc. 388
14,725
Automatic Data Processing Inc. 1,008
44,705
Avaya Inc.* 685
11,781
BMC Software 381
7,087
Broadcom Corporation* 497
16,042
Ciena Corp. 695
2,320
Cisco Systems, Inc.* 11,540
222,722
Citrix Systems, Inc.* 291
7,138
Computer Associates International 1,000
31,060
Computer Sciences Corp. 321
18,095
Compuware Corp.* 661
4,277
Comverse Technology, Inc.* 334
8,166
Convergys Corp. 245
3,673
Corning Inc. 2,317
27,271
Dell Inc.* 4,305
181,413
Electronic Arts Inc.* 517
31,889
Electronic Data Systems* 828
19,127
EMC Corp. 4,173
62,053
First Data 1,487
63,257
Fiserv, Inc.* 333
13,383
Freescale Semiconductor Inc. 666
12,228
Gateway Inc. 636
3,822
Hewlett-Packard 5,207
109,191
Intel Corporation 11,039
$ 258,202
International Business Machines 2,876
283,516
Intuit Inc.* 328
14,435
Jabil Circuit 343
8,773
JDS Uniphase Corporation* 2,459
7,795
KLA-Tencor Corporation* 336
15,650
Lexmark International Inc 222
18,870
Linear Technology Corporation 529
20,504
LSI Logic 654
3,584
Lucent Technologies* 7,334
27,576
Maxim Integrated Products, Inc. 550
23,315
Mercury Interactive Corporation* 158
7,197
Micron Technology 1,043
12,881
Microsoft Corporation 18,587
496,459
Molex Incorporated 324
9,720
Motorola Inc. 4,003
68,852
National Semiconductor 613
11,003
NCR Corp.* 162
11,215
Network Appliance, Inc.* 594
19,733
Novell Inc. 661
4,462
Novellus Systems, Inc.* 253
7,056
NVIDIA Corp. 284
6,691
Oracle Corporation* 8,867
121,655
Parametric Technology 458
2,698
Paychex, Inc. 645
21,982
PeopleSoft, Inc.* 595
15,756
PMC-Sierra Inc. 302
3,398
QLogic Corporation* 160
5,877
QUALCOMM Incorporated 2,766
117,278
Sabre Holding Corp. 238
5,274
Sanmina-SCI Corporation* 891
7,547
Scientific-Atlanta 262
8,649
Siebel Systems, Inc.* 858
9,009
Solectron 1,638
8,731
Sun Microsystems, Inc.* 5,677
30,542
SunGard Data Systems* 496
14,052
Symantec Corporation* 1,066
27,460
Symbol Technologies* 401
6,937
Tektronix Inc. 145
4,380
Tellabs, Inc.* 710
6,099
Teradyne Inc.* 332
5,667
Texas Instruments* 2,956
72,777
Unisys Corp. 569
5,792
VERITAS Software Corporation* 738
21,070
Xerox Corp. 1,365
23,218
Xilinx, Inc. 593
17,582
Yahoo! Inc.* 2,297
86,551
- ----------------
3,111,909
- ----------------
MATERIALS - 1.79%
Air Products & Chemicals* 388
22,492
Alcoa Inc 1,484
46,627
Allegheny Technologies Inc* 159
3,446
Ball Corp. 194
8,532
Bemis Company 183
5,323
Dow Chemical 1,599
79,166
Du Pont (E.I.) 1,707
83,728
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
39
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
MATERIALS - 1.79% (CONTINUED)
Eastman Chemical* 133
$ 7,678
Ecolab Inc.* 439
15,422
Engelhard Corp. 213
6,533
Freeport-McMoran Copper & Gold 303
11,584
Georgia-Pacific Group* 436
16,341
Great Lakes Chemical 87
2,479
Hercules, Inc. 188
2,792
International Flavors & Fragrances 162
6,940
International Paper 829
34,818
Louisiana Pacific 186
4,974
MeadWestvaco Corporation 344
11,658
Monsanto Co. 454
25,220
Newmont Mining Corp. 757
33,618
Nucor Corp.* 270
14,132
Pactiv Corp. 262
6,626
Phelps Dodge* 160
15,827
PPG Industries* 293
19,971
Praxair, Inc. 555
24,503
Rohm & Haas 383
16,940
Sealed Air Corp. 144
7,671
Sigma-Aldrich Corporation 118
7,134
Temple-Inland* 95
6,498
United States Steel Corp. 190
9,738
Vulcan Materials 175
9,557
Weyerhaeuser Corp. 412
27,695
- ----------------
595,663
- ----------------
TELECOMMUNICATIONS SERVICES - 1.88%
ALLTEL Corp. 527
30,967
AT&T Corp. 1,355
25,826
BellSouth 3,133
87,066
Century Telephone 238
8,442
Citizens Communications 491
6,771
Nextel Communications, Inc.* 1,892
56,760
Qwest Communications International 3,053
13,555
SBC Communications Inc. 5,655
145,729
Sprint Corp. FON 2,436
60,535
Verizon Communications* 4,729
191,572
- ----------------
627,223
- ----------------
UTILITIES - 1.69%
AES Corp.* 1,088
14,873
Allegheny Energy 217
4,277
Ameren Corporation 296
14,841
American Electric Power 676
23,214
Calpine Corp. 713
2,809
CenterPoint Energy 525
5,933
CINergy Corp. 308
12,822
CMS Energy 260
2,717
Consolidated Edison 411
17,981
Constellation Energy Group 288
12,588
Dominion Resources 513
34,751
DTE Energy Co. 296
12,766
Duke Energy 1,561
39,540
Dynegy Inc. 647
2,989
Edison International 557
17,841
Entergy Corp. 394
26,630
Exelon Corp. 1,129
49,754
FirstEnergy Corp. 563
$ 22,244
FPL Group 316
23,621
Keyspan Energy 274
10,809
NICOR Inc.* 76
2,807
NiSource Inc. 447
10,183
Peoples Energy 65
2,857
PG&E Corp. 716
23,828
Pinnacle West Capital 157
6,973
PPL Corp. 304
16,197
Progress Energy, Inc. 421
19,047
Public Serv. Enterprise Inc. 404
20,915
Sempra Energy 393
14,415
Southern Co.* 1,259
42,202
TECO Energy 300
4,603
TXU Corp. 519
33,507
Xcel Energy Inc 682
12,412
- ----------------
562,946
- ----------------
Total Common Stocks
(cost $18,151,823)
19,306,203
- ----------------
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY OBLIGATIONS - 10.65%
U.S. TREASURY NOTES - 10.65%
6.500% due 05/15/05 $ 400,000
$ 405,844
5.750% due 11/15/05 475,000
487,172
7.000% due 07/15/06 250,000
265,059
6.125% due 08/15/07 100,000
107,320
5.500% due 02/15/08 200,000
213,109
4.750% due 11/15/08 200,000
209,477
3.375% due 12/15/08 84,000
83,734
6.000% due 08/15/09 50,000
55,145
5.750% due 08/15/10 180,000
198,176
4.375% due 08/15/12 100,000
102,387
3.625% due 05/15/13 234,000
226,751
6.250% due 08/15/23 250,000
292,686
6.125% due 11/15/27 400,000
467,172
5.250% due 11/15/28 200,000
209,625
6.125% due 08/15/29 195,000
228,942
- ----------------
Total U.S. Treasury Obligations
(cost $3,523,539)
3,552,599
- ----------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 5.26%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 5.26%
3.500% due 09/15/07 1,750,000
1,755,000
- ----------------
Total U.S. Government Agency
Obligations (cost $1,793,102)
1,755,000
- ----------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
40
<Page>
<Table>
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
MORTGAGE-BACKED SECURITIES - 12.54%
FNCL (7.000% due 07/01/29) $ 545,122
$ 578,345
FNCL (6.500% due 08/01/32) 181,361
190,360
FNCL (6.000% due 08/01/33) 383,700
396,932
FNCL (5.500% due 07/01/33) 386,278
392,490
FNCL (5.500% due 11/01/33) 672,043
682,850
FGCI (5.000% due 05/01/18) 850,075
863,966
FGCI (4.500% due 09/01/18) 172,798
172,632
G2SF (5.500% due 07/20/34) 886,534
905,075
- ----------------
Total Mortgage-Backed Securities
(cost $4,200,552)
4,182,650
- ----------------
CORPORATE BONDS - 9.26%
BANK,BANK HOLDING COMPANIES &
OTHER BANK SERVICES - 1.55%
Key Bank
(5.000% due 07/17/07) 315,000
326,877
UPC
(4.375% due 12/01/10) 190,000
189,659
- ----------------
516,536
- ----------------
CAPITAL GOODS - 1.34%
Burlington Resources
(6.500% due 12/01/11) 150,000
167,924
Honeywell International
(7.500% due 03/01/10) 125,000
144,418
Masco Corp.
( 5.875% due 07/15/12) 125,000
133,962
- ----------------
446,304
- ----------------
CONSUMER CYCLICALS -1.84%
Amgen
(6.500% due 12/01/07) 150,000
162,154
Ford Motor Credit Corp.
(6.375% due 02/01/29) 500,000
449,968
- ----------------
612,122
- ----------------
CONSUMER NON-DURABLE - 0.72%
Campbell Soup Co.
(5.875% due 10/01/08) 225,000
240,655
- ----------------
ENERGY - 0.44%
Colonial Pipeline Co.
(7.750% due 11/01/10)(2) $ 125,000
$ 147,070
- ----------------
MANUFACTURING - 2.42%
Champion International Corp.
(7.200% due 11/01/26) 450,000
524,490
Weyerhauser Co.
(6.750% due 03/15/12) 250,000
281,708
- ----------------
806,198
- ----------------
TELECOMMUNICATION - 0.95%
Public Services Inc.
(6.625% due 02/15/11) 150,000
166,291
TIAA Global Market
(4.125% due 11/15/07)(2) 150,000
151,913
- ----------------
318,204
- ----------------
Total Corporate Bonds
(cost $3,030,518)
3,087,089
- ----------------
<Caption>
SHARES
VALUE
------------------
- -----------------
SHORT-TERM INVESTMENTS(4) - 5.67%
NORTHERN TRUST DIVERSIFIED ASSETS
PORTFOLIO - 2.98% 995,864
$ 995,864
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY BILL - 2.69%
(2.240% due 03/17/05) $ 900,000
$ 896,180
- ----------------
Total Short-Term Investments
(cost $1,891,804)
1,892,044
- ----------------
TOTAL INVESTMENTS - 101.26%
(cost $32,591,338)(1)
33,775,585
- ----------------
NORTHERN INSTITUTIONAL LIQUID ASSET
PORTFOLIO(3) - 11.60%
3,869,885
- ----------------
OTHER ASSETS AND LIABILITIES - (12.86%)
(4,288,987)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 33,356,483
================
</Table>
* Non-income producing
(1) For federal income tax purposes, cost is $32,628,898 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$2,762,153 and ($1,615,466), respectively, with a net appreciation
/
depreciation of $1,146,687.
(2) Security exempt from registration under Rule 144(a) of the
Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(3) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$5,920,016,
$3,869,885, and $2,153,764, respectively.
(4) Securities and other assets with an aggregate value of $1,213,700
have been
segregated with the custodian or designated to cover margin
requirements for
the open futures contracts as of December 31, 2004:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
TYPE CONTRACTS (DEPRECIATION)
- -----------------------------------------------------------------
S&P 500 Index (03/05) 4 $ 8,300
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
41
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL STATEMENTS BALANCED INDEX
PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
33,775,585
Collateral for securities loaned, at fair value
3,869,885
Receivables:
Shares sold
2,450
Interest and dividends
159,171
Prepaid expenses and other
1,104
--------
- --------
37,808,195
--------
- --------
LIABILITIES
Payables:
Shares redeemed
542,674
Payable upon return of securities loaned
3,869,885
Administration expenses
2,046
Directors' fees
1,130
Custodian fees
6,579
Fund accounting fees
7,116
Professional fees
15,318
Royalty fees
2,292
Variation margin
1,233
Other accrued expenses
3,439
--------
- --------
4,451,712
--------
- --------
NET ASSETS*
Paid-in capital
33,006,288
Accumulated undistributed net
investment income
183,382
Accumulated net realized gain / (loss)
on investments and futures contracts
(1,025,734)
Net unrealized appreciation / (depreciation)
on investments and futures contracts
1,192,547
--------
- --------
$
33,356,483
================
Shares authorized ($.10 par value)
20,000,000
Shares outstanding
732,278
Net asset value, offering and redemption
price per share $
45.55
Investments at cost $
32,591,338
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $
183,382
Unrealized appreciation $
1,146,687
</Table>
<Table>
<Caption>
CAPITAL LOSS CARRYFORWARD EXPIRING DECEMBER 31:
- ---------------------------------------------------------------
2009 2010 2011 2012
--------- ------------- ----------- --------------
$ -- $ (350,093) $ -- $ (629,782)
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
495,164
Dividends
363,138
Other income
4,639
--------
- --------
862,941
--------
- --------
EXPENSES
Advisory fees
91,786
Administration expenses
30,595
Custodian fees and expenses
12,208
Fund accounting fees
42,109
Professional fees
17,367
Directors' fees
5,172
Transfer agent fees
8,565
Royalty fee
2,295
Other expenses
6,112
--------
- --------
216,209
Reimbursements and waivers
(32,604)
--------
- --------
183,605
--------
- --------
NET INVESTMENT INCOME / (LOSS)
679,336
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
(780,186)
Net realized gain / (loss) on futures contracts
174,302
--------
- --------
(605,884)
--------
- --------
Net change in unrealized appreciation /
(depreciation) on investments and
futures contracts
1,833,724
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
1,227,840
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
1,907,176
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- -----------------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE LIMIT(1) WAIVER
REIMBURSEMENT
- -----------------------------------------------------------------------
- --------
0.30% 0.10% 0.30% $ -- $
32,604
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
42
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
679,336 $ 251,950
Net realized gain / (loss) on investments and futures
(605,884) 221,827
Net change in unrealized appreciation / (depreciation)
on investments and futures contracts
1,833,724 1,311,205
--------
- -------- ----------------
1,907,176 1,784,982
--------
- -------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(554,898) (266,449)
--------
- -------- ----------------
(554,898) (266,449)
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
26,260,814 977,184
Reinvestment of distributions
554,898 266,449
Payments for shares redeemed
(6,478,995) (1,733,072)
--------
- -------- ----------------
20,336,717 (489,439)
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
21,688,995 1,029,094
NET ASSETS
Beginning of period
11,667,488 10,638,394
--------
- -------- ----------------
End of period $
33,356,483 $ 11,667,488
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $
183,382 $ 38,835
================ ================
FUND SHARE TRANSACTIONS
Sold
596,795 24,635
Reinvestment of distributions
12,889 6,880
Redeemed
(148,409) (44,231)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
461,275 (12,716)
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
14,613,197 $ 28,482
U.S. Government Securities
8,744,492 2,631,308
Corporate Bonds
2,295,705 215,287
--------
- -------- ----------------
$
25,653,394 $ 2,875,077
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
3,160,132 $ 34,615
U.S. Government Securities
2,563,036 1,797,524
Corporate Bonds
316,554 686,851
--------
- -------- ----------------
$
6,039,722 $ 2,518,990
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income $
554,898 $ 266,449
--------
- -------- ----------------
$
554,898 $ 266,449
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
43
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
NASDAQ-100 INDEX PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the investment
performance of U.S. common stocks, as represented by the Nasdaq-100
Index (the
"Index").
STRATEGY - The Summit Pinnacle Nasdaq-100 Index Portfolio (the
"Portfolio") will
attempt to achieve, in both rising and falling markets, a correlation
of at
least 95% between the total return of its net assets before expenses
and the
total return of the Index.
MANAGER'S COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return was
10.09%
(after waivers and reimbursements, but before the impact of any product
or
contract-level fees). This compares to a 10.74% total return for the
Index. The
difference of 0.65% is referred to as "tracking error" and is largely
attributed
to the Portfolio's operating expenses. These expenses represent the
Portfolio's
costs for advisory, administration, accounting, custody and other
services. The
remaining difference can be caused by a number of factors, including
the timing
and size of cash flows into and out of the Portfolio; brokers'
commissions or
other trading costs; and holding security positions in amounts that are
different than the weightings in the Index, among others. While an
exact
replication of the capitalization weightings of securities in the Index
is not
feasible, the Portfolio's objectives and strategies call for a
correlation of at
least 95% between the Portfolio's pre-expense total return and that of
the
Index. The Portfolio achieved this level of correlation for the period
presented.
FUND DATA
<Table>
Manager: Team Managed
Inception Date: April 27, 2000
Total Net Assets: $27.61 Million
Number of Equity Holdings: 100
Median Cap Size: $7.83 Billion
Average Price-to-book Ratio: 4.33x
Dividend Yield: 0.30%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit Nasdaq-100 Index Portfolio - Total Return
<Table>
<Caption>
1-YEAR 5-YEAR SINCE INCEPTION
10.09% 0.76% -15.43%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
<Table>
<Caption>
SUMMIT NASDAQ-100 INDEX PORTFOLIO NASDAQ-100 INDEX
Mar-2000 $ 10,000 $ 10,000
Apr-2000 $ 10,760 $ 10,763
May-2000 $ 9,470 $ 9,482
Jun-2000 $ 10,730 $ 10,737
Jul-2000 $ 10,300 $ 10,296
Aug-2000 $ 11,630 $ 11,633
Sep-2000 $ 10,170 $ 10,187
Oct-2000 $ 9,360 $ 9,365
Nov-2000 $ 7,150 $ 7,152
Dec-2000 $ 6,670 $ 6,681
Jan-2001 $ 7,380 $ 7,399
Feb-2001 $ 5,420 $ 5,446
Mar-2001 $ 4,470 $ 4,490
Apr-2001 $ 5,270 $ 5,295
May-2001 $ 5,110 $ 5,137
Jun-2001 $ 5,190 $ 5,224
Jul-2001 $ 4,770 $ 4,806
Aug-2001 $ 4,160 $ 4,195
Sep-2001 $ 3,310 $ 3,335
Oct-2001 $ 3,860 $ 3,896
Nov-2001 $ 4,520 $ 4,557
Dec-2001 $ 4,460 $ 4,503
Jan-2002 $ 4,380 $ 4,426
Feb-2002 $ 3,836 $ 3,881
Mar-2002 $ 4,096 $ 4,149
Apr-2002 $ 3,600 $ 3,647
May-2002 $ 3,406 $ 3,451
Jun-2002 $ 2,958 $ 3,003
Jul-2002 $ 2,718 $ 2,748
Aug-2002 $ 2,662 $ 2,692
Sep-2002 $ 2,350 $ 2,378
Oct-2002 $ 2,794 $ 2,827
Nov-2002 $ 3,162 $ 3,189
Dec-2002 $ 2,788 $ 2,813
Jan-2003 $ 2,786 $ 2,809
Feb-2003 $ 2,864 $ 2,887
Mar-2003 $ 2,888 $ 2,913
Apr-2003 $ 3,136 $ 3,163
May-2003 $ 3,394 $ 3,426
Jun-2003 $ 3,404 $ 3,437
Jul-2003 $ 3,614 $ 3,653
Aug-2003 $ 3,794 $ 3,837
Sep-2003 $ 3,686 $ 3,730
Oct-2003 $ 4,004 $ 4,055
Nov-2003 $ 4,026 $ 4,079
Dec-2003 $ 4,144 $ 4,204
Jan-2004 $ 4,214 $ 4,277
Feb-2004 $ 4,148 $ 4,213
Mar-2004 $ 4,056 $ 4,122
Apr-2004 $ 3,950 $ 4,016
May-2004 $ 4,132 $ 4,203
Jun-2004 $ 4,270 $ 4,348
Jul-2004 $ 3,942 $ 4,015
Aug-2004 $ 3,856 $ 3,927
Sep-2004 $ 3,978 $ 4,053
Oct-2004 $ 4,184 $ 4,266
Nov-2004 $ 4,424 $ 4,512
Dec-2004 $ 4,562 $ 4,656
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
Microsoft Corporation 6.68%
QUALCOMM Incorporated 5.60%
eBay Inc. 3.84%
Intel Corporation 3.44%
Cisco Systems, Inc. 3.04%
Nextel Communications, Inc. 2.80%
Amgen Inc. 2.57%
Dell Inc. 2.53%
Apple Computer, Inc. 2.36%
Starbucks Corporation 2.33%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
Communications 28.9%
Consumer Cyclical 9.4%
Consumer Non-Cyclical 13.7%
Industrial 2.5%
Technology 36.4%
Short-Term, Futures, & Other 9.1%
</Table>
"Nasdaq" and related marks are trademarks or service marks of The
Nasdaq Stock
Market, Inc. and have been licensed for use for certain purposes by
Summit
Mutual Funds, Inc. and the Nasdaq-100 Index Portfolio. Nasdaq makes no
warranty,
express or implied, and bears no liability with respect to Summit
Mutual Funds,
its use, or any data included therein.
44
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
NASDAQ-100 INDEX PORTFOLIO FINANCIAL
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
PERIOD FROM
APRIL 27, 2000(1)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------
- ---------------------------------------------------------
2004 2003 2002 2001 2000
------
- ---------------------------------------------------------
Net asset value, beginning of period $
20.72 $ 13.94 $ 22.30 $ 33.35 $ 50.00
------
- --- --------- --------- --------- ---------------
Investment Activities:
Net investment income / (loss)
0.12 (0.04) (0.07) -- (0.05)
Net realized and unrealized gains / (losses)
1.97 6.82 (8.29) (11.05) (16.60)
------
- --- --------- --------- --------- ---------------
Total from Investment Activities
2.09 6.78 (8.36) (11.05) (16.65)
------
- --- --------- --------- --------- ---------------
Net asset value, end of period $
22.81 $ 20.72 $ 13.94 $ 22.30 $ 33.35
========= ========= ========= ========= ===============
Total return
10.09% 48.64% -37.49% -33.13% -33.30%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (2)
0.65% 0.65% 0.65% 0.65% 0.64%(3)
Ratio of expenses to average net assets - gross
0.79% 0.91% 1.11% 0.97% 0.88%(3)
Ratio of net investment income / (loss) to average net assets
0.61% -0.31% -0.43% -0.21% -0.17%(3)
Portfolio turnover rate
4.19% 3.97% 11.79% 5.49% 14.69%(3)
Net assets, end of period (000's) $
27,607 $ 23,350 $ 9,583 $ 14,560 $ 8,577
</Table>
(1) COMMENCEMENT OF OPERATIONS.
(2) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(3) ANNUALIZED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
45
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS NASDAQ-100 INDEX
PORTFOLIO
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
COMMON STOCKS - 91.46%
BASIC INDUSTRIES - 0.58%
Sigma-Aldrich Corporation 1,254
$ 75,816
Smurfit-Stone Container Corporation* 4,567
85,312
- ----------------
161,128
- ----------------
COMMUNICATIONS - 28.94%
Amazon.com, Inc.* 5,002
221,539
Check Point Software Technologies Ltd.* 4,588
113,002
Cisco Systems, Inc.* 43,525
840,033
Comcast Corporation* 17,891
595,412
Comverse Technology, Inc.* 3,761
91,956
eBay Inc.* 9,115
1,059,892
EchoStar Communications Corporation 4,360
144,926
IAC/InterActiveCorp* 13,914
384,305
JDS Uniphase Corporation* 30,679
97,252
Juniper Networks, Inc.* 6,770
184,076
Lamar Advertising Company* 1,569
67,122
Level 3 Communications, Inc.* 12,594
42,694
Liberty Media International, Inc.* 3,290
152,097
LM Ericsson Telephone Company* 3,250
102,343
MCI, Inc. 6,450
130,032
Nextel Communications, Inc.* 25,802
774,060
NTL Incorporated* 1,780
129,869
QUALCOMM Incorporated 36,436
1,544,886
Sirius Satellite Radio Inc.* 25,480
194,922
Symantec Corporation* 13,166
339,156
Tellabs, Inc.* 4,478
38,466
VeriSign, Inc.* 4,290
143,801
XM Satellite Radio Holdings Inc.* 3,930
147,847
Yahoo! Inc.* 11,916
448,995
- ----------------
7,988,683
- ----------------
CONSUMER CYCLICAL - 9.34%
Bed Bath & Beyond Inc.* 7,499
298,685
CDW Corporation 1,630
108,151
Cintas Corporation 3,860
169,300
Costco Wholesale Corporation 4,541
219,830
Dollar Tree Stores, Inc.* 2,086
59,826
Fastenal Company 1,365
84,029
KMart Holding Corporation* 1,800
178,110
PACCAR Inc. 3,694
297,293
PETsMART, Inc. 2,665
94,687
Ross Stores, Inc. 2,808
81,067
Staples, Inc. 6,265
211,193
Starbucks Corporation* 10,308
642,807
Wynn Resorts, Limited* 1,990
133,171
- ----------------
2,578,149
- ----------------
CONSUMER NON-CYCLICAL - 13.67%
Amgen Inc.* 11,049
708,793
Apollo Group, Inc.* 3,560
287,328
Biogen Idec Inc* 6,881
458,343
Biomet, Inc. 6,483
281,297
Career Education Corporation* 1,919
76,760
Chiron Corporation* 4,944
164,784
DENTSPLY International Inc. 1,431
$ 80,422
Express Scripts, Inc.* 1,321
100,977
Genzyme Corp. 5,293
307,365
Gilead Sciences, Inc.* 7,940
277,821
Invitrogen Corporation* 903
60,618
Lincare Holdings Inc.* 1,785
76,130
MedImmune, Inc.* 4,990
135,279
Millennium Pharmaceuticals, Inc.* 6,224
75,435
Patterson Companies Inc.* 2,466
107,000
Paychex, Inc. 6,386
217,635
Teva Pharmaceutical Industries Limited 8,426
251,600
Whole Foods Market, Inc. 1,109
105,743
- ----------------
3,773,330
- ----------------
INDUSTRIAL - 2.51%
American Power Conversion Corporation 3,760
80,464
C.H. Robinson Worldwide, Inc. 1,572
87,277
Expeditors International of Washington, Inc. 1,942
108,519
Flextronics International Ltd.* 11,334
156,636
Garmin Ltd. 1,887
114,805
Molex Incorporated 1,858
55,740
Sanmina-SCI Corporation* 10,407
88,148
- ----------------
691,589
- ----------------
TECHNOLOGY - 36.42%
Adobe Systems Incorporated 4,383
274,989
Altera Corporation* 10,036
207,745
Apple Computer, Inc.* 10,112
651,213
Applied Materials, Inc.* 16,674
285,125
ATI Technologies Inc.* 4,523
87,701
Autodesk, Inc. 4,480
170,016
BEA Systems, Inc.* 7,043
62,401
Broadcom Corporation* 4,392
141,774
Citrix Systems, Inc.* 3,671
90,050
Cognizant Technology Solutions Corporation* 2,350
99,476
Dell Inc.* 16,581
698,723
Electronic Arts Inc.* 5,656
348,862
Fiserv, Inc.* 4,563
183,387
Intel Corporation 40,556
948,605
Intersil Corporation 2,641
44,210
Intuit Inc.* 4,560
200,686
KLA-Tencor Corporation* 4,572
212,964
Lam Research Corporation* 2,539
73,402
Linear Technology Corporation 7,863
304,770
Marvell Technology Group, Ltd.* 4,558
161,672
Maxim Integrated Products, Inc. 8,474
359,213
Mercury Interactive Corporation* 1,675
76,296
Microchip Technology Incorporated 3,248
86,592
Microsoft Corporation 69,024
1,843,631
Network Appliance, Inc.* 7,001
232,573
Novellus Systems, Inc.* 2,925
81,578
Oracle Corporation* 41,040
563,069
PeopleSoft Inc.* 9,976
264,164
Pixar* 1,047
89,634
QLogic Corporation* 1,815
66,665
Research in Motion Limited* 3,422
282,041
SanDisk Corporation* 2,748
68,618
Siebel Systems, Inc.* 10,938
114,849
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
46
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
TECHNOLOGY - 36.42% (CONTINUED)
Sun Microsystems, Inc.* 26,761
$ 143,974
Synopsys, Inc.* 2,705
53,072
VERITAS Software Corporation* 8,012
228,743
Xilinx, Inc. 8,552
253,567
- ----------------
10,056,050
- ----------------
Total Common Stocks
(cost $23,701,573)
25,248,929
- ----------------
UNIT INVESTMENT TRUST - 1.86%
Nasdaq 100 Shares 12,874
513,801
- ----------------
Total Unit Investment Trust
(cost $360,359)
513,801
- ----------------
SHORT-TERM INVESTMENTS(3) - 7.00%
NORTHERN TRUST DIVERSIFIED ASSETS
PORTFOLIO - 1.23% 338,266
338,266
- ----------------
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY BILL - 5.77%
(1.000% due 09/16/04) $ 1,600,000
$ 1,593,210
- ----------------
Total Short-Term Investments
(cost $1,931,049)
1,931,476
- ----------------
TOTAL INVESTMENTS - 100.32%
(cost $25,992,981)(1)
27,694,206
- ----------------
NORTHERN INSTITUTIONAL LIQUID ASSET
PORTFOLIO(2) - 13.76%
3,798,596
- ----------------
OTHER ASSETS AND LIABILITIES - (14.08%)
(3,886,218)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 27,606,584
================
</Table>
* Non-income producing
(1) For federal income tax purposes, cost is $26,880,561 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$5,152,409 and ($4,338,764), respectively, with a net appreciation
/
depreciation of $813,645.
