N-CSR 1 smfncsrfiled030810.htm SUMMIT MUTUAL FUNDS ANNUAL SHAREHOLDER REPORT Summit Mutual Funds

 

 

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: 811-04000

SUMMIT MUTUAL FUNDS, INC.
(Exact name of registrant as specified in charter)

4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Address of Principal Executive Offices)

William M. Tartikoff, Esq.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Name and Address of Agent for Service)

 

Registrant's telephone number, including area code: (301) 951-4800

Date of fiscal year end: December 31

Date of reporting period: Year ended December 31, 2009

 

 

Item 1. Report to Stockholders.

 

<PAGE>

Summit Zenith
Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments

A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

7

Shareholder Expense Example

8

Report of Independent Registered Public Accounting Firm

9

Statement of Net Assets

12

Statement of Operations

13

Statements of Changes in Net Assets

14

Notes to Financial Statements

20

Financial Highlights

22

Explanation of Financial Tables

23

Proxy Voting

24

Availability of Quarterly Portfolio Holdings

25

Basis for Board's Approval of Investment Advisory Contracts

27

Director and Officer Information Table

 

Summit Zenith Portfolio

Managed by Calvert Asset Management Company, Inc.

 

Performance

For the 12-month period ended December 31, 2009, Summit Zenith Portfolio returned 25.40%, outperforming the Russell 1000 Value Index, which returned 19.69%. The portfolio's outperformance was largely the result of strong stock selection.

 

Summit Zenith Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

25.40%

Five year

0.26%

Ten year

5.08%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

We entered 2009 with a new President, an untested Treasury secretary, and a relatively new Federal Reserve chairman. Their first order of business was to save the financial system from itself. After the dual shocks of the Lehman Brothers bankruptcy and JPMorgan Chase's acquisition of Bear Stearns, the powers in Washington D.C. rescued almost all remaining major banks and financial firms. Unprecedented government and central bank support eased the panic and helped unlock capital markets. Corporate refinancing, which was all but impossible in late 2008 and early 2009, became much easier with the federal funds rate at nearly zero percent and the implicit guarantee that almost all credit would be backstopped by the Federal Reserve.

Markets continued their losing ways until late March 2009. From that point on, they experienced a rally that was even more impressive than annual numbers suggest because it appears to have resulted not from investor enthusiasm, but from markets being oversold late in 2008. Investors, some of whom may have had too much exposure to equities when the market crashed, remained wary even as markets rebounded. Money market holdings, yielding nearly zero, held little attraction for investors. Bond funds became the primary beneficiary of investors' stock market fears and money markets' yield stinginess.

Portfolio Strategy

Early in the year, as equities continued to lose steam, we increased the portfolio's defensive holdings in companies such as Kroger, Berkshire Hathaway, Johnson & Johnson, Southern Company, and Wal-Mart. As equities bottomed in March and rallied into July, we increased the portfolio's holdings of CBS, News Corporation, Equity Residential, and Goldman Sachs. Citigroup, Genworth, and Boeing had fallen on hard times during 2008, but rebounded sufficiently for us to sell our positions during 2009, freeing capital for investment in other opportunities.

We added high-quality names such as U.S. Bank and ExxonMobil to the portfolio. Whenever we have an opportunity to add to the Portfolio's holdings of high-quality stocks at attractive valuations we do so. We also added Newmont Mining and Devon Energy when their prices dropped as a result of commodity fears. We later reduced these positions as their share prices rebounded. We also initiated and built a position in Burlington Northern Santa Fe. We sold these shares once Berkshire Hathaway made its acquisition offer (which was a major reason for our initiation of the position).

Economic Sectors

% of Total
Investments

Consumer Discretionary

7.9%

Consumer Staples

10.6%

Energy

16.9%

Financials

22.6%

Health Care

9.1%

Industrials

7.5%

Information Technology

8.8%

Materials

2.8%

Telecommunication Services

6.1%

Time Deposit

3.0%

Utilities

4.7%

Total

100%

Contributors to Performance

The sectors that contributed most to the Portfolio's performance during the one year period were Energy, Industrial, and Financial.

Stock selection within the Energy sector helped the Portfolio outperform the benchmark. Relative to the benchmark, the portfolio was underweight ExxonMobil and overweight Anadarko Petroleum, BP, and Spectra Energy. The higher-beta names benefited as oil rose from $50 to $80 per barrel over the course of the year. (Beta refers to the level of price variability in a stock relative to the broad market.) Anadarko Petroleum also was a top contributor to portfolio return as it benefited from exploration successes in West Africa and was rumored to be a potential takeover candidate.

Industrials also contributed postively to performance, primarily as a result of superior stock selection. Overweight positions in 3M and Boeing made positive performance contributions, as did a relative underweight to General Electric.

Finally, the Portfolio benefited from strong subsector allocation within the Financial sector. The portfolio was overweight Capital Markets and underweight Commercial Banks and Diversified Financials. Three of the top-performing companies in the portfolio were in the Financial sector: JPMorgan Chase, Goldman Sachs, and Discover Financial Services.

Detractors from Performance

The Consumer Staples, Materials, and Healthcare sectors detracted from the Portfolio's relative performance during the year. The Portfolio had poor subsector allocations within Consumer Staples. It was overweight Food & Staples Retailing with holdings in Kroger, Wal-Mart, and CVS Caremark. Kroger shares lost value late in the year when it was forced to drop prices in response to heightened competition and value-minded consumers.

Our holdings in the Materials sector also detracted from relative performance primarily because the portfolio did not include Freeport-McMoran, which soared an astonishing 225% during the year. A bright spot in the sector was Newmont Mining, which performed well as it profited from the escalating price of gold.

Healthcare also hurt performance due to poor stock selection within the sector. The Portfolio did not hold Wyeth, which was a top performer in the benchmark. Wyeth's shares gained when Pfizer announced that it was acquiring the company. The Portfolio's overweight position in Managed Care and a lack of exposure to Biotechnology made positive performance contributions.

Outlook

The stimulus package of 2009 was not large enough to reduce unemployment. Consequently, 2010 appears to be the year of job protection, especially in this election year. Voters were not clamoring for new legislation in 2009, but they are fearful of high unemployment and waiting to see what politicians will do to produce jobs. This environment should prove equity-friendly, as it is likely that Congress will favor business-friendly proposals instead of punitive, job-destroying legislation.

In 2010, we could see further recovery in equity prices as economic growth returns. Our plan is to stay fully invested and shift investments from cyclical holdings (on economic enthusiasm) to defensive holdings (as the recovery sputters) and back again.

See the prospectus supplement included at the back of this report for an update on the Portfolio's investment objective and investment strategies.

 

January 2010

 

As of December 31, 2009, the following companies represented the following percentages of Portfolio net assets: JPMorgan Chase (2.39%), Kroger (1.96%), Berkshire Hathaway (1.95%), Johnson & Johnson (1.92%), Southern Company (2.58%), Wal-Mart (1.92%), CBS (1.38%), News Corporation (1.58%), Equity Residential (1.25%), Goldman Sachs (0.99%), Citigroup (0.0%), Genworth (0.0%), Boeing (0.0%), U.S. Bancorp (0.86%), ExxonMobil (2.20%), Newmont Mining (1.67%), Devon Energy (2.31%), Burlington Northern Santa Fe (0.0%), Anadarko Petroleum (1.70%), BP (2.15%), Spectra Energy (1.60%), 3M (1.89%), General Electric (1.94%), Discover Financial Services (1.47%), CVS Caremark (1.73%), Freeport-McMoran (0.0%), Wyeth (0.0%), and Pfizer (2.23%). All holdings are subject to change without notice.

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

 

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

Actual

$1,000.00

$1,224.60

$4.15

Hypothetical (5% return per year before expenses)

$1,000.00

$1,021.48

$3.77

 

* Expenses are equal to the Fund's annualized expense ratio of 0.74%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Zenith Portfolio:

We have audited the accompanying statement of net assets of the Summit Zenith Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Zenith Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

December 31, 2009

Equity Securities - 96.9%

Shares

Value

Capital Markets - 6.5%

 

 

AllianceBernstein Holding LP*

96,000

$2,697,600

Bank of New York Mellon Corp.

115,458

3,229,360

Goldman Sachs Group, Inc.

10,400

1,755,936

Legg Mason, Inc.

70,000

2,111,200

Morgan Stanley

57,100

1,690,160

 

 

11,484,256

 

 

 

Chemicals - 1.1%

 

 

Dow Chemical Co.

70,400

1,945,152

 

 

 

Commercial Banks - 2.6%

 

 

US Bancorp

67,700

1,523,927

Wells Fargo & Co.

116,900

3,155,131

 

 

4,679,058

 

 

 

Communications Equipment - 4.1%

 

 

Cisco Systems, Inc.*

144,000

3,447,360

Motorola, Inc.*

236,700

1,836,792

Nokia Oyj (ADR)

159,600

2,050,860

 

 

7,335,012

 

 

 

Computers & Peripherals - 1.6%

 

 

International Business Machines Corp.

21,400

2,801,260

 

 

 

Consumer Finance - 1.5%

 

 

Discover Financial Services

178,100

2,619,851

 

 

 

Diversified Financial Services - 4.2%

 

 

Bank of America Corp.

216,684

3,263,261

JPMorgan Chase & Co.

102,204

4,258,841

 

 

7,522,102

 

 

 

Diversified Telecommunication Services - 6.1%

 

 

AT&T, Inc.

160,500

4,498,815

Frontier Communications Corp.

291,600

2,277,396

Verizon Communications, Inc.

125,300

4,151,189

 

 

10,927,400

 

 

 

Electric Utilities - 4.7%

 

 

Duke Energy Corp.

214,144

3,685,418

Southern Co.

137,800

4,591,496

 

 

8,276,914

 

 

 

Electrical Equipment - 1.9%

 

 

Emerson Electric Co.

80,300

3,420,780

 

 

 

Electronic Equipment & Instruments - 1.4%

 

 

Tyco Electronics Ltd.

103,325

2,536,629

 

 

 

Equity Securities - Cont'd

Shares

Value

Food & Staples Retailing - 6.3%

 

 

CVS Caremark Corp.

95,400

$3,072,834

Kroger Co.

169,800

3,485,994

Walgreen Co.

34,800

1,277,856

Wal-Mart Stores, Inc.

63,900

3,415,455

 

 

11,252,139

 

 

 

Food Products - 4.3%

 

 

Kraft Foods, Inc.

151,372

4,114,291

Unilever NV

107,500

3,475,475

 

 

7,589,766

 

 

 

Health Care Equipment & Supplies - 1.5%

 

 

Covidien plc

57,425

2,750,083

 

 

 

Health Care Providers & Services - 1.8%

 

 

WellPoint, Inc.*

53,400

3,112,686

 

 

 

Household Durables - 0.9%

 

 

Sony Corp. (ADR)

57,600

1,670,400

 

 

 

Industrial Conglomerates - 5.6%

 

 

3M Co.

40,600

3,356,402

General Electric Co.

228,200

3,452,666

Tyco International Ltd.*

86,425

3,083,644

 

 

9,892,712

 

 

 

Insurance - 6.6%

 

 

Allstate Corp.

79,200

2,379,168

Berkshire Hathaway, Inc., Class B*

1,055

3,466,730

MetLife, Inc.

83,700

2,958,795

Travelers Co.'s, Inc.

59,200

2,951,712

 

 

11,756,405

 

 

 

Internet Software & Services - 0.1%

 

 

AOL, Inc.*

7,742

180,234

 

 

 

Media - 6.9%

 

 

CBS Corp., Class B

174,074

2,445,740

Comcast Corp.

197,600

3,331,536

Gannett Co., Inc.

86,200

1,280,070

News Corp., Class B

176,300

2,806,696

Time Warner, Inc.

85,166

2,481,737

 

 

12,345,779

 

 

 

Metals & Mining - 1.7%

 

 

Newmont Mining Corp.

62,800

2,971,068

 

 

 

Oil, Gas & Consumable Fuels - 16.8%

 

 

Anadarko Petroleum Corp.

48,300

3,014,886

BP plc (ADR)

66,000

3,826,020

ConocoPhillips

82,542

4,215,420

Devon Energy Corp.

56,000

4,116,000

Exxon Mobil Corp.

57,400

3,914,106

 

 

 

Equity Securities - Cont'd

Shares

Value

Oil, Gas & Consumable Fuels - Cont'd

 

 

Marathon Oil Corp.

124,500

$3,886,890

Royal Dutch Shell plc (ADR)

69,300

4,165,623

Spectra Energy Corp.

138,672

2,844,163

 

 

29,983,108

 

 

 

Pharmaceuticals - 5.8%

 

 

GlaxoSmithKline plc (ADR)

70,900

2,995,525

Johnson & Johnson

52,900

3,407,289

Pfizer, Inc.

218,200

3,969,058

 

 

10,371,872

 

 

 

Real Estate Investment Trusts - 1.3%

 

 

Equity Residential

65,900

2,226,102

 

 

 

Software - 1.6%

 

 

Microsoft Corp.

93,200

2,841,667

 

 

 

 

 

 

     Total Equity Securities (Cost $199,550,168)

 

172,492,435

 

 

 

 

 

 

 

Principal

 

Time Deposit - 3.0%

Amount

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

$5,352,760

5,352,760

 

 

 

     Total Time Deposit (Cost $5,352,760)

 

5,352,760

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $204,902,928) - 99.9%

 

177,845,195

          Other assets and liabilities, net - 0.1%

 

217,978

          Net Assets - 100%

 

$178,063,173

 

 

 

 

 

 

Net Assets Consist of:

 

 

Paid-in capital applicable to 2,930,839 shares of common stock outstanding;

 

 

$0.10 par value, 40,000,000 shares authorized

 

$236,481,405

Undistributed net investment income

 

318,385

Accumulated net realized gain (loss) on investments

 

(31,678,884)

Net unrealized appreciation (depreciation) on investments

 

(27,057,733)

 

 

 

          Net Assets

 

$178,063,173

 

 

 

          Net Asset Value per share

 

$60.76

*Non-income producing security.

Abbreviations:

ADR: American Depositary Receipt
LP: Limited Partnership

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income (net of foreign taxes withheld of $67,232)

$4,450,530

     Interest income

1,514

     Total investment income

4,452,044

 

 

Expenses:

 

     Investment advisory fee

973,582

     Transfer agent fees and expenses

2,627

     Directors' fees and expenses

26,187

     Administrative fees

152,122

     Accounting fees

25,408

     Custodian fees

22,072

     Reports to shareholders

50,442

     Professional fees

32,143

     Miscellaneous

11,608

          Total expenses

1,296,191

          Reimbursement from Advisor

(170,174)

     Fees paid indirectly

(313)

          Net expenses

1,125,704

 

 

               Net Investment Income

3,326,340

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

(29,235,023)

Change in unrealized appreciation or (depreciation)

62,691,043

 

 

               Net Realized and Unrealized Gain

 

                (Loss) on Investments

33,456,020

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$36,782,360

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$3,326,340

$1,094,473

     Net realized gain (loss) on investments

(29,235,023)

649,111

     Change in unrealized appreciation or (depreciation)

62,691,043

(20,707,578)

 

 

 

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

36,782,360

(18,963,994)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(3,261,948)

(1,753,024)

     Net realized gain

(354,426)

(5,154,085)

          Total distributions

(3,616,374)

(6,907,109)

 

 

 

Capital share transactions:

 

 

     Shares sold

14,172,390

6,549,955

     Reinvestment of distributions

3,616,370

6,907,105

     Shares issued from merger (see Note A)

--

107,884,520

     Shares redeemed

(17,316,930)

(9,202,613)

          Total capital share transactions

471,830

112,138,967

 

 

 

          Total Increase (Decrease) in Net Assets

33,637,816

86,267,864

 

 

 

Net Assets

 

 

Beginning of year

144,425,357

58,157,493

End of year (including undistributed net investment income

 

 

     of $318,385 and $241,869, respectively)

$178,063,173

$144,425,357

 

 

 

Capital Share Activity

 

 

Shares sold

289,892

99,232

Reinvestment of distributions

59,072

99,493

Shares issued from merger (see Note A)

--

2,227,178

Shares redeemed

(338,718)

(130,949)

     Total capital share activity

10,246

2,294,954

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Zenith Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

On December 12, 2008, the net assets of the Ameritas Income & Growth Portfolio, a series of Calvert Variable Series, Inc. merged into Summit Mutual Funds, Inc., Zenith Portfolio. The merger was accomplished by a tax-free exchange of 13,716,124 shares of Ameritas Income & Growth Portfolio (valued at $107,884,520) for 2,227,178 shares of the Summit Zenith Portfolio outstanding at December 12, 2008. The Ameritas Income & Growth Portfolio's net assets as of December 12, 2008, including $74,101,129 of unrealized depreciation, were combined with those of Summit Zenith Portfolio.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the close of business of the Portfolio, that are expected to materially affect the value of those securities, then they are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Equity securities*

$172,492,435

--

--

$172,492,435

Other debt obligations

--

$5,352,760

--

5,352,760

TOTAL

$172,492,435

$5,352,760

--

$177,845,195

*For further breakdown of Equity Securities by industry type, please refer to the Statement of Net Assets.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Withholding taxes on foreign dividends have been provided for in accordance with the Portfolio's understanding of the applicable country's tax rules and rates.

Foreign Currency Transactions: The Portfolio's accounting records are maintained in U.S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are converted into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities is included with the net realized and unrealized gain or loss on investments.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements:

In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of 0.64% of the Portfolio's average daily net assets. Under the terms of the agreement, $96,111 was payable at year end. In addition, $2,762 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is 0.74%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $15,032 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), a subsidiary of Calvert, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $64 for the year ended December 31, 2009. Under the terms of the agreement, $5 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $44,981,909 and $42,652,643, respectively.

Capital Loss Carryforwards

Expiration Date

31-Dec-15

$2,277,422

31-Dec-17

29,095,011

Capital losses may be utilized to offset future capital gains until expiration. The Portfolio's use of net capital loss carryforwards acquired from Ameritas Income & Growth Portfolio may be limited under certain tax provisions.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from:

2009

2008

Ordinary income

$3,261,948

$3,179,457

Long term capital gain

354,426

3,727,652

     Total

$3,616,374

$6,907,109

As of December 31, 2009, the tax basis components of distributable earnings / (accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$8,750,016

Unrealized (depreciation)               

(36,114,200)

Net unrealized appreciation/(depreciation)     

($27,364,184)

Undistributed ordinary income          

$318,385

Capital loss carryforward     

($31,372,433)

Federal income tax cost of investments     

$205,209,379

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales, partnerships and capital loss carryovers subject to limitations under the Internal Revenue Code section 382.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to partnerships and real estate investment trusts.

Undistributed net investment income

$12,124

Accumulated net realized gain (loss)

53,874

Paid-in capital

(65,998)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no loans outstanding pursuant to this line of credit at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

AVERAGE
DAILY
BALANCE

WEIGHTED
AVERAGE
INTEREST
RATE

MAXIMUM
AMOUNT
BORROWED

MONTH OF
MAXIMUM
AMOUNT
BORROWED

 

$5,161

1.46%

$186,341

October 2009

 

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates $354,426 of the long term capital gain distributions paid during the year or the maximum amount allowable but not less than the aforementioned amount as capital gain dividend in accordance with Section 852(b)(3)(C) of the Internal Revenue Code.

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 100% of the ordinary dividends paid during the year as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

 

2009

2008

2007

Net asset value, beginning

$49.45

$92.96

$101.12

Income from investment operations

 

 

 

     Net investment income

1.16

.61

1.64

     Net realized and unrealized gain (loss)

11.41

(34.05)

(.06)

          Total investment operations

12.57

(33.44)

1.58

Distributions from

 

 

 

     Net investment income

(1.14)

(1.95)

(1.42)

     Net realized gain

(.12)

(8.12)

(8.32)

          Total distributions

(1.26)

(10.07)

(9.74)

Total increase (decrease) in net asset value

11.31

(43.51)

(8.16)

Net asset value, ending

$60.76

$49.45

$92.96

 

 

 

 

Total return*

25.40%

(39.49%)

1.40%

Ratios to average net assets: A

 

 

 

     Net investment income (loss)

2.19%

2.14%

1.61%

     Total expenses

.85%

.90%

.87%

     Expenses before offsets

.74%

.90%

.87%

     Net expenses

.74%

.90%

.87%

Portfolio turnover

29%

34%

42%

Net assets, ending (in thousands)

$178,063

$144,425

$58,157

 

 

 

 

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

 

2006

2005

 

Net asset value, beginning

$91.78

$91.30

 

Income from investment operations

 

 

 

     Net investment income

1.42

1.35

 

     Net realized and unrealized gain (loss)

18.02

4.57

 

          Total from investment operations

19.44

5.92

 

Distributions from

 

 

 

     Net investment income

(1.42)

(1.43)

 

     Net realized gain

(8.68)

(4.01)

 

          Total distributions

(10.10)

(5.44)

 

Total increase (decrease) in net asset value

9.34

.48

 

Net asset value, ending

$101.12

$91.78

 

 

 

 

 

Total return*

23.12%

6.92%

 

Ratios to average net assets: A

 

 

 

     Net investment income (loss)

1.57%

1.49%

 

     Total expenses

.88%

.89%

 

     Expenses before offsets

.88%

.89%

 

     Net expenses

.88%

.89%

 

Portfolio turnover

61%

57%

 

Net assets, ending (in thousands)

$62,428

$52,795

 

 

See notes to financial highlights.

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

* Total return is not annualized for periods less than one year.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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 is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Fund and the Advisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's investment, supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's management style and its performance in employing its investment strategies, as well as its current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed below the median of its peer universe for the one- and three-year periods and above the median of its peer universe for the five-year period ended June 30, 2009. The data also indicated that the Portfolio underperformed its Lipper index for the one- and three-year periods ended June 30, 2009, and it outperformed the Lipper index for the five-year period ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance. Based upon its review, the Board concluded that the Portfolio's performance was being addressed.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was below the median of its peer group and that total expenses (net of expense reimbursements) were below the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. The Board noted that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services received by the Portfolio from the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board noted that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's growth and size on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains appropriate compliance programs; (c) performance of the Portfolio is being addressed; (d) the Advisor is likely to execute its investment strategies consistently over time; and (e) the Portfolio's advisory fee is reasonable in relation to those of similar funds and to the services to be provided by the Advisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement would be in the best interests of the Portfolio and its shareholders.

Director and Officer Information Table

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit S&P 500
Index Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments

A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

23

Statement of Operations

24

Statements of Changes in Net Assets

25

Notes to Financial Statements

31

Financial Highlights

33

Explanation of Financial Tables

34

Proxy Voting

35

Availability of Quarterly Portfolio Holdings

35

Basis for Boards Approval of Investment Advisory Contracts

39

Director and Officer Information Table

 

Summit S&P 500 Index Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit S&P 500 Index Portfolio provided a return of 26.11% compared to a return of 26.46% for the Standard & Poor's (S&P) 500 Index. As an index fund, the portfolio employs a passive management approach and seeks, as closely as possible, to replicate the holdings and match the performance of the S&P 500 Index. The portfolio's underperformance was largely attributable to fees and operating expenses. These expenses represent the Portfolio's costs for advisory, administration, accounting, custody, and other services.

 

Summit S&P 500 Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

26.11%

Five year

0.12%

Ten year

-1.33%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

The stabilized banking system, an improved economic outlook, and low valuations fueled a stock market rally that lasted throughout much of 2009. The S&P 500 Index, which declined significantly during the first quarter of 2009, hit bottom in early March at a level of 676.53. For the balance of the year, the index trended higher, closing the year at 1,115.10. Including dividend reinvestment, the index gained 67.8% from its March 2009 low through the end of the year.

Portfolio Strategy

The Portfolio continued to meet its investment objective of closely tracking the total return of the S&P 500 Index. The index includes 500 of the largest companies in the United States and is widely accepted as a proxy for the performance of U.S. markets. These companies delivered strong returns for the year in absolute terms.

At year end, the S&P 500 Index was most heavily weighted in Information Technology (19.9%) and Financials (14.4%) companies. Other sectors of significant weight included Healthcare (12.6%) and Energy (11.5%). The portfolio had the lowest exposure to companies in the Telecommunications Services (3.2%) and Utilities (3.6%) sectors.

The top-performing sectors of the S&P 500 Index, including dividend reinvestment, were Information Technology (up 61.7% in 2009), Materials (48.6%), and Consumer Discretionary (41.5%). The worst performers included the Telecommunication Services (8.9%), Utilities (11.9%), and Energy (13.8%) sectors.

Summit S&P 500 Index Portfolio fully replicates the S&P 500 Index, which means that it holds all of the stocks in the Index. Market fluctuation, cash flows, and corporate actions may cause the Portfolio to hold slightly different weightings than the Index. Since the S&P 500 Index is not a mutual fund, direct investment is not possible and there are no expenses charged against its return as there are against the Portfolio's return.

Economic Sectors

% of Total
Investments

Consumer Discretionary

9.2%

Consumer Staples

10.8%

Energy

10.9%

Exchange Traded Funds

1.1%

Financials

13.6%

Government

0.4%

Health Care

12.0%

Industrials

9.6%

Information Technology

18.8%

Materials

3.4%

Telecommunication Services

3.0%

Time Deposit

3.7%

Utilities

3.5%

Total

100%

Outlook

The outlook for 2010 is for modest growth in the U.S. and global economies, and for improved corporate earnings. Interest rates may increase modestly as the economy strengthens and the Federal Reserve removes the massive liquidity that it has injected into the market. Riskier assets, including equities, may outperform in this environment, in a continuation of the trend established in 2009.

Challenges will remain, however, as the economic recovery will likely be muted by high unemployment and by consumers who continue to repair their balance sheets by curtailing spending. In addition, financial institutions will continue to deal with problem assets, and weakness in the commercial real estate market will likely bring new challenges in 2010. Lastly, the prospect of higher interest rates may negatively affect price/earnings multiples in the equity markets.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,223.60

$2.13

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,023.29

$1.94

* Expenses are equal to the Fund's annualized expense ratio of 0.38%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit S&P 500 Index Portfolio:

We have audited the accompanying statement of net assets of the Summit S&P 500 Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit S&P 500 Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

Equity Securities - 94.8%

Shares

Value

Aerospace & Defense - 2.6%

 

 

Boeing Co.

16,477

$891,900

General Dynamics Corp.

8,752

596,624

Goodrich Corp.

2,822

181,314

Honeywell International, Inc.

17,507

686,274

ITT Corp.

4,150

206,421

L-3 Communications Holdings, Inc.

2,634

229,026

Lockheed Martin Corp.

7,268

547,644

Northrop Grumman Corp.

7,127

398,043

Precision Castparts Corp.

3,194

352,458

Raytheon Co.

8,564

441,217

Rockwell Collins, Inc.

3,545

196,251

United Technologies Corp.

21,226

1,473,297

 

 

6,200,469

 

 

 

Air Freight & Logistics - 1.0%

 

 

C.H. Robinson Worldwide, Inc.

3,774

221,647

Expeditors International of Washington, Inc.

4,800

166,704

FedEx Corp.

7,108

593,163

United Parcel Service, Inc., Class B

22,485

1,289,964

 

 

2,271,478

 

 

 

Airlines - 0.1%

 

 

Southwest Airlines Co.

16,832

192,390

 

 

 

Auto Components - 0.2%

 

 

Goodyear Tire & Rubber Co.*

5,851

82,499

Johnson Controls, Inc.

15,251

415,437

 

 

497,936

 

 

 

Automobiles - 0.4%

 

 

Ford Motor Co.*

75,075

750,750

Harley-Davidson, Inc.

5,318

134,014

 

 

884,764

 

 

 

Beverages - 2.5%

 

 

Brown-Forman Corp., Class B

2,469

132,264

Coca-Cola Co.

52,700

3,003,900

Coca-Cola Enterprises, Inc.

7,208

152,810

Constellation Brands, Inc.*

4,267

67,973

Dr Pepper Snapple Group, Inc.

5,759

162,980

Molson Coors Brewing Co., Class B

3,576

161,492

Pepsi Bottling Group, Inc.

3,276

122,850

PepsiCo, Inc.

35,401

2,152,381

 

 

5,956,650

 

 

 

Equity Securities - Cont'd

Shares

Value

Biotechnology - 1.5%

 

 

Amgen, Inc.*

23,002

$1,301,223

Biogen Idec, Inc.*

6,562

351,067

Celgene Corp.*

10,381

578,014

Cephalon, Inc.*

1,787

111,527

Genzyme Corp.*

6,020

295,040

Gilead Sciences, Inc.*

20,344

880,488

 

 

3,517,359

 

 

 

Building Products - 0.0%

 

 

Masco Corp.

8,136

112,358

 

 

 

Capital Markets - 2.6%

 

 

Ameriprise Financial, Inc.

5,785

224,574

Bank of New York Mellon Corp.

27,474

768,448

Charles Schwab Corp.

21,904

412,233

E*Trade Financial Corp.*

38,249

66,936

Federated Investors, Inc., Class B

1,821

50,079

Franklin Resources, Inc.

3,353

353,239

Goldman Sachs Group, Inc.

11,692

1,974,077

Invesco Ltd.

9,952

233,772

Janus Capital Group, Inc.

3,994

53,719

Legg Mason, Inc.

3,532

106,525

Morgan Stanley

30,992

917,363

Northern Trust Corp.

5,486

287,466

State Street Corp.

11,230

488,954

T. Rowe Price Group, Inc.

5,852

311,619

 

 

6,249,004

 

 

 

Chemicals - 1.9%

 

 

Air Products & Chemicals, Inc.

4,808

389,736

Airgas, Inc.

1,788

85,109

CF Industries Holdings, Inc.

1,054

95,682

Dow Chemical Co.

25,922

716,225

Eastman Chemical Co.

1,648

99,275

Ecolab, Inc.

5,403

240,866

EI Du Pont de Nemours & Co.

20,483

689,663

FMC Corp.

1,577

87,933

International Flavors & Fragrances, Inc.

1,904

78,331

Monsanto Co.

12,356

1,010,103

PPG Industries, Inc.

3,796

222,218

Praxair, Inc.

6,939

557,271

Sigma-Aldrich Corp.

2,751

139,008

 

 

4,411,420

 

 

 

Commercial Banks - 2.6%

 

 

BB&T Corp.

15,615

396,153

Comerica, Inc.

3,425

101,277

Fifth Third Bancorp

18,033

175,822

First Horizon National Corp.*

5,363

71,860

Huntington Bancshares, Inc.

16,036

58,531

KeyCorp

20,923

116,123

M&T Bank Corp.

1,980

132,442

Marshall & Ilsley Corp.

12,188

66,425

 

 

 

 

 

 

Equity Securities - Cont'd

Shares

Value

Commercial Banks - Cont'd

 

 

PNC Financial Services Group, Inc.

10,486

$553,556

Regions Financial Corp.

27,946

147,834

SunTrust Banks, Inc.

11,313

229,541

US Bancorp

43,688

983,417

Wells Fargo & Co.

116,486

3,143,957

Zions Bancorporation

3,472

44,546

 

 

6,221,484

 

 

 

Commercial Services & Supplies - 0.5%

 

 

Avery Dennison Corp.

2,440

89,036

Cintas Corp.

3,180

82,839

Iron Mountain, Inc.*

4,358

99,188

Pitney Bowes, Inc.

4,711

107,222

Republic Services, Inc.

7,337

207,711

RR Donnelley & Sons Co.

4,655

103,667

Stericycle, Inc.*

1,825

100,685

Waste Management, Inc.

11,111

375,663

 

 

1,166,011

 

 

 

Communications Equipment - 2.5%

 

 

Cisco Systems, Inc.*

130,366

3,120,962

Harris Corp.

2,818

133,996

JDS Uniphase Corp.*

4,337

35,780

Juniper Networks, Inc.*

11,936

318,333

Motorola, Inc.*

52,467

407,144

QUALCOMM, Inc.

38,046

1,760,008

Tellabs, Inc.*

9,576

54,392

 

 

5,830,615

 

 

 

Computers & Peripherals - 5.6%

 

 

Apple, Inc.*

20,448

4,311,665

Dell, Inc.*

39,167

562,438

EMC Corp.*

46,485

812,093

Hewlett-Packard Co.

53,906

2,776,698

International Business Machines Corp.

29,820

3,903,438

Lexmark International, Inc.*

1,890

49,102

NetApp, Inc.*

7,820

268,930

QLogic Corp.*

2,876

54,270

SanDisk Corp.*

5,179

150,139

Sun Microsystems, Inc.*

17,246

161,595

Teradata Corp.*

3,857

121,226

Western Digital Corp.*

5,159

227,770

 

 

13,399,364

 

 

 

Construction & Engineering - 0.2%

 

 

Fluor Corp.

4,055

182,637

Jacobs Engineering Group, Inc.*

2,830

106,436

Quanta Services, Inc.*

5,097

106,222

 

 

395,295

 

 

 

Construction Materials - 0.1%

 

 

Vulcan Materials Co.

2,949

155,324

 

 

 

 

 

 

Equity Securities - Cont'd

Shares

Value

Consumer Finance - 0.8%

 

 

American Express Co.

26,994

$1,093,797

Capital One Financial Corp.

10,266

393,598

Discover Financial Services

12,313

181,124

SLM Corp.*

10,759

121,254

 

 

1,789,773

 

 

 

Containers & Packaging - 0.2%

 

 

Ball Corp.

2,138

110,534

Bemis Co., Inc.

2,595

76,942

Owens-Illinois, Inc.*

3,824

125,695

Pactiv Corp.*

3,193

77,079

Sealed Air Corp.

3,838

83,899

 

 

474,149

 

 

 

Distributors - 0.1%

 

 

Genuine Parts Co.

3,619

137,377

 

 

 

Diversified Consumer Services - 0.2%

 

 

Apollo Group, Inc.*

2,923

177,075

DeVry, Inc.

1,491

84,585

H&R Block, Inc.

7,494

169,514

 

 

431,174

 

 

 

Diversified Financial Services - 4.1%

 

 

Bank of America Corp.

225,493

3,395,925

Citigroup, Inc.

444,524

1,471,374

CME Group, Inc.

1,509

506,949

IntercontinentalExchange, Inc.*

1,665

186,979

JPMorgan Chase & Co.

89,397

3,725,173

Leucadia National Corp.*

4,571

108,744

Moody's Corp.

4,381

117,411

NYSE Euronext

5,892

149,068

The NASDAQ OMX Group, Inc.*

3,326

65,921

 

 

9,727,544

 

 

 

Diversified Telecommunication Services - 2.7%

 

 

AT&T, Inc.

133,909

3,753,469

CenturyTel, Inc.

6,764

244,925

Frontier Communications Corp.

6,531

51,007

Qwest Communications International, Inc.

33,811

142,344

Verizon Communications, Inc.

64,393

2,133,340

Windstream Corp.

9,657

106,131

 

 

6,431,216

 

 

 

Electric Utilities - 1.9%

 

 

Allegheny Energy, Inc.

3,845

90,281

American Electric Power Co., Inc.

10,828

376,706

Duke Energy Corp.

29,809

513,013

Edison International

7,386

256,885

Entergy Corp.

4,266

349,130

Exelon Corp.

14,952

730,704

FirstEnergy Corp.

6,907

320,830

 

 

 

Equity Securities - Cont'd

Shares

Value

Electric Utilities - Cont'd

 

 

FPL Group, Inc.

9,387

$495,821

Northeast Utilities

3,980

102,644

Pepco Holdings, Inc.

5,323

89,693

Pinnacle West Capital Corp.

2,446

89,475

PPL Corp.

8,559

276,541

Progress Energy, Inc.

6,344

260,167

Southern Co.

18,198

606,357

 

 

4,558,247

 

 

 

Electrical Equipment - 0.5%

 

 

Emerson Electric Co.

17,055

726,543

First Solar, Inc.*

1,091

147,721

Rockwell Automation, Inc.

3,229

151,699

Roper Industries, Inc.

2,110

110,501

 

 

1,136,464

 

 

 

Electronic Equipment & Instruments - 0.6%

 

 

Agilent Technologies, Inc.*

7,864

244,334

Amphenol Corp.

3,889

179,594

Corning, Inc.

35,321

682,049

FLIR Systems, Inc.*

3,636

118,970

Jabil Circuit, Inc.

4,448

77,262

Molex, Inc.

3,006

64,779

 

 

1,366,988

 

 

 

Energy Equipment & Services - 1.7%

 

 

Baker Hughes, Inc.

7,024

284,332

BJ Services Co.

6,655

123,783

Cameron International Corp.*

5,581

233,286

Diamond Offshore Drilling, Inc.

1,576

155,110

FMC Technologies, Inc.*

2,741

158,539

Halliburton Co.

20,558

618,590

Nabors Industries Ltd.*

6,442

141,015

National Oilwell Varco, Inc.

9,487

418,282

Rowan Co.'s, Inc.*

2,394

54,200

Schlumberger Ltd.

27,252

1,773,833

Smith International, Inc.

5,613

152,505

 

 

4,113,475

 

 

 

Food & Staples Retailing - 2.5%

 

 

Costco Wholesale Corp.

9,907

586,197

CVS Caremark Corp.

32,019

1,031,332

Kroger Co.

14,725

302,304

Safeway, Inc.

8,970

190,971

SUPERVALU, Inc.

5,120

65,075

Sysco Corp.

13,441

375,542

Walgreen Co.

22,423

823,373

Wal-Mart Stores, Inc.

48,469

2,590,668

Whole Foods Market, Inc.*

3,398

93,275

 

 

6,058,737

 

 

 

 

 

 

Equity Securities - Cont'd

Shares

Value

Food Products - 1.6%

 

 

Archer-Daniels-Midland Co.

14,563

$455,968

Campbell Soup Co.

4,130

139,594

ConAgra Foods, Inc.

9,915

228,541

Dean Foods Co.*

4,283

77,265

General Mills, Inc.

7,317

518,117

H.J. Heinz Co.

7,167

306,461

Hershey Co.

3,769

134,893

Hormel Foods Corp.

1,690

64,981

J.M. Smucker Co.

2,710

167,342

Kellogg Co.

5,856

311,539

Kraft Foods, Inc.

33,535

911,481

McCormick & Co., Inc.

2,978

107,595

Sara Lee Corp.

15,806

192,517

Tyson Foods, Inc.

7,309

89,681

 

 

3,705,975

 

 

 

Gas Utilities - 0.1%

 

 

EQT Corp.

2,968

130,355

Nicor, Inc.

945

39,784

Questar Corp.

3,956

164,451

 

 

334,590

 

 

 

Health Care Equipment & Supplies - 1.9%

 

 

Baxter International, Inc.

13,605

798,341

Becton Dickinson & Co.

5,368

423,320

Boston Scientific Corp.*

34,283

308,547

C.R. Bard, Inc.

2,146

167,173

CareFusion Corp.*

3,829

95,751

DENTSPLY International, Inc.

3,594

126,401

Hospira, Inc.*

3,692

188,292

Intuitive Surgical, Inc.*

869

263,585

Medtronic, Inc.

25,164

1,106,713

St. Jude Medical, Inc.*

7,598

279,454

Stryker Corp.

6,421

323,426

Varian Medical Systems, Inc.*

2,823

132,258

Zimmer Holdings, Inc.*

4,806

284,083

 

 

4,497,344

 

 

 

Health Care Providers & Services - 2.1%

 

 

Aetna, Inc.

9,853

312,340

AmerisourceBergen Corp.

6,403

166,926

Cardinal Health, Inc.

8,215

264,852

CIGNA Corp.

6,198

218,604

Coventry Health Care, Inc.*

3,228

78,408

DaVita, Inc.*

2,329

136,806

Express Scripts, Inc.*

6,307

545,240

Humana, Inc.*

3,851

169,020

Laboratory Corp. of America Holdings*

2,404

179,915

McKesson Corp.

6,095

380,939

Medco Health Solutions, Inc.*

10,841

692,848

Patterson Co.'s, Inc.*

1,980

55,400

Quest Diagnostics, Inc.

3,531

213,202

 

 

 

Equity Securities - Cont'd

Shares

Value

Health Care Providers & Services - Cont'd

 

 

Tenet Healthcare Corp.*

10,103

$54,455

UnitedHealth Group, Inc.

26,409

804,946

WellPoint, Inc.*

10,401

606,274

 

 

4,880,175

 

 

 

Health Care Technology - 0.0%

 

 

IMS Health, Inc.

4,398

92,622

 

 

 

Hotels, Restaurants & Leisure - 1.4%

 

 

Carnival Corp.*

9,903

313,826

Darden Restaurants, Inc.

3,318

116,362

International Game Technology

6,732

126,360

Marriott International, Inc.

5,770

157,230

McDonald's Corp.

24,522

1,531,154

Starbucks Corp.*

16,874

389,115

Starwood Hotels & Resorts Worldwide, Inc.

4,241

155,093

Wyndham Worldwide Corp.

3,754

75,718

Wynn Resorts Ltd.

1,638

95,381

Yum! Brands, Inc.

10,721

374,913

 

 

3,335,152

 

 

 

Household Durables - 0.3%

 

 

Black & Decker Corp.

1,455

94,327

D.R. Horton, Inc.

6,671

72,514

Fortune Brands, Inc.

3,411

147,355

Harman International Industries, Inc.

1,447

51,050

Leggett & Platt, Inc.

3,428

69,931

Lennar Corp.

3,675

46,930

Newell Rubbermaid, Inc.

6,296

94,503

Pulte Homes, Inc.*

7,630

76,302

Whirlpool Corp.

1,689

136,235

 

 

789,147

 

 

 

Household Products - 2.4%

 

 

Clorox Co.

3,175

193,675

Colgate-Palmolive Co.

11,238

923,202

Kimberly-Clark Corp.

9,421

600,212

Procter & Gamble Co.

66,323

4,021,163

 

 

5,738,252

 

 

 

Independent Power Producers & Energy Traders - 0.2%

 

 

AES Corp.*

15,139

201,500

Constellation Energy Group, Inc.

4,588

161,360

 

 

362,860

 

 

 

Industrial Conglomerates - 2.1%

 

 

3M Co.

16,147

1,334,872

General Electric Co.

241,644

3,656,074

Textron, Inc.

6,180

116,246

 

 

5,107,192

 

 

 

Equity Securities - Cont'd

Shares

Value

Insurance - 2.3%

 

 

Aflac, Inc.

10,612

$490,805

Allstate Corp.

12,156

365,166

American International Group, Inc.*

3,256

97,615

AON Corp.

6,149

235,753

Assurant, Inc.

2,849

83,989

Chubb Corp.

7,677

377,555

Cincinnati Financial Corp.

3,689

96,799

Genworth Financial, Inc.*

11,609

131,762

Hartford Financial Services Group, Inc.

8,679

201,874

Lincoln National Corp.

7,164

178,240

Loews Corp.

8,237

299,415

Marsh & McLennan Co.'s, Inc.

11,992

264,783

MetLife, Inc.

18,560

656,096

Principal Financial Group, Inc.

7,517

180,709

Progressive Corp.*

15,208

273,592

Prudential Financial, Inc.

10,525

523,724

Torchmark Corp.

1,791

78,714

Travelers Co.'s, Inc.

12,394

617,965

Unum Group

7,523

146,849

XL Capital Ltd.

7,756

142,167

 

 

5,443,572

 

 

 

Internet & Catalog Retail - 0.6%

 

 

Amazon.com, Inc.*

7,582

1,019,930

Expedia, Inc.*

4,780

122,894

priceline.com, Inc.*

1,000

218,500

 

 

1,361,324

 

 

 

Internet Software & Services - 2.0%

 

 

Akamai Technologies, Inc.*

3,623

91,771

AOL, Inc.*

0.1

2

eBay, Inc.*

25,575

602,036

Google, Inc.*

5,478

3,396,250

VeriSign, Inc.*

4,359

105,662

Yahoo!, Inc.*

27,072

454,268

 

 

4,649,989

 

 

 

IT Services - 1.5%

 

 

Affiliated Computer Services, Inc.*

2,215

132,214

Automatic Data Processing, Inc.

11,455

490,503

Cognizant Technology Solutions Corp.*

6,707

303,827

Computer Sciences Corp.*

3,461

199,111

Fidelity National Information Services, Inc.

7,437

174,323

Fiserv, Inc.*

3,458

167,644

MasterCard, Inc.

2,183

558,804

Paychex, Inc.

7,294

223,488

SAIC, Inc.*

6,982

132,239

Total System Services, Inc.

4,771

82,395

Visa, Inc.

10,214

893,317

Western Union Co.

15,680

295,568

 

 

3,653,433

 

 

 

 

 

 

Equity Securities - 94.8% - Cont'd

Shares

Value

Leisure Equipment & Products - 0.1%

 

 

Eastman Kodak Co.*

6,489

$27,384

Hasbro, Inc.

3,012

96,565

Mattel, Inc.

8,229

164,415

 

 

288,364

 

 

 

Life Sciences - Tools & Services - 0.4%

 

 

Life Technologies Corp.*

4,084

213,307

Millipore Corp.*

1,342

97,094

PerkinElmer, Inc.

2,449

50,425

Thermo Fisher Scientific, Inc.*

9,284

442,754

Waters Corp.*

2,124

131,603

 

 

935,183

 

 

 

Machinery - 1.5%

 

 

Caterpillar, Inc.

14,162

807,092

Cummins, Inc.

4,573

209,718

Danaher Corp.

5,993

450,674

Deere & Co.

9,595

518,994

Dover Corp.

4,223

175,719

Eaton Corp.

3,760

239,211

Flowserve Corp.

1,263

119,391

Illinois Tool Works, Inc.

8,755

420,152

PACCAR, Inc.

8,245

299,046

Pall Corp.

2,648

95,858

Parker Hannifin Corp.

3,642

196,231

Snap-on, Inc.

1,212

51,219

Stanley Works

1,914

98,590

 

 

3,681,895

 

 

 

Media - 2.7%

 

 

CBS Corp., Class B

15,304

215,021

Comcast Corp.

64,883

1,093,927

DIRECTV*

21,782

726,430

Gannett Co., Inc.

5,624

83,516

Interpublic Group of Co.'s, Inc.*

11,575

85,423

McGraw-Hill Co.'s, Inc.

7,144

239,395

Meredith Corp.

736

22,706

New York Times Co.*

2,202

27,217

News Corp.

51,233

701,380

Omnicom Group, Inc.

7,055

276,203

Scripps Networks Interactive, Inc.

1,997

82,876

Time Warner Cable, Inc.

7,989

330,665

Time Warner, Inc.

26,524

772,909

Viacom, Inc., Class B*

13,768

409,323

Walt Disney Co.

43,702

1,409,389

Washington Post Co., Class B

146

64,182

 

 

6,540,562

 

 

 

 

 

 

Equity Securities - Cont'd

Shares

Value

Metals & Mining - 1.0%

 

 

AK Steel Holding Corp.

2,644

$56,449

Alcoa, Inc.

22,085

356,010

Allegheny Technologies, Inc.

2,224

99,569

Cliffs Natural Resources, Inc.

2,987

137,671

Freeport-McMoRan Copper & Gold, Inc.*

9,766

784,112

Newmont Mining Corp.

11,125

526,324

Nucor Corp.

7,144

333,268

Titanium Metals Corp.*

1,566

19,606

United States Steel Corp.

3,249

179,085

 

 

2,492,094

 

 

 

Multiline Retail - 0.8%

 

 

Big Lots, Inc.*

1,737

50,338

Family Dollar Stores, Inc.

3,132

87,164

J.C. Penney Co., Inc.

5,349

142,337

Kohl's Corp.*

6,955

375,083

Macy's, Inc.

9,541

159,907

Nordstrom, Inc.

3,874

145,585

Sears Holdings Corp.*

1,102

91,962

Target Corp.

17,041

824,273

 

 

1,876,649

 

 

 

Multi-Utilities - 1.3%

 

 

Ameren Corp.

5,394

150,762

Centerpoint Energy, Inc.

9,028

130,996

CMS Energy Corp.

5,489

85,958

Consolidated Edison, Inc.

6,381

289,889

Dominion Resources, Inc.

13,665

531,842

DTE Energy Co.

3,753

163,593

Integrys Energy Group, Inc.

1,595

66,974

NiSource, Inc.

6,644

102,185

PG&E Corp.

8,466

378,007

Public Service Enterprise Group, Inc.

11,464

381,178

SCANA Corp.

2,660

100,229

Sempra Energy

5,612

314,160

TECO Energy, Inc.

5,151

83,549

Wisconsin Energy Corp.

2,650

132,050

Xcel Energy, Inc.

10,352

219,669

 

 

3,131,041

 

 

 

Office Electronics - 0.1%

 

 

Xerox Corp.

19,803

167,533

 

 

 

Oil, Gas & Consumable Fuels - 9.1%

 

 

Anadarko Petroleum Corp.

11,180

697,856

Apache Corp.

7,632

787,394

Cabot Oil & Gas Corp.

2,349

102,393

Chesapeake Energy Corp.

14,734

381,316

Chevron Corp.

45,608

3,511,360

ConocoPhillips

33,660

1,719,016

Consol Energy, Inc.

4,100

204,180

Denbury Resources, Inc.*

6,021

89,111

 

 

 

Equity Securities - Cont'd

Shares

Value

Oil, Gas & Consumable Fuels - Cont'd

 

 

Devon Energy Corp.

10,062

$739,557

El Paso Corp.

15,898

156,277

EOG Resources, Inc.

5,761

560,545

Exxon Mobil Corp.

107,860

7,354,974

Hess Corp.

6,616

400,268

Marathon Oil Corp.

16,036

500,644

Massey Energy Co.

1,786

75,030

Murphy Oil Corp.

4,330

234,686

Noble Energy, Inc.

3,932

280,037

Occidental Petroleum Corp.

18,404

1,497,165

Peabody Energy Corp.

6,078

274,786

Pioneer Natural Resources Co.

2,758

132,853

Range Resources Corp.

3,593

179,111

Southwestern Energy Co.*

7,847

378,225

Spectra Energy Corp.

14,682

301,128

Sunoco, Inc.

2,531

66,059

Tesoro Corp.

2,957

40,067

Valero Energy Corp.

12,949

216,896

Williams Co.'s, Inc.

13,279

279,921

XTO Energy, Inc.

13,165

612,568

 

 

21,773,423

 

 

 

Paper & Forest Products - 0.2%

 

 

International Paper Co.

9,828

263,194

MeadWestvaco Corp.

3,704

106,045

Weyerhaeuser Co.

4,791

206,684

 

 

575,923

 

 

 

Personal Products - 0.3%

 

 

Avon Products, Inc.