(2) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$4,017,808,
$3,798,596, and $307,227, respectively.
(3) Securities and other assets with an aggregate value of $2,084,480
have been
segregated with the custodian or designated to cover margin
requirements for
the open futures contracts as of December 31, 2004:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
TYPE CONTRACTS
(DEPRECIATION)
- -----------------------------------------------------------------------
- -----------------
Nasdaq-100 Index (03/05) 9
$ (7,695)
Nasdaq-100 Index Mini (03/05) 19
$ (2,617)
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
47
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL STATEMENTS NASDAQ-100 INDEX
PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
27,694,206
Collateral for securities loaned, at fair value
3,798,596
Receivables:
Shares sold
39,749
Securities sold
- --
Interest and dividends
12,065
Variation margin
640
Prepaid expenses and other
800
--------
- --------
31,546,056
--------
- --------
LIABILITIES
Payables:
Investment securities purchased
96,726
Shares redeemed
7,065
Payable upon return of securities
loaned
3,798,596
Bank overdraft
12
Advisory fees
2,423
Administration expenses
6,313
Directors' fees
1,052
Custodian fees
4,439
Fund accounting fees
5,482
Professional fees
13,524
Other accrued expenses
3,840
--------
- --------
3,939,472
--------
- --------
NET ASSETS*
Paid-in capital
33,158,286
Accumulated net invesments
income / (loss)
150,050
Accumulated net realized gain / (loss)
on investments and futures contracts
(7,392,665)
Net unrealized appreciation / (depreciation)
on investments and futures contracts
1,690,913
--------
- --------
$
27,606,584
================
Shares authorized ($.10 par value)
20,000,000
Shares outstanding
1,210,100
Net asset value, offering and redemption
price per share $
22.81
Investments at cost $
25,992,981
*FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $
150,050
Unrealized appreciation $
813,645
</Table>
<Table>
<Caption>
CAPITAL LOSS CARRYFORWARD EXPIRING DECEMBER 31,
- -----------------------------------------------------------------------
- ----
2008 2009 2010 2011 2012
---------- ------------ ------------ ---------- --------
- -
$ (905,274) $ (1,618,274) $ (3,618,754) $ (231,064) $
(139,726)
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
24,808
Dividends
282,408
Foreign dividend taxes withheld
(321)
Other income
4,213
--------
- --------
311,108
--------
- --------
EXPENSES
Advisory fees
86,724
Administration expenses
24,778
Custodian fees and expenses
11,391
Fund accounting fees
31,606
Professional fees
15,265
Directors' fees
3,868
Transfer agent fees
9,310
Royalty fee
5,014
Other expenses
6,727
--------
- --------
194,683
Reimbursements and waivers
(33,625)
--------
- --------
161,058
--------
- --------
NET INVESTMENT INCOME / (LOSS)
150,050
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
(328,474)
Net realized gain / (loss) on
futures contracts
135,246
--------
- --------
(193,228)
--------
- --------
Net change in unrealized appreciation /
(depreciation) on investments and
futures contracts
2,500,698
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
2,307,470
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
2,457,520
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- --------------------------------------
ADMINISTRATION EXPENSE
ADVISORY FEE FEE LIMIT(1) WAIVER REIMBURSEMENT
- ------------------------------------------------------------------
0.35% 0.10% 0.30% $ -- $ 33,625
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
48
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
150,050 $ (47,918)
Net realized gain / (loss) on investments and futures
(193,228) (335,435)
Net change in unrealized appreciation / (depreciation)
on investments and futures contracts
2,500,698 6,386,730
--------
- -------- ----------------
2,457,520 6,003,377
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
8,977,661 15,025,665
Payments for shares redeemed
(7,178,214) (7,262,288)
--------
- -------- ----------------
1,799,447 7,763,377
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
4,256,967 13,766,754
NET ASSETS
Beginning of period
23,349,617 9,582,863
--------
- -------- ----------------
End of period $
27,606,584 $ 23,349,617
================ ================
ACCUMULATED NET INVESTMENT INCOME / (LOSS) $
150,050 $ --
================ ================
FUND SHARE TRANSACTIONS
Sold
435,537 887,236
Redeemed
(352,288) (447,781)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
83,249 439,455
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
1,794,249 $ 9,016,870
--------
- -------- ----------------
$
1,794,249 $ 9,016,870
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
938,494 $ 529,604
--------
- -------- ----------------
$
938,494 $ 529,604
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
49
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the investment
performance of U.S. common stocks, as represented by the Russell 2000
Index (the
"Index").
STRATEGY - The Summit Pinnacle Russell 2000 Small Cap Index Portfolio
(the
"Portfolio") will attempt to achieve, in both rising and falling
markets, a
correlation of at least 95% between the total return of its net assets
before
expenses and the total return of the Index.
MANAGERS' COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return was
17.72%
(after waivers and reimbursements, but before the impact of any product
or
contract-level fees). This compares to an 18.33% total return for the
Index. The
difference of 0.61% is referred to as "tracking error". One component
of the
difference is attributed to the Portfolio's operating expenses. These
expenses
represent the Portfolio's costs for advisory, administration,
accounting,
custody and other services. The remaining difference can be caused by a
number
of factors, including the timing and size of cash flows into and out of
the
Portfolio; brokers' commissions or other trading costs; and holding
security
positions in amounts that are different than the weightings in the
Index, among
others. While an exact replication of the capitalization weightings of
securities in the Index is not feasible, the Portfolio's objectives and
strategies call for a correlation of at least 95% between the
Portfolio's
pre-expense total return and that of the Index. The Portfolio achieved
this
level of correlation for the period presented.
FUND DATA
<Table>
Manager: Team Managed
Inception Date: April 27, 2000
Total Net Assets: $68.77 Million
Number of Equity Holdings: 2,030
Median Capitalization Size: $561 Million
Average Price-to-book Ratio: 2.42x
Dividend Yield: 1.04%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit Russell 2000 Small Cap Index Portfolio - Total Return
<Table>
<Caption>
1-YEAR 3-YEAR SINCE INCEPTION
17.72% 10.76% 7.20%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
<Table>
<Caption>
SUMMIT RUSSELL 2000 SMALL CAP INDEX PORTFOLIO RUSSELL
2000 INDEX
Mar-2000 $ 10,000 $
10,000
Apr-2000 $ 10,440 $
10,456
May-2000 $ 9,850 $
9,846
Jun-2000 $ 10,650 $
10,707
Jul-2000 $ 10,330 $
10,372
Aug-2000 $ 11,101 $
11,158
Sep-2000 $ 10,770 $
10,828
Oct-2000 $ 10,299 $
10,345
Nov-2000 $ 9,265 $
9,283
Dec-2000 $ 10,039 $
10,086
Jan-2001 $ 10,562 $
10,610
Feb-2001 $ 9,886 $
9,915
Mar-2001 $ 9,412 $
9,430
Apr-2001 $ 10,128 $
10,168
May-2001 $ 10,369 $
10,418
Jun-2001 $ 10,718 $
10,777
Jul-2001 $ 10,105 $
10,194
Aug-2001 $ 9,767 $
9,865
Sep-2001 $ 8,437 $
8,537
Oct-2001 $ 8,933 $
9,036
Nov-2001 $ 9,610 $
9,736
Dec-2001 $ 10,193 $
10,337
Jan-2002 $ 10,087 $
10,229
Feb-2002 $ 9,812 $
9,949
Mar-2002 $ 10,590 $
10,748
Apr-2002 $ 10,689 $
10,846
May-2002 $ 10,209 $
10,364
Jun-2002 $ 9,697 $
9,850
Jul-2002 $ 8,218 $
8,363
Aug-2002 $ 8,188 $
8,342
Sep-2002 $ 7,597 $
7,743
Oct-2002 $ 7,826 $
7,991
Nov-2002 $ 8,523 $
8,704
Dec-2002 $ 8,047 $
8,219
Jan-2003 $ 7,818 $
7,992
Feb-2003 $ 7,580 $
7,750
Mar-2003 $ 7,673 $
7,850
Apr-2003 $ 8,399 $
8,594
May-2003 $ 9,299 $
9,517
Jun-2003 $ 9,478 $
9,689
Jul-2003 $ 10,060 $
10,295
Aug-2003 $ 10,508 $
10,767
Sep-2003 $ 10,302 $
10,568
Oct-2003 $ 11,163 $
11,455
Nov-2003 $ 11,546 $
11,862
Dec-2003 $ 11,766 $
12,103
Jan-2004 $ 12,264 $
12,628
Feb-2004 $ 12,376 $
12,742
Mar-2004 $ 12,491 $
12,860
Apr-2004 $ 11,856 $
12,204
May-2004 $ 12,038 $
12,399
Jun-2004 $ 12,541 $
12,920
Jul-2004 $ 11,689 $
12,051
Aug-2004 $ 11,626 $
11,989
Sep-2004 $ 12,166 $
12,552
Oct-2004 $ 12,398 $
12,799
Nov-2004 $ 13,464 $
13,909
Dec-2004 $ 13,849 $
14,320
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
iShares Russell 2000 Index Fund 0.74%
New Century Financial Corp. 0.22%
Terex Corp. 0.21%
Laidlaw International 0.20%
Energen Corp. 0.19%
Crown Holdings Inc. 0.19%
Tesoro Petroleum Corp. 0.19%
Landstar System Inc. 0.19%
Valeant Pharmaceuticals International 0.19%
Joy Global Inc. 0.19%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
Materials 9.9%
Capital Goods 12.0%
Consumer Cyclical 17.2%
Consumer Staples 1.5%
Energy 4.9%
Financial 22.8%
Technology 12.1%
Health Care 11.4%
Utilities 4.1%
Short-Term, Futures, & Other 4.1%
</Table>
The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company.
Russell is a trademark of the Frank Russell Company. Summit Mutual
Funds and the
Russell 2000 Small Cap Index Portfolio are not promoted, sponsored or
endorsed
by, nor in any way affiliated with Frank Russell Company. Frank Russell
is not
responsible for and has not reviewed the Prospectus, and Frank Russell
makes no
representation or warranty, express or implied, as to its accuracy, or
completeness, or otherwise.
50
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO FINANCIAL
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the
period. Share amounts and net asset values have been adjusted as a
result of the
1-for-5 reverse stock split on February 15, 2002.
<Table>
<Caption>
PERIOD FROM
APRIL 27, 2000(1)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------
- ---------------------------------------------------------
2004 2003 2002 2001 2000
------
- ---------------------------------------------------------
Net asset value, beginning of period $
54.40 $ 37.52 $ 48.10 $ 49.95 $ 50.00
------
- -- --------- --------- --------- ---------------
Investment Activities:
Net investment income / (loss)
0.31(4) 0.22 0.29 0.40 0.40
Net realized and unrealized gains / (losses)
9.32 16.95 (10.31) 0.35 (0.20)
------
- -- --------- --------- --------- ---------------
Total from Investment Activities
9.63 17.17 (10.02) 0.75 0.20
------
- -- --------- --------- --------- ---------------
DISTRIBUTIONS:
Net investment income
(0.11) (0.29) (0.09) (0.45) (0.25)
Net realized gains
- -- -- (0.47) (2.15) --
------
- -- --------- --------- --------- ---------------
Total Distributions
(0.11) (0.29) (0.56) (2.60) (0.25)
------
- -- --------- --------- --------- ---------------
Net asset value, end of period $
63.92 $ 54.40 $ 37.52 $ 48.10 $ 49.95
======== ========= ========= ========= ===============
Total return
17.72% 46.19% -21.05% 1.54% 0.39%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (2)
0.75% 0.75% 0.75% 0.75% 0.74%(3)
Ratio of expenses to average net assets - gross
0.76% 1.12% 1.33% 1.10% 1.35%(3)
Ratio of net investment income / (loss) to average net assets
0.60% 0.57% 0.65% 0.90% 1.11%(3)
Portfolio turnover rate
27.27% 23.87% 30.78% 32.70% 82.19%(3)
Net assets, end of period (000's) $
68,770 $ 25,794 $ 13,863 $ 21,503 $ 16,105
</Table>
(1) COMMENCEMENT OF OPERATIONS.
(2) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(3) ANNUALIZED.
(4) PER SHARE AMOUNTS ARE BASED ON AVERAGE SHARES OUTSTANDING.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
51
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
SCHEDULE OF INVESTMENTS RUSSELL 2000 SMALL CAP INDEX
PORTFOLIO
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
COMMON STOCKS - 96.36%
CAPITAL GOODS - 12.00%
A O Smith Corp. 889
$ 26,617
A.S.V. Inc.* 407
19,495
AAR Corp.* 1,934
26,341
Actuant Corp.* 1,418
73,949
Ade Corp.* 494
9,248
Advanced Energy Industries Inc* 1,106
10,098
Aftermarket Technology Corp.* 611
9,837
AirTran Holdings Inc.* 5,033
53,853
Alaska Air Group* 1,780
59,612
Alexander & Baldwin 2,590
109,868
America West Holding Corp.* 1,834
12,068
American Superconductor Corp.* 1,274
18,970
Applied Films Corp.* 770
16,601
Applied Industrial 1,591
43,593
Applied Signal Technolgy 513
18,083
Arctic Cat Inc. 719
19,068
Arkansas Best Corp. 1,340
60,153
Arris Group Inc.* 4,882
34,369
Artesyn Technologies Inc.* 1,795
20,284
Arvinmeritor Inc 4,153
92,903
Astec Industries Inc.* 718
12,357
Asyst Technologies Inc.* 2,453
12,486
ATMI Inc.* 1,930
43,483
Audiovox Corp.* 899
14,186
August Technology Corp.* 927
9,761
Aviall Inc.* 1,423
32,686
Axcelis Technologies Inc.* 6,042
49,121
Baldor Electric Co. 2,010
55,335
Bandag, Inc. 586
29,189
Be Aerospace Inc.* 3,353
39,029
Beazer Homes Usa Inc. 815
119,161
Belden Cdt Inc. 2,866
66,491
Blount International Inc.* 223
3,885
Brooks Automation Inc.* 2,728
46,976
Bucyrus International Inc. 640
26,010
C&D Technologies Inc. 1,327
22,612
Cascade Corp. 556
22,212
C-COR Inc.* 2,246
20,888
Central Frieght Lines Inc.* 448
2,822
Champion Enterprises Inc.* 4,278
50,566
Coachmen Industries Inc. 736
12,777
Cognex Corp. 2,445
68,216
Cohu Inc. 1,120
20,787
Collins & Aikman Corp.* 2,000
8,720
Color Kinetics Inc.* 210
3,692
Commercial Vehicle Group Inc.* 470
10,260
Continental Airlines Inc.* 3,927
53,172
Cooper Tire & Rubber 4,023
86,696
Covenant Transport Inc.* 455
9,473
Credence Systems* 5,856
53,582
CTS Corp. 2,204
29,291
Cuno Inc.* 985
58,509
Curtiss-Wright Corp. 1,286
73,829
Cymer Inc.* 2,230
65,874
Darling International Inc.* 3,334
$ 14,536
DDI Corp.* 1,362
4,331
Delta Air Lines 6,543
48,942
Dionex Corp.* 1,159
65,681
Dominion Homes Inc.* 208
5,246
Ducommun Inc.M* 380
7,923
DuPont Photomasks Inc.* 765
20,204
Duratek Inc.* 532
13,252
EGL Inc.* 2,197
65,668
Electro Scientific Industries* 1,737
34,323
Engineered Support Systems Inc 1,343
79,532
Enpro Industries Inc.* 1,263
37,347
Entegris Inc.* 2,276
22,646
ESCO Technologies Inc.* 776
59,480
Esterline Technologies Corp.* 1,466
47,865
ExpressJet Holdings Inc.* 2,226
28,671
Faro Technologies Inc.* 552
17,211
Federal Signal 2,893
51,090
FEI Co.* 1,475
30,975
Flanders Corp.* 683
6,557
Fleetwood Enterprises Inc.* 3,231
43,489
Florida East Coast Ind Inc. 1,315
59,307
Flowserve Corporation* 3,303
90,965
FLYI Inc.* 2,368
4,191
Forward Air Corp.* 1,293
57,797
Franklin Electric Co. Inc. 839
35,456
Frontier Airlines Inc.* 2,125
24,246
FSI International Inc.* 1,560
7,285
Gardner Denver Inc.* 1,212
43,983
General Binding Corp.* 312
4,100
General Cable Corp.* 2,382
32,991
Genesee & Wyoming Inc.* 1,096
30,830
Genlyte Group Inc.* 634
54,321
Goodyear Tire & Rubber 8,749
128,260
Gorman-Rupp Co. 478
10,994
Greenbrier Cos 296
10,020
GulfMark Offshore Inc.* 755
16,814
Hayes Lemmerz International* 1,970
17,395
Headwaters Inc.* 2,043
58,226
Heartland Express Inc. 2,750
61,793
Heico Corp. 1,197
27,040
Helix Technology Corp. 1,564
27,198
Hub Group Inc.* 404
21,097
Idex Corp. 3,039
123,080
Imagistics International Inc.* 870
29,284
Intac International Inc.* 411
5,343
Interdigital Communications* 3,271
72,289
Intevac Inc.* 874
6,607
Ionics Inc.* 961
41,650
Itron Inc.* 1,089
26,038
JLG Industries Inc. 2,652
52,059
Joy Global Inc. 2,955
128,336
Kadant Inc.* 747
15,314
Kansas City Southern* 3,802
67,409
Keithley Instruments Inc. 657
12,943
Kennametal Inc. 2,215
110,241
Keystone Automotive Inds Inc.* 793
18,437
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
52
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CAPITAL GOODS - 12.00% (CONTINUED)
Kimball International Inc. 1,131
$ 16,750
Kirby Corp.* 1,332
59,114
Knight Transportation Inc. 2,262
56,098
Kulicke & Soffa Industries Inc* 3,024
26,067
Laidlaw International* 6,321
135,269
Landstar System Inc.* 1,756
129,312
Levitt Corp. 800
24,456
Lincoln Electric Holdings Inc. 2,035
70,289
Lindsay Manufacturin 614
15,890
Littelfuse Inc.* 1,352
46,184
LTX Corp.* 3,630
27,915
MTS Systems Corp. 1,296
43,818
M/I Homes Inc. 633
34,885
Magnetek Inc.* 1,236
8,528
Manitowoc Co. 1,635
61,558
Marine Products Corp. 452
11,802
Marten Transport Ltd.* 477
10,842
MasTec Inc.* 1,226
12,395
Mattson Technology Inc.* 2,423
27,283
Measurement Specialties Inc.* 558
14,207
Meritage Home Corp.* 603
67,958
Mesa Air Group Inc.* 1,656
13,149
Metrologic Instruments Inc.* 548
11,645
Middleby Corp. 233
11,818
Milacron Inc.* 2,906
9,851
Mine Safety Appliances Co. 1,306
66,214
MKS Instruments Inc.* 1,983
36,785
Modine Mfg. 1,430
48,291
Monaco Coach Corp. 1,593
32,768
Moog Inc. 1,589
72,061
MTC Technologies Inc.* 378
12,689
Mykrolis Corp.* 2,495
35,354
Nacco Industries Inc. 245
25,823
Noble International Ltd. 331
6,749
Nordson Corporation 1,616
64,753
Northwest Airlines Corp.* 4,395
48,037
Offshore Logistics Inc.* 1,225
39,776
Old Dominion Fght Lines Inc.Co* 860
29,928
Orbital Sciences Corp.* 3,082
36,460
Orleans Homebuilders Inc.* 127
2,521
Overnite Corp. 1,683
62,675
Overseas Shipholding Group 1,715
94,668
Pam Transportation Services Inc* 333
6,244
Pacer International Inc.* 1,673
35,568
Palm Harbor Homes Inc.* 496
8,372
Paxar Corp.* 2,115
46,890
Photon Dynamics Inc.* 869
21,099
Photronics Inc.* 1,958
32,307
Pinnacle Airlines Corp.* 1,013
14,121
Powell Inds Inc.* 355
6,564
Power-One Inc. 3,865
34,476
Powerwave Technologies* 6,424
54,476
Presstek Inc.* 1,342
12,991
Quality Distribution Inc.* 400
3,376
Quixote Corp. 392
7,969
Rae Systems Inc.* 1,803
13,162
Railamerica Inc.* 2,236
29,180
Rayovac Corp.* 2,069
$ 63,229
Regal Beloit 1,477
42,242
Republic Airways Holdings Inc.* 261
3,463
Robbins & Myers Inc. 568
13,535
Rofin-Sinar Technologies Inc.* 779
33,069
Rudolph Technologies Inc.* 671
11,521
Sauer-Danfoss Inc. 525
11,450
SBA Communications Corp.* 2,906
26,968
Scs Transportation Inc.* 776
18,135
Seabulk International Inc.* 303
3,669
Semitool Inc.* 850
7,888
Skyline Corp. 356
14,525
Skywest Inc. 3,462
69,448
Sonic Solutions* 911
20,443
Spatialight Inc.* 1,226
10,973
SpectraLink Corp. 994
14,095
Sports Resorts International* 73
210
Standard Motor Products Inc. 656
10,365
Standex International Corp. 637
18,148
Stewart & Stevenson Services Inc. 1,770
35,807
Stoneridge Inc.* 812
12,286
Strattec Sec Corp.* 200
12,524
Superior Industries International Inc. 1,366
39,682
Swift Transportation* 2,591
55,655
Symmetricom Inc.* 2,754
26,741
Taser International Inc.* 2,956
93,380
TBC Corp.* 1,223
33,999
Technical Olympic Usa Inc. 480
12,182
Technitrol Inc.* 2,467
44,899
Tecumseh Products Co. 859
41,060
Tektronix Inc. 233
7,039
Teledyne Technologies Inc.* 2,005
59,007
Tennant Co. 397
15,741
Tenneco Automotive Inc.* 2,558
44,100
Terayon Communication Systems* 3,488
9,452
Terex Corp.* 2,975
141,759
Thomas & Betts* 3,558
109,409
Thomas Industries Inc. 758
30,259
Thor Industries 2,170
80,399
Tower Automotive Inc.* 3,031
7,244
Transact Technologies Inc.* 446
9,527
TRC Co. Inc.* 475
8,075
Triumph Group Inc.* 828
32,706
U S Xpress Enterprises Inc.* 300
8,790
Ultratech Inc.* 1,107
20,867
United Industrial Corp. 554
21,462
USF Corp. 1,678
63,680
Varian Semiconductor Equipment* 2,226
82,028
Veeco Instruments Inc.* 1,579
33,270
Vicor Corp. 998
13,084
Viisage Technology Inc.* 1,694
15,263
Visteon Corp. 7,900
77,183
Wabash Natl Corp.* 1,815
48,878
Wabtec Corp. 2,384
50,827
Watts Water Technologies Inc. 1,452
46,812
Werner Enterprises 2,904
65,747
William Lyon Homes Inc.* 219
15,383
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
53
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CAPITAL GOODS - 12.00% (CONTINUED)
Winnebago Industries Inc. 1,586
$ 61,949
Woodhead Industries Inc. 632
10,131
Woodward Governor Co. 507
36,306
X-Rite Inc. 1,083
17,339
Zygo Corp.* 933
11,000
- ----------------
8,253,189
- ----------------
CONSUMER CYCLICALS - 17.24%
1-800 Contacts Inc.* 380
8,360
1-800-Flowers.Com Inc.* 1,157
9,730
24/7 Real Media Inc.* 1,135
4,915
4 Kids Entertainment Inc.* 722
15,176
99(Cents) Only Stores* 2,947
47,624
Aaron Rents Inc. 2,350
58,750
ABM Industries Inc. 2,301
45,376
A C Moore & Crafts Inc.* 717
20,657
Action Performance Cos Inc. 808
8,880
Administaff Inc.* 1,130
14,249
Advanced Marketing Svcs Inc. 743
7,475
Advisory Board Co.* 924
34,077
Advo Inc. 1,834
65,382
Aeropostale Inc.* 3,385
99,621
Alderwoods Group Inc.* 2,349
26,732
Alliance Gaming Corp.* 3,096
42,756
Alloy Inc.* 1,719
13,872
Ambassadors Group Inc. 418
14,885
Amerco* 486
22,346
American Greetings 3,784
95,924
American Woodmark Corp. 560
24,461
America's Car-Mart Inc.* 293
11,134
Ameristar Casinos Inc. 596
25,694
AMN Healthcare Services Inc.* 599
9,530
Angelica Corp. 466
12,605
Applica Inc.* 1,023
6,189
Aquantive Inc.* 2,849
25,470
Arbitron Inc.* 1,835
71,895
Argosy Gaming Co.* 1,571
73,366
Asbury Automotive Group Inc.* 585
8,061
Atari Inc.* 481
1,409
Autobytel Inc.* 2,169
13,101
Aztar Corp.* 2,114
73,821
Banta Corp. 1,510
67,588
Bassett Furniture Ind Inc. 538
10,558
Beasley Broadcast Group Inc.* 281
4,926
bebe Stores Inc. 471
12,708
Big 5 Sporting Goods Corp. 1,061
30,918
BJ's Restaurants Inc.* 561
7,854
Blair Corp. 425
15,156
Blue Nile Inc.* 196
5,414
Blyth Inc 1,675
49,513
Bob Evans Farms 2,129
55,652
Bon-Ton Stores Inc. 270
4,253
Bowne & Company Inc. 2,107
34,260
Boyd Gaming Corp. 2,714
113,038
Bright Horizons Family* 689
44,620
Brightpoint Inc.* 1,008
19,696
Brookstone Inc.* 1,047
20,469
Brown Shoe Co. Inc. 1,105
$ 32,962
Buffalo Wild Wings Inc.* 297
10,339
Build-A-Bear Workshop Inc.* 470
16,521
Burlington Coat Factory 956
21,701
Cache Inc.* 333
6,001
California Pizza Kitchen Inc.* 1,189
27,347
Callaway Golf Co. 4,072
54,972
Carmike Cinemas Inc. 400
14,600
Carter's Inc.* 344
11,693
Casella Waste Systems Inc.* 1,026
15,021
Casual Male Retail Group* 1,468
8,001
Catalina Marketing 3,173
94,016
Cato Corp.Cl A 1,198
34,526
CBRL Group 3,030
126,806
CDI Corp. 643
13,747
CEC Entertainment Inc.* 2,261
90,372
Central Euro Distribution Corp* 640
18,906
Central Garden & Pet Co.* 880
36,731
Central Parking Corp. 966
14,635
Century Business Services Inc.* 3,300
14,388
Charles Rivers Assocs Inc.* 531
24,835
Charlotte Russe Holding Inc.* 606
6,121
Charming Shoppes Inc.* 6,878
64,447
Charter Communications Inc.* 16,254
36,409
Chemed Corp. 633
42,481
Cherokee Inc. 354
12,489
Childrens Place Retail Stores* 884
32,735
Christopher & Banks Corp. 2,242
41,365
Churchill Downs Inc. 399
17,835
CKE Restaurants Inc.* 3,122
45,300
Clark Inc.* 842
13,068
CMGI Inc.* 26,479
67,521
CNET Networks Inc.* 7,629
85,674
Coinstar Inc.* 1,283
34,423
Coldwater Creek Inc.* 1,356
41,860
Kenneth Cole Productions Inc. 435
13,424
Conn's Inc.* 362
6,089
Consolidated Graphics Inc.* 589
27,035
Cornell Companies Inc.* 695
10,550
Corrections Corp.Of America* 2,115
85,552
Cosi Inc.* 1,074
6,498
Cost Plus Inc.* 1,351
43,408
CoStar Group Inc.* 838
38,699
Courier Corp. 337
17,497
Cross Country Healthcare Inc.* 1,409
25,475
Crown Media Holdings Inc.* 759
6,527
CSK Auto Corp.Com* 2,839
47,525
CSS Inds Inc. 363
11,529
Cumulus Media Inc.* 3,022
45,572
Dave & Busters Inc.* 580
11,716
Deb Shops Inc. 222
5,559
Deckers Outdoor Corp.* 468
21,991
Del Laboratories Inc.* 256
8,896
Department 56 Inc.* 691
11,505
Design Within Reach Inc.* 220
3,201
Diamond Cluster International Inc.* 1,375
19,704
Dick's Sporting Goods Inc.* 1,843
64,781
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
54
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CONSUMER CYCLICALS - 17.24% (CONTINUED)
Digital Theater Systems Inc.* 878
$ 17,674
Dollar Thrifty Automotive* 1,518
45,844
Domino's Pizza Inc. 1,290
22,962
Doubleclick Inc.* 6,744
52,468
Dover Motorsports Inc. 815
4,670
Dover Downs Gaming 420
5,502
Dress Barn Inc.* 1,071
18,850
drugstore.com Inc.* 2,312
7,861
Earthlink Inc.* 7,873
90,697
Educate Inc.* 940
12,446
Electronics Boutique Holdings* 607
26,065
Elizabeth Arden Inc.* 1,371
32,548
Emmis Communications* 2,949
56,591
Empire Resorts Inc.* 447
4,984
Entravision Communications* 2,518
21,025
Escalade Inc. 410
5,478
Ethan Allen Interiors Inc. 1,991
79,680
Exponent Inc.* 314
8,632
Findwhat.Com* 1,455
25,797
First Advantage Corp.* 161
3,284
Fisher Companies Inc.* 340
16,619
Forrester Research Inc.* 713
12,791
Freds Inc. 2,383
41,464
FTI Consulting Inc.* 2,573
54,213
Furniture Brands International 2,970
74,399
G & K Services Inc. 911
39,556
Gamestop Corp.* 2,260
50,647
Gander Mountain Co.* 299
3,836
Gaylord Entertainment Co.* 1,832
76,083
Genesco Inc.* 1,308
40,731
GEO Group Inc.* 433
11,509
Gevity Hr Inc. 1,407
28,928
Global Imaging Sys Inc.* 1,385
54,708
Goody S Family Clothing Inc. 983
8,985
Gray Television Inc. 2,723
42,207
Greenfield Online* 260
5,717
Grey Global Group Inc. 45
49,500
Group 1 Automotive Inc.* 1,177
37,076
GSI Commerce Inc.* 1,010
17,958
Guess? Inc.* 778
9,764
Guitar Center Management* 1,471
77,507
Gymboree Corp.* 1,595
20,448
Hancock Fabrics Inc. 986
10,225
Handleman Co. 1,246
26,764
Harris Interactive Inc.* 2,558
20,208
Hartmarx Corp.* 1,194
9,277
Haverty Furniture Cos Inc. 969
17,927
Heidrick & Struggles International Inc.* 874
29,952
Hibbett Sporting Goods Inc.* 1,432
38,106
Hollinger International Inc. 3,477
54,519
Hollywood Entertainment Corp.* 3,177
41,587
Hooker Furniture Corp. 358
8,127
Hot Topic Inc.* 2,909
50,006
Hudson Highland Group Inc.* 520
14,976
IHOP Corp. 1,118
46,833
Infospace Inc.* 1,856
88,253
InfoUSA Inc.* 1,660
18,575
Insight Communications Co. Inc.* 2,325
$ 21,553
Insight Enterprises Inc.* 2,956
60,657
Insurance Auto Auctions Inc.* 451
10,111
Inter Parfums Inc. 264
4,198
Interchange Corp.* 180
3,265
Internap Network Services Corp* 12,347
11,483
Ipass Inc.* 2,307
17,072
Isle Of Capri Casinos Inc.* 704
18,058
Ivillage Inc.* 1,389
8,584
J. Jill Group Plc* 927
13,803
Jack In The Box Inc.* 2,206
81,335
Jackson Hewitt Tax Service Inc 2,240
56,560
JAKKS Pacific Inc.* 1,513
33,452
Jamdat Mobile Inc.* 320
6,608
Jarden Corp.* 1,640
71,242
Jo-Ann Stores Inc.* 985
27,127
Jos A Bank Clothiers Inc.* 533
15,084
Journal Communications Inc. 1,054
19,046
Journal Register Co.* 2,510
48,518
K2 Inc.* 2,536
40,272
Kellwood Co. 1,638
56,511
Kelly Services 919
27,735
Kforce Inc.* 1,333
14,796
Kirkland's Inc.* 578
7,104
Korn/Ferry International* 1,943
40,317
Krispy Kreme Doughnuts* 3,216
40,522
K-Swiss Inc. 1,531
44,583
Labor Ready Inc.* 2,501
42,317
Lakes Intertainment Inc.* 800
13,032
Landry's Restaurants Inc. 1,304
37,894
Lawson Products 256
12,910
La-Z Boy Inc. 3,176
48,815
Leapfrog Enterprises Inc.* 1,434
19,502
Learning Tree International Inc.* 460
6,164
Lecg Corp.* 681
12,701
Libbey Inc. 713
15,836
Liberty Corp.(The) 820
36,047
Life Time Fitness Inc.* 610
15,787
Lifeline Systems Inc.* 578
14,889
Lifetime Hoan Corp. 373
5,931
LIN TV Corp.* 1,612
30,789
Linens'N Things Inc.* 2,725
67,580
Lithia Motors Inc. 745
19,981
LKQ Corp.* 762
15,293
LodgeNet Entertainment Corp.* 523
9,252
Lone Star Steakhouse Saloon 829
23,212
LookSmart Ltd.* 4,986
10,919
Magna Entertainment Corp.* 1,968
11,847
Mannatech Inc. 741
14,109
Manning Greg Actions Inc.* 263
3,256
Marchex Inc.* 214
4,494
Marcus Corp.Cil 1,030
25,894
Marinemax Inc.* 608
18,094
Marketwatch Inc.* 545
9,810
Martha Stewart Living* 608
17,644
Matthews International Corp. 1,971
72,533
Maximus Inc.* 1,154
35,912
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
55
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CONSUMER CYCLICALS - 17.24% (CONTINUED)
Medical Staffing Network Hldgs* 633
$ 5,184
Mens Wearhouse Inc.(The)* 1,930
61,683
Midas Group Inc.* 807
16,140
Midway Games Inc.* 2,762
29,001
Monro Muffler Brake Inc.* 490
12,397
Movado Group Inc. 794
14,808
Movie Gallery Inc. 1,389
26,488
MPS Group, Inc.* 6,399
78,452
MTR Gaming Group Inc.* 1,212
12,799
Multimedia Games Inc.* 1,235
19,464
National Presto Industries Inc 245
11,148
Nautilus Group Inc. 1,675
40,485
Navarre Corp.* 1,092
19,219
Navigant Consulting Co.* 2,747
73,070
Navigant International Inc.* 734
8,933
Neoforma Inc.* 481
3,699
NetRatings Inc.* 641
12,288
Nevada Gold & Casinos Inc.* 390
4,758
New York & Co. Inc.* 520
8,590
Nexstar Broadcasting Group Inc* 526
4,850
NIC Inc.* 1,626
8,260
Nu Skin Enterprises Inc. 3,184
80,810
Oakley Inc. 1,080
13,770
O'Charleys Inc.* 1,288
25,180
Oshkosh B'Gosh Inc. 348
7,447
Overstock.Com Inc.* 668
46,092
Oxford Industries Inc. 693
28,621
P.F. Chang's China Bistro Inc.* 1,546
87,117
Panera Bread Co.* 1,732
69,834
Pantry Inc.* 606
18,235
Papa Johns International Inc.* 607
20,905
Party City Corp.* 596
7,706
Paxson Communications Corp.* 2,368
3,268
Payless Shoesource* 4,103
50,467
PC Connection Inc.* 376
3,580
PC Mall Inc.* 406
9,086
PDI Inc.* 440
9,803
Pegasus Solutions Inc.* 1,214
15,296
Penn National Gaming Inc.* 1,922
116,377
Pep Boys Manny Moe & Jack 3,485
59,489
Perry Ellis International* 283
5,759
Petmedexpress.Com Inc.* 489
3,721
Phillips-Van Heusen Corp. 1,476
39,852
Pinnacle Entertainment Inc.* 2,135
42,230
Planetout Inc.* 300
4,080
Plato Learning Inc.* 1,200
8,940
Playboy Enterprises Inc.* 1,020
12,536
Playtex Products Inc.* 1,816
14,510
Prepaid Legal Services Inc. 546
20,502
Priceline.Com Inc.* 1,446
34,111
PRIMEDIA Inc.* 8,011
30,442
Princeton Review Inc.* 861
5,295
ProQuest Co.* 1,449
43,035
Pulitzer Inc. 437
28,339
Quiksilver Inc.* 3,378
100,631
R H Donnelley Corp.* 1,356
80,072
Rare Hospitality International Inc.* 2,065
65,791
RC2 Corp.* 1,002
$ 32,665
Reader's Digest Association 5,970
83,043
Red Robin Gourmet Burgers* 625
33,419
Regent Communications Inc.* 1,820
9,646
Renaissance Learning Inc. 397
7,368
Rent Way Inc.* 1,369
10,966
Resources Connection Inc.* 1,388
75,382
Restoration Hardware Inc.* 1,373
7,881
Retail Ventures Inc.* 691
4,906
Revlon Inc.* 7,621
17,528
Rollins, Inc. 1,020
26,846
Rush Enterprises Inc.* 305
5,280
Russ Berrie & Co. Inc. 418
9,547
Russell Corp. 1,713
33,369
Ryan's Restaurant Group Inc.* 2,566
39,568
Saga Communications Inc.* 853
14,373
Salem Communications Corp.* 501
12,500
Schawk Inc. 474
8,617
Scholastic Corp.* 1,826
67,489
School Specialty Inc.* 1,342
51,748
Scientific Games Corp.* 4,597
109,592
SCP Pool Corp. 3,265
104,154
Select Comfort Corp.* 2,191
39,307
Sharper Image Corp.* 612
11,536
Shoe Carnival Inc.* 385
5,005
Shopko Stores Inc.* 1,743
32,559
Shuffle Master Inc.* 1,391
65,516
Sinclair Broadcast Group Inc. 2,688
24,756
Sitel Corp.* 3,043
7,486
Six Flags Inc.* 5,669
30,443
Skechers Usa Inc.* 1,036
13,427
Sohu.Com Inc.* 1,153
20,420
Sonic Automatic Inc. 1,686
41,813
Sonic Corp.* 3,620
110,410
Source Interlink Cos Inc.* 1,027
13,639
SourceCorp.* 841
16,072
Spanish Broadcasting Systems Inc.* 1,930
20,381
Speedway Motorsports Inc. 773
30,286
Spherion Corp.* 3,633
30,517
Sports Authority Inc.(The)* 1,373
35,355
Stage Stores Inc.* 979
40,648
Stamps.Com Inc.* 877
13,892
Stanley Furniture Co. Inc. 292
13,125
Startek Inc. 568
16,160
Stein Mart Inc.* 1,292
22,042
Steinway Musical Instruments Inc.* 351
10,158
Madden Steven Ltd.* 606
11,429
Stewart Enterprises Inc.* 6,668
46,609
Strayer Education Inc. 897
98,482
Stride Rite Corp. 2,040
22,787
Sturm Ruger & Co. Inc. 1,106
9,987
Systemax Inc.* 503
3,692
Take-Two Interactive Software* 2,679
93,202
Teletech Hldgs Inc.* 1,965
19,041
Tempur-Pedic International Inc* 982
20,818
Tetra Tech Inc.* 3,369
56,397
Texas Roadhouse Inc.* 550
16,253
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
56
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
CONSUMER CYCLICALS - 17.24% (CONTINUED)
Bombay Co. Inc.* 1,856
$ 10,264
Buckle Inc. 396
11,682
Finish Line Inc. 2,270
41,541
Steak N Shake Co.* 1,479
29,698
Topps Co. 1,851
18,047
Nelson Thomas Inc. 524
11,842
THQ Inc.* 2,298
52,716
TiVo Inc.* 2,383
13,988
Too Inc.* 2,098
51,317
Toro Co. 1,264
102,826
Tractor Supply Co.* 1,894
70,476
Trans World Entertainment* 1,213
15,126
Travelzoo Inc.* 81
7,730
Triarc Companies Inc. 2,144
26,285
Tuesday Morning Corp.* 1,534
46,986
Tupperware Corp. 3,154
65,351
Unifirst Corp. 472
13,348
United Auto Group Inc. 1,000
29,590
United Natural Foods Inc.* 2,388
74,267
United Online Inc.* 3,200
36,896
United Stationers Inc.* 2,038
94,156
Universal Electronics Inc.* 704
12,390
Universal Technical Institute* 738
28,133
Usana Inc.* 549
18,776
Vail Resorts Inc.* 1,195
26,792
Valassis Communication* 3,131
109,616
ValueClick Inc.* 4,689
62,504
Valuevision Media Inc.* 938
13,048
Ventiv Health Inc.* 964
19,588
Vertrue Inc.* 307
11,595
Volt Information Sciences Inc.* 413
12,138
Warnaco Group Inc.* 2,767
59,767
Waste Connections Inc.* 2,889
98,948
Water Pik Technologies Inc.* 518
9,184
Watson Wyatt & Co.Holdings 1,962
52,876
Websidestory Inc.* 300
3,729
Wesco International Inc.* 936
27,743
West Marine Inc.* 701
17,350
Weyco Group Inc. 142
6,289
Wireless Facilities Inc.* 2,824
26,659
WMS Industries Inc.* 1,194
40,047
Wolverine World Wide Inc. 2,426
76,225
World Fuel Services Corp. 586
29,183
World Wrestling Entertainment 697
8,455
Yankee Candle Co. Inc.* 2,986
99,075
Young Broadcasting Inc.* 845
8,923
Zale Corp.* 3,210
95,883
- ----------------
11,851,036
- ----------------
CONSUMER STAPLES - 1.50%
American Italian Pasta Co. 838
19,484
Arden Group Inc. 73
7,335
Boston Beer Inc.* 411
8,742
Cal-Maine Foods Inc. 783
9,466
Casey's General Stores Inc. 3,041
55,194
Chiquita Brands International Inc. 2,467
54,422
Coca-Cola Bottling Co. 207
11,811
Dimon Inc. 2,356
15,832
Farmer Bros Co. 351
$ 8,508
Flowers Foods Inc. 2,155
68,055
Great Atlantic & Pacific Tea* 863
8,846
Hain Celestial Group Inc.* 1,542
31,873
Hansen Natural Corp.* 314
11,433
Ingles Markets Inc. 533
6,604
Interstate Bakeries Corp. 2,370
15,168
J & J Snack Foods Corp. 316
15,493
Sanfilippo (John B) & Son Inc.* 329
8,482
Lance Inc. 1,540
29,306
Longs Drug Stores Corp. 1,828
50,398
M & F Worldwide Corp.* 531
7,232
Maui Land & Pineapple Co. Inc.* 168
6,594
Nash Finch Co. 642
24,242
National Beverage Corp.* 376
3,128
Natures Sunshine Prods Inc. 541
11,015
Nutraceutical International* 411
6,334
Omega Protein Corp.* 311
2,675
Pathmark Stores Inc.* 1,570
9,122
Peet's Coffee & Tea Inc.* 613
16,226
Performance Food Group Co.* 2,771
74,568
Provide Commerce Inc.* 228
8,470
RalCorp.Holdings Inc. 1,756
73,629
Ruddick Corp. 1,975
42,838
Sanderson Farms Inc. 538
23,285
Schweitzer-Mauduit International Inc. 784
26,617
Seaboard Corp. 18
17,964
Sensient Technologies 2,833
67,964
Smart & Final Inc.* 652
9,382
Standard Commercial Corp. 527
10,255
Star Scientific Inc.* 1,339
6,809
Universal Corp. 1,523
72,860
Vector Group Ltd. 1,256
20,887
Weis Markets Inc. 586
22,602
Wild Oats Markets Inc.* 1,584
13,955
Winn-Dixie Stores Inc. 4,291
19,524
- ----------------
1,034,629
- ----------------
ENERGY - 4.88%
Atlas America Inc.* 120
4,290
Atwood Oceanics Inc.* 737
38,398
Berry Petroleum Co. 1,125
53,663
Brigham Exploration Co.* 1,159
10,431
Cabot Oil & Gas Corp. 2,018
89,297
Cal Dive International Inc.* 2,376
96,822
Callon Petroleum Co.* 537
7,765
Calpine Corp. 25,708
101,290
Capstone Turbine Corp.* 4,347
7,955
Carbo Ceramics Inc. 663
45,747
Cheniere Energy Inc.* 1,086
69,178
Cimarex Energy Co.* 2,551
96,683
Williams Clayton Energy Inc.* 231
5,290
Comstock Resources Inc.* 2,161
47,650
Crosstex Energy Inc. 124
5,196
Delta Petroleum Corp.* 829
12,999
Denbury Resources Inc.* 3,405
93,467
Dril-Quip Inc.* 340
8,248
Edge Petroleum Corp.* 676
9,856
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
57
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
ENERGY - 4.88% (CONTINUED)
Encore Acquisition Co.* 1,480
$ 51,667
Energy Partners Ltd.* 1,481
30,020
Forest Oil* 3,088
97,951
Frontier Oil Corp. 1,606
42,816
Fuelcell Energy Inc.* 2,515
24,899
Fx Energy Inc.* 1,396
16,305
Giant Industries Inc.* 555
14,713
Global Industries Ltd.* 4,992
41,384
Global Power Equipment Group* 1,766
17,377
Grey Wolf Inc.* 11,400
60,078
Gulf Island Fabrication Inc. 418
9,125
Hanover Compressor* 4,642
65,591
Harvest Natural Resources Inc.* 2,247
38,806
Helmerich & Payne 3,092
105,252
Holly Corp. 1,262
35,172
Hornbeck Offshore Services Inc* 317
6,118
Houston Exploration Co.* 749
42,176
Hydril Co.* 1,002
45,601
Input/Output Inc.* 3,882
34,317
KCS Energy Inc.* 3,023
44,680
Key Energy Services Inc.* 8,118
95,792
KFX Inc.* 2,733
39,683
Lufkin Industries Inc. 353
14,088
Magnum Hunter Resources Inc.* 5,364
69,196
Matrix Service Co.* 895
7,214
McMoRan Exploration Co.* 991
18,532
Meridian Resource Corp.* 2,736
16,553
Mission Resources Corp.* 2,119
12,375
Newpark Resources Inc.* 5,117
26,353
Oceaneering International Inc.* 1,523
56,838
Oil States International Inc.* 1,807
34,857
Parker Drilling Co.* 4,924
19,351
Penn Virginia Corp. 1,132
45,925
Petroleum Development Corp.* 1,028
39,650
Plains Exploration & Production* 4,771
124,046
Plug Power Inc.* 2,529
15,452
Quicksilver Resources Inc.* 1,832
67,381
Range Resources Corp. 4,198
85,891
Remington Oil & Gas Corp.* 1,328
36,188
Resource America Inc. 776
25,220
RPC Inc. 498
12,510
Seacor Holdings Inc.* 969
51,745
Spinnaker Exploration Co.* 1,530
53,657
St Mary Land & Exploration Co. 1,741
72,669
Stone Energy Corp.* 1,433
64,614
Superior Energy Services Inc.* 3,292
50,730
Swift Energy Co.* 1,747
50,558
Syntroleum Corp.* 1,466
11,772
Tesoro Petroleum Corp.* 4,062
129,412
Tetra Technologies Inc.* 1,375
38,913
Todco* 630
11,605
Transmontaigne Inc.* 1,134
6,951
Unit Corp.* 2,330
89,029
Universal Compression Holdings* 898
31,349
Veritas Dgc Inc.* 2,076
46,523
Vintage Petroleum Inc. 3,175
72,041
W-H Energy Services Inc.* 1,517
33,920
Whiting Petroleum Corp.* 1,638
49,550
- ----------------
3,356,406
- ----------------
FINANCIAL - 22.79%
First Source Corp. 615
$ 15,689
21st Century Insurance Group 1,156
15,722
Aames Investment Corp. 1,920
20,544
ABC Bancorp 510
10,710
Acadia Realty Trust 1,280
20,864
Accredited Home Lenders* 854
42,427
Ace Cash Express Inc.* 471
13,970
Advanta Corp. 1,026
24,901
Advent Software, Inc.* 1,423
29,143
Affiliated Managers Group Inc.* 1,482
100,391
Affirmative Insurance Holdings 500
8,420
Affordable Residential 1,290
18,512
Alabama National Bancorp 784
50,568
Alexander's Inc.* 100
21,500
Alexandria Real Estate Equity 1,172
87,220
Alfa Corp. 1,964
29,823
Amcore Financial Inc. 1,540
49,557
American Campus Communities 640
14,394
American Equity Investment Life Holding Co. 1,060
11,416
American Financial Realty Trust 6,547
105,930
American Home Mortgaga Investment Corp. 2,093
71,685
American Physicans Capital Inc* 444
15,993
Americanwest Bancorp* 533
10,793
Amerus Group Co. 2,394
108,448
Amli Residential Pptys Tr 1,531
48,992
Anchor Bancorp Wis Inc. 1,028
29,966
Anthracite Capital Inc. 3,221
39,812
Anworth Mortgage Asset Corp. 2,671
28,606
Apollo Investment Corp.* 3,708
55,991
Arbor Realty Trust Inc. 366
8,982
Archipelago Holdings Llc* 560
11,749
Ares Capital Corp. 580
11,269
Argonaut Group Inc.* 1,402
29,624
Arrow Financial Corp. 452
14,012
Ashford Hospitality Trust 1,046
11,370
Asset Acceptance Capital Corp.* 410
8,733
Associated Banc-Corp. 445
14,778
Asta Funding Inc. 485
13,017
Atlantic Coast Federal Corp.* 300
4,131
Baldwin & Lyons Inc. 418
11,198
BancFirst Corp. 167
13,190
BancorpSouth Inc. 4,632
112,882
Banctrust Financial Group Inc. 446
10,976
Bank Mutual Corp. 4,735
57,625
Bank Granite Corp. 707
14,776
Bank Of The Ozarks Inc. 556
18,921
BankAtlantic Bancorp Inc. 2,542
50,586
BankUnited Financial Corp.* 1,629
52,047
Banner Corp. 528
16,468
Bedford Property Investors Inc 756
21,478
Berkshire Hills Bancorp Inc. 278
10,328
Beverly Hills Bancorp Inc. 690
6,969
BFC Financial Corporation* 361
4,567
Bimini Mortgage Mgmt Inc. 820
13,169
Biomed Realty Trust Inc. 1,890
41,977
BISYS Group* 7,306
120,184
BKF Capital Group Inc. 320
12,128
Boston Private Financial Holdings Inc. 1,656
46,650
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
58
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FINANCIAL - 22.79% (CONTINUED)
Brandywine Realty Trust 2,877
$ 84,555
Bristol West Holdings Inc. 790
15,800
Brookline Bancorp Inc. 3,532
57,642
Bryn Mawr Bank Corp. 368
8,092
Calamos Asset Management Inc.* 1,210
32,670
Camden Natl Corp. 404
15,922
Capital Automotive REIT 1,985
70,517
Capital City Bank Group Inc. 463
19,353
Capital Corp Of The West 263
12,361
Capital Crossing Bank* 220
6,752
Capital Lease Funding Inc. 1,182
14,775
Capital Southwest Corp. 143
11,228
Capital Trust 621
19,071
Capital Bancorp Ltd. 531
18,702
Capstead Mortgage Corp. 776
8,179
Carramerica Realty Corp. 3,268
107,844
Carreker-Antinori Inc.* 1,056
9,082
Cascade Bancorp 869
17,571
Cash America International Inc 1,750
52,028
Cathay Bancorp Inc. 2,634
98,775
CB Richard Ellis Group Inc.* 1,540
51,667
CCC Information Services Group* 662
14,703
Cedar Shopping Centers Inc. 859
12,284
Center Financial Corp. 503
10,070
Central Coast Bancorp* 468
10,806
Central Pacific Financial Co. 1,701
61,525
Centruy Bancorp Inc. 182
5,369
Ceres Group Inc.* 1,575
8,127
Charter Financial Corp. 207
9,081
Chartermac 2,662
65,059
Chemical Financial Corp. 1,450
62,234
Chittenden Corp. 2,792
80,214
Circle Group Internet Inc.* 1,049
2,329
Citizens Banking Corp. 2,613
89,757
Citizens First Bancorp Inc. 445
10,760
Citizens Inc.* 1,637
10,428
City Bank Lynnwood 403
14,568
City Holding Co. 873
31,638
Clifton Savings Bancorp Inc. 718
8,724
CNA Surety Corp.* 813
10,854
Coastal Financial Corp. 669
12,818
CoBiz Inc. 673
13,662
Cohen & Steers Inc. 400
6,500
Collegiate Funding Services* 440
6,200
Colonial Properties Trust 989
38,838
Columbia Bancorp 303
10,360
Columbia Banking Systems Inc. 953
23,815
Commerce Group Inc.Mass 1,487
90,766
Commercial Capital BanCorp.Inc 2,167
50,231
Commercial Federal Corp. 2,468
73,324
Commercial Net Lease Realty 3,147
64,828
Community Bank System Inc. 1,636
46,217
Community Banks Inc. 558
15,713
Community Trust Bancorp Inc. 622
20,112
CompuCredit Corp.* 1,155
31,578
Corillian Corp.* 1,694
8,334
Cornerstone Realty Income Trust Inc 3,029
30,229
Corporate Office Properties Trust Inc. 2,224
$ 65,274
Correctional Properties Trust 573
16,548
Corus Bankshares Inc. 813
39,032
Cousins Properties Inc. 2,186
66,170
Crawford & Co. 672
5,040
Credit Acceptance Corp.* 557
14,176
Crt Properties Inc. 1,642
39,178
CVB Financial Corp. 2,224
59,069
Cybersource Corp.* 1,427
10,203
Danielson Holding Corp.* 2,383
20,136
Delphi Finl Group Inc. 1,520
70,148
Digital Insight Corp.* 1,832
33,709
Digital Realty Trust Inc. 1,050
14,144
Dime Community Bancshares 1,895
33,939
Direct General Corp. 827
26,547
Donegal Group Inc. 145
3,325
Downey Financial Corp. 1,193
68,001
East West Bancorp Inc. 3,012
126,384
Eastgroup Propties Inc. 1,094
41,922
Education Lending Group Inc.* 653
10,128
eFunds Corp.* 2,889
69,365
Electro Rent Corp.* 941
13,390
EMC Insurance Group Inc. 116
2,510
Encore Capital Group Inc.* 633
15,053
Enstar Group Inc.* 166
10,375
Entertainment Properties Trust 1,549
69,008
Equity Inns Inc. 3,043
35,725
Equity Lifestyle Properties 973
34,785
Equity One Inc. 2,054
48,741
eSpeed Inc.* 1,258
15,561
Essex Property Trust Inc. 1,385
116,063
Eurobancshares Inc.* 420
8,820
Euronet Worldwide Inc.* 1,175
30,574
Extra Space Storage Inc. 1,070
14,263
Factset Research Systems Inc. 1,253
73,225
Farmers Capital Bank Corp. 316
13,019
FBL Financial Group Inc. 650
18,558
Farmer Mac 440
10,252
FelCor Lodging Trust Inc.* 2,986
43,745
Fidelity Bankshares Inc. 688
29,419
Financial Federal Corp. 901
35,319
Financial Institutions Inc. 420
9,765
First Bancorp (NorthCarolina) 582
15,813
First Bancorp (Puerto Rico) 1,996
126,766
First Busey Corp. 691
14,421
First Cash Inc.* 613
16,373
First Charter Corp. 1,794
46,949
First Citizens Bancshares Inc. 317
46,995
First Commonwealth Finl Corp. 4,252
65,438
First Community Bancorp 679
28,993
First Community Bancshares Inc 524
18,906
Firstfed Financial Corp.* 1,046
54,256
First Financial Bancorp 2,141
37,468
First Financial Corp. 706
24,731
First Financial Bankshares, Inc. 714
31,994
First Financial Holdings Inc. 657
21,510
First Indiana Corp. 617
13,889
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
59
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FINANCIAL - 22.79% (CONTINUED)
First Industrial Realty Trust Inc 2,493
$ 101,540
First Merchants Corp. 968
27,394
First Midwest Bancorp Inc. 2,831
102,737
First Niagara Financial Group 5,075
70,796
First Oak Brook Bancshares Inc 350
11,344
First Place Financial Corp. 619
13,859
First Republic Bank 679
35,987
First State Bancorp 399
14,667
Flagstar Bancorp Inc. 1,932
43,663
Flushing Financial Corp. 883
17,713
First National Bankshares 3,567
85,251
FNB Corp. (Pennsylvania) 3,027
61,630
FNB Corp. (Virginia) 379
10,748
Fpic Ins Group Inc.* 419
14,824
Franklin Bank Corp.* 555
10,129
Frontier Financial Corp. 846
32,664
Gabelli Asset Management Inc. 344
16,691
Gables Residential Trust 1,758
62,919
GATX Corp. 2,994
88,503
GB&T Bancshares Inc. 515
12,422
German American Bancorp 483
7,776
Getty Rlty Corp.New 915
26,288
Glacier Bancorp Inc. 1,509
51,366
Gladstone Capital Corp. 452
10,712
Glenborough Realty Trust Inc. 1,664
35,410
Glimcher Realty Trust 2,154
59,687
Global Signal Inc. 500
13,770
GMH Communities Trust 1,500
21,150
Gold Banc Corp. Inc. 2,423
35,424
Government Properties Trust Inc. 1,008
9,939
Gramercy Capital Corp. 500
10,300
Great American Financial 379
6,583
Great Southern Bancorp Inc. 542
18,970