9,684

305,046

Estee Lauder Co.'s, Inc.

2,808

135,795

Mead Johnson Nutrition Co.

4,663

203,773

 

 

644,614

 

 

 

Pharmaceuticals - 6.1%

 

 

Abbott Laboratories, Inc.

35,061

1,892,943

Allergan, Inc.

6,969

439,117

Bristol-Myers Squibb Co.

38,877

981,644

Eli Lilly & Co.

22,910

818,116

Forest Laboratories, Inc.*

6,840

219,633

Johnson & Johnson

62,598

4,031,937

King Pharmaceuticals, Inc.*

5,217

64,013

Merck & Co., Inc.

69,315

2,532,770

Mylan, Inc.*

6,933

127,775

Pfizer, Inc.

183,409

3,336,210

Watson Pharmaceuticals, Inc.*

2,307

91,380

 

 

14,535,538

 

 

 

Equity Securities - Cont'd

Shares

Value

Professional Services - 0.1%

 

 

Dun & Bradstreet Corp.

1,112

$93,819

Equifax, Inc.

3,055

94,369

Monster Worldwide, Inc.*

3,050

53,070

Robert Half International, Inc.

3,396

90,775

 

 

332,033

 

 

 

Real Estate Investment Trusts - 1.1%

 

 

Apartment Investment & Management Co.

2,364

$37,635

AvalonBay Communities, Inc.

1,849

151,821

Boston Properties, Inc.

3,145

210,935

Equity Residential

6,264

211,598

HCP, Inc.

6,769

206,725

Health Care REIT, Inc.

2,883

127,775

Host Hotels & Resorts, Inc.

14,853

173,335

Kimco Realty Corp.

9,111

123,272

Plum Creek Timber Co., Inc.

3,525

133,104

ProLogis

10,725

146,825

Public Storage

3,084

251,192

Simon Property Group, Inc.

6,435

513,513

Ventas, Inc.

3,549

155,233

Vornado Realty Trust

3,502

244,930

 

 

2,687,893

 

 

 

Real Estate Management & Development - 0.0%

 

 

CB Richard Ellis Group, Inc.*

6,441

87,404

 

 

 

Road & Rail - 0.9%

 

 

Burlington Northern Santa Fe Corp.

5,960

587,775

CSX Corp.

8,909

431,997

Norfolk Southern Corp.

8,349

437,655

Ryder System, Inc.

1,353

55,703

Union Pacific Corp.

11,440

731,016

 

 

2,244,146

 

 

 

Semiconductors & Semiconductor Equipment - 2.5%

 

 

Advanced Micro Devices, Inc.*

12,778

123,691

Altera Corp.

6,714

151,938

Analog Devices, Inc.

6,623

209,154

Applied Materials, Inc.

30,222

421,295

Broadcom Corp.*

9,869

310,380

Intel Corp.

125,371

2,557,568

KLA-Tencor Corp.

3,892

140,735

Linear Technology Corp.

5,058

154,471

LSI Corp.*

15,700

94,357

MEMC Electronic Materials, Inc.*

5,408

73,657

Microchip Technology, Inc.

4,163

120,977

Micron Technology, Inc.*

19,279

203,586

National Semiconductor Corp.

5,646

86,723

Novellus Systems, Inc.*

2,037

47,544

NVIDIA Corp.*

12,639

236,096

 

 

 

 

 

 

Equity Securities - Cont'd

Shares

Value

Semiconductors & Semiconductor Equipment - Cont'd

 

 

Teradyne, Inc.*

3,535

$37,931

Texas Instruments, Inc.

28,475

742,058

Xilinx, Inc.

6,288

157,577

 

 

5,869,738

 

 

 

Software - 4.1%

 

 

Adobe Systems, Inc.*

11,900

437,682

Autodesk, Inc.*

5,236

133,047

BMC Software, Inc.*

4,133

165,733

CA, Inc.

9,072

203,757

Citrix Systems, Inc.*

4,197

174,637

Compuware Corp.*

4,553

32,918

Electronic Arts, Inc.*

7,393

131,226

Intuit, Inc.*

7,173

220,283

McAfee, Inc.*

3,760

152,543

Microsoft Corp.

175,351

5,346,452

Novell, Inc.*

7,081

29,386

Oracle Corp.

88,871

2,180,894

Red Hat, Inc.*

4,234

130,831

Salesforce.com, Inc.*

2,570

189,589

Symantec Corp.*

18,275

326,940

 

 

9,855,918

 

 

 

Specialty Retail - 1.9%

 

 

Abercrombie & Fitch Co.

1,859

64,786

AutoNation, Inc.*

2,276

43,585

AutoZone, Inc.*

638

100,849

Bed Bath & Beyond, Inc.*

6,010

232,166

Best Buy Co., Inc.

7,743

305,539

GameStop Corp.*

3,983

87,387

Gap, Inc.

10,818

226,637

Home Depot, Inc.

38,733

1,120,546

Limited Brands, Inc.

5,988

115,209

Lowe's Co.'s, Inc.

33,380

780,758

Office Depot, Inc.*

6,647

42,873

O'Reilly Automotive, Inc.*

3,283

125,148

RadioShack Corp.

3,028

59,046

Ross Stores, Inc.

2,853

121,852

Sherwin-Williams Co.

2,138

131,808

Staples, Inc.

16,581

407,727

Tiffany & Co.

2,822

121,346

TJX Co.'s, Inc.

9,538

348,614

 

 

4,435,876

 

 

 

Textiles, Apparel & Luxury Goods - 0.5%

 

 

Coach, Inc.

7,240

264,477

Nike, Inc., Class B

8,865

585,710

Polo Ralph Lauren Corp.

1,368

110,781

VF Corp.

2,029

148,604

 

 

1,109,572

 

 

 

Equity Securities - Cont'd

Shares

Value

Thrifts & Mortgage Finance - 0.1%

 

 

Hudson City Bancorp, Inc.

10,751

$147,611

People's United Financial, Inc.

7,895

131,847

 

 

279,458

 

 

 

Tobacco - 1.5%

 

 

Altria Group, Inc.

47,080

924,181

Lorillard, Inc.

3,562

285,779

Philip Morris International, Inc.

43,275

2,085,422

Reynolds American, Inc.

3,831

202,928

 

 

3,498,310

 

 

 

Trading Companies & Distributors - 0.1%

 

 

Fastenal Co.

3,127

130,208

W.W. Grainger, Inc.

1,442

139,629

 

 

269,837

 

 

 

Wireless Telecommunication Services - 0.3%

 

 

American Tower Corp.*

9,032

390,273

MetroPCS Communications, Inc.*

6,387

48,733

Sprint Nextel Corp.*

67,425

246,776

 

 

685,782

 

 

 

 

 

 

     Total Equity Securities (Cost $217,335,417)

 

225,637,478

 

 

 

 

 

 

Exchange Traded Funds - 1.1%

 

 

SPDR Trust Series 1

24,000

2,674,560

 

 

 

     Total Exchange Traded Funds (Cost $2,654,101)

 

2,674,560

 

 

 

 

Principal

 

U.S. Treasury - 0.4%

Amount

 

United States Treasury Bills, 2/11/10 ^

$1,000,000

999,959

 

 

 

     Total U.S. Treasury (Cost $999,959)

 

999,959

 

 

 

 

 

 

Time Deposit - 3.7%

 

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

8,832,402

8,832,402

 

 

 

     Total Time Deposit (Cost $8,832,402)

 

8,832,402

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $229,821,879) - 100.0%

 

238,144,399

          Other assets and liabilities, net - 0.0%

 

(67,242)

          NET ASSETS - 100%

 

$238,077,157

Net Assets Consist of:

 

 

Paid-in capital applicable to 3,328,750 shares of common

 

 

     stock outstanding; $0.10 par value, 30,000,000 shares authorized

 

$243,402,087

Undistributed net investment income

 

449,700

Accumulated net realized gain (loss) on investments

 

(14,209,551)

Net unrealized appreciation (depreciation) on investments

 

8,434,921

 

 

 

          Net Assets

 

$238,077,157

 

 

 

          Net Asset Value Per Share

 

$71.52

 

 

Futures

Number of
Contracts

Expiration
Date

Underlying
Face Amount
At Value

Unrealized
Appreciation
(Depreciation)

Purchased:

 

 

 

 

     E-Mini S&P 500 Index^

47

3/10

$2,610,145

$31,351

     S&P 500 Index^

25

3/10

6,941,875

81,050

          Total Purchased

 

 

 

$112,401

 

 

^ Futures collateralized by 1,000,000 units of U.S. Treasury Bills.

* Non-income producing security.

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income (net of foreign taxes withheld of $673 )

$5,073,419

     Interest Income

2,143

          Total investment income

5,075,562

 

 

Expenses:

 

     Investment advisory fee

537,555

     Transfer agency fees and expenses

4,125

     Accounting Fees

31,531

     Directors' fees and expenses

35,320

     Administrative fees

215,022

     Custodian fees

63,563

     Reports to shareholders

33,153

     Professional fees

38,494

     Miscellaneous

37,217

          Total expenses

995,980

          Reimbursement from Advisor

(178,788)

          Fees paid indirectly

(108)

               Net expenses

817,084

 

 

               Net Investment Income

4,258,478

 

 

 

 

Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) on:

 

     Investments

8,460,010

     Futures

1,415,901

 

9,875,911

 

 

Changes in unrealized appreciation or (depreciation) on:

 

     Investments

37,239,154

     Futures

96,909

 

37,336,063

 

 

 

 

          Net Realized and Unrealized Gain

 

          (Loss)

47,211,974

 

 

          Increase (Decrease) in Net Assets

 

          Resulting From Operations

$51,470,452

 

See notes to financial statements.

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$4,258,478

$4,831,335

     Net realized gain (loss) on investments

9,875,911

(3,880,447)

     Change in unrealized appreciation or (depreciation)

37,336,063

(104,302,903)

 

 

 

 

 

 

          Increase (Decrease) In Net Assets

 

 

          Resulting From Operations

51,470,452

(103,352,015)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(4,209,282)

(8,361,638)

     Net realized gain

(2,915,695)

(3,225,031)

          Total distributions

(7,124,977)

(11,586,669)

 

 

 

Capital share transactions:

 

 

     Shares sold

21,427,150

21,151,535

     Shares issued from merger (See Note A)

--

45,246,467

     Reinvestment of distributions

7,124,975

11,586,669

     Shares redeemed

(48,444,184)

(52,242,981)

          Total capital share transactions

(19,892,059)

25,741,690

 

 

 

Total Increase (Decrease) In Net Assets

24,453,416

(89,196,994)

 

 

 

 

 

 

Net Assets

 

 

Beginning of year

213,623,741

302,820,735

End of year (including undistributed net investment

 

 

     income of $449,700 and $431,245, respectively)

$238,077,157

$213,623,741

 

 

 

 

 

 

Capital Share Activity

 

 

Shares sold

356,748

263,983

Shares issued from merger (See Note A)

--

782,946

Shares reinvested

98,615

154,659

Shares redeemed

(781,868)

(654,209)

     Total capital share activity

(326,505)

547,379

 

 

See notes to financial statements.

 

Notes to Financial Statements

Note A -- Significant Accounting Policies

General: The Summit S&P 500 Index Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

On December 12, 2008, the net assets of the Ameritas Index 500 Portfolio, a series of Calvert Variable Series, Inc. merged into Summit Mutual Funds, Inc., S&P 500 Index Portfolio. The merger was accomplished by a tax-free exchange of 782,946 shares of the Summit S&P 500 Index Portfolio (valued at $45,246,467) for 483,294 shares of the Ameritas Index 500 Portfolio outstanding at December 12, 2008. The Ameritas Index 500 Portfolio's net assets as of December 12, 2008, including $17,423,864 of unrealized depreciation, were combined with those of the Summit S&P 500 Index Portfolio.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the close of business of the Portfolio, that are expected to materially affect the value of those securities, then they are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date.

These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Equity securities*

$225,637,478

--

--

$225,637,478

U.S. government obligations

--

$999,959

--

999,959

Exchange traded funds

2,674,560

--

--

2,674,560

Other debt obligations

--

8,832,402

--

8,832,402

TOTAL

$228,312,038

$9,832,361

--

$238,144,399

 

 

 

 

 

Other financial instruments**

$112,401

--

--

$112,401

* For further breakdown of Equity Securities by industry type, please refer to the Statement of Net Assets.

** Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument.

Futures Contracts: The Portfolio may purchase and sell futures contracts, but only when, in the judgment of the Advisor, such a position acts as a hedge. The Portfolio may not enter into futures contracts for the purpose of speculation or leverage. These futures contracts may include, but are not limited to, market index futures contracts. The Portfolio is subject to market risk in the normal course of pursuing its investment objectives. The Portfolio may use futures contracts to hedge against changes in the value of securities. The Portfolio may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Portfolio's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms. Futures contracts are designed by boards of trade which are designated "contracts markets" by the Commodities Futures Trading Commission. Futures contracts trade on the contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee the futures contracts against default. As a result, there is minimal counterparty credit risk to the Portfolio.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned.

Foreign Currency Transactions: The Portfolio's accounting records are maintained in U.S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are translated into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities and foreign currencies is included with the net realized and unrealized gain or loss on investments and foreign currencies.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Recent Party Transactions

Calvert Asset Management Company, Inc. ("the Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .25% of the Portfolio's average daily net assets. Under the terms of the agreement, $50,458 was payable at year end. In addition, $1,336 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is .38%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $20,183 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $106 for the year ended December 31, 2009. Under the terms of the agreement, $7 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $19,012,365 and $49,007,610, respectively.

Capital Loss Carryforwards

Expiration Date

31-Dec-10

$2,110,080

31-Dec-11

960,576

31-Dec-12

2,529,937

31-Dec-13

1,687,669

31-Dec-15

2,330,473

31-Dec-16

280,386

31-Dec-17

2,509,534

The Portfolio's use of capital loss carryforwards may be limited under certain tax provisions.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from: 2009 2008

     Ordinary income $4,209,282 $8,361,637

     Long term capital gain 2,915,695 3,225,032

          Total $7,124,977 $11,586,669

As of December 31, 2009, the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$48,661,637

Unrealized (depreciation)               

(48,167,705)

Net unrealized appreciation/(depreciation)     

$493,932

Undistributed ordinary income

$449,700

Undistributed long term capital gain

$6,140,094

Capital loss carryforward     

($12,408,655)

Federal income tax cost of investments     

$237,650,467

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales, real estate investment trusts, Section 1256 contracts, and capital loss carryforwards subject to limitations under Internal Revenue Code Section 382.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distributions (or available capital loss carryforwards, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to real estate investment trusts, expired capital losses and litigation settlements.

Undistributed net investment income

($30,741)

Accumulated net realized gain (loss)

7,531,241

Paid-in capital

(7,500,500)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no borrowings under the agreement during the year at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

AVERAGE
DAILY
BALANCE

WEIGHTED
AVERAGE
INTEREST
RATE

MAXIMUM
AMOUNT
BORROWED

MONTH OF
MAXIMUM
AMOUNT
BORROWED

 

$16,735

1.46%

$807,387

December 2009

 

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates $2,915,695 of the long term capital gain distributions paid during the year or the maximum amount allowable but not less than the aforementioned amount as capital gain dividend in accordance with Section 852(b)(3)(C) of the Internal Revenue Code.

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 100% of the ordinary dividends paid during the year as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

 

2009

2008

2007

Net asset value, beginning

$58.44

$97.44

$94.19

Income from investment operations

 

 

 

     Net investment income

1.33

1.44

1.52

     Net realized and unrealized gain (loss)

13.95

(36.76)

3.31

          Total from investment operations

15.28

(35.32)

4.83

Distributions from

 

 

 

     Net investment income

(1.30)

(2.60)

(1.42)

     Net realized gain

(.90)

(1.08)

(.16)

          Total distributions

(2.20)

(3.68)

(1.58)

Total increase (decrease) in net asset value

13.08

(39.00)

3.25

Net asset value, ending

$71.52

$58.44

$97.44

 

 

 

 

Total return*

26.11%

(37.10%)

5.16%

Ratios to average net assets: A

 

 

 

     Net investment income

     1.98%

2.00%

1.59%

     Total expenses

.46%

.47%

.45%

     Expenses before offsets

.38%

.39%

.39%

     Net expenses

.38%

.39%

.39%

Portfolio turnover

9%

7%

3%

Net assets, ending (in thousands)

$238,077

$213,624

$302,821

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

 

2006

2005

 

Net asset value, beginning

$82.85

$80.48

 

Income from investment operations

 

 

 

     Net investment income

1.40

1.17

 

     Net realized and unrealized gain (loss)

11.19

2.39

 

          Total from investment operations

12.59

3.56

 

Distributions from

 

 

 

     Net investment income

(1.25)

(1.19)

 

     Net realized gain

--

--

 

          Total distributions

(1.25)

(1.19)

 

Total increase (decrease) in net asset value

11.34

2.37

 

Net asset value, ending

$94.19

$82.85

 

 

 

 

 

Total return*

15.36%

4.52%

 

Ratios to average net assets: A

 

 

 

     Net investment income

1.56%

1.49%

 

     Total expenses

.43%

.49%

 

     Expenses before offsets

.39%

.39%

 

     Net expenses

.39%

.39%

 

Portfolio turnover

3%

6%

 

Net assets, ending (in thousands)

$309,019

$290,666

 

See notes to financial highlights.

 

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

* Total return is not annualized for periods less than one year.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one- and three-year periods ended June 30, 2009, and performed at the median of its peer universe for the five-year period ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one-year period, matched its Lipper index for the three-year period and underperformed its Lipper index for the five-year period ended June 30, 2009. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was above the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the relatively small range in total expense ratios among the funds in the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. In addition, the Board considered the subadvisory fee paid to the Subadvisor by the Advisor in comparison to fees paid by similar institutional clients. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

Director and Officer Information Table

 Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

 

<PAGE>

Summit S&P MidCap
400 Index Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

20

Statement of Operations

21

Statements of Changes in Net Assets

22

Notes to Financial Statements

28

Financial Highlights

30

Explanation of Financial Tables

31

Proxy Voting and Availability of Quarterly Portfolio Holdings

31

Basis for Board's Approval of Investment Advisory Contracts

35

Director and Officer Information Table

 

 

Summit S&P Midcap 400 Index Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit S&P MidCap 400 Index Portfolio provided a return of 36.38% (Class I) compared to a return of 37.38% for the Standard & Poor's (S&P) MidCap 400 Index. As an index fund, the portfolio employs a passive management approach and seeks, as closely as possible, to replicate the holdings and match the performance of the S&P 400 Index. The portfolio's underperformance was largely attributable to fees and operating expenses and the timing and size of portfolio cash flows.

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

The stabilized banking system, an improved economic outlook, and low valuations fueled a stock market rally that lasted throughout much of 2009. The S&P 400 Index, which declined significantly during the first quarter of 2009, hit bottom in early March, at a level of 404.62. For the balance of the year, the Index trended higher, closing the year at 726.67. Including dividend reinvestment, the Index gained 82.0% from its March 2009 low through the end of the year.

 

Summit S&P MidCap 400 Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

 

Class I

Class F**

One year

36.38%

36.12%

Five year

2.65%

2.46%

Ten year

5.62%

5.37%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

**Prior to October 1, 2007, Class F share performance is based on Class I performance.

Absent limitation of expenses during certain of the periods shown, performance would

have been lower.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted. The value of an investment in Class I shares is plotted in the graph. The value of an investment in another class of shares would be different.

 

Portfolio Strategy

The Portfolio continued to meet its investment objective of closely tracking the total return of the S&P 400 Index. The Index includes 400 mid-sized companies that have average market capitalizations of slightly more than $2 billion. These companies delivered strong returns for the year, both in absolute terms and relative to larger company stocks as measured by the Standard & Poor's 500 Index, which returned 26.5% for the year.

During 2009, the S&P 400 Index was most heavily weighted in Financial Services (18.2%), Consumer Discretionary (15.3%), and Industrial (114.8%) companies. Other sectors of significant weight included Information Technology (14.3%) and Healthcare (12.3%). The Index had the lowest exposure to companies in the Consumer Staples (4.1%) and Telecommunications Services (0.6%) sectors of the market.

The top-performing sectors of the S&P 400 Index, including dividend reinvestment, were Energy (up 63.5% for the year), Technology (59.7%), and Materials (55.8%). The worst performers were Financial Services (12.9%) and Telecommunications Services (14.0%).

The Summit S&P Midcap 400 Index Portfolio fully replicates the S&P 400 Index, which means that it holds all of the stocks in the Index. Market fluctuation, cash flows, and corporate actions may cause the Portfolio to hold slightly different weightings than the Index. Since the S&P 400 Index is not a mutual fund, direct investment in the Index is not possible and there are no expenses charged against its return as there are against the Portfolio's return.

Economic Sectors

% of Total
Invest ments

Consumer Discretionary

13.6%

Consumer Staples

3.8%

Energy

6.5%

Exchange Traded Funds

0.6%

Financials

18.2%

Government

0.4%

Health Care

11.2%

Industrials

13.8%

Information Technology

14.8%

Materials

6.0%

Telecommunication Services

0.8%

Time Deposit

3.9%

Utilities

6.4%

Total

100%

Outlook

The outlook for 2010 is for modest growth in the U.S. and global economies, and for improved corporate earnings. Interest rates may increase modestly as the economy strengthens and the Federal Reserve removes the massive liquidity that it has injected into the market. Riskier assets, including equities, may outperform in this environment, in a continuation of the trend established in 2009.

Challenges will remain, however, as the economic recovery will likely be muted by high unemployment and by consumers who continue to repair their balance sheets by curtailing spending. In addition, financial institutions will continue to deal with problem assets and weakness in the commercial real estate market, which will likely bring new challenges in 2010. Lastly, the prospect of higher interest rates may negatively affect price/earnings multiples in the equity markets.

 

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Class I

 

 

 

Actual

$1,000.00

$1,261.60

$3.14

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,022.43

$2.80

 

 

 

 

Class F

 

 

 

Actual

$1,000.00

$1,260.70

$4.50

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,021.22

$4.02

* Expenses are equal to the Fund's annualized expense ratio of 0.55% and 0.79%, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit S&P Mid Cap 400 Index Portfolio:

We have audited the accompanying statement of net assets of the Summit S&P Mid Cap 400 Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit S&P Mid Cap 400 Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

Equity Securities - 95.1%

 

Shares

Value

 

Aerospace & Defense - 0.6%

 

 

 

 

Alliant Techsystems, Inc.*

 

3,599

$317,684

 

BE Aerospace, Inc.*

 

11,056

259,816

 

 

 

 

577,500

 

 

 

 

 

 

Airlines - 0.3%

 

 

 

 

Airtran Holdings, Inc.*

 

14,228

74,270

 

Alaska Air Group, Inc.*

 

3,840

132,710

 

JetBlue Airways Corp.*

 

22,702

123,726

 

 

 

 

330,706

 

 

 

 

 

 

Auto Components - 0.7%

 

 

 

 

BorgWarner, Inc.

 

12,750

423,555

 

Gentex Corp.

 

15,047

268,589

 

 

 

 

692,144

 

 

 

 

 

 

Automobiles - 0.1%

 

 

 

 

Thor Industries, Inc.

 

3,908

122,711

 

TravelCenters of America LLC (b)*

 

60,000

10

 

 

 

 

122,721

 

 

 

 

 

 

Beverages - 0.5%

 

 

 

 

Hansen Natural Corp.*

 

7,925

304,320

 

PepsiAmericas, Inc.

 

6,122

179,130

 

 

 

 

483,450

 

 

 

 

 

 

Biotechnology - 1.3%

 

 

 

 

OSI Pharmaceuticals, Inc.*

 

6,343

196,823

 

United Therapeutics Corp.*

 

5,218

274,728

 

Vertex Pharmaceuticals, Inc.*

 

21,221

909,320

 

 

 

 

1,380,871

 

 

 

 

 

 

Building Products - 0.2%

 

 

 

 

Lennox International, Inc.

 

5,309

207,263

 

 

 

 

 

 

Capital Markets - 1.9%

 

 

 

 

Affiliated Managers Group, Inc.*

 

4,631

311,898

 

Apollo Investment Corp.

 

18,986

180,937

 

Eaton Vance Corp.

 

12,843

390,556

 

Jefferies Group, Inc.*

 

13,151

312,073

 

Raymond James Financial, Inc.

 

10,798

256,669

 

SEI Investments Co.

 

14,195

248,696

 

Waddell & Reed Financial, Inc.

 

9,386

286,648

 

 

 

 

1,987,477

 

 

 

 

 

 

Chemicals - 3.0%

 

 

 

 

Albemarle Corp.

 

10,004

363,845

 

Ashland, Inc.

 

8,251

326,905

 

Cabot Corp.

 

7,147

187,466

 

 

 

 

 

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Chemicals - Cont'd

 

 

 

 

Cytec Industries, Inc.

 

5,300

$193,026

 

Lubrizol Corp.

 

7,518

548,438

 

Minerals Technologies, Inc.

 

2,048

111,555

 

Olin Corp.

 

8,551

149,813

 

RPM International, Inc.

 

14,084

286,328

 

Scotts Miracle-Gro Co.

 

4,887

192,108

 

Sensient Technologies Corp.

 

5,331

140,205

 

Terra Industries, Inc.

 

10,911

351,225

 

Valspar Corp.

 

11,021

299,110

 

 

 

 

3,150,024

 

 

 

 

 

 

Commercial Banks - 3.1%

 

 

 

 

Associated Banc-Corp.

 

13,982

153,942

 

BancorpSouth, Inc.

 

8,019

188,126

 

Bank of Hawaii Corp.

 

5,231

246,171

 

Cathay General Bancorp

 

7,075

53,416

 

City National Corp.

 

4,726

215,506

 

Commerce Bancshares, Inc.

 

7,979

308,947

 

Cullen/Frost Bankers, Inc.

 

6,523

326,150

 

FirstMerit Corp.

 

9,388

189,074

 

Fulton Financial Corp.

 

19,264

167,982

 

International Bancshares Corp.

 

5,666

107,257

 

PacWest Bancorp

 

3,318

66,858

 

SVB Financial Group*

 

4,479

186,729

 

Synovus Financial Corp.

 

52,505

107,635

 

TCF Financial Corp.

 

12,222

166,464

 

Trustmark Corp.

 

6,112

137,764

 

Valley National Bancorp

 

16,282

230,065

 

Webster Financial Corp.

 

7,320

86,888

 

Westamerica Bancorporation

 

3,194

176,852

 

Wilmington Trust Corp.

 

7,918

97,708

 

 

 

 

3,213,534

 

 

 

 

 

 

Commercial Services & Supplies - 1.6%

 

 

 

 

Brinks Co.

 

5,233

127,371

 

Clean Harbors, Inc.*

 

2,492

148,548

 

Copart, Inc.*

 

7,356

269,450

 

Corrections Corp. of America*

 

12,586

308,986

 

Deluxe Corp.

 

5,835

86,300

 

Herman Miller, Inc.

 

6,381

101,968

 

HNI Corp.

 

4,917

135,857

 

Mine Safety Appliances Co.

 

3,303

87,629

 

Rollins, Inc.

 

4,957

95,571

 

Waste Connections, Inc.*

 

8,756

291,925

 

 

 

 

1,653,605

 

 

 

 

 

 

Communications Equipment - 1.8%

 

 

 

 

3Com Corp.*

 

42,744

320,580

 

ADC Telecommunications, Inc.*

 

10,545

65,485

 

Adtran, Inc.

 

6,105

137,668

 

Ciena Corp.*

 

10,081

109,278

 

CommScope, Inc.*

 

10,231

271,428

 

F5 Networks, Inc.*

 

8,730

462,515

 

Palm, Inc.*

 

18,208

182,808

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Communications Equipment - Cont'd

 

 

 

 

Plantronics, Inc.

 

5,344

$138,837

 

Polycom, Inc.*

 

9,184

229,325

 

 

 

 

1,917,924

 

 

 

 

 

 

Computers & Peripherals - 0.4%

 

 

 

 

Diebold, Inc.

 

7,239

205,949

 

NCR Corp.*

 

17,368

193,306

 

 

 

 

399,255

 

 

 

 

 

 

Construction & Engineering - 1.4%

 

 

 

 

AECOM Technology Corp.*

 

12,402

341,055

 

Granite Construction, Inc.

 

3,679

123,835

 

KBR, Inc.

 

17,533

333,127

 

Shaw Group, Inc.*

 

9,136

262,660

 

URS Corp.*

 

9,215

410,252

 

 

 

 

1,470,929

 

 

 

 

 

 

Construction Materials - 0.4%

 

 

 

 

Martin Marietta Materials, Inc.

 

4,916

439,540

 

 

 

 

 

 

Consumer Finance - 0.2%

 

 

 

 

AmeriCredit Corp.*

 

10,494

199,806

 

 

 

 

 

 

Containers & Packaging - 1.4%

 

 

 

 

AptarGroup, Inc.

 

7,389

264,083

 

Greif, Inc.

 

3,739

201,831

 

Packaging Corp. of America

 

11,251

258,885

 

Silgan Holdings, Inc.

 

2,950

170,746

 

Sonoco Products Co.

 

10,915

319,264

 

Temple-Inland, Inc.

 

11,642

245,763

 

 

 

 

1,460,572

 

 

 

 

 

 

Distributors - 0.3%

 

 

 

 

LKQ Corp.*

 

15,385

301,392

 

 

 

 

 

 

Diversified Consumer Services - 1.7%

 

 

 

 

Brinks Home Security Holdings, Inc.*

 

5,003

163,298

 

Career Education Corp.*

 

7,540

175,757

 

Corinthian Colleges, Inc.*

 

9,518

131,063

 

ITT Educational Services, Inc.*

 

3,412

327,416

 

Matthews International Corp.

 

3,317

117,521

 

Regis Corp.

 

6,234

97,063

 

Service Corp. International

 

27,435

224,693

 

Sotheby's

 

7,312

164,374

 

Strayer Education, Inc.

 

1,530

325,110

 

 

 

 

1,726,295

 

 

 

 

 

 

Diversified Financial Services - 0.4%

 

 

 

 

MSCI, Inc.*

 

11,396

362,393

 

 

 

 

 

 

Diversified Telecommunication Services - 0.3%

 

 

 

 

Cincinnati Bell, Inc.*

 

22,354

77,121

 

tw telecom, Inc.*

 

16,390

280,925

 

 

 

 

358,046

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Electric Utilities - 1.8%

 

 

 

 

Cleco Corp.

 

6,610

$180,651

 

DPL, Inc.

 

13,190

364,044

 

Great Plains Energy, Inc.

 

14,776

286,507

 

Hawaiian Electric Industries, Inc.

 

10,012

209,251

 

IDACORP, Inc.

 

5,168

165,118

 

NV Energy, Inc.

 

25,644

317,473

 

PNM Resources, Inc.

 

9,545

120,744

 

Westar Energy, Inc.

 

11,898

258,424

 

 

 

 

1,902,212

 

 

 

 

 

 

Electrical Equipment - 1.3%

 

 

 

 

AMETEK, Inc.

 

11,876

454,138

 

Hubbell, Inc., Class B

 

6,506

307,734

 

Regal-Beloit Corp.

 

4,056

210,669

 

Thomas & Betts Corp.*

 

5,777

206,759

 

Woodward Governor Co.

 

6,160

158,743

 

 

 

 

1,338,043

 

 

 

 

 

 

Electronic Equipment & Instruments - 2.3%

 

 

 

 

Arrow Electronics, Inc.*

 

13,076

387,180

 

Avnet, Inc.*

 

16,660

502,466

 

Ingram Micro, Inc.*

 

17,813

310,837

 

Itron, Inc.*

 

4,369

295,213

 

National Instruments Corp.

 

6,194

182,413

 

Tech Data Corp.*

 

5,604

261,483

 

Trimble Navigation Ltd.*

 

13,095

329,994

 

Vishay Intertechnology, Inc.*

 

20,399

170,332

 

 

 

 

2,439,918

 

 

 

 

 

 

Energy Equipment & Services - 2.7%

 

 

 

 

Atwood Oceanics, Inc.*

 

6,228

223,274

 

Exterran Holdings, Inc.*

 

6,830

146,504

 

Helix Energy Solutions Group, Inc.*

 

10,390

122,083

 

Helmerich & Payne, Inc.

 

11,625

463,605

 

Oceaneering International, Inc.*

 

5,997

350,944

 

Patterson-UTI Energy, Inc.

 

16,790

257,726

 

Pride International, Inc.*

 

19,220

613,310

 

Superior Energy Services, Inc.*

 

8,546

207,582

 

Tidewater, Inc.

 

5,650

270,917

 

Unit Corp.*

 

4,415

187,638

 

 

 

 

2,843,583

 

 

 

 

 

 

Food & Staples Retailing - 0.3%

 

 

 

 

BJ's Wholesale Club, Inc.*

 

6,067

198,451

 

Ruddick Corp.

 

4,456

114,653

 

 

 

 

313,104

 

 

 

 

 

 

Food Products - 1.5%

 

 

 

 

Corn Products International, Inc.

 

8,159

238,488

 

Flowers Foods, Inc.

 

8,469

201,223

 

Green Mountain Coffee Roasters, Inc.*

 

3,846

313,334

 

Lancaster Colony Corp.

 

2,120

105,364

 

Ralcorp Holdings, Inc.*

 

6,187

369,426

 

Smithfield Foods, Inc.*

 

15,385

233,698

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Food Products - Cont'd

 

 

 

 

Tootsie Roll Industries, Inc.

 

2,879

$78,827

 

 

 

 

1,540,360

 

 

 

 

 

 

Gas Utilities - 2.3%

 

 

 

 

AGL Resources, Inc.

 

8,447

308,062

 

Atmos Energy Corp.

 

10,086

296,528

 

Energen Corp.

 

7,839

366,865

 

National Fuel Gas Co.

 

8,872

443,600

 

Oneok, Inc.

 

11,618

517,814

 

UGI Corp.

 

11,850

286,652

 

WGL Holdings, Inc.

 

5,479

183,766

 

 

 

 

2,403,287

 

 

 

 

 

 

Health Care Equipment & Supplies - 3.6%

 

 

 

 

Beckman Coulter, Inc.

 

7,635

499,634

 

Edwards Lifesciences Corp.*

 

6,230

541,077

 

Gen-Probe, Inc.*

 

5,406

231,917

 

Hill-Rom Holdings, Inc.

 

6,845

164,212

 

Hologic, Inc.*

 

28,410

411,945

 

IDEXX Laboratories, Inc.*

 

6,405

342,283

 

Immucor, Inc.*

 

7,708

156,010

 

Kinetic Concepts, Inc.*

 

6,756

254,363

 

Masimo Corp.*

 

5,667

172,390

 

ResMed, Inc.*

 

8,257

431,593

 

STERIS Corp.

 

6,405

179,148

 

Teleflex, Inc.

 

4,349

234,368

 

Thoratec Corp.*

 

6,182

166,419

 

 

 

 

3,785,359

 

 

 

 

 

 

Health Care Providers & Services - 3.1%

 

 

 

 

Community Health Systems, Inc.*

 

10,136

360,842

 

Health Management Associates, Inc.*

 

26,998

196,275

 

Health Net, Inc.*

 

11,356

264,481

 

Henry Schein, Inc.*

 

9,965

524,159

 

Kindred Healthcare, Inc.*

 

4,267

78,769

 

LifePoint Hospitals, Inc.*

 

5,989

194,702

 

Lincare Holdings, Inc.*

 

7,417

275,319

 

Omnicare, Inc.

 

13,046

315,452

 

Owens & Minor, Inc.

 

4,567

196,061

 

Psychiatric Solutions, Inc.*

 

6,144

129,884

 

Universal Health Services, Inc., Class B

 

10,734

327,387

 

VCA Antech, Inc.*

 

9,278

231,208

 

WellCare Health Plans, Inc.*

 

4,614

169,611

 

 

 

 

3,264,150

 

 

 

 

 

 

Health Care Technology - 0.6%

 

 

 

 

Cerner Corp.*

 

7,462

615,167

 

 

 

 

 

 

Hotels, Restaurants & Leisure - 1.7%

 

 

 

 

Bob Evans Farms, Inc.

 

3,538

102,425

 

Boyd Gaming Corp.*

 

6,292

52,664

 

Brinker International, Inc.

 

11,164

166,567

 

Cheesecake Factory, Inc.*

 

6,575

141,954

 

Chipotle Mexican Grill, Inc.*

 

3,459

304,945

 

International Speedway Corp.

 

3,355

95,450

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Hotels, Restaurants & Leisure - Cont'd

 

 

 

 

Life Time Fitness, Inc.*

 

4,511

$112,459

 

Panera Bread Co.*

 

3,411

228,435

 

Scientific Games Corp.*

 

7,416

107,903

 

Wendys/Arbys Group, Inc.

 

40,050

187,835

 

WMS Industries, Inc.*

 

5,776

231,040

 

 

 

 

1,731,677

 

 

 

 

 

 

Household Durables - 1.7%

 

 

 

 

American Greetings Corp.

 

4,511

98,295

 

KB Home

 

8,148

111,465

 

MDC Holdings, Inc.

 

4,107

127,481

 

Mohawk Industries, Inc.*

 

6,137

292,121

 

NVR, Inc.*

 

654

464,804

 

Ryland Group, Inc.

 

4,999

98,480

 

Toll Brothers, Inc.*

 

14,989

281,943

 

Tupperware Brands Corp.

 

7,000

325,990

 

 

 

 

1,800,579

 

 

 

 

 

 

Household Products - 0.9%

 

 

 

 

Church & Dwight Co., Inc.

 

7,687

464,679

 

Energizer Holdings, Inc.*

 

7,683

470,814

 

 

 

 

935,493

 

 

 

 

 

 

Independent Power Producers & Energy Traders - 0.1%

 

 

 

 

Dynegy, Inc.*

 

55,558

100,560

 

 

 

 

 

 

Industrial Conglomerates - 0.2%

 

 

 

 

Carlisle Co.'s, Inc.

 

6,695

229,371

 

 

 

 

 

 

Insurance - 4.1%

 

 

 

 

American Financial Group, Inc.

 

8,624

215,169

 

Arthur J. Gallagher & Co.

 

11,061

248,983

 

Brown & Brown, Inc.

 

12,842

230,771

 

Everest Re Group Ltd.

 

6,652

569,943

 

Fidelity National Financial, Inc.

 

25,207

339,286

 

First American Corp.

 

10,960

362,886

 

Hanover Insurance Group, Inc.

 

5,559

246,986

 

HCC Insurance Holdings, Inc.

 

12,275

343,332

 

Horace Mann Educators Corp.

 

4,473

55,913

 

Mercury General Corp.

 

3,893

152,839

 

Old Republic International Corp.

 

26,271

263,761

 

Protective Life Corp.

 

9,354

154,809

 

Reinsurance Group of America, Inc.

 

7,955

379,056

 

StanCorp Financial Group, Inc.

 

5,372

214,987

 

Unitrin, Inc.

 

5,456

120,305

 

WR Berkley Corp.

 

14,871

366,421

 

 

 

 

4,265,447

 

 

 

 

 

 

Internet & Catalog Retail - 0.3%

 

 

 

 

NetFlix, Inc.*

 

4,754

262,136

 

 

 

 

 

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Internet Software & Services - 0.9%

 

 

 

 

AOL, Inc.*

 

11,756

$273,680

 

Digital River, Inc.*

 

4,407

118,945

 

Equinix, Inc.*

 

4,293

455,702

 

ValueClick, Inc.*

 

9,435

95,482

 

 

 

 

943,809

 

 

 

 

 

 

IT Services - 2.8%

 

 

 

 

Acxiom Corp.*

 

8,624

115,734

 

Alliance Data Systems Corp.*

 

5,732

370,230

 

Broadridge Financial Solutions, Inc.

 

15,026

338,987

 

Convergys Corp.*

 

13,543

145,587

 

DST Systems, Inc.*

 

4,296

187,091

 

Gartner, Inc.*

 

6,537

117,927

 

Global Payments, Inc.

 

8,925

480,701

 

Hewitt Associates, Inc.*

 

9,165

387,313

 

Lender Processing Services, Inc.

 

10,508

427,255

 

Mantech International Corp.*

 

2,414

116,548

 

NeuStar, Inc.*

 

8,126

187,223

 

SRA International, Inc.*

 

4,879

93,189

 

 

 

 

2,967,785

 

 

 

 

 

 

Life Sciences - Tools & Services - 1.9%

 

 

 

 

Affymetrix, Inc.*

 

8,062

47,082

 

Bio-Rad Laboratories, Inc.*

 

2,099

202,470

 

Charles River Laboratories International, Inc.*

 

7,205

242,736

 

Covance, Inc.*

 

6,987

381,281

 

Mettler-Toledo International, Inc.*

 

3,689

387,308

 

Pharmaceutical Product Development, Inc.

 

12,914

302,704

 

Techne Corp.

 

4,071

279,108

 

Varian, Inc.*

 

3,160

162,866

 

 

 

 

2,005,555

 

 

 

 

 

 

Machinery - 5.1%

 

 

 

 

AGCO Corp.*

 

10,107

326,860

 

Bucyrus International, Inc.

 

8,212

462,910

 

Crane Co.

 

5,113

156,560

 

Donaldson Co., Inc.

 

8,436

358,867

 

Federal Signal Corp.

 

5,857

35,259

 

Graco, Inc.

 

6,552

187,191

 

Harsco Corp.

 

8,779

282,947

 

IDEX Corp.

 

8,828

274,992

 

Joy Global, Inc.

 

11,269

581,368

 

Kennametal, Inc.

 

8,878

230,118

 

Lincoln Electric Holdings, Inc.

 

4,648

248,482

 

Nordson Corp.

 

3,673

224,714

 

Oshkosh Corp.

 

9,771

361,820

 

Pentair, Inc.

 

10,750

347,225

 

SPX Corp.

 

5,367

293,575

 

Terex Corp.*

 

11,805

233,857

 

Timken Co.

 

8,678

205,755

 

Trinity Industries, Inc.

 

8,663

151,083

 

Valmont Industries, Inc.

 

2,184

171,335

 

Wabtec Corp.

 

5,199

212,327

 

 

 

 

5,347,245

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Marine - 0.3%

 

 

 

 

Alexander & Baldwin, Inc.

 

4,479

$153,316

 

Kirby Corp.*

 

5,877

204,696

 

 

 

 

358,012

 

 

 

 

 

 

Media - 1.1%

 

 

 

 

DreamWorks Animation SKG, Inc.*

 

8,248

329,508

 

Harte-Hanks, Inc.

 

4,355

46,947

 

John Wiley & Sons, Inc.

 

4,677

195,873

 

Lamar Advertising Co.*

 

5,817

180,851

 

Marvel Entertainment, Inc.*

 

5,319

287,651

 

Scholastic Corp.

 

2,904

86,626

 

 

 

 

1,127,456

 

 

 

 

 

 

Metals & Mining - 1.1%

 

 

 

 

Carpenter Technology Corp.

 

4,809

129,602

 

Commercial Metals Co.

 

12,300

192,495

 

Reliance Steel & Aluminum Co.

 

6,991

302,151

 

Steel Dynamics, Inc.

 

23,747

420,797

 

Worthington Industries, Inc.

 

6,657

87,007

 

 

 

 

1,132,052

 

 

 

 

 

 

Multiline Retail - 0.6%

 

 

 

 

99 Cents Only Stores*

 

5,160

67,441

 

Dollar Tree, Inc.*

 

9,771

471,939

 

Saks, Inc.*

 

18,095

118,703

 

 

 

 

658,083

 

 

 

 

 

 

Multi-Utilities - 1.9%

 

 

 

 

Alliant Energy Corp.

 

12,091

365,874

 

Black Hills Corp.

 

4,280

113,976

 

MDU Resources Group, Inc.

 

20,677

487,977

 

NSTAR

 

11,674

429,603

 

OGE Energy Corp.

 

10,555

389,374

 

Vectren Corp.

 

8,864

218,764

 

 

 

 

2,005,568

 

 

 

 

 

 

Office Electronics - 0.2%

 

 

 

 

Zebra Technologies Corp.*

 

6,461

183,234

 

 

 

 

 

 

Oil, Gas & Consumable Fuels - 3.8%

 

 

 

 

Arch Coal, Inc.

 

17,758

395,116

 

Bill Barrett Corp.*

 

4,229

131,564

 

Cimarex Energy Co.

 

9,197

487,165

 

Comstock Resources, Inc.*

 

5,097

206,785

 

Encore Acquisition Co.*

 

6,072

291,577

 

Forest Oil Corp.*

 

12,269

272,985

 

Frontier Oil Corp.

 

11,440

137,738

 

Mariner Energy, Inc.*

 

11,140

129,335

 

Newfield Exploration Co.*

 

14,633

705,750

 

Overseas Shipholding Group, Inc.

 

2,574

113,127

 

Patriot Coal Corp.*

 

8,194

126,679

 

Plains Exploration & Production Co.*

 

15,221

421,013

 

Quicksilver Resources, Inc.*

 

12,946

194,319

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Oil, Gas & Consumable Fuels - Cont'd

 

 

 

 

Southern Union Co.

 

13,557

$307,744

 

 

 

 

3,920,897

 

 

 

 

 

 

Paper & Forest Products - 0.1%

 

 

 

 

Louisiana-Pacific Corp.*

 

13,311

92,911

 

 

 

 

 

 

Personal Products - 0.5%

 

 

 

 

Alberto-Culver Co.

 

9,337

273,481

 

NBTY, Inc.*

 

6,762

294,417

 

 

 

 

567,898

 

 

 

 

 

 

Pharmaceuticals - 1.0%

 

 

 

 

Endo Pharmaceuticals Holdings, Inc.*

 

12,808

262,692

 

Medicis Pharmaceutical Corp.

 

6,551

177,205

 

Perrigo Co.

 

8,860

352,982

 

Valeant Pharmaceuticals International*

 

7,369

234,261

 

 

 

 

1,027,140

 

 

 

 

 

 

Professional Services - 1.3%

 

 

 

 

Corporate Executive Board Co.

 

3,731

85,141

 

FTI Consulting, Inc.*

 

5,654

266,643

 

Korn/Ferry International*

 

4,985

82,253

 

Manpower, Inc.

 

8,568

467,641

 

MPS Group, Inc.*

 

10,181

139,887

 

Navigant Consulting, Inc.*

 

5,530

82,176

 

Watson Wyatt Worldwide, Inc.*

 

4,664

221,633

 

 

 

 

1,345,374

 

 

 

 

 

 

Real Estate Investment Trusts - 6.9%

 

 

 

 

Alexandria Real Estate Equities, Inc.

 

4,865

312,771

 

AMB Property Corp.

 

15,985

408,417

 

BRE Properties, Inc.

 

5,985

197,984

 

Camden Property Trust

 

7,007

296,887

 

Corporate Office Properties Trust

 

6,342

232,307

 

Cousins Properties, Inc.

 

11,099

84,685

 

Duke Realty Corp.

 

24,480

297,922

 

Equity One, Inc.

 

3,861

62,432

 

Essex Property Trust, Inc.

 

3,207

268,266

 

Federal Realty Investment Trust

 

6,687

452,844

 

Highwoods Properties, Inc.

 

7,745

258,296

 

Hospitality Properties Trust

 

13,588

322,171

 

Liberty Property Trust

 

12,402

396,988

 

Macerich Co.

 

10,748

386,391

 

Mack-Cali Realty Corp.

 

8,562

295,988

 

Nationwide Health Properties, Inc.

 

12,267

431,553

 

Omega Healthcare Investors, Inc.

 

9,374

182,324

 

Potlatch Corp.

 

4,345

138,519

 

Rayonier, Inc.

 

8,751

368,942

 

Realty Income Corp.

 

11,398

295,322

 

Regency Centers Corp.

 

8,776

307,687

 

Senior Housing Properties Trust

 

14,028

306,792

 

SL Green Realty Corp.

 

8,505

427,291

 

UDR, Inc.

 

16,830

276,685

 

Weingarten Realty Investors

 

11,391

225,428

 

 

 

 

7,234,892

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Real Estate Management & Development - 0.3%

 

 

 

 

Jones Lang LaSalle, Inc.

 

4,567

$275,847

 

 

 

 

 

 

Road & Rail - 1.1%

 

 

 

 

Con-way, Inc.

 

5,359

187,083

 

JB Hunt Transport Services, Inc.

 

9,564

308,630

 

Kansas City Southern*

 

10,573

351,975

 

Landstar System, Inc.

 

5,609

217,461

 

Werner Enterprises, Inc.

 

4,786

94,715

 

 

 

 

1,159,864

 

 

 

 

 

 

Semiconductors & Semiconductor Equipment - 2.4%

 

 

 

 

Atmel Corp.*

 

49,307

227,305

 

Cree, Inc.*

 

11,413

643,351

 

Fairchild Semiconductor International, Inc.*

 

13,529

135,155

 

Integrated Device Technology, Inc.*

 

18,902

122,296

 

International Rectifier Corp.*

 

7,784

172,182

 

Intersil Corp.

 

13,377

205,203

 

Lam Research Corp.*

 

14,014

549,489

 

RF Micro Devices, Inc.*

 

29,195

139,260

 

Semtech Corp.*

 

6,716

114,239

 

Silicon Laboratories, Inc.*

 

5,030

243,150

 

 

 

 

2,551,630

 

 

 

 

 

 

Software - 3.5%

 

 

 

 

ACI Worldwide, Inc.*

 

3,884

66,611

 

Advent Software, Inc.*

 

1,776

72,336

 

ANSYS, Inc.*

 

9,769

424,561

 

Cadence Design Systems, Inc.*

 

29,068

174,117

 

FactSet Research Systems, Inc.

 

4,587

302,146

 

Fair Isaac Corp.

 

5,306

113,071

 

Informatica Corp.*

 

9,851

254,747

 

Jack Henry & Associates, Inc.

 

9,203

212,773

 

Mentor Graphics Corp.*

 

10,728

94,728

 

MICROS Systems, Inc.*

 

8,741

271,233

 

Parametric Technology Corp.*

 

12,983

212,142

 

Quest Software, Inc.*

 

6,649

122,342

 

Rovi Corp.*

 

11,349

361,693

 

Solera Holdings, Inc.

 

7,604

273,820

 

Sybase, Inc.*

 

8,979

389,689

 

Synopsys, Inc.*

 

15,937

355,076

 

 

 

 

3,701,085

 

 

 

 

 

 

Specialty Retail - 4.5%

 

 

 

 

Aaron's, Inc.

 

5,929

164,411

 

Advance Auto Parts, Inc.