Greater Bay Bancorp 3,142
87,599
Greenhill & Co. 262
7,519
Hancock Hldg Co. 1,672
55,945
Hanmi Financial Corp. 888
31,915
Harbor Florida Bancshares Inc. 1,266
43,816
Harland (John H) Co. 1,701
61,406
Harleysville Group 675
16,112
Harleysville National Corp. 1,617
43,012
Harris & Harris Group Inc.* 649
10,631
Healthcare Realty Trust Inc. 2,868
116,728
Healthextras Inc.* 867
14,132
Heartland Financial Usa Inc. 480
9,653
Heritage Property Investment 1,638
52,563
Highland Hospitality Corp. 1,806
20,299
Highwoods Properties 3,211
88,945
Hilb Rogal & Hobbs Co. 1,878
68,059
Home Properties Inc. 1,979
85,097
Homebanc Corp. 1,870
18,102
Homestore Inc.* 4,973
15,068
Horace Mann Educators 2,591
49,436
Horizon Financial Corp. 544
11,196
Hudson River Bancorp Inc. 1,845
36,513
Huron Consulting Group Inc.* 300
6,660
Hypercom Corp.* 2,662
15,759
IBERIABANK Corp. 327
$ 21,700
IMPAC Mortgage Holdings Inc. 4,523
102,536
Independence Holding Co. 239
4,410
Independent Bank Corp. (Massachusetts) 767
25,886
Independent Bank Corp. (Michigan) 1,133
33,797
Infinity Property & Casuality 1,249
43,965
Innkeepers USA Trust 1,997
28,357
Interactive Data Corp.* 2,220
48,263
Interchange Financial Services Corp. 576
14,930
Integra Bank Corp. 799
18,465
International Bancshares Corp. 34
1,339
Intersections Inc.* 370
6,383
Investment Technology Group* 2,619
52,380
Investors Real Estate Trust* 2,478
25,994
Ipayment Inc.* 548
27,137
Irwin Financial Corp. 914
25,948
ITLA Capital Corp.* 279
16,402
Jones Lang Lasalle Inc.* 1,925
72,014
K-Fed Bancorp 297
4,443
Kansas City Life Insurance Co. 192
9,082
Kilroy Realty Corp. 1,713
73,231
Kite Realty Group Trust 900
13,752
KNBT Bancorp Inc. 1,845
31,181
Knight Trading Group Inc.* 7,059
77,296
Kramont Realty Trust 1,446
33,836
Kronos Inc.* 1,832
93,670
La Quinta Properties Inc.* 11,320
102,899
Labranche & Co.* 3,112
27,884
Lakeland Bancorp Inc. 687
12,057
Lakeland Financial Corp. 304
12,069
LandAmerica Financial Group 988
53,283
LaSalle Hotel Properties 1,697
54,016
Lexington Corp.Pptys Trust 2,904
65,572
LTC Properties Inc. 770
15,331
Luminent Mortgage Capital Inc. 2,165
25,764
Macatawa Bank Corp. 460
14,853
MAF Bancorp Inc. 1,684
75,477
Maguire Properties Inc. 2,033
55,826
Main Street Banks Inc. 709
24,765
Mainsource Financial Group 510
12,186
Marketaxess Holdings Inc.* 260
4,423
Marlin Business Services Inc.* 310
5,890
MB Financial Inc. 1,161
48,936
MBT Financial Corp. 754
17,546
MCG Capital Corp. 2,010
34,431
McGrath RentCorp 503
21,936
Mercantile Bank Corp. 375
14,813
Meristar Hospitality Corp.* 5,281
44,096
Metris Companies Inc.* 1,945
24,799
MFA Mortgage Investments Inc. 4,841
42,698
Mid-America Apartment Communties Inc. 930
38,335
Midland Co. 474
14,822
Mid-State Bancshares 1,442
41,313
Midwest Banc Holdings Inc. 563
12,313
Mission West Properties 927
9,863
Mortgageit Holdings Inc. 760
13,642
NBT Bancorp Inc. 1,998
51,389
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
60
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FINANCIAL - 22.79% (CONTINUED)
Nara Bancorp 960
$ 20,419
NASB Financial Inc. 161
6,434
National Financial Partners 2,043
79,268
Nationwide Health Properties Inc. 4,032
95,760
National Health Investors Inc. 1,383
40,356
National Penn Bancshares Inc. 2,117
58,641
National Western Life Ins Co.* 114
18,994
NBC Capital Corp. 361
9,592
NCO Group Inc.* 1,622
41,929
NDCHealth Corp. 2,171
40,359
Nelnet Inc.* 423
11,391
Net Bank Inc. 2,800
29,148
New Century Financial Corp. 2,333
149,102
Newcastle Investment Corp. 2,164
68,772
NGP Capital Resources Co.* 840
12,911
Northwest Bancorp Inc. 1,154
28,954
Novastar Financial Inc. 1,595
78,953
NYMAGIC INC 172
4,352
Oak Hill Financial Inc. 107
4,151
OceanFirst Financial Corp. 488
12,029
Ocwen Financial Corp.* 2,078
19,866
Ohio Casualty* 3,693
85,715
Old National Bancorp 3,996
103,337
Old Second Bancorp Inc. 700
22,316
Omega Financial Corp. 599
20,534
Omega Healthcare Investors Inc 2,830
33,394
Oriental Financial Group Inc. 974
27,560
Origen Financial Inc. 430
3,216
Pacific Capital Bancorp 2,772
94,220
Park National Corp. 850
115,175
Parkway Properties Inc. 574
29,131
Partners Trust Financial Group 1,686
19,642
Peapack Gladstone Financial Corp. 381
12,021
Pennsylvania Real Estate Investment 1,880
80,464
Penn America Corp. 501
7,565
Pennfed Financial Services Inc 474
7,622
Pennrock Financial Services Corp. 400
15,564
Peoples Bancorp Inc. 555
15,224
Peoples Holding Co. 428
14,167
PFF Bancorp Inc. 647
29,976
Philadelphia Consolidated Holding Corp.* 1,031
68,190
Phoenix Companies Inc. 5,691
71,138
Pico Holdings Inc.* 417
8,661
Piper Jaffray Companies Inc.* 1,206
57,828
Placer Sierra Bancshares 300
8,532
PMA Capital Corp.* 1,411
14,604
Portal Software Inc.* 1,684
4,463
Portfolio Recovery Associates* 633
26,092
Post Properties Inc. 2,407
84,004
Prentiss Properties Trust 2,683
102,491
Presidential Life Corp. 1,112
18,860
PRG-Schultz International Inc.* 2,142
10,774
PrivateBancorp Inc. 857
27,621
ProAssurance Corp.* 1,587
62,068
Prosperity Bancshares Inc. 1,004
29,327
Provident Financial Holdings 262
7,559
Provident Bancorp Inc. 2,789
36,787
Provident Bankshares Corp. 1,958
$ 71,212
Provident Financial Services 4,532
87,785
PS Business Parks Inc. 822
37,072
QC Holdings Inc.* 260
4,982
R&G Financial Corp. 1,682
65,396
Rait Investment Trust 1,553
43,437
Ramco-Gershenson Properties Trust 745
24,026
Realty Income Corp. 2,409
121,847
Redwood Trust Inc. 1,055
65,505
Republic Bancorp Inc. 4,267
65,200
Republic Bancorp Inc. (Kentucky) 425
10,923
Rewards Network Inc.* 834
5,838
Riggs National Corp. 830
17,646
RLI Corp. 1,350
56,120
Royal Bancshares Pa Inc. 228
6,174
S & T Bancorp Inc. 1,447
54,537
S Y Bancorp Inc. 617
14,870
S1 Corp.* 4,234
38,360
Safety Insurance Group Inc. 524
16,323
Sanders Morris Harris Group Inc. 623
11,096
Sandy Spring Bancorp Inc. 758
29,054
Santander Bancorp 275
8,294
Saul Centers Inc. 583
22,300
Saxon Capital Inc. 2,990
71,730
SCBT Financial Corp. 423
14,205
Seacoast Banking Corp.Fl 604
13,439
Security Bank Corp. 244
9,760
Selective Insurance Group Inc. 1,698
75,120
Senior Housing Prop Trust 3,231
61,195
Signature Bank* 292
9,449
Silicon Valley Bancshares* 2,135
95,691
Simmons First National Corp. 766
22,176
Smithtown Bancorp Inc. 272
8,636
Sotheby's Holdings* 2,815
51,120
Southern Community Financial 777
8,042
Southside Bancshares Inc. 486
11,105
Southwest BanCorp.Inc.Oklahoma 559
13,684
Southwest BanCorp.Of Texas Inc 4,194
97,678
Sovran Self Storage Inc. 957
40,328
State Auto Financial Corp. 703
18,173
State Bancorp Inc. 422
11,605
State Financial Services Corp. 300
9,030
Sterling Bancorp 843
23,815
Sterling Bancshares Inc. 2,737
39,057
Sterling Financial Corp. (Pennsylvania) 1,312
37,615
Sterling Financial Corp. (Washington)* 1,370
53,786
Stewart Information Services Corp. 1,049
43,691
Stifel Finl Corp.* 377
7,898
Strategic Hotel Capital Inc. 1,070
17,655
Suffolk Bancorp 569
19,818
Summit Properties Inc. 1,687
54,929
Sun Bancorp Inc.* 416
10,392
Sun Communities Inc. 842
33,891
Sunstone Hotel Investors Inc. 1,330
27,637
Susquehanna Bancshares Inc. 2,815
70,234
SWS Group Inc. 788
17,273
Tanger Factory Outlet Ctrs Inc 1,420
37,573
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
61
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FINANCIAL - 22.79% (CONTINUED)
Taubman Centers Inc. 2,996
$ 89,730
Taylor Capital Group Inc. 203
6,801
Texas Capital Bancshares Inc.* 1,313
28,387
Texas Regl Bancshares Inc. 2,503
81,798
Bancorp Inc.* 412
6,592
First Of Long Island Corp. 178
8,980
Navigators Group Inc.* 447
13,459
Tierone Corp. 1,015
25,223
TNS Inc.* 232
5,069
Tompkins TrustCo. Inc. 378
20,219
Tower Group Inc. 780
9,360
Town & Country Trust 910
25,143
Tradestation Group Inc.* 980
6,880
Triad Guaranty Inc.* 487
29,454
TriCo Bancshares 585
13,689
TrustCo Bank Corp. 4,526
62,414
Trustmark Corp. 2,837
88,146
UICI 2,331
79,021
UMB Financial Corp. 788
44,648
Umpqua Holdings Corp. 2,694
67,916
Union Bankshares Corp. 399
15,334
United Bankshares Inc. 2,286
87,211
United Community Banks Inc. 1,735
46,724
United Community Finl Corp. 1,410
15,792
United Fire & Casualty Co. 752
25,350
United Panam Financial Corp.* 241
4,593
United Rentals* 2,612
49,367
Universal American Financial* 1,381
21,364
Universal Health Realty Trust 613
19,696
Univest Corp.Of Pa 396
18,224
Unizan Financial Corp. 1,306
34,413
Urstadt Biddle Properties 1,098
18,721
US Restaurant Properties Inc. 1,178
21,275
USB Holding Co. Inc. 601
14,965
USI Holdings Corp.* 1,841
21,300
U-Store-It Trust 1,560
27,066
Value Line Inc. 71
2,786
Vesta Insurance Group Inc. 1,884
6,933
Virginia Commerce BanCorp.Inc.* 320
9,062
Virginia Financial Group Inc. 374
13,711
Washington Real Estate Investment Trust 2,511
85,048
Washington Trust BanCorp.Inc. 691
20,253
Waypoint Financial Corp. 1,803
51,115
Wesbanco Inc. 1,141
36,478
West Bancorp 880
15,497
West Coast Bancorp 785
19,947
Westamerica Bancorp 1,938
113,005
Western Sierra Bancorp* 334
12,811
Westfield Financial Inc. 255
6,584
Wilshire Bancorp Inc.* 736
12,173
Winston Hotels Inc. 1,211
14,302
Wintrust Financial Corp. 1,307
74,447
World Acceptance Corp.* 841
23,136
WSFS Financial Corp. 314
18,940
Yardville National Bancorp 439
15,040
Zenith National Insurance Corp 556
27,711
Ziprealty Inc.* 240
4,289
- ----------------
15,674,409
- ----------------
HEALTH CARE - 11.43%
Abaxis Inc.* 912
$ 13,215
Abegenix Inc.* 4,914
50,811
Abiomed Inc.* 796
12,290
Able Laboratories Inc.* 889
20,225
Accelrys Inc.* 1,272
9,922
Adolor Corp.* 2,027
20,108
Advanced Medical Optics Inc.* 2,210
90,919
Advanced Neuromod Sys Inc.* 1,049
41,394
Advancis Pharmaceutical Corp.* 493
1,883
Aksys Ltd.* 420
2,335
Albany Molecular Research Inc.* 1,213
13,513
Alexion Pharmaceuticals Inc.* 1,637
41,252
Align Technology Inc.* 3,118
33,519
Alkermes Inc.* 5,522
77,805
Alliance Imaging Inc.* 656
7,380
Allscripts Healthcare Solution* 1,429
15,247
Alpharma Inc. 2,371
40,188
Amedisys Inc.* 769
24,908
America Service Group Inc.* 555
14,857
Amercan Healthways Inc.* 1,730
57,159
American Medical Systems* 1,548
64,722
Amerigroup Corp.* 1,502
113,641
Amsurg Corp.* 1,829
54,029
Analogic Corp. 598
26,784
Animas Corp.* 222
3,470
Antigenics Inc.* 1,325
13,409
Applera Corp-Celera Genomics* 4,420
60,775
Apria Healthcare Group* 3,016
99,377
Ariad Pharmaceuticals Inc.* 2,731
20,291
Array Biopharma Inc.* 1,247
11,871
Arrow International Inc. 1,180
36,568
Arthrocare Corp.* 1,300
41,678
Aspect Medical Systems Inc.* 641
15,679
Atherogenics Inc.* 2,233
52,609
Avant Immunotherapeutics Inc.* 3,880
7,799
Axonyx Inc.* 2,676
16,591
Barrier Therapeutics Inc.* 342
5,677
Bentley Pharmaceuticals Inc.* 802
8,622
Beverly Enterprises Inc.* 6,611
60,491
Bio-Reference Labs Inc.* 402
6,995
Biocryst Pharmaceuticals Inc.* 854
4,936
Bioenvision Inc.* 1,013
9,076
Biolase Technologies Inc. 1,123
12,207
Biomarin Pharmaceutical Inc.* 3,362
21,483
Bio-Rad Laboratries Inc.* 1,008
57,829
Biosite Inc.* 676
41,601
Bone Care International Inc.* 817
22,753
Bradley Pharmaceuticals Inc.* 706
13,696
Bruker Biosciences Corp.* 1,117
4,502
Cancervax Corp.* 863
9,364
Candela Corp.* 1,004
11,405
Caraco Pharm Labs Inc.* 474
4,527
Cardiac Science Inc.* 3,587
7,676
CardioDynamics International Corp.* 1,880
9,720
Cell Genesys Inc.* 2,333
18,897
Cell Therapeutics Inc.* 3,740
30,444
Centene Corp.* 2,466
69,911
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
62
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
HEALTH CARE - 11.43% (CONTINUED)
Cepheid Inc.* 2,178
$ 21,649
Cerner Corp.* 1,705
90,655
Chattem Inc.* 1,044
34,556
Ciphergen Biosystems Inc.* 1,209
5,199
Closure Medical Corp.* 359
7,001
Computer Programs & Systems 337
7,802
Conceptus Inc.* 1,332
10,809
Conmed Corp.* 1,822
51,781
Connetics Corp.* 1,881
45,689
Corcept Therapeutics Inc.* 235
1,469
Corgentech Inc.* 322
2,666
Corixa Corp.* 2,908
10,585
Corvel Corp.* 331
8,864
Cti Molecular Imaging Inc.* 1,905
27,032
Cubist Pharmaceuticals Inc.* 2,501
29,587
Curagen Corp.* 2,249
16,103
Curtis Inc.* 2,164
11,296
CV Therapeutics Inc.* 1,894
43,562
Cyberonics Inc.* 905
18,752
Cypress Bioscience Inc.* 1,534
21,568
Cytogen Corp.* 810
9,331
Cytokinetics Inc.* 395
4,049
Datascope Corp. 609
24,171
Decode Genetics Inc.* 2,508
19,587
Dendreon Corp.* 3,507
37,805
Depomed Inc.* 1,101
5,945
Diagnostic Products Corp. 1,382
76,079
Digene Corp.* 733
19,168
Discovery Laboratories Inc.* 2,441
19,357
Diversa Corp.* 1,234
10,785
dj Orthopedics Inc.* 933
19,985
Dov Pharmaceutical Inc.* 629
11,353
Durect Corp.* 1,585
5,199
Dusa Pharmaceuticals Inc.* 782
11,183
Dyax Corp.* 1,367
9,870
Dynavax Technologies Corp.* 325
2,600
Eclipsys Corp.* 2,196
44,864
Encore Medical Corp.* 1,606
10,905
Encysive Pharmaceuticals Inc.* 3,387
33,633
Endocardial Solutions Inc.* 1,146
13,408
Enzo Biochem Inc.* 1,563
30,432
Enzon Pharmaceuticals Inc.* 2,630
36,084
Epix Pharmaceuticals Inc.* 1,190
21,313
eResearch Technology Inc.* 2,532
40,132
Exactech Inc.* 318
5,816
Exelixis Inc.* 3,769
35,806
E-Z-Em Inc.* 344
5,022
First Health Group* 5,503
102,961
First Horizon Pharmaceutical* 1,631
37,334
Foxhollow Technologies Inc.* 240
5,902
Genaera Corp.* 2,738
9,364
Genencor International Inc.* 390
6,396
Genelabs Technologies Inc.* 4,597
5,516
Genesis Healthcare Corp.* 1,206
42,246
Genta Inc.* 3,167
5,574
Gentiva Health Services Inc.* 1,530
25,582
Geron Corp.* 2,355
18,769
GTX Inc.* 283
$ 3,818
Guilford Pharmaceuticals Inc.* 1,773
8,776
Haemonetics Corp.* 1,189
43,054
Hanger Orthopedic Group Inc.* 1,118
9,056
Healthcare Services Group Inc. 776
16,172
Hollis-Eden Pharmaceuticals* 718
6,764
Hologic Inc.* 1,065
29,256
Hooper Holmes Inc. 2,990
17,701
Human Genome Sciences Inc.* 7,806
93,828
ICU Medical Inc.* 551
15,064
Idenix Pharmaceuticals Inc.* 300
5,145
IDX Systems Corp.* 1,263
43,523
I-Flow Corp.* 947
17,264
Illumina Inc.* 1,519
14,400
Immucor Inc.* 2,706
63,606
Immunicon Corp.* 315
2,199
Immunogen Inc.* 1,912
16,902
Immunomedics Inc.* 2,173
6,606
Impax Laboratories Inc.* 2,940
46,687
Incyte Corp.* 4,148
41,439
Indevus Pharmaceuticals Inc.* 2,160
12,874
Inkine Pharmaceutical Co. Inc.* 2,542
13,803
Inspire Pharmaceuticals Inc.* 2,449
41,070
Integra Lifesciences Holdings* 1,229
45,387
Intermune Inc.* 1,499
19,877
Intralase Corp.* 400
9,392
Intuitive Surgical Inc.* 2,000
80,040
Invacare Corp. 1,585
73,322
Inverness Medical Innovations* 701
17,595
ISIS Pharmaceuticals Inc.* 2,707
15,971
Isolagen Inc.* 1,155
9,090
Ista Pharmaceuticals Inc.* 385
3,896
Ivax Diagnostics Inc.* 351
1,527
Kensey Nash Corp.* 497
17,161
Keryx Biopharmaceuticals Inc.* 1,130
13,074
Kindred Healthcare Inc.* 1,596
47,800
Kos Pharmeceuticals Inc.* 623
23,450
Kosan Biosciences Inc.* 1,103
7,644
KV Pharmaceutical Co.* 2,175
47,959
Kyphon Inc.* 1,415
36,450
Labone Inc.* 890
28,516
Landauer Inc. 465
21,251
Lannett Co. Inc.* 361
3,556
Laserscope* 944
33,899
Lca-Vision Inc. 806
18,841
Lexicon Genetics Inc.* 3,928
30,462
Lifecell Corp.* 1,484
15,166
Lifepoint Hospitals* 2,306
80,295
Ligand Pharmaceutical Inc.* 4,458
51,891
Luminex Corp.* 1,401
12,441
Magellan Health Services Inc.* 1,646
56,227
Mannkind Corp.* 630
9,923
Marshall Edwards Inc.* 375
3,354
Matria Healthcare Inc.* 538
21,020
Maxim Pharmaceuticals Inc.* 1,479
4,467
Maxygen Inc.* 1,176
15,041
Medarex Inc.* 4,871
52,509
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
63
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
HEALTH CARE - 11.43% (CONTINUED)
Medcath Corp.* 315
$ 7,762
Medical Action Industries Inc.* 426
8,392
Medicines Co.* 2,881
82,973
Mentor Corp. 2,686
90,626
Merit Medical Systems Inc.* 1,224
18,703
Micro Therapeutics Inc.* 612
2,295
Microtek Medical Holdings Inc.* 2,243
9,107
Microvision Inc.* 973
6,811
Molecular Devices Corp.* 658
13,226
Molina Healthcare Inc.* 541
25,092
Momenta Pharmaceuticals Inc.* 320
2,259
Myogen Inc.* 729
5,883
Myriad Genetics Inc.* 1,828
41,148
Nabi Biopharmaceuticals* 3,496
51,216
Nanogen Inc.* 1,777
13,079
National Healthcare Corp. 351
12,390
Neighborcare Inc.* 2,262
69,489
Neopharm Inc.* 899
11,246
Neose Technologies Inc.* 1,079
7,251
Neurogen Corp.* 1,305
12,215
Nitromed Inc.* 514
13,698
Northfield Laboratories Inc.* 993
22,392
Noven Pharmaceuticals Inc.* 1,221
20,830
NPS Pharmaceuticals Inc.* 2,274
41,569
Nuvasive Inc.* 339
3,475
Nuvelo Inc.* 1,479
14,568
OCA Inc.* 2,206
14,008
Ocular Sciences Inc.* 1,236
60,576
Odyssey Healthcare Inc.* 2,182
29,850
Omnicell Inc.* 1,136
12,496
Onyx Pharmaceuticals Inc.* 2,100
68,019
Option Care Inc. 691
11,878
Orasure Technologies Inc.* 2,073
13,931
Orthologic Corp.* 1,803
11,269
Orthovita Inc.* 2,119
8,879
Oscient Pharmaceutical Corp.* 3,170
11,571
Owens & Minor Inc. 2,401
67,636
Pain Therapeutics Inc.* 1,346
9,705
Palatin Technologies Inc.* 2,751
7,318
Palomar Medical Technologies* 627
16,346
Par Pharmaceutical Cos.* 2,088
86,401
Parexel International Corp.* 1,613
32,744
Pediatrix Medical Group Inc.* 1,279
81,920
Penwest Pharmaceuticals Co.* 867
10,369
Peregrine Pharmaceuticals Inc.* 6,566
7,682
Perrigo Co. 3,806
65,730
Per-Se Technologies Inc.* 1,184
18,743
Pharmacyclics Inc.* 1,024
10,721
Pharmion Corp.* 942
39,762
Pharmos Corp.* 4,593
6,522
Phase Forward Inc.* 290
2,369
Polymedica Corp. 1,592
59,366
Possis Medical Inc.* 838
11,296
Pozen Inc.* 1,252
9,102
PRA International* 430
10,655
Praecis Pharmaceuticals Inc.* 2,733
5,193
Priority Healthcare Corp.* 1,734
37,749
Progenics Pharmaceuticals Inc.* 614
$ 10,536
Province Healthcare Co.* 2,967
66,312
Proxymed Inc.* 313
3,074
PSS World Medical Inc.* 4,141
51,825
Psychiatric Solutions Inc.* 518
18,938
Quality Systems Inc.* 176
10,525
Quidel Corp.* 1,650
8,382
Radiation Therapy Services Inc* 290
4,930
Regeneration Technologies Inc.* 1,212
12,702
Regeneron Pharmaceuticals Inc.* 1,982
18,254
Rehabcare Group Inc.* 846
23,680
Renovis Inc.* 311
4,472
Res-Care Inc.* 910
13,850
Rigel Pharmaceuticals Inc.* 522
12,747
Salix Pharmaceuticals Ltd.* 2,229
39,208
Santarus Inc.* 362
3,280
Sciclone Pharmaceuticals Inc.* 2,328
8,614
Seattle Genetics Inc.* 1,630
10,644
Select Medical Corp. 5,506
96,906
Serologicals Corp.* 1,814
40,126
SFBC International Inc.* 651
25,715
Sierra Health Services Inc.* 1,401
77,209
Sola International Inc.* 1,919
52,849
Sonosite Inc.* 769
26,108
Sonic Innovations Inc.* 962
4,012
Specialty Laboratories Inc.* 417
4,604
Stereotaxis Inc.* 290
2,851
Steris Corp.* 4,376
103,799
Sunrise Assisted Living Inc.* 848
39,313
Supergen Inc.* 2,313
16,307
Surmodics Inc.* 741
24,090
Sybron Dental Specialties Inc.* 2,363
83,603
Symbion Inc.* 432
9,539
Tanox Inc.* 1,239
18,833
Techne Corp.* 2,476
96,316
Telik Inc.* 2,652
50,759
Tercica Inc.* 297
2,973
Thermogenesis Corp.* 2,330
14,772
Third Wave Technologies* 1,466
12,608
Thoratec Corp.* 2,636
27,467
Transkaryotic Therapies Inc.* 1,790
45,448
Trimeris Inc.* 815
11,549
Tripath Imaging Inc.* 1,436
12,881
United Surgical Partners International* 1,678
69,973
United Therapeutics Corp.* 987
44,563
Urologix Inc.* 734
4,749
Valeant Pharmaceuticals International 4,875
128,456
Ventana Medical Systems Inc.* 714
45,689
Vertex Pharmaceuticals* 4,815
50,895
Viasys Healthcare Inc.* 1,878
35,682
Vicuron Pharmaceuticals Inc.* 3,077
53,571
Vion Pharmaceuticals Inc.* 2,891
13,559
Vistacare Inc.* 470
7,816
Visx Inc.* 3,014
77,972
Vital Signs Inc. 293
11,404
Vnus Medical Technologies* 280
3,786
Wellcare Group Inc.* 470
15,275
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
64
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
HEALTH CARE - 11.43% (CONTINUED)
West Pharmaceutical Services Inc. 1,848
$ 46,255
Wilson Greatbatch Tech Inc.* 1,316
29,505
Wright Medical Group Inc.* 1,617
46,085
Young Innovations Inc. 245
8,264
Zila Inc.* 2,368
10,135
Zoll Medical Corp.* 480
16,512
Zymogenetics Inc.* 1,013
23,299
- ----------------
7,861,243
- ----------------
INDUSTRIAL - 0.43%
GenCorp. Inc. 2,747
51,012
Kaman Corp. 1,103
13,953
Lancaster Colony 1,622
69,535
Raven Industries Inc. 808
17,218
Sequa Corp.* 326
19,935
Trinity Industries 2,225
75,828
Walter Industries Inc. 1,441
48,605
- ----------------
296,086
- ----------------
MATERIALS - 9.86%
AAON Inc.* 455
7,312
Aceto Corp. 833
15,860
Acuity Brands Inc. 2,544
80,899
Airgas Inc. 3,652
96,815
AK Steel Holding Corp.* 6,457
93,433
Albany International Corp. 1,599
56,221
Albemarle Corp. 1,943
75,214
Aleris International Inc.* 712
12,047
Alico Inc.* 187
10,943
Allegheny Technologies Inc* 5,865
127,095
AMCOL International Corp. 1,295
26,017
American Vanguard Corp.Com 261
9,600
Ameron International Corp. 429
16,259
Anchor Glass Container Corp. 514
3,454
Apogee Enterprises Inc. 1,434
19,230
Aptargroup Inc. 2,239
118,174
Arch Chemicals Inc. 1,385
39,860
Armor Holdings Inc.* 1,771
83,272
Avatar Holdings Inc.* 240
11,544
Barnes Group Inc. 780
20,678
Beacon Roofing Supply Inc.* 710
14,101
Bluegreen Corp.* 849
16,836
Brady Corp. 1,130
70,704
Brookfield Homes Corp. 779
26,408
Brush Engineered Materials* 876
16,206
Buckeye Technologies Inc.* 1,534
19,957
Building Material Hldg Corp. 700
26,803
Cabot Micro-Electronics* 1,476
59,114
Calgon Carbon Corp. 1,770
16,072
Cambrex Corp. 1,574
42,655
Caraustar Inds Inc.* 1,755
29,519
Carpenter Technology Corp. 1,451
84,825
Century Alumimum Co.* 1,138
29,884
Ceradyne Inc.* 833
47,656
Chesapeake Corp. 1,179
32,022
Circor International Inc. 801
18,551
CLARCOR Inc. 1,565
85,715
Cleveland-Cliffs Inc. 559
58,058
Coeur D'Alene Mines Corp.* 14,032
55,146
Comfort Systems Usa* 2,008
$ 15,421
Commercial Metals Co. 1,776
89,795
Compass Minerals International Inc. 788
19,093
Compx International Inc. 177
2,926
Consolidated-Tomoka Land Co. 294
12,642
Corn Products International Inc. 2,184
116,975
Crompton Corporation 6,943
81,927
Crown Holdings Inc.* 9,625
132,248
Cytec Industries 2,341
120,374
Delta & Pine Land Co. 2,274
62,035
Deltic Timber Corp. 517
21,947
DHB Industries Inc.* 1,386
26,389
Drew Industries Inc.* 373
13,491
Dycom Industries* 2,953
90,126
Eagle Materials Inc. 1,083
93,517
ElkCorp 1,229
42,056
EMCOR Group Inc.* 790
35,692
Encore Wire Corp.* 828
11,037
Energy Conversion Devices Inc.* 1,222
23,609
Enersys Inc.* 660
10,065
Ennis Business Forms Inc. 856
16,478
Exide Technologies* 1,221
16,825
Ferro Corp. 2,528
58,624
First Acceptance Corporation* 1,068
9,569
FMC Corp.* 2,219
107,178
H.B. Fuller Co. 1,738
49,550
Georgia Gulf Corp. 1,738
86,552
Gibraltar Industries Inc. 1,447
34,178
Glatfelter 1,497
22,874
Gold Kist Holdings Inc.* 710
9,670
GrafTech International Ltd.* 5,869
55,521
Granite Construction 2,038
54,211
Graphic Packaging Corp.* 4,022
28,958
Great Lakes Chemical 3,090
88,034
Greif Inc. 680
38,080
Griffon Corp.* 1,485
40,095
Hecla Mining Co.* 7,007
40,851
Hercules, Inc. 6,713
99,688
Hexcel Corp.* 1,090
15,805
Infrasource Services Inc.* 450
5,850
Insituform Technologies Inc.* 1,625
36,839
Integrated Electrical Services Inc* 1,717
8,310
Interface Inc.* 2,681
26,730
Jacuzzi Brands Inc.* 4,626
40,246
Kaydon Corp. 1,723
56,893
Kronos Worlwide Inc. 162
6,606
Layne Christensen Co.* 515
9,347
Lennox International Inc. 2,663
54,192
LNR Property Corp. 894
56,242
Lone Star Technologies Inc.* 1,802
60,295
Longview Fibre 3,058
55,472
LSI Industries Inc. 1,031
11,805
MacDermid Inc. 1,620
58,482
Maverick Tube Corp.* 2,631
79,719
Medis Technologies Ltd.* 679
12,460
Metal Management Inc. 920
24,720
Metals Usa Inc.* 1,054
19,552
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
65
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
MATERIALS - 9.86% (CONTINUED)
MGP Ingredients Inc. 412
$ 3,560
Minerals Technologies 1,123
74,904
Mobile Mini Inc.* 750
24,780
Mueller Industries Inc. 2,117
68,167
Myers Industries Inc. 1,273
16,294
NL Industries Inc.* 412
9,105
NCI Bldg Systems Inc.* 1,017
38,138
Newmarket Corp.* 717
14,268
NN Inc. 873
11,532
NS Group Inc.* 1,177
32,721
Nuco2 Inc.* 329
7,301
Octel Corp. 650
13,527
Olin Corp. 4,208
92,660
OM Group Inc.* 1,701
55,146
Omnova Solutions Inc.* 2,099
11,796
Oregon Steel Mills Inc.* 2,046
41,513
Penn Engineering & Manufacturing Corp. 561
10,154
Perini Corp.* 336
5,608
PolyOne Corp.* 5,553
50,310
Pope & Talbot Inc. 823
14,082
Potlatch Corp. 1,779
89,982
Quaker Chemical Corp. 430
10,681
Quanex Corp. 958
65,690
Quanta Services* 4,332
34,656
Reading International Inc.* 753
6,295
Reliance Steel & Aluminum Co. 1,722
67,089
Rock-Tenn Co. 1,526
23,134
Rogers Corp.* 865
37,282
Royal Gold Inc. 857
15,632
RTI International Metals Inc.* 1,307
26,846
Ryerson Tull Inc. 1,228
19,341
Schnitzer Steel Industries Inc. 1,024
34,744
Schulman A Inc. 1,815
38,859
Shaw Group Inc.* 3,812
68,044
Silgan Hldgs Inc. 572
34,869
Simpson Mfg Inc. 2,258
78,804
Spartech Corp. 1,500
40,635
Standard Register Co. 612
8,641
Steel Dynamics 2,244
85,003
Steel Technologies Inc. 524
14,415
Stepan Co. 276
6,723
Stillwater Mining Co.* 2,379
26,788
Sunterra Corp.* 969
13,605
Symyx Technologies Inc.* 1,709
51,407
Tarragon Corp.* 349
6,230
Tejon Ranch Co.* 396
16,157
Terra Industries Inc.* 2,038
18,097
Texas Industries Inc. 1,296
80,844
Mosaic Co.(The)* 6,899
112,592
Titanium Metals Corp.* 340
8,208
Trammell Crow Co.* 1,968
35,640
Tredegar Industries Inc. 1,697
34,296
Trex Company Inc.* 537
28,160
U S Concrete Inc.* 1,104
8,468
UAP Holding Corp.* 1,650
28,496
Ultralife Batteries Inc.* 733
14,257
Universal Forest Products Inc. 823
35,719
URS Corp.* 1,918
$ 61,568
USEC Inc. 5,169
50,088
USG Corp.* 1,923
77,439
Valence Technology Inc.* 2,831
8,804
Valhi Inc. 530
8,529
Valmont Industries Inc. 751
18,858
WD-40 Co. 891
25,313
W.R. Grace & Co.* 3,997
54,399
Washington Group International Inc.* 1,517
62,576
Watsco. Inc. 1,343
47,300
Wausau-Mosinee Paper Corp. 2,765
49,383
WCI Communities Inc.* 2,087
61,358
Wellman Inc. 1,665
17,799
Westlake Chemical Corp. 590
19,706
Wheeling-Pittsburgh Corp.* 463
17,844
York International 2,479
85,625
- ----------------
6,780,509
- ----------------
TECHNOLOGY - 12.07%
@Road Inc.* 1,783
12,321
Actel Corp.* 1,344
23,574
Activcard Corp.* 2,204
19,616
Actuate Software Corp.* 2,701
6,888
Adaptec Inc.* 6,647
50,451
Advanced Digital Information* 3,901
39,088
Aeroflex Inc.* 4,036
48,916
Agile Software Corp.* 2,724
22,255
Agilysys Inc. 1,750
29,995
Airspan Networks Inc.* 1,607
8,726
Alliance Semiconductor Corp.* 1,065
3,941
Altiris Inc.* 1,085
38,442
Amis Holdings Inc.* 1,940
32,049
Anaren Inc.* 1,080
13,997
Anixter International Inc.* 1,808
65,070
Ansoft Corp.* 374
7,555
Ansys Inc.* 1,824
58,477
Anteon International Corp.* 1,648
68,985
Answerthink Inc.* 2,349
10,946
Ariba Inc.* 3,622
60,125
Arm Holdings Plc 5,301
32,706
Ascential Software Corp.* 3,577
58,341
Asiainfo Holdings Inc.* 1,843
10,984
Aspect Communications Corp.* 2,473
27,549
Aspen Technology Inc.* 2,156
13,389
Atheros Communications* 485
4,971
Authentidate Holding Corp.* 1,510
9,347
Avanex Corp.* 4,160
13,770
BEI Technologies Inc. 579
17,880
Bel Fuse Inc. 535
18,078
Benchmark Electronics Inc.* 2,524
86,068
Bioveris Corp.* 1,072
7,836
Black Box Corp. 843
40,481
Blackbaud Inc.* 430
6,295
Blackboard Inc.* 330
4,887
Blue Coat Systems Inc.* 468
8,709
Borland Software Corp.* 4,817
56,263
Broadwing Corp.* 2,922
26,619
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
66
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
TECHNOLOGY - 12.07% (CONTINUED)
Brocade Communications Systems* 15,997
$ 122,217
Caci International Inc.* 1,772
120,726
California Micro Devices Corp.* 1,101
7,806
Callwave Inc.* 210
3,242
Captaris Inc.* 1,677
8,653
Carrier Access Corp.* 1,045
11,161
Catapult Communications Corp.* 292
7,055
Checkpoint Systems Inc.* 2,322
41,912
Cherokee International Corp.* 371
3,565
Chordiant Software Inc.* 3,743
8,534
Ciber Inc.* 3,073
29,624
Cirrus Logic Inc.* 5,076
27,969
Clarus Corporation* 691
6,219
Coherent Inc.* 1,866
56,801
Commscope, Inc.* 3,322
62,786
Comtech Telecommunications* 902
33,924
Concord Communications Inc.* 955
10,581
Concur Technologies Inc.* 1,366
12,171
Covansys Corporation* 1,048
16,034
CRAY Inc.* 4,475
20,854
CSG Systems International* 3,107
58,101
Cubic Corp. 816
20,539
Cyberguard Corp.* 726
4,574
Cyberoptics Corp.* 387
5,755
Daktronics Inc.* 752
18,717
Dendrite International Inc.* 2,165
42,001
Digi International Inc.* 1,120
19,253
Digimarc Corp.* 807
7,521
Digital River Inc.* 1,864
77,561
Digitas Inc.* 4,193
40,043
Diodes Inc.* 373
8,441
Ditech Communications Corp.* 1,845
27,583
Dot Hill Systems Corp.* 2,265
17,758
DRS Technologies Inc.* 1,456
62,186
DSP Group Inc.* 1,773
39,591
E Piphany Inc.* 3,967
19,161
Eagle Broadband Inc.* 10,002
6,601
Echelon Corp.* 1,461
12,331
Ecollege.Com Inc.* 830
9,429
EDO Corp. 818
25,972
Electronics For Imaging Inc.* 3,218
56,025
Embarcadero Technologies Inc.* 1,108
10,426
EMS Technologies Inc.* 579
9,623
Emulex Corp.* 4,812
81,034
Enterasys Networks Inc.* 10,971
19,748
Entrust Inc.* 3,320
12,583
Epicor Software Corp.* 2,579
36,338
EPIQ System Inc.* 712
10,424
Equinix Inc.* 507
21,669
Ess Technology Inc.* 1,750
12,443
Exar Corp.* 2,496
35,418
Excel Technology Inc.* 626
16,276
Extreme Networks Inc.* 6,599
43,223
F5 Networks Inc.* 2,060
100,363
Falconstor Software Inc.* 1,378
13,187
FileNet Corp.* 2,504
64,503
Finisar Corp.* 8,637
19,692
Formfactor Inc.* 1,658
$ 44,998
Gartner, Inc.* 3,778
47,074
Gateway Inc. 13,490
81,075
Genesis Microchip Inc.* 1,966
31,889
Harmonic Inc.* 4,260
35,528
Herley Industries Inc.* 596
12,123
Hutchinson Technology Inc.* 1,582
54,690
Hyperion Solutions Corp.* 2,347
109,417
Indentix InCorp.* 5,367
39,608
iGATE Corp.* 1,088
4,406
Ii-Vi Inc.* 586
24,899
Imation Corp. 2,142
68,180
Infocrossing Inc.* 819
13,866
InFocus Corp.* 2,067
18,934
Infonet Services Corp.* 3,263
6,591
Informatica Corp.* 5,118
41,558
Innovative Solutions & Support* 364
12,143
Inphonic Inc.* 390
10,717
Integrated Device Technology* 6,275
72,539
Integrated Silicon Solution* 1,863
15,277
Inter-Tel Inc. 1,254
34,335
Intergraph Corp.* 1,907
51,356
Intermagnetics General Corp.* 1,698
43,146
Internet Capital Group Inc.* 1,988
17,892
Internet Security Systems Inc.* 2,313
53,777
Intervideo Inc.* 447
5,914
Intervoice Inc.* 2,166
28,916
Interwoven Inc.* 2,431
26,449
Iomega Corp.* 2,691
14,908
Ixia* 1,380
23,198
Ixys Corp.* 981
10,124
j2 Global Communications Inc.* 983
33,914
JDA Software Group Inc.* 1,343
18,292
Jupitermedia Corp.* 816
19,404
Kanbay International Inc.* 370
11,581
Keane Inc.* 3,087
45,379
Kemet Corp.* 5,184
46,397
Keynote Systems Inc.* 803
11,178
Kintera Inc.* 311
2,802
Komag Inc.* 1,616
30,348
Kopin Corp.* 3,659
14,160
KVH Industries Inc.* 753
7,379
Lasercard Corp.* 509
5,339
Lattice Semconductor* 6,878
39,205
Lawson Software Inc.* 2,903
19,944
Leadis Technology Inc.* 300
3,195
Lecroy Corp.* 407
9,499
Lexar Media Inc.* 4,327
33,924
Lionbridge Technologies Inc.* 2,433
16,350
Macrovision Corporation* 2,955
76,003
Magma Design Automation* 1,286
16,152
Manhattan Associates Inc.* 1,816
43,366
Mantech International Corp.* 879
20,867
Manugistics Group Inc.* 2,866
8,225
MAPICS Inc.* 1,242
13,103
Mapinfo Corp.* 1,055
12,639
MatrixOne Inc.* 2,540
16,637
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
67
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
TECHNOLOGY - 12.07% (CONTINUED)
Maxwell Technologies Inc.* 572
$ 5,800
McData Corp.* 7,045
41,988
Mentor Graphics* 4,538
69,386
Mercury Computer Systems Inc.* 1,268
37,634
Merge Technologies Inc.* 573
12,749
Merix Corp.* 940
10,829
Methode Electronics Inc. 2,173
27,923
Micrel Inc.* 4,153
45,766
Micros Systems Inc.* 941
73,454
Micromuse Inc.* 4,688
26,018
Microsemi Corp.* 3,625
62,930
Microstrategy Inc.* 626
37,717
Microtune Inc.* 2,600
15,886
Mindspeed Technologies Inc.* 5,195
14,442
Mips Technologies Inc.* 2,139
21,069
Mobility Electronics Inc.* 1,290
11,068
Monolithic Power Systems* 290
2,697
Monolithic System Technology* 1,219
7,594
Motive Inc.* 280
3,186
MRO Software Inc.* 1,021
13,293
MRV Communications Inc.* 5,515
20,240
MSC.Software Corp.* 1,429
14,962
Multi-Fineline Electronix Inc.* 320
5,837
Ness Technologies Inc.* 700
10,430
Net2Phone Inc.* 1,863
6,334
Netgear Inc.* 1,130
20,555
NetIQ Corp.* 3,419
41,746
NetScout Systems Inc.* 1,239
8,648
Network Equipment Technologies* 1,252
12,295
Newport Corporation* 2,505
35,321
NMS Communications Corp.* 2,428
15,321
Novatel Wireless Inc.* 963
18,663
Omnivision Technologies Inc.* 3,295
60,463
ON Semiconductor Corp.* 7,184
32,615
Open Solutions Inc.* 621
16,121
Openwave Systems Inc.* 3,837
59,320
Oplink Communications Inc.* 5,583
10,999
OPNET Technologies Inc.* 615
5,178
Opsware Inc.* 2,679
19,664
Optical Communication Products* 959
2,398
OSI Systems Inc.* 687
15,602
Overland Storage Inc.* 714
11,917
Packeteer Inc.* 2,004
28,958
Palmone Inc.* 2,513
79,285
PalmSource Inc.* 764
9,733
Paradyne Networks Inc.* 2,056
7,381
Parametric Technology 16,000
94,240
Park Electrochemical Corp. 903
19,577
PC-Tel Inc.* 1,093
8,667
PDF Solutions Inc.* 762
12,276
PEC Solutions Inc.* 603
8,545
Pegasystem Inc.* 590
5,033
Pericom Semiconductor Corp.* 1,157
10,911
Perot Systems Corp.* 4,491
71,991
Pinnacle Systems Inc.* 3,593
21,917
Pixelworks Inc.* 2,445
27,726
Planar Systems Inc.* 764
8,580
Plexus Corp* 2,608
$ 33,930
PLX Technology Inc.* 1,032
10,733
Portalplayer Inc.* 330
8,144
Power Integrations Inc.* 1,640
32,439
Progress Software Corp.* 1,933
45,136
QAD Inc. 669
5,967
Quantum Corporation* 11,080
29,030
Quest Software Inc.* 2,987
47,643
Radisys Corp.* 979
19,139
Realnetworks Inc.* 6,685
44,255
Redback Networks Inc.* 1,630
8,737
Remec Inc.* 3,633
26,194
Retek Inc.* 2,913
17,915
RF Micro Devices, Inc.* 11,184
76,499
Rightnow Technologies Inc.* 340
5,491
RSA Security Inc.* 4,235
84,954
Safeguard Scientifics Inc.* 6,252
13,254
Safenet Inc.* 1,431
52,575
Salesforce.Com Inc.* 580
9,825
Sapient Corp.* 4,733
37,438
SBS Technologies Inc.* 797
11,126
ScanSoft Inc.* 4,215
17,661
ScanSource Inc.* 655
40,715
SeaChange Inernational Inc.* 1,277
22,271
Secure Computing Corp.* 1,858
18,543
SeeBeyond Technology Corp.* 2,590
9,272
SERENA Software Inc.* 1,501
32,482
SI International Inc.* 262
8,059
Sigmatel Inc.* 1,484
52,727
Silicon Graphics Inc.* 15,773
27,287
Silicon Image Inc.* 4,486
73,840
Silicon Storage Technology Inc.* 4,890
29,095
Siliconix Inc.* 306
11,166
SimpleTech Inc.* 1,053
4,844
Sipex Corp.* 1,033
4,834
Sirf Technology Holdings Inc.* 572
7,276
Skyworks Solutions Inc.* 9,087
85,690
SonicWALL Inc.* 3,105
19,624
SPSS Inc.* 739
11,558
SRA International Inc.* 680
43,656
SS&C Technologies Inc. 709
14,641
Staktek Holdings Inc.* 534
2,478
Standard Microsystems Corp.* 961
17,135
Stellent Inc.* 1,060
9,349
Stratasys Inc.* 479
16,075
Stratex Networks Inc.* 4,396
9,935
Suntron Corp.* 127
399
Supertex Inc.* 466
10,112
Supportsoft Inc.* 1,895
12,621
Sycamore Networks Inc.* 10,356
42,045
Sykes Enterprises Inc.* 1,306
9,077
Synaptics Inc.* 1,349
41,252
Synnex Corp.* 342
8,229
Syntel Inc. 383
6,718
Sypris Solutions Inc. 353
5,404
TALX Corp. 712
18,362
Tekelec* 3,051
62,362
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
68
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
TECHNOLOGY - 12.07% (CONTINUED)
Terremark Worldwide Inc.* 15,677
$ 10,033
Tessera Technologies Inc.* 1,548
57,601
Tier Technologies Inc.* 866
8,011
Tippingpoint Technologies Inc.* 171
7,986
Titan Corp.* 5,092
82,490
Transaction Systems* 2,282
45,298
Transmeta Corp.* 7,778
12,678
Trident Microsystems Inc.* 979
16,369
Trimble Navigation Ltd.* 3,056
100,970
Tripath Technology Inc.* 1,786
2,233
Triquint Semiconductor* 8,288
36,882
TriZetto Group Inc.* 1,637
15,552
TTM Technologies Inc.* 2,498
29,476
Tumbleweed Communications Corp* 2,490
8,317
Tyler Technologies Inc.* 1,917
16,026
Ulticom Inc.* 540
8,656
Ultimate Software Group Inc.* 798
10,119
Universal Display Corp.* 1,086
9,774
Unova Inc.* 2,904
73,442
Varian Inc.* 2,081
85,341
Verint Systems Inc.* 610
22,161
Verity Inc.* 1,555
20,402
Versata Inc.* 2
6
Verso Technologies Inc.* 6,941
4,998
ViaSat Inc.* 1,278
31,017
Vignette Corp.* 15,079
20,960
Vitesse Semiconductor Corp.* 13,036
46,017
Volterra Semiconductor Corp.* 240
5,317
WatchGuard Technologies Inc.* 1,748
7,744
WebEx Communications Inc.* 1,813
43,113
WebMethods Inc.* 2,416
17,419
Websense Inc.* 1,378
69,892
Westell Technoligies Inc.* 2,570
17,476
Wind River Systems* 4,298
58,238
Witness Systems Inc.* 1,072
18,717
WJ Communications Inc.* 1,653
5,686
Xybernaut Corp.* 9,237
11,362
Zhone Technologies Inc.* 2,362
6,118
Zix Corp.* 1,089
5,608
Zoran Corp.* 2,531
29,309
- ----------------
8,301,236
- ----------------
UTILITIES - 4.16%
Airgate Pcs Inc.* 617
21,965
Alamosa Holdings Inc.* 4,561
56,876
Alaska Comm Systems Holdings Inc. 513
4,427
American States Water Co. 796
20,696
Aquila, Inc.* 13,406
49,468
Atmos Energy Corp. 4,652
127,232
Avitsa Corp. 2,967
52,427
Black Hills 1,953
59,918
Boston Communication Group Inc* 957
8,843
California Water Service Group 1,039
39,118
Cascade Natural Gas Corp. 586
12,423
Centennial Communications Corp* 619
4,909
Central Vermont Public Service Corp. 632
14,700
CH Energy Group Inc. 823
39,545
Cincinnati Bell Inc.* 14,757
61,242
Cleco Corp. 2,903
$ 58,815
CMS Energy 11,781
123,111
Commonwealth Tel Enterprises* 1,296
64,359
Connecticut Water Service Inc. 417
11,046
CT Communications Inc. 986
12,128
D&E Communications Inc. 679
8,182
Dobson Communications Corp.* 5,749
9,888
Duquesne Light Holdings, Inc. 4,609
86,880
El Paso Electric Co.* 2,865
54,263
Empire District Electric Company 1,545
35,041
Energen Corp. 2,268
133,699
Energysouth Inc. 354
9,926
General Communication Inc.* 2,712
29,940
Golden Telecom Inc. 739
19,524
IDACORP Inc. Holding Co. 2,304
70,433
Intrado Inc.* 902
10,914
Iowa Telecommunications 1,000
21,570
ITC Deltacom Inc.* 655
1,120
Laclede Group Inc. 1,262
39,311
Mediacom Communications Corp.* 3,444
21,525
MGE Energy Inc. 1,192
42,948
Middlesex Water Co. 553
10,474
New Jersey Resources Corp. 1,679
72,768
Nicor Inc.* 2,691
99,406
North Pittsburgh Systems Inc. 784
19,388
Northwest Natural Gas Co. 1,656
55,873
Ormat Technologies Inc.* 380
6,186
Otter Tail Corp. 1,551
39,597
People's Energy 2,301
101,129
Piedmont Natural Gas Co. Inc. 4,656
108,205
PNM Resources, Inc. 3,665
92,688
Price Communications Corp.* 2,444
45,433
Primus Telecommunications Group* 3,866
12,294
PTEK Hldgs Inc. 3,808
40,784
Shenandoah Telecom Co. 343
10,273
Sierra Pacific* 7,024
73,752
SJW Corp. 337
12,267
South Jersey Industries Inc. 717
37,686
Southern Union Co.* 4,000
95,920
Southwest Gas Corp. 2,111
53,619
Southwest Water Co. 905
12,174
Southwestern Energy Co.* 2,284
115,776
SureWest Communications 761
21,574
Talk America Holdings Inc.* 1,394
9,228
Time Warner Telecom Inc.* 2,592
11,301
Triton Pcs Holdings Inc.* 1,993
6,816
Ubiquitel Inc.* 4,334
30,858
UIL Hldgs Corp. 651
33,396
Unisource Energy Corp. 2,053
49,498
USA Mobility Inc.* 1,423
50,246
WGL Holdings, Inc. 2,931
90,392
- ----------------
2,857,413
- ----------------
Total Common Stocks
(cost $56,239,900)
66,266,156
- ----------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
69
<Page>
<Table>
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
CORPORATE BONDS - 0.02%
MATERIALS - 0.02%
Mueller Industries Inc.
(6.000% due 11/01/14) $ 15,000
$ 14,700
- ----------------
Total Corporate Bonds
(cost $15,000)
14,700
- ----------------
<Caption>
SHARES
VALUE
------------------
- -----------------
UNIT INVESTMENT TRUST(2) - 0.75%
iShares Russell 2000 Index Fund* 3,955
$ 512,173
- ----------------
Total Unit Investment Trust
(cost $287,123)
512,173
- ----------------
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
SHORT-TERM INVESTMENTS(2) - 0.72%
U.S. TREASURY BILL - 0.72%
(2.240% due 03/17/05) $ 500,000
$ 497,878
- ----------------
Total Short-Term Investments
(cost $497,745)
497,878
- ----------------
TOTAL INVESTMENTS - 97.85%
(cost $57,039,768)(1)
67,290,907
- ----------------
OTHER ASSETS AND LIABILITIES(2) - 2.15%
1,479,407
- ----------------
TOTAL NET ASSETS - 100.00%
$ 68,770,314
================
</Table>
* Non-income producing
(1) For federal income tax purposes, cost is $57,297,087 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$13,621,551 and ($3,627,731), respectively, with a net appreciation
/
depreciation of $9,993,820.
(2) Securities and other assets with an aggregate value of $1,634,875
have been
segregated with the custodian or designated to cover margin
requirements for
the open futures contracts as of December 31, 2004:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
TYPE CONTRACTS
(DEPRECIATION)
- -----------------------------------------------------------------------
- -----------------
Russell 2000 Index (03/05) 5
$ 21,750
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
70
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO FINANCIAL
STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
67,290,907
Receivables:
Shares sold
122,793
Securities sold
4,536,286
Interest and dividends
86,285
Variation margin
1,125
Prepaid expenses and other
12,701
--------
- --------
72,050,097
--------
- --------
LIABILITIES
Payables:
Investment securities purchased
21,951
Shares redeemed
19,629
Bank overdraft
3,163,556
Advisory fees
20,651
Administration expenses
5,701
Directors' fees
3,012
Custodian fees
6,802
Fund accounting fees
9,544
Professional fees
17,238
Royalty fees
5,141
Other accrued expenses
6,558
--------
- --------
3,279,783
--------
- --------
NET ASSETS*
Paid-in capital
57,788,926
Accumulated undistributed net
investment income
309,409
Accumulated net realized gain / (loss)
on investments and futures contracts
399,090
Net unrealized appreciation / (depreciation)
on investments and futures contracts
10,272,889
--------
- --------
$
68,770,314
================
Shares authorized ($.10 par value)
20,000,000
Shares outstanding
1,075,916
Net asset value, offering and redemption
price per share $
63.92
Investments at cost $
57,039,768
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $
684,003
Undistributed long-term gains $
303,283
Unrealized appreciation $
9,993,820
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
59,332
Dividends
645,526
Foreign dividend taxes withheld
(14)
Other income
7,888
--------
- --------
712,732
--------
- --------
EXPENSES
Advisory fees
185,763
Administration expenses
53,075
Custodian fees and expenses
41,110
Fund accounting fees
57,037
Professional fees
23,170
Directors' fees
9,941
Transfer agent fees
10,669
Royalty fee
7,364
Other expenses
14,904
--------
- --------
403,033
Reimbursements and waivers
(8,798)
--------
- --------
394,235
--------
- --------
NET INVESTMENT INCOME / (LOSS)
318,497
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
1,238,358
Net realized gain / (loss) on
futures contracts
448,347
--------
- --------
1,686,705
--------
- --------
Net change in unrealized appreciation /
(depreciation) on investments and
futures contracts
6,889,992
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
8,576,697
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
8,895,194
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- ----------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE LIMIT(1) WAIVER REIMBURSEMENT
- ----------------------------------------------------------------
0.35% 0.10% 0.40% $ -- $ 8,798
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
71
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
318,497 $ 98,386
Net realized gain / (loss) on investments and futures
1,686,705 (215,741)
Net change in unrealized appreciation / (depreciation)
on investments and futures contracts
6,889,992 6,714,656
--------
- -------- ----------------
8,895,194 6,597,301
--------
- -------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(105,479) (103,286)
--------
- -------- ----------------
(105,479) (103,286)
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
42,380,445 13,037,142
Reinvestment of distributions
105,479 103,286
Payments for shares redeemed
(8,299,247) (7,703,184)
--------
- -------- ----------------
34,186,677 5,437,244
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
42,976,392 11,931,259
NET ASSETS
Beginning of period
25,793,922 13,862,663
--------
- -------- ----------------
End of period $
68,770,314 $ 25,793,922
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $
309,409 $ 96,391
================ ================
FUND SHARE TRANSACTIONS
Sold
747,513 279,445
Reinvestment of distributions
1,826 2,947
Redeemed
(147,549) (177,778)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
601,790 104,614
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
47,154,645 $ 10,708,607
Corporate Bonds
18,679 --
--------
- -------- ----------------
$
47,173,324 $ 10,708,607
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
13,128,769 $ 3,567,071
Corporate Bonds
3,679 --
--------
- -------- ----------------
$
13,132,448 $ 3,567,071
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income $
105,479 $ 103,286
--------
- -------- ----------------
$
105,479 $ 103,286
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
72
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
EAFE INTERNATIONAL INDEX
PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the total
return
performance of common stocks as represented by the Morgan Stanley
Capital
International ("MSCI") EAFE Index (the "Index"). The Index emphasizes
the stock
of companies in major markets in Europe, Australasia, and the Far East.