 

10,433

422,328

 

Aeropostale, Inc.*

 

7,342

249,995

 

American Eagle Outfitters, Inc.

 

22,673

384,988

 

AnnTaylor Stores Corp.*

 

6,704

91,443

 

Barnes & Noble, Inc.

 

4,464

85,128

 

Carmax, Inc.*

 

24,430

592,428

 

Chicos FAS, Inc.*

 

19,440

273,132

 

Coldwater Creek, Inc.*

 

6,781

30,243

 

Collective Brands, Inc.*

 

7,005

159,504

 

Dicks Sporting Goods, Inc.*

 

9,844

244,820

 

Foot Locker, Inc.

 

17,088

190,360

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Specialty Retail - Cont'd

 

 

 

 

Guess?, Inc.

 

6,343

$268,309

 

J Crew Group, Inc.*

 

6,081

272,064

 

PetSmart, Inc.

 

13,670

364,852

 

Rent-A-Center, Inc.*

 

7,219

127,921

 

Urban Outfitters, Inc.*

 

14,167

495,703

 

Williams-Sonoma, Inc.

 

11,556

240,134

 

 

 

 

4,657,763

 

 

 

 

 

 

Textiles, Apparel & Luxury Goods - 1.0%

 

 

 

 

Fossil, Inc.*

 

5,247

176,089

 

Hanesbrands, Inc.*

 

10,355

249,659

 

Phillips-Van Heusen Corp.

 

5,645

229,639

 

Timberland Co.*

 

4,876

87,427

 

Under Armour, Inc.*

 

4,098

111,752

 

Warnaco Group, Inc.*

 

4,962

209,347

 

 

 

 

1,063,913

 

 

 

 

 

 

Thrifts & Mortgage Finance - 1.4%

 

 

 

 

Astoria Financial Corp.

 

9,307

115,686

 

First Niagara Financial Group, Inc.

 

20,727

288,313

 

New York Community Bancorp, Inc.

 

45,797

664,514

 

NewAlliance Bancshares, Inc.

 

11,682

140,301

 

Washington Federal, Inc.

 

12,364

239,120

 

 

 

 

1,447,934

 

 

 

 

 

 

Tobacco - 0.1%

 

 

 

 

Universal Corp.

 

2,713

123,740

 

 

 

 

 

 

 

 

 

 

 

Trading Companies & Distributors - 0.4%

 

 

 

 

GATX Corp.

 

5,023

144,411

 

MSC Industrial Direct Co.

 

4,790

225,130

 

United Rentals, Inc.*

 

6,865

67,346

 

 

 

 

436,887

 

 

 

 

 

 

Water Utilities - 0.3%

 

 

 

 

Aqua America, Inc.

 

14,856

260,129

 

 

 

 

 

 

 

 

 

 

 

Wireless Telecommunication Services - 0.5%

 

 

 

 

Syniverse Holdings, Inc.*

 

7,516

131,380

 

Telephone & Data Systems, Inc.

 

10,383

352,191

 

 

 

 

483,571

 

 

 

 

 

 

     Total Equity Securities (Cost $99,438,376)

 

 

99,286,167

 

 

 

 

 

 

 

 

 

 

 

Exchange Traded Funds - 0.6%

 

 

 

 

Midcap SPDR Trust Series 1

 

4,900

645,624

 

 

 

 

 

 

     Total Exchange Traded Funds (Cost $645,886)

 

 

645,624

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

 

 

Time Deposit - 3.9%

 

Amount

Value

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

$4,040,552

$4,040,552

 

 

 

 

 

 

     Total Time Deposit (Cost $4,040,552)

 

 

4,040,552

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury - 0.4%

 

 

 

 

United States Treasury Bills, 2/11/10^

 

400,000

399,938

 

 

 

 

 

 

     Total U.S. Treasury (Cost $399,938)

 

 

399,938

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $104,524,752) - 100.0%

 

 

104,372,281

 

          Other assets and liabilities, net - 0.0%

 

 

(24,455)

 

          NET ASSETS - 100%

 

 

$104,347,826

 

 

 

 

 

 

 

 

 

 

 

Net Assets Consist of:

 

 

 

 

Paid-in capital applicable to the following shares of common stock outstanding;

 

 

 

 

     $0.10 per value, 20,000,000 shares authorized:

 

 

 

 

          Class I: 1,899,442

 

 

$115,459,542

 

          Class F: 9,495

 

 

438,623

 

Undistributed net investment income

 

 

311,012

 

Accumulated net realized gain (loss) on investments

 

 

(11,848,412)

 

Net unrealized appreciation (depreciation) on investments

 

 

(12,939)

 

 

 

 

 

 

          Net Assets

 

 

$104,347,826

 

 

 

 

 

 

Net Asset Value Per Share:

 

 

 

 

Class I: (based on net assets of $103,824,681)

 

 

$54.66

 

Class F: (based on net assets of $523,145)

 

 

$55.10

 

 

Futures

Number Of
Contracts

Expiration
Date

Underlying
Face Amount
At Value

Unrealized
Appreciation
(Depreciation)

Purchased:

 

 

 

 

     E-Mini S&P MidCap 400 Index^

63

3/10

$4,566,870

$139,532

 

(b) This security was valued by the Board of Directors. See note A.

^ Futures collateralized by 400,000 units of U.S. Treasury Bills.

* Non-income producing security.

Abbreviations:

LLC: Limited Liability Corporation

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income

$1,633,487

     Interest income

125

          Total investment income

1,633,612

 

 

Expenses:

 

     Investment advisory fee

272,987

     Transfer agent fees and expenses

19,909

     Administrative fees

90,996

     Distribution plan expenses:

 

          Class F

727

     Directors' fees and expenses

14,298

     Custodian fees

42,042

     Reports to shareholders

18,150

     Professional fees

25,271

     Accounting fees

12,095

     Miscellaneous

25,876

          Total expenses

522,351

          Reimbursement from Advisor:

 

               Class I

(16,885)

               Class F

(4,052)

     Fees paid indirectly

(67)

          Net expenses

501,347

 

 

               Net Investment Income

1,132,265

 

 

 

 

Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) on:

 

     Investments

549,871

     Futures

135,066

 

684,937

 

 

Change in unrealized appreciation (depreciation) on:

 

     Investments

27,503,568

     Futures

1,778

 

27,505,346

 

 

               Net Realized and Unrealized Gain

 

                (Loss)

28,190,283

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$29,322,548

 

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$1,132,265

$1,818,988

     Net realized gain (loss)

684,937

(12,128,233)

     Change in unrealized appreciation or (depreciation)

27,505,346

(50,236,462)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

29,322,548

(60,545,707)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income:

 

 

          Class I shares

(808,995)

(2,853,958)

          Class F shares

(2,174)

(739)

     Net realized gain:

 

 

          Class I shares

--

(11,824,562)

          Class F shares

--

(1,281)

               Total distributions

(811,169)

(14,680,540)

 

 

 

Capital share transactions:

 

 

     Shares sold:

 

 

          Class I shares

10,586,679

18,892,154

          Class F shares

440,988

212,505

     Reinvestment of distributions:

 

 

          Class I shares

808,993

14,678,521

          Class F shares

2,174

2,020

     Shares redeemed:

 

 

          Class I shares

(20,604,871)

(45,958,150)

          Class F shares

(166,966)

(53,098)

               Total capital share transactions

(8,933,003)

(12,226,048)

 

 

 

Total Increase (Decrease) In Net Assets

19,578,376

(87,452,295)

 

 

 

Net Assets

 

 

Beginning of year

84,769,450

172,221,745

End of year (including undistributed net investment income

 

 

     of $311,012 and $131,531 respectively)

$104,347,826

$84,769,450

 

 

 

Capital Share Activity

 

 

     Shares sold:

 

 

          Class I shares

241,201

322,460

          Class F shares

10,071

3,807

     Reinvestment of distributions:

 

 

          Class I shares

14,611

256,407

          Class F shares

39

38

     Shares redeemed:

 

 

          Class I shares

(452,512)

(919,042)

          Class F shares

(3,176)

(1,299)

               Total capital share activity

(189,766)

(337,629)

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit S&P MidCap 400 Index Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio offers Class I and Class F shares. Class F shares are subject to Distribution Plan Expenses. Each class has different: (a) dividend rates, due to differences in Distribution Plan expenses and other class-specific expenses, (b) exchange privileges; and (c) class-specific voting rights.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Short-term notes are stated at amortized cost, which approximates fair value. The Portfolio may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, securities valued at $10, or 0.0% of net assets were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Equity securities**

$99,286,157

--

$10

$99,286,167

Exchange traded funds

645,624

--

--

645,624

U.S. government obligations

--

$399,938

--

399,938

Other debt obligations

--

4,040,552

--

4,040,552

TOTAL

$99,931,781

$4,440,490

$10*

$104,372,281

 

 

 

 

 

Other financial instruments***

$139,532

--

--

$139,532

* Level 3 securities represent 0.0% of net assets.

** For further breakdown of equity securities by industry type, please refer to the Statement of Net Assets.

***Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument

Futures Contracts: The Portfolio may purchase and sell futures contracts, but only when, in the judgment of the Advisor, such a position acts as a hedge. The Portfolio may not enter into futures contracts for the purpose of speculation or leverage. These futures contracts may include, but are not limited to, market index futures contracts. The Portfolio is subject to market risk in the normal course of pursuing its investment objectives. The Portfolio may use futures contracts to hedge against changes in the value of securities. The Portfolio may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Portfolio's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms. Futures contracts are designed by boards of trade which are designated "contracts markets" by the Commodities Futures Trading Commission. Futures contracts trade on the contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee the futures contracts against default. As a result, there is minimal counterparty credit risk to the Portfolio.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Investment income and realized and unrealized gains and losses are allocated to separate classes of shares based upon the relative net assets of each class. Expenses arising in connection with a class are charged directly to that class. Expenses common to the classes are allocated to each class in proportion to their relative net assets. Withholding taxes on foreign dividends have been provided for in accordance with the Portfolio's understanding of the applicable country's tax rules and rates.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements

In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .30% of the Portfolio's average daily net assets. Under the terms of the agreement, $26,301 was payable at year end. In addition, $16,171 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is .55% and .79% for Class I and Class F, respectively. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $8,767 was payable at year end.

Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Portfolio. Distribution plans, adopted by Class F shares, allow the Portfolio to pay the distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed 0.20% annually of average daily net assets of Class F. Under the terms of the agreement, $101 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $199 for the year ended December 31, 2009. Under the terms of the agreement, $16 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $14,038,884 and $24,002,152.

Capital Loss Carryforward

Expiration Date

31-Dec-16

$11,276,152

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from:

 

2009

2008

Ordinary income

 

$811,169

$3,307,172

Long term capital gain

 

--

11,373,368

          Total

 

$811,169

$14,680,540

As of December 31, 2009, the tax basis components of distributable earnings / (accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$15,695,049

Unrealized (depreciation)               

(16,280,248)

Net unrealized appreciation/(depreciation)     

($585,199)

Undistributed ordinary income

$311,012

Capital loss carryforward     

($11,276,152)

Federal income tax cost of investments     

$104,957,480

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales, real estate investment trusts, return of capital distributions and Section 1256 contracts.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to real estate investment trusts and litigation settlements.

Undistributed net investment income

($141,615)

Accumulated net realized gain (loss)

141,615

Note D -- Line Of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no loans outstanding pursuant to this line of credit at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

AVERAGE
DAILY
BALANCE

WEIGHTED
AVERAGE
INTEREST
RATE

MAXIMUM
AMOUNT
BORROWED

MONTH OF
MAXIMUM
AMOUNT
BORROWED

 

$6,812

1.45%

$183,212

November 2009

 

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 99.9% of the ordinary dividends paid during the year or the maximum amount allowable but not less than the aforementioned percentage as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

Class I Shares

2009

2008 (z)

2007

Net asset value, beginning

$40.39

$70.69

$69.23

Income from investment operations

 

 

 

     Net investment income

.60

.72

.67

     Net realized and unrealized gain (loss)

14.10

(24.89)

4.44

          Total from investment operations

14.70

(24.17)

5.11

Distributions from

 

 

 

     Net investment income

(.43)

(1.26)

(.66)

     Net realized gain

--

(4.87)

(2.99)

          Total distributions

(.43)

(6.13)

(3.65)

Total increase (decrease) in net asset value

14.27

(30.30)

1.46

Net asset value, ending

$54.66

$40.39

$70.69

 

 

 

 

Total return*

36.38%

(36.63%)

7.38%

Ratios to average net assets: A

 

 

 

     Net investment income

1.25%

1.27%

1.11%

     Total expenses

.57%

.55%

.52%

     Expenses before offsets

.55%

.55%

.52%

     Net expenses

.55%

.55%

.52%

Portfolio turnover

16%

22%

23%

Net assets, ending (in thousands)

$103,825

$84,665

$172,221

 

 

 

 

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

Class I Shares

2006

2005

 

Net asset value, beginning

$66.08

$60.76

 

Income from investment operations

 

 

 

     Net investment income

.67

.52

 

     Net realized and unrealized gain (loss)

5.64

6.50

 

          Total from investment operations

6.31

7.02

 

Distributions from

 

 

 

     Net investment income

(.59)

(.33)

 

     Net realized gain

(2.57)

(1.37)

 

          Total distributions

(3.16)

(1.70)

 

Total increase (decrease) in net asset value

3.15

5.32

 

Net asset value, ending

$69.23

$66.08

 

 

 

 

 

Total return*

9.72%

11.94%

 

Ratios to average net assets: A

 

 

 

     Net investment income

1.15%

.91%

 

     Total expenses

.52%

.54%

 

     Expenses before offsets

.52%

.54%

 

     Net expenses

.52%

.54%

 

Portfolio turnover

14%

19%

 

Net assets, ending (in thousands)

$144,136

$127,372

 

 

 

 

 

 

 

 

 

See notes to financial highlights.

 

 

 

 

 

 

 

 

 

 

 

Financial Highlights

 

 

 

 

 

 

 

 

 

Periods Ended

 

 

December 31,

December 31,

December 31,

Class F Shares

2009

2008 (z)

2007^

Net asset value, beginning

$40.65

$70.66

$73.77

Income from investment operations

 

 

 

     Net investment income

.43

.66

.16

     Net realized and unrealized gain (loss)

14.25

(24.90)

(3.27)

          Total from investment operations

14.68

(24.24)

(3.11)

Distributions from

 

 

 

     Net investment income

(.23)

(.90)

--

     Net realized gain

--

(4.87)

--

          Total distributions

(.23)

(5.77)

--

Total increase (decrease) in net asset value

14.45

(30.01)

(3.11)

Net asset value, ending

$55.10

$40.65

$70.66

 

 

 

 

Total return*

36.12%

(36.76%)

(4.21%)

Ratios to average net assets: A

 

 

 

     Net investment income

.98%

1.26%

.89% (a)

     Total expenses

1.90%

.79%

.71% (a)

     Expenses before offsets

.79%

.78%

.71% (a)

     Net expenses

.79%

.78%

.71% (a)

Portfolio turnover

16%

22%

23%

Net assets, ending (in thousands)

$523

$104

$1

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

(a) Annualized.

* Total return is not annualized for periods less than one year.

^ From October 1, 2007 inception.

(z) Per share figures calculated using the Average Share Method.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory Contracts

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed below the median of its peer group for the one- and five-year periods ended June 30, 2009, and performed above the median of its peer universe for the three-year period ended June 30, 2009. The data also indicated that the Portfolio above its Lipper index for the one-, three- and five-year periods ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance. Based upon its review, the Board concluded that the Portfolio's performance was being addressed.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was above the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the relatively small range in total expense ratios among the funds in the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. In addition, the Board considered the subadvisory fee paid to the Subadvisor by the Advisor in comparison to fees paid by similar institutional clients. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

 

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is being addressed; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit Balanced
Index Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments

A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

24

Statement of Operations

25

Statements of Changes in Net Assets

26

Notes to Financial Statements

32

Financial Highlights

34

Explanation of Financial Tables

35

Proxy Voting

36

Availability of Quarterly Portfolio Holdings

36

Basis for Boards Approval of Investment Advisory Contracts

40

Director and Officer Information Table

 

Summit Balanced Index Portfolio

Managed by Summit Investment Partners, Inc.

 

Performance

For the year ended December 31, 2009, Summit Balanced Index Portfolio returned 18.41% compared to 26.46% for the Standard & Poor's (S&P) 500 Index, its benchmark. For context, a composite index, which is comprised of 60% S&P 500 Index and 40% Barclays Capital Aggregate Bond Index, returned 18.25% for the period. While the Portfolio underperformed the S&P 500 benchmark due to its fixed-income allocation, it outperformed the composite primarily because of its slightly overweight position in equities throughout the year. Also, the fixed-income portion of the portfolio delivered strong returns relative to the fixed-income benchmark.

 

Summit Balanced Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

18.41%

Five year

2.61%

Ten year

1.89%

* Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

** In December 2009 the Portfolio changed its broad-based benchmark in order to adopt an index that is not blended. The Portfolio also continues to show the Summit Balanced Composite because it is more consistent with the Portfolio's construction process and represents a more accurate reflection of the Portfolio's anticipated risk and return patterns.

*** 60% S&P 500 Index and 40% Barclays Capital Aggregate Bond Index.

The performance data shown represents past performance, and does not guarantee future results.The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

Investment Climate

Economic and market performance in early 2009 closely resembled performance in late 2008. Equity markets were weak. Fixed-income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

Fixed-income markets opened up for both investment-grade and high-yield issuers, which was critical in breaking the credit crunch that began in 2008. Bond investments provided a wide range of returns during 2009. The corporate bond sector produced a return of 18.68% for the year, while the U.S. Treasury sector returned -3.57%. Mortgage-backed securities returned 5.89% as the government launched a trillion dollar purchase program to support that market. In general, riskier assets performed well, while lower-risk assets lagged. This was a complete reversal from 2008, when riskier assets were shed by investors and delivered strongly negative returns.

After posting negative returns during the first few months of the year, equity markets rallied. As liquidity and risk-taking returned to the marketplace, a more positive economic outlook prevailed and share prices moved higher.

Portfolio Strategy

As an index fund, the Portfolio's strategy is purely passive. Its goal is to mirror, as closely as possible, the performance of a portfolio comprised of 60% S&P 500 Index and 40% Barclays Capital Aggregate Bond Index. When target weightings change significantly, the Portfolio is rebalanced.

The Portfolio relies on full replication to track the performance of the S&P 500 Index, although market shifts and portfolio cash flows may cause it to have slightly different weightings than the Index. Full replication of the Barclays Capital Aggregate Bond Index is not feasible, as the Index includes more than 8,400 securities. Therefore, the Portfolio employs stratified sampling to track performance of the Index. Stratified sampling requires the portfolio manager to select securities in each sector of the marketplace to represent sectors in the Index.

Asset Allocation
(at 12.31.09)

% of Total Investments

Equity Investments

57%

Fixed Income Investments

40%

Time Deposit

3%

Total

100%

Outlook

During 2010, we expect to see modest economic growth in the United States and throughout the world, and improved corporate earnings. We anticipate that the recovery will remain modest as many challenges remain. Unemployment is above 10%, creating slack in the American economy. Consumers continue to reduce debt and limit spending. Many financial institutions have not yet addressed problem assets on their books, which will become problematic if the commercial real estate market experiences weakness as the year unfolds. Finally, the Federal Reserve (Fed) will have to drain liquidity from the system at some point. The Fed's timing and the magnitude of its actions will significantly influence economic and market performance.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,144.70

$3.24

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,022.18

$3.06

 

*  Expenses are equal to the Fund's annualized expense ratio of 0.60%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Balanced Index Portfolio:

We have audited the accompanying statement of net assets of the Summit Balanced Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Balanced Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

Equity Securities - 57.3%

 

Shares

Value

 

Aerospace & Defense - 1.6%

 

 

 

 

Boeing Co.

 

656

$35,509

 

General Dynamics Corp.

 

348

23,723

 

Goodrich Corp.

 

122

7,839

 

Honeywell International, Inc.

 

679

26,617

 

ITT Corp.

 

165

8,207

 

L-3 Communications Holdings, Inc.

 

115

9,999

 

Lockheed Martin Corp.

 

292

22,002

 

Northrop Grumman Corp.

 

288

16,085

 

Precision Castparts Corp.

 

127

14,014

 

Raytheon Co.

 

352

18,135

 

Rockwell Collins, Inc.

 

155

8,581

 

United Technologies Corp.

 

850

58,999

 

 

 

 

249,710

 

 

 

 

 

 

Air Freight & Logistics - 0.6%

 

 

 

 

C.H. Robinson Worldwide, Inc.

 

165

9,691

 

Expeditors International of Washington, Inc.

 

192

6,668

 

FedEx Corp.

 

282

23,533

 

United Parcel Service, Inc., Class B

 

898

51,518

 

 

 

 

91,410

 

 

 

 

 

 

Airlines - 0.0%

 

 

 

 

Southwest Airlines Co.

 

670

7,658

 

 

 

 

 

 

Auto Components - 0.1%

 

 

 

 

Goodyear Tire & Rubber Co.*

 

263

3,708

 

Johnson Controls, Inc.

 

584

15,908

 

 

 

 

19,616

 

 

 

 

 

 

Automobiles - 0.2%

 

 

 

 

Ford Motor Co.*

 

2,909

29,090

 

Harley-Davidson, Inc.

 

212

5,342

 

 

 

 

34,432

 

 

 

 

 

 

Beverages - 1.5%

 

 

 

 

Brown-Forman Corp., Class B

 

115

6,160

 

Coca-Cola Co.

 

2,105

119,985

 

Coca-Cola Enterprises, Inc.

 

287

6,084

 

Constellation Brands, Inc.*

 

225

3,584

 

Dr Pepper Snapple Group, Inc.

 

230

6,509

 

Molson Coors Brewing Co., Class B

 

154

6,955

 

Pepsi Bottling Group, Inc.

 

148

5,550

 

PepsiCo, Inc.

 

1,407

85,546

 

 

 

 

240,373

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Biotechnology - 0.9%

 

 

 

 

Amgen, Inc.*

 

918

$51,931

 

Biogen Idec, Inc.*

 

261

13,964

 

Celgene Corp.*

 

415

23,107

 

Cephalon, Inc.*

 

82

5,118

 

Genzyme Corp.*

 

245

12,007

 

Gilead Sciences, Inc.*

 

817

35,360

 

 

 

 

141,487

 

 

 

 

 

 

Building Products - 0.0%

 

 

 

 

Masco Corp.

 

325

4,488

 

 

 

 

 

 

Capital Markets - 1.6%

 

 

 

 

Ameriprise Financial, Inc.

 

247

9,589

 

Bank of New York Mellon Corp.

 

1,086

30,375

 

Charles Schwab Corp.

 

860

16,185

 

E*Trade Financial Corp.*

 

1,407

2,462

 

Federated Investors, Inc., Class B

 

103

2,834

 

Franklin Resources, Inc.

 

136

14,328

 

Goldman Sachs Group, Inc.

 

462

78,004

 

Invesco Ltd.

 

408

9,584

 

Janus Capital Group, Inc.

 

163

2,192

 

Legg Mason, Inc.

 

153

4,614

 

Morgan Stanley

 

1,228

36,349

 

Northern Trust Corp.

 

218

11,423

 

State Street Corp.

 

447

19,462

 

T. Rowe Price Group, Inc.

 

232

12,354

 

 

 

 

249,755

 

 

 

 

 

 

Chemicals - 1.1%

 

 

 

 

Air Products & Chemicals, Inc.

 

190

15,401

 

Airgas, Inc.

 

85

4,046

 

CF Industries Holdings, Inc.

 

48

4,357

 

Dow Chemical Co.

 

1,033

28,542

 

Eastman Chemical Co.

 

78

4,699

 

Ecolab, Inc.

 

214

9,540

 

EI Du Pont de Nemours & Co.

 

816

27,475

 

FMC Corp.

 

75

4,182

 

International Flavors & Fragrances, Inc.

 

91

3,744

 

Monsanto Co.

 

493

40,303

 

PPG Industries, Inc.

 

149

8,722

 

Praxair, Inc.

 

277

22,246

 

Sigma-Aldrich Corp.

 

120

6,064

 

 

 

 

179,321

 

 

 

 

 

 

Commercial Banks - 1.5%

 

 

 

 

BB&T Corp.

 

616

15,628

 

Comerica, Inc.

 

161

4,761

 

Fifth Third Bancorp

 

780

7,605

 

First Horizon National Corp.*

 

201

2,694

 

Huntington Bancshares, Inc.

 

388

1,416

 

KeyCorp

 

798

4,429

 

M&T Bank Corp.

 

75

5,017

 

Marshall & Ilsley Corp.

 

300

1,635

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Commercial Banks - Cont'd

 

 

 

 

PNC Financial Services Group, Inc.

 

417

$22,013

 

Regions Financial Corp.

 

1,164

6,157

 

SunTrust Banks, Inc.

 

427

8,664

 

US Bancorp

 

1,727

38,875

 

Wells Fargo & Co.

 

4,643

125,315

 

Zions Bancorporation

 

115

1,475

 

 

 

 

245,684

 

 

 

 

 

 

Commercial Services & Supplies - 0.3%

 

 

 

 

Avery Dennison Corp.

 

102

3,722

 

Cintas Corp.

 

144

3,751

 

Iron Mountain, Inc.*

 

163

3,710

 

Pitney Bowes, Inc.

 

203

4,620

 

Republic Services, Inc.

 

291

8,238

 

RR Donnelley & Sons Co.

 

202

4,499

 

Stericycle, Inc.*

 

77

4,248

 

Waste Management, Inc.

 

445

15,046

 

 

 

 

47,834

 

 

 

 

 

 

Communications Equipment - 1.5%

 

 

 

 

Cisco Systems, Inc.*

 

5,226

125,110

 

Harris Corp.

 

129

6,134

 

JDS Uniphase Corp.*

 

278

2,294

 

Juniper Networks, Inc.*

 

474

12,642

 

Motorola, Inc.*

 

2,073

16,086

 

QUALCOMM, Inc.

 

1,501

69,436

 

Tellabs, Inc.*

 

389

2,210

 

 

 

 

233,912

 

 

 

 

 

 

Computers & Peripherals - 3.4%

 

 

 

 

Apple, Inc.*

 

819

172,694

 

Dell, Inc.*

 

1,554

22,315

 

EMC Corp.*

 

1,826

31,900

 

Hewlett-Packard Co.

 

2,171

111,828

 

International Business Machines Corp.

 

1,199

156,949

 

Lexmark International, Inc.*

 

101

2,624

 

NetApp, Inc.*

 

330

11,349

 

QLogic Corp.*

 

139

2,623

 

SanDisk Corp.*

 

205

5,943

 

Sun Microsystems, Inc.*

 

767

7,187

 

Teradata Corp.*

 

178

5,595

 

Western Digital Corp.*

 

203

8,963

 

 

 

 

539,970

 

 

 

 

 

 

Construction & Engineering - 0.1%

 

 

 

 

Fluor Corp.

 

177

7,972

 

Jacobs Engineering Group, Inc.*

 

122

4,588

 

Quanta Services, Inc.*

 

220

4,585

 

 

 

 

17,145

 

 

 

 

 

 

Construction Materials - 0.0%

 

 

 

 

Vulcan Materials Co.

 

113

5,952

 

 

 

 

 

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Consumer Finance - 0.5%

 

 

 

 

American Express Co.

 

1,074

$43,518

 

Capital One Financial Corp.

 

411

15,758

 

Discover Financial Services

 

508

7,473

 

SLM Corp.*

 

473

5,331

 

 

 

 

72,080

 

 

 

 

 

 

Containers & Packaging - 0.1%

 

 

 

 

Ball Corp.

 

93

4,808

 

Bemis Co., Inc.

 

122

3,617

 

Owens-Illinois, Inc.*

 

153

5,029

 

Pactiv Corp.*

 

139

3,356

 

Sealed Air Corp.

 

156

3,410

 

 

 

 

20,220

 

 

 

 

 

 

Distributors - 0.0%

 

 

 

 

Genuine Parts Co.

 

157

5,960

 

 

 

 

 

 

Diversified Consumer Services - 0.1%

 

 

 

 

Apollo Group, Inc.*

 

111

6,724

 

DeVry, Inc.

 

70

3,971

 

H&R Block, Inc.

 

329

7,442

 

 

 

 

18,137

 

 

 

 

 

 

Diversified Financial Services - 2.5%

 

 

 

 

Bank of America Corp.

 

9,081

136,760

 

Citigroup, Inc.

 

17,714

58,633

 

CME Group, Inc.

 

60

20,157

 

IntercontinentalExchange, Inc.*

 

75

8,422

 

JPMorgan Chase & Co.

 

3,601

150,054

 

Leucadia National Corp.*

 

195

4,639

 

Moody's Corp.

 

193

5,172

 

NYSE Euronext

 

235

5,946

 

The NASDAQ OMX Group, Inc.*

 

147

2,914

 

 

 

 

392,697

 

 

 

 

 

 

Diversified Telecommunication Services - 1.6%

 

 

 

 

AT&T, Inc.

 

5,411

151,670

 

CenturyTel, Inc.

 

292

10,573

 

Frontier Communications Corp.

 

306

2,390

 

Qwest Communications International, Inc.

 

1,522

6,408

 

Verizon Communications, Inc.

 

2,565

84,978

 

Windstream Corp.

 

428

4,704

 

 

 

 

260,723

 

 

 

 

 

 

Electric Utilities - 1.1%

 

 

 

 

Allegheny Energy, Inc.

 

167

3,921

 

American Electric Power Co., Inc.

 

431

14,994

 

Duke Energy Corp.

 

1,171

20,153

 

Edison International

 

295

10,260

 

Entergy Corp.

 

177

14,486

 

Exelon Corp.

 

596

29,127

 

FirstEnergy Corp.

 

276

12,820

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Electric Utilities - Cont'd

 

 

 

 

FPL Group, Inc.

 

372

$19,649

 

Northeast Utilities

 

172

4,436

 

Pepco Holdings, Inc.

 

200

3,370

 

Pinnacle West Capital Corp.

 

92

3,365

 

PPL Corp.

 

340

10,985

 

Progress Energy, Inc.

 

253

10,376

 

Southern Co.

 

719

23,957

 

 

 

 

181,899

 

 

 

 

 

 

Electrical Equipment - 0.3%

 

 

 

 

Emerson Electric Co.

 

679

28,925

 

First Solar, Inc.*

 

50

6,770

 

Rockwell Automation, Inc.

 

140

6,577

 

Roper Industries, Inc.

 

85

4,452

 

 

 

 

46,724

 

 

 

 

 

 

Electronic Equipment & Instruments - 0.4%

 

 

 

 

Agilent Technologies, Inc.*

 

339

10,533

 

Amphenol Corp.

 

168

7,758

 

Corning, Inc.

 

1,404

27,111

 

FLIR Systems, Inc.*

 

149

4,875

 

Jabil Circuit, Inc.

 

208

3,613

 

Molex, Inc.

 

134

2,888

 

 

 

 

56,778

 

 

 

 

 

 

Energy Equipment & Services - 1.0%

 

 

 

 

Baker Hughes, Inc.

 

280

11,334

 

BJ Services Co.

 

287

5,338

 

Cameron International Corp.*

 

199

8,318

 

Diamond Offshore Drilling, Inc.

 

63

6,201

 

FMC Technologies, Inc.*

 

111

6,420

 

Halliburton Co.

 

815

24,523

 

Nabors Industries Ltd.*

 

257

5,626

 

National Oilwell Varco, Inc.

 

378

16,666

 

Rowan Co.'s, Inc.*

 

129

2,921

 

Schlumberger Ltd.

 

1,082

70,427

 

Smith International, Inc.

 

226

6,141

 

 

 

 

163,915

 

 

 

 

 

 

Food & Staples Retailing - 1.5%

 

 

 

 

Costco Wholesale Corp.

 

393

23,254

 

CVS Caremark Corp.

 

1,303

41,970

 

Kroger Co.

 

589

12,092

 

Safeway, Inc.

 

408

8,686

 

SUPERVALU, Inc.

 

225

2,860

 

Sysco Corp.

 

534

14,920

 

Walgreen Co.

 

896

32,901

 

Wal-Mart Stores, Inc.

 

1,938

103,586

 

Whole Foods Market, Inc.*

 

138

3,788

 

 

 

 

244,057

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Food Products - 1.0%

 

 

 

 

Archer-Daniels-Midland Co.

 

580

$18,160

 

Campbell Soup Co.

 

189

6,388

 

ConAgra Foods, Inc.

 

434

10,004

 

Dean Foods Co.*

 

185

3,337

 

General Mills, Inc.

 

294

20,818

 

H.J. Heinz Co.

 

285

12,187

 

Hershey Co.

 

150

5,368

 

Hormel Foods Corp.

 

84

3,230

 

J.M. Smucker Co.

 

117

7,225

 

Kellogg Co.

 

232

12,342

 

Kraft Foods, Inc.

 

1,332

36,204

 

McCormick & Co., Inc.

 

129

4,661

 

Sara Lee Corp.

 

629

7,661

 

Tyson Foods, Inc.

 

315

3,865

 

 

 

 

151,450

 

 

 

 

 

 

Gas Utilities - 0.1%

 

 

 

 

EQT Corp.

 

129

5,666

 

Nicor, Inc.

 

48

2,021

 

Questar Corp.

 

171

7,108

 

 

 

 

14,795

 

 

 

 

 

 

Health Care Equipment & Supplies - 1.1%

 

 

 

 

Baxter International, Inc.

 

545

31,980

 

Becton Dickinson & Co.

 

217

17,113

 

Boston Scientific Corp.*

 

1,361

12,249

 

C.R. Bard, Inc.

 

89

6,933

 

CareFusion Corp.*

 

185

4,627

 

DENTSPLY International, Inc.

 

146

5,135

 

Hospira, Inc.*

 

146

7,446

 

Intuitive Surgical, Inc.*

 

35

10,616

 

Medtronic, Inc.

 

1,000

43,980

 

St. Jude Medical, Inc.*

 

315

11,586

 

Stryker Corp.

 

245

12,341

 

Varian Medical Systems, Inc.*

 

113

5,294

 

Zimmer Holdings, Inc.*

 

194

11,467

 

 

 

 

180,767

 

 

 

 

 

 

Health Care Providers & Services - 1.3%

 

 

 

 

Aetna, Inc.

 

395

12,522

 

AmerisourceBergen Corp.

 

292

7,612

 

Cardinal Health, Inc.

 

325

10,478

 

CIGNA Corp.

 

268

9,452

 

Coventry Health Care, Inc.*

 

165

4,008

 

DaVita, Inc.*

 

102

5,991

 

Express Scripts, Inc.*

 

248

21,440

 

Humana, Inc.*

 

167

7,330

 

Laboratory Corp. of America Holdings*

 

107

8,008

 

McKesson Corp.

 

241

15,063

 

Medco Health Solutions, Inc.*

 

428

27,353

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Health Care Providers & Services - Cont'd

 

 

 

 

Patterson Co.'s, Inc.*

 

92

$2,574

 

Quest Diagnostics, Inc.

 

155

9,359

 

Tenet Healthcare Corp.*

 

425

2,291

 

UnitedHealth Group, Inc.

 

1,050

32,004

 

WellPoint, Inc.*

 

429

25,006

 

 

 

 

200,491

 

 

 

 

 

 

Health Care Technology - 0.0%

 

 

 

 

IMS Health, Inc.

 

179

3,770

 

 

 

 

 

 

Hotels, Restaurants & Leisure - 0.9%

 

 

 

 

Carnival Corp.*

 

396

12,549

 

Darden Restaurants, Inc.

 

137

4,804

 

International Game Technology

 

291

5,462

 

Marriott International, Inc.

 

247

6,731

 

McDonald's Corp.

 

986

61,566

 

Starbucks Corp.*

 

666

15,358

 

Starwood Hotels & Resorts Worldwide, Inc.

 

184

6,729

 

Wyndham Worldwide Corp.

 

189

3,812

 

Wynn Resorts Ltd.

 

68

3,960

 

Yum! Brands, Inc.

 

422

14,757

 

 

 

 

135,728

 

 

 

 

 

 

Household Durables - 0.2%

 

 

 

 

Black & Decker Corp.

 

67

4,344

 

D.R. Horton, Inc.

 

271

2,946

 

Fortune Brands, Inc.

 

136

5,875

 

Harman International Industries, Inc.

 

77

2,716

 

Leggett & Platt, Inc.

 

162

3,305

 

Lennar Corp.

 

162

2,069

 

Newell Rubbermaid, Inc.

 

297

4,458

 

Pulte Homes, Inc.*

 

310

3,100

 

Whirlpool Corp.

 

76

6,130

 

 

 

 

34,943

 

 

 

 

 

 

Household Products - 1.5%

 

 

 

 

Clorox Co.

 

137

8,357

 

Colgate-Palmolive Co.

 

450

36,968

 

Kimberly-Clark Corp.

 

375

23,891

 

Procter & Gamble Co.

 

2,679

162,428

 

 

 

 

231,644

 

 

 

 

 

 

Independent Power Producers & Energy Traders - 0.1%

 

 

 

 

AES Corp.*

 

603

8,026

 

Constellation Energy Group, Inc.

 

197

6,928

 

 

 

 

14,954

 

 

 

 

 

 

Industrial Conglomerates - 1.3%

 

 

 

 

3M Co.

 

631

52,165

 

General Electric Co.

 

9,724

147,124

 

Textron, Inc.

 

265

4,985

 

 

 

 

204,274

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Insurance - 1.4%

 

 

 

 

Aflac, Inc.

 

423

$19,564

 

Allstate Corp.

 

485

14,569

 

American International Group, Inc.*

 

132

3,957

 

AON Corp.

 

248

9,508

 

Assurant, Inc.

 

116

3,420

 

Chubb Corp.

 

316

15,541

 

Cincinnati Financial Corp.

 

160

4,198

 

Genworth Financial, Inc.*

 

486

5,516

 

Hartford Financial Services Group, Inc.

 

347

8,071

 

Lincoln National Corp.

 

262

6,519

 

Loews Corp.

 

329

11,959

 

Marsh & McLennan Co.'s, Inc.

 

473

10,444

 

MetLife, Inc.

 

740

26,159

 

Principal Financial Group, Inc.

 

278

6,683

 

Progressive Corp.*

 

613

11,028

 

Prudential Financial, Inc.

 

418

20,800

 

Torchmark Corp.

 

82

3,604

 

Travelers Co.'s, Inc.

 

513

25,578

 

Unum Group

 

300

5,856

 

XL Capital Ltd.

 

336

6,159

 

 

 

 

219,133

 

 

 

 

 

 

Internet & Catalog Retail - 0.3%

 

 

 

 

Amazon.com, Inc.*

 

301

40,490

 

Expedia, Inc.*

 

207

5,322

 

priceline.com, Inc.*

 

40

8,740

 

 

 

 

54,552

 

 

 

 

 

 

Internet Software & Services - 1.2%

 

 

 

 

Akamai Technologies, Inc.*

 

156

3,951

 

eBay, Inc.*

 

1,014

23,870

 

Google, Inc.*

 

221

137,016

 

VeriSign, Inc.*

 

189

4,581

 

Yahoo!, Inc.*

 

1,077

18,072

 

 

 

 

187,490

 

 

 

 

 

 

IT Services - 0.9%

 

 

 

 

Affiliated Computer Services, Inc.*

 

96

5,730

 

Automatic Data Processing, Inc.

 

454

19,440

 

Cognizant Technology Solutions Corp.*

 

265

12,005

 

Computer Sciences Corp.*

 

149

8,572

 

Fidelity National Information Services, Inc.

 

308

7,220

 

Fiserv, Inc.*

 

152

7,369

 

MasterCard, Inc.

 

87

22,270

 

Paychex, Inc.

 

315

9,652

 

SAIC, Inc.*

 

278

5,265

 

Total System Services, Inc.

 

178

3,074

 

Visa, Inc.

 

407

35,596

 

Western Union Co.

 

634

11,951

 

 

 

 

148,144

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Leisure Equipment & Products - 0.1%

 

 

 

 

Eastman Kodak Co.*

 

338

$1,426

 

Hasbro, Inc.

 

124

3,975

 

Mattel, Inc.

 

325

6,494

 

 

 

 

11,895

 

 

 

 

 

 

Life Sciences - Tools & Services - 0.2%

 

 

 

 

Life Technologies Corp.*

 

173

9,048

 

Millipore Corp.*

 

59

4,269

 

PerkinElmer, Inc.

 

126

2,594

 

Thermo Fisher Scientific, Inc.*

 

369

17,598

 

Waters Corp.*

 

94

5,824

 

 

 

 

39,333

 

 

 

 

 

 

Machinery - 0.9%

 

 

 

 

Caterpillar, Inc.

 

561

31,971

 

Cummins, Inc.

 

183

8,392

 

Danaher Corp.

 

234

17,597

 

Deere & Co.

 

382

20,662

 

Dover Corp.

 

183

7,615

 

Eaton Corp.

 

150

9,543

 

Flowserve Corp.

 

51

4,821

 

Illinois Tool Works, Inc.

 

348

16,701

 

PACCAR, Inc.

 

328

11,897

 

Pall Corp.

 

122

4,416

 

Parker Hannifin Corp.

 

158

8,513

 

Snap-on, Inc.

 

62

2,620

 

Stanley Works

 

88

4,533

 

 

 

 

149,281

 

 

 

 

 

 

Media - 1.7%

 

 

 

 

CBS Corp., Class B

 

664

9,329

 

Comcast Corp.

 

2,591

43,684

 

DIRECTV*

 

856

28,548

 

Gannett Co., Inc.

 

212

3,148

 

Interpublic Group of Co.'s, Inc.*

 

544

4,015

 

McGraw-Hill Co.'s, Inc.

 

309

10,355

 

Meredith Corp.

 

41

1,265

 

New York Times Co.*

 

191

2,361

 

News Corp.

 

2,030

27,791

 

Omnicom Group, Inc.

 

281

11,001

 

Scripps Networks Interactive, Inc.

 

96

3,984

 

Time Warner Cable, Inc.

 

319

13,203

 

Time Warner, Inc.

 

1,071

31,209

 

Viacom, Inc., Class B*

 

548

16,292

 

Walt Disney Co.

 

1,758

56,695

 

Washington Post Co., Class B

 

6

2,638

 

 

 

 

265,518

 

 

 

 

 

 

Metals & Mining - 0.6%

 

 

 

 

AK Steel Holding Corp.

 

120

2,562

 

Alcoa, Inc.

 

880

14,186

 

Allegheny Technologies, Inc.

 

109

4,880

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Metals & Mining - Cont'd

 

 

 

 

Cliffs Natural Resources, Inc.

 

119

$5,485

 

Freeport-McMoRan Copper & Gold, Inc.*

 

391

31,393

 

Newmont Mining Corp.

 

443

20,958

 

Nucor Corp.

 

285

13,295

 

Titanium Metals Corp.*

 

100

1,252

 

United States Steel Corp.

 

126

6,945

 

 

 

 

100,956

 

 

 

 

 

 

Multiline Retail - 0.5%

 

 

 

 

Big Lots, Inc.*

 

83

2,405

 

Family Dollar Stores, Inc.

 

137

3,813

 

J.C. Penney Co., Inc.

 

232

6,174

 

Kohl's Corp.*

 

276

14,885

 

Macy's, Inc.

 

412

6,905

 

Nordstrom, Inc.

 

162

6,088

 

Sears Holdings Corp.*

 

49

4,089

 

Target Corp.

 

679

32,843

 

 

 

 

77,202

 

 

 

 

 

 

Multi-Utilities - 0.8%

 

 

 

 

Ameren Corp.

 

240

6,708

 

Centerpoint Energy, Inc.

 

399

5,789

 

CMS Energy Corp.

 

261

4,087

 

Consolidated Edison, Inc.

 

249

11,312

 

Dominion Resources, Inc.

 

538

20,939

 

DTE Energy Co.

 

162

7,062

 

Integrys Energy Group, Inc.

 

82

3,443

 

NiSource, Inc.

 

270

4,153

 

PG&E Corp.

 

335

14,958

 

Public Service Enterprise Group, Inc.

 

457

15,195

 

SCANA Corp.

 

109

4,107

 

Sempra Energy

 

222

12,428

 

TECO Energy, Inc.

 

244

3,958

 

Wisconsin Energy Corp.

 

115

5,730

 

Xcel Energy, Inc.

 

447

9,485

 

 

 

 

129,354

 

 

 

 

 

 

Office Electronics - 0.0%

 

 

 

 

Xerox Corp.

 

852

7,208

 

 

 

 

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels - 5.5%

 

 

 

 

Anadarko Petroleum Corp.

 

443

27,652

 

Apache Corp.

 

304

31,364

 

Cabot Oil & Gas Corp.

 

102

4,446

 

Chesapeake Energy Corp.

 

579

14,985

 

Chevron Corp.

 

1,823

140,353

 

ConocoPhillips

 

1,339

68,383

 

Consol Energy, Inc.

 

164

8,167

 

Denbury Resources, Inc.*

 

226

3,345

 

Devon Energy Corp.

 

401

29,473

 

El Paso Corp.

 

634

6,232

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Oil, Gas & Consumable Fuels - Cont'd

 

 

 

 

EOG Resources, Inc.

 

228

$22,184

 

Exxon Mobil Corp.

 

4,353

296,831

 

Hess Corp.

 

263

15,911

 

Marathon Oil Corp.

 

639

19,950

 

Massey Energy Co.

 

87

3,655

 

Murphy Oil Corp.

 

173

9,377

 

Noble Energy, Inc.

 

157

11,182

 

Occidental Petroleum Corp.

 

732

59,548

 

Peabody Energy Corp.

 

242

10,941

 

Pioneer Natural Resources Co.

 

119

5,732

 

Range Resources Corp.

 

142

7,079

 

Southwestern Energy Co.*

 

311

14,990

 

Spectra Energy Corp.

 

584

11,978

 

Sunoco, Inc.

 

125

3,262

 

Tesoro Corp.

 

160

2,168

 

Valero Energy Corp.

 

509

8,526

 

Williams Co.'s, Inc.

 

527

11,109

 

XTO Energy, Inc.

 

524

24,382

 

 

 

 

873,205

 

 

 

 

 

 

Paper & Forest Products - 0.2%

 

 

 

 

International Paper Co.

 

424

11,354

 

MeadWestvaco Corp.

 

168

4,810

 

Weyerhaeuser Co.

 

191

8,240

 

 

 

 

24,404

 

 

 

 

 

 

Personal Products - 0.2%

 

 

 

 

Avon Products, Inc.

 

386

12,159

 

Estee Lauder Co.'s, Inc.

 

116

5,610

 

Mead Johnson Nutrition Co.

 

186

8,128

 

 

 

 

25,897

 

 

 

 

 

 

Pharmaceuticals - 3.7%

 

 

 

 

Abbott Laboratories, Inc.

 

1,396

75,370

 

Allergan, Inc.

 

278

17,517

 

Bristol-Myers Squibb Co.

 

1,589

40,122

 

Eli Lilly & Co.

 

913

32,603

 

Forest Laboratories, Inc.*

 

273

8,766

 

Johnson & Johnson

 

2,518

162,184

 

King Pharmaceuticals, Inc.*

 

225

2,761

 

Merck & Co., Inc.

 

2,795

102,129

 

Mylan, Inc.*

 

300

5,529

 

Pfizer, Inc.

 

7,331

133,351

 

Watson Pharmaceuticals, Inc.*

 

96

3,803

 

 

 

 

584,135

 

 

 

 

 

 

Professional Services - 0.1%

 

 

 

 

Dun & Bradstreet Corp.

 

52

4,387

 

Equifax, Inc.

 

131

4,046

 

Monster Worldwide, Inc.*

 

152

2,645

 

Robert Half International, Inc.

 

149

3,983

 

 

 

 

15,061

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Real Estate Investment Trusts - 0.7%

 

 

 

 

Apartment Investment & Management Co.

 

114

$1,815

 

AvalonBay Communities, Inc.

 

73

5,994

 

Boston Properties, Inc.

 

126

8,451

 

Equity Residential

 

248

8,377

 

HCP, Inc.

 

265

8,093

 

Health Care REIT, Inc.

 

109

4,831

 

Host Hotels & Resorts, Inc.

 

618

7,212

 

Kimco Realty Corp.

 

364

4,925

 

Plum Creek Timber Co., Inc.

 

160

6,042

 

ProLogis

 

400

5,476

 

Public Storage

 

129

10,507

 

Simon Property Group, Inc.

 

257

20,508

 

Ventas, Inc.

 

154

6,736

 

Vornado Realty Trust

 

153

10,701

 

 

 

 

109,668

 

 

 

 

 

 

Real Estate Management & Development - 0.0%

 

 

 

 

CB Richard Ellis Group, Inc.*

 

250

3,393

 

 

 

 

 

 

Road & Rail - 0.6%

 

 

 

 

Burlington Northern Santa Fe Corp.

 

237

23,373

 

CSX Corp.

 

354

17,166

 

Norfolk Southern Corp.

 

332

17,403

 

Ryder System, Inc.

 

71

2,923

 

Union Pacific Corp.

 

456

29,138

 

 

 

 

90,003

 

 

 

 

 

 

Semiconductors & Semiconductor Equipment - 1.5%

 

 

 

 

Advanced Micro Devices, Inc.*

 

511

4,947

 

Altera Corp.

 

289

6,540

 

Analog Devices, Inc.

 

264

8,337

 

Applied Materials, Inc.

 

1,205

16,798

 

Broadcom Corp.*

 

390

12,267

 

Intel Corp.

 

5,016

102,326

 

KLA-Tencor Corp.

 

168

6,075

 

Linear Technology Corp.

 

218

6,658

 

LSI Corp.*

 

645

3,876

 

MEMC Electronic Materials, Inc.*

 

244

3,323

 

Microchip Technology, Inc.

 

166

4,824

 

Micron Technology, Inc.*

 

765

8,078

 

National Semiconductor Corp.

 

250

3,840

 

Novellus Systems, Inc.*

 

101

2,357

 

NVIDIA Corp.*

 

495

9,247

 

Teradyne, Inc.*

 

158

1,695

 

Texas Instruments, Inc.

 

1,139

29,682

 

Xilinx, Inc.

 

271

6,791

 

 

 

 

237,661

 

 

 

 

 

 

Software - 2.5%

 

 

 

 

Adobe Systems, Inc.*

 

474

17,434

 

Autodesk, Inc.*

 

208

5,285

 

BMC Software, Inc.*

 

181

7,258

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Software - Cont'd

 

 

 

 

CA, Inc.