STRATEGY - The Summit Pinnacle EAFE International Index Portfolio (the
"Portfolio") will invest primarily in common stocks of the companies
that
compose the Index.
MANAGERS' COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return was
18.02%
(after waivers and reimbursements, but before the impact of any product
or
contract-level fees). This compares to a 20.25% total return for the
Index. The
difference of 2.23% is referred to as "tracking error." One component
of the
difference is attributed to the Portfolio's operating expenses. These
expenses
represent the Portfolio's costs for advisory, administration,
accounting,
custody and other services. The remaining difference can be caused by a
number
of factors, including the timing and size of cash flows into and out of
the
Portfolio; brokers' commissions or other trading costs; and holding a
sample of
the security positions in the Index or holding them in amounts that are
different than the weightings in the Index, among others. While an
exact
replication of the capitalization weightings of securities in the Index
is not
feasible, the Portfolio's objectives and strategies call for it to seek
investment results that correspond to the pre-expense total return of
the Index.
FUND DATA
<Table>
Manager: Subadvised by World Asset
Management, L.L.C.
A division of Munder Capital Management
Inception Date: November 12, 2002
Total Net Assets: $50.94 Million
Number of Holdings: 598
Median Cap Size: $3.80 Billion
Average Price-to-book Ratio: 2.21x
Dividend Yield: 2.41%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit EAFE International Index Portfolio - Total Return
<Table>
<Caption>
1-YEAR SINCE INCEPTION
18.02% 22.93%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
Absent limitation of expenses during certain of the periods shown,
performance
would have been lower.
<Table>
<Caption>
SUMMIT EAFE INTERNATIONAL INDEX PORTFOLIO
MSCI EAFE INTERNATIONAL INDEX
Nov-2002 $ 10,000
$ 10,000
Nov-2002 $ 10,400
$ 10,454
Dec-2002 $ 9,918
$ 10,103
Jan-2003 $ 9,478
$ 9,681
Feb-2003 $ 9,261
$ 9,460
Mar-2003 $ 9,034
$ 9,274
Apr-2003 $ 9,880
$ 10,183
May-2003 $ 10,471
$ 10,800
Jun-2003 $ 10,655
$ 11,062
Jul-2003 $ 10,806
$ 11,329
Aug-2003 $ 10,988
$ 11,602
Sep-2003 $ 11,287
$ 11,960
Oct-2003 $ 11,962
$ 12,705
Nov-2003 $ 12,232
$ 12,987
Dec-2003 $ 13,170
$ 14,001
Jan-2004 $ 13,321
$ 14,199
Feb-2004 $ 13,597
$ 14,527
Mar-2004 $ 13,629
$ 14,608
Apr-2004 $ 13,330
$ 14,278
May-2004 $ 13,359
$ 14,326
Jun-2004 $ 13,645
$ 14,640
Jul-2004 $ 13,196
$ 14,164
Aug-2004 $ 13,223
$ 14,227
Sep-2004 $ 13,549
$ 14,598
Oct-2004 $ 14,009
$ 15,096
Nov-2004 $ 14,940
$ 16,127
Dec-2004 $ 15,544
$ 16,835
</Table>
TOP 10 EQUITY HOLDINGS
<Table>
<Caption>
(% OF NET ASSETS)
-----------------
BP Amoco Plc 2.30%
HSBC Holdings Plc 1.96%
Vodafone Group Plc 1.95%
GlaxoSmithKline Plc 1.47%
Total FinaElf SA 1.33%
Royal Dutch Petroleum Company 1.29%
Toyota Motor Corporation 1.25%
Novartis 1.25%
Royal Bank of Scotland Group Plc 1.14%
Nestle SA 1.11%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
Australia 5.3%
France 9.0%
Germany 6.9%
Italy 4.5%
Japan 21.1%
Netherlands 5.2%
Sweden 2.0%
United Kingdom 25.4%
Switzerland 6.7%
Spain 4.1%
Short-Term & Other 9.8%
</Table>
The EAFE International Index Portfolio is not sponsored, endorsed, sold
or
promoted by MSCI or any affiliate of MSCI. Neither MSCI nor any other
party
makes any representation or warranty, express or implied to Summit
Mutual Funds,
Inc. or any member to the public regarding the advisability of
investing in
funds generally or in this fund particularly or the ability of the EAFE
Index to
track general stock market performance.
73
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL HIGHLIGHTS EAFE INTERNATIONAL INDEX
PORTFOLIO
<Table>
<Caption>
PERIOD FROM
NOVEMBER 12, 2002(1)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
- ------------------------------------------------
2004 2003 2002
- ------------------------------------------------
Net asset value, beginning of period
$ 64.41 $ 49.59 $ 50.00
- -------- -------- --------------------
Investment Activities:
Net investment income / (loss)
1.00(4) 1.34 0.19
Net realized and unrealized gains / (losses)
10.42 14.49 (0.60)
- -------- -------- --------------------
Total from Investment Activities
11.42 15.83 (0.41)
- -------- -------- --------------------
DISTRIBUTIONS:
Net investment income
(0.69) (0.19) --
Net realized gains
(0.80) (0.82) --
- -------- -------- --------------------
Total Distributions
(1.49) (1.01) --
- -------- -------- --------------------
Net asset value, end of period
$ 74.34 $ 64.41 $ 49.59
======== ======== ====================
Total return
18.02% 32.79% -0.82%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (2)
0.95% 0.65% 0.65%(3)
Ratio of expenses to average net assets - gross
1.69% 2.46% 1.99%(3)
Ratio of net investment income / (loss) to average net assets
1.70% 2.14% 2.24%(3)
Portfolio turnover rate
55.49% 75.27% 449.05%(3)
Net assets, end of period (000's)
$ 50,938 $ 16,565 $ 22,234
</Table>
(1) COMMENCEMENT OF OPERATIONS.
(2) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(3) ANNUALIZED.
(4) PER SHARE AMOUNTS ARE BASED ON AVERAGE SHARES OUTSTANDING.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
74
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
EAFE INTERNATIONAL INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
COMMON STOCKS - 98.03%
AUSTRALIA - 5.27%
Alumina Ltd 8,720
$ 40,604
Amcor Limited 5,277
30,404
AMP Ltd 10,569
60,149
Australia & New Zealand Bank Group 8,981
144,958
Australian Gas Light 3,798
40,788
Australian Stock Exchange* 1,579
25,251
BHP Billiton Ltd 19,473
234,163
BHP Steel Ltd 4,544
29,387
Brambles Industries Limited 7,246
39,477
Coca-Cola Amatil Ltd 4,788
30,518
Coles Myer Limited 6,507
50,294
CSL Limited 1,530
35,081
Commonwealth Bank of Australia 6,370
160,290
Commonwealth Property Office* 40,485
39,670
DB Rreef Trust* 55,835
57,775
Fairfax-John Holdings Ltd 8,427
30,057
Foster's Brewing Group Limited 11,929
54,143
Gandel Retail Trust* 27,897
34,990
Harvey Norman Holdings Ltd* 10,318
25,478
ING Industrial Fund* 43,469
73,603
Insurance Australia Group Ltd 9,052
45,626
James Hardie Inds* 5,719
30,037
Lend Lease Corporation Limited 2,921
30,339
Lion Nathan Ltd* 4,475
30,168
Macquarie Bank Limited 1,375
50,121
Macquarie Infrastructure Group 16,879
44,987
National Australia Bank 7,982
180,329
Newcrest Mining Limited 2,194
30,012
Orica Limited 1,887
30,132
Origin Energy Limited 7,480
40,400
Patrick Corporation Ltd* 5,850
30,175
Perpetual Trustees Australia* 817
40,284
Qantas Airways Ltd* 8,548
24,860
QBE Insurance Group Ltd 3,849
46,314
Rinker Group Ltd 4,772
39,839
Rio Tinto Limited 1,926
59,063
Santos Limited 6,791
45,143
Sonic Healthcare Ltd* 2,641
25,216
Suncorp Metway Limited 2,556
34,823
TABCORP Holdings Limited 2,950
39,983
Telstra Corporation Limited 10,411
40,071
Toll Holdings Ltd* 3,020
30,279
Transurban Group* 5,719
30,037
Ushio Inc.* 1,353
25,285
Wesfarmers Limited 2,065
64,426
Westfield Trust 6,570
84,618
Westpac Banking Corp 7,242
110,645
WMC Limited 7,095
40,156
Woodside Petroleum Limited 3,521
55,478
Woolworths Limited 5,959
70,116
- ----------------
2,686,042
- ----------------
AUSTRIA - 0.37%
Boehler* 318
$ 40,190
Erste Bank* 745
39,797
OMV AG 130
39,173
Telekom Austria AG 1,829
34,681
Wienerberger Baustoffindustr* 721
34,448
- ----------------
188,289
- ----------------
BELGIUM - 1.37%
Belgacom SA* 2,105
90,987
Cofinimmo* 272
44,514
Colruyt NV* 187
30,400
Delhaize-Le Lion 520
39,546
Dexia 3,645
83,830
Electrabel 121
53,946
Fortis Group 5,870
162,369
Groupe Bruxelles Lambert 427
34,766
KBC Bancassurance Holding 581
44,619
Solvay SA 358
39,416
UCB S.A 677
34,416
Umicore* 422
39,722
- ----------------
698,531
- ----------------
DENMARK - 0.73%
AP Moller 7
57,816
Danisco A/S 490
29,906
Danske Bank A/S 2,106
64,555
ISS A/S 713
39,803
Novo-Nordisk A/S 1,634
89,276
Novozymes A/S 581
29,514
TDC A/S 1,399
59,244
- ----------------
370,114
- ----------------
FINLAND - 1.32%
Fortum Oyj 2,145
39,710
Kone Oyj 379
29,410
Nokia Oyj 25,790
407,340
Sampo Oyj 2,512
34,691
Stora Enso Oyj 3,881
59,452
Tietoenator Oyj 938
29,834
UMP-Kymmene Oyj 3,361
74,740
- ----------------
675,177
- ----------------
FRANCE - 9.02%
Accor SA 1,236
54,114
Alcatel SA 6,715
104,508
Arcelor 2,763
63,733
Axa 7,372
182,171
BNP Paribas 4,130
299,210
Bouygues 1,174
54,256
Cap Gemini SA* 928
29,718
Carrefour Supermarche 3,198
152,315
Compagnie De Saint-Gobain 1,705
102,713
Credit Agricole SA 3,425
103,351
Essilor International 654
51,248
Euronext 968
29,565
Finmeccanica SPA 49,012
44,435
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
75
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
FRANCE - 9.02% (CONTINUED)
France Telecom 8,022
$ 265,619
Groupe Danone 1,340
123,764
Lafarge SA 966
93,226
Lagardere S.C.A 750
54,132
L'Air liquide 559
103,336
L'OREAL 1,694
128,598
LVMH Moet Hennessy Louis Vuitton 1,352
103,555
Michelin (C.G.D.E.) 844
54,137
Pernod-Ricard 354
54,228
Peugeot SA 933
59,224
Pinault-Printemps-Redoute 445
44,548
Pirelli & Co* 18,438
24,861
Publicis Groupe 1,063
34,460
Renault SA 1,061
88,765
Sanofi-Aventis 5,224
417,522
Schneider Electric SA 1,426
99,240
Societe Generale 1,751
177,194
Sodexho Alliance SA 826
24,992
STMicroelectronics N.V 3,566
69,556
Suez Lyonnaise des Eaux 4,494
119,848
Technip SA 188
34,753
Television Francaise 906
29,494
The Thales Company 618
29,669
Thomson Mulitmedia* 1,508
39,868
Total FinaElf SA 3,110
679,322
Unibal Holding 281
44,230
Valeo SA 585
24,491
Vinci 443
59,492
Vivendi Environment 1,705
61,716
Vivendi Universal* 5,541
176,917
- ----------------
4,592,094
- ----------------
GERMANY - 6.91%
Adidas AG 306
49,562
Allianz AG 1,684
222,374
Altana AG 470
29,732
BASF AG 2,616
188,173
Bayer AG 3,648
123,468
Bayer Hypo-Vereinsbank* 3,689
83,889
Commerzbank AG 2,885
59,488
Continental AG* 704
44,736
DaimlerChrysler AG 4,621
221,409
Depfa Bank* 2,392
40,219
Deutsche Bank AG 2,618
232,371
Deutsche Boerse AG 660
39,697
Deutsche Lufthansa* 2,094
29,943
Deutsche Post AG 2,596
59,492
Deutsche Telekom* 15,098
341,485
E.ON AG 3,369
307,638
Fresenius Medical Care AG 370
29,748
Greberit AG* 34
24,877
Greek Org of Football 1,080
29,888
Heidelbergcement AG* 407
24,662
Henkel KGAA 340
29,554
Hypo Real Estate Holding* 721
29,910
Infineon Technologies* 4,112
44,211
Linde AG 556
34,696
Man AG 781
$ 29,968
Merck Kgaa 366
25,024
Metro AG 899
49,441
Muenchener Rueckversicherungs AG 1,045
128,249
Porsche AG* 54
34,256
Puma AG* 128
34,953
RWE AG 2,315
127,755
SAP AG 1,157
206,332
Schering AG 923
68,977
Siemens AG 4,435
375,923
ThyssenKrupp AG 1,798
39,592
Volkswagen AG 1,743
79,012
- ----------------
3,520,704
- ----------------
GREECE - 0.43%
Alpha Bank AE 1,543
53,817
Bank of Piraeus 1,965
34,348
EFG Eurobank Ergasias 1,143
39,276
Heelenic Telecommun 1,909
34,303
National Bank of Greece 1,795
59,240
- ----------------
220,984
- ----------------
HONG KONG - 1.65%
Bank of East Asia 14,338
44,549
Boc Hong Kong Holdings Ltd 23,269
44,456
Cathay Pacific Airways* 13,149
24,868
Cheung Kong Holdings 8,975
89,488
China Light & Power Holding 7,748
44,558
Esprit Holdings Limited 6,563
39,685
Hang Lung Properties Ltd* 16,064
24,801
Hang Seng Bank 3,892
54,079
Henderson Land Development 6,587
34,237
Hokkaido Electric Power Co 6,471
29,555
Hong Kong Exchanges & Clearing 11,102
29,709
Hong Kong & China Gas 21,199
43,774
Hutchison Whampoa 12,180
114,001
Li & Fung Ltd. 17,652
29,750
Sun Hung Kai Properties Ltd 8,422
84,245
Swire Pacific Ltd. 5,976
49,975
Television Broadcast* 5,231
24,295
Wharf Holdings Ltd 9,881
34,578
- ----------------
840,603
- ----------------
ITALY - 4.53%
Alleanza Assicurazioni 2,838
39,617
Assicurazioni Generali 5,087
172,655
Autogill SpA* 1,773
29,618
Autostrade SpA 1,651
44,209
Banca Antonveneta SpA* 1,683
44,380
Banca Intesa SpA 22,832
109,862
Banca Monte Dei Paschi Siena 9,650
34,432
Banca Nazionale Lavoro 13,269
39,589
Banche Popolari Unite 2,682
54,537
Banco Popolar Di Verona 2,689
54,679
Banco Popolare Di Milano 3,888
34,457
Bank of Ireland 5,940
98,906
Capitalia SpA 9,817
44,968
Enel SpA 19,091
187,614
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
76
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
ITALY - 4.53% (CONTINUED)
ENI-Ente Nazionale Idrocarburi SpA 13,948
$ 349,221
Fiat SpA* 4,310
34,564
Irish Life & Permanent Plc 1,849
34,683
Luxottica Group SpA 1,213
24,699
Mediaset SpA 3,889
49,320
Mediobanca SpA 3,042
49,246
Riunione Adriatica di Sicurta SpA 1,744
39,446
San Paolo-IMI SpA 6,215
89,546
South African Breweries 4,787
79,407
Telecom Italia Rnc 25,783
83,759
Telecom Italia SpA 45,857
187,617
TIM SpA 21,172
158,279
Unicredito Italiano SpA 24,044
138,244
- ----------------
2,307,554
- ----------------
JAPAN - 21.08%
77th Bank*
Acom Co Ltd 473
35,405
Advantest Corp. 532
45,636
Aeon Co. Ltd. 3,661
61,094
Aiful Corp 276
30,355
Aisin Seiki Co. Ltd 1,198
30,339
Ajinomoto Co Inc 3,814
45,409
Asahi Breweries Ltd. 2,870
35,542
Asahi Glass Co Ltd 4,546
50,132
Asahi Kasei Corp 9,002
45,067
Bank of Fukuoka Ltd 4,695
30,927
Bank of Yokohama Ltd 7,230
45,580
Bridgestone Corp 3,808
75,811
Canon Inc 4,699
253,591
Casio Computer* 1,970
30,395
Central Japan Railway Co 5
40,841
Chiba Bank Ltd 4,563
30,503
Chubu Electric Power Co. 3,597
86,353
Chugai Pharmaceutical Co Ltd 1,848
30,551
Citizen Watch Co 3,190
30,664
Credit Saison Co 986
35,891
Dai Nippon Printing Co. Ltd. 4,128
66,228
Daiichi Pharmaceutical Co Ltd 1,625
35,126
Daikin Industries 1,401
40,470
Daito Trust Construction 647
30,749
Daiwa House 3,592
40,838
Daiwa Securities Group Inc 7,684
55,491
Denso Corp 2,825
75,677
Dentsu* 15
40,402
East Japan Railway Company 16
89,002
Eisai Co Ltd 1,567
51,535
Electric Power Development* 1,077
30,165
Fanuc 926
60,547
Fast Retailing Co Ltd 396
30,143
Fuji Photo Film Company Ltd 2,683
97,925
Fujisawa Pharmaceutical Co 1,689
46,234
Fujitsu Limited 11,614
75,598
Hitachi Ltd 18,361
127,221
Hirose Electric Co Ltd 260
30,397
Honda Motor Co Ltd 4,243
219,872
Hoya Corporation 626
70,682
Itochu Corp 9,844
45,536
Ito-Yokado Co Ltd 1,926
$ 80,822
Japan Tobacco Inc 6
68,508
JFE Holdings Inc. 3,003
85,720
Joyo Bank Ltd 5,203
25,388
JSR Corp 1,374
30,103
Kajima Corporation 7,075
30,449
Kamigumi Co Ltd* 3,837
30,630
Kaneka Corp 2,233
25,278
Kansai Electric Power Co 3,485
70,741
Kao Corp 2,763
70,646
Kawasaki Kisen Kaisha Ltd 4,556
29,300
Keihin Electric Express Railway 5,749
35,402
Keio Electric Railway 5,184
30,405
Keyence Corporation 228
51,087
Kinki Nippon Railway Co Ltd 11,852
40,945
Kirin Brewery Co. Ltd. 4,632
45,610
Kobe Steel Ltd.* 19,773
30,295
Komatsu Ltd 6,489
45,405
Konica Minolta Holdings Inc 3,067
40,706
Kubota Corp. 7,183
35,610
Kuraray Co Ltd 3,386
30,367
Kyocera Corp 976
75,150
Kyushu Electric Power 2,263
45,715
Marubeni Corp 10,938
30,315
Marui Co 2,664
35,669
Matsushita Electric Industrial Co Ltd 12,469
197,859
Millea Holdings 5
74,168
Minebea Co Ltd* 6,995
30,514
Mitsubishi Chemical Corp 11,722
35,691
Mitsubishi Corp 6,250
80,755
Mitsubishi Electric Corp 12,363
60,566
Mitsubishi Estate Co Ltd 5,612
65,721
Mitsubishi Heavy Industries Ltd 19,568
55,570
Mitsubishi Tokyo Financial 27
274,031
Mitsui & Co Ltd 7,312
65,578
Mitsui Fudosan Co Ltd 4,176
50,738
Mitsui Osk Lines Ltd 6,591
39,558
Mitsui Pertochemical 5,558
30,266
Mitsui Sumitomo Insurance Co 6,947
60,338
Mitsui Trust Holdings Inc 3,535
35,326
Mizuho Financial Group Inc 43
216,532
Murata Manufacturing Co. Ltd 1,436
80,299
NEC Corporation 11,370
70,681
NGK Insulators 3,187
30,480
Nidec Corporation 333
40,589
Nikko Cordial Corp 10,570
56,012
Nikon Corp 2,429
30,010
Nintendo Co Ltd 606
76,112
Nippon Express Co Ltd 7,183
35,400
Nippon Mining Holdings Inc* 6,467
30,420
Nippon Oil Corp 8,781
56,301
Nippon Paper Gorup Inc 7
31,424
Nippon Steel Corp 34,820
85,292
Nippon Telegraph & Telephone Corp. 28
125,695
Nippon Yusen Kabushiki Kaisha 7,344
39,562
Nissan Motor Co Ltd 13,932
151,461
Nitto Denko Corp 1,102
60,440
Nomura Holdings Inc. 10,442
152,243
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
77
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
JAPAN - 21.08% (CONTINUED)
Nomura Reaserch Institute Ltd 325
$ 30,448
NTT Data Corp* 9
29,072
NTT Mobile Communications 115
212,111
Obayashi Corp 4,004
25,242
Odakyu Electric Railway Co 5,219
30,254
OJI Paper Co Ltd 5,291
30,361
Oki Electric Ind Co Ltd* 5,855
25,198
Olympus Corp 1,662
35,439
Omron Corp* 1,714
40,897
Oriental Land Co Ltd 434
30,156
Orix Corp 485
65,885
Osaka Gas Co Ltd 14,596
45,581
Pioneer Electric Corp 1,527
29,804
Promise Co Ltd 574
41,004
Resona Holding Inc* 25,325
51,406
Ricoh Company Limited 3,971
76,614
Rohm Company Limited 685
70,860
Sankyo Co. Ltd. 2,255
50,945
Sanyo Electric Co Ltd 11,717
40,478
Secom 1,396
55,856
Sega Sammy Holdings Inc* 465
25,548
Seiko Epson Corp 679
30,216
Sekisui Chemical 3,469
25,357
Sekisui House Ltd 3,060
35,656
Seven Eleven 2,249
70,892
Sharp Corporation 5,877
95,952
Shin-Etsu Chemical Co Ltd 2,101
86,115
Shinsei Bank Ltd 3,736
25,449
Shionogi & Co Ltd 2,552
35,290
Shiseido Co Ltd 2,422
35,076
Shizuoka Bank Ltd. 3,741
35,450
SMC Corporation 402
46,018
Softbank Corp 1,337
65,108
Sompo Japan Insurance 4,479
45,634
Sony Corporation 5,309
205,169
Sumitomo Chemical Co Ltd. 9,254
45,335
Sumitomo Corp 5,875
50,683
Sumitomo Electric Industries Ltd 4,674
50,859
Sumitomo Metal Industries 26,268
35,632
Sumitomo Metal Mining 4,220
30,146
Sumitomo Mitsui Financial 22
159,949
Sumitomo Realty 2,706
35,281
Sumitomo Trust and Banking 7,779
56,253
Taisho Pharmaceutical Co 1,380
30,032
Takeda Pharmaceutical Co Ltd 4,747
239,041
Takefuji Corp 449
30,366
T&D Holdings Inc* 1,056
50,497
TDK Corp 820
60,738
Teijin Limited 5,802
25,197
Terumo Corporation 1,311
35,311
Tobu Railway Co Ltd 9,372
35,670
Tohoku Electric Power 2,531
45,448
Tokyo Electric Power 5,964
146,379
Tokyo Electron Limited 1,155
71,124
Tokyo Gas Co Ltd 16,066
65,851
Tokyu Corporation 7,478
40,430
Tonengeneral Sekiyu 3,317
30,202
Toppan Printing Co. Ltd. 4,080
$ 45,271
Toray Industries Inc 8,640
40,472
Toshiba Corporation 18,780
80,640
Tostem Corp 1,963
35,651
Toto Ltd 2,631
25,111
Toyota Industries Corporation 1,212
30,279
Toyota Motor Corporation 15,684
638,258
Trend Micro 660
35,618
UFJ Holdings Inc 22
133,327
West Japan Railway* 12
48,482
Wolters Kluwer 1,979
39,731
Yahoo Japan Corp* 12
57,617
Yamada Denki Corp 709
30,375
Yamaha Motor Co Ltd 2,023
30,364
Yamanouchi Pharmaceutical Co Ltd 1,845
71,841
Yamato Transport Co Ltd 2,731
40,511
Yokogawa Electric 2,248
30,055
- ----------------
10,740,390
- ----------------
NETHERLANDS - 5.14%
ABN Amro Holding NV 8,755
231,936
Aegon NV 7,920
107,976
Akzo Nobel NV 1,745
74,430
ASML Lithography Holding NV* 3,110
49,924
Corio NV* 503
29,468
DSM NV 534
34,564
Heineken NV 1,621
54,048
Inbev 1,135
44,030
Inditex 1,503
44,332
ING Groep NV 9,990
302,266
Koninklijke Ahold NV* 9,592
74,316
Koninklijke KPN NV 10,882
103,392
Koninklijke Numico NV* 957
34,510
Nordea Bank AB* 11,638
117,336
Philips Electronics NV 7,665
203,268
Reed Elsevier NV 4,732
64,513
Rodamco Europe NV 369
29,291
Royal Dutch Petroleum Company 11,413
656,980
TNT Post Group NV 2,379
64,608
Unilever NV* 3,177
213,024
Vnu-Ver Ned Uitgev Ver Bezit 1,675
49,474
Wereldhave NV* 322
35,014
- ----------------
2,618,700
- ----------------
NEW ZEALAND - 0.13%
Sky City Entertainment Group* 7,823
30,400
Telecom Corp 7,965
35,382
- ----------------
65,782
- ----------------
NORWAY - 0.65%
DNB Nor ASA 4,509
44,482
Norsk Hydro ASA 1,194
94,035
Orkla ASA 1,653
54,312
Statoil ASA 3,518
55,181
Storebrand ASA* 2,602
25,132
Telenor ASA 5,465
49,627
Yara International ASA* 557
7,334
- ----------------
330,103
- ----------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
78
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
PORTUGAL - 0.42%
Banco BPI SA* 7,289
$ 29,525
Banco Comercial Portugues 13,525
34,745
Brisa-Auto Estradas de Portugal SA* 3,243
29,754
Electricidade de Portugal SA 16,289
49,374
Portugal Telecom SGPS SA 5,638
69,737
- ----------------
213,135
- ----------------
SINGAPORE - 0.74%
DBS Group Holdings Ltd 6,577
64,868
Fraser & Neave Ltd* 3,054
30,495
Keppel Corp. 5,714
30,103
Oversea-Chinese Banking Corp 7,142
59,065
Singapore Airlines Ltd. 5,600
39,108
Singapore Press Holdings 14,008
39,670
Singapore Technologies Engineering Ltd* 34,297
50,005
UTD Overseas Bank 7,625
64,460
- ----------------
377,774
- ----------------
SPAIN - 4.11%
Abertis Infraestructuras SA 1,787
39,349
Acciona SA 334
29,555
Acerinox SA 1,852
29,730
ACS, Actividades Cons 1,938
44,255
Altadis SA 1,748
80,070
Amadeus Global Travel* 2,576
26,506
Banco Bilbao Vizcaya Argentaria SA 16,649
295,323
Banco Popular Espanol 1,046
68,956
Banco Santander Central Hispano SA 31,620
392,403
Endesa SA 5,679
133,465
Fomento De Condtruc 620
29,858
Gas Natural SDG SA 1,269
39,258
Grupo Ferrovial SA 550
29,395
Iberdrola SA 4,649
118,168
Indra Sistemas SA* 2,010
34,342
NH Hoteles SA* 2,592
34,386
Repsol YPF SA 5,486
142,873
Telefonica SA 23,972
451,613
Union Electrica Fenosa SA 1,677
44,108
Vallehermoso SA* 1,850
30,553
- ----------------
2,094,166
- ----------------
SWEDEN - 2.01%
Assa Abloy AB 2,029
34,654
Atlas Copco AB - Series A 1,089
49,162
Electrolux AB 1,937
44,305
Ericsson Lm-B Shares* 82,678
263,757
Gambro AB Series A* 2,054
29,286
Hennes & Mauritz AB 2,706
94,267
Sandvik AB 1,212
48,878
Securitas AB 2,309
39,610
Skandia Forsakrings AB 8,028
39,987
Skandinaviska Enskilda Banken (SEB) 2,266
43,817
Skanska AB 2,862
34,346
SKF AB 662
29,487
Svenska Cellulosa AB 922
39,334
Svenska Handelsbanken 2,458
63,989
Tele2 AB 865
33,973
Telia AB 10,706
64,119
Volvo AB Class A 767
$ 29,259
Volvo AB Class B 986
39,096
- ----------------
1,021,326
- ----------------
SWITZERLAND - 6.73%
ABB Ltd.* 11,351
63,388
Adecco SA 886
44,608
AGFA Gevaert NV 890
30,195
CIBA Spezialitaten 589
44,806
CIE Financ Richemont 3,302
109,912
Clariant AG-Reg 1,838
29,661
Credit Suisse Group 6,313
265,378
Givaudan* 60
39,522
Holcim Ltd B 979
58,976
Lonza AG 523
29,436
Nestle SA 2,163
565,907
Nobel Biocare* 160
28,986
Novartis 12,631
636,493
Rietter Holding* 202
58,623
Roche Holding AG 3,774
434,453
Serono SA* 45
29,641
Swiss Re 1,813
129,306
Swisscom 162
63,826
Syngenta AG 654
69,478
Synthers Inc* 352
39,469
The Swatch Group AG-B 335
49,170
UBS AG 5,629
472,012
Zurich Financial Services AG 800
133,392
- ----------------
3,426,638
- ----------------
UNITED KINGDOM - 25.42%
3I Group Plc 3,839
49,088
Alliance Unichem Plc 2,058
29,811
Allied Irish Banks Plc 5,022
104,781
Amvescap Plc 5,648
34,781
Anglo American Plc* 12,315
291,289
Associated British 3,262
29,748
AstraZeneca Plc 9,591
347,836
Aviva Plc 12,237
147,541
BAA Plc 6,616
74,180
BAE Systems Plc 17,880
79,126
Barclays Plc 34,404
387,066
BBA Group Plc 4,523
24,814
BG Group Plc 21,313
144,853
Billiton Plc 13,912
163,063
BOC Group Plc 2,598
49,555
Boots Co. Plc 5,081
63,944
BP Amoco Plc 120,241
1,172,723
BPB Plc 3,843
34,917
Brambles Industries Plc 5,996
29,959
British American Tobacco* 9,138
157,458
British Land Company Plc 3,131
53,860
British SKY Broadcasting Plc 7,327
79,057
BT Group Plc 49,548
193,108
Bunzl Plc 4,729
39,449
Cable & Wireless Plc 15,152
34,690
Cadbury Schweppes Plc 11,636
108,349
Capita Group Plc 4,943
34,710
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
79
<Page>
<Table>
<Caption>
SHARES
VALUE
------------------
- -----------------
UNITED KINGDOM - 25.42% (CONTINUED)
Carnival Plc 1,042
$ 63,577
Centrica Plc 21,922
99,434
Compass Group Plc 14,674
69,375
Corus Group Plc* 24,532
23,785
CRH Plc 3,138
84,027
Daily Mail & Gen Trust A 2,091
29,788
Diageo Plc 17,022
242,817
Dixons Group Plc 13,715
40,024
Elan Corporation Plc* 2,024
58,717
Electrocomponents Plc 4,563
24,946
Emap Plc 1,905
29,826
Enterprise Inns Plc 2,274
34,709
European Aeronautic Defense 1,517
44,106
Exel Plc 2,487
34,522
Friends Provident Plc 13,316
39,371
George Wimpey Plc 3,216
24,975
GKN Plc* 6,598
29,958
GlaxoSmithKline Plc 31,830
746,770
GUS Plc 6,054
109,083
Hammerson Plc 2,082
34,716
Hanson Plc 5,160
44,308
Hays Plc 14,541
34,687
HBOS Plc 21,201
345,169
Hilton Group Plc 10,021
54,736
HSBC Holdings Plc 59,176
998,650
IMI Plc 3,971
30,019
Imperial Chemical Industries Plc 7,482
34,619
Imperial Tobacco 4,323
118,437
Intercontinental Hotel Group 3,948
49,079
Intertek Testing Services* 2,221
30,062
ITV Plc 26,794
54,143
Johnson Matthey Plc 1,832
34,751
Kingfisher Plc 14,114
83,937
Land Securities Plc 2,194
58,972
Legal & General Group Plc 32,784
69,236
Lloyds TSB Group Plc 30,545
277,383
London Stock Exchange Plc* 2,646
29,566
Man Group Plc 1,790
50,587
Marks & Spencer Plc 10,552
69,488
National Grid Transco Plc 17,216
163,942
National Power Plc* 11,804
35,014
Next Plc 1,720
54,487
Pearson Plc 4,934
59,537
Peninsular & Orient Steam Navigation 6,056
34,590
Persimmon Plc 2,276
30,195
Provident Financial Plc 2,307
29,764
Prudential Plc 13,014
113,185
Punch Taverns Plc 1,877
24,883
Rank Group Plc 5,828
29,590
Rechitt Benckiser Plc 3,430
103,652
Reed Elsevier Plc 7,513
69,308
Rentokil Initial Plc 14,139
40,107
Reuters Group Plc 8,853
64,163
Rexam Plc 3,952
34,864
Rio Tinto Plc Reg 5,923
174,326
RMC Group Plc 1,823
$ 29,715
Rolls Royce Plc* 10,345
49,059
Rolls Royce Plc B 180,369
329
Royal Bank of Scotland Group Plc 17,222
579,291
Royal Sun Alliance Ins. Group 20,072
29,866
Sage Group Plc 8,926
34,660
Sainsbury (J) Plc 9,444
49,045
Scot & Newcastle 5,935
49,652
Scottish & Southern Energy 5,025
84,174
Scottish Power Plc 10,996
85,131
Severn Trent Plc 2,401
44,576
Shell Transport & Trading Co 50,824
433,242
Signet Group Plc 14,244
30,082
Slough Estates Plc 3,278
34,614
Smith & Nephew Plc 5,832
59,679
Smiths Group Plc 3,804
60,033
Tate & Lyle 3,250
29,498
Taylor Woodrow Plc 5,805
30,313
Tesco Plc 42,730
263,955
Thorn EMI 5,788
29,448
Tomkins Plc 7,169
34,994
Trinity Mirror Plc 2,457
30,001
Unilever Plc 15,596
153,157
United Business Media Plc 3,235
29,812
United Utilities Plc 4,910
59,388
Vodafone Group Plc 365,373
990,840
Whitbread Plc 2,430
39,492
William Hill Plc 3,211
34,769
Wolseley Plc 3,452
64,519
WPP Group Plc 6,731
74,048
Yell Group Plc 4,678
39,518
Yorshire Water Plc 2,911
35,349
- ----------------
12,945,967
- ----------------
Total Common Stocks
(cost $42,765,078)
49,934,073
- ----------------
UNIT INVESTMENT TRUST - 0.63%
iShares MSCI EAFE Index Fund* 2,016
323,064
- ----------------
Total Unit Investment Trust
(cost $208,807)
323,064
- ----------------
SHORT-TERM INVESTMENTS - 37.78%
NORTHERN TRUST DIVERSIFIED ASSETS
FUND - 37.78% 19,243,823
19,243,823
- ----------------
Total Short-Term Investments
(cost $19,243,823)
19,243,823
- ----------------
TOTAL INVESTMENTS - 136.44%
(cost $62,217,708)(1)
69,500,960
- ----------------
OTHER ASSETS AND LIABILITIES - (36.44%)
(18,562,699)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 50,938,261
================
</Table>
* Non-income producing
(1) For federal income tax purposes, cost of investments and foreign
currencies
is $63,026,041 and gross unrealized appreciation and depreciation
of
securities as of December 31, 2004 was $7,003,127 and ($341,916),
respectively, with a net appreciation / depreciation of $6,661,211.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
80
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
EAFE INTERNATIONAL INDEX PORTFOLIO FINANCIAL
STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
69,500,960
Cash denominated in foreign currencies
186,291
Cash
522,351
Receivables:
Shares sold
16,789
Securities sold
2,010,801
Interest and dividends
54,456
Receivable from Adviser
7,870
Prepaid expenses and other
13,796
--------
- --------
72,313,314
--------
- --------
LIABILITIES
Payables:
Investment securities purchased
21,308,234
Shares redeemed
41
Directors' fees
1,235
Custodian fees
12,977
Fund accounting fees
18,308
Professional fees
17,394
Royalty fees
10,600
Other accrued expenses
6,264
--------
- --------
21,375,053
--------
- --------
NET ASSETS*
Paid-in capital
43,240,886
Accumulated undistributed net investment
income
446,092
Accumulated net realized gain / (loss)
on investments and futures contracts
(39,536)
Net unrealized appreciation / (depreciation)
on investments, futures contracts, and
foreign currency translations
7,290,819
--------
- --------
$
50,938,261
================
Shares authorized ($.10 par value)
20,000,000
Shares outstanding
685,164
Net asset value, offering and redemption
price per share $
74.34
Foreign currencies at cost $
178,724
Investments at cost $
62,217,708
* FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $
815,656
Undistributed long-term gains $
220,508
Unrealized appreciation $
6,661,211
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
585
Dividends
820,360
Foreign dividend taxes withheld
(98,300)
Other income
6,603
--------
- --------
729,248
--------
- --------
EXPENSES
Advisory fees
154,413
Administration expenses
27,574
Custodian fees and expenses
128,570
Fund accounting fees
101,297
Professional fees
18,596
Directors' fees
4,356
Transfer agent fees
10,259
Royalty fee
10,632
Other expenses
9,523
--------
- --------
465,220
Reimbursements and waivers
(203,492)
--------
- --------
261,728
--------
- --------
NET INVESTMENT INCOME / (LOSS)
467,520
--------
- --------
REALIZED AND UNREALIZED
GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
556,595
Net change in unrealized appreciation /
(depreciation) on investments,
futures contracts, and foreign
currency translations
3,553,469
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
4,110,064
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
4,577,584
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
PERCENT OF CURRENT
NET ASSET VALUE
- ------------------------------
ADMINISTRATION EXPENSE
ADVISORY FEE FEE LIMIT(1) WAIVER REIMBURSEMENT
- -----------------------------------------------------------------------
- -
0.56% 0.10% 0.69%(2) $ -- $ 203,492
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
(2) The Adviser agreed to temporarily waive its fees and/or reimburse
expenses
of the portfolio, to the extent necessary to limit all expenses to
0.95% of
the average daily net assets of the portfolio until December 31,
2004.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
81
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
<Table>
<Caption>
2004 2003
--------
- ----------------------------
OPERATIONS
Net investment income / (loss) $
467,520 $ 346,251
Net realized gain / (loss) on investments and futures
556,595 (113,522)
Net change in unrealized appreciation / (depreciation)
on investments, futures contracts, and foreign
currency translations
3,553,469 3,703,209
--------
- -------- ----------------
4,577,584 3,935,938
--------
- -------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(369,685) (85,175)
Net realized gain on investments
(427,028) (368,895)
--------
- -------- ----------------
(796,713) (454,070)
--------
- -------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
41,242,581 13,109,321
Reinvestment of distributions
796,713 454,070
Payments for shares redeemed
(11,446,405) (22,714,310)
--------
- -------- ----------------
30,592,889 (9,150,919)
--------
- -------- ----------------
NET INCREASE / (DECREASE) IN NET ASSETS
34,373,760 (5,669,051)
NET ASSETS
Beginning of period
16,564,501 22,233,552
--------
- -------- ----------------
End of period $
50,938,261 $ 16,564,501
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $
446,092 $ 348,617
================ ================
FUND SHARE TRANSACTIONS
Sold
589,544 265,111
Reinvestment of distributions
12,104 10,026
Redeemed
(173,659) (466,317)
--------
- -------- ----------------
Net increase / (decrease) from fund share transactions
427,989 (191,180)
================ ================
TOTAL COST OF PURCHASES OF:
Common Stocks $
47,061,926 $ 11,664,501
--------
- -------- ----------------
$
47,061,926 $ 11,664,501
================ ================
TOTAL PROCEEDS FROM SALES OF:
Common Stocks $
15,464,778 $ 21,514,240
--------
- -------- ----------------
$
15,464,778 $ 21,514,240
================ ================
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income $
794,865 $ 454,070
Long-term capital gains
1,848 --
--------
- -------- ----------------
$
796,713 $ 454,070
================ ================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
82
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
LEHMAN AGGREGATE BOND INDEX
PORTFOLIO
OBJECTIVE - Seeks investment results that correspond to the total
return
performance of the bond market, as represented by the Lehman Brothers
Aggregate
Bond Index (the "Index").
STRATEGY - The Summit Pinnacle Lehman Aggregate Bond Index Portfolio
(the
"Portfolio") will invest at least 80% of the value of its assets in
obligations
issued or guaranteed by the U.S. Government, publicly-traded debt
securities
rated BBB or BAA3 or higher by a national rating agency, or cash and
cash
equivalents. Up to 20% of the Portfolio's total assets may be invested
in
financial futures or options contracts. The Portfolio will not purchase
bonds
rated below investment grade.
MANAGERS' COMMENTS:
For the year ended December 31, 2004, the Portfolio's total return
3.55% (after
waivers and reimbursements, but before the impact of any product or
contract-level fees). This compares to a 4.34% total return for the
Index. The
difference of 0.79% is referred to as "tracking error" and is largely
attributed
to the Portfolio's operating expenses. These expenses represent the
Portfolio's
costs for advisory, administration, accounting, custody and other
services. The
remaining difference can be caused by a number of factors, including
the timing
and size of cash flows into and out of the Portfolio; brokers'
commissions or
other trading costs; holding security positions in amounts that are
different
than the weightings in the Index; and the fact that the Portfolio is
only a
sample of the Index verses a complete replica, among others. While an
exact
replication of the capitalization weightings of securities in the Index
is not
feasible, the Portfolio's objectives and strategies call for a
correlation of at
least 95% between the Portfolio's pre-expense total return and that of
the
Index. The Portfolio achieved this level of correlation for the period
presented.
FUND DATA
<Table>
Manager: Team Managed
Inception Date: April 1, 2003
Total Net Assets: $32.78 Million
Number of Holdings: 81
Average Duration: 4.4 years
Average Maturity: 12.6 years
Average Credit Quality: AAA/Aaa
Current Yield: 4.26%
</Table>
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
Summit Lehman Bond Index Portfolio - Total Return
<Table>
<Caption>
1-YEAR SINCE INCEPTION
3.55% 2.99%
</Table>
Past performance is not predictive of future results.
Performance does not reflect the deduction of taxes that a shareholder
would pay
on fund distributions or redemption of fund shares.
Separate account expenses are not included.
<Table>
<Caption>
SUMMIT LEHMAN BOND INDEX PORTFOLIO LEHMAN
BROTHERS AGGREGATE BOND INDEX
3/31/2003 $ 10,000
$ 10,000
4/30/2003 $ 10,074
$ 10,083
5/31/2003 $ 10,272
$ 10,270
6/30/2003 $ 10,244
$ 10,250
7/31/2003 $ 9,853
$ 9,905
8/31/2003 $ 9,901
$ 9,971
9/30/2003 $ 10,172
$ 10,235
10/31/2003 $ 10,061
$ 10,140
11/30/2003 $ 10,076
$ 10,164
12/31/2003 $ 10,170
$ 10,267
1/31/2004 $ 10,249
$ 10,350
2/29/2004 $ 10,349
$ 10,462
3/31/2004 $ 10,419
$ 10,541
4/30/2004 $ 10,154
$ 10,266
5/31/2004 $ 10,110
$ 10,225
6/30/2004 $ 10,155
$ 10,283
7/31/2004 $ 10,246
$ 10,385
8/31/2004 $ 10,430
$ 10,583
9/30/2004 $ 10,455
$ 10,612
10/31/2004 $ 10,526
$ 10,701
11/30/2004 $ 10,445
$ 10,615
12/31/2004 $ 10,531
$ 10,713
</Table>
QUALITY BREAKDOWN
<Table>
<Caption>
(% OF PORTFOLIO)
---------------
AAA 78%
AA 3%
A 11%
BBB 8%
</Table>
[CHART]
SECTOR ALLOCATIONS
<Table>
U.S. Treasuries & Agency Obligations 31.3%
Mortgage & Asset Backed Securities 44.1%
Corporate Bonds & Notes 21.7%
Short-Term & Other 2.9%
</Table>
83
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
FINANCIAL HIGHLIGHTS LEHMAN AGGREGATE BOND INDEX
PORTFOLIO
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
PERIOD FROM
YEAR ENDED APRIL 1, 2003(1)
DECEMBER 31, TO DECEMBER 31,
- ----------------------------------
2004 2003
- ----------------------------------
Net asset value, beginning of period
$ 49.78 $ 50.00
- ---------- ---------------
Investment Activities:
Net investment income / (loss)
1.71(4) 1.32
Net realized and unrealized gains / (losses)
0.03 (0.49)
- ---------- ---------------
Total from Investment Activities
1.74 0.83
- ---------- ---------------
DISTRIBUTIONS:
Net investment income
(1.39) (1.05)
- ---------- ---------------
Total Distributions
(1.39) (1.05)
- ---------- ---------------
Net asset value, end of period
$ 50.13 $ 49.78
========== ===============
Total return
3.55% 1.70%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - net (2)
0.60% 0.60%(3)
Ratio of expenses to average net assets - gross
0.71% 1.10%(3)
Ratio of net investment income / (loss) to average net assets
3.26% 2.83%(3)
Portfolio turnover rate
43.24% 31.94%(3)
Net assets, end of period (000's)
$ 32,786 $ 10,296
</Table>
(1) COMMENCEMENT OF OPERATIONS.
(2) NET EXPENSES REPRESENT GROSS EXPENSES REDUCED BY FEES WAIVED AND/OR
REIMBURSED BY THE ADVISER.
(3) ANNUALIZED.
(4) PER SHARE AMOUNTS ARE BASED ON AVERAGE SHARES OUTSTANDING.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
84
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
LEHMAN AGGREGATE BOND INDEX PORTFOLIO SCHEDULE OF
INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
U.S. TREASURY OBLIGATIONS - 31.29%
U.S. TREASURY NOTES & BONDS - 31.29%
6.500% due 05/15/05 $ 700,000
$ 710,226
5.750% due 11/15/05 155,000
158,972
4.625% due 05/15/06 350,000
358,066
6.500% due 10/15/06 475,000
503,463
2.250% due 02/15/07 450,000
442,371
6.250% due 02/15/07 450,000
478,969
2.750% due 08/15/07 760,000
751,657
6.125% due 08/15/07 500,000
536,602
5.500% due 02/15/08 650,000
692,606
5.625% due 05/15/08 300,000
321,773
3.125% due 10/15/08 800,000
791,469
3.750% due 12/15/08 196,000
195,380
5.500% due 05/15/09 200,000
216,312
6.000% due 08/15/09 200,000
220,578
6.500% due 02/15/10 600,000
679,289
5.750% due 08/15/10 300,000
330,293
4.375% due 08/15/12 100,000
102,316
3.625% due 05/15/13 546,000
529,087
6.250% due 08/15/23 400,000
468,297
5.500% due 08/15/28 500,000
541,172
5.250% due 11/15/28 650,000
681,281
5.250% due 02/15/29 300,000
314,695
6.125% due 08/15/29 200,000
234,812
- ----------------
Total U.S. Treasury Obligations
(cost $10,266,595)
10,259,686
- ----------------
SOVEREIGN GOVERNMENT BONDS - 0.95%
New Brunswick
(6.750% due 08/15/13) 100,000
117,747
Republic of Italy
(2.500% due 07/15/08) 200,000
192,405
- ----------------
Total Sovereign Government Bonds
(cost $309,760)
310,152
- ----------------
MORTGAGE-BACKED SECURITIES - 41.70%
FHLMC 2.500% due 03/15/06 500,000
496,707
FHLMC 2.375% due 04/15/06 500,000
495,568
FHLMC 5.500% due 07/15/06 800,000
827,885
FHMLC 3.500% due 09/15/07 1,300,000
1,303,714
FHLMC 5.750% due 03/15/09 200,000
215,513
FHLMC 5.000% due 05/01/18 1,841,828
1,871,927
FHLMC 4.500% due 09/01/18 691,191
690,528
FHLMC 5.000% due 02/01/33 1,169,987
1,164,304
FNMA 5.000% due 11/01/17 302,394
307,611
FNMA 5.500% due 08/01/18 727,979
752,985
FNMA 6.500% due 04/01/23 94,344
100,347
FNMA 6.500% due 08/01/32 987,408
1,036,403
FNMA 5.500% due 07/01/33 1,400,009
1,422,523
FNMA 6.000% due 08/01/33 313,936
324,763
FNMA 5.500% due 11/01/33 1,176,075
1,194,988
GNMA 5.500% due 07/20/34 1,437,748
1,467,818
- ----------------
Total Mortgage-Backed Securities
(cost $13,736,020)
13,673,584
- ----------------
ASSET-BACKED SECURITIES - 2.44%
PRIVATE SECTOR - 2.44%
BSCMS 2000-WF2A1
(7.110% due 10/15/32) $ 392,567
$ 421,561
BSCMS 2003-T12A3
(4.240% due 08/13/39) 350,000
347,880
Countrywide
(6.815% due 01/25/29) 30,511
31,151
- ----------------
Total Asset-Backed Securities
(cost $820,820)
800,592
- ----------------
CORPORATE BONDS AND NOTES - 21.65%
BANK, BANK HOLDING COMPANIES, &
OTHER BANK SERVICES - 1.82%
Citigroup Capital
(7.750% due 12/01/36) 100,000
108,506
Key Bank
(5.000% due 07/17/07) 185,000
191,976
Residential Asset Corp.
(4.610% due 06/25/33) 298,000
297,786
- ----------------
598,268
- ----------------
CAPITAL GOODS - 3.60%
Eaton Corp.
(5.750% due 07/15/12) 439,000
473,617
Eli Lilly
(2.900% due 03/15/08) 100,000
97,718
General Electric Capital Corp
(6.125% due 02/22/11) 100,000
109,539
Honeywell International
(7.500% due 03/01/10) 108,000
124,777
Masco Corp
(5.875% due 07/15/12) 180,000
192,905
Pitney Bowes Inc.
(4.625% due 10/01/12) 180,000
181,969
- ----------------
1,180,525
- ----------------
CONSUMER NON-DURABLE - 2.86%
Campbell Soup Co.
(5.875% due 10/01/08) 230,000
246,003
Cargill Inc.(2)6.250% due 05/01/06) 230,000
238,492
Cintas Corp.
(5.125% due 06/01/07) 68,000
70,627
Diageo Capital
(3.375% due 03/20/08) 136,000
134,712
E.W. Scripps Co
(5.750% due 07/15/12) 180,000
193,362
Pharmacia Corp.
(5.875% due 12/01/08) 50,000
53,793
- ----------------
936,989
- ----------------
ENERGY - 3.68%
Colonial Pipeline Co.(2)
7.750% due 11/01/10) 175,000
205,898
Colonial Pipeline Co.(2)
6.580% due 08/28/32) 100,000
114,557
Conoco Funding Co.
(6.350% due 10/15/11) 80,000
89,294
Conoco Inc. Sr. Nts.
(6.350% due 04/15/09) 143,000
156,485
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
85
<Page>
<Table>
<Caption>
PRINCIPAL
VALUE
------------------
- -----------------
ENERGY - 3.68% (CONTINUED)
Devon Financing Corp.
(6.875% due 09/30/11) $ 180,000
$ 203,860
Exelon Generation Co.
(5.350% due 01/15/14) 230,000
235,838
Public Service Inc.
(6.625% due 02/15/11) 180,000
199,549
- ----------------
1,205,481
- ----------------
FINANCE - 1.55%
American General Finance
(5.375% due 09/01/09) 210,000
220,253
Camden Trust
(5.875% due 11/30/12) 100,000
104,852
TIAA Global Market(2)
4.125% due 11/15/07) 180,000
182,295
- ----------------
507,400
- ----------------
HEALTH CARE - 0.59%
Amgen Inc.
(6.500% due 12/01/07) 180,000
194,585
- ----------------
MEDIA & CABLE - 0.66%
Comcast Corp.
(5.850% due 01/15/10) 100,000
107,197
Thomson Corp.
(6.200% due 01/05/12) 100,000
109,879
- ----------------
217,076
- ----------------
MANUFACTURING - 4.91%
Alcoa Inc.
(6.500% due 06/01/11) 100,000
112,206
Champion International Corp.
(7.200% due 11/01/26) 200,000
233,107
Ford Motor Co.
(6.375% due 02/01/29) 500,000
449,968
Westvaco Corp.
(7.950% due 02/15/31) 500,000
610,824
Weyerhauser Co.
(6.750% due 03/15/12) 180,000
202,830
- ----------------
1,608,935
- ----------------
TELECOMMUNICATIONS - 1.42%
GTE North Inc.
(6.940% due 04/15/28) $ 80,000
$ 89,099
Sprint Capital Corp.
(6.000% due 01/15/07) 180,000
188,387
Verizon Wireless
(5.375% due 12/15/06) 180,000
186,445
- ----------------
463,931
- ----------------
TRANSPORTATION - 0.56%
CSX Corp.
(4.875% due 11/01/09) 180,000
183,588
- ----------------
Total Corporate Bonds & Notes
(cost $7,103,364)
7,096,778
- ----------------
<Caption>
SHARES
VALUE
------------------
- -----------------
UNIT INVESTMENT TRUST - 0.75%
iShares Lehman Aggregate Bond Fund* 2,400
$ 245,760
- ----------------
Total Unit Investment Trust
(cost $245,160)
245,760
- ----------------
SHORT-TERM INVESTMENTS - 0.88%
NORTHERN TRUST DIVERSIFIED ASSETS 287,849
287,849
- ----------------
Total Short-Term Investments
(cost $287,849)
287,849
- ----------------
TOTAL INVESTMENTS - 99.66%
(cost $32,769,568)(1)
32,674,401
- ----------------
NORTHERN INSTITUTIONAL LIQUID ASSET
PORTFOLIO(3) - 21.87%
7,170,533
- ----------------
OTHER ASSETS AND LIABILITIES - (21.53%)
(7,059,225)
- ----------------
TOTAL NET ASSETS - 100.00%
$ 32,785,709
================
</Table>
* Non-income producing.
(1) For federal income tax purposes, cost is $32,769,568 and gross
unrealized
appreciation and depreciation of securities as of December 31, 2004
was
$129,167 and ($224,334), respectively, with a net appreciation /
depreciation of ($95,167).