 

360

$8,086

 

Citrix Systems, Inc.*

 

180

7,490

 

Compuware Corp.*

 

233

1,684

 

Electronic Arts, Inc.*

 

332

5,893

 

Intuit, Inc.*

 

317

9,735

 

McAfee, Inc.*

 

142

5,761

 

Microsoft Corp.

 

7,087

216,083

 

Novell, Inc.*

 

404

1,677

 

Oracle Corp.

 

3,526

86,528

 

Red Hat, Inc.*

 

185

5,716

 

Salesforce.com, Inc.*

 

107

7,893

 

Symantec Corp.*

 

736

13,167

 

 

 

 

399,690

 

 

 

 

 

 

Specialty Retail - 1.1%

 

 

 

 

Abercrombie & Fitch Co.

 

92

3,206

 

AutoNation, Inc.*

 

129

2,470

 

AutoZone, Inc.*

 

32

5,058

 

Bed Bath & Beyond, Inc.*

 

237

9,155

 

Best Buy Co., Inc.

 

309

12,193

 

GameStop Corp.*

 

149

3,269

 

Gap, Inc.

 

435

9,113

 

Home Depot, Inc.

 

1,539

44,523

 

Limited Brands, Inc.

 

262

5,041

 

Lowe's Co.'s, Inc.

 

1,334

31,202

 

Office Depot, Inc.*

 

321

2,071

 

O'Reilly Automotive, Inc.*

 

134

5,108

 

RadioShack Corp.

 

123

2,400

 

Ross Stores, Inc.

 

114

4,869

 

Sherwin-Williams Co.

 

96

5,918

 

Staples, Inc.

 

653

16,057

 

Tiffany & Co.

 

122

5,246

 

TJX Co.'s, Inc.

 

383

13,999

 

 

 

 

180,898

 

 

 

 

 

 

Textiles, Apparel & Luxury Goods - 0.3%

 

 

 

 

Coach, Inc.

 

288

10,521

 

Nike, Inc., Class B

 

351

23,191

 

Polo Ralph Lauren Corp.

 

63

5,102

 

VF Corp.

 

88

6,445

 

 

 

 

45,259

 

 

 

 

 

 

Thrifts & Mortgage Finance - 0.1%

 

 

 

 

Hudson City Bancorp, Inc.

 

463

6,357

 

People's United Financial, Inc.

 

358

5,979

 

 

 

 

12,336

 

 

 

 

 

 

Tobacco - 0.9%

 

 

 

 

Altria Group, Inc.

 

1,871

36,728

 

Lorillard, Inc.

 

150

12,035

 

Philip Morris International, Inc.

 

1,747

84,188

 

Reynolds American, Inc.

 

153

8,104

 

 

 

 

141,055

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

 

Trading Companies & Distributors - 0.1%

 

 

 

 

Fastenal Co.

 

130

$5,413

 

W.W. Grainger, Inc.

 

64

6,197

 

 

 

 

11,610

 

 

 

 

 

 

Wireless Telecommunication Services - 0.2%

 

 

 

 

American Tower Corp.*

 

357

15,426

 

MetroPCS Communications, Inc.*

 

300

2,289

 

Sprint Nextel Corp.*

 

2,597

9,505

 

 

 

 

27,220

 

 

 

 

 

 

     Total Equity Securities (Cost $8,161,138)

 

 

9,116,314

 

 

 

 

 

 

Exchange Traded Funds - 2.5%

 

 

 

 

iShares Barclays Aggregate Bond Fund

 

3,800

392,122

 

 

 

 

 

 

     Total Exchange Traded Funds (Cost $397,203)

 

 

392,122

 

 

 

 

 

 

 

 

Principal

 

 

Commercial Mortgage-Backed Securities - 1.8%

 

Amount

 

 

Wachovia Bank Commercial Mortgage Trust, 4.964%, 11/15/35

 

$285,000

283,782

 

 

 

 

 

 

     Total Commercial Mortgage-Backed Securities (Cost $203,319)

 

 

283,782

 

 

 

 

 

 

Corporate Bonds - 8.4%

 

 

 

 

Affiliated Computer Services, Inc., 5.20%, 6/1/15

 

140,000

144,550

 

Apache Corp., 5.625%, 1/15/17

 

100,000

106,599

 

Colonial Pipeline Co., 7.75%, 11/1/10 (e)

 

125,000

131,403

 

Conoco Funding Co., 6.35%, 10/15/11

 

50,000

54,398

 

Goldman Sachs Group, Inc., 5.35%, 1/15/16

 

100,000

103,866

 

Honeywell International, Inc., 7.50%, 3/1/10

 

125,000

126,395

 

Hospira, Inc., 6.40%, 5/15/15

 

100,000

110,938

 

Public Service Co. of North Carolina, Inc., 6.625%, 2/15/11

 

150,000

156,975

 

Shell International Finance BV, 4.00%, 3/21/14

 

100,000

104,592

 

US Bank NA, 4.95%, 10/30/14

 

100,000

106,444

 

Wells Fargo & Co., 4.375%, 1/31/13

 

125,000

129,496

 

XTO Energy, Inc., 4.625%, 6/15/13

 

50,000

53,159

 

 

 

 

 

 

     Total Corporate Bonds (Cost $1,268,912)

 

 

1,328,815

 

 

 

 

 

 

Time Deposit - 2.5%

 

 

 

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

401,578

401,578

 

 

 

 

 

 

     Total Time Deposit (Cost $401,578)

 

 

401,578

 

 

 

 

 

 

 

 

Principal

 

 

U.S. Government Agencies And Instrumentalities - 2.1%

 

Amount

Value

 

Federal Home Loan Bank, 3.625%, 10/18/13

 

$320,000

$335,152

 

 

 

 

 

 

     Total U.S. Government Agencies And Instrumentalities (Cost $329,453)

 

 

335,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Agency Mortgage-Backed Securities - 12.5%

 

 

 

 

Fannie Mae:

 

 

 

 

     7.00%, 7/1/29

 

58,178

64,268

 

     6.50%, 8/1/32

 

48,741

52,463

 

     5.50%, 7/1/33

 

169,231

177,869

 

     6.00%, 8/1/33

 

96,920

103,523

 

     5.50%, 11/1/33

 

284,628

299,156

 

     7.50%, 11/1/36

 

117,971

128,821

 

Freddie Mac:

 

 

 

 

     5.00%, 5/1/18

 

336,258

354,373

 

     4.50%, 9/1/18

 

75,288

78,402

 

     6.00%, 8/1/36

 

348,700

370,712

 

Ginnie Mae, 5.50%, 7/20/34

 

348,347

366,789

 

 

 

 

 

 

     Total U.S. Government Agency Mortgage-Backed Securities (Cost $1,916,660)

 

 

1,996,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury - 12.5%

 

 

 

 

United States Treasury Bills, 2/11/10 ^

 

100,000

99,986

 

United States Treasury Bonds, 5.25%, 11/15/28

 

200,000

216,844

 

United States Treasury Notes:

 

 

 

 

     2.75%, 10/31/13

 

400,000

409,688

 

     2.00%, 11/30/13

 

325,000

323,273

 

     1.50%, 12/31/13

 

125,000

121,719

 

     2.375%, 8/31/14

 

350,000

347,484

 

     5.125%, 5/15/16

 

250,000

278,867

 

     3.00%, 9/30/16

 

200,000

196,406

 

 

 

 

 

 

     Total U.S. Treasury (Cost $1,966,226)

 

 

1,994,267

 

 

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $14,644,489) - 99.6%

 

 

15,848,406

 

          Other assets and liabilities, net - 0.4%

 

 

71,390

 

          Net Assets - 100%

 

 

$15,919,796

 

 

 

 

 

 

Net Assets Consist of:

 

 

 

 

Paid-in capital applicable to 350,492 shares of common stock outstanding;

 

 

 

 

$0.10 par value, 20,000,000 shares authorized

 

 

$15,177,218

 

Undistributed net investment income

 

 

111,995

 

Accumulated net realized gain (loss) on investments

 

 

(578,017)

 

Net unrealized appreciation (depreciation) on investments

 

 

1,208,600

 

 

 

 

 

 

          Net Assets

 

 

$15,919,796

 

 

 

 

 

 

          Net Asset Value per Share

 

 

$45.42

 

 

Futures

Number Of
Contracts

Expiration
Date

Underlying
Face Amount
At Value

Unrealized
Appreciation
(Depreciation)

Purchased:

 

 

 

 

     E-Mini S&P 500 Index^

7

3/10

$388,745

$4,683

          Total Purchased

 

 

 

$4,683

 

* Non-income producing security.

(e) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

^ Futures collateralized by 100,000 units of U.S. Treasury Bills.

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Interest income

$253,817

     Dividend income

219,349

     Total investment income

473,166

 

 

Expenses:

 

     Investment advisory fee

45,991

     Transfer agent fees and expenses

2,233

     Directors' fees and expenses

2,381

     Administrative fees

15,330

     Custodian fees

35,994

     Accounting fees

744

     Reports to shareholders

3,248

     Professional fees

17,970

     Contract Services

17,551

     Miscellaneous

52

          Total expenses

141,494

          Reimbursement from Advisor

(49,475)

          Fees paid indirectly

(37)

               Net expenses

91,982

 

 

                    Net Investment Income

381,184

 

 

Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) on:

 

     Investments

174,836

     Futures

(52,430)

 

122,406

 

 

Changes in unrealized appreciation (depreciation) on:

 

     Investments

2,125,293

     Futures

(29,917)

 

2,095,376

 

 

               Net Realized and Unrealized Gain

 

               (Loss)

2,217,782

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$2,598,966

 

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

 

 

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$381,184

$623,303

     Net realized gain (loss) on investments

122,406

(45,569)

     Change in unrealized appreciation (depreciation)

2,095,376

(5,336,359)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

2,598,966

(4,758,625)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(348,198)

(619,228)

          Total distributions

(348,198)

(619,228)

 

 

 

Capital share transactions:

 

 

     Shares sold

1,518,492

1,422,473

     Reinvestment of distributions

348,196

619,228

     Shares redeemed

(4,041,694)

(6,813,199)

          Total capital share transactions

(2,175,006)

(4,771,498)

 

 

 

Total Increase (Decrease) in Net Assets

75,762

(10,149,351)

 

 

 

Net Assets

 

 

Beginning of year

15,844,034

25,993,385

End of year (including undistributed net investment

 

 

     income of $111,995 and $66,235, respectively)

$15,919,796

$15,844,034

 

 

 

Capital Share Activity

 

 

Shares sold

36,816

29,832

Reinvestment of distributions

7,612

14,516

Shares redeemed

(98,053)

(143,741)

     Total capital share activity

(53,625)

(99,393)

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Balanced Index Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing the average bid prices or at bid prices based on a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the close of business of the Portfolio, that are expected to materially affect the value of those securities, then they are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Portfolio may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued in good faith under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Commercial Mortgage-Backed Securities

--

$283,782

--

$283,782

Corporate Bonds

--

1,328,815

--

1,328,815

Equity Securities*

$9,116,314

--

--

9,116,314

Exchanged Traded Funds

392,122

--

--

392,122

Other debt Obligations

--

401,578

--

401,578

U.S. Government Obligations

--

4,325,795

--

4,325,795

TOTAL

$9,508,436

$6,339,970

--

$15,848,406

 

 

 

 

 

Other Financial Instruments**

$4,683

--

--

$4,683

*     For further breakdown of Equity Securities by industry type, please refer to the Statement of Net Assets.

** Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Withholding taxes on foreign dividends have been provided for in accordance with the Portfolio's understanding of the applicable country's tax rules and rates.

Futures Contracts: The Portfolio may purchase and sell futures contracts, but only when, in the judgment of the Advisor, such a position acts as a hedge. The Portfolio may not enter into futures contracts for the purpose of speculation or leverage. These futures contracts may include, but are not limited to, market index futures contracts. The Portfolio is subject to market risk in the normal course of pursuing its investment objectives. The Portfolio may use futures contracts to hedge against changes in the value of securities. The Portfolio may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Portfolio's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms. Futures contracts are designed by boards of trade which are designated "contracts markets" by the Commodities Futures Trading Commission. Futures contracts trade on the contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee the futures contracts against default. As a result, there is minimal counterparty credit risk to the Portfolio.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company ("UNIFI"). The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .30% of the Portfolio's average daily net assets. Under the terms of the agreement, $4,068 was payable at year end. In addition, $5,844 was payable at year end for operating expenses paid by the advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is .60%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $1,356 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $51 for the year ended December 31, 2009. Under the terms of the agreement, $5 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term and U.S. Government securities, were $4,922,323 and $6,826,223, respectively. U.S. Government security purchases and sales were $2,965,864 and $2,081,601, respectively.

Capital Loss Carryforwards

Expiration Date

31-Dec-13

$337,505

31-Dec-16

752

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from:

2009

2008

Ordinary income

$348,198

$619,228

     Total

$348,198

$619,228

As of December 31, 2009, the components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$2,434,147

Unrealized (depreciation)               

(1,465,307)

Net unrealized appreciation/(depreciation)     

$968,840

Undistributed ordinary income          

$111,995

Capital loss carryforward     

($338,257)

Federal income tax cost of investments     

$14,879,566

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales, real estate investment trusts, and Section 1256 contracts.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to asset-backed securities and real estate investment trusts.

Undistributed net investment income

$12,774

Accumulated net realized gain (loss)

(12,774)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

Average
Daily
Balance

Weighted
Average
Interest
Rate

Maximum
Amount
Borrowed

Month Of
Maximum
Amount
Borrowed

 

$2,248

1.46%

$239,076

October 2009

 

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 49.2% of the ordinary dividends paid during the year or the maximum amount allowable but not less than the aforementioned percentage as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

 

2009

2008

2007

Net asset value, beginning

$39.21

$51.62

$49.58

Income from investment operations

 

 

 

     Net investment income

1.14

1.48

1.33

     Net realized and unrealized gain (loss)

6.09

(12.45)

2.12

          Total from investment operations

7.23

(10.97)

3.45

Distributions from

 

 

 

     Net investment income

(1.02)

(1.44)

(1.41)

          Total distributions

(1.02)

(1.44)

(1.41)

Total increase (decrease) in net asset value

6.21

(12.41)

2.04

Net asset value, ending

$45.42

$39.21

$51.62

 

 

 

 

Total return*

18.41%

(21.55%)

7.02%

Ratios to average net assets: A

 

 

 

     Net investment income

2.49%

3.08%

2.47%

     Total expenses

.92%

.86%

.69%

     Expenses before offsets

.60%

.60%

.60%

     Net expenses

.60%

.60%

.60%

Portfolio turnover

53%

26%

15%

Net assets, ending (in thousands)

$15,920

$15,844

$25,993

 

 

 

 

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

 

2006

2005

 

Net asset value, beginning

$45.74

$45.55

 

Income from investment operations

 

 

 

     Net investment income

1.16

1.07

 

     Net realized and unrealized gain (loss)

3.80

.28

 

          Total from investment operations

4.96

1.35

 

Distributions from

 

 

 

     Net investment income

(1.12)

(1.16)

 

          Total distributions

(1.12)

(1.16)

 

Total increase (decrease) in net asset value

3.84

.19

 

Net asset value, ending

$49.58

$45.74

 

 

 

 

 

Total return*

11.02%

3.04%

 

Ratios to average net assets: A

 

 

 

     Net investment income

2.36%

2.25%

 

     Total expenses

.69%

.70%

 

     Expenses before offsets

.60%

.60%

 

     Net expenses

.60%

.60%

 

Portfolio turnover

21%

4%

 

Net assets, ending (in thousands)

$28,784

$29,316

 

 

See notes to financial highlights.

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

*      Total return is not annualized for periods less than one year.

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one- and three-year periods ended June 30, 2009, and performed below the median of its peer universe for the five-year period ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one-, three- and five-year periods ended June 30, 2009. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was below the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

 

Summit NASDAQ-100
Index Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

13

Statement of Operations

14

Statements of Changes in Net Assets

15

Notes to Financial Statements

21

Financial Highlights

23

Explanation of Financial Tables

24

Proxy Voting

25

Availability of Quarterly Portfolio Holdings

26

Basis for Board's Approval of Investment Advisory Contracts

29

Director and Officer Information Table

 

Summit Nasdaq-100 Index Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Nasdaq-100 Index Portfolio provided a return of 53.51% compared to a return of 54.61% for the Nasdaq 100 Index. As an index fund, the Portfolio employs a passive management approach and seeks, as closely as possible, to replicate the holdings and match the performance of the Nasdaq 100 Index. The Portfolio's underperformance is largely attributable to fees and operating expenses. These expenses represent the Portfolio's costs for advisory, administration, accounting, custody, and other services.

 

Summit Nasdaq-100 Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

53.51%

Five year

2.69%

Ten year

-6.51%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed-income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

The stabilized banking system, an improved economic outlook, and low valuations fueled a stock market rally that lasted throughout much of 2009. The Nasdaq 100 Index, which declined significantly during the first quarter of 2009, hit bottom in early March at a level of 1,043.87. For the balance of the year, the Index trended higher, closing the year at 1,860.31. Including dividend reinvestment, the Index gained 79.1% from its March 2009 low through the end of the year.

Portfolio Strategy

The Portfolio continued to meet its investment objective of closely tracking the total return of the Nasdaq 100 Index. The Index includes 100 of the largest and most actively traded non-financial domestic and international companies. The average market capitalization of the companies in the Index is roughly $30 billion, which is significantly larger than the $20 billion average capitalization of companies in the Standard & Poor's 500 Index (S&P 500 Index). These companies delivered strong returns for the year, both in absolute terms and relative to the S&P 500 Index, which returned 26.5% for the year.

At the end of 2009, the Index was most heavily weighted in Information Technology (63.2%), Consumer Discretionary (14.4%), and Healthcare (15.6%) companies. It had no exposure to companies in the Utilities, Energy, or Financial Services sectors.

The top-performing sectors of the Nasdaq 100 Index, including dividend reinvestment, were Information Technology (up 72.55% for the year) and Consumer Discretionary (66.1%). The worst performers were the Healthcare (15.5%) and Consumer Staples (14.4%) sectors.

The Summit Nasdaq-100 Index Portfolio fully replicates the Nasdaq 100 Index, which means that it holds all of the stocks in the Index. Market fluctuation, cash flows, and corporate actions may cause the Portfolio to hold slightly different weightings than the Index. Since the Nasdaq 100 Index is not a mutual fund, direct investment in the Index is not possible and there are no expenses charged against its return as there are against the Portfolio's return.

Economic Sectors

% of Total
Investments

Consumer Discretionary

14.3%

Consumer Staples

0.8%

Exchange Traded Funds

0.4%

Government

0.2%

Health Care

15.5%

Industrials

4.1%

Information Technology

62.8%

Materials

0.3%

Telecommunication Services

1.6%

Total

100%

Outlook

The outlook for 2010 is for modest growth in the U.S. and global economies, and for improved corporate earnings. Interest rates may increase modestly as the economy strengthens and the Federal Reserve removes the massive liquidity that it has injected into the market. Riskier assets, including equities, may outperform in this environment, in a continuation of the trend established in 2009.

Challenges will remain, however, as the economic recovery will likely be muted by high unemployment and by consumers who continue to repair their balance sheets by curtailing spending. In addition, financial institutions will continue to deal with problem assets and weakness in the commercial real estate market, which will likely bring new challenges in 2010. Lastly, the prospect of higher interest rates may negatively affect price/earnings multiples in the equity markets.

 

January 2010

 

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,258.80

$3.70

Hypothetical (5% return per year before expenses)

$1,000.00

$1,021.93

$3.31

* Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Nasdaq-100 Index Portfolio:

We have audited the accompanying statement of net assets of the Summit Nasdaq-100 Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Nasdaq-100 Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

 

Equity Securities - 98.5%

 

Shares

Value

Air Freight & Logistics - 1.0%

 

 

 

C.H. Robinson Worldwide, Inc.

 

2,444

$143,536

Expeditors International of Washington, Inc.

 

3,115

108,184

 

 

 

251,720

 

 

 

 

Biotechnology - 7.9%

 

 

 

Amgen, Inc.*

 

6,953

393,331

Biogen Idec, Inc.*

 

4,634

247,919

Celgene Corp.*

 

6,717

374,003

Cephalon, Inc.*

 

1,083

67,590

Genzyme Corp.*

 

4,905

240,394

Gilead Sciences, Inc.*

 

13,062

565,324

Vertex Pharmaceuticals, Inc.*

 

3,071

131,592

 

 

 

2,020,153

 

 

 

 

Chemicals - 0.3%

 

 

 

Sigma-Aldrich Corp.

 

1,723

87,063

 

 

 

 

 

 

 

 

Commercial Services & Supplies - 0.6%

 

 

 

Cintas Corp.

 

2,763

71,976

Stericycle, Inc.*

 

1,305

71,997

 

 

 

143,973

 

 

 

 

Communications Equipment - 10.4%

 

 

 

Cisco Systems, Inc.*

 

30,304

725,478

QUALCOMM, Inc.

 

29,741

1,375,818

Research In Motion Ltd.*

 

8,379

565,918

 

 

 

2,667,214

 

 

 

 

Computers & Peripherals - 17.6%

 

 

 

Apple, Inc.*

 

18,555

3,912,507

Dell, Inc.*

 

10,596

152,158

Logitech International SA*

 

2,526

43,195

NetApp, Inc.*

 

5,184

178,278

SanDisk Corp.*

 

3,419

99,117

Seagate Technology LLC

 

7,394

134,497

 

 

 

4,519,752

 

 

 

 

Construction & Engineering - 0.2%

 

 

 

Foster Wheeler AG*

 

1,990

58,586

 

 

 

 

 

 

 

 

Diversified Consumer Services - 0.6%

 

 

 

Apollo Group, Inc.*

 

2,331

141,212

 

 

 

 

 

 

 

 

Electrical Equipment - 0.6%

 

 

 

First Solar, Inc.*

 

1,099

148,805

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Electronic Equipment & Instruments - 0.7%

 

 

 

Flextronics International Ltd.*

 

13,239

$96,777

FLIR Systems, Inc.*

 

2,347

76,794

 

 

 

173,571

 

 

 

 

Food & Staples Retailing - 0.8%

 

 

 

Costco Wholesale Corp.

 

3,386

200,350

 

 

 

 

 

 

 

 

Health Care Equipment & Supplies - 1.2%

 

 

 

DENTSPLY International, Inc.

 

2,150

75,616

Hologic, Inc.*

 

4,064

58,928

Intuitive Surgical, Inc.*

 

563

170,769

 

 

 

305,313

 

 

 

 

Health Care Providers & Services - 1.7%

 

 

 

Express Scripts, Inc.*

 

3,614

312,430

Henry Schein, Inc.*

 

1,343

70,642

Patterson Co.'s, Inc.*

 

1,736

48,573

 

 

431,645

 

 

 

 

 

Health Care Technology - 0.4%

 

 

 

Cerner Corp.*

 

1,200

98,928

 

 

 

 

Hotels, Restaurants & Leisure - 1.8%

 

 

 

Starbucks Corp.*

 

15,162

349,636

Wynn Resorts Ltd.

 

1,979

115,237

 

 

 

464,873

 

 

 

 

Household Durables - 0.3%

 

 

 

Garmin Ltd.

 

2,799

85,929

 

 

 

 

Internet & Catalog Retail - 3.6%

 

 

 

Amazon.com, Inc.*

 

4,238

570,096

Expedia, Inc.*

 

4,187

107,648

Liberty Media Corp. - Interactive*

 

8,229

89,202

priceline.com, Inc.*

 

684

149,454

 

 

916,400

 

 

 

 

 

Internet Software & Services - 8.1%

 

 

 

Baidu.com (ADR)*

 

399

164,081

eBay, Inc.*

 

14,207

334,433

Google, Inc.*

 

2,183

1,353,416

VeriSign, Inc.*

 

2,732

66,224

Yahoo!, Inc.*

 

9,921

166,474

 

 

 

2,084,628

 

 

 

 

IT Services - 3.1%

 

 

 

Automatic Data Processing, Inc.

 

5,257

225,105

Cognizant Technology Solutions Corp.*

 

4,233

191,755

Fiserv, Inc.*

 

2,838

137,586

Infosys Technologies Ltd. (ADR)

 

1,620

89,537

Paychex, Inc.

 

5,055

154,885

 

 

 

798,868

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Leisure Equipment & Products - 0.5%

 

 

 

Mattel, Inc.

 

6,092

$121,718

 

 

 

 

 

 

 

 

Life Sciences - Tools & Services - 1.1%

 

 

 

Illumina, Inc.*

 

1,791

54,894

Life Technologies Corp.*

 

2,674

139,663

QIAGEN NV*

 

3,447

76,937

 

 

 

271,494

 

 

 

 

Machinery - 1.2%

 

 

 

Joy Global, Inc.

 

1,511

77,952

PACCAR, Inc.

 

6,006

217,838

 

 

 

295,790

 

 

 

 

Media - 4.4%

 

 

 

Comcast Corp.

 

21,283

358,831

DIRECTV*

 

10,269

342,471

DISH Network Corp.

 

3,255

67,606

News Corp.

 

20,972

287,107

Virgin Media, Inc.

 

4,962

83,511

 

 

 

1,139,526

 

 

 

 

Multiline Retail - 0.6%

 

 

 

Sears Holdings Corp.*

 

1,782

148,708

 

 

 

 

 

 

 

 

Pharmaceuticals - 3.1%

 

 

 

Mylan, Inc.*

 

4,578

84,373

Teva Pharmaceutical Industries Ltd. (ADR)

 

10,889

611,744

Warner Chilcott plc*

 

3,694

105,168

 

 

 

801,285

 

 

 

 

Road & Rail - 0.2%

 

 

 

JB Hunt Transport Services, Inc.

 

1,898

61,248

 

 

 

 

 

 

 

 

Semiconductors & Semiconductor Equipment - 7.8%

 

 

 

Altera Corp.

 

6,123

138,564

Applied Materials, Inc.

 

10,159

141,616

Broadcom Corp.*

 

5,872

184,674

Intel Corp.

 

28,512

581,645

KLA-Tencor Corp.

 

3,101

112,132

Lam Research Corp.*

 

1,953

76,577

Linear Technology Corp.

 

4,435

135,445

Marvell Technology Group Ltd.*

 

8,817

182,953

Maxim Integrated Products, Inc.

 

4,513

91,614

Microchip Technology, Inc.

 

2,283

66,344

NVIDIA Corp.*

 

8,075

150,841

Xilinx, Inc.

 

5,480

137,329

 

 

 

1,999,734

 

 

 

 

Software - 14.5%

 

 

 

Activision Blizzard, Inc.*

 

16,679

185,304

Adobe Systems, Inc.*

 

7,567

278,314

Autodesk, Inc.*

 

3,553

90,282

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Software - Cont'd

 

 

 

BMC Software, Inc.*

 

3,145

$126,115

CA, Inc.

 

7,392

166,024

Check Point Software Technologies Ltd.*

 

3,039

102,961

Citrix Systems, Inc.*

 

3,205

133,360

Electronic Arts, Inc.*

 

4,887

86,744

Intuit, Inc.*

 

5,876

180,452

Microsoft Corp.

 

45,119

1,375,678

Oracle Corp.

 

30,809

756,053

Symantec Corp.*

 

12,485

223,357

 

 

 

3,704,644

 

 

 

 

Specialty Retail - 2.4%

 

 

 

Bed Bath & Beyond, Inc.*

 

5,208

201,185

O'Reilly Automotive, Inc.*

 

2,028

77,307

Ross Stores, Inc.

 

1,865

79,654

Staples, Inc.

 

7,153

175,892

Urban Outfitters, Inc.*

 

2,502

87,545

 

 

 

621,583

 

 

 

 

Trading Companies & Distributors - 0.3%

 

 

 

Fastenal Co.

 

2,127

88,568

 

 

 

 

 

 

 

 

Wireless Telecommunication Services - 1.5%

 

 

 

Millicom International Cellular SA

 

1,567

115,597

NII Holdings, Inc.*

 

2,427

81,499

Vodafone Group plc (ADR)

 

8,608

198,759

 

 

 

395,855

 

 

 

 

     Total Equity Securities (Cost $16,114,265)

 

 

25,249,136

 

 

 

 

 

 

 

 

 

 

 

 

Exchange Traded Funds - 0.3%

 

 

 

Powershares QQQ

 

2,000

91,840

 

 

 

 

     Total Exchange Traded Funds (Cost $82,380)

 

 

91,840

 

 

 

 

 

 

 

 

 

 

Principal

 

U.S. Treasury - 0.2%

 

Amount

 

United States Treasury Bills, 2/11/10 ^

 

$50,000

49,994

 

 

 

 

     Total U.S. Treasury (Cost $49,994)

 

 

49,994

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $16,246,639) - 99.0%

 

 

25,390,970

          Other assets and liabilities, net - 1.0%

 

 

246,517

          Net Assets - 100%

 

 

$25,637,487

 

 

See notes to financial statements.

 

 

Net Assets Consist of:

 

 

 

Paid-in capital applicable to 1,004,862 shares outstanding;

 

 

 

$0.10 par value, 20,000,000 shares authorized

 

 

$26,215,582

Undistributed net investment income

 

 

3,871

Accumulated net realized gain (loss) on investments

 

 

(9,738,837)

Net unrealized appreciation (depreciation) on investments

 

 

9,156,871

 

 

 

 

          Net Assets

 

 

$25,637,487

 

 

 

 

          Net Asset Value per Share

 

 

$25.51

 

Futures

Number Of
Contracts

Expiration
Date

Underlying
Face Amount
At Value

Unrealized
Appreciation
(Depreciation)

Purchased:

 

 

 

 

     E-Mini NASDAQ 100 Index^

10

3/10

$371,750

$12,540

 

^ Futures collateralized by 50,000 units of U.S. Treasury Bills.

* Non-income producing security.

Abbreviations:

ADR: American Depositary Receipt

LLC: Limited Liability Corporation

 

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income (net of foreign taxes withheld of $1,609)

$154,333

     Interest income

116

          Total investment income

154,449

 

 

Expenses:

 

     Investment advisory fee

72,643

     Transfer agent fees and expenses

4,277

     Accounting fees

2,344

     Trustees' fees and expenses

3,259

     Administrative fees

20,755

     Custodian fees

12,772

     Reports to shareholders

6,921

     Professional fees

18,479

     Contract services

12,228

     Miscellaneous

77

          Total expenses

153,755

          Reimbursement from Advisor

(18,821)

          Fees paid indirectly

(25)

               Net expenses

134,909

 

 

               Net Investment Income

19,540

 

 

Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) on:

 

     Investments

19,147

     Futures

114,879

 

134,026

 

 

Change in unrealized appreciation (depreciation) on:

 

     Investments

8,815,873

     Futures

(5,451)

 

8,810,422

 

 

               Net Realized and Unrealized Gain

 

               (Loss)

8,944,448

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$8,963,988

 

 

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$19,540

$14,757

     Net realized gain (loss)

134,026

(2,191,481)

     Change in unrealized appreciation or (depreciation)

8,810,422

(10,861,942)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

8,963,988

(13,038,666)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(18,834)

(11,592)

          Total distributions

(18,834)

(11,592)

 

 

 

Capital share transactions:

 

 

     Shares sold

4,370,242

4,815,827

     Reinvestment of distributions

18,834

11,590

     Shares redeemed

(4,886,008)

(7,409,885)

          Total capital share transactions

(496,932)

(2,582,468)

 

 

 

Total Increase (Decrease) in Net Assets

8,448,222

(15,632,726)

 

 

 

Net Assets

 

 

Beginning of year

17,189,265

32,821,991

End of year (including undistributed net investment

 

 

     income of $3,871 and $3,165, respectively)

$25,637,487

$17,189,265

 

 

 

Capital Share Activity

 

 

Shares sold

219,980

217,395

Reinvestment of distributions

731

703

Shares redeemed

(249,786)

(330,016)

     Total capital share activity

(29,075)

(111,918)

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit NASDAQ-100 Index Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non-diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the close of business of the Portfolio, that are expected to materially affect the value of those securities, then they are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Portfolio may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Equity Securities*

$25,249,136

--

--

$25,249,136

Exchange traded Funds

91,840

--

--

91,840

U.S. government obligations

--

$49,994

--

49,994

TOTAL

$25,340,976

$49,994

--

$25,390,970

 

 

 

 

 

Other Financial Instruments**

$12,540

--

--

$12,540

*For further breakdown of Equity Securities by industry type, please refer to the Statement of Net Assets.

**Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Withholding taxes on foreign dividends have been provided for in accordance with the Portfolio's understanding of the applicable country's tax rules and rates.

Futures Contracts: The Portfolio may purchase and sell futures contracts, but only when, in the judgment of the Advisor, such a position acts as a hedge. The Portfolio may not enter into futures contracts for the purpose of speculation or leverage. These futures contracts may include, but are not limited to, market index futures contracts. The Portfolio is subject to market risk in the normal course of pursuing its investment objectives. The Portfolio may use futures contracts to hedge against changes in the value of securities. The Portfolio may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Portfolio's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms. Futures contracts are designed by boards of trade which are designated "contracts markets" by the Commodities Futures Trading Commission. Futures contracts trade on the contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee the futures contracts against default. As a result, there is minimal counterparty credit risk to the Portfolio.

Foreign Currency Transactions: The Portfolio's accounting records are maintained in U.S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are converted into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities is included with the net realized and unrealized gain or loss on investments.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements:

In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Mutual Holding Company ("UNIFI"). The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .35% of the Portfolio's average daily net assets. Under the terms of the agreement, $7,469 was payable at year end. In addition, $7,007 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is .65%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $2,134 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $72 for the year ended December 31, 2009. Under the terms of the agreement, $6 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $2,070,013 and $2,187,890, respectively.

Capital Loss Carryforward

Expiration Date

31-Dec-10

$3,618,754

31-Dec-11

231,064

31-Dec-12

139,726

31-Dec-13

1,358,042

31-Dec-14

708,047

31-Dec-15

697,707

31-Dec-16

2,318,532

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from:

2009

2008

Ordinary income

$18,834

$11,592

     Total

$18,834

$11,592

As of December 31, 2009 the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$9,747,656

Unrealized (depreciation)               

(1,257,750)

Net unrealized appreciation/(depreciation)     

$8,489,906

Undistributed ordinary income

$3,871

Capital loss carryforward     

($9,071,872)

Federal income tax cost of investments     

$16,901,064

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales and Section 1256 contracts.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to expired capital losses.

Accumulated net realized gain (loss)

$1,545,107

Paid-in capital

(1,545,107)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no borrowings under the agreement during the year ended December 31, 2009.

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 100% of the ordinary dividends paid during the year as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

 

2009

2008

2007

Net asset value, beginning

$16.63

$28.64

$24.47

Income from investment operations

 

 

 

     Net investment income (loss)

.02

.03

(.01)

     Net realized and unrealized gain (loss)

8.88

(12.01)

4.49

          Total from investment operations

8.90

(11.98)

4.48

Distributions from

 

 

 

     Net investment income

(.02)

(.03)

***

     Return of capital

--

--

(.31)

          Total distributions

(.02)

(.03)

(.31)

Total increase (decrease) in net asset value

8.88

(12.01)

4.17

Net asset value, ending

$25.51

$16.63

$28.64

 

 

 

 

Total return*

53.51%

(41.81%)

18.50%

Ratios to average net assets: A

 

 

 

     Net investment income (loss)

.09%

.06%

(.01%)

     Total expenses

.74%

.80%

.71%

     Expenses before offsets

.65%

.65%

.65%

     Net expenses

.65%

.65%

.65%

Portfolio turnover

10%

12%

13%

Net assets, ending (in thousands)

$25,637

$17,189

$32,822

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

 

2006

2005

 

Net asset value, beginning

$22.97

$22.81

 

Income from investment operations

 

 

 

     Net investment income

.02

.02

 

     Net realized and unrealized gain (loss)

1.51

.26

 

          Total from investment operations

1.53

.28

 

Distributions from

 

 

 

     Net investment income

(.03)

(.12)

 

          Total distributions

(.03)

(.12)

 

Total increase (decrease) in net asset value

1.50

.16

 

Net asset value, ending

$24.47

$22.97

 

 

 

 

 

Total return*

6.67%

1.30%

 

Ratios to average net assets: A

 

 

 

     Net investment income

.05%

.09%

 

     Total expenses

.76%

.76%

 

     Expenses before offsets

.65%

.65%

 

     Net expenses

.65%

.65%

 

Portfolio turnover

8%

14%

 

Net assets, ending (in thousands)

$26,108

$26,330

 

 

See notes to financial highlights.

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements.

Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

* Total return is not annualized for periods less than one year.

*** Amount is less than $0.005.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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 is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one-, three- and five-year periods ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one-, three- and five-year periods ended June 30, 2009. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was below the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio and the relatively small range in total expense ratios among the funds in the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. In addition, the Board considered the subadvisory fee paid to the Subadvisor by the Advisor in comparison to fees paid by similar institutional clients. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit Russell
2000 Small Cap
Index Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

52

Statement of Operations

53

Statements of Changes in Net Assets

54

Notes to Financial Statements

60

Financial Highlights

63

Explanation of Financial Tables

64

Proxy Voting

65

Availability of Quarterly Portfolio Holdings

65

Basis for Board's Approval of Investment Advisory Contracts

69

Director and Officer Information Table

 

 

Summit Russell 2000 Small Cap Index Portfolio
Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Russell 2000 Small Cap Index Portfolio provided a return of 26.17% (Class I) compared to a return of 27.17% for the Russell 2000 Index. As an index fund, the Portfolio employs a passive management approach and seeks, as closely as possible, to replicate the holdings and match the performance of the Russell 2000 Index. The Portfolio's underperformance was largely attributable to its fees and operating expenses.

Summit Russell 2000 Small Cap Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

 

Class I

Class F**

One year

26.17%

25.91%

Five year

-0.06%

-0.25%

Since inception (4.27.00)

3.39%

2.96%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

**Prior to October 4, 2007, Class F share performance is based on Class I performance, adjusted to reflect Class F expenses.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted. The value of an investment in Class I shares is plotted in the graph. The value of an investment in another class of shares would be different.

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed-income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

The stabilized banking system, an improved economic outlook, and low valuations fueled a stock market rally that lasted throughout much of 2009. The Russell 2000 Index, which declined significantly during the first quarter of 2009, hit bottom early in March at a level of 343.26. For the balance of the year, the Index trended higher, closing the year at 625.39. Including dividend reinvestment, the Index gained 84.5% from its March 2009 low through the end of the year.

Economic Sectors

% of Total
Investments

Consumer Discretionary

13.5%

Consumer Staples

3.4%

Energy

5.0%

Exchange Traded Funds

0.1%

Financials

19.8%

Government

0.4%

Health Care

13.9%

Industrials

15.5%

Information Technology

18.2%

Materials

4.6%

Telecommunication Services

0.9%

Time Deposit

1.5%

Utilities

3.2%

Total

100%

Portfolio Transactions

The Portfolio continued to meet its investment objective of closely tracking the total return of the Russell 2000 Index. The Index includes approximately 2,000 small companies that have average market capitalizations of approximately $600 million, which is significantly smaller than the $20 billion average capitalization of companies in the Standard & Poor's 500 Index (S&P 500 Index). The Russell 2000 Index delivered strong returns for the year, both in absolute terms and relative to the S&P 500 Index, which returned 26.5%.

At the end of 2009, the Index was most heavily weighted in the Financial Services (20.3%) and Information Technology (18.2%) sectors. Other sectors with significant weightings included Healthcare (14.7%) and Industrials (16.1%). The Index had the least exposure to companies in the Telecommunications Services (1%), Utilities (3.2%), and Consumer Staples (3.4%) sectors of the market.

The top-performing sectors in the Russell 2000 Index, including dividend reinvestment, were Consumer Discretionary (up 60.6% for the year), Technology (59.6%), and Materials (59.2%). The worst performers were Financial Services (-1.7%) and Utilities (7.8%).

The Portfolio fully replicates the Russell 2000 Index, which means that it holds all of the stocks in the Index. Market fluctuation, cash flows, and corporate actions may cause the Portfolio to hold slightly different weightings than the Index. Since the Russell 2000 Index is not a mutual fund, direct investment in the Index is not possible and there are no expenses charged against its return as there are against the Portfolio's return.

Outlook

The outlook for 2010 is for modest growth in the U.S. and global economies, and for improved corporate earnings. Interest rates may increase modestly as the economy strengthens and the Federal Reserve removes the massive liquidity that it has injected into the market. Riskier assets, including equities, may outperform in this environment, in a continuation of the trend established in 2009.

Challenges will remain, however, as the economic recovery will likely be muted by high unemployment and by consumers who continue to repair their balance sheets by curtailing spending. In addition, financial institutions will continue to deal with problem assets and weakness in the commercial real estate market, which will likely bring new challenges in 2010. Lastly, the prospect of higher interest rates may negatively affect price/earnings multiples in the equity markets.

 

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Class I

 

 

 

Actual

$1,000.00

$1,232.70

$3.94

Hypothetical (5% return per year before expenses)

$1,000.00

$1,021.68

$3.57

 

 

 

 

Class F

 

 

 

Actual

$1,000.00

$1,231.50

$5.12

Hypothetical (5% return per year before expenses)

$1,000.00

$1,020.62

$4.63

* Expenses are equal to the Fund's annualized expense ratio of 0.70% and 0.91%, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Russell 2000 Small Cap Index Portfolio:

We have audited the accompanying statement of net assets of the Summit Russell 2000 Small Cap Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Russell 2000 Small Cap Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

 

Equity Securities - 97.7%

 

Shares

Value

Aerospace & Defense - 1.7%

 

 

 

AAR Corp.*

 

2,670

$61,357

Aerovironment, Inc.*

 

917

26,666

American Science & Engineering, Inc.

 

628

47,627

Applied Signal Technology, Inc.

 

897

17,303

Argon ST, Inc.*

 

932

20,243

Ascent Solar Technologies, Inc.*

 

1,229

6,514

Astronics Corp.*

 

730

6,241

Ceradyne, Inc.*

 

1,779

34,175

Cubic Corp.

 

1,078

40,209

Curtiss-Wright Corp.

 

3,121

97,750

DigitalGlobe, Inc.*

 

1,016

24,587

Ducommun, Inc.

 

721

13,490

DynCorp International, Inc.*

 

1,706

24,481

Esterline Technologies Corp.*

 

2,049

83,538

GenCorp, Inc.*

 

3,476

24,332

GeoEye, Inc.*

 

1,322

36,857

Global Defense Technology & Systems, Inc.*

 

320

5,267

HEICO Corp.

 

1,594

70,662

Herley Industries, Inc.*

 

1,076

14,946

Hexcel Corp.*

 

6,661

86,460

Ladish Co., Inc.*

 

1,161

17,508

LMI Aerospace, Inc.*

 

692

9,204

Moog, Inc.*

 

3,123

91,285

Orbital Sciences Corp.*

 

3,893

59,407

Stanley, Inc.*

 

792

21,709

Taser International, Inc.*

 

4,261

18,663

Teledyne Technologies, Inc.*

 

2,486

95,363

Todd Shipyards Corp.

 

455

7,626

Triumph Group, Inc.

 

1,149

55,439

 

 

 

1,118,909

 

 

 

 

Air Freight & Logistics - 0.3%

 

 

 

Air Transport Services Group, Inc.*

 

4,389

11,587

Atlas Air Worldwide Holdings, Inc.*

 

1,430

53,268

Dynamex, Inc.*

 

725

13,123

Forward Air Corp.

 

1,997

50,025

HUB Group, Inc.*

 

2,563

68,765

Pacer International, Inc.*

 

2,628

8,304

 

 

 

205,072

 

 

 

 

Airlines - 0.9%

 

 

 

Airtran Holdings, Inc.*

 

9,050

47,241

Alaska Air Group, Inc.*

 

2,512

86,815

Allegiant Travel Co.*

 

1,059

49,953

Hawaiian Holdings, Inc.*

 

3,555

24,885

JetBlue Airways Corp.*

 

17,476

95,244

Republic Airways Holdings, Inc.*

 

2,380

17,588

 

 

 

 

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Airlines - Cont'd

 

 

 

Skywest, Inc.

 

3,839

$64,956

UAL Corp.*

 

11,579

149,485

US Airways Group, Inc.*

 

11,112

53,782

 

 

 

589,949

 

 

 

 

Auto Components - 0.9%

 

 

 

American Axle & Manufacturing Holdings, Inc.*

 

2,978

23,884

Amerigon, Inc.*

 

1,764

14,006

ArvinMeritor, Inc.*

 

5,111

57,141

China Automotive Systems, Inc.*

 

341

6,380

Cooper Tire & Rubber Co.

 

4,068

81,563

Dana Holding Corp.*

 

9,762

105,820

Dorman Products, Inc.*

 

875

13,702

Drew Industries, Inc.*

 

1,267

26,163

Exide Technologies*

 

3,463

24,622

Fuel Systems Solutions, Inc.*

 

884

36,456

Hawk Corp.*

 

433

7,625

Modine Manufacturing Co.*

 

3,171

37,545

Raser Technologies, Inc.*

 

3,590

4,452

Spartan Motors, Inc.

 

2,476

13,940

Standard Motor Products, Inc.*

 

1,237

10,539

Stoneridge, Inc.*

 

1,166

10,506

Superior Industries International, Inc.

 

1,592

24,358

Tenneco, Inc.*

 

4,072

72,197

Wonder Auto Technology, Inc.*

 

1,171

13,771

 

 

 

584,670

 

 

 

 

Automobiles - 0.0%

 

 

 

Winnebago Industries*

 

2,007

24,485

 

 

 

 

 

 

 

 

Beverages - 0.1%

 

 

 

Boston Beer Co., Inc.*

 

659

30,709

Coca Cola Bottling Co. Consolidated

 

327

17,665

Heckmann Corp.*

 

5,507

27,480

National Beverage Corp.*

 

857

11,878

 

 

 

87,732

 

 

 

 

Biotechnology - 3.8%

 

 

 

Acorda Therapeutics, Inc.*

 

2,623

66,152

Affymax, Inc.*

 

1,193

29,515

Alkermes, Inc.*

 

6,521

61,363

Alnylam Pharmaceuticals, Inc.*

 

2,483

43,750

AMAG Pharmaceuticals, Inc.*

 

1,175

44,685

Amicus Therapeutics, Inc.*

 

1,196

4,748

Arena Pharmaceuticals, Inc.*

 

5,675

20,146

Ariad Pharmaceuticals, Inc.*

 

5,295

12,073

Arqule, Inc.*

 

2,994

11,048

Array Biopharma, Inc.*

 

3,610

10,144

AVI BioPharma, Inc.*

 

6,075

8,869

BioCryst Pharmaceuticals, Inc.*

 

1,477

9,541

Biospecifics Technologies Corp.*

 

285

8,365

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Biotechnology - Cont'd

 

 

 

Cardium Therapeutics, Inc.*

 

3,073

$2,090

Celera Corp.*

 

5,865

40,527

Cell Therapeutics, Inc.*

 

35,275

40,213

Celldex Therapeutics, Inc.*

 

1,190

5,569

Cepheid, Inc.*

 

3,997

49,883

Chelsea Therapeutics International, Inc.*

 

1,869

5,046

Clinical Data, Inc.*

 

826

15,083

Cubist Pharmaceuticals, Inc.*

 

3,976

75,425

Curis, Inc.*

 

5,028

16,341

Cytokinetics, Inc.*

 

2,652

7,717

Cytori Therapeutics, Inc.*

 

1,587

9,681

Dyax Corp.*

 

4,431

15,021

Emergent Biosolutions, Inc.*

 

1,079

14,664

Enzon Pharmaceuticals, Inc.*

 

3,126

32,917

Exelixis, Inc.*

 

7,334

54,052

Facet Biotech Corp.*

 

1,750

30,765

Genomic Health, Inc.*

 

970

18,973

Geron Corp.*

 

6,154

34,155

GTx, Inc.*

 

1,485

6,237

Halozyme Therapeutics, Inc.*

 

4,454

26,145

Hemispherx Biopharma, Inc.*

 

8,741

4,895

Human Genome Sciences, Inc.*

 

12,579

384,917

Idenix Pharmaceuticals, Inc.*

 

1,994

4,287

Idera Pharmaceuticals, Inc.*

 

1,638

8,468

Immunogen, Inc.*

 

3,728

29,302

Immunomedics, Inc.*

 

5,060

16,243

Incyte Corp. Ltd.*

 

5,584

50,870

Infinity Pharmaceuticals, Inc.*

 

1,415

8,745

Insmed, Inc.*

 

9,871

7,601

InterMune, Inc.*

 

2,635

34,360

Isis Pharmaceuticals, Inc.*

 

6,425

71,317

Lexicon Pharmaceuticals, Inc.*

 

6,399

10,878

Ligand Pharmaceuticals, Inc., Class B*

 

8,949

19,419

MannKind Corp.*

 

3,939

34,506

Martek Biosciences Corp.*

 

2,288

43,335

Maxygen, Inc.*

 

2,071

12,612

Medivation, Inc.*

 

1,983

74,660

Metabolix, Inc.*

 

1,513

16,749

Micromet, Inc.*

 

3,230

21,512

Molecular Insight Pharmaceuticals, Inc.*

 

1,409

3,170

Momenta Pharmaceuticals, Inc.*

 

2,700

34,047

Myriad Pharmaceuticals, Inc.*

 

1,819

9,150

Nabi Biopharmaceuticals*

 

4,129

20,232

Nanosphere, Inc.*

 

1,028

6,620

Neurocrine Biosciences, Inc.*

 

2,921

7,945

NeurogesX, Inc.*

 

816

6,291

Novavax, Inc.*

 

4,156

11,055

NPS Pharmaceuticals, Inc.*

 

3,762

12,791

Omeros Corp.*

 

480

3,370

OncoGenex Pharmaceutical, Inc.*

 

316

7,040

Onyx Pharmaceuticals, Inc.*

 

4,258

124,930

Opko Health, Inc.*

 

3,824

6,998

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Biotechnology - Cont'd

 

 

 

Orexigen Therapeutics, Inc.*

 

1,597

$11,882

Osiris Therapeutics, Inc.*

 

1,190

8,497

OXiGENE, Inc.*

 

2,151

2,452

PDL BioPharma, Inc.

 

8,243

56,547

Pharmasset, Inc.*

 

1,446

29,932

Poniard Pharmaceuticals, Inc.*

 

1,820

3,331

Progenics Pharmaceuticals, Inc.*

 

2,122

9,422

Protalix BioTherapeutics, Inc.*

 

2,385

15,789

Regeneron Pharmaceuticals, Inc.*

 

4,347

105,110

Repligen Corp.*

 

2,475

10,172

Rigel Pharmaceuticals, Inc.*

 

3,437

32,686

Sangamo Biosciences, Inc.*

 

2,918

17,275

Savient Pharmaceuticals, Inc.*

 

4,666

63,504

Sciclone Pharmaceuticals, Inc.*

 

2,822

6,575

Seattle Genetics, Inc.*

 

5,741

58,329

SIGA Technologies, Inc.*

 

2,047

11,873

Spectrum Pharmaceuticals, Inc.*

 

2,586

11,482

StemCells, Inc.*

 

8,151

10,270

Synta Pharmaceuticals Corp.*

 

1,334

6,750

Theravance, Inc.*

 

3,677

48,058

Vanda Pharmaceuticals, Inc.*

 

1,839

20,670

Vical, Inc.*

 

2,625

8,636

Zymogenetics, Inc.*

 

2,581

16,493

 

 

 

2,504,953

 

 

 

 

Building Products - 0.6%

 

 

 

AAON, Inc.

 

861

16,781

American Woodmark Corp.

 

707

13,914

Ameron International Corp.

 

636

40,361

Apogee Enterprises, Inc.

 

1,923

26,922

Builders FirstSource, Inc.:

 

 

 

     Common Stock*

 

2,767

10,653

     Rights (Expires 1/14/2010)*

 

2,041

499

Gibraltar Industries, Inc.*

 

1,862

29,289

Griffon Corp.*

 

2,998

36,636

Insteel Industries, Inc.

 

1,210

15,730

NCI Building Systems, Inc.*

 

6,192

11,208

Quanex Building Products Corp.

 

2,733

46,379

Simpson Manufacturing Co., Inc.

 

2,626

70,613

Trex Co., Inc.*

 

1,069

20,952

Universal Forest Products, Inc.

 

1,324

48,736

 

 

 

388,673

 

 

 

 

Capital Markets - 2.5%

 

 

 

Allied Capital Corp.*

 

12,288

44,360

American Capital Ltd.*

 

19,367

47,255

Apollo Investment Corp.

 

11,247

107,184

Ares Capital Corp.

 

7,501

93,387

Artio Global Investors, Inc.*

 

1,917

48,864

BGC Partners, Inc.

 

2,668

12,326

BlackRock Kelso Capital Corp.

 

1,036

8,827

Broadpoint Gleacher Securities Group, Inc.*

 

3,814

17,010

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Capital Markets - Cont'd

 

 

 

Calamos Asset Management, Inc.

 

1,353

$15,600

Capital Southwest Corp.

 

205

16,154

Cohen & Steers, Inc.

 

1,187

27,111

Cowen Group, Inc.*

 

1,200

7,104

Diamond Hill Investment Group, Inc.

 

164

10,534

Duff & Phelps Corp.

 

1,119

20,433

E*Trade Financial Corp.*

 

107,702

188,478

Epoch Holding Corp.

 

804

8,402

Evercore Partners, Inc.

 

993

30,187

FBR Capital Markets Corp.*

 

1,352

8,355

Fifth Street Finance Corp.

 

2,258

24,251

GAMCO Investors, Inc.

 

495

23,904

GFI Group, Inc.

 

4,486

20,501

Gladstone Capital Corp.

 

1,681

12,944

Gladstone Investment Corp.

 

1,760

8,026

Harris & Harris Group, Inc.*

 

1,858

8,491

Hercules Technology Growth Capital, Inc.

 

2,420

25,144

International Assets Holding Corp.*

 

870

12,650

JMP Group, Inc.

 

1,155

11,227

Kayne Anderson Energy Development Co.

 

798

11,611

KBW, Inc.*

 

2,402

65,719

Knight Capital Group, Inc.*

 

6,414

98,776

Kohlberg Capital Corp.

 

1,466

6,685

LaBranche & Co., Inc.*

 

4,089

11,613

Main Street Capital Corp.

 

559

9,011

MCG Capital Corp.*

 

4,489

19,392

MF Global Ltd.*

 

6,677

46,405

MVC Capital, Inc.

 

1,494

17,629

NGP Capital Resources Co.

 

1,493

12,138

Oppenheimer Holdings, Inc.

 

640

21,261

optionsXpress Holdings, Inc.

 

2,914

45,021

PennantPark Investment Corp.

 

1,728

15,414

Penson Worldwide, Inc.*

 

1,340

12,140

Piper Jaffray Co.'s*

 

1,360

68,830

Prospect Capital Corp.

 

4,384

51,775

Pzena Investment Management, Inc.*

 

491

3,997

Riskmetrics Group, Inc.*

 

1,617

25,726

Safeguard Scientifics, Inc.*

 

1,400

14,434

Sanders Morris Harris Group, Inc.

 

1,551

8,530

Stifel Financial Corp.*

 

2,074

122,864

SWS Group, Inc.

 

1,661

20,098

Thomas Weisel Partners Group, Inc.*

 

1,424

5,383

TICC Capital Corp.

 

2,100

12,705

TradeStation Group, Inc.*

 

2,296

18,115

Triangle Capital Corp.

 

586

7,085

US Global Investors, Inc.

 

1,009

12,421

Virtus Investment Partners, Inc.*

 

434

6,901

Westwood Holdings Group, Inc.

 

428

15,553

 

 

 

1,645,941

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Chemicals - 2.1%

 

 

 

American Vanguard Corp.

 

1,505

$12,491

Ampal-American Israel Corp.*

 

1,584

4,277

Arch Chemicals, Inc.

 

1,728

53,361

Balchem Corp.

 

1,256

42,088

Calgon Carbon Corp.*

 

3,776

52,486

China Green Agriculture, Inc.*

 

648

9,526

Ferro Corp.

 

5,982

49,292

H.B. Fuller Co.

 

3,352

76,258

Hawkins, Inc.

 

688

15,019

ICO, Inc.

 

2,207

16,133

Innophos Holdings, Inc.

 

1,189

27,335

Innospec, Inc.

 

1,631

16,457

Koppers Holdings, Inc.

 

1,406

42,799

Landec Corp.*

 

1,849

11,538

LSB Industries, Inc.*

 

1,190

16,779

Minerals Technologies, Inc.

 

1,292

70,375

NewMarket Corp.

 

692

79,421

NL Industries, Inc.

 

532

3,692

Olin Corp.

 

5,379

94,240

OM Group, Inc.*

 

2,106

66,107

Omnova Solutions, Inc.*

 

3,020

18,513

PolyOne Corp.*

 

6,363

47,532

Quaker Chemical Corp.

 

819

16,904

Rockwood Holdings, Inc.*

 

3,398

80,057

Schulman A, Inc.

 

1,613

32,550

Sensient Technologies Corp.

 

3,361

88,394

ShengdaTech, Inc.*

 

1,941

11,898

Solutia, Inc.*

 

8,227

104,483

Spartech Corp.

 

2,109

21,638

Stepan Co.

 

490

31,757

STR Holdings, Inc.*

 

852

13,385

Westlake Chemical Corp.

 

1,345

33,531

WR Grace & Co.*

 

4,986

126,395

Zep, Inc.

 

1,487

25,755

Zoltek Co.'s, Inc.*

 

1,916

18,202

 

 

 

1,430,668

 

 

 

 

Commercial Banks - 5.7%

 

 

 

1st Source Corp.

 

1,038

16,701

Alliance Financial Corp.

 

324

8,797

American National Bankshares, Inc.

 

482

10,556

Ameris Bancorp

 

1,097

7,857

Ames National Corp.

 

514

10,851

Arrow Financial Corp.

 

649

16,225

Auburn National Bancorporation, Inc.

 

185

3,643

Bancfirst Corp.

 

454

16,816

Banco Latinoamericano de Exportaciones SA

 

1,891

26,285

Bancorp Rhode Island, Inc.

 

288

7,396

Bancorp, Inc.*

 

881

6,044

Bank of Kentucky Financial Corp.

 

243

4,564

Bank of Marin Bancorp

 

408

13,284

Bank of the Ozarks, Inc.

 

986

28,860

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Commercial Banks - Cont'd

 

 

 

Banner Corp.

 

1,191

$3,192

Bar Harbor Bankshares

 

227

6,231

Boston Private Financial Holdings, Inc.

 

4,678

26,992

Bridge Bancorp, Inc.

 

491

11,804

Bryn Mawr Bank Corp.

 

548

8,269

Camden National Corp.

 

528

17,266

Cape Bancorp, Inc.*

 

930

6,250

Capital City Bank Group, Inc.

 

939

12,996

Cardinal Financial Corp.

 

1,926

16,833

Cathay General Bancorp

 

3,651

27,565

Center Bancorp, Inc.

 

869

7,751

Centerstate Banks of Florida, Inc.

 

736

7,426

Central Pacific Financial Corp.*

 

2,178

2,853

Century Bancorp, Inc.

 

277

6,102

Chemical Financial Corp.

 

1,467

34,592

Chicopee Bancorp, Inc.*

 

510

6,365

Citizens & Northern Corp.

 

715

6,821

Citizens Holding Co.

 

314

7,030

Citizens Republic Bancorp, Inc.*

 

24,665

17,019

City Holding Co.

 

1,100

35,563

CNB Financial Corp.

 

682

10,905

CoBiz Financial, Inc.

 

1,421

6,750

Columbia Banking System, Inc.

 

1,937

31,341

Community Bank System, Inc.

 

2,256

43,563

Community Trust Bancorp, Inc.

 

1,102

26,944

CVB Financial Corp.

 

5,850

50,544

Danvers Bancorp, Inc.

 

1,422

18,472

Eagle Bancorp, Inc.*

 

781

8,177

East West Bancorp, Inc.

 

6,317

99,809

Enterprise Bancorp, Inc.

 

399

4,369

Enterprise Financial Services Corp.

 

881

6,793

Farmers Capital Bank Corp.

 

495

5,059

Financial Institutions, Inc.

 

874

10,296

First Bancorp (North Carolina)

 

1,145

15,996

First Bancorp (Puerto Rico)

 

6,345

14,593

First Bancorp, Inc. (Maine)

 

691

10,655

First Busey Corp.

 

1,922

7,477

First California Financial Group, Inc.*

 

446

1,222

First Commonwealth Financial Corp.

 

5,869

27,291

First Community Bancshares, Inc.

 

723

8,712

First Financial Bancorp

 

3,548

51,659

First Financial Bankshares, Inc.

 

1,436

77,874

First Financial Corp.

 

866

26,430

First Merchants Corp.

 

1,736

10,312

First Midwest Bancorp, Inc.

 

3,569

38,866

First of Long Island Corp.

 

427

10,782

First South Bancorp, Inc.

 

641

6,602

FirstMerit Corp.

 

5,699

114,778

FNB Corp.

 

7,863

53,390

German American Bancorp, Inc.

 

875

14,219

Glacier Bancorp, Inc.

 

4,244

58,228

Great Southern Bancorp, Inc.

 

692

14,781

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Commercial Banks - Cont'd

 

 

 

Guaranty Bancorp*

 

4,153

$5,482

Hampton Roads Bankshares, Inc.

 

1,456

2,519

Hancock Holding Co.

 

1,894

82,938

Harleysville National Corp.

 

3,271

21,065

Heartland Financial USA, Inc.

 

1,017

14,594

Heritage Financial Corp.

 

440

6,063

Home Bancorp, Inc.*

 

705

8,594

Home Bancshares, Inc.

 

1,056

25,418

Iberiabank Corp.

 

1,422

76,518

Independent Bank Corp.

 

1,533

32,024

International Bancshares Corp.

 

3,595

68,053

Investors Bancorp, Inc.*

 

3,224

35,271

Lakeland Bancorp, Inc.

 

1,608

10,275

Lakeland Financial Corp.

 

866

14,938

MainSource Financial Group, Inc.

 

1,480

7,074

MB Financial, Inc.

 

3,468

68,389

Merchants Bancshares, Inc.

 

377

8,535

Metro Bancorp, Inc.*

 

413

5,191

Midsouth Bancorp, Inc.

 

362

5,032

Nara Bancorp, Inc.*

 

1,816

20,593

National Bankshares, Inc.

 

547

15,475

National Penn Bancshares, Inc.:

 

 

 

     Common Stock

 

8,719

50,483

     Fractional Shares (b)*

 

25,000

5

NBT Bancorp, Inc.

 

2,365

48,175

Northfield Bancorp, Inc.

 

1,332

18,009

Northrim BanCorp, Inc.

 

500

8,440

Norwood Financial Corp.

 

148

4,231

Ohio Valley Banc Corp.

 

315

6,939

Old National Bancorp

 

6,003

74,617

Old Point Financial Corp.

 

159

2,472

Old Second Bancorp, Inc.

 

1,095

7,545

Oriental Financial Group, Inc.

 

1,831

19,775

Orrstown Financial Services, Inc.

 

404

14,092

Pacific Capital Bancorp

 

3,497

3,357

Pacific Continental Corp.

 

850

9,724

PacWest Bancorp

 

1,839

37,056

Park National Corp.

 

759

44,690

Peapack Gladstone Financial Corp.

 

695

8,813

Penns Woods Bancorp, Inc.

 

303

9,829

Peoples Bancorp, Inc.

 

821

7,947

Peoples Financial Corp.

 

299

6,076

Pinnacle Financial Partners, Inc.*

 

2,433

34,597

Porter Bancorp, Inc.

 

221

3,324

Premierwest Bancorp

 

1,620

2,300

PrivateBancorp, Inc.

 

3,638

32,633

Prosperity Bancshares, Inc.

 

3,181

128,735

Renasant Corp.

 

1,454

19,774

Republic Bancorp, Inc.

 

737

15,182

Republic First Bancorp, Inc.*

 

566

2,417

S&T Bancorp, Inc.

 

1,624

27,624

Sandy Spring Bancorp, Inc.

 

1,309

11,637

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Commercial Banks - Cont'd

 

 

 

Santander BanCorp*

 

295

$3,623

SCBT Financial Corp.

 

872

24,146

Shore Bancshares, Inc.

 

669

9,674

Sierra Bancorp

 

592

4,517

Signature Bank*

 

2,799

89,288

Simmons First National Corp.

 

1,010

28,078

Smithtown Bancorp, Inc.

 

1,158

6,890

South Financial Group, Inc.

 

12,507

8,063

Southside Bancshares, Inc.

 

905

17,763

Southwest Bancorp, Inc.

 

1,158

8,037

State Bancorp, Inc.

 

1,141

8,112

StellarOne Corp.

 

1,700

16,932

Sterling BanCorp.

 

1,434

10,239

Sterling Bancshares, Inc.

 

5,683

29,154

Sterling Financial Corp.*

 

3,940

2,443

Suffolk Bancorp

 

661

19,632

Sun Bancorp, Inc.*

 

1,172

4,394

Susquehanna Bancshares, Inc.

 

6,315

37,195

SVB Financial Group*

 

2,826

117,816

SY Bancorp, Inc.

 

792

16,909

Texas Capital Bancshares, Inc.*

 

2,458

34,314

Tompkins Financial Corp.

 

570

23,085

Tower Bancorp, Inc.

 

275

6,284

TowneBank

 

1,583

18,489

Trico Bancshares

 

961

16,001

Trustmark Corp.

 

4,356

98,184

UMB Financial Corp.

 

2,222

87,436

Umpqua Holdings Corp.

 

5,987

80,286

Union Bankshares Corp.

 

1,075

13,319

United Bankshares, Inc.

 

2,635

52,621

United Community Banks, Inc.*

 

5,653

19,164

United Security Bancshares

 

475

8,141

Univest Corp. of Pennsylvania

 

987

17,302

Washington Banking Co.

 

753

8,991

Washington Trust Bancorp, Inc.

 

909

14,162

Webster Financial Corp.

 

4,684

55,599

WesBanco, Inc.

 

1,582

19,522

West Bancorporation, Inc.

 

1,387

6,838

Westamerica Bancorporation

 

2,016

111,626

Western Alliance Bancorp*

 

3,621

13,687

Wilber Corp.

 

459

3,305

Wilshire Bancorp, Inc.

 

1,534

12,563

Wintrust Financial Corp.

 

1,654

50,927

Yadkin Valley Financial Corp.

 

913

3,342

 

 

 

3,766,320

 

 

 

 

Commercial Services & Supplies - 2.4%

 

 

 

ABM Industries, Inc.

 

3,171

65,513

ACCO Brands Corp.*

 

3,764

27,402

American Ecology Corp.

 

1,232

20,993

American Reprographics Co.*

 

2,509

17,588

Amrep Corp.*

 

138

1,891

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Commercial Services & Supplies - Cont'd

 

 

 

APAC Customer Services, Inc.*

 

2,008

$11,968

ATC Technology Corp.*

 

1,367

32,603

Bowne & Co., Inc.

 

2,221

14,836

Cenveo, Inc.*

 

3,827

33,486

Clean Harbors, Inc.*

 

1,480

88,223

Consolidated Graphics, Inc.*

 

675

23,639

Cornell Co.'s, Inc.*

 

762

17,297

Courier Corp.

 

832

11,856

Deluxe Corp.

 

3,526

52,150

EnergySolutions, Inc.

 

5,203

44,173

EnerNOC, Inc.*

 

967

29,387

Ennis, Inc.

 

1,786

29,987

Fuel Tech, Inc.*

 

1,212

9,902

G&K Services, Inc.

 

1,278

32,116

GEO Group, Inc.

 

 

 

     Common Stock*

 

3,532

77,280

     Escrow (b)*

 

100,000

12

Healthcare Services Group

 

2,987

64,101

Heritage-Crystal Clean, Inc.*

 

202

2,113

Herman Miller, Inc.

 

3,709

59,270

HNI Corp.

 

3,095

85,515

ICT Group, Inc.*

 

698

11,398

Innerworkings, Inc.*

 

1,691

9,977

Interface, Inc.

 

3,349

27,830

Kimball International, Inc., Class B

 

2,210

18,829

Knoll, Inc.

 

3,248

33,552

M&F Worldwide Corp.*

 

739

29,191

Mcgrath Rentcorp

 

1,629

36,424

Metalico, Inc.*

 

1,927

9,481

Mine Safety Appliances Co.

 

1,840

48,815

Mobile Mini, Inc.*

 

2,541

35,803

Multi-Color Corp.

 

757

9,243

North American Galvanizing & Coating, Inc.*

 

1,004

4,869

Perma-Fix Environmental Services*

 

4,267

9,686

Rollins, Inc.

 

3,024

58,303

Schawk, Inc.

 

1,200

16,320

Standard Parking Corp.*

 

515

8,178

Standard Register Co.

 

1,196

6,100

Steelcase, Inc.

 

4,927

31,336

SYKES Enterprises, Inc.*

 

2,390

60,873

Team, Inc.*

 

1,357

25,525

Tetra Tech, Inc.*

 

4,155

112,891

United Stationers, Inc.*

 

1,638

93,120

Viad Corp.

 

1,522

31,399

Waste Services, Inc.*

 

1,226

11,169

 

 

 

1,593,613

 

 

 

 

Communications Equipment - 3.0%

 

 

 

3Com Corp.*

 

26,834

201,255

Acme Packet, Inc.*

 

2,681

29,491

ADC Telecommunications, Inc.*

 

6,666

41,396

Adtran, Inc.

 

3,812

85,961

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Communications Equipment - Cont'd

 

 

 

Airvana, Inc.*

 

1,921

$14,600

Anaren, Inc.*

 

1,002

15,080

Arris Group, Inc.*

 

8,540

97,612

Aruba Networks, Inc.*

 

4,035

43,013

Bel Fuse, Inc., Class B

 

701

15,064

BigBand Networks, Inc.*

 

2,619

9,009

Black Box Corp.

 

1,286

36,445

Blue Coat Systems, Inc.*

 

2,724

77,743

Cogo Group, Inc.*

 

1,591

11,726

Communications Systems, Inc.

 

482

5,996

Comtech Telecommunications Corp.*

 

1,941

68,032

DG FastChannel, Inc.*

 

1,439

40,191

Digi International, Inc.*

 

1,699

15,495

Emcore Corp.*

 

5,846

6,255

EMS Technologies, Inc.*

 

1,050

15,225

Emulex Corp.*

 

5,723

62,381

Extreme Networks*

 

6,916

19,849

Globecomm Systems, Inc.*

 

1,607

12,567

Harmonic, Inc.*

 

6,897

43,658

Harris Stratex Networks, Inc.*

 

4,319

29,844

Hughes Communications, Inc.*

 

572

14,889

Infinera Corp.*

 

5,793

51,384

InterDigital, Inc.*

 

3,015

80,018

Ixia*

 

2,169

16,137

KVH Industries, Inc.*

 

1,103

16,269

Loral Space & Communications, Inc.*

 

739

23,360

Netgear, Inc.*

 

2,372

51,449

Network Equipment Technologies, Inc.*

 

2,304

9,331

Oplink Communications, Inc.*

 

1,413

23,159

Opnext, Inc.*

 

1,520

2,888

Palm, Inc.*

 

11,397

114,426

Parkervision, Inc.*

 

1,832

3,353

PC-Tel, Inc.*

 

1,456

8,620

Plantronics, Inc.

 

3,370

87,553

Polycom, Inc.*

 

5,784

144,426

Powerwave Technologies, Inc.*

 

10,470

13,192

Riverbed Technology, Inc.*

 

3,775

86,712

Seachange International, Inc.*

 

2,460

16,162

ShoreTel, Inc.*

 

3,051

17,635

Sonus Networks, Inc.*

 

15,017

31,686

Sycamore Networks, Inc.

 

1,328

27,768

Symmetricom, Inc.*

 

3,011

15,657

Tekelec*

 

4,596

70,227

Utstarcom, Inc.*

 

8,802

19,276

Viasat, Inc.*

 

1,792

56,950

 

 

 

2,000,415

 

 

 

 

Computers & Peripherals - 0.8%

 

 

 

3PAR, Inc.*

 

1,894

22,444

ActivIdentity Corp.*

 

3,619

8,505

Adaptec, Inc.*

 

8,430

28,240

Avid Technology, Inc.*

 

1,946

24,831

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Computers & Peripherals - Cont'd

 

 

 

Compellent Technologies, Inc.*

 

1,125

$25,515

Cray, Inc.*

 

2,516

16,153

Electronics for Imaging, Inc.*

 

3,397

44,195

Imation Corp.*

 

2,260

19,707

Immersion Corp.*

 

2,323

10,616

Intermec, Inc.*

 

4,280

55,041

Intevac, Inc.*

 

1,513

17,354

Isilon Systems, Inc.*

 

1,962

13,459

Netezza Corp.*

 

3,253

31,554

Novatel Wireless, Inc.*

 

2,100

16,737

Quantum Corp.*

 

14,503

42,494

Rimage Corp.*

 

646

11,202

Silicon Graphics International Corp.*

 

2,362

16,557

STEC, Inc.*

 

1,705

27,860

Stratasys, Inc.*

 

1,396

24,123

Super Micro Computer, Inc.*

 

1,763

19,604

Synaptics, Inc.*

 

2,366

72,518

 

 

 

548,709

 

 

 

 

Construction & Engineering - 0.9%

 

 

 

Argan, Inc.*

 

585

8,418

Comfort Systems USA, Inc.

 

2,669

32,936

Dycom Industries, Inc.*

 

2,691

21,609

EMCOR Group, Inc.*

 

4,536

122,018

Furmanite Corp.*

 

2,902

11,057

Granite Construction, Inc.

 

2,364

79,572

Great Lakes Dredge & Dock Corp.

 

2,761

17,891

Insituform Technologies, Inc.*

 

2,679

60,867

Integrated Electrical Services, Inc.*

 

617

3,609

Layne Christensen Co.*

 

1,408

40,424

MasTec, Inc.*

 

3,594

44,925

Michael Baker Corp.*

 

583

24,136

MYR Group, Inc.*

 

1,189

21,497

Northwest Pipe Co.*

 

689

18,507

Orion Marine Group, Inc.*

 

1,847

38,898

Pike Electric Corp.*

 

1,145

10,626

Primoris Services Corp.

 

644

5,133

Sterling Construction Co., Inc.*

 

919

17,626

Tutor Perini Corp.*

 

1,778

32,146

 

 

 

611,895

 

 

 

 

Construction Materials - 0.1%

 

 

 

Headwaters, Inc.*

 

4,077

26,582

Texas Industries, Inc.

 

1,630

57,034

United States Lime & Minerals, Inc.*

 

143

4,938

US Concrete, Inc.*

 

3,167

2,882

 

 

 

91,436

 

 

 

 

Consumer Finance - 0.5%

 

 

 

Advance America Cash Advance Centers, Inc.

 

3,524

19,593

Cardtronics, Inc.*

 

1,000

11,070

Cash America International, Inc.

 

2,037

71,213

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Consumer Finance - Cont'd

 

 

 

CompuCredit Holdings Corp.*

 

1,284

$4,276

Credit Acceptance Corp.*

 

415

17,471

Dollar Financial Corp.*

 

1,662

39,323

Ezcorp, Inc.*

 

3,122

53,730

First Cash Financial Services, Inc.*

 

1,531

33,973

First Marblehead Corp.*

 

4,239

9,029

Nelnet, Inc.

 

1,394

24,019

QC Holdings, Inc.

 

270

1,299

Rewards Network, Inc.

 

504

6,371

World Acceptance Corp.*

 

1,122

40,201

 

 

 

331,568

 

 

 

 

Containers & Packaging - 0.5%

 

 

 

AEP Industries, Inc.*

 

367

14,049

Boise, Inc.*

 

2,019

10,721

Bway Holding Co.*

 

596

11,455

Graphic Packaging Holding Co.*

 

7,706

26,740

Myers Industries, Inc.

 

2,159

19,647

Rock-Tenn Co.

 

2,647

133,435

Silgan Holdings, Inc.

 

1,845

106,788

 

 

 

322,835

 

 

 

 

Distributors - 0.0%

 

 

 

Audiovox Corp.*

 

1,390

9,855

Core-Mark Holding Co., Inc.*

 

670

22,083

 

 

 

31,938

 

 

 

 

Diversified Consumer Services - 1.1%

 

 

 

American Public Education, Inc.*

 

1,253

43,053

Bridgepoint Education, Inc.*

 

1,095

16,447

Capella Education Co.*

 

1,006

75,752

ChinaCast Education Corp.*

 

2,320

17,539

Coinstar, Inc.*

 

2,083

57,866

Corinthian Colleges, Inc.*

 

5,523

76,052

CPI Corp.

 

396

4,863

Grand Canyon Education, Inc.*

 

1,088

20,683

Jackson Hewitt Tax Service, Inc.*

 

2,266

9,970

K12, Inc.*

 

1,628

32,999

Learning Tree International, Inc.*

 

519

6,197

Lincoln Educational Services Corp.*

 

765

16,577

Mac-Gray Corp.*

 

905

9,321

Matthews International Corp.

 

2,100

74,403

Nobel Learning Communities, Inc.*

 

322

2,444

Pre-Paid Legal Services, Inc.*

 

508

20,869

Princeton Review, Inc.*

 

1,065

4,324

Regis Corp.

 

3,940

61,346

Sotheby's

 

4,616

103,768

Steiner Leisure Ltd.*

 

1,008

40,078

Stewart Enterprises, Inc.

 

5,547

28,567

Universal Technical Institute, Inc.*

 

1,363

27,533

 

 

 

750,651

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Diversified Financial Services - 0.5%

 

 

 

Asset Acceptance Capital Corp.*

 

1,189

$8,061

California First National Bancorp

 

145

1,894

Compass Diversified Holdings

 

1,641

20,939

Encore Capital Group, Inc.*

 

930

16,182

Financial Federal Corp.

 

1,866

51,315

Life Partners Holdings, Inc.

 

591

12,523

MarketAxess Holdings, Inc.

 

2,178

30,274

Medallion Financial Corp.

 

1,184

9,673

NewStar Financial, Inc.*

 

1,906

7,472

PHH Corp.*

 

3,753

60,461

Pico Holdings, Inc.*

 

1,561

51,092

Portfolio Recovery Associates, Inc.*

 

1,061

47,618

Primus Guaranty Ltd.*

 

1,277

3,895

Resource America, Inc.

 

783

3,163

 

 

 

324,562

 

 

 

 

Diversified Telecommunication Services - 0.7%

 

 

 

AboveNet, Inc.*

 

852

55,414

Alaska Communications Systems Group, Inc.

 

3,177

25,352

Atlantic Tele-Network, Inc.

 

617

33,941

Cbeyond, Inc.*

 

1,598

25,169

Cincinnati Bell, Inc.*

 

14,823

51,139

Cogent Communications Group, Inc.*

 

3,058

30,152

Consolidated Communications Holdings, Inc.

 

1,608

28,140

General Communication, Inc.*

 

2,900

18,502

Global Crossing Ltd.*

 

2,019

28,771

HickoryTech Corp.

 

1,030

9,095

inContact, Inc.*

 

2,138

6,264

Iowa Telecommunications Services, Inc.

 

2,351

39,403

Neutral Tandem, Inc.*

 

2,264

51,506

PAETEC Holding Corp.*

 

8,470

35,151

Premiere Global Services, Inc.*

 

4,193

34,592

SureWest Communications*

 

1,128

11,235

 

 

 

483,826

 

 

 

 

Electric Utilities - 1.2%

 

 

 

Allete, Inc.

 

2,023

66,112

Central Vermont Public Service Corp.

 

824

17,139

Cleco Corp.

 

4,168

113,911

El Paso Electric Co.*

 

3,099

62,848

Empire District Electric Co.

 

2,363

44,259

IDACORP, Inc.

 

3,253

103,933

MGE Energy, Inc.

 

1,594

56,970

PNM Resources, Inc.

 

5,977

75,609

Portland General Electric Co.

 

5,184

105,805

UIL Holdings Corp.

 

2,024

56,834

Unisource Energy Corp.

 

2,457

79,091

Unitil Corp.

 

726

16,684

 

 

 

799,195

 

 

 

 

Electrical Equipment - 2.2%

 

 

 

A.O. Smith Corp.

 

1,514

65,692

Acuity Brands, Inc.

 

2,973

105,958

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Electrical Equipment - Cont'd

 

 

 

Advanced Battery Technologies, Inc.*

 

3,310

$13,240

American Superconductor Corp.*

 

2,996

122,536

AZZ, Inc.*

 

892

29,168

Baldor Electric Co.

 

3,211

90,197

Belden, Inc.

 

3,216

70,495

Brady Corp.

 

3,305

99,183

Broadwind Energy, Inc.*

 

2,478

20,047

Chase Corp.

 

480

5,669

China BAK Battery, Inc.*

 

2,409

6,697

Encore Wire Corp.

 

1,252

26,380

Ener1, Inc.*

 

3,304

20,947

Energy Conversion Devices, Inc.*

 

3,308

34,966

EnerSys*

 

2,784

60,886

Franklin Electric Co., Inc.

 

1,593

46,324

FuelCell Energy, Inc.*

 

5,465

20,548

Fushi Copperweld, Inc.*

 

1,149

11,628

GrafTech International Ltd.*

 

8,291

128,925

GT Solar International, Inc.*

 

2,291

12,738

Harbin Electric, Inc.*

 

894

18,363

II-VI, Inc.*

 

1,792

56,986

LaBarge, Inc.*

 

972

11,713

Lihua International, Inc.*

 

220

2,299

LSI Industries, Inc.

 

1,507

11,875

Microvision, Inc.*

 

4,522

14,335

Orion Energy Systems, Inc.*

 

723

3,174

Polypore International, Inc.*

 

1,562

18,588

Powell Industries, Inc.*

 

590

18,603

Power-One, Inc.*

 

5,945

25,861

PowerSecure International, Inc.*

 

1,349

9,726

Preformed Line Products Co.

 

155

6,789

Regal-Beloit Corp.

 

2,472

128,396

SatCon Technology Corp.*

 

4,075

11,491

Ultralife Corp.*

 

1,001

4,324

Valence Technology, Inc.*

 

4,040

3,676

Vicor Corp.*

 

1,546

14,378

Woodward Governor Co.

 

4,159

107,177

 

 

 

1,459,978

 

 

 

 

Electronic Equipment & Instruments - 2.1%

 

 

 

Agilysys, Inc.

 

1,051

9,564

Anixter International, Inc.*

 

2,055

96,790

Benchmark Electronics, Inc.*

 

4,504

85,171

Brightpoint, Inc.*

 

3,455

25,394

Checkpoint Systems, Inc.*

 

2,682

40,901

China Security & Surveillance Technology, Inc.*

 

3,042

23,241

Cogent, Inc.*

 

3,008

31,253

Cognex Corp.

 

2,736

48,482

Coherent, Inc.*

 

1,494

44,417

Comverge, Inc.*

 

1,315

14,781

CPI International, Inc.*

 

510

6,752

CTS Corp.

 

2,326

22,376

Daktronics, Inc.

 

2,468

22,730

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Electronic Equipment & Instruments - Cont'd

 

 

 

DDi Corp.*

 

1,132

$5,535

DTS, Inc.*

 

1,199

41,018

Echelon Corp.*

 

2,290

26,472

Electro Rent Corp.

 

1,223

14,113

Electro Scientific Industries, Inc.*

 

1,883

20,374

FARO Technologies, Inc.*

 

1,156

24,785

ICx Technologies, Inc.*

 

1,092

10,396

Insight Enterprises, Inc.*

 

3,152

35,996

IPG Photonics Corp.*

 

1,532

25,646

L-1 Identity Solutions, Inc.*

 

5,161

38,656

Littelfuse, Inc.*

 

1,499

48,193

Maxwell Technologies, Inc.*

 

1,454

25,939

Measurement Specialties, Inc.*

 

1,150

11,558

Mercury Computer Systems, Inc.*

 

1,566

17,242

Methode Electronics, Inc.

 

2,606

22,620

MTS Systems Corp.

 

1,156

33,223

Multi-Fineline Electronix, Inc.*

 

692

19,632

Newport Corp.*

 

2,495

22,929

OSI Systems, Inc.*

 

1,075

29,326

PAR Technology Corp.*

 

642

3,711

Park Electrochemical Corp.

 

1,494

41,294

PC Connection, Inc.*

 

756

5,103

PC Mall, Inc.*

 

882

4,604

Plexus Corp.*

 

2,723

77,605

Radisys Corp.*

 

1,788

17,075

RAE Systems, Inc.*

 

3,207

3,528

Rofin-Sinar Technologies, Inc.*

 

1,995

47,102

Rogers Corp.*

 

1,083

32,826

Scansource, Inc.*

 

1,829

48,834

Smart Modular Technologies WWH, Inc.*

 

2,531

15,920

Spectrum Control, Inc.*

 

993

9,404

SYNNEX Corp.*

 

1,344

41,207

Technitrol, Inc.

 

2,828

12,387

TTM Technologies, Inc.*

 

2,984

34,406

Universal Display Corp.*

 

2,015

24,905

X-Rite, Inc.*

 

2,048

4,465

Zygo Corp.*

 

1,269

8,540

 

 

 

1,378,421

 

 

 

 

Energy Equipment & Services - 1.7%

 

 

 

Allis-Chalmers Energy, Inc.*

 

4,233

15,959

Basic Energy Services, Inc.*

 

1,787

15,904

Bolt Technology Corp.*

 

687

7,571

Boots & Coots, Inc.*

 

6,175

10,189

Bristow Group, Inc.*

 

2,462

94,664

BronCo Drilling Co., Inc.*

 

1,634

8,284

Cal Dive International, Inc.*

 

3,095

23,398

CARBO Ceramics, Inc.

 

1,329

90,598

Complete Production Services, Inc.*

 

4,025

52,325

Dawson Geophysical Co.*

 

533

12,318

Dril-Quip, Inc.*

 

2,007

113,355

ENGlobal Corp.*

 

1,283

4,016

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Energy Equipment & Services - Cont'd

 

 

 

Geokinetics, Inc.*

 

381

$3,665

Global Industries Ltd.*

 

6,882

49,069

Gulf Island Fabrication, Inc.

 

845

17,770

Gulfmark Offshore, Inc.*

 

1,570

44,447

Hercules Offshore, Inc.*

 

7,737

36,983

Hornbeck Offshore Services, Inc.*

 

1,580

36,782

ION Geophysical Corp.*

 

7,305

43,246

Key Energy Services, Inc.*

 

8,527

74,952

Lufkin Industries, Inc.

 

1,026

75,103

Matrix Service Co.*

 

1,807

19,245

Natural Gas Services Group, Inc.*

 

835

15,740

Newpark Resources*

 

6,117

25,875

OYO Geospace Corp.*

 

325

13,939

Parker Drilling Co.*

 

8,293

41,050

PHI, Inc.*

 

914

18,920

Pioneer Drilling Co.*

 

2,949

23,297

RPC, Inc.

 

1,943

20,207

Sulphco, Inc.*

 

4,243

2,843

Superior Well Services, Inc.*

 

962

13,718

T-3 Energy Services, Inc.*

 

868

22,134

Tetra Technologies, Inc.*

 

5,199

57,605

TGC Industries, Inc.*

 

1,044

4,082

Union Drilling, Inc.*

 

688

4,300

Vantage Drilling Co.*

 

2,359

3,798

Willbros Group, Inc.*

 

2,852

48,113

 

 

 

1,165,464

 

 

 

 

Food & Staples Retailing - 0.8%

 

 

 

Andersons, Inc.

 

1,252

32,327

Arden Group, Inc.

 

92

8,797

Casey's General Stores, Inc.

 

3,504

111,848

Diedrich Coffee, Inc.*

 

238

8,294

Great Atlantic & Pacific Tea Co.*

 

2,321

27,365

Ingles Markets, Inc.

 

1,002

15,160

Nash Finch Co.

 

885

32,825

Pantry, Inc.*

 

1,631

22,165

Pricesmart, Inc.

 

1,150

23,506

Ruddick Corp.

 

2,966

76,315

Spartan Stores, Inc.

 

1,655

23,650

Susser Holdings Corp.*

 

620

5,326

United Natural Foods, Inc.*

 

2,967

79,337

Village Super Market, Inc.

 

430

11,748

Weis Markets, Inc.

 

764

27,779

Winn-Dixie Stores, Inc.*

 

3,758

37,730

 

 

 

544,172

 

 

 

 

Food Products - 1.4%

 

 

 

AgFeed Industries, Inc.*

 

1,582

7,910

Alico, Inc.

 

267

7,599

American Dairy, Inc.*

 

566

12,271

American Italian Pasta Co.*

 

1,446

50,306

B&G Foods, Inc.

 

1,602

14,706

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Food Products - Cont'd

 

 

 

Calavo Growers, Inc.

 

718

$12,206

Cal-Maine Foods, Inc.

 

1,004

34,216

Chiquita Brands International, Inc.*

 

3,174

57,259

Darling International, Inc.*

 

5,673

47,540

Diamond Foods, Inc.

 

1,173

41,688

Dole Food Co., Inc.*

 

2,481

30,789

Farmer Bros Co.

 

538

10,620

Fresh Del Monte Produce, Inc.*

 

2,826

62,455

Griffin Land & Nurseries, Inc.

 

267

7,778

Hain Celestial Group, Inc.*

 

2,807

47,747

Harbinger Group, Inc.*

 

714

5,012

HQ Sustainable Maritime Industries, Inc.*

 

532

3,745

Imperial Sugar Co.

 

949

16,551

J&J Snack Foods Corp.

 

977

39,041

Lancaster Colony Corp.

 

1,325

65,853

Lance, Inc.

 

1,981

52,100

Lifeway Foods, Inc.*

 

385

4,574

Omega Protein Corp.*

 

1,463

6,379

Overhill Farms, Inc.*

 

1,250

6,075

Sanderson Farms, Inc.

 

1,403

59,150

Seneca Foods Corp.*

 

510

12,174

Smart Balance, Inc.*

 

4,322

25,932

Synutra International, Inc.*

 

1,420

19,184

Tootsie Roll Industries, Inc.

 

1,667

45,642

TreeHouse Foods, Inc.*

 

2,178

84,637

Zhongpin, Inc.*

 

1,470

22,947

 

 

 

914,086

 

 

 

 

Gas Utilities - 1.2%

 

 

 

Chesapeake Utilities Corp.

 

645

20,672

Laclede Group, Inc.

 

1,529

51,634

New Jersey Resources Corp.

 

2,908

108,759

Nicor, Inc.

 

3,120

131,352

Northwest Natural Gas Co.

 

1,831

82,468

Piedmont Natural Gas Co., Inc.

 

5,070

135,624

South Jersey Industries, Inc.

 

2,055

78,460

Southwest Gas Corp.

 

3,085

88,015

WGL Holdings, Inc.

 

3,460

116,048

 

 

 

813,032

 

 

 

 

Health Care Equipment & Supplies - 3.5%

 

 

 

Abaxis, Inc.*

 

1,512

38,632

Abiomed, Inc.*

 

2,131

18,625

Accuray, Inc.*

 

2,876

16,134

AGA Medical Holdings, Inc.*

 

952

14,061

Align Technology, Inc.*

 

4,017

71,583

Alphatec Holdings, Inc.*

 

1,987

10,611

American Medical Systems Holdings, Inc.*

 

5,093

98,244

Analogic Corp.

 

883

34,004

Angiodynamics, Inc.*

 

1,688

27,143

Atrion Corp.

 

120

18,686

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Health Care Equipment & Supplies - Cont'd

 

 

 

ATS Medical, Inc.*

 

3,743

$12,090

Bovie Medical Corp.*

 

1,345

10,504

Cantel Medical Corp.*

 

865

17,456

Cardiac Science Corp.*

 

1,550

3,457

Cardiovascular Systems, Inc.*

 

710

3,259

Conceptus, Inc.*

 

2,213

41,516

Conmed Corp.*

 

2,005

45,714

CryoLife, Inc.*

 

2,218

14,240

Cutera, Inc.*

 

1,050

8,936

Cyberonics, Inc.*

 

1,886

38,550

Cynosure, Inc.*

 

762

8,755

Delcath Systems, Inc.*

 

1,790

9,201

DexCom, Inc.*

 

3,094

25,000

Electro-Optical Sciences, Inc.*

 

1,393

14,431

Endologix, Inc.*

 

3,467

18,306

EnteroMedics, Inc.*

 

1,203

674

ev3, Inc.*

 

5,149

68,688

Exactech, Inc.*

 

562

9,728

Greatbatch, Inc.*

 

1,681

32,326

Haemonetics Corp.*

 

1,770

97,615

Hansen Medical, Inc.*

 

1,359

4,118

HeartWare International, Inc.*

 

368

13,053

Home Diagnostics, Inc.*

 

913

5,569

ICU Medical, Inc.*

 

878

31,994

Immucor, Inc.*

 

4,860

98,366

Insulet Corp.*

 

2,389

34,115

Integra LifeSciences Holdings Corp.*

 

1,304

47,961

Invacare Corp.

 

1,994

49,730

IRIS International, Inc.*

 

1,248

15,425

Kensey Nash Corp.*

 

576

14,688

MAKO Surgical Corp.*

 

1,032

11,455

Masimo Corp.*

 

3,499

106,440

Medical Action Industries, Inc.*

 

1,125

18,067

Meridian Bioscience, Inc.

 

2,792

60,168

Merit Medical Systems, Inc.*

 

2,024

39,043

Micrus Endovascular Corp.*

 

1,240

18,612

Natus Medical, Inc.*

 

2,021

29,891

Neogen Corp.*

 

1,366

32,251

NuVasive, Inc.*

 

2,516

80,462

NxStage Medical, Inc.*

 

1,585

13,235

OraSure Technologies, Inc.*

 

3,551

18,039

Orthofix International NV*

 

1,180

36,545

Orthovita, Inc.*

 

4,562

16,013

Palomar Medical Technologies, Inc.*

 

1,454

14,656

Quidel Corp.*

 

1,778

24,501

Rochester Medical Corp.*

 

791

8,804

Rockwell Medical Technologies, Inc.*

 

1,116

8,582

RTI Biologics, Inc.*

 

4,061

15,594

Sirona Dental Systems, Inc.*

 

1,170

37,136

Somanetics Corp.*

 

910

15,971

SonoSite, Inc.*

 

1,183

27,954

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Health Care Equipment & Supplies - Cont'd

 

 

 

Spectranetics Corp.*

 

2,522

$17,553

Stereotaxis, Inc.*

 

2,011

7,903

STERIS Corp.

 

4,034

112,831

SurModics, Inc.*

 

1,133

25,674

Symmetry Medical, Inc.*

 

2,600

20,956

Synovis Life Technologies, Inc.*

 

796

10,276

Thoratec Corp.*

 

3,896

104,880

TomoTherapy, Inc.*

 

3,263

12,726

TranS1, Inc.*

 

973

3,843

Utah Medical Products, Inc.

 

254

7,447

Vascular Solutions, Inc.*

 

1,278

10,722

Volcano Corp.*

 

3,455

60,048

West Pharmaceutical Services, Inc.

 

2,261

88,631

Wright Medical Group, Inc.*

 

2,724

51,620

Young Innovations, Inc.

 

430

10,655

Zoll Medical Corp.*

 

1,532

40,935

 

 

 

2,363,307

 

 

 

 

Health Care Providers & Services - 3.7%

 

 

 

Air Methods Corp.*

 

746

25,081

Alliance Imaging, Inc.*

 

1,964

11,214

Allied Healthcare International, Inc.*

 

3,553

10,339

Allion Healthcare, Inc.*

 

1,570

10,299

Almost Family, Inc.*

 

508

20,081

Amedisys, Inc.*

 

1,887

91,633

America Service Group, Inc.

 

652

10,347

American Caresource Holdings, Inc.*

 

836

2,006

American Dental Partners, Inc.*

 

1,023

13,197

AMERIGROUP Corp.*

 

3,649

98,377

AMN Healthcare Services, Inc.*

 

2,252

20,403

AmSurg Corp.*

 

2,117

46,616

Assisted Living Concepts, Inc.*

 

694

18,301

Bio-Reference Laboratories, Inc.*

 

814

31,901

BioScrip, Inc.*

 

2,676

22,371

Capital Senior Living Corp.*

 

1,797

9,021

CardioNet, Inc.*

 

1,876

11,143

Catalyst Health Solutions, Inc.*

 

2,530

92,269

Centene Corp.*

 

2,972

62,917

Chemed Corp.

 

1,559

74,785

Chindex International, Inc.*

 

880

12,434

Clarient, Inc.*

 

2,361

6,257

Continucare Corp.*

 

2,312

10,103

Corvel Corp.*

 

513

17,206

Cross Country Healthcare, Inc.*

 

2,311

22,902

Emergency Medical Services Corp.*

 

2,021

109,437

Emeritus Corp.*

 

1,367

25,631

Ensign Group, Inc.

 

663

10,190

Genoptix, Inc.*

 

1,162

41,286

Gentiva Health Services, Inc.*

 

1,998

53,966

Hanger Orthopedic Group, Inc.*

 

1,742

24,092

Health Grades, Inc.*

 

1,877

8,052

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Health Care Providers & Services - Cont'd

 

 

 

Healthsouth Corp.*

 

6,382

$119,790

HealthSpring, Inc.*

 

3,380

59,522

Healthways, Inc.*

 

2,328

42,696

HMS Holdings Corp.*

 

1,782

86,766

inVentiv Health, Inc.*

 

2,308

37,320

IPC The Hospitalist Co., Inc.*

 

1,110

36,909

Kindred Healthcare, Inc.*

 

2,688

49,620

Landauer, Inc.

 

643

39,480

LCA-Vision, Inc.*

 

1,300

6,656

LHC Group, Inc.*

 

1,073

36,064

Magellan Health Services, Inc.*

 

2,434

99,137

Medcath Corp.*

 

1,026

8,116

Metropolitan Health Networks, Inc.*

 

3,191

6,350

Molina Healthcare, Inc.*

 

916

20,949

MWI Veterinary Supply, Inc.*

 

794

29,934

National Healthcare Corp.

 

552

19,933

National Research Corp.

 

137

2,836

Nighthawk Radiology Holdings, Inc.*

 

1,459

6,609

NovaMed, Inc.*

 

1,577

6,119

Odyssey HealthCare, Inc.*

 

2,272

35,398

Owens & Minor, Inc.

 

2,877

123,510

PharMerica Corp.*

 

2,231

35,428

Providence Service Corp.*

 

729

11,518

PSS World Medical, Inc.*

 

4,097

92,469

Psychiatric Solutions, Inc.*

 

3,882

82,066

RadNet, Inc.*

 

1,700

3,468

RehabCare Group, Inc.*

 

1,691

51,457

Res-Care, Inc.*

 

1,816

20,339

Select Medical Holdings Corp.*

 

2,338

24,830

Skilled Healthcare Group, Inc.*

 

1,394

10,385

Sun Healthcare Group, Inc.*

 

3,148

28,867

Sunrise Senior Living, Inc.*

 

3,577

11,518

Triple-S Management Corp., Class B*

 

1,418

24,957

U.S. Physical Therapy, Inc.*

 

799

13,527

Universal American Corp.*

 

1,866

21,832

Virtual Radiologic Corp.*

 

557

7,107

WellCare Health Plans, Inc.*

 

2,913

107,082

 

 

 

2,444,421

 

 

 

 

Health Care Technology - 0.7%

 

 

 

AMICAS, Inc.*

 

2,782

15,134

athenahealth, Inc.*

 

2,311

104,550

Computer Programs & Systems, Inc.

 

715

32,926

Eclipsys Corp.*

 

3,876

71,783

MedAssets, Inc.*

 

2,722

57,734

Medidata Solutions, Inc.*

 

550

8,580

MedQuist, Inc.

 

724

4,844

Merge Healthcare, Inc.*

 

2,049

6,885

Omnicell, Inc.*

 

2,179

25,472

Phase Forward, Inc.*

 

2,976

45,682

Quality Systems, Inc.

 

1,627

102,159

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Health Care Technology - Cont'd

 

 

 

Transcend Services, Inc.*

 

495

$10,573

Vital Images, Inc.*

 

993

12,601

 

 

 

498,923

 

 

 

 

Hotels, Restaurants & Leisure - 2.4%

 

 

 

AFC Enterprises, Inc.*

 

1,734

14,149

Ambassadors Group, Inc.

 

1,297

17,237

Ameristar Casinos, Inc.

 

1,765

26,881

Bally Technologies, Inc.*

 

3,758

155,168

Benihana, Inc.*

 

1,039

3,938

BJ's Restaurants, Inc.*

 

1,387

26,103

Bluegreen Corp.*

 

1,023

2,476

Bob Evans Farms, Inc.

 

2,118

61,316

Buffalo Wild Wings, Inc.*

 

1,243

50,056

California Pizza Kitchen, Inc.*

 

1,333

17,929

Caribou Coffee Co., Inc.*

 

540

4,169

Carrols Restaurant Group, Inc.*

 

890

6,292

CEC Entertainment, Inc.*

 

1,589

50,721

Cheesecake Factory, Inc.*

 

4,148

89,555

Churchill Downs, Inc.

 

656

24,502

CKE Restaurants, Inc.

 

3,371

28,519

Cracker Barrel Old Country Store, Inc.

 

1,561

59,302

Denny's Corp.*

 

6,630

14,520

DineEquity, Inc.*

 

1,211

29,415

Domino's Pizza, Inc.*

 

2,541

21,294

Dover Downs Gaming & Entertainment, Inc.

 

975

3,686

Einstein Noah Restaurant Group, Inc.*

 

351

3,450

Frisch's Restaurants, Inc.

 

176

4,198

Gaylord Entertainment Co.*

 

2,652

52,377

Great Wolf Resorts, Inc.*

 

2,359

5,591

Interval Leisure Group, Inc.*

 

2,730

34,043

Isle of Capri Casinos, Inc.*

 

1,259

9,417

Jack in the Box, Inc.*

 

3,939

77,480

Krispy Kreme Doughnuts, Inc.*

 

4,485

13,231

Lakes Entertainment, Inc.*

 

1,479

3,712

Landry's Restaurants, Inc.*

 

505

10,751

Life Time Fitness, Inc.*

 

2,778

69,256

Luby's, Inc.*

 

1,719

6,326

Marcus Corp.

 

1,385

17,756

McCormick & Schmick's Seafood Restaurants, Inc.*

 

1,172

8,157

Monarch Casino & Resort, Inc.*

 

614

4,973

Morgans Hotel Group Co.*

 

1,503

6,809

Multimedia Games, Inc.*

 

2,104

12,645

O'Charleys, Inc.*

 

1,444

9,458

Orient-Express Hotels Ltd.*

 

5,289

53,630

Papa John's International, Inc.*

 

1,508

35,227

Peet's Coffee & Tea, Inc.*

 

786

26,197

PF Chang's China Bistro, Inc.*

 

1,636

62,021

Pinnacle Entertainment, Inc.*

 

4,145

37,222

Red Lion Hotels Corp.*

 

1,051

5,192

Red Robin Gourmet Burgers, Inc.*

 

1,071

19,171

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Hotels, Restaurants & Leisure - Cont'd

 

 

 

Ruby Tuesday, Inc.*

 

4,037

$29,066

Ruth's Hospitality Group, Inc.*

 

1,602

3,348

Shuffle Master, Inc.*

 

3,701

30,496

Sonic Corp.*

 

4,181

42,103

Speedway Motorsports, Inc.

 

901

15,876

Steak N Shake Co.*

 

84

27,226

Texas Roadhouse, Inc.*

 

3,450

38,743

Town Sports International Holdings, Inc.*

 

1,394

3,248

Universal Travel Group*

 

792

8,031

Vail Resorts, Inc.*

 

2,030

76,734

Youbet.com, Inc.*

 

2,368

6,796

 

 

 

1,577,185

 

 

 

 

Household Durables - 1.3%

 

 

 

American Greetings Corp.

 

2,720

59,269

Beazer Homes USA, Inc.*

 

3,012

14,578

Blyth, Inc.

 

407

13,724

Brookfield Homes Corp.*

 

809

6,472

Cavco Industries, Inc.*

 

516

18,535

CSS Industries, Inc.

 

519

10,089

Ethan Allen Interiors, Inc.

 

1,808

24,263

Furniture Brands International, Inc.*

 

3,311

18,078

Helen of Troy Ltd.*

 

2,061

50,412

Hooker Furniture Corp.

 

751

9,290

Hovnanian Enterprises, Inc.*

 

3,696

14,193

iRobot Corp.*

 

1,426

25,098

La-Z-Boy, Inc.*

 

3,552

33,850

M/I Homes, Inc.*

 

1,117

11,606

Meritage Homes Corp.*

 

2,257

43,628

National Presto Industries, Inc.

 

333

36,373

NIVS IntelliMedia Technology Group, Inc.*

 

646

1,667

Ryland Group, Inc.

 

2,970

58,509

Sealy Corp.*

 

3,443

10,880

Skyline Corp.

 

544

10,010

Standard Pacific Corp.*

 

6,962

26,038

Stanley Furniture Co., Inc.*

 

816

8,282

Tempur-Pedic International, Inc.*

 

5,168

122,120

Tupperware Brands Corp.

 

4,322

201,275

Universal Electronics, Inc.*

 

940

21,827

 

 

 

850,066

 

 

 

 

Household Products - 0.1%

 

 

 

Central Garden and Pet Co.*

 

4,290

42,643

Oil-Dri Corp. of America

 

406

6,293

Orchids Paper Products Co.*

 

383

7,668

WD-40 Co.

 

1,143

36,987

 

 

 

93,591

 

 

 

 

Independent Power Producers & Energy Traders - 0.0%

 

 

 

US Geothermal, Inc.*

 

4,942

7,561

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Industrial Conglomerates - 0.3%

 

 

 

Otter Tail Corp.

 

2,447

$60,686

Raven Industries, Inc.

 

1,172

37,234

Seaboard Corp.

 

23

31,027

Standex International Corp.

 

853

17,137

Tredegar Corp.

 

2,046

32,368

United Capital Corp.*

 

143

3,406

 

 

 

181,858

 

 

 

 

Insurance - 3.1%

 

 

 

AMBAC Financial Group, Inc.*

 

21,026

17,452

American Equity Investment Life Holding Co.

 

4,252

31,635

American Physicians Capital, Inc.

 

665

20,163

American Physicians Service Group, Inc.

 

503

11,604

American Safety Insurance Holdings Ltd.*

 

593

8,569

Amerisafe, Inc.*

 

1,303

23,415

Amtrust Financial Services, Inc.

 

1,567

18,522

Argo Group International Holdings Ltd.*

 

2,127

61,981

Assured Guaranty Ltd.

 

8,468

184,264

Baldwin & Lyons, Inc., Class B

 

563

13,855

Citizens, Inc.*

 

2,297

14,999

CNA Surety Corp.*

 

1,156

17,213

Conseco, Inc.*

 

13,795

68,975

Crawford & Co., Class B*

 

1,432

5,642

Delphi Financial Group, Inc.

 

3,191

71,383

Donegal Group, Inc.

 

916

14,235

Eastern Insurance Holdings, Inc.

 

618

5,327

eHealth, Inc.*

 

1,708

28,062

EMC Insurance Group, Inc.

 

340

7,313

Employers Holdings, Inc.

 

3,220

49,395

Enstar Group Ltd.*

 

461

33,662

FBL Financial Group, Inc.

 

894

16,557

First Acceptance Corp.*

 

1,175

2,291

First Mercury Financial Corp.

 

986

13,518

Flagstone Reinsurance Holdings Ltd.

 

2,700

29,538

Fpic Insurance Group, Inc.*

 

488

18,847

Greenlight Capital Re Ltd.*

 

1,943

45,797

Hallmark Financial Services*

 

470

3,741

Harleysville Group, Inc.

 

958

30,455

Hilltop Holdings, Inc.*

 

2,735

31,835

Horace Mann Educators Corp.

 

2,703

33,787

Independence Holding Co.

 

517

2,999

Infinity Property & Casualty Corp.

 

946

38,445

Kansas City Life Insurance Co.

 

365

10,859

Maiden Holdings Ltd.

 

3,438

25,166

Max Capital Group Ltd.

 

3,184

71,003

Meadowbrook Insurance Group, Inc.

 

4,057

30,022

Mercer Insurance Group, Inc.

 

441

8,013

Montpelier Re Holdings Ltd.

 

5,957

103,175

National Financial Partners Corp.*

 

2,840

22,976

National Interstate Corp.

 

490

8,310

National Western Life Insurance Co.

 

156

27,085

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Insurance - Cont'd

 

 

 

Navigators Group, Inc.*

 

862

$40,609

NYMAGIC, Inc.

 

377

6,254

Phoenix Co.'s, Inc.*

 

7,976

22,173

Platinum Underwriters Holdings Ltd.

 

3,533

135,279

PMA Capital Corp.*

 

2,532

15,952

Presidential Life Corp.

 

1,423

13,020

ProAssurance Corp.*

 

2,283

122,620

RLI Corp.

 

1,287

68,533

Safety Insurance Group, Inc.

 

917

33,223

SeaBright Insurance Holdings, Inc.*

 

1,495

17,178

Selective Insurance Group

 

3,645

59,960

State Auto Financial Corp.

 

979

18,111

Stewart Information Services Corp.

 

1,361

15,352

Tower Group, Inc.

 

3,093

72,407

United America Indemnity Ltd.*

 

2,728

21,606

United Fire & Casualty Co.

 

1,525

27,801

Universal Insurance Holdings, Inc.

 

1,043

6,122

Zenith National Insurance Corp.

 

2,575

76,632

 

 

 

2,054,917

 

 

 

 

Internet & Catalog Retail - 0.5%

 

 

 

1-800-FLOWERS.COM, Inc.*

 

2,081

5,515

Blue Nile, Inc.*

 

873

55,287

Drugstore.Com*

 

6,658

20,573

Gaiam, Inc.*

 

1,432

11,012

HSN, Inc.*

 

2,739

55,300

NutriSystem, Inc.

 

2,119

66,049

Orbitz Worldwide, Inc.*

 

2,514

18,453

Overstock.com, Inc.*

 

1,079

14,631

PetMed Express, Inc.

 

1,611

28,402

Shutterfly, Inc.*

 

1,568

27,926

Stamps.com, Inc.*

 

749

6,741

Ticketmaster Entertainment, Inc.*

 

2,591

31,662

US Auto Parts Network, Inc.*

 

778

4,046

Vitacost.com, Inc.*

 

763

7,951

 

 

 

353,548

 

 

 

 

Internet Software & Services - 1.8%

 

 

 

Ancestry.com, Inc.*

 

535

7,495

Archipelago Learning, Inc.*

 

499

10,329

Art Technology Group, Inc.*

 

8,734

39,390

comScore, Inc.*

 

1,433

25,149

Constant Contact, Inc.*

 

1,654

26,464

DealerTrack Holdings, Inc.*

 

2,593

48,722

Dice Holdings, Inc.*

 

1,136

7,441

Digital River, Inc.*

 

2,634

71,092

DivX, Inc.*

 

2,147

12,109

Earthlink, Inc.

 

7,302

60,680

GSI Commerce, Inc.*

 

2,084

52,913

Imergent, Inc.

 

619

3,757

Infospace, Inc.*

 

2,415

20,697

Innodata Isogen, Inc.*

 

1,692

9,374

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Internet Software & Services - Cont'd

 

 

 

Internap Network Services Corp.*

 

4,018

$18,885

Internet Brands, Inc.*

 

1,767

13,836

Internet Capital Group, Inc.*

 

2,537

16,871

Ipass, Inc.*

 

3,977

4,136

j2 Global Communications, Inc.*

 

3,079

62,658

Keynote Systems, Inc.

 

1,035

11,292

Knot, Inc.*

 

2,250

22,657

Limelight Networks, Inc.*

 

2,297

9,027

Liquidity Services, Inc.*

 

1,166

11,742

LivePerson, Inc.*

 

2,848

19,851

LogMeIn, Inc.*

 

550

10,972

LoopNet, Inc.*

 

1,590

15,805

Marchex, Inc., Class B

 

1,359

6,904

MercadoLibre, Inc.*

 

1,782

92,432

ModusLink Global Solutions, Inc.*

 

3,148

29,623

Move, Inc.*

 

10,640

17,662

NIC, Inc.

 

3,482

31,825

OpenTable, Inc.*

 

237

6,034

Openwave Systems, Inc.*

 

6,580

15,002

Perficient, Inc.*

 

1,973

16,632

Rackspace Hosting, Inc.*

 

4,573

95,347

RealNetworks, Inc.*

 

5,723

21,232

Saba Software, Inc.*

 

1,942

8,040

SAVVIS, Inc.*

 

2,494

35,041

support.com, Inc.*

 

3,687

9,734

Switch & Data Facilities Co., Inc.*

 

1,406

28,415

TechTarget, Inc.*

 

1,109

6,244

Terremark Worldwide, Inc.*

 

4,212

28,810

Travelzoo, Inc.*

 

438

5,383

United Online, Inc.

 

5,767

41,465

ValueClick, Inc.*

 

6,001

60,730

Vocus, Inc.*

 

1,138

20,484

Web.com Group, Inc.*

 

1,821

11,891

Zix Corp.*

 

5,001

8,552

 

 

 

1,210,826

 

 

 

 

IT Services - 2.2%

 

 

 

Acxiom Corp.*

 

4,683

62,846

CACI International, Inc.*

 

2,069

101,071

Cass Information Systems, Inc.

 

540

16,416

China Information Security Technology, Inc.*

 

1,826

11,248

Ciber, Inc.*

 

4,183

14,431

Computer Task Group, Inc.*

 

1,181

9,460

CSG Systems International, Inc.*

 

2,424

46,274

Cybersource Corp.*

 

4,767

95,864

Dynamics Research Corp.*

 

682

7,236

Echo Global Logistics, Inc.*

 

400

5,076

eLoyalty Corp.*

 

516

3,545

Euronet Worldwide, Inc.*

 

3,360

73,752

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

IT Services - Cont'd

 

 

 

ExlService Holdings, Inc.*

 

1,131

$20,539

Forrester Research, Inc.*

 

1,140

29,583

Gartner, Inc.*

 

4,088

73,748

Global Cash Access Holdings, Inc.*

 

2,586

19,369

Hackett Group, Inc.*

 

3,281

9,121

Heartland Payment Systems, Inc.

 

2,583

33,915

iGate Corp.

 

1,744

17,440

infoGROUP, Inc.*

 

2,363

18,951

Information Services Group, Inc.*

 

1,874

5,941

Integral Systems, Inc.*

 

1,350

11,691

Lionbridge Technologies*

 

4,533

10,426

Mantech International Corp.*

 

1,509

72,855

MAXIMUS, Inc.

 

1,208

60,400

MoneyGram International, Inc.*

 

5,675

16,344

NCI, Inc.*

 

519

14,350

Ness Technologies, Inc.*

 

2,663

13,049

Online Resources Corp.*

 

1,746

9,184

RightNow Technologies, Inc.*

 

1,504

26,124

Sapient Corp.*

 

5,820

48,131

SRA International, Inc.*

 

2,876

54,932

StarTek, Inc.*

 

941

7,039

Syntel, Inc.

 

889

33,809

TeleTech Holdings, Inc.*

 

2,241

44,887

Tier Technologies, Inc., Class B*

 

1,385

11,080

TNS, Inc.*

 

1,787

45,908

Unisys Corp.*

 

2,841

109,549

VeriFone Holdings, Inc.*

 

5,009

82,047

Virtusa Corp.*

 

703

6,369

Wright Express Corp.*

 

2,647

84,333

 

 

 

1,438,333

 

 

 

 

Leisure Equipment & Products - 0.7%

 

 

 

Brunswick Corp.

 

6,080

77,277

Callaway Golf Co.

 

4,441

33,485

Eastman Kodak Co.*

 

18,504

78,087

Jakks Pacific, Inc.*

 

2,018

24,458

Leapfrog Enterprises, Inc.*

 

2,658

10,393

Marine Products Corp.

 

813

4,008

Polaris Industries, Inc.

 

2,112

92,146

Pool Corp.

 

3,337

63,670

RC2 Corp.*

 

1,387

20,458

Smith & Wesson Holding Corp.*

 

4,203

17,190

Sport Supply Group, Inc.

 

727

9,153

Steinway Musical Instruments*

 

547

8,703

Sturm Ruger & Co., Inc.

 

1,504

14,589

 

 

 

453,617

 

 

 

 

Life Sciences - Tools & Services - 0.7%

 

 

 

Accelrys, Inc.*

 

2,135

12,234

Affymetrix, Inc.*

 

4,868

28,429

Albany Molecular Research, Inc.*

 

1,613

14,646

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Life Sciences - Tools & Services - Cont'd

 

 

 

BioDelivery Sciences International, Inc.*

 

744

$2,924

Bruker Corp.*

 

3,374

40,690

Cambrex Corp.*

 

2,197

12,259

Dionex Corp.*

 

1,220

90,121

Enzo Biochem, Inc.*

 

2,561

13,778

eResearchTechnology, Inc.*

 

2,937

17,651

Harvard Bioscience, Inc.*

 

1,938

6,919

Kendle International, Inc.*

 

983

17,999

Luminex Corp.*

 

2,860

42,700

Parexel International Corp.*

 

3,970

55,977

Sequenom, Inc.*

 

4,447

18,411

Varian, Inc.*

 

1,989

102,513

 

 

 

477,251

 

 

 

 

Machinery - 2.7%

 

 

 

3D Systems Corp.*

 

1,362

15,391

Actuant Corp.

 

4,672

86,572

Alamo Group, Inc.

 

494

8,472

Albany International Corp.

 

1,865

41,888

Altra Holdings, Inc.*

 

1,840

22,724

American Railcar Industries, Inc.

 

744

8,199

Ampco-Pittsburgh Corp.

 

582

18,350

Astec Industries, Inc.*

 

1,325

35,697

Badger Meter, Inc.

 

1,071

42,647

Barnes Group, Inc.

 

3,219

54,401

Blount International, Inc.*

 

2,651

26,775

Briggs & Stratton Corp.

 

3,437

64,306

Cascade Corp.

 

627

17,236

Chart Industries, Inc.*

 

1,961

32,455

China Fire & Security Group, Inc.*

 

967

13,084

CIRCOR International, Inc.

 

1,236

31,122

CLARCOR, Inc.

 

3,513

113,962

Colfax Corp.*

 

1,719

20,697

Columbus McKinnon Corp.*

 

1,314

17,949

Duoyuan Printing, Inc.*

 

600

4,830

Dynamic Materials Corp.

 

887

17,784

Eastern Co.

 

471

6,326

Energy Recovery, Inc.*

 

2,650

18,232

EnPro Industries, Inc.*

 

1,376

36,340

ESCO Technologies, Inc.

 

1,811

64,924

Federal Signal Corp.

 

3,522

21,202

Flanders Corp.*

 

1,282

5,718

Flow International Corp.*

 

2,995

9,225

Force Protection, Inc.*

 

5,105

26,597

FreightCar America, Inc.

 

823

16,320

Gorman-Rupp Co.

 

1,053

29,105

Graham Corp.

 

792

16,394

Greenbrier Co.'s, Inc.

 

1,305

13,546

Hurco Co.'s, Inc.*

 

512

7,578

John Bean Technologies Corp.

 

1,901

32,336

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Machinery - Cont'd

 

 

 

Kadant, Inc.*

 

847

$13,518

Kaydon Corp.

 

2,291

81,926

K-Tron International, Inc.*

 

193

20,987

LB Foster Co.*

 

700

20,867

Lindsay Corp.

 

875

34,869

Met-Pro Corp.

 

1,199

12,733

Middleby Corp.*

 

1,127

55,246

Miller Industries, Inc.*

 

795

9,023

Mueller Industries, Inc.

 

2,563

63,665

Mueller Water Products, Inc.

 

10,611

55,177

NACCO Industries, Inc.

 

370

18,426

Nordson Corp.

 

2,318

141,815

Omega Flex, Inc.

 

248

3,472

PMFG, Inc.*

 

1,034

16,761

Portec Rail Products, Inc.

 

525

5,623

RBC Bearings, Inc.*

 

1,595

38,806

Robbins & Myers, Inc.

 

1,834

43,136

Sauer-Danfoss, Inc.*

 

885

10,629

SmartHeat, Inc.*

 

527

7,652

Sun Hydraulics Corp.

 

929

24,386

Tecumseh Products Co.*

 

1,299

15,185

Tennant Co.

 

1,214

31,795

Titan International, Inc.

 

2,604

21,118

Trimas Corp.*

 

1,166

7,894

Twin Disc, Inc.

 

694

7,245

Watts Water Technologies, Inc.

 

2,019

62,427

 

 

 

1,822,765

 

 

 

 

Marine - 0.2%

 

 

 

American Commercial Lines, Inc.*

 

711

13,033

Eagle Bulk Shipping, Inc.*

 

3,538

17,513

Genco Shipping & Trading Ltd.*

 

1,774

39,702

Horizon Lines, Inc.

 

2,384

13,279

International Shipholding Corp.

 

379

11,775

TBS International Ltd.*

 

835

6,137

Ultrapetrol (Bahamas) Ltd.*

 

1,489

7,088

 

 

 

108,527

 

 

 

 

Media - 0.9%

 

 

 

Arbitron, Inc.

 

1,826

42,765

Ascent Media Corp.*

 

972

24,815

Belo Corp.

 

6,159

33,505

Carmike Cinemas, Inc.*

 

867

6,555

Cinemark Holdings, Inc.

 

2,379

34,186

CKX, Inc.*

 

4,193

22,097

Crown Media Holdings, Inc.*

 

1,039

1,507

Dolan Media Co.*

 

2,065

21,084

EW Scripps Co.*

 

2,261

15,737

Fisher Communications, Inc.*

 

401

6,516

Global Sources Ltd.*

 

1,248

7,800

Harte-Hanks, Inc.

 

2,613

28,168

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Media - Cont'd

 

 

 

Journal Communications, Inc.

 

3,369

$13,105

Knology, Inc.*

 

2,049

22,437

LIN TV Corp.*

 

2,131

9,504

Live Nation, Inc.*

 

5,769

49,094

LodgeNet Interactive Corp.*

 

1,598

8,837

Martha Stewart Living Omnimedia*

 

2,043

10,092

Mediacom Communications Corp.*

 

3,136

14,018

National CineMedia, Inc.

 

2,906

48,152

Outdoor Channel Holdings, Inc.*

 

1,282

7,436

Playboy Enterprises, Inc., Class B*

 

1,700

5,440

Primedia, Inc.

 

1,152

4,159

RCN Corp.*

 

2,520

27,342

Reading International, Inc.*

 

1,368

5,540

Rentrak Corp.*

 

746

13,182

Scholastic Corp.

 

1,555

46,386

Sinclair Broadcast Group, Inc.*

 

2,946

11,872

Valassis Communications, Inc.*

 

3,327

60,751

Value Line, Inc.

 

108

2,712

World Wrestling Entertainment, Inc.

 

1,509

23,133

 

 

 

627,927

 

 

 

 

Metals & Mining - 1.1%

 

 

 

Allied Nevada Gold Corp.*

 

3,483

52,524

AM Castle & Co.

 

1,145

15,675

AMCOL International Corp.

 

1,617

45,955

Brush Engineered Materials, Inc.*

 

1,391

25,789

Century Aluminum Co.*

 

3,879

62,801

China Precision Steel, Inc.*

 

1,368

2,804

Coeur d'Alene Mines Corp.*

 

5,200

93,912

General Moly, Inc.*

 

4,998

10,396

General Steel Holdings, Inc.*

 

858

3,784

Haynes International, Inc.

 

832

27,431

Hecla Mining Co.*

 

15,660

96,779

Horsehead Holding Corp.*

 

2,704

34,476

Kaiser Aluminum Corp.

 

1,064

44,284

Olympic Steel, Inc.

 

625

20,363

Paramount Gold and Silver Corp.*

 

5,014

7,270

RTI International Metals, Inc.*

 

2,078

52,303

Stillwater Mining Co.*

 

2,819

26,724

Sutor Technology Group Ltd.*

 

608

1,617

Universal Stainless & Alloy*

 

534

10,071

US Gold Corp.*

 

5,504

13,650

Worthington Industries, Inc.

 

4,156

54,319

 

 

 

702,927

 

 

 

 

Multiline Retail - 0.3%

 

 

 

99 Cents Only Stores*

 

3,235

42,281

Dillard's, Inc.

 

3,539

65,294

Fred's, Inc.

 

2,763

28,183

Retail Ventures, Inc.*

 

1,722

15,309

Saks, Inc.*

 

8,704

57,098

Tuesday Morning Corp.*

 

2,412

6,223

 

 

 

214,388

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Multi-Utilities - 0.4%

 

 

 

Avista Corp.

 

3,770

$81,394

Black Hills Corp.

 

2,676

71,262

CH Energy Group, Inc.

 

1,089

46,304

NorthWestern Corp.

 

2,482

64,582

 

 

 

263,542

 

 

 

 

Oil, Gas & Consumable Fuels - 3.3%

 

 

 

Alon USA Energy, Inc.

 

562

3,844

Apco Oil and Gas International, Inc.

 

721

15,934

Approach Resources, Inc.*

 

716

5,528

Arena Resources, Inc.*

 

2,638

113,751

Atlas Energy, Inc.

 

4,737

142,915

ATP Oil & Gas Corp.*

 

2,634

48,150

Berry Petroleum Co.

 

2,957

86,197

Bill Barrett Corp.*

 

2,646

82,317

BPZ Resources, Inc.*

 

6,385

60,657

Brigham Exploration Co.*

 

6,770

91,733

Carrizo Oil & Gas, Inc.*

 

1,923

50,940

Cheniere Energy, Inc.*

 

3,868

9,361

Clayton Williams Energy, Inc.*

 

431

15,102

Clean Energy Fuels Corp.*

 

2,289

35,273

Cloud Peak Energy, Inc.*

 

2,122

30,896

Contango Oil & Gas Co.*

 

836

39,300

CREDO Petroleum Corp.*

 

555

5,161

Crosstex Energy, Inc.

 

3,047

18,434

Cubic Energy, Inc.*

 

2,135

3,181

CVR Energy, Inc.*

 

1,585

10,873

Delek US Holdings, Inc.

 

1,057

7,198

Delta Petroleum Corp.*

 

12,444

12,942

DHT Maritime, Inc.

 

3,126

11,504

Endeavour International Corp.*

 

9,060

9,785

Evergreen Energy, Inc.*

 

6,516

2,235

FX Energy, Inc.*

 

3,212

9,154

General Maritime Corp.

 

3,596

25,136

Georesources, Inc.*

 

439

5,997

GMX Resources, Inc.*

 

1,939

26,642

Golar LNG Ltd.*

 

2,230

28,589

Goodrich Petroleum Corp.*

 

1,691

41,176

Gran Tierra Energy, Inc.*

 

13,941

79,882

Green Plains Renewable Energy, Inc.*

 

735

10,929

GreenHunter Energy, Inc., Warrants (strike price $27.50/share, expire 9/14/11) (b)*

 

34

-

Gulfport Energy Corp.*

 

1,809

20,713

Harvest Natural Resources, Inc.*

 

2,277

12,045

International Coal Group, Inc.*

 

6,265

24,183

Isramco, Inc.*

 

85

6,077

James River Coal Co.*

 

1,903

35,263

Knightsbridge Tankers Ltd.

 

1,180

15,647

McMoRan Exploration Co.*

 

5,226

41,913

Nordic American Tanker Shipping

 

2,914

87,420

Northern Oil And Gas, Inc.*

 

2,263

26,794

Oilsands Quest, Inc.*

 

13,143

15,114

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Oil, Gas & Consumable Fuels - Cont'd

 

 

 

Panhandle Oil and Gas, Inc.

 

584

$15,126

Patriot Coal Corp.*

 

5,089

78,676

Penn Virginia Corp.

 

3,132

66,680

Petroleum Development Corp.*

 

1,184

21,561

Petroquest Energy, Inc.*

 

3,456

21,185

PrimeEnergy Corp.*

 

74

2,693

Rex Energy Corp.*

 

1,336

16,032

Rosetta Resources, Inc.*

 

3,607

71,887

Ship Finance International Ltd.

 

3,078

41,953

Stone Energy Corp.*

 

2,875

51,894

Swift Energy Co.*

 

2,577

61,745

Syntroleum Corp.*

 

4,983

13,255

Teekay Tankers Ltd.

 

725

6,184

Toreador Resources Corp.*

 

1,348

13,345

Uranerz Energy Corp.*

 

3,556

4,623

Uranium Energy Corp.*

 

3,667

13,861

USEC, Inc.*

 

8,147

31,366

Vaalco Energy, Inc.*

 

4,020

18,291

Venoco, Inc.*

 

1,241

16,183

W&T Offshore, Inc.

 

2,347

27,460

Warren Resources, Inc.*

 

4,644

11,378

Western Refining, Inc.*

 

2,379

11,205

Westmoreland Coal Co.*

 

757

6,745

World Fuel Services Corp.

 

4,068

108,982

Zion Oil & Gas, Inc.*

 

938

6,707

 

 

 

2,164,902

 

 

 

 

Paper & Forest Products - 0.8%

 

 

 

Buckeye Technologies, Inc.*

 

2,667

26,030

Clearwater Paper Corp.*

 

774

42,547

Deltic Timber Corp.

 

773

35,697

Domtar Corp.*

 

2,866

158,805

Glatfelter

 

3,313

40,253

KapStone Paper and Packaging Corp.*

 

2,269

22,350

Louisiana-Pacific Corp.*

 

8,588

59,944

Neenah Paper, Inc.

 

1,163

16,224

Schweitzer-Mauduit International, Inc.

 

1,211

85,194

Wausau Paper Corp.

 

3,001

34,811

 

 

 

521,855

 

 

 

 

Personal Products - 0.7%

 

 

 

American Oriental Bioengineering, Inc.*

 

4,268

19,846

Bare Escentuals, Inc.*

 

4,561

55,781

Chattem, Inc.*

 

1,341

125,115

China Sky One Medical, Inc.*

 

592

13,468

China-Biotics, Inc.*

 

576

8,911

Elizabeth Arden, Inc.*

 

1,846

26,656

Female Health Co.*

 

1,254

5,931

Inter Parfums, Inc.

 

1,120

13,630

Mannatech, Inc.

 

1,100

3,432

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Personal Products - Cont'd

 

 

 

Medifast, Inc.*

 

895

$27,369

Nu Skin Enterprises, Inc.

 

3,409

91,600

Nutraceutical International Corp.*

 

861

10,651

Prestige Brands Holdings, Inc.*

 

2,336

18,361

Revlon, Inc.*

 

1,344

22,862

Schiff Nutrition International, Inc.

 

744

5,818

USANA Health Sciences, Inc.*

 

429

13,685

 

 

 

463,116

 

 

 

 

Pharmaceuticals - 1.5%

 

 

 

Acura Pharmaceuticals, Inc.*

 

651

3,470

Adolor Corp.*

 

3,668

5,355

Akorn, Inc.*

 

4,543

8,132

Ardea Biosciences, Inc.*

 

861

12,054

ARYx Therapeutics, Inc.*

 

1,643

5,274

Auxilium Pharmaceuticals, Inc.*

 

3,191

95,666

AVANIR Pharmaceuticals, Inc.*

 

4,795

9,111

Biodel, Inc.*

 

856

3,715

BioMimetic Therapeutics, Inc.*

 

1,057

12,610

BMP Sunstone Corp.*

 

1,844

10,492

Cadence Pharmaceuticals, Inc.*

 

1,701

16,449

Caraco Pharmaceutical Laboratories Ltd.*

 

813

4,911

Cornerstone Therapeutics, Inc.*

 

514

3,135

Cumberland Pharmaceuticals, Inc.*

 

600

8,154

Cypress Bioscience, Inc.*

 

2,626

15,126

Depomed, Inc.*

 

3,827

12,820

Discovery Laboratories, Inc.*

 

7,429

4,669

Durect Corp.*

 

6,499

16,053

Hi-Tech Pharmacal Co., Inc.*

 

640

17,952

Impax Laboratories, Inc.*

 

4,185

56,916

Inspire Pharmaceuticals, Inc.*

 

4,526

24,984

ISTA Pharmaceuticals, Inc.*

 

2,623

11,961

Javelin Pharmaceuticals, Inc.*

 

3,921

5,097

KV Pharmaceutical Co.*

 

2,490

9,138

Lannett Co., Inc.*

 

798

4,716

MAP Pharmaceuticals, Inc.*

 

623

5,937

Matrixx Initiatives, Inc.*

 

747

3,152

Medicines Co.*

 

3,811

31,784

Medicis Pharmaceutical Corp.

 

4,060

109,823

MiddleBrook Pharmaceuticals, Inc.*

 

2,857

1,457

Nektar Therapeutics*

 

6,386

59,518

Obagi Medical Products, Inc.*

 

1,191

14,292

Optimer Pharmaceuticals, Inc.*

 

1,975

22,278

Pain Therapeutics, Inc.*

 

2,773

14,863

Par Pharmaceutical Co.'s, Inc.*

 

2,400

64,944

Pozen, Inc.*

 

2,076

12,435

Questcor Pharmaceuticals, Inc.*

 

3,946

18,744

Repros Therapeutics, Inc.*

 

747

595

Salix Pharmaceuticals Ltd.*

 

3,801

96,545

Santarus, Inc.*

 

4,094

18,914

Sucampo Pharmaceuticals, Inc.*

 

729

2,945

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Pharmaceuticals - Cont'd

 

 

 

SuperGen, Inc.*

 

4,667

$12,228

Viropharma, Inc.*

 

5,341

44,811

VIVUS, Inc.*

 

5,536

50,876

XenoPort, Inc.*

 

2,090

38,790

 

 

 

1,002,891

 

 

 

 

Professional Services - 1.5%

 

 

 

Acacia Research - Acacia Technologies*

 

2,206

20,097

Administaff, Inc.

 

1,452

34,253

Advisory Board Co.*

 

1,069

32,775

Barrett Business Services, Inc.

 

606

7,448

CBIZ, Inc.*

 

3,028

23,316

CDI Corp.

 

840

10,878

COMSYS IT Partners, Inc.*

 

1,102

9,797

Corporate Executive Board Co.

 

2,352

53,673

CoStar Group, Inc.*

 

1,372

57,308

CRA International, Inc.*

 

752

20,041

Diamond Management & Technology Consultants, Inc.

 

1,884

13,885

Exponent, Inc.*

 

931

25,919

Franklin Covey Co.*

 

1,007

6,344

GP Strategies Corp.*

 

1,245

9,375

Heidrick & Struggles International, Inc.

 

1,173

36,644

Hill International, Inc.*

 

1,866

11,644

Huron Consulting Group, Inc.*

 

1,485

34,214

ICF International, Inc.*

 

606

16,241

Kelly Services, Inc.*

 

1,808

21,569

Kforce, Inc.*

 

1,976

24,700

Korn/Ferry International*

 

3,086

50,919

Mistras Group, Inc.*

 

693

10,437

MPS Group, Inc.*

 

6,380

87,661

Navigant Consulting, Inc.*

 

3,549

52,738

Odyssey Marine Exploration, Inc.*

 

3,831

5,402

On Assignment, Inc.*

 

2,712

19,391

Resources Connection, Inc.*

 

3,104

65,867

School Specialty, Inc.*

 

1,296

30,313

Spherion Corp.*

 

3,573

20,080

TrueBlue, Inc.*

 

3,025

44,800

Volt Information Sciences, Inc.*

 

1,008

10,080

VSE Corp.

 

320

14,426

Watson Wyatt Worldwide, Inc.*

 

2,938

139,614

 

 

 

1,021,849

 

 

 

 

Real Estate Investment Trusts - 6.1%

 

 

 

Acadia Realty Trust

 

2,737

46,173

Agree Realty Corp.

 

491

11,435

Alexander's, Inc.*

 

149

45,359

American Campus Communities, Inc.

 

3,601

101,188

American Capital Agency Corp.

 

1,045

27,734

Anworth Mortgage Asset Corp.

 

7,435

52,045

Apollo Commercial Real Estate Finance, Inc.*

 

693

12,467

Ashford Hospitality Trust, Inc.*

 

4,002

18,569

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Real Estate Investment Trusts - Cont'd

 

 

 

Associated Estates Realty Corp.

 

1,155

$13,017

BioMed Realty Trust, Inc.

 

6,754

106,578

CapLease, Inc.

 

3,566

15,619

Capstead Mortgage Corp.

 

4,735

64,633

Care Investment Trust, Inc.

 

1,058

8,231

CBL & Associates Properties, Inc.

 

9,512

91,981

Cedar Shopping Centers, Inc.

 

2,890

19,652

Cogdell Spencer, Inc.

 

2,199

12,446

Colonial Properties Trust

 

4,679

54,885

Colony Financial, Inc.

 

997

20,309

Cousins Properties, Inc.

 

5,082

38,776

CreXus Investment Corp.*

 

943

13,164

Cypress Sharpridge Investments, Inc.

 

1,200

16,212

DCT Industrial Trust, Inc.

 

14,098

70,772

Developers Diversified Realty Corp.

 

11,063

102,443

DiamondRock Hospitality Co.

 

8,007

67,819

DuPont Fabros Technology, Inc.

 

1,826

32,850

Dynex Capital, Inc.

 

888

7,752

EastGroup Properties, Inc.

 

1,740

66,607

Education Realty Trust, Inc.

 

3,909

18,920

Entertainment Properties Trust

 

2,891

101,966

Equity Lifestyle Properties, Inc.

 

1,743

87,969

Equity One, Inc.

 

2,359

38,145

Extra Space Storage, Inc.

 

5,960

68,838

FelCor Lodging Trust, Inc.*

 

5,012

18,043

First Industrial Realty Trust, Inc.*

 

3,355

17,547

First Potomac Realty Trust

 

1,949

24,499

Franklin Street Properties Corp.

 

4,607

67,308

Getty Realty Corp.

 

1,204

28,330

Gladstone Commercial Corp.

 

676

9,065

Glimcher Realty Trust

 

3,012

8,132

Government Properties Income Trust

 

850

19,533

Gramercy Capital Corp.*

 

3,318

8,594

Hatteras Financial Corp.

 

2,497

69,816

Healthcare Realty Trust, Inc.

 

4,094

87,857

Hersha Hospitality Trust

 

3,645

11,445

Highwoods Properties, Inc.

 

4,886

162,948

Home Properties, Inc.

 

2,271

108,349

Inland Real Estate Corp.

 

4,845

39,487

Invesco Mortgage Capital, Inc.

 

650

14,794

Investors Real Estate Trust

 

4,996

44,964

iStar Financial, Inc.*

 

6,903

17,672

Kilroy Realty Corp.

 

2,977

91,305

Kite Realty Group Trust

 

3,655

14,876

LaSalle Hotel Properties

 

4,385

93,094

Lexington Realty Trust

 

6,255

38,030

LTC Properties, Inc.

 

1,603

42,880

Medical Properties Trust, Inc.

 

5,530

55,300

MFA Mortgage Investments, Inc.

 

19,311

141,936

Mid-America Apartment Communities, Inc.

 

1,948

94,049

Mission West Properties, Inc.

 

1,213

8,722

Monmouth Real Estate Investment Corp.

 

1,576

11,725

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Real Estate Investment Trusts - Cont'd

 

 

 

National Health Investors, Inc.

 

1,791

$66,249

National Retail Properties, Inc.

 

5,515

117,028

NorthStar Realty Finance Corp.

 

4,104

14,077

Omega Healthcare Investors, Inc.

 

5,684

110,554

Parkway Properties, Inc.

 

1,570

32,687

Pennsylvania Real Estate Investment Trust

 

2,669

22,580

Pennymac Mortgage Investment Trust*

 

1,100

18,898

Post Properties, Inc.

 

3,236

63,426

Potlatch Corp.

 

2,740

87,351

PS Business Parks, Inc.

 

1,236

61,862

RAIT Financial Trust*

 

4,875

6,386

Ramco-Gershenson Properties Trust

 

1,254

11,963

Redwood Trust, Inc.

 

5,343

77,260

Resource Capital Corp.

 

1,695

8,339

Saul Centers, Inc.

 

507

16,609

Sovran Self Storage, Inc.

 

1,901

67,923

Starwood Property Trust, Inc.

 

3,175

59,976

Strategic Hotels & Resorts, Inc.*

 

5,929

11,028

Sun Communities, Inc.

 

1,140

22,515

Sunstone Hotel Investors, Inc.*

 

6,869

60,997

Tanger Factory Outlet Centers

 

2,778

108,314

Transcontinental Realty Investors, Inc.*

 

108

1,286

UMH Properties, Inc.

 

691

5,860

Universal Health Realty Income Trust

 

765

24,503

Urstadt Biddle Properties, Inc.

 

1,402

21,409

U-Store-It Trust

 

5,481

40,121

Walter Investment Management Corp.

 

1,409

20,191

Washington Real Estate Investment Trust

 

4,018

110,696

Winthrop Realty Trust

 

832

9,036

 

 

 

4,083,978

 

 

 

 

Real Estate Management & Development - 0.2%

 

 

 

American Realty Investors, Inc.*

 

204

2,499

Avatar Holdings, Inc.*

 

486

8,267

China Housing & Land Development, Inc.*

 

2,028

8,376

Consolidated-Tomoka Land Co.

 

432

15,094

Forestar Group, Inc.*

 

2,476

54,422

Tejon Ranch Co.*

 

747

21,827

 

 

 

110,485

 

 

 

 

Road & Rail - 1.0%

 

 

 

Amerco, Inc.*

 

617

30,677

Arkansas Best Corp.

 

1,746

51,385

Avis Budget Group, Inc.*

 

7,022

92,129

Celadon Group, Inc.*

 

1,741

18,890

Dollar Thrifty Automotive Group, Inc.*

 

1,954

50,042

Genesee & Wyoming, Inc.*

 

2,562

83,624

Heartland Express, Inc.

 

3,475

53,063

Knight Transportation, Inc.

 

3,944

76,080

Marten Transport Ltd.*

 

1,060

19,027

Old Dominion Freight Line, Inc.*

 

1,921

58,975

Patriot Transportation Holding, Inc.*

 

89

8,407

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Road & Rail - Cont'd

 

 

 

RailAmerica, Inc.*

 

1,527

$18,629

Saia, Inc.*

 

1,029

15,250

Universal Truckload Services, Inc.

 

475

8,597

USA Truck, Inc.*

 

614

7,687

Werner Enterprises, Inc.

 

2,939

58,163

YRC Worldwide, Inc.*

 

4,550

3,821

 

 

 

654,446

 

 

 

 

Semiconductors & Semiconductor Equipment - 3.6%

 

 

 

Actel Corp.*

 

1,809

21,491

Advanced Analogic Technologies, Inc.*

 

2,962

11,670

Advanced Energy Industries, Inc.*

 

2,277

34,337

Amkor Technology, Inc.*

 

7,526

53,886

Anadigics, Inc.*

 

4,345

18,336

Applied Micro Circuits Corp.*

 

4,546

33,959

Atheros Communications, Inc.*

 

4,413

151,101

ATMI, Inc.*

 

2,170

40,405

Brooks Automation, Inc.*

 

4,653

39,923

Cabot Microelectronics Corp.*

 

1,616

53,263

Cavium Networks, Inc.*

 

2,501

59,599

Ceva, Inc.*

 

1,354

17,412

Cirrus Logic, Inc.*

 

4,502

30,704

Cohu, Inc.

 

1,611

22,473

Cymer, Inc.*

 

2,048

78,602

Diodes, Inc.*

 

2,235

45,706

DSP Group, Inc.*

 

1,569

8,833

Entegris, Inc.*

 

8,374

44,215

Entropic Communications, Inc.*

 

4,168

12,796

Exar Corp.*

 

2,429

17,270

FEI Co.*

 

2,578

60,222

Formfactor, Inc.*

 

3,399

73,962

GSI Technology, Inc.*

 

1,456

6,523

Hittite Microwave Corp.*

 

1,478

60,228

IXYS Corp.*

 

1,911

14,180

Kopin Corp.*

 

4,655

19,458

Kulicke & Soffa Industries, Inc.*

 

4,111

22,158

Lattice Semiconductor Corp.*

 

7,952

21,470

MEMSIC, Inc.*

 

1,224

4,015

Micrel, Inc.

 

3,129

25,658

Microsemi Corp.*

 

5,596

99,329

Microtune, Inc.*

 

4,122

9,316

MIPS Technologies, Inc.*

 

3,345

14,618

MKS Instruments, Inc.*

 

3,403

59,246

Monolithic Power Systems, Inc.*

 

2,337

56,018

Netlogic Microsystems, Inc.*

 

1,245

57,594

NVE Corp.*

 

370

15,285

Omnivision Technologies, Inc.*

 

3,455

50,201

Pericom Semiconductor Corp.*

 

1,758

20,270

Photronics, Inc.*

 

3,214

14,302

PLX Technology, Inc.*

 

2,208

7,132

Power Integrations, Inc.

 

1,643

59,739

RF Micro Devices, Inc.*

 

18,340

87,482

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Semiconductors & Semiconductor Equipment - Cont'd

 

 

 

Rubicon Technology, Inc.*

 

864

$17,548

Rudolph Technologies, Inc.*

 

2,121

14,253

Semtech Corp.*

 

4,212

71,646

Sigma Designs, Inc.*

 

1,835

19,635

Silicon Image, Inc.*

 

5,780

14,912

Silicon Storage Technology, Inc.*

 

6,318

16,174

Skyworks Solutions, Inc.*

 

11,541

163,767

Standard Microsystems Corp.*

 

1,515

31,482

Supertex, Inc.*

 

843

25,121

Techwell, Inc.*

 

1,223

16,144

Tessera Technologies, Inc.*

 

3,354

78,048

Trident Microsystems, Inc.*

 

4,861

9,041

TriQuint Semiconductor, Inc.*

 

10,526

63,156

Ultratech, Inc.*

 

1,630

24,222

Veeco Instruments, Inc.*

 

2,638

87,160

Virage Logic Corp.*

 

1,278

7,029

Volterra Semiconductor Corp.*

 

1,562

29,865

White Electronic Designs Corp.*

 

1,810

8,453

Zoran Corp.*

 

3,559

39,327

 

 

 

2,391,370

 

 

 

 

Software - 4.4%

 

 

 

ACI Worldwide, Inc.*

 

2,511

43,064

Actuate Corp.*

 

3,425

14,659

Advent Software, Inc.*

 

1,054

42,929

American Software, Inc.

 

1,795

10,770

ArcSight, Inc.*

 

1,270

32,487

Ariba, Inc.*

 

6,029

75,483

AsiaInfo Holdings, Inc.*

 

2,016

61,428

Blackbaud, Inc.

 

3,024

71,457

Blackboard, Inc.*

 

2,182

99,041

Bottomline Technologies, Inc.*

 

1,750

30,747

Callidus Software, Inc.*

 

2,401

7,251

China TransInfo Technology Corp.*

 

684

5,588

Chordiant Software, Inc.*

 

2,524

6,941

Commvault Systems, Inc.*

 

2,872

68,038

Concur Technologies, Inc.*

 

2,745

117,349

Deltek, Inc.*

 

1,456

11,328

DemandTec, Inc.*

 

1,564

13,716

Double-Take Software, Inc.*

 

1,377

13,756

Ebix, Inc.*

 

486

23,731

Epicor Software Corp.*

 

3,259

24,834

EPIQ Systems, Inc.*

 

2,234

31,254

ePlus, Inc.*

 

291

4,804

Fair Isaac Corp.

 

3,371

71,836

FalconStor Software, Inc.*

 

2,372

9,630

Fortinet, Inc.*

 

867

15,233

GSE Systems, Inc.*

 

1,262

6,916

i2 Technologies, Inc.*

 

1,112

21,261

Informatica Corp.*

 

6,012

155,470

Interactive Intelligence, Inc.*

 

869

16,024

Jack Henry & Associates, Inc.

 

5,779

133,610

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Software - Cont'd

 

 

 

JDA Software Group, Inc.*

 

1,823

$46,432

Kenexa Corp.*

 

1,553

20,267

Lawson Software, Inc.*

 

9,472

62,989

Manhattan Associates, Inc.*

 

1,590

38,208

Mentor Graphics Corp.*

 

6,646

58,684

MicroStrategy, Inc.*

 

625

58,762

Monotype Imaging Holdings, Inc.*

 

1,201

10,845

Net 1 UEPS Technologies, Inc.*

 

2,147

41,695

Netscout Systems, Inc.*

 

1,699

24,873

NetSuite, Inc.*

 

1,152

18,409

Opnet Technologies, Inc.

 

1,050

12,800

Parametric Technology Corp.*

 

7,995

130,638

Pegasystems, Inc.

 

1,036

35,224

Pervasive Software, Inc.*

 

1,213

5,847

Phoenix Technologies Ltd.*

 

2,193

6,031

Progress Software Corp.*

 

2,756

80,503

PROS Holdings, Inc.*

 

1,025

10,609

QAD, Inc.

 

1,023

6,251

Quest Software, Inc.*

 

4,218

77,611

Radiant Systems, Inc.*

 

1,893

19,687

Renaissance Learning, Inc.

 

446

5,067

Rosetta Stone, Inc.*

 

494

8,867

S1 Corp.*

 

3,646

23,772

Smith Micro Software, Inc.*

 

1,961

17,924

SolarWinds, Inc.*

 

837

19,259

Solera Holdings, Inc.

 

4,798

172,776

SonicWALL, Inc.*

 

3,708

28,218

Sourcefire, Inc.*

 

1,546

41,355

SRS Labs, Inc.*

 

917

6,722

SuccessFactors, Inc.*

 

3,192

52,923

Symyx Technologies*

 

2,680

14,740

Synchronoss Technologies, Inc.*

 

1,308

20,679

Take-Two Interactive Software, Inc.*

 

5,537

55,647

Taleo Corp.*

 

2,692

63,316

TeleCommunication Systems, Inc.*

 

2,682

25,962

THQ, Inc.*

 

4,874

24,565

TIBCO Software, Inc.*

 

12,124

116,754

TiVo, Inc.*

 

7,209

73,388

Tyler Technologies, Inc.*

 

2,155

42,906

Ultimate Software Group, Inc.*

 

1,681

49,371

Unica Corp.*

 

1,113

8,626

VASCO Data Security International, Inc.*

 

2,141

13,424

Websense, Inc.*

 

3,055

53,340

 

 

 

2,946,601

 

 

 

 

Specialty Retail - 3.2%

 

 

 

America's Car-Mart, Inc.*

 

680

17,904

AnnTaylor Stores Corp.*

 

4,044

55,160

Asbury Automotive Group, Inc.*

 

2,219

25,585

Bebe Stores, Inc.

 

1,889

11,844

Big 5 Sporting Goods Corp.

 

1,485

25,512

Books-A-Million, Inc.

 

554

3,723

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Specialty Retail - Cont'd

 

 

 

Borders Group, Inc.*

 

3,373

$3,980

Brown Shoe Co., Inc.

 

2,868

28,307

Build-A-Bear Workshop, Inc.*

 

1,323

6,469

Cabela's, Inc.*

 

2,878

41,040

Cato Corp.

 

1,904

38,194

Charming Shoppes, Inc.*

 

7,963

51,521

Christopher & Banks Corp.

 

2,475

18,860

Citi Trends, Inc.*

 

1,011

27,924

Coldwater Creek, Inc.*

 

3,939

17,568

Collective Brands, Inc.*

 

4,418

100,598

Conn's, Inc.*

 

780

4,555

Destination Maternity Corp.*

 

373

7,087

Dress Barn, Inc.*

 

3,902

90,136

DSW, Inc.*

 

840

21,739

Finish Line

 

2,917

36,608

Gander Mountain Co.*

 

407

2,076

Genesco, Inc.*

 

1,565

42,975

Group 1 Automotive, Inc.*

 

1,660

47,061

Gymboree Corp.*

 

2,014

87,589

Haverty Furniture Co.'s, Inc.

 

1,213

16,654

hhgregg, Inc.*

 

878

19,342

Hibbett Sports, Inc.*

 

1,975

43,430

HOT Topic, Inc.*

 

3,037

19,315

J Crew Group, Inc.*

 

3,468

155,158

Jo-Ann Stores, Inc.*

 

1,864

67,551

JOS A Bank Clothiers, Inc.*

 

1,262

53,244

Kirkland's, Inc.*

 

980

17,023

Lithia Motors, Inc.*

 

1,325

10,892

Lumber Liquidators Holdings, Inc.*

 

995

26,666

Men's Wearhouse, Inc.

 

3,595

75,711

Midas, Inc.*

 

1,091

9,219

Monro Muffler, Inc.

 

1,152

38,523

New York & Co., Inc.*

 

1,850

7,937

OfficeMax, Inc.*

 

5,264

66,800

Pacific Sunwear Of California*

 

4,543

18,081

PEP Boys-Manny Moe & Jack

 

3,356

28,392

Pier 1 Imports, Inc.*

 

7,885

40,135

Rent-A-Center, Inc.*

 

4,556

80,732

Rex Stores Corp.*

 

499

7,016

Rue21, Inc.*

 

469

13,174

Sally Beauty Holdings, Inc.*

 

6,482

49,587

Shoe Carnival, Inc.*

 

707

14,472

Sonic Automotive, Inc.*

 

2,078

21,590

Stage Stores, Inc.

 

2,622

32,408

Stein Mart, Inc.*

 

1,842

19,636

Syms Corp.*

 

529

3,825

Systemax, Inc.

 

704

11,060

Talbots, Inc.*

 

1,677

14,942

The Buckle, Inc.

 

1,759

51,504

The Childrens Place Retail Stores, Inc.*

 

1,524

50,307

Tractor Supply Co.*

 

2,478

131,235

Ulta Salon Cosmetics & Fragrance, Inc.*

 

1,909

34,667

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Specialty Retail - Cont'd

 

 

 

Vitamin Shoppe, Inc.*

 

631

$14,033

West Marine, Inc.*

 

1,129

9,100

Wet Seal, Inc.*

 

6,690

23,082

Zale Corp.*

 

1,642

4,466

Zumiez, Inc.*

 

1,398

17,783

 

 

 

2,132,707

 

 

 

 

Textiles, Apparel & Luxury Goods - 2.1%

 

 

 

American Apparel, Inc.*

 

2,699

8,367

Carter's, Inc.*

 

3,912

102,690

Cherokee, Inc.

 

601

10,710

Columbia Sportswear Co.

 

794

30,998

CROCS, Inc.*

 

5,781

33,241

Deckers Outdoor Corp.*

 

905

92,057

FGX International Holdings Ltd.*

 

1,095

21,451

Fossil, Inc.*

 

3,235

108,567

Fuqi International, Inc.*

 

750

13,462

G-III Apparel Group Ltd.*

 

901

19,525

Iconix Brand Group, Inc.*

 

4,924

62,289

Jones Apparel Group, Inc.

 

5,889

94,577

Kenneth Cole Productions, Inc.*

 

718

6,929

K-Swiss, Inc.*

 

1,958

19,463

Liz Claiborne, Inc.*

 

6,566

36,967

Lululemon Athletica, Inc.*

 

2,805

84,430

Maidenform Brands, Inc.*

 

1,302

21,730

Movado Group, Inc.

 

1,243

12,082

Oxford Industries, Inc.

 

868

17,950

Perry Ellis International, Inc.*

 

648

9,759

Quiksilver, Inc.*

 

9,552

19,295

Skechers U.S.A., Inc.*

 

2,287

67,261

Steven Madden Ltd.*

 

1,079

44,498

Timberland Co.*

 

3,001

53,808

True Religion Apparel, Inc.*

 

1,749

32,339

Under Armour, Inc.*

 

2,286

62,339

Unifi, Inc.*

 

3,597

13,956

Unifirst Corp.

 

974

46,859

Volcom, Inc.*

 

1,302

21,795

Warnaco Group, Inc.*

 

3,159

133,278

Weyco Group, Inc.

 

483

11,418

Wolverine World Wide, Inc.

 

3,397

92,466

 

 

 

1,406,556

 

 

 

 

Thrifts & Mortgage Finance - 1.3%

 

 

 

Abington Bancorp, Inc.

 

1,510

10,404

Astoria Financial Corp.

 

5,900

73,337

Bank Mutual Corp.

 

3,235

22,386

BankFinancial Corp.

 

1,569

15,533

Beneficial Mutual Bancorp, Inc.*

 

2,254

22,179

Berkshire Hills Bancorp, Inc.

 

946

19,563

Brookline Bancorp, Inc.

 

4,270

42,316

Brooklyn Federal Bancorp, Inc.

 

270

2,711

Cheviot Financial Corp.

 

221

1,633

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Thrifts & Mortgage Finance - Cont'd

 

 

 

Clifton Savings Bancorp, Inc.

 

836

$7,833

Dime Community Bancshares

 

1,774

20,791

Doral Financial Corp.*

 

429

1,557

ESB Financial Corp.

 

726

9,598

ESSA Bancorp, Inc.

 

1,049

12,273

First Defiance Financial Corp.

 

641

7,237

First Financial Holdings, Inc.

 

930

12,081

First Financial Northwest, Inc.

 

1,256

8,227

First Financial Service Corp.

 

319

2,890

Flagstar Bancorp, Inc.*

 

3,427

2,056

Flushing Financial Corp.

 

1,707

19,221

Fox Chase Bancorp, Inc.*

 

492

4,684

Heritage Financial Group

 

158

1,145

Home Federal Bancorp, Inc.

 

1,144

15,227

Kearny Financial Corp.

 

1,413

14,243

Kentucky First Federal Bancorp

 

240

2,640

K-Fed Bancorp

 

316

2,778

Legacy Bancorp, Inc.

 

582

5,739

Meridian Interstate Bancorp, Inc.*

 

838

7,282

MGIC Investment Corp.*

 

8,651

50,003

NASB Financial, Inc.

 

278

6,475

NewAlliance Bancshares, Inc.

 

7,368

88,490

Northeast Community Bancorp, Inc.

 

465

3,055

Northwest Bancshares, Inc.

 

2,821

31,934

OceanFirst Financial Corp.

 

705

7,966

Ocwen Financial Corp.*

 

3,935

37,658

Oritani Financial Corp.

 

698

9,584

PMI Group, Inc.*

 

5,033

12,683

Provident Financial Services, Inc.

 

4,125

43,931

Provident New York Bancorp

 

2,394

20,205

Prudential Bancorp, Inc. of Pennsylvania

 

316

3,008

Radian Group, Inc.

 

5,651

41,309

Rockville Financial, Inc.

 

708

7,434

Roma Financial Corp.

 

676

8,355

Territorial Bancorp, Inc.*

 

900

16,245

Tree.com, Inc.*

 

506

4,630

Trustco Bank Corp. NY

 

5,541

34,908

United Financial Bancorp, Inc.

 

1,139

14,932

ViewPoint Financial Group

 

701

10,101

Waterstone Financial, Inc.*

 

553

1,134

Westfield Financial, Inc.

 

2,139

17,647

WSFS Financial Corp.

 

490

12,559

 

 

 

851,810

 

 

 

 

Tobacco - 0.2%

 

 

 

Alliance One International, Inc.*

 

6,125

29,890

Star Scientific, Inc.*

 

5,250

3,675

Universal Corp.

 

1,725

78,677

Vector Group Ltd.

 

2,680

37,520

 

 

 

149,762

 

 

 

 

Equity Securities - Cont'd

 

Shares

Value

Trading Companies & Distributors - 0.8%

 

 

 

Aceto Corp.

 

1,948

$10,032

Aircastle Ltd.

 

3,237

31,885

Applied Industrial Technologies, Inc.

 

2,916

64,356

Beacon Roofing Supply, Inc.*

 

3,245

51,920

BlueLinx Holdings, Inc.*

 

916

2,537

DXP Enterprises, Inc.*

 

572

7,476

H&E Equipment Services, Inc.*

 

1,884

19,763

Houston Wire & Cable Co.

 

1,218

14,494

Interline Brands, Inc.*

 

2,241

38,702

Kaman Corp.

 

1,861

42,971

Lawson Products

 

334

5,895

RSC Holdings, Inc.*

 

3,485

24,534

Rush Enterprises, Inc.*

 

2,204

26,206

TAL International Group, Inc.

 

1,136

15,029

Textainer Group Holdings Ltd.

 

632

10,681

Titan Machinery, Inc.*

 

1,023

11,806

United Rentals, Inc.*

 

4,149

40,702

Watsco, Inc.

 

1,835

89,878

Willis Lease Finance Corp.*

 

373

5,595

 

 

 

514,462

 

 

 

 

Transportation Infrastructure - 0.0%

 

 

 

CAI International, Inc.*

 

587

5,301

 

 

 

 

Venture Capital - 0.1%

 

 

 

Allos Therapeutics, Inc.*

 

4,787

31,451

Evergreen Solar, Inc.*

 

12,957

19,565

 

 

 

51,016

 

 

 

 

Water Utilities - 0.3%

 

 

 

American States Water Co.

 

1,275

45,148

Artesian Resources Corp.

 

490

8,972

Cadiz, Inc.*

 

953

11,407

California Water Service Group

 

1,356

49,928

Connecticut Water Service, Inc.

 

671

16,621

Consolidated Water Co., Inc.

 

1,003

14,333

Middlesex Water Co.

 

924

16,290

Pennichuck Corp.

 

336

7,100

SJW Corp.

 

892

20,132

Southwest Water Co.

 

1,950

11,485

York Water Co.

 

901

13,074

 

 

 

214,490

 

 

 

 

Wireless Telecommunication Services - 0.3%

 

 

 

NTELOS Holdings Corp.

 

2,189

39,008

Shenandoah Telecommunications Co.

 

1,731

35,226

Syniverse Holdings, Inc.*

 

4,720

82,506

USA Mobility, Inc.

 

1,562

17,198

 

 

 

173,938

 

 

 

 

 

 

 

 

     Total Equity Securities (Cost $72,707,630)

 

 

65,120,183

 

 

 

 

 

 

Principal

 

U.S. Treasury - 0.5%

 

Amount

Value

United States Treasury Bills, 2/11/10 ^

 

$300,000

$299,966

 

 

 

 

     Total U.S. Treasury (Cost $299,966)

 

 

299,966

 

 

 

 

Time Deposit - 1.5%

 

 

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

973,490

973,490

 

 

 

 

     Total Time Deposit (Cost $973,490)

 

 

973,490

 

 

 

 

Exchange Traded Funds - 0.1%

 

Shares

 

iShares Russell 2000 Index Fund

 

1,000

62,260

 

 

 

 

     Total Exchange Traded Funds (Cost $58,471)

 

 

62,260

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $74,039,557) - 99.8%

 

 

66,455,899

          Other assets and liabilities, net - 0.2%

 

 

163,586

          Net Assets - 100%

 

 

$66,619,485

 

 

 

 

Net Assets Consist of:

 

 

 

Paid-in capital applicable to the following shares of common stock outstanding;

 

 

 

$0.10 par value, 20,000,000 shares authorized:

 

 

 

Class I: 1,261,716 shares outstanding

 

 

$74,269,179

Class F: 65,485 shares outstanding

 

 

3,135,369

Undistributed net investment income

 

 

154,606

Accumulated net realized gain (loss) on investments

 

 

(3,413,643)

Net unrealized appreciation (depreciation) on investments

 

 

(7,526,026)

 

 

 

 

          Net Assets

 

 

$66,619,485

 

 

 

 

Net Asset Value per Share:

 

 

 

Class I (based on net assets of $63,320,160)

 

 

$50.19

Class F (based on net assets of $3,299,325)

 

 

$50.38

Futures

Number Of
Contracts

Expiration
Date

Underlying
Face Amount
At Value

Unrealized
Appreciation
(Depreciation)

Purchased:

 

 

 

 

     E-Mini Russell 2000 Index^

23

3/10

$1,434,970

$57,632

 

(b) This security was valued by the Board of Directors. See note A.

^ Futures collateralized by 300,000 units of U.S. Treasury Bills.

* Non-income producing security.

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income (net of foreign taxes withheld of $118)

$920,950

     Interest income

6,136

          Total investment income

927,086

 

 

Expenses:

 

     Investment advisory fee

212,159

          Transfer agent fees and expenses

10,481

     Accounting fees

6,351

     Distribution plan expenses:

 

          Class F

4,425

     Directors' fees and expenses

9,500

     Administrative fees

60,617

     Custodian fees

99,384

     Reports to shareholders

23,685

     Professional fees

23,388

     Contract services

77,795

     Miscellaneous

226

          Total expenses

528,011

               Reimbursement from Advisor:

 

                    Class F

(7,421)

                    Class I

(91,538)

     Fees paid indirectly

(87)

               Net expenses

428,965

 

 

               Net Investment Income

498,121

 

 

Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) on:

 

     Investments

(3,670,917)

     Foreign currency transactions

164

     Futures

428,901

 

(3,241,852)

 

 

Change in unrealized appreciation (depreciation) on:

 

     Investments

17,766,851

     Assets and liabilities denominated in foreign currencies

3

     Futures

(126,926)

 

17,639,928

 

 

               Net Realized and Unrealized Gain

 

               (Loss)

14,398,076

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$14,896,197

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$498,121

$914,785

     Net realized gain (loss)

(3,241,852)

1,131,847

     Change in unrealized appreciation or (depreciation)

17,639,928

(33,476,017)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

14,896,197

(31,429,385)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income:

 

 

          Class I shares

(331,011)

(1,591,208)

          Class F shares

(8,613)

(10,834)

     Net realized gain:

 

 

          Class I shares

(685,510)

(5,230,091)

          Class F shares

(35,436)

(48,980)

               Total distributions

($1,060,570)

(6,881,113)

 

 

 

Capital share transactions:

 

 

     Shares sold:

 

 

          Class I shares

8,103,966

17,263,850

          Class F shares

2,505,356

1,086,448

     Reinvestment of distributions:

 

 

          Class I shares

1,016,521

6,821,298

          Class F shares

44,049

59,815

     Shares redeemed:

 

 

          Class I shares

(17,396,665)

(19,484,061)

          Class F shares

(880,732)

(420,084)

               Total capital share transactions

(6,607,505)

5,327,266

 

 

 

Total Increase (Decrease) in Net Assets

7,228,122

(32,983,232)

 

 

 

Net Assets

 

 

Beginning of year

59,391,363

92,374,595

End of year (including undistributed net investment

 

 

     income of $154,606 and $81,759, respectively)

$66,619,485

$59,391,363

 

 

 

Capital Share Activity

 

 

Shares sold:

 

 

     Class I shares

197,679

301,083

     Class F shares

60,682

20,691

Reinvestment of distributions:

 

 

     Class I shares

19,999

132,013

     Class F shares

863

1,189

Shares redeemed:

 

 

     Class I shares

(401,191)

(356,259)

     Class F shares

(20,161)

(8,241)

          Total capital share transactions

(142,129)

90,476

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Russell 2000 Small Cap Index Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio offers Class I and Class F shares. Class F shares are subject to Distribution Plan Expenses. Each class has different: (a) dividend rates, due to differences in Distribution Plan expenses and other class-specific expenses, (b) exchange privileges; and (c) class-specific voting rights.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the close of business of the Portfolio, that are expected to materially affect the value of those securities, then they are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Portfolio may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, securities valued at $17 or 0.0% of net assets were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Equity Securities**

$65,120,166

--

$17

$65,120,183

Exchange Traded Funds

62,260

--

--

62,260

U.S. Government Obligations

--

$299,966

--

299,966

Other Debt Obligations

--

973,490

--

973,490

TOTAL

$65,182,426

$1,273,456

$17*

$66,455,899

 

 

 

 

 

Other financial instruments***

$57,632

--

--

$57,632

*Level 3 securities represent 0.0% of net assets.

** For further breakdown of Equity Securities by industry type, please refer to the Statement of Net Assets.

*** Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, which are valued at the unrealized appreciation/ depreciation on the instrument.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Investment income and realized and unrealized gains and losses are allocated to separate classes of shares based upon the relative net assets of each class. Expenses arising in connection with a class are charged directly to that class. Expenses common to the classes are allocated to each class in proportion to their relative net assets. Withholding taxes on foreign dividends have been provided for in accordance with the Portfolio's understanding of the applicable country's tax rules and rates.

Futures Contracts: The Portfolio may purchase and sell futures contracts, but only when, in the judgment of the Advisor, such a position acts as a hedge. The Portfolio may not enter into futures contracts for the purpose of speculation or leverage. These futures contracts may include, but are not limited to, market index futures contracts. The Portfolio is subject to market risk in the normal course of pursuing its investment objectives. The Portfolio may use futures contracts to hedge against changes in the value of securities. The Portfolio may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Portfolio's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms. Futures contracts are designed by boards of trade which are designated "contracts markets" by the Commodities Futures Trading Commission. Futures contracts trade on the contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee the futures contracts against default. As a result, there is minimal counterparty credit risk to the Portfolio.

Foreign Currency Transactions: The Portfolio's accounting records are maintained in U.S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are converted into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities is included with the net realized and unrealized gain or loss on investments.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Mutual Holding Company ("UNIFI"). The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .35% of the Portfolio's average daily net assets. Under the terms of the agreement, $19,442 was payable at year end. In addition, $13,454 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense caps are .70% and .91% for Class I and Class F, respectively. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $5,555 was payable at year end.

Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Portfolio. Distribution plans, adopted by Class F shares, allow the Portfolio to pay the distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed 0.20% annually of average daily net assets of Class F. Under the terms of the agreement, $547 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $206 for the year ended December 31, 2009. Under the terms of the agreement, $16 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $14,007,234 and $20,038,469, respectively.

Capital Loss Carryforward

Expiration Date

31-Dec-17

$3,409,538

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

 

2009

2008

Distributions paid from:

 

 

Ordinary income

$339,624

$1,976,868

Long term capital gain

720,946

4,904,245

        Total

$1,060,570

$6,881,113

As of December 31, 2009, the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$10,143,494

Unrealized (depreciation)               

(17,677,995)

Net unrealized appreciation/(depreciation)     

($7,534,501)

Undistributed ordinary income

$158,976

Capital loss carryforward     

($3,409,538)

Federal income tax cost of investments     

$73,990,400

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales, real estate investment trusts, passive foreign investment companies and Section 1256 contracts.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to real estate investment trusts, foreign currency transactions, litigation settlements, and passive foreign investment companies.

Undistributed net investment income

($85,650)

Accumulated net realized gain (loss)

86,619

Paid-in Capital

(969)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no loan outstanding pursuant to this line of credit at December 31, 2009.

For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

Average
Daily
Balance

Weighted
Average
Interest
Rate

Maximum
Amount
Borrowed

Month Of
Maximum
Amount
Borrowed

 

$10,898

1.45%

$3,539,345

December 2009

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions ocurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates $720,946 of the long term capital gain distributions paid during the year or the maximum amount allowable but not less than the afore-mentioned amount as capital gain dividend in accordance with Section 852(b)(3)(C) of the Internal Revenue Code.

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 90.7% of the ordinary dividends paid during the year or the maximum amount allowable but not less than the aforementioned percentage as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

Class I Shares

2009

2008 (z)

2007 (z)

Net asset value, beginning

$40.42

$67.00

$74.19

Income from investment operations

 

 

 

     Net investment income

.40

.62

.74

     Net realized and unrealized gain (loss)

10.19

(22.38)

(1.98)

          Total from investment operations

10.59

(21.76)

(1.24)

Distributions from

 

 

 

     Net investment income

(.27)

(1.13)

(.47)

     Net realized gain

(.55)

(3.69)

(5.48)

          Total distributions

(.82)

(4.82)

(5.95)

Total increase (decrease) in net asset value

9.77

(26.58)

(7.19)

Net asset value, ending

$50.19

$40.42

$67.00

 

 

 

 

Total return*

26.17%

(33.95%)

(2.20%)

Ratios to average net assets: A

 

 

 

     Net investment income

.83%

1.13%

1.04%

     Total expenses

.86%

.70%

.64%

     Expenses before offsets

.70%

.70%

.64%

     Net expenses

.70%

.70%

.64%

Portfolio turnover

24%

30%

19%

Net assets, ending (in thousands)

$63,320

$58,414

$91,676

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

Class I Shares

2006

2005

 

Net asset value, beginning

$65.46

$63.92

 

Income from investment operations

 

 

 

     Net investment income

.46

.41

 

     Net realized and unrealized gain (loss)

10.88

2.07

 

          Total from investment operations

11.34

2.48

 

Distributions from

 

 

 

     Net investment income

(.44)

(.31)

 

     Net realized gain

(2.17)

(.63)

 

          Total distributions

(2.61)

(.94)

 

Total increase (decrease) in net asset value

8.73

1.54

 

Net asset value, ending

$74.19

$65.46

 

Total return*

17.60%

4.01%

 

Ratios to average net assets: A

 

 

 

     Net investment income

.84%

.70%

 

     Total expenses

.65%

.69%

 

     Expenses before offsets

.65%

.69%

 

     Net expenses

.65%

.69%

 

Portfolio turnover

24%

25%

 

Net assets, ending (in thousands)

$95,694

$75,815

 

 

 

 

 

See notes to financial highlights.

 

 

 

 

 

 

 

 

 

 

 

Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

Class F Shares

2009

2008 (z)

2007 (z)

Net asset value, beginning

$40.55

$66.78

$74.02

Income from investment operations

 

 

 

     Net investment income

.19

.58

.59

     Net realized and unrealized gain (loss)

10.32

(22.36)

(1.97)

          Total from investment operations

10.51

(21.78)

(1.38)

Distributions from

 

 

 

     Net investment income

(.13)

(.76)

(.38)

     Net realized gain

(.55)

(3.69)

(5.48)

          Total distributions

(.68)

(4.45)

(5.86)

Total increase (decrease) in net asset value

9.38

(26.23)

(7.24)

Net asset value, ending

$50.38

$40.55

$66.78

 

 

 

 

Total return*

25.91%

(34.05%)

(2.40%)

Ratios to average net assets: A

 

 

 

     Net investment income

.63%

1.09%

.84%

     Total expenses

1.25%

.91%

.84%

     Expenses before offsets

.91%

.91%

.84%

     Net expenses

.91%

.91%

.84%

Portfolio turnover

24%

30%

19%

Net assets, ending (in thousands)

$3,299

$977

$699

 

 

 

 

 

 

 

 

 

Periods Ended

 

 

December 31,

December 31,

 

Class F Shares

2006

2005#

 

Net asset value, beginning

$65.43

$64.41

 

Income from investment operations

 

 

 

     Net investment income

.31

.12

 

     Net realized and unrealized gain (loss)

10.87

.90

 

          Total from investment operations

11.18

1.02

 

Distributions from

 

 

 

     Net investment income

(.42)

--

 

     Net realized gain

(2.17)

--

 

          Total distributions

(2.59)

--

 

Total increase (decrease) in net asset value

8.59

1.02

 

Net asset value, ending

$74.02

$65.43

 

 

 

 

 

Total return*

17.35%

1.58%

 

Ratios to average net assets: A

 

 

 

     Net investment income

.64%

.74% (a)

 

     Total expenses

.85%

.84% (a)

 

     Expenses before offsets

.85%

.84% (a)

 

     Net expenses

.85%

.84% (a)

 

Portfolio turnover

24%

25%

 

Net assets, ending (in thousands)

$272

$5

 

 

See notes to financial highlights.

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

(a) Annualized.

# From October 4, 2005, inception.

(z) Per share figures are calculated using the Average Shares Method.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one-year period ended June 30, 2009, and performed below the median of its peer universe for the three- and five-year periods ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one- and five-year periods ended June 30, 2009 and underperformed its Lipper index for the three-year period ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance. Based upon its review, the Board concluded that the Portfolio's performance was being addressed.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was above the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. In addition, the Board considered the subadvisory fee paid to the Subadvisor by the Advisor in comparison to fees paid by similar institutional clients. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is being addressed; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit EAFE
International Index
Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

30

Statement of Operations

31

Statements of Changes in Net Assets

33

Notes to Financial Statements

39

Financial Highlights

41

Explanation of Financial Tables

42

Proxy Voting

43

Availability of Quarterly Portfolio Holdings

43

Basis for Board's Approval of Investment Advisory Contracts

47

Director and Officer Information Table

 

Summit EAFE International Index Portfolio

Managed by World Asset Management, Inc.

Performance

For the 12 months ended December 31, 2009, Summit International EAFE Index Portfolio returned 27.83% (Class I) compared to the 32.46% return for the Morgan Stanley Capital International (MSCI) EAFE Index (Standard). As an index fund, the portfolio employs a passive management approach and seeks, as closely as possible, to replicate the holdings and match the performance of the MSCI EAFE Index before fees and expenses. The difference in performance is attributable to fund expenses and fair value pricing adjustments.

 

Summit EAFE International Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

 

Class I

Class F**

One year

27.83%

27.47%

Five year

2.66%

2.43%

Since inception (11.12.02)

8.35%

8.11%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

**Prior to December 17, 2007, Class F share performance is based on Class I performance.

Absent limitation of expenses during certain of the periods shown, performance would have been lower.

The performance data shown represents past performance, and does not guarantee future results.The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted. The value of an investment in Class I Shares is plotted in the graph. The value of an investment in another class of shares would be different.

 

Investment Climate

Early in 2009, central banks around the world lowered interest rates to record levels, and governments in most countries initiated unprecedented stimulus programs as they fought to limit the effects of the global financial crisis and economic downturn. It appears that the massive liquidity created by these actions helped to limit the magnitude of the crisis. By spring, there were signs that the global economy and credit markets had stabilized. From late March, stock markets across the world rallied strongly. Emerging markets were the best-performing asset category for the year, although many segments of the fixed-income market also delivered stellar returns.

Portfolio Strategy

The Portfolio continued to meet its investment objective of closely tracking the total return of the MSCI EAFE Index. The unmanaged MSCI EAFE Index is made up of a wide range of securities that trade in developed markets throughout the world. These markets delivered strong returns for the year, both in absolute terms and relative to markets in the United States as measured by the Standard & Poor's 500 Index, which returned 26.5% for the year.

There were 21 countries in the MSCI EAFE Index universe at the end of 2009. Japan and the United Kingdom were the most heavily weighted at 20.7% and 21.6%, respectively. Norway, Australia, Singapore, and Sweden delivered the strongest performance for the year. Each country posted an annual return in excess of 60%. Japan and Finland were the weakest performers in the Index, returning 4.4% and 7.2%, respectively. Because of its heavy weighting and weak performance, Japan detracted the most from performance during the year.

At year-end, the MSCI EAFE Index was most heavily weighted in the Financials, Industrials, and Consumer Discretionary sectors, which comprised 25.47%, 11.22%, and 9.67% of the index, respectively. Materials was the best performing sector for the year, while Utilities delivered the weakest performance. Financials and Consumer Discretionary sectors outperformed the benchmark. The Industrials sector underperformed.

Fair value pricing adjustment to the Portfolio accounted for a significant amount of the underperformance relative to the Index. The Portfolio uses the fair value pricing service to adjust its net asset value (NAV) when the closing market prices of international stocks that are held in the portfolio have changed materially relative to their closing prices on their local stock exchanges. This practice helps deter short-term trading in the Portfolio, although, as during the current year, it can cause performance to deviate from the Index.

Cash flows into the Summit EAFE International Portfolio were invested promptly to minimize their impact on total return. Passive market indexes like the MSCI EAFE Index do not incur any operating expenses, unlike the Portfolio. Net Asset Value (NAV) rounding also contributed to the Portfolio's return relative to the Index. NAV rounding occurs because mutual fund prices are carried out only to two decimal places.

Economic Sectors

% of Total
Investments

Communications

0.1%

Consumer Discretionary

9.4%

Consumer Staples

10.0%

Energy

8.2%

Exchange Traded Funds

1.9%

Financials

24.0%

Health Care

8.2%

Industrials

11.0%

Information Technology

4.7%

Materials

10.1%

Telecommunication Services

5.7%

Time Deposit

0.9%

Utilities

5.8%

Total

100%

Outlook

Global economic growth generally turned positive in 2009. Central bank and government intervention helped to support demand, reduce uncertainty, and lower systemic risk in financial markets. While it appears that many countries may be at or near recovery, the pace of recovery is likely to be characterized by slow or moderate growth in many places. Financial systems are recovering and the current unprecedented government support will need to be withdrawn over time.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Class I

 

 

 

Actual

$1,000.00

$1,208.20

$5.50

Hypothetical (5% return per year before expenses)

$1,000.00

$1,020.22

$5.04

 

 

 

 

Class F

 

 

 

Actual

$1,000.00

$1,207.30

$6.40

Hypothetical (5% return per year before expenses)

$1,000.00

$1,019.41

$5.85

* Expenses are equal to the Fund's annualized expense ratio of 0.99% and 1.15%, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit EAFE International Index Portfolio:

We have audited the accompanying statement of net assets of the Summit EAFE International Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit EAFE International Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

December 31, 2009

Equity Securities - 96.9%

Shares

Value

Australia - 8.1%

 

 

AGL Energy Ltd.

3,754

$47,193

Alumina Ltd.*

20,472

33,596

Amcor Ltd.

10,210

56,845

AMP Ltd.

16,894

101,685

Aristocrat Leisure Ltd.

3,601

12,846

Arrow Energy NL*

4,874

18,032

Asciano Group*

22,591

36,450

ASX Ltd.

1,436

44,697

Australia & New Zealand Banking Group Ltd.

19,562

397,761

AXA Asia Pacific Holdings Ltd.

8,537

50,200

Bendigo and Adelaide Bank Ltd.

2,648

23,200

BGP Holdings plc*

77,172

-

BHP Billiton Ltd.

28,156

1,077,539

Billabong International Ltd.

1,636

15,896

BlueScope Steel Ltd.

15,296

42,182

Boral Ltd.

5,219

27,562

Brambles Ltd.

11,760

71,196

Caltex Australia Ltd.*

1,245

10,325

CFS Retail Property Trust

15,218

25,758

Coca-Cola Amatil Ltd.

4,668

48,073

Cochlear Ltd.

497

30,670

Commonwealth Bank of Australia

12,742

620,947

Computershare Ltd.

3,729

38,000

Crown Ltd.

4,252

30,424

CSL Ltd.

5,063

147,203

CSR Ltd.

10,250

16,476

Dexus Property Group

39,219

29,596

Energy Resources of Australia Ltd.

560

11,970

Fairfax Media Ltd.

17,758

27,374

Fortescue Metals Group Ltd.*

10,366

40,798

Foster's Group Ltd.

16,173

79,536

Goodman Fielder Ltd.

11,562

16,819

Goodman Group

50,138

28,198

GPT Group

77,172

41,420

Harvey Norman Holdings Ltd.

4,456

16,722

Incitec Pivot Ltd.

13,421

42,506

Insurance Australia Group Ltd.

17,378

62,208

Leighton Holdings Ltd.

1,249

42,176

Lend Lease Corp. Ltd.

3,646

33,204

Macquarie Airports

6,230

16,812

Macquarie Group Ltd.

2,548

109,022

Macquarie Infrastructure Group

18,975

22,598

Metcash Ltd.

6,417

25,669

Mirvac Group

21,331

29,657

National Australia Bank Ltd.

16,093

391,354

Newcrest Mining Ltd.

4,058

127,103

Nufarm Ltd.

1,531

14,948

OneSteel Ltd.

11,123

33,069

Orica Ltd.

3,013

69,794

 

 

 

Equity Securities - Cont'd

Shares

Value

Australia - Cont'd

 

 

Origin Energy Ltd.

7,335

$110,052

OZ Minerals Ltd.*

26,186

27,365

Paladin Energy Ltd.*

4,709

17,465

Qantas Airways Ltd.

9,663

25,666

QBE Insurance Group Ltd.

8,411

191,860

Rio Tinto Ltd.

3,655

241,688

Santos Ltd.

6,871

86,466

Sims Metal Management Ltd.

1,289

25,217

Sonic Healthcare Ltd.

3,059

42,104

SP AusNet

11,118

9,100

Stockland

19,149

67,252

Suncorp-Metway Ltd.

10,548

81,398

TABCORP Holdings Ltd.

5,064

31,383

Tatts Group Ltd.

10,122

22,067

Telstra Corp. Ltd.

36,908

113,038

Toll Holdings Ltd.

5,543

43,169

Transurban Group

9,685

47,948

Wesfarmers Ltd.

1,274

35,399

Wesfarmers Ltd. PPS

8,432

234,289

Westfield Group

17,188

191,568

Westpac Banking Corp.

24,423

549,406

Woodside Petroleum Ltd.:

 

 

     Common Stock

4,165

174,946

     Rights (expires 1/29/10)*

347

1,589

Woolworths Ltd.

10,310

258,088

WorleyParsons Ltd.

1,431

37,047

 

 

7,002,879

 

 

 

Austria - 0.3%

 

 

Erste Bank der Oesterreichischen Sparkassen AG

1,462

54,186

Immoeast AG*

3,766

20,644

OMV AG

1,258

55,084

Raiffeisen International Bank Holding AG

480

27,166

Telekom Austria AG

2,701

38,560

Verbund - Oesterreichische Elektrizitaetswirtschafts AG

646

27,386

Vienna Insurance Group

349

17,919

Voestalpine AG

1,029

37,518

 

 

278,463

 

 

 

Belgium - 0.9%

 

 

Anheuser-Busch InBev NV

6,051

312,587

Belgacom SA

1,276

46,020

Colruyt SA

126

30,377

Delhaize Group

843

64,561

Dexia SA*

4,435

27,896

Fortis NV:

 

 

     Common Stock*

18,743

69,433

     Rights (expires 7/4/14)(b)*

14,430

-

Groupe Bruxelles Lambert SA

676

63,611

KBC Groep NV*

1,350

58,457

Mobistar SA

251

17,163

Nationale A Portefeuille

276

14,717

Solvay SA

497

53,574

 

 

 

Equity Securities - Cont'd

Shares

Value

Belgium - Cont'd

 

 

UCB SA

846

$35,423

Umicore SA

1,004

33,430

 

 

827,249

 

 

 

Bermuda - 0.1%

 

 

Seadrill Ltd.

2,344

59,330

 

 

 

Canada - 0.1%

 

 

Thomson Corp.*

1,487

47,956

 

 

 

China - 0.0%

 

 

Foxconn International Holdings Ltd.*

18,892

21,699

 

 

 

Cyprus - 0.0%

 

 

Bank of Cyprus Public Co. Ltd.

4,675

32,583

 

 

 

Denmark - 0.9%

 

 

A P Moller - Maersk A/S:

 

 

     Series A

4

26,962

     Series B

11

76,911

Carlsberg A/S, Series B

897

66,188

Coloplast A/S, Series B

207

18,811

Danske Bank A/S*

3,810

86,740

DSV A/S*

1,754

31,464

H. Lundbeck A/S

495

9,009

Novo Nordisk A/S, Series B

3,754

240,164

Novozymes A/S, Series B

386

40,019

Topdanmark A/S*

125

16,923

TrygVesta A/S

217

14,323

Vestas Wind Systems A/S*

1,709

104,557

William Demant Holding A/S*

209

15,747

 

 

747,818

 

 

 

Finland - 1.1%

 

 

Elisa Oyj

1,116

25,493

Fortum Oyj

3,726

100,931

Kesko Oyj, Series B

598

19,722

Kone OYJ

1,289

55,086

Metso Oyj

1,070

37,616

Neste Oil Oyj

1,075

19,063

Nokia Oyj

31,418

403,297

Nokian Renkaat Oyj

948

22,999

Orion Oyj, Class B

749

16,126

Outokumpu Oyj

1,039

19,535

Pohjola Bank plc

1,213

13,125

Rautaruukki Oyj

747

17,150

Sampo Oyj

3,524

85,517

Sanoma Oyj

675

15,146

Stora Enso Oyj, Series R*

4,880

34,202

UPM-Kymmene Oyj

4,362

51,871

Wartsila Oyj

737

29,458

 

 

966,337

 

 

 

Equity Securities - Cont'd

Shares

Value

France - 9.9%

 

 

Accor SA

1,199

$65,127

Aeroports de Paris

249

20,027

Air France-KLM*

1,206

18,802

Air Liquide SA

2,096

247,393

Alcatel-Lucent*

19,447

65,124

Alstom SA

1,695

117,754

Atos Origin SA*

380

17,300

AXA SA

13,145

310,850

BioMerieux

115

13,375

BNP Paribas

7,017

553,679

Bouygues

1,872

97,618

Bureau Veritas SA

410

21,236

Cap Gemini SA

1,224

55,436

Carrefour SA

5,322

255,852

Casino Guichard-Perrachon SA

462

41,400

Christian Dior SA

533

54,777

Cie de Saint-Gobain

3,086

165,632

Cie Generale de Geophysique-Veritas*

1,261

26,893

Cie Generale d'Optique Essilor International SA

1,681

100,066

CNP Assurances SA

311

30,107

Compagnie Generale des Etablissements Michelin, Series B

1,216

93,264

Credit Agricole SA

7,471

130,233

Dassault Systemes SA

543

30,904

EDF Energies Nouvelles SA

1,987

118,225

Eiffage SA

339

19,151

Eramet

47

14,635

Eurazeo SA

251

17,514

Eutelsat Communications

829

26,595

Fonciere Des Regions:

 

 

     Common

195

19,940

     Warrants (strike price $65.00/share, expires 12/31/10)*

195

165

France Telecom SA

15,356

383,359

GDF Suez

10,122

439,084

Gecina SA

167

18,074

Groupe Danone

4,613

280,899

Hermes International

442

58,787

Icade SA

175

16,641

Iliad SA

144

17,153

Imerys SA

284

16,889

Ipsen SA

211

11,719

JC Decaux SA*

556

13,479

Klepierre SA

797

32,418

Lafarge SA

1,675

137,732

Lagardere SCA

990

39,943

Legrand SA

881

24,564

L'Oreal SA

2,008

222,915

LVMH Moet Hennessy Louis Vuitton SA

2,055

230,716

M6-Metropole Television SA

540

13,815

Natixis*

7,319

36,430

Neopost SA

261

21,562

PagesJaunes Groupe

1,060

11,799

Pernod-Ricard SA

1,659

142,386

 

 

 

Equity Securities - Cont'd

Shares

Value

France - Cont'd

 

 

PPR SA

637

$76,323

PSA Peugeot Citroen SA*

1,276

42,742

Publicis Groupe

986

39,995

Renault SA*

1,553

79,072

Safran SA

1,574

30,618

Sanofi-Aventis SA

8,829

692,004

Schneider Electric SA

1,945

225,308

SCOR SE

1,390

34,716

Societe BIC SA

223

15,433

Societe Des Autoroutes Paris-Rhin-Rhone*

189

14,476

Societe Generale Groupe

3,897

269,615

Societe Television Francaise 1

984

18,169

Sodexo

790

45,116

Suez Environnement SA

2,259

52,181

Technip SA

871

61,028

Thales SA

750

38,430

Total SA

17,908

1,147,452

Unibail-Rodamco

684

150,559

Vallourec SA

451

82,022

Veolia Environnement

3,171

104,258

Vinci SA

3,546

198,591

Vivendi

9,821

289,902

 

 

8,627,448

 

 

 

Germany - 7.8%

 

 

Adidas AG

1,623

87,619

Allianz SE

3,800

472,947

BASF SE

7,744

480,283

Bayer AG

6,412

512,426

Bayerische Motoren Werke AG:

 

 

     Common

2,777

126,234

     Preferred

437

14,372

Beiersdorf AG

739

48,563

Celesio AG

713

18,113

Commerzbank AG*

5,946

49,848

Daimler AG

7,565

404,133

Deutsche Bank AG

4,967

350,051

Deutsche Boerse AG

1,635

135,922

Deutsche Lufthansa AG

1,920

32,230

Deutsche Post AG

7,098

136,560

Deutsche Postbank AG*

734

23,982

Deutsche Telekom AG

23,783

351,215

E.ON AG

15,948

665,722

Fraport AG Frankfurt Airport Services Worldwide

307

15,967

Fresenius Medical Care AG & Co. KGaA

1,602

84,814

Fresenius SE:

 

 

     Common

236

14,689

     Preferred

675

48,235

GEA Group AG

1,310

29,163

Hannover Rueckversicherung AG*

530

24,875

 

 

 

 

 

 

Equity Securities - Cont'd

Shares

Value

Germany - Cont'd

 

 

Henkel AG & Co. KGaA:

 

 

Common

1,089

$48,629

Preferred

1,471

76,576

Hochtief AG

369

28,196

Infineon Technologies AG*

9,085

50,149

K+S AG

1,245

71,559

Linde AG

1,272

153,088

MAN AG

887

69,075

Merck KGAA

542

50,655

Metro AG

951

57,960

Muenchener Rueckversicherungs AG

1,731

269,812

Porsche Automobil Holding SE, Preferred

734

46,097

Puma AG Rudolf Dassler Sport

44

14,571

RWE AG:

 

 

     Common

3,512

341,252

     Preferred

342

30,511

Salzgitter AG

327

31,961

SAP AG

7,199

339,498

Siemens AG

6,902

633,006

SolarWorld AG

733

16,061

Suedzucker AG

602

12,498

ThyssenKrupp AG

2,805

105,631

TUI AG*

1,272

10,610

United Internet AG*

1,126

14,889

Volkswagen AG:

 

 

     Common

370

40,925

     Preferred

882

82,899

Wacker Chemie AG

140

24,415

 

 

6,748,486

 

 

 

Greece - 0.4%

 

 

Alpha Bank AE*

3,007

34,784

Coca Cola Hellenic Bottling Co. SA

1,532

34,898

EFG Eurobank Ergasias SA*

2,709

30,041

Hellenic Petroleum SA

769

8,545

Hellenic Telecommunications Organization SA

2,056

30,100

Marfin Investment Group SA*

5,328

15,152

National Bank of Greece SA*

5,092

129,828

OPAP SA

1,873

41,000

Piraeus Bank SA*

2,541

28,990

Public Power Corp. SA*

973

17,957

Titan Cement Co. SA

484

14,018

 

 

385,313

 

 

 

Hong Kong - 2.3%

 

 

ASM Pacific Technology Ltd.

1,812

17,031

Bank of East Asia Ltd.

12,359

48,679

BOC Hong Kong Holdings Ltd.

31,045

70,135

Cathay Pacific Airways Ltd.*

10,771

20,234

Cheung Kong Holdings Ltd.

11,659

150,098

Cheung Kong Infrastructure Holdings Ltd.

3,782

14,354

Chinese Estates Holdings Ltd.

6,434

10,939

CLP Holdings Ltd.

17,158

115,928

Esprit Holdings Ltd.

9,639

63,435

 

 

 

Equity Securities - Cont'd

Shares

Value

Hong Kong - Cont'd

 

 

Genting Singapore plc*

32,342

$29,643

Hang Lung Group Ltd.

6,716

33,180

Hang Lung Properties Ltd.

17,388

67,930

Hang Seng Bank Ltd.

6,415

94,285

Henderson Land Development Co. Ltd.

9,005

67,322

Hong Kong & China Gas Co. Ltd.

33,248

83,005

Hong Kong Aircraft Engineering Co. Ltd.

558

7,214

Hong Kong Exchanges and Clearing Ltd.

8,574

152,628

HongKong Electric Holdings

11,638

63,156

Hopewell Highway Infrastructure Ltd.

434

264

Hopewell Holdings

5,159

16,620

Hutchison Whampoa Ltd.

17,884

122,410

Hysan Development Co. Ltd.

5,712

16,173

Kerry Properties Ltd.

6,245

31,531

Li & Fung Ltd.

19,238

78,800

Lifestyle International Holdings Ltd.

4,881

9,053

Link REIT

18,180

46,074

Mongolia Energy Co. Ltd.*

25,371

12,875

MTR Corp.

11,874

40,712

New World Development Ltd.

21,010

42,878

Noble Group Ltd.

11,460

26,277

NWS Holdings Ltd.

7,388

13,624

Orient Overseas International Ltd.

1,967

9,155

PCCW Ltd.

31,249

7,561

Shangri-La Asia Ltd.

11,781

22,035

Sino Land Co.

14,695

28,518

Sun Hung Kai Properties Ltd.

11,832

175,557

Swire Pacific Ltd.

6,457

78,085

Television Broadcasts Ltd.

2,388

11,442

Wharf Holdings Ltd.

11,551

66,045

Wheelock & Co. Ltd.

8,036

24,657

Wing Hang Bank Ltd.

1,612

14,978

Yue Yuen Industrial Holdings Ltd.

6,035

17,506

 

 

2,022,026

 

 

 

Ireland - 0.4%

 

 

CRH plc

5,806

157,255

Elan Corp. plc*

4,174

26,122

Experian plc

8,603

85,107

Kerry Group plc

1,174

34,601

Ryanair Holdings plc*

3,203

15,129

 

 

318,214

 

 

 

Italy - 3.3%

 

 

A2A SpA

9,199

19,253

Assicurazioni Generali SpA

10,043

269,236

Atlantia SpA

2,160

56,141

Autogrill SpA*

853

10,727

Banca Carige SpA

5,423

14,431

Banca Monte dei Paschi di Siena SpA

18,433

32,271

Banca Popolare di Milano Scarl

3,307

23,458

Banco Popolare SC*

5,373

40,214

 

 

 

Equity Securities - Cont'd

Shares

Value

Italy - Cont'd

 

 

Enel SpA

55,223

$320,641

ENI SpA

21,842

556,019

Exor SpA

605

11,699

Fiat SpA*

6,414

93,338

Finmeccanica SpA

3,395

54,139

Fondiaria-Sai SpA

522

8,251

Intesa Sanpaolo SpA*

64,617

289,495

Intesa Sanpaolo SpA-RSP

7,823

26,124

Italcementi SpA

594

8,112

Luxottica Group SpA

972

25,177

Mediaset SpA

5,946

48,579

Mediobanca SpA:

 

 

     Common*

3,972

47,123

     Warrants (strike price $9.00/share, expires 3/18/11)*

3,783

587

Mediolanum SpA

1,837

11,405

Parmalat SpA

14,285

40,024

Pirelli & C. SpA*

21,952

13,103

Prysmian SpA

905

15,840

Saipem SpA

2,221

76,290

Snam Rete Gas SpA

12,583

62,565

Telecom Italia SpA

50,557

55,791

Telecom Italia SpA-RSP

84,195

130,567

Terna Rete Elettrica Nazionale SpA

10,911

46,943

UniCredit SpA*

119,477

397,384

Unione di Banche Italiane SCPA:

 

 

     Common

4,825

69,108

     Warrants (strike price $12.30/share, expires 6/30/11)*

5,007

352

Unipol Gruppo Finanziario SpA*

7,280

9,937

 

 

2,884,324

 

 

 

Japan - 20.1%

 

 

77 Bank Ltd.

2,894

15,322

ABC-Mart, Inc.

210

5,839

Acom Co. Ltd.

350

5,312

Advantest Corp.

1,339

34,806

Aeon Co. Ltd.

5,372

43,457

Aeon Credit Service Co. Ltd.

694

6,671

Aeon Mall Co. Ltd.

740

14,327

Aioi Insurance Co. Ltd.

4,371

20,908

Air Water, Inc.

1,225

14,430

Aisin Seiki Co. Ltd.

1,606

45,924

Ajinomoto Co., Inc.

5,579

52,548

Alfresa Holdings Corp.

248

9,823

All Nippon Airways Co. Ltd.

6,886

18,674

Amada Co. Ltd.

2,874

17,845

Aozora Bank Ltd.*

6,756

7,143

Asahi Breweries Ltd.

3,245

59,539

Asahi Glass Co. Ltd.

8,462

79,309

Asahi Kasei Corp.

10,590

52,944

Asics Corp.

1,480

13,257

Astellas Pharma, Inc.

3,805

141,800

Bank of Kyoto Ltd.

2,610

21,073

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

Bank of Yokohama Ltd.

10,277

$46,563

Benesse Corp.

624

26,107

Bridgestone Corp.

5,116

89,698

Brother Industries Ltd.

1,862

21,282

Canon Marketing Japan, Inc.

570

8,375

Canon, Inc.

8,951

378,587

Casio Computer Co. Ltd.

2,134

16,975

Central Japan Railway Co.

12

80,088

Chiba Bank Ltd.

6,386

38,128

Chiyoda Corp.

1,306

9,934

Chubu Electric Power Co., Inc.

5,555

132,444

Chugai Pharmaceutical Co. Ltd.

1,878

35,005

Chugoku Bank Ltd.

1,467

18,102

Chugoku Electric Power Co., Inc.

2,334

44,532

Chuo Mitsui Trust Holdings, Inc.

8,254

27,561

Citizen Holdings Co. Ltd.

2,633

14,988

Coca-Cola West Co. Ltd.

466

8,199

Cosmo Oil Co. Ltd.

5,429

11,370

Credit Saison Co. Ltd.

1,351

15,132

Dai Nippon Printing Co. Ltd.

4,701

59,303

Daicel Chemical Industries Ltd.

2,296

13,413

Daido Steel Co. Ltd.

2,623

9,689

Daihatsu Motor Co. Ltd.

1,752

17,444

Daiichi Sankyo Co. Ltd.

5,650

118,273

Daikin Industries Ltd.

1,967

76,805

Dainippon Sumitomo Pharma Co. Ltd.

1,345

14,053

Daito Trust Construction Co. Ltd.

657

30,996

Daiwa House Industry Co. Ltd.

4,278

45,796

Daiwa Securities Group, Inc.

13,607

68,248

Dena Co. Ltd.

2

11,765

Denki Kagaku Kogyo K K

4,031

18,035

Denso Corp.

4,079

122,308

Dentsu, Inc.

1,400

32,235

Dowa Holdings Co. Ltd.

2,166

12,027

East Japan Railway Co.

2,852

180,048

Eisai Co. Ltd.

2,114

77,529

Electric Power Development Co. Ltd.

1,117

31,690

Elpida Memory, Inc.*

1,067

17,413

FamilyMart Co. Ltd.

491

14,478

Fanuc Ltd.

1,607

149,500

Fast Retailing Co. Ltd.

400

74,691

Fuji Electric Holdings Co. Ltd.*

5,068

8,751

Fuji Heavy Industries Ltd.*

5,254

25,510

Fuji Media Holdings, Inc.

3

4,141

FUJIFILM Holdings Corp.

4,101

122,576

Fujitsu Ltd.

15,629

100,559

Fukuoka Financial Group, Inc.

6,491

22,536

Furukawa Electric Co. Ltd.

5,635

23,462

GS Yuasa Corp.

3,077

22,593

Gunma Bank Ltd.

3,321

16,871

Hachijuni Bank Ltd.

3,374

19,637

Hakuhodo DY Holdings, Inc.

195

9,421

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

Hankyu Hanshin Holdings, Inc.

9,599

$42,636

Hino Motors Ltd.*

2,169

7,521

Hirose Electric Co. Ltd.

251

26,174

Hiroshima Bank Ltd.

4,196

16,088

Hisamitsu Pharmaceutical Co., Inc.

558

18,012

Hitachi Chemical Co. Ltd.

874

17,602

Hitachi Construction Machinery Co. Ltd.

950

24,775

Hitachi High-Technologies Corp.

577

11,342

Hitachi Ltd.*

28,257

86,588

Hitachi Metals Ltd.

1,480

14,100

Hokkaido Electric Power Co., Inc.

1,535

27,870

Hokuhoku Financial Group, Inc.

10,507

21,389

Hokuriku Electric Power Co.

1,571

34,202

Honda Motor Co. Ltd.

13,854

468,659

Hoya Corp.

3,467

91,957

Ibiden Co. Ltd.

1,075

38,303

Idemitsu Kosan Co. Ltd.

198

11,474

IHI Corp.*

11,077

17,567

Inpex Corp.

6

45,055

Isetan Mitsukoshi Holdings Ltd.

2,928

26,398

Isuzu Motors Ltd.*

9,965

18,624

Ito En Ltd.

535

$8,028

ITOCHU Corp.

12,631

92,926

Itochu Techno-Solutions Corp.

249

6,667

Iyo Bank Ltd.

2,037

16,496

J Front Retailing Co. Ltd.

4,048

17,844

JAFCO Co. Ltd.

289

6,950

Japan Airlines Corp.*

8,184

5,889

Japan Petroleum Exploration Co.

239

10,498

Japan Prime Realty Investment Corp.

4

8,286

Japan Real Estate Investment Corp.

3

22,031

Japan Retail Fund Investment Corp.

2

8,956

Japan Steel Works Ltd.

2,917

36,698

Japan Tobacco, Inc.

37

124,904

JFE Holdings, Inc.

4,123

162,442

JGC Corp.

1,738

32,010

Joyo Bank Ltd.

5,518

22,044

JS Group Corp.

2,101

36,166

JSR Corp.

1,502

30,462

JTEKT Corp.

1,617

20,674

Jupiter Telecommunications Co. Ltd.

20

19,824

Kajima Corp.

7,519

15,100

Kamigumi Co. Ltd.

2,186

15,892

Kaneka Corp.

2,495

15,836

Kansai Electric Power Co., Inc.

6,407

144,490

Kansai Paint Co. Ltd.

1,829

15,194

Kao Corp.

4,531

105,827

Kawasaki Heavy Industries Ltd.

12,469

31,446

Kawasaki Kisen Kaisha Ltd.*

5,398

15,304

KDDI Corp.

24

126,622

Keihin Electric Express Railway Co. Ltd.

3,701

27,123

Keio Corp.

4,853

29,252

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

Keisei Electric Railway Co. Ltd.

2,314

$12,652

Keyence Corp.

347

71,573

Kikkoman Corp.

1,412

17,259

Kinden Corp.

1,116

9,404

Kintetsu Corp.

13,637

45,181

Kirin Holdings Co. Ltd.

7,020

111,968

Kobe Steel Ltd.*

20,907

37,885

Koito Manufacturing Co. Ltd.

830

13,229

Komatsu Ltd.

7,960

166,030

Konami Corp.

782

13,952

Konica Minolta Holdings, Inc.

4,014

41,188

Kubota Corp.

9,170

84,367

Kuraray Co. Ltd.

2,890

33,845

Kurita Water Industries Ltd.

947

29,602

Kyocera Corp.

1,364

120,354

Kyowa Hakko Kirin Co. Ltd.

2,176

22,903

Kyushu Electric Power Co., Inc.

3,182

65,471

Lawson, Inc.

543

23,933

Mabuchi Motor Co. Ltd.

239

11,756

Makita Corp.

939

31,966

Marubeni Corp.

13,851

75,441

Marui Group Co. Ltd.

1,871

11,474

Maruichi Steel Tube Ltd.

315

6,296

Matsui Securities Co. Ltd.

1,016

7,068

Mazda Motor Corp.*

8,198

18,753

McDonald's Holdings Company (Japan), Ltd.

557

10,635

Mediceo Paltac Holdings Co. Ltd.

1,230

15,195

MEIJI Holdings Co. Ltd.*

576

21,678

Minebea Co. Ltd.

3,209

17,368

Mitsubishi Chemical Holdings Corp.

10,109

42,621

Mitsubishi Corp.

11,383

283,150

Mitsubishi Electric Corp.*

16,212

119,752

Mitsubishi Estate Co. Ltd.

9,915

157,342

Mitsubishi Gas Chemical Co., Inc.

3,508

17,626

Mitsubishi Heavy Industries Ltd.

25,473

89,495

Mitsubishi Logistics Corp.

959

11,229

Mitsubishi Materials Corp.*

9,120

22,343

Mitsubishi Motors Corp.*

30,199

41,633

Mitsubishi Rayon Co. Ltd.

4,278

17,125

Mitsubishi Tanabe Pharma Corp.

1,884

23,441

Mitsubishi UFJ Financial Group, Inc.

87,620

429,211

Mitsubishi UFJ Lease & Finance Co. Ltd.

514

15,425

Mitsui & Co. Ltd.

14,545

206,015

Mitsui Chemicals, Inc.

5,374

13,826

Mitsui Engineering & Shipbuilding Co. Ltd.

6,713

16,063

Mitsui Fudosan Co. Ltd.

7,025

118,026

Mitsui Mining & Smelting Co. Ltd.*

4,806

12,444

Mitsui OSK Lines Ltd.

9,614

50,491

Mitsui Sumitomo Insurance Group Holdings, Inc.

3,534

89,737

Mitsumi Electric Co. Ltd.

753

13,256

Mizuho Financial Group, Inc.

105,585

189,017

Mizuho Trust & Banking Co. Ltd.*

13,678

12,689

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

Murata Manufacturing Co. Ltd.

1,795

$88,673

Namco Bandai Holdings, Inc.

1,677

15,964

NEC Corp.*

16,177

41,690

NGK Insulators Ltd.

2,124

46,239

NGK Spark Plug Co. Ltd.

1,348

15,183

NHK Spring Co. Ltd.

1,330

12,339

Nidec Corp.

912

83,899

Nikon Corp.

2,690

53,080

Nintendo Co. Ltd.

831

197,097

Nippon Building Fund, Inc.

4

30,319

Nippon Electric Glass Co. Ltd.

2,922

39,881

Nippon Express Co. Ltd.

7,129

29,173

Nippon Meat Packers, Inc.

1,533

17,622

Nippon Mining Holdings, Inc.

7,399

31,692

Nippon Oil Corp.

10,443

48,372

Nippon Paper Group, Inc.

801

20,452

Nippon Sheet Glass Co. Ltd.

5,610

16,055

Nippon Steel Corp.

42,831

173,246

Nippon Telegraph & Telephone Corp.

4,358

171,505

Nippon Yusen Kabushiki Kaisha

9,288

28,432

Nipponkoa Insurance Co. Ltd.

5,481

31,016

Nishi-Nippon City Bank Ltd.

5,681

13,884

Nissan Chemical Industries Ltd.

1,232

17,553

Nissan Motor Co. Ltd.*

20,859

182,396

Nissay Dowa General Insurance Co. Ltd.

1,472

7,018

Nissha Printing Co. Ltd.

222

10,924

Nisshin Seifun Group, Inc.

1,582

21,259

Nisshin Steel Co. Ltd.

6,421

11,360

Nisshinbo Holdings, Inc.

1,156

10,589

Nissin Foods Holdings Co. Ltd.

588

19,167

Nitori Co. Ltd.

312

23,227

Nitto Denko Corp.

1,384

49,344

NOK Corp.

944

13,034

Nomura Holdings, Inc.

21,209

156,377

Nomura Real Estate Holdings, Inc.

777

11,478

Nomura Real Estate Office Fund, Inc.

2

10,847

Nomura Research Institute Ltd.

849

16,638

NSK Ltd.

4,148

30,458

NTN Corp.

3,354

15,073

NTT Data Corp.

10

30,896

NTT DoCoMo, Inc.

129

179,787

NTT Urban Development Corp.

10

6,634

Obayashi Corp.

5,748

19,571

Obic Co. Ltd.

58

9,467

Odakyu Electric Railway Co. Ltd.

5,255

40,289

OJI Paper Co. Ltd.

7,143

29,767

Olympus Corp.

1,820

58,508

Omron Corp.

1,705

30,430

Ono Pharmaceutical Co. Ltd.

709

30,309

Oracle Corp. Japan

319

13,222

Oriental Land Co. Ltd.

419

27,525

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

ORIX Corp.

878

$59,738

Osaka Gas Co. Ltd.

16,297

54,933

Otsuka Corp.*

132

6,547

Panasonic Corp.

16,464

235,559

Panasonic Electric Works Co. Ltd.

3,150

37,887

Rakuten, Inc.*

60

45,628

Resona Holdings, Inc.

4,077

41,189

Ricoh Co. Ltd.

5,624

79,359

Rinnai Corp.

318

15,302

Rohm Co. Ltd.

822

53,405

Sankyo Co. Ltd.

450

22,427

Santen Pharmaceutical Co. Ltd.

619

19,802

SANYO Electric Co. Ltd.*

14,137

25,965

Sapporo Hokuyo Holdings, Inc.

2,513

9,095

Sapporo Holdings Ltd.

2,386

13,002

SBI Holdings, Inc.

140

24,895

Secom Co. Ltd.

1,761

83,335

Sega Sammy Holdings, Inc.

1,544

18,411

Seiko Epson Corp.

1,161

18,637

Sekisui Chemical Co. Ltd.

3,621

22,400

Sekisui House Ltd.

4,259

38,218

Seven & I Holdings Co. Ltd.

6,464

131,264

Seven Bank Ltd.

4

7,948

Sharp Corp.

8,386

105,573

Shikoku Electric Power Co., Inc.

1,498

38,659

Shimadzu Corp.

2,111

14,002

Shimamura Co. Ltd.

184

17,512

Shimano, Inc.

563

22,544

Shimizu Corp.

5,273

18,912

Shin-Etsu Chemical Co. Ltd.

3,443

194,160

Shinko Electric Industries Co. Ltd.

567

8,176

Shinko Securities Co. Ltd.

4,764

14,266

Shinsei Bank Ltd.*

8,301

9,001

Shionogi & Co. Ltd.

2,504

54,179

Shiseido Co. Ltd.

2,923

56,051

Shizuoka Bank Ltd.

5,064

43,906

Showa Denko KK

9,948

19,849

Showa Shell Sekiyu KK

1,580

12,862

SMC Corp.

452

51,114

Softbank Corp.

6,348

148,442

Sojitz Corp.

10,988

20,651

Sompo Japan Insurance, Inc.

7,458

47,485

Sony Corp.

8,427

244,387

Sony Financial Holdings, Inc.

7

18,266

Square Enix Holdings Co. Ltd.

532

11,166

Stanley Electric Co. Ltd.

1,184

23,822

Sumco Corp.

973

17,122

Sumitomo Chemical Co. Ltd.

13,194

57,615

Sumitomo Corp.

9,442

95,080

Sumitomo Electric Industries Ltd.

6,327

78,459

Sumitomo Heavy Industries Ltd.*

4,827

24,375

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

Sumitomo Metal Industries Ltd.

28,224

$75,284

Sumitomo Metal Mining Co. Ltd.

4,391

64,761

Sumitomo Mitsui Financial Group, Inc.

7,616

217,234

Sumitomo Realty & Development Co. Ltd.

3,195

59,953

Sumitomo Rubber Industries, Inc.

1,585

13,651

Sumitomo Trust & Banking Co. Ltd.

11,945

58,098

Suruga Bank Ltd.

1,778

15,430

Suzuken Co. Ltd.

591

19,363

Suzuki Motor Corp.

2,961

72,743

Sysmex Corp.

273

14,256

T&D Holdings, Inc.

1,953

39,824

Taiheiyo Cement Corp.*

7,631

8,688

Taisei Corp.

8,507

14,571

Taisho Pharmaceutical Co. Ltd.

1,075

18,401

Taiyo Nippon Sanso Corp.

2,367

25,117

Takashimaya Co. Ltd.

2,497

15,800

Takeda Pharmaceutical Co. Ltd.

6,293

258,488

TDK Corp.

978

59,664

Teijin Ltd.

7,848

25,237

Terumo Corp.

1,415

84,722

THK Co. Ltd.

1,084

19,157

Tobu Railway Co. Ltd.

6,843

35,687

Toho Co. Ltd.

951

15,416

Toho Gas Co. Ltd.

3,757

19,935

Tohoku Electric Power Co., Inc.

3,586

70,916

Tokio Marine Holdings, Inc.

6,074

164,949

Tokuyama Corp.

2,429

13,542

Tokyo Electric Power Co., Inc.

10,215

256,169

Tokyo Electron Ltd.

1,439

92,059

Tokyo Gas Co. Ltd.

19,379

77,291

Tokyo Steel Manufacturing Co. Ltd.

950

10,693

Tokyo Tatemono Co. Ltd.

2,513

9,554

Tokyu Corp.

9,540

37,987

Tokyu Land Corp.

3,966

14,565

TonenGeneral Sekiyu KK

2,370

19,758

Toppan Printing Co. Ltd.

4,694

37,993

Toray Industries, Inc.

11,170

60,215

Toshiba Corp.*

32,953

181,822

Tosoh Corp.

4,570

12,583

TOTO Ltd.

2,182

13,811

Toyo Seikan Kaisha Ltd.

1,271

19,242

Toyo Suisan Kaisha Ltd.

744

17,062

Toyoda Gosei Co. Ltd.

545

16,409

Toyota Boshoku Corp.

551

12,247

Toyota Industries Corp.

1,503

44,646

Toyota Motor Corp.

23,141

972,759

Toyota Tsusho Corp.

1,782

26,291

Trend Micro, Inc.

882

33,536

Tsumura & Co.

504

16,241

Ube Industries Ltd.

8,466

23,192

Unicharm Corp.

347

32,501

 

 

 

Equity Securities - Cont'd

Shares

Value

Japan - Cont'd

 

 

UNY Co. Ltd.

1,624

$11,354

Ushio, Inc.

937

15,606

USS Co. Ltd.

192

11,665

West Japan Railway Co.

14

46,885

Yahoo! Japan Corp.

121

36,188

Yakult Honsha Co. Ltd.

811

24,429

Yamada Denki Co. Ltd.

728

48,945

Yamaguchi Financial Group, Inc.

1,774

16,424

Yamaha Corp.

1,323

15,747

Yamaha Motor Co. Ltd.*

1,802

22,640

Yamato Holdings Co. Ltd.

3,261

45,111

Yamato Kogyo Co. Ltd.

405

13,110

Yamazaki Baking Co. Ltd.*

1,016

12,031

Yaskawa Electric Corp.

2,011

16,756

Yokogawa Electric Corp.

1,915

16,765

 

 

17,429,128

 

 

 

Jersey - 0.1%

 

 

Randgold Resources Ltd.

686

54,546

 

 

 

Luxembourg - 0.6%

 

 

ArcelorMittal

7,202

326,612

Millicom International Cellular SA

634

47,007

SES SA (FDR)

2,374

53,227

Tenaris SA

3,961

84,680

 

 

511,526

 

 

 

Mexico - 0.0%

 

 

Fresnillo plc

1,504

18,974

 

 

 

Netherlands - 4.4%

 

 

Aegon NV*

13,108

83,527

Akzo Nobel NV

1,943

128,055

ASML Holding NV

3,618

123,046

Corio NV

448

30,594

European Aeronautic Defence and Space Co. NV

3,417

68,250

Fugro NV (CVA)

566

32,319

Heineken Holding NV

925

38,750

Heineken NV

2,055

97,363

ING Groep NV (CVA)*

16,443

158,941

James Hardie Industries NV*

3,626

27,323

Koninklijke Ahold NV

9,999

132,642

Koninklijke Boskalis Westminster NV

499

19,215

Koninklijke DSM NV

1,293

63,391

Koninklijke KPN NV

14,382

243,918

Koninklijke Philips Electronics NV

8,158

241,533

Koninklijke Vopak NV*

262

20,697

QIAGEN NV*

1,663

37,145

Randstad Holding NV*

853

42,171

Reed Elsevier NV

6,071

74,484

Royal Dutch Shell plc:

 

 

     Series A

29,746

898,750

     Series B

22,616

659,502

 

 

 

Equity Securities - Cont'd

Shares

Value

Netherlands - Cont'd

 

 

SBM Offshore NV

1,257

$24,593

TNT NV

3,095

94,725

Unilever NV (CVA)

13,666

445,263

Wolters Kluwer NV

2,333

51,130

 

 

3,837,327

 

 

 

New Zealand - 0.1%

 

 

Auckland International Airport Ltd.

7,195

10,509

Contact Energy Ltd.*

2,519

11,206

Fletcher Building Ltd.

5,071

29,238

Sky City Entertainment Group Ltd.

4,825

11,508

Telecom Corp. of New Zealand Ltd.

15,511

28,053

 

 

90,514

 

 

 

Norway - 0.7%

 

 

DnB NOR ASA*

6,149

66,701

Norsk Hydro ASA*

5,758

47,830

Orkla ASA

6,474

63,122

Renewable Energy Corp. ASA*

2,788

21,314

StatoilHydro ASA

9,422

234,846

Telenor ASA*

7,048

98,787

Yara International ASA

1,590

71,941

 

 

604,541

 

 

 

Portugal - 0.3%

 

 

Banco Comercial Portugues SA

19,693

23,633

Banco Espirito Santo SA

4,404

28,622

Brisa Auto-Estradas de Portugal SA

1,510

15,428

Cimpor Cimentos de Portugal SGPS SA

1,973

18,178

Energias de Portugal SA

15,338

67,879

Galp Energia SGPS SA

1,293

22,256

Jeronimo Martins SGPS SA

1,847

18,369

Portugal Telecom SGPS SA

4,888

59,415

 

 

253,780

 

 

 

Singapore - 1.4%

 

 

Ascendas Real Estate Investment Trust

11,343

17,778

CapitaLand Ltd.

21,370

63,347

CapitaMall Trust

19,574

24,839

City Developments Ltd.

4,195

34,247

ComfortDelgro Corp. Ltd.

15,748

18,326

Cosco Corp. Singapore Ltd.

9,136

7,678

DBS Group Holdings Ltd.

14,356

156,214

Fraser and Neave Ltd.

8,157

24,259

Golden Agri-Resources Ltd.*

56,011

20,183

Jardine Cycle & Carriage Ltd.

1,044

19,938

Keppel Corp. Ltd.

10,692

62,262

Neptune Orient Lines Ltd.

7,580

8,831

Olam International Ltd.

10,581

19,831

Oversea-Chinese Banking Corp. Ltd.

20,984

135,182

SembCorp Industries Ltd.

8,237

21,529

 

 

 

Equity Securities - Cont'd

Shares

Value

Singapore - Cont'd

 

 

SembCorp Marine Ltd.

7,323

$19,098

Singapore Airlines Ltd.

4,479

47,328

Singapore Airport Terminal Services Ltd.

3,506

6,811

Singapore Exchange Ltd.

7,175

42,328

Singapore Press Holdings Ltd.

13,366

34,764

Singapore Technologies Engineering Ltd.

11,338

26,083

Singapore Telecommunications Ltd.

66,811

147,245

StarHub Ltd.

5,029

7,666

United Overseas Bank Ltd.

10,228

142,450

UOL Group Ltd.

4,818

13,835

Wilmar International Ltd.

10,714

48,661

Yangzijiang Shipbuilding Holdings Ltd.

11,876

10,161

 

 

1,180,874

 

 

 

Spain - 4.5%

 

 

Abertis Infraestructuras SA

2,362

53,293

Acciona SA

213

27,662

Acerinox SA

1,173

24,261

ACS Actividades de Construccion y Servicios SA

1,202

59,755

Banco Bilbao Vizcaya Argentaria SA

29,871

541,037

Banco de Sabadell SA

7,550

41,932

Banco de Valencia SA

1,787

13,600

Banco Popular Espanol SA

6,220

45,408

Banco Santander SA

68,422

1,124,048

Bankinter SA

2,383

24,219

Cintra Concesiones de Infraestructuras de Transporte SA

3,677

42,937

Criteria Caixacorp SA

7,053

33,326

EDP Renovaveis SA*

1,829

17,288

Enagas SA

1,502

33,240

Fomento de Construcciones y Contratas SA

320

13,420

Gamesa Corp. Tecnologica SA

1,530

25,646

Gas Natural SDG SA

1,878

40,421

Gestevision Telecinco SA

827

12,070

Grifols SA

1,138

19,828

Iberdrola Renovables SA

7,087

33,761

Iberdrola SA

30,845

293,597

Iberia Lineas Aereas de Espana SA*

4,399

11,919

Inditex SA

1,830

113,382

Indra Sistemas SA

826

19,429

Mapfre SA

6,005

25,088

Red Electrica de Espana SA

907

50,262

Repsol YPF SA

6,145

164,048

Sacyr Vallehermoso SA*

837

9,541

Telefonica SA

35,525

990,033

Zardoya Otis SA

1,180

23,000

 

 

3,927,451

 

 

 

Equity Securities - Cont'd

Shares

Value

Sweden - 2.4%

 

 

Alfa Laval AB

2,881

$39,655

Assa Abloy AB

2,618

50,130

Atlas Copco AB:

 

 

     Series A

5,633

82,316

     Series B

3,273

42,455

Electrolux AB, Series B*

2,009

47,151

Getinge AB, Series B

1,679

31,861

Hennes & Mauritz AB

4,289

237,331

Holmen AB, Series B

443

11,299

Husqvarna AB, Series B*

3,417

25,225

Investor AB, Series B

3,821

70,632

Loomis AB, Series B

521

5,686

Lundin Petroleum AB*

1,967

15,477

Nordea Bank AB

27,098

274,497

OMX AB (b)*

588

-

Sandvik AB

8,459

101,389

Scania AB, Series B

2,684

34,423

Securitas AB, Series B

2,627

25,637

Skandinaviska Enskilda Banken AB*

12,743

78,339

Skanska AB, Series B

3,347

56,952

SKF AB, Series B

3,256

55,922

SSAB AB, Class B

697

10,773

SSAB Svenskt Stal AB

1,514

25,595

Svenska Cellulosa AB, Series B

4,764

63,634

Svenska Handelsbanken AB

4,105

117,395

Swedbank AB*

2,810

27,952

Swedish Match AB

2,105

46,013

Tele2 AB, Series B

2,558

39,186

Telefonaktiebolaget LM Ericsson, Series B

25,039

230,293

TeliaSonera AB

18,836

135,983

Volvo AB:

 

 

     Series A

3,695

31,277

     Series B

9,128

77,764

 

 

2,092,242

 

 

 

Switzerland - 8.0%

 

 

ABB Ltd.*

18,513

353,675

Actelion Ltd.*

839

44,760

Adecco SA

1,032

56,912

Aryzta AG

681

25,372

Baloise Holding AG

419

34,863

BKW FMB Energie AG

110

8,544

Compagnie Financiere Richemont SA

4,379

146,363

Credit Suisse Group AG

9,441

464,464

Geberit AG

342

60,513

Givaudan SA

64

50,878

Holcim Ltd.*

2,058

159,351

Julius Baer Group Ltd.

1,770

61,750

Julius Baer Holding AG

1,770

21,514

Kuehne + Nagel International AG

453

43,772

Lindt & Spruengli AG

7

15,019

 

 

 

Equity Securities - Cont'd

Shares

Value

Switzerland - Cont'd

 

 

Logitech International SA*

1,527

$26,240

Lonza Group AG

380

26,620

Nestle SA

30,525

1,481,343

Nobel Biocare Holding AG

1,042

34,835

Novartis AG

17,743

965,605

Pargesa Holding SA

226

19,770

Roche Holding AG

5,894

1,001,551

Schindler Holding AG:

 

 

     Participation Certificates

407

31,189

     Registered Shares

180

13,631

SGS SA

39

50,727

Sonova Holding AG

388

46,865

STMicroelectronics NV

5,727

51,924

Straumann Holding AG

65

18,301

Swatch Group AG:

 

 

     Bearer Shares

258

64,867

     Registered Shares

364

17,385

Swiss Life Holding AG*

263

33,277

Swiss Reinsurance

2,897

138,644

Swisscom AG

201

76,566

Syngenta AG

813

227,564

Synthes, Inc.

498

65,150

UBS AG*

29,850

458,044

Xstrata plc*

15,994

281,914

Zurich Financial Services AG

1,232

267,572

 

 

6,947,334

 

 

 

United Kingdom - 18.7%

 

 

3i Group plc

8,083

36,566

Admiral Group plc

1,629

31,097

AMEC plc

2,892

36,737

Anglo American plc*

11,044

478,311

Antofagasta plc

3,308

52,489

Associated British Foods plc

2,988

39,681

AstraZeneca plc

12,146

571,111

Autonomy Corp. plc*

1,802

43,968

Aviva plc

22,978

145,629

BAE Systems plc

29,648

170,978

Balfour Beatty plc

4,244

17,648

Barclays plc

92,570

408,216

BG Group plc

28,187

505,126

BHP Billiton plc

18,516

591,872

BP plc

157,203

1,521,420

British Airways plc*

5,002

14,933

British American Tobacco plc

16,748

543,702

British Land Co. plc

7,149

54,839

British Sky Broadcasting Group plc

9,558

86,162

BT Group plc

64,976

140,787

Bunzl plc

2,745

29,780

Burberry Group plc

3,791

36,373

Cable & Wireless plc

21,296

48,130

Cadbury plc

11,458

147,549

 

 

 

Equity Securities - Cont'd

 

 

 

Shares

Value

United Kingdom - Cont'd

 

 

Cairn Energy plc*

11,550

$61,596

Capita Group plc

5,218

62,983

Carnival plc*

1,360

46,475

Carphone Warehouse Group plc

3,841

11,586

Centrica plc

42,934

194,042

Cobham plc

9,589

38,680

Compass Group plc

15,497

110,762

Diageo plc

20,970

365,964

Drax Group plc

3,003

20,117

Eurasian Natural Resources Corp.

2,160

31,881

F&C Asset Management plc

2,040

2,484

FirstGroup plc

4,243

28,967

G4S plc

10,633

44,470

GlaxoSmithKline plc

43,528

922,717

Hammerson plc

5,836

39,660

Home Retail Group plc

7,361

33,578

HSBC Holdings plc

145,263

1,658,969

ICAP plc

4,533

31,436

Imperial Tobacco Group plc

8,527

268,921

Inmarsat plc

3,625

40,323

Intercontinental Hotels Group plc

2,157

30,889

International Power plc

12,764

63,199

Invensys plc

7,010

33,609

Investec plc

3,540

24,284

J Sainsbury plc

9,974

51,896

Johnson Matthey plc

1,801

44,516

Kazakhmys plc*

1,795

37,584

Kingfisher plc

19,806

72,654

Land Securities Group plc

6,342

69,553

Legal & General Group plc

49,177

63,332

Liberty International plc

3,797

31,292

Lloyds TSB Group plc*

136,732

109,846

London Stock Exchange Group plc

1,304

15,098

Lonmin plc*

1,294

40,202

Man Group plc

14,330

70,540

Marks & Spencer Group plc

13,242

85,967

National Grid plc

20,410

223,262

Next plc

1,653

55,150

Old Mutual plc*

44,269

77,356

Pearson plc

6,794

97,738

Petrofac Ltd.

1,738

28,961

Prudential plc

21,173

215,844

Reckitt Benckiser Group plc

5,083

275,582

Reed Elsevier plc

10,169

83,565

Rexam plc

7,355

34,388

Rio Tinto plc

11,500

620,249

Rolls-Royce Group plc:

 

 

     Common*

15,543

121,382

     Common C Shares Entitlement*

932,580

1,507

Royal Bank of Scotland Group plc*

141,866

66,589

RSA Insurance Group plc

27,964

54,448

 

 

 

Equity Securities - Cont'd

Shares

Value

United Kingdom - Cont'd

 

 

SABMiller plc

7,921

$232,445

Sage Group plc

10,997

39,070

Schroders plc

1,077

23,005

Scottish & Southern Energy plc

7,722

144,406

Segro plc

6,160

34,028

Serco Group plc

4,088

34,779

Severn Trent plc

2,071

36,203

Shire plc

4,700

91,977

Smith & Nephew plc

7,417

76,213

Smiths Group plc

3,263

53,429

Standard Chartered plc

16,863

422,593

Standard Life plc

18,566

64,470

Tesco plc

66,276

455,694

Thomas Cook Group plc

7,639

28,390

Tomkins plc

7,691

23,761

TUI Travel plc

4,994

20,569

Tullow Oil plc

6,724

140,322

Unilever plc

10,767

344,888

United Utilities Group plc

5,717

45,520

Vedanta Resources plc

1,159

47,937

Vodafone Group plc

440,349

1,020,442

Whitbread plc

1,463

32,926

William Morrison Supermarkets plc

17,650

78,745

Wolseley plc*

2,381

47,666

WPP plc

10,511

102,711

 

 

16,211,386

 

 

 

 

 

 

     Total Equity Securities (Cost $86,770,980)

 

84,129,748

Exchange Traded Funds - 1.9%

 

 

iShares MSCI EAFE Index Fund

29,139

1,611,387

 

 

 

     Total Exchange Traded Funds (Cost $1,615,451)

 

1,611,387

 

 

 

 

Principal

 

Time Deposit - 0.9%

Amount

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

$808,366

808,366

 

 

 

     Total Time Deposit (Cost $808,366)

 

808,366

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $89,194,797) - 99.7%

 

86,549,501

          Other assets and liabilities, net - 0.3%

 

292,960

          Net Assets - 100%

 

$86,842,461

 

 

 

Net Assets Consist of:

 

 

Paid-in capital applicable to the following shares of common stock

 

 

with 20,000,000 shares of $.10 par value shares authorized:

 

 

      Class I: 1,155,283 shares outstanding

 

$99,048,408

      Class F: 67,541 shares outstanding

 

4,392,756

Undistributed net investment income

 

307,648

Accumulated net realized gain (loss) on investments

 

(14,269,797)

Net unrealized appreciation (depreciation) on investments

 

(2,636,554)

 

 

 

          Net Assets

 

$86,842,461

 

 

 

Net Asset Value Per Share

 

 

Class I (based on net assets of $81,899,137)

 

$70.89

Class F (based on net assets of $4,943,324)

 

$73.19

 

(b) This security was valued by the Board of Directors. See Note A.

* Non-income producing security.

Abbreviations:

CVA: Certification Van Aandelen
FDR: Fiduciary Depositary Receipts
REIT: Real Estate Investment Trust

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income (net of foreign taxes withheld of $211,214)

$2,260,610

     Interest income

492

          Total investment income

2,261,102

 

 

Expenses:

 

     Investment advisory fee

416,753

     Transfer agency fees and expenses

9,589

     Distribution Plan expenses:

 

          Class F

5,692

     Trustees' fees and expenses

11,755

     Administrative fees

74,420

     Custodian fees

175,587

     Reports to shareholders

6,251

     Professional fees

24,705

     Accounting fess

3,783

     Contract services

60,020

     Miscellaneous

281

          Total expenses

788,836

          Reimbursement from Advisor:

 

               Class I

(68,463)

               Class F

(7,656)

     Fees paid indirectly

(33)

          Net expenses

712,684

 

 

               Net Investment Income

1,548,418

 

 

Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) on:

 

     Investments

824,920

     Foreign currency transactions

29,829

 

854,749

 

 

Change in unrealized appreciation (depreciation) on:

 

     Investments

16,963,020

     Assets and liabilities denominated in foreign currencies

17,224

 

16,980,244

 

 

          Net Realized and Unrealized Gain

 

           (Loss)

17,834,993

 

 

          Increase (Decrease) in Net Assets

 

          Resulting From Operations

$19,383,411

 

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$1,548,418

$2,485,490

     Net realized gain (loss)

854,749

(14,616,221)

     Change in unrealized appreciation or (depreciation)

16,980,244

(40,508,872)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

19,383,411

(52,639,603)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

 

 

          Class I shares

(1,583,672)

(3,151,804)

          Class F shares

(41,939)

(4,508)

     Net realized gain

 

 

          Class I shares

--

(2,054,260)

          Class F shares

--

(18)

               Total distributions

(1,625,611)

(5,210,590)

 

 

 

Capital share transactions:

 

 

     Shares sold

 

 

          Class I shares

17,519,588

28,840,408

          Class F shares

3,196,044

1,720,729

     Reinvestment of distributions

 

 

          Class I shares

1,583,666

5,206,064

          Class F shares

41,939

4,526

     Shares redeemed

 

 

          Class I shares

(20,101,692)

(29,136,738)

          Class F shares

(451,745)

(119,737)

               Total capital share transactions

1,787,800

6,515,252

 

 

 

Total Increase (Decrease) in Net Assets

19,545,600

(51,334,941)

 

 

 

Net Assets

 

 

Beginning of year

67,296,861

118,631,802

End of year (including undistributed net investment

 

 

     income of $307,648 and $1,007,403, respectively)

$86,842,461

$67,296,861

 

See notes to financial statements.

 

 

Year Ended

Year Ended

 

December 31,

December 31,

Capital Share Activity

2009

2008

Shares sold

 

 

     Class I shares

303,824

328,264

     Class F shares

51,752

24,311

Reinvestment of distributions

 

 

     Class I shares

22,318

69,512

     Class F shares

572

78

Shares redeemed

 

 

     Class I shares

(337,457)

(363,522)

     Class F shares

(7,644)

(1,538)

          Total capital share transactions

33,365

57,105

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: Summit EAFE International Index Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund"), is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio offers Class I and Class F shares. Class F shares are subject to Distribution Plan Expenses. Each class has different: (a) dividend rates, due to differences in Distribution Plan expenses and other class-specific expenses, (b) exchange privileges; and (c) class-specific voting rights.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investments Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the close of business of the fund, that are expected to materially affect the value of those securities, then they are valued at their fair value taking these events into account. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

The Portfolio has retained a third party fair value pricing service to quantitatively analyze the price movement of its holdings on foreign exchanges and to automatically fair value if the variation from the prior day's closing price exceeds specified parameters. On December 31, 2009, price movements exceeded specified parameters and the third party fair value pricing service quantitatively fair valued the affected securities.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, securities valued at $0 or 0.0% of net assets were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Equity Securities*

$52,156

$84,077,592**

--

$84,129,748

Exchange Traded Funds

1,611,387

--

--

1,611,387

Other Debt Obligations

--

808,366

--

808,366

TOTALS

$1,663,543

$84,885,958

--

$86,549,501

*For further breakdown of Equity Securities by country, please refer to the Statement of Net Assets.

**Includes certain securities trading primarily outside the U.S. whose value was adjusted as a result of significant market movements following the close of local trading.

Foreign Currency Transactions: The Portfolio's accounting records are maintained in U.S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are translated into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities and foreign currencies is included with the net realized and unrealized gain or loss on investments and foreign currencies.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Investment income and realized and unrealized gains and losses are allocated to separate classes of shares based upon the relative net assets of each class. Expenses arising in connection with a class are charged directly to that class. Expenses common to the classes are allocated to each class in proportion to their relative net assets. Withholding taxes on foreign dividends have been provided for in accordance with the Portfolio's understanding of the applicable country's tax rules and rates.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of 0.56% of the Portfolio's average daily net assets. Under the terms of the agreement, $41,149 was payable at year end. In addition, $20,748 was payable at year end for operating expenses paid by the Portfolio during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is .95% and 1.15% for Class I and Class F, respectively. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services to the Portfolio for an annual fee, payable monthly, of .10% based on the Portfolio's average daily net assets. Under the terms of the agreement, $7,348 was payable at year end.

Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Portfolio. Distribution plans, adopted by Class F shares, allow the Portfolio to pay the distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed 0.20% annually of average daily net assets of Class F. Under the terms of the agreement, $810 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $172 for the year ended December 31, 2009. Under the terms of the agreement, $14 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities, were $22,717,508 and $21,295,797, respectively.

Capital Loss Carryforward

Expiration Date

31-Dec-16

$13,907,367

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

 

2009

2008

Distributions paid from:

 

 

     Ordinary income

$1,625,611

$3,309,051

     Long-term capital gain

--

1,901,539

          Total

$1,625,611

$5,210,590

As of December 31, 2009 the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$9,117,887

Unrealized (depreciation)               

(12,180,770)

Net unrealized appreciation/(depreciation)     

($3,062,883)

Undistributed ordinary income

$362,805

Capital loss carryforward     

($13,907,367)

Federal income tax cost of investments     

$89,612,384

The differences between components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These book-tax differences are due to wash sales and passive foreign investment companies.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distributions (or available capital loss carryforwards, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to foreign currency transactions and passive foreign investment companies.

Undistributed net investment income

$34,610

Accumulated net realized gain (loss)

(34,610)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no loans outstanding pursuant to this line of credit at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

Average
Daily
Balance

Weighted
Average
Interest
Rate

Maximum
Amount
Borrowed

Month Of
Maximum
Amount
Borrowed

 

$15,292

1.46%

$1,930,503

September 2009

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

The Portfolio designates $2.00 per share as income derived from foreign sources and $.17 per share as foreign taxes paid for the calendar year ended December 31, 2009.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

Class I Shares

2009

2008

2007

Net asset value, beginning

$56.55

$104.77

$98.66

Income from investment operations

 

 

 

     Net investment income

1.33

2.17

1.00

     Net realized and unrealized gain (loss)

14.41

(45.83)

8.00

          Total from investment operations

15.74

(43.66)

9.80

Distributions from

 

 

 

     Net investment income

(1.40)

(2.77)

(1.48)

     Net realized gain

--

(1.79)

(2.21)

          Total distributions

(1.40)

(4.56)

(3.69)

Total increase (decrease) in net asset value

14.34

(48.22)

6.11

Net asset value, ending

$70.89

$56.55

$104.77

 

 

 

 

Total return*

27.83%

(42.68%)

10.10%

Ratios to average net assets: A

 

 

 

     Net investment income

2.10%

2.51%

1.48%

     Total expenses

1.05%

1.22%

1.26%

     Expenses before offsets

.95%

.95%

.95%

     Net expenses

.95%

.95%

.95%

Portfolio turnover

29%

47%

48%

Net assets, ending (in thousands)

$81,899

$65,973

$118,631

 

 

 

 

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

Class I Shares

2006

2005

 

Net asset value, beginning

$81.98

$74.34

 

Income from investment operations

 

 

 

     Net investment income

1.46

1.59

 

     Net realized and unrealized gain (loss)

18.83

7.59

 

          Total from investment operations

20.29

9.18

 

Distributions from

 

 

 

     Net investment income

(1.63)

(.72)

 

     Net realized gain

(1.98)

(.82)

 

          Total distributions

(3.61)

(1.54)

 

Total increase (decrease) in net asset value

16.68

7.64

 

Net asset value, ending

$98.66

$81.98

 

 

 

 

 

Total return*

25.56%

12.57%

 

Ratios to average net assets: A

 

 

 

     Net investment income

1.66%

1.75%

 

     Total expenses

1.29%

1.50%

 

     Expenses before offsets

.95%

.95%

 

     Net expenses

.95%

.95%

 

Portfolio turnover

44%

77%

 

Net assets, ending (in thousands)

$58,754

$44,084

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to financial highlights.

 

 

 

 

 

 

 

 

 

 

 

 

 

Periods Ended

 

 

December 31,

December 31,

December 31,

Class F Shares

2009

2008

2007^

Net asset value, beginning

$57.91

$104.76

$102.10

Income from investment operations

 

 

 

     Net investment income

.68

1.25

.01

     Net realized and unrealized gain (loss)

15.23

(45.05)

2.65

          Total from investment operations

15.91

(43.80)

2.66

Distributions from

 

 

 

     Net investment income

(.63)

(1.26)

--

     Net realized gain

--

(1.79)

--

          Total distributions

(.63)

(3.05)

--

Total increase (decrease) in net asset value

15.28

(46.85)

2.66

Net asset value, ending

$73.19

$57.91

$104.76

 

 

 

 

Total return*

27.47%

(42.81%)

2.61%

Ratios to average net assets: A

 

 

 

     Net investment income

1.67%

1.33%

.25% (a)

     Total expenses

1.42%

1.42%

1.46% (a)

     Expenses before offsets

1.15%

1.15%

1.15% (a)

     Net expenses

1.15%

1.15%

1.15% (a)

Portfolio turnover

29%

47%

48%

Net assets, ending (in thousands)

$4,943

$1,324

$1

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

(a) Annualized.

* Total return is not annualized for periods less than one year.

^ From December 17, 2007 inception.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed below the median of its peer universe for the one-, three- and five-year periods ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance. Based upon its review, the Board concluded that the Portfolio's performance was being addressed.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was above the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. The Board also relied on the ability of the Advisor to negotiate the Investment Subadvisory Agreement and the corresponding subadvisory fee at arm's length. In addition, the Board considered the subadvisory fee paid to the Subadvisor by the Advisor in comparison to fees paid by similar institutional clients. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor pays the Subadvisor's subadvisory fee and the subadvisory fee was negotiated at arm's length by the Advisor, the cost of services to be provided by the Subadvisor was not a material factor in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration, although the Board noted that the subadvisory fee included breakpoints that would reduce the subadvisory fee on assets above certain specified asset levels.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is being addressed; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

 

Summit Barclays
Capital Aggregate
Bond Index Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

12

Statement of Operations

13

Statements of Changes in Net Assets

14

Notes to Financial Statements

19

Financial Highlights

21

Explanation of Financial Tables

22

Proxy Voting

22

Availability of Quarterly Portfolio Holdings

23

Basis for Board's Approval of Investment Advisory Contracts

27

Director and Officer Information Table

 

Summit Barclays Capital Aggregate Bond Index Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Barclays Capital Aggregate Bond Index Portfolio provided a return of 4.59% compared to a 5.93% return for its benchmark index, the Barclays Capital Aggregate Bond Index. As an index fund, the Portfolio employs a passive management approach and seeks, as closely as possible, to replicate the holdings and match the performance of its benchmark index before fees and expenses. The Portfolio did not perform as well as the Index because of fund expenses and the Portfolio's reliance on stratified sampling to replicate index performance.

 

Summit Barclays Capital Aggregate Bond Index Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

4.59%

Five year

4.74%

Since inception (3.31.03)

4.28%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

In 2009, interest rates rose materially at the longer-maturity end of the yield curve as the 30-year Treasury rate increased from 2.77% to 4.64%. Interest rates at the shorter-maturity end of the yield curve remained low and increased less; the two-year Treasury rate increased from 0.76% to 1.14%. Shorter-term rates remained low, as the Federal Reserve continued to pursue an accommodative monetary policy, injecting a massive amount of liquidity into the system.

Fixed-income markets opened up for both investment-grade and high-yield issuers, which was critical in breaking the credit crunch that began in 2008. Bond investments provided a wide range of returns during 2009. The corporate bond sector produced a return of 18.68% for the year, while the U.S. Treasury sector returned -3.57%. Mortgage-backed securities returned 5.89% as the government launched a trillion-dollar purchase program to support that market. In general, riskier assets performed well, while lower-risk assets lagged. This was a complete reversal from 2008, when riskier assets were shed by investors and delivered strongly negative returns. In a market such as this, a small overweight or underweight to a given sector had the potential to change relative performance substantially.

Portfolio Strategy

The Portfolio's strategy is purely passive. Its goal is to mirror the performance of the Barclays Capital Aggregate Bond Index as closely as possible. An exact replication of the Index is not feasible, as the Index is comprised of more than 8,400 securities. Therefore, the Portfolio relies on stratified sampling. Stratified sampling is a strategy that attempts to replicate the performance of the index by using fewer securities and closely matching the characteristics of the index, such as duration, sector allocation, quality, and others.

During 2009, there was significant volatility, and difference of return, between the various sectors of the Index. For example, the corporate bond portion of the Index returned 18.68%. The Treasury portion of the index returned -3.57%. The lower quality, BBB rated bond portion of the Index returned 27.49%. During periods like this, the slight underweighting or overweighting of one sector can significantly affect performance. The portfolio's underweight position in BBB rated corporate securities during the first half of the year, along with other minor weighting variations, was responsible for a significant amount of underperformance in 2009.

Economic Sectors

% of Total
Investments

Asset Backed Securities

0.2%

Basic Materials

0.4%

Communications

1.4%

Consummer, Cyclical

1.3%

Consummer, Non-cyclical

2.1%

Energy

4.0%

Exchange Traded Funds

0.9%

Financials

6.3%

Government

35.7%

Industrials

3.6%

Mortgage Backed Securities

40.7%

Technology

2.3%

Utilities

1.1%

Total

100%

Outlook

While the unemployment rate remains high, we expect a modestly improved economic picture in 2010. An improving economy and increased corporate earnings will likely extend the trends that occurred in 2009. Interest rates will likely rise and bond spreads may be tighter. This, in turn, is likely to help the corporate bond sector outperform Treasuries again in 2010.

If the economy continues to strengthen, as we expect, the Federal Reserve will be forced to remove liquidity from the system at some point in order to stave off future inflation concerns. The impact of reduced liquidity in the system could drive short-term rates materially higher, resulting in a flatter yield curve. Higher rates and a flatter yield curve are not positives for fixed-income investors.

During 2010, we expect to see modest economic growth in the United States and throughout the world, and improved corporate earnings. We anticipate that recovery will remain modest as many challenges remain. Unemployment is above 10%, creating slack in the American economy. Consumers continue to reduce debt and limit spending. Many financial institutions have not yet addressed problem assets on their books, which will become problematic if the commercial real estate market experiences weakness as the year unfolds.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,031.00

$2.84

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,022.41

$2.82

* Expenses are equal to the Fund's annualized expense ratio of 0.55%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Barclays Capital Aggregate Bond Index Portfolio:

We have audited the accompanying statement of net assets of the Summit Barclays Capital Aggregate Bond Index Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Barclays Capital Aggregate Bond Index Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

 

 

Principal

 

Asset-Backed Securities - 0.2%

 

Amount

Value

Residential Asset Securities Corp., STEP, 4.61% to 3/25/13, 5.11% thereafter to 5/25/33 (r)

 

$97,375

$57,107

 

 

 

 

     Total Asset-Backed Securities (Cost $96,287)

 

 

57,107

 

 

 

 

Commercial Mortgage-Backed Securities - 4.4%

 

 

 

Banc of America Commercial Mortgage, Inc.:

 

 

 

     6.186%, 6/11/35

 

500,000

522,850

     5.889%, 4/10/49 (r)

 

550,000

473,984

Bear Stearns Commercial Mortgage Securities:

 

 

 

     4.24%, 8/13/39 (r)

 

299,029

299,806

     4.254%, 7/11/42

 

305,690

307,038

JP Morgan Chase Commercial Mortgage Securities Corp., 5.464%, 10/12/35

 

32,025

32,295

JP Morgan Commercial Mortgage Finance Corp., 7.023%, 2/15/32 (e)(r)

 

758

757

 

 

 

 

     Total Commercial Mortgage-Backed Securities (Cost $1,629,320)

 

 

1,636,730

 

 

 

 

Corporate Bonds - 22.3%

 

 

 

Affiliated Computer Services, Inc., 5.20%, 6/1/15

 

300,000

309,750

Alcoa, Inc., 5.72%, 2/23/19

 

149,000

144,058

Apache Corp., 5.625%, 1/15/17

 

100,000

106,599

AstraZeneca plc, 6.45%, 9/15/37

 

350,000

394,203

Bank of America Corp., 7.375%, 5/15/14

 

100,000

113,395

BlackRock, Inc., 3.50%, 12/10/14

 

100,000

98,998

BP Capital Markets plc, 3.625%, 5/8/14

 

200,000

204,439

CA, Inc., 5.375%, 12/1/19

 

100,000

101,076

Camden Property Trust, 5.875%, 11/30/12

 

100,000

104,101

Citigroup, Inc.:

 

 

 

     6.50%, 8/19/13

 

125,000

133,149

     6.125%, 5/15/18

 

200,000

201,082

Coca-Cola Co., 5.35%, 11/15/17

 

100,000

108,579

Colonial Pipeline Co.:

 

 

 

     7.75%, 11/1/10 (e)

 

375,000

394,208

     6.58%, 8/28/32 (e)

 

100,000

105,321

Connecticut Light & Power Co., 5.65%, 5/1/18

 

200,000

213,043

Conoco Funding Co., 6.35%, 10/15/11

 

80,000

87,037

Deere & Co., 6.55%, 10/1/28

 

250,000

273,031

Deutsche Bank AG, 4.875%, 5/20/13

 

150,000

159,357

Emerson Electric Co., 4.75%, 10/15/15

 

200,000

215,189

Goldman Sachs Group, Inc., 5.35%, 1/15/16

 

200,000

207,733

GTE Corp., 6.94%, 4/15/28

 

80,000

82,979

Harley-Davidson Funding Corp., 5.75%, 12/15/14 (e)

 

100,000

99,293

Honeywell International, Inc.:

 

 

 

     7.50%, 3/1/10

 

108,000

109,205

     4.25%, 3/1/13

 

100,000

105,342

 

 

 

 

 

 

Principal

 

Corporate Bonds - Cont'd

 

Amount

Value