(2) Security exempt from registration under Rule 144(a) of the
Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(3) This security was purchased with cash collateral held from
securities
lending. The market value of the securities on loan, the collateral
purchased with cash, and the noncash collateral accepted is
$13,063,376,
$7,170,533, and $6,117,338, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
86
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
LEHMAN AGGREGATE BOND INDEX PORTFOLIO FINANCIAL
STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS
Investments in securities, at value $
32,674,401
Collateral for securities loaned, at fair value
7,170,533
Receivables:
Shares sold
37,754
Securities sold
409,046
Interest and dividends
355,715
Prepaid expenses and other
705
--------
- --------
40,648,154
--------
- --------
LIABILITIES
Payables:
Investment securities purchased
657,951
Shares redeemed
38
Payable upon return of securities loaned
7,170,533
Advisory fees
2,150
Administration expenses
3,508
Directors' fees
1,177
Custodian fees
1,945
Fund accounting fees
7,610
Professional fees
13,783
Other accrued expenses
3,750
--------
- --------
7,862,445
--------
- --------
NET ASSETS*
Paid-in capital
32,818,429
Accumulated undistributed net
investment income
185,586
Accumulated net realized gain / (loss)
on investments and futures contracts
(123,139)
Net unrealized appreciation / (depreciation)
on investments
(95,167)
--------
- --------
$
32,785,709
================
Shares authorized ($.10 par value)
20,000,000
Shares outstanding
653,959
Net asset value, offering and
redemption price per share $
50.13
Investments at cost $
32,769,568
*FEDERAL TAX DATA AS OF DECEMBER 31, 2004
Undistributed ordinary income $
185,586
</Table>
<Table>
<Caption>
CAPITAL LOSS CARRYFORWARD EXPIRING DECEMBER 31:
- ------------------------------------------------------------
2011 2012
---------- ----------
$ (65,139) $ (58,001)
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME
Interest $
1,073,214
Dividends
5,924
Other income
5,917
--------
- --------
1,085,055
--------
- --------
EXPENSES
Advisory fees
84,523
Administration expenses
28,174
Custodian fees and expenses
3,896
Fund accounting fees
44,409
Professional fees
16,837
Directors' fees
4,587
Transfer agent fees
9,578
Other expenses
6,731
--------
- --------
198,735
Reimbursements and waivers
(29,690)
--------
- --------
169,045
--------
- --------
NET INVESTMENT INCOME / (LOSS)
916,010
--------
- --------
REALIZED AND UNREALIZED GAIN / (LOSS)
Net realized gain / (loss) on investments
and options
27,952
Net change in unrealized appreciation /
(depreciation) on investments
(63,875)
--------
- --------
NET REALIZED AND UNREALIZED
GAIN / (LOSS)
(35,923)
--------
- --------
NET INCREASE / (DECREASE)
IN NET ASSETS FROM OPERATIONS $
880,087
================
</Table>
TRANSACTIONS WITH AFFILIATES:
<Table>
<Caption>
PERCENT OF CURRENT
NET ASSET VALUE
- ------------------------------------------
ADVISORY ADMINISTRATION EXPENSE
FEE FEE LIMIT(1) WAIVER REIMBURSEMENT
- --------------------------------------------------------------------
0.30% 0.10% 0.30% $ -- $ 29,690
</Table>
(1) The Adviser has agreed to pay other expenses of the portfolio,
other than
the advisory fees, to the extent that such expenses exceed the
stated
percentage of their average net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
87
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
PERIOD FROM
YEAR ENDED APRIL 1, 2003 TO
DECEMBER 31, DECEMBER 31,
- ----------------------------------
2004 2003
- ----------------------------------
OPERATIONS
Net investment income / (loss)
$ 916,010 $ 219,221
Net realized gain / (loss) on investments and futures
27,952 (11,332)
Net change in unrealized appreciation / (depreciation) on
investments (63,875) (31,292)
- ------------ ---------------
880,087 176,597
- ------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS*
Net investment income
(871,519) (217,885)
- ------------ ---------------
(871,519) (217,885)
- ------------ ---------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
36,483,759 10,766,846
Reinvestment of distributions
871,519 217,885
Payments for shares redeemed
(14,874,112) (647,468)
- ------------ ---------------
22,481,166 10,337,263
- ------------ ---------------
NET INCREASE / (DECREASE) IN NET ASSETS
22,489,734 10,295,975
NET ASSETS
Beginning of period
10,295,975 --
- ------------ ---------------
End of period
$ 32,785,709 $ 10,295,975
============ ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
$ 185,586 $ 55,143
============ ===============
FUND SHARE TRANSACTIONS
Sold
726,338 215,438
Reinvestment of distributions
17,551 4,423
Redeemed
(296,741) (13,049)
- ------------ ---------------
Net increase / (decrease) from fund share transactions
447,148 206,812
============ ===============
TOTAL COST OF PURCHASES OF:
U.S. Government Securities
$ 26,066,150 $ 9,445,137
Corporate Bonds
8,061,738 3,118,814
- ------------ ---------------
$ 34,127,888 $ 12,563,951
============ ===============
TOTAL PROCEEDS FROM SALES OF:
U.S. Government Securities
$ 8,164,771 $ 1,695,122
Corporate Bonds
3,435,321 708,215
- ------------ ---------------
$ 11,600,092 $ 2,403,337
============ ===============
*TAX CHARACTER OF DISTRIBUTIONS PAID
Ordinary income
$ 871,519 $ 217,885
- ------------ ---------------
$ 871,519 $ 217,885
============ ===============
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
88
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2004
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Summit Mutual Funds, Inc., ("Summit Mutual Funds"), is registered under
the
Investment Company Act of 1940, as amended, as an open-end management
investment
company. Summit Mutual Funds is offered in two categories of funds, the
Pinnacle
Series and the Apex Series. The shares of the Pinnacle Series (the
"Series") are
sold to insurance companies and their separate accounts to fund the
benefits
under certain variable insurance products. The results of the Series
presented
exclude the additional fees and expenses of variable annuity or
variable life
insurance contracts. The Series' shares are offered in nine different
portfolios
- - Zenith Portfolio, Bond Portfolio, S&P 500 Index Portfolio, S&P MidCap
400
Index Portfolio, Balanced Index Portfolio, Nasdaq-100 Index Portfolio,
Russell
2000 Small Cap Index Portfolio, EAFE International Index Portfolio, and
Lehman
Aggregate Bond Index Portfolio (individually "Portfolio", collectively
"Portfolios"). The Zenith Portfolio seeks long-term appreciation of
capital by
investing primarily in common stocks and other equity securities. The
Bond
Portfolio seeks a high level of current income as is consistent with
reasonable
investment risk by investing primarily in long-term, fixed-income,
investment-grade corporate bonds. The S&P 500 Index Portfolio, S&P
MidCap 400
Index Portfolio, Russell 2000 Small Cap Index Portfolio, Nasdaq-100
Index
Portfolio, and EAFE International Index Portfolio seek investment
results that
correspond to the total return performance of common stocks as
represented by
their respective index. The Balanced Index Portfolio seeks investment
results,
with respect to 60% of its assets, that correspond to the total return
performance of U.S. common stocks, as represented by the S&P 500 Index
and, with
respect to 40% of its assets, that correspond to the total return
performance of
investment grade bonds, as represented by the Lehman Brothers Aggregate
Bond
Index. The Lehman Aggregate Bond Index Portfolio seeks investment
results that
correspond to the total return performance of the bond market, as
represented by
the Lehman Brothers Aggregate Bond Index. The results of the
Portfolio(s) for
your investment product are included herein.
The preparation of financial statements in conformity with accounting
principles
generally accepted in the United States of America ("generally accepted
accounting principles") requires management to make estimates and
assumptions
that affect the reported amounts of assets and liabilities and
disclosure of
contingent assets and liabilities at the date of the financial
statements and
the reported amounts of revenues and expenses during the reporting
period.
Actual results could differ from those estimates.
SECURITIES VALUATION - Securities held in each Portfolio, except for
money
market instruments maturing in 60 days or less, are valued as follows:
Securities traded on stock exchanges (including securities traded in
both the
over-the-counter market and on an exchange), or listed on the NASDAQ
National
Market System, are valued at the last sales price as of the close of
the New
York Stock Exchange on the day the securities are being valued, or,
lacking any
sales, at the closing bid prices. Alternatively, NASDAQ listed
securities may be
valued on the basis of the NASDAQ Official Closing Price. Securities
traded only
in the over-the-counter market are valued at the last bid price, as of
the close
of trading on the New York Stock Exchange, quoted by brokers that make
markets
in the securities. Other securities for which market quotations are not
readily
available are valued at fair value as determined in good faith under
procedures
adopted by the Board of Directors. Money market instruments with a
remaining
maturity of 60 days or less held in each Portfolio are valued at
amortized cost
which approximates market.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME - Securities transactions
are
recorded on the trade date (the date the order to buy or sell is
executed).
Dividend income is recorded on the ex-dividend date and interest income
is
recorded on the accrual basis. All amortization of discount and premium
is
recognized currently under the effective interest method. Gains and
losses on
sales of investments are calculated on the identified cost basis for
financial
reporting and tax purposes. Paydown gains and losses on mortgage and
asset-backed securities are presented as interest income.
FEDERAL TAXES - It is the intent of Summit Mutual Funds to comply with
the
requirements under Subchapter M of the Internal Revenue Code applicable
to
regulated investment companies and to distribute all of its net
investment
income and any net realized capital gains. Regulated investment
companies owned
by the segregated asset accounts of a life insurance company, held in
connection
with variable insurance products, are exempt from excise tax on
undistributed
income. Therefore, no provision for income or excise taxes has been
recorded.
DISTRIBUTIONS - Distributions from net investment income in all fixed
income
Portfolios generally are declared and paid quarterly. Equity Portfolios
generally declare and pay dividends annually. Net realized capital
gains are
distributed periodically, no less frequently than annually.
Distributions are
recorded on the ex-dividend date. All distributions are reinvested in
additional
shares of the respective Portfolio at the net asset value per share.
89
<Page>
The amount of distributions are determined in accordance with federal
income tax
regulations which may differ from generally accepted accounting
principles in
the United States of America. These "book/tax" differences are either
considered
temporary or permanent in nature. To the extent these differences are
permanent
in nature, such amounts are reclassified within the capital accounts
based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Distributions which exceed net investment income and
net
realized capital gains for financial reporting purposes but not for tax
purposes
are reported as distributions in excess of net investment income or
distributions in excess of net realized capital gains. To the extent
they exceed
net investment income and net realized capital gains for tax purposes,
they are
reported as distributions of paid-in-capital.
EXPENSES - Allocable expenses of Summit Mutual Funds are charged to
each
Portfolio based on the ratio of the net assets of each Portfolio to the
combined
net assets of Summit Mutual Funds. Nonallocable expenses are charged to
each
Portfolio based on specific identification.
FOREIGN CURRENCY - Summit Mutual Funds' accounting records are
maintained in
U.S. dollars. All Portfolios may purchase foreign securities within
certain
limitations set forth in the Prospectus. Amounts denominated in or
expected to
settle in foreign currencies are translated into U.S. dollars at the
spot rate
at the close of the London Market. Summit Mutual Funds does not isolate
that
portion of the results of operations resulting from changes in foreign
exchange
rates on investments from the underlying fluctuation in the securities
resulting
from market prices. All are included in net realized and unrealized
gain or loss
for investments.
Foreign security and currency transactions may involve certain risks
not
typically associated with those of U.S. companies including the level
of
governmental supervision and regulations of foreign securities markets
and the
possibility of political and economic instability.
FUTURES CONTRACTS AND PORTFOLIO SECURITIES LOANED - S&P 500 Index
Portfolio, S&P
MidCap 400 Index Portfolio, Balanced Index Portfolio, Nasdaq-100 Index
Portfolio, Russell 2000 Small Cap Index Portfolio, and EAFE
International Index
Portfolio (collectively, the "Index Portfolios") may enter into futures
contracts that relate to securities in which it may directly invest and
indices
comprised of such securities and may purchase and write call and put
options on
such contracts. The Index Portfolios may invest up to 20% of their
assets in
such futures and/or options, except that until each Portfolio reaches
$25
million (or $50 million in the case of the Nasdaq-100 Index Portfolio,
the
Russell 2000 Small Cap Index Portfolio, and the EAFE International
Index
Portfolio), it may invest up to 100% in such futures and/or options.
These
contracts provide for the sale of a specified quantity of a financial
instrument
at a fixed price at a future date. When the Index Portfolios enter into
a
futures contract, they are required
90
<Page>
to deposit and maintain as collateral such initial margin as required
by the
exchange on which the contract is traded. Under terms on the contract,
the Index
Portfolios agree to receive from or pay to the broker an amount equal
to the
daily fluctuation in the value of the contract (known as the variation
margin).
The variation margin is recorded as unrealized gain or loss until the
contract
expires or is otherwise closed, at which time the gain or loss is
realized. The
Index Portfolios invest in futures as a substitute to investing in the
common
stock positions in the Index that they intend to match. The potential
risk to
the Index Portfolios is that the change in the value in the underlying
securities may not correlate to the value of the contracts.
The Portfolios currently lend their securities to approved brokers to
earn
additional income and receive cash and/or securities as collateral to
secure the
loans. Income from securities lending is included in "Other Income" on
the
Statement of Operations. Collateral is maintained at not less than 100%
of the
value of loaned securities. Although the risk of lending is mitigated
by the
collateral, the Portfolios could experience a delay in recovering its
securities
and a possible loss of income or value if the borrower fails to return
them. In
addition to cash collateral, the Portfolios may accept noncash
collateral
consisting of government securities and irrevocable letters of credit
from
domestically domiciled banks.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
ADVISORY FEES - Summit Mutual Funds pays investment advisory fees to
Summit
Investment Partners, Inc. (the "Adviser") under terms of an Investment
Advisory
Agreement (the "Agreement"). Certain officers and directors of the
Adviser are
affiliated with the Fund. The Fund pays the Adviser, as full
compensation for
all services and facilities furnished, a monthly fee computed
separately for
each Portfolio on a daily basis.
ADMINISTRATION FEES - Summit Mutual Funds pays the Adviser to perform
certain
administration services. The Fund shall pay the Adviser as full
compensation for
all facilities and services furnished a fee computed separately for
each
portfolio of the Fund.
DIRECTORS' FEES - Each director who is not affiliated with the Adviser
receives
fees from Summit Mutual Funds for service as a director. Members of the
Board of
Directors who are not affiliated with the Adviser are eligible to
participate in
a deferred compensation plan. The value of each director's deferred
compensation
account will increase or decrease at the same rate as if it were
invested in
shares of the Scudder Money Market Fund.
Summit Investment Partners, Inc. is a wholly-owned subsidiary of The
Union
Central Life Insurance Company ("Union Central").
NOTE 3 - SUBSEQUENT EVENT
On or about January 28, 2005, the boards of directors of Union Central
and The
Ameritas Acacia Companies of Lincoln, Nebraska voted to combine at the
mutual
holding company level. This transaction is subject to appropriate
regulatory
approval and the approval of the members and policyholders of both
insurance
companies.
91
<Page>
SUMMIT MUTUAL FUNDS, INC. - PINNACLE SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO BOARD OF DIRECTORS AND SHAREHOLDERS OF
SUMMIT MUTUAL FUNDS, INC.:
We have audited the accompanying statements of assets and liabilities
of Summit
Mutual Funds, Inc. - Pinnacle Series (the "Funds"), comprising the
Zenith
Portfolio, Bond Portfolio, S&P 500 Index Portfolio, S&P MidCap 400
Index
Portfolio, Balanced Index Portfolio, Nasdaq-100 Index Portfolio,
Russell 2000
Small Cap Index Portfolio, EAFE International Index Portfolio, and
Lehman
Aggregate Bond Index Portfolio, including the schedules of investments,
as of
December 31, 2004, and the related statements of operations for the
year then
ended, the statements of changes in net assets and the financial
highlights for
the periods presented. These financial statements and financial
highlights are
the responsibility of the Funds' management. Our responsibility is to
express an
opinion on these financial statements and financial highlights based on
our
audits.
We conducted our audits in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that we plan
and perform the audit to obtain reasonable assurance about whether the
financial
statements and financial highlights are free of material misstatement.
An audit
includes consideration of internal control over financial reporting as
a basis
for designing audit procedures that are appropriate in the
circumstances, but
not for the purpose of expressing an opinion on the effectiveness of
the Funds'
internal control over financial reporting. Accordingly, we express no
such
opinion. An audit also includes examining, on a test basis, evidence
supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, as well
as evaluating the overall financial statement presentation. Our
procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the Funds' custodian and brokers; where replies
were not
received from brokers, we performed other auditing procedures. We
believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to
above present fairly, in all material respects, the financial position
of Summit
Mutual Funds, Inc. - Pinnacle Series as of December 31, 2004, the
results of
their operations, the changes in their net assets, and the financial
highlights
for their respective stated periods, in conformity with accounting
principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 11, 2005
92
<Page>
SUMMIT MUTUAL FUNDS, INC. -
PINNACLE SERIES
MANAGEMENT OF
THE FUND
DIRECTORS AND OFFICERS
INDEPENDENT DIRECTORS
<Table>
<Caption>
NUMBER OF
TERM OF
PORTFOLIOS IN OTHER
POSITION(S) OFFICE AND
FUND COMPLEX DIRECTORSHIPS
WITH THE LENGTH OF
PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY
NAME, AGE AND ADDRESS(1) FUND TIME SERVED DURING
PAST FIVE YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------
- ------------------------------------------------------------
Theodore H. Emmerich Director Director since
Consultant; former 15 American Financial
(78) 1987 Partner,
Ernst & Whinney, Group
Accountants
Yvonne L. Gray Director Director since Chief
Operating Officer, 15
(53) 1999 United
Way of Greater
Cincinnati (Social
Services
Provider); prior
thereto,
Vice President /
Trust
Operations Officer,
Fifth
Third Bank; former
Audit
Manager, Price
Waterhouse (Accounting
Firm)
David C. Phillips Director Director since Co-
Founder, Cincinnati 15 Meridian Bioscience,
(66) 2001 Works
Inc. (Job Inc.; Cintas, Inc.
Placement); prior thereto,
Chief
Executive Officer,
Downtown
Cincinnati Inc.
(Economic
Revitalization
of
Cincinnati)
Mary W. Sullivan Director Director since Attorney,
Peck, Shaffer & 15 Franklin Savings
(48) 2001 Williams
LLP (Law Firm) and Loan Co.; First
Franklin Corporation
</Table>
INTERESTED DIRECTORS AND OFFICERS
<Table>
<Caption>
NUMBER OF
TERM OF
PORTFOLIOS IN OTHER
POSITION(S) OFFICE AND
FUND COMPLEX DIRECTORSHIPS
WITH THE LENGTH OF
PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY
NAME, AGE AND ADDRESS(1) FUND TIME SERVED DURING
PAST FIVE YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------
- ------------------------------------------------------------
Steven R. Sutermeister* Director, President Director since Senior
Vice President, 15 Carillon Investments,
(50) and Chief Executive 1999 Union
Central; President Inc.; Summit Investment
Officer and Chief
Executive Partners, Inc.; Union
Officer,
Adviser. Central Mortgage
Funding, Inc.
John F. Labmeier Vice President and Officer since Vice
President, Associate NA NA
1876 Waycross Rd. Secretary 1990 General
Counsel and
(55) Assistant
Secretary, Union
Central;
Vice President
and
Secretary, Carillon
Investments, Inc.;
Secretary, Adviser
Thomas G. Knipper Vice President, Officer since
Treasurer, Adviser NA NA
(47) Controller and Chief 1995
Compliance Officer
John M. Lucas Assistant Secretary Officer since Second
Vice President, NA NA
1876 Waycross Rd. 1990 Counsel
and Assistant
Cincinnati, OH 45240
Secretary, Union Central
(53)
</Table>
- ----------
(1) Except as otherwise indicated, the business of each listed person
is 312 Elm
St., Ste. 1212, Cincinnati, OH 45202
* Mr. Sutermeister may be considered to be an "interested person" of
the Fund
(within the meaning of the Investment Company Act of 1940) because
of his
affiliation with the Adviser.
<Page>
SMFI 231PINNACLE 12/04
THE SUMMIT PINNACLE SERIES IS DISTRIBUTED TO INSURANCE COMPANY SEPARATE
ACCOUNTS
AVAILABLE IN VARIABLE ANNUITY AND VARIABLE UNIVERSAL LIFE INSURANCE
PRODUCTS.
SUMMIT PINNACLE SERIES IS DISTRIBUTED BY CARILLON INVESTMENTS, INC.,
CINCINNATI,
OHIO, MEMBER SIPC. THE PINNACLE SERIES CONSISTS OF THE FOLLOWING
PORTFOLIOS:
EQUITY INDEX ACCOUNTS
S&P 500 INDEX PORTFOLIO
S&P MIDCAP 400 INDEX PORTFOLIO
RUSSELL 2000 SMALL CAP INDEX PORTFOLIO
NASDAQ-100 INDEX PORTFOLIO
EAFE INTERNATIONAL INDEX PORTFOLIO
FIXED INCOME & BALANCED INDEX ACCOUNT
BALANCED INDEX PORTFOLIO
LEHMAN AGGREGATE BOND INDEX PORTFOLIO
MANAGED ACCOUNTS
ZENITH PORTFOLIO
BOND PORTFOLIO
THE SUMMIT APEX SERIES IS A FAMILY OF MUTUAL FUNDS INTENDED FOR
INSTITUTIONAL
AND RETAIL ACCOUNTS. FOR MORE COMPLETE INFORMATION ABOUT THE SUMMIT
MUTUAL
FUNDS' APEX SERIES, INCLUDING CHARGES AND EXPENSES, CALL 888-259-7565
FOR A
PROSPECTUS. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
SUMMIT
APEX SERIES IS DISTRIBUTED BY QUASAR DISTRIBUTORS, LLC., MILWAUKEE,
WISCONSIN,
MEMBER SIPC.
THE APEX SERIES CONSISTS OF THE FOLLOWING FUNDS:
EQUITY INDEX ACCOUNTS
NASDAQ-100 INDEX FUND
MANAGED ACCOUNTS
EVEREST FUND
BOND FUND
SHORT-TERM GOVERNMENT FUND
HIGH YIELD BOND FUND
STABLE VALUE ACCOUNT
MONEY MARKET FUND
PLEASE VISIT OUR WEBSITE AT www.summitfunds.com
TO LEARN MORE ABOUT THE SUMMIT MUTUAL FUNDS.
[SUMMIT MUTUAL FUNDS LOGO]
ITEM 2. CODE OF ETHICS
As of the end of the period covered by this report
(December 31, 2004), the Registrant has adopted a code of
ethics that applies to its principal executive officer
and principal financial officer/controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Audit Committee of the Summit Mutual Funds, Inc. Board
of Directors has named the following financial experts:
- Theodore H. Emmerich, Independent Director
- Yvonne L. Gray, Independent Director
- David C. Phillips, Independent Director
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
<table>
<Caption>
Fiscal Year Ended 12/31
-----------------------
2004 2003
-------- --------
<s> <c> <c>
(a) Audit Fees $114,450 $95,500
(b) Audit-related Fees - -
(c) Tax Fees - -
(d) All Other Fees - -
(e) (1) Pre-approval Policy* (see below)
(e) (2) % above that were pre-approved 0% 0%
(f) If greater than 50%, disclose hrs. N/A N/A
(g) Non-audit fees rendered to Adviser
(or affiliate that provided services
to the Funds). 43,250 49,500
(h) Disclose whether the Audit Committee
has considered whether the provisions
of non-audit services rendered to the
Adviser that were NOT pre-approved is
compatible with maintaining the
auditor's independence. Yes Yes
</table>
*(e) (1) The following discloses the audit committee's pre-approval
policies and procedures, as set forth in the Audit Committee Charter:
"(c) The Committee shall pre-approve all auditing services and
permissible non-audit services (e.g., tax services) to be
provided to the Fund by the Accountant, including the fees
therefor. The Committee may delegate to one or more of its
members the authority to grant pre-approvals. In connection
with such delegation, the Committee shall establish pre-
approval policies and procedures, including the requirement
that the decisions of any member to whom authority is
delegated under this section (c) shall be presented to the
full Committee at its next scheduled meeting.
(d) Pre-approval for a non-audit service shall not be required
if: (1) the aggregate amount of all such non-audit services
is not more than 5% of the total revenues paid by the Fund to
the Accountant in the fiscal year in which the non-audit
services are provided; (2) such services were not recognized
by the Fund at the time of the engagement to be non-audit
services; and (3) such services are promptly brought to the
attention of the Committee and approved prior to the
completion of the audit by the Committee or by one or more
members of the Committee to whom authority to grant such
approvals has been delegated by the Committee.
(e) The Committee shall pre-approve the Accountant's engagements
for non-audit services with the Adviser and any affiliate of
the Adviser that provides ongoing services to the Fund in
accordance with paragraph (c) above, if the engagement
relates directly to the operations and financial reporting of
the Fund, unless the aggregate amount of all services
provided constitutes no more than 5% of the total amount of
revenues paid to the Accountant by the Fund, the Adviser and
any affiliate of the Adviser that provides ongoing services
to the Fund during the fiscal year in which the services are
provided that would have to be pre-approved by the Committee
pursuant to this paragraph (without regard to this
exception)."
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Included in Report to Shareholders.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END
MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following discloses the procedures by which shareholders
may recommend nominees to the board of directors, as set
forth in the Nominating Committee Charter:
"4.While the Committee is solely responsible for the selection
and nomination of potential candidates to serve on the Board,
the Committee may consider nominations from shareholders of
the Funds. Shareholders may submit for the Committee's
consideration, recommendations regarding potential nominees
for service on the Boards. Each eligible shareholder or
shareholder group may submit no more than one nominee each
calendar year.
(a) In order for the Committee to consider shareholder
submissions, the following requirements must be satisfied
regarding the nominee:
(i) The nominee must satisfy all qualifications provided
herein and in the Funds' organizational documents,
including qualification as a possible Independent
Director if the nominee is to serve in that capacity.
(ii) The nominee may not be the nominating shareholder,
a member of the nominating shareholder group or a
member of the immediate family of the nominating
shareholder or any member of the nominating
shareholder group.(1)
(iii) Neither the nominee nor any member of the nominee's
immediate family may be currently employed or
employed within the year prior to the nomination
by any nominating shareholder entity or entity in
a nominating shareholder group.
(iv) Neither the nominee nor any immediate family member
of the nominee is permitted to have accepted
directly or indirectly, during the year of the
election for which the nominee's name was submitted,
during the immediately preceding calendar year,
or during the year when the nominee's name was
submitted, any consulting, advisory, or other
compensatory fee from the nominating shareholder
or any member of a nominating shareholder group.
(v) The nominee may not be an executive officer, director
or person fulfilling similar functions of the
nominating shareholder or any member of the
nominating shareholder group, or of an affiliate
of the nominating shareholder or any such member
of the nominating shareholder group.
(vi) The nominee may not control the nominating
shareholder or any member of the nominating
shareholder group (or, in the case of a holder
or member that is a fund, an interested person
of such holder or member as defined by Section
2(a)(19) of the 1940 Act).
(vii) A shareholder or shareholder group may not submit
for consideration a nominee which has previously
been considered by the Committee.
- ---------
(1) Terms such as "immediate family member" and "control" shall be
interpreted in accordance with the federal securities laws.
(b) In order for the Committee to consider shareholder
submissions, the following requirements must be satisfied
regarding the shareholder or shareholder group submitting
the proposed nominee:
(i) Any shareholder or shareholder group submitting
a proposed nominee must beneficially own, either
individually or in the aggregate, more than 5% of
a Fund's (or a series thereof) securities that
are eligible to vote both at the time of submission
of the nominee and at the time of the Board member
election. Each of the securities used for purposes
of calculating this ownership must have been held
continuously for at least two years as of the date
of the nomination. In addition, such securities
must continue to be held through the date of the
meeting. The nominating shareholder or shareholder
group must also bear the economic risk of the
investment.
(ii) The nominating shareholder or shareholder group
must also submit a certification which provides
the number of shares which the person or group
has (a) sole power to vote or direct the vote;
(b) shared power to vote or direct the vote;
(c) sole power to dispose or direct the disposition
of such shares; and (d) shared power to dispose
or direct the disposition of such shares. In
addition the certification shall provide that
the shares have been held continuously for at
least two years.
(c) Shareholders or shareholder groups submitting proposed
nominees must substantiate compliance with the above
requirements at the time of submitting their proposed
nominee as part of their written submission to the
attention of the Funds' Secretary, who will provide all
submissions to the Committee. This submission to the
Funds must include:
(i) the shareholder's contact information;
(ii) the nominee's contact information and the number
of applicable Fund shares owned by the proposed
nominee;
(iii) all information regarding the nominee that would
be required to be disclosed in solicitations of
proxies for elections of directors required by
Regulation 14A under the Securities Exchange Act; and
(iv) a notarized letter executed by the nominee, stating
his or her intention to serve as a nominee and be
named in a Fund's proxy statement, if so designated
by the Committee and the Fund's Board.
The Committee will consider all submissions meeting the
applicable requirements stated herein that are received not
earlier than January 1 of the most recently completed calendar
year. It shall be in the Committee's sole discretion whether
to seek corrections of a deficient submission or to exclude a
nominee from consideration."
ITEM 10. CONTROLS AND PROCEDURES
(a) The Registrant's President and Controller have evaluated
the Registrant's disclosure controls and procedures within
90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures were effective, as of that
date, in ensuring that information required to be disclosed
by the Registrant in this form N-CSR was recorded, processed,
summarized, and reported timely.
(b) There were no significant changes in Registrant's internal
controls or other factors that could significantly affect these
controls subsequent to the date of their evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.
ITEM 11. EXHIBITS
(1) Code of Ethics, filed herewith.
(2) Certifications pursuant to Rule 30a-2(a) under
the Act, and Section 906 of the Sarbanes-Oxley
Act of 2002 filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Summit Mutual Funds, Inc.
By: /s/ Steven R. Sutermeister
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Steven R. Sutermeister, President
Date: March 4, 2005
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Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
By: /s/ Steven R. Sutermeister
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Steven R. Sutermeister, President
Date: March 4, 2005
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By: /s/ Thomas G. Knipper
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Thomas G. Knipper, Controller
Date: March 4, 2005
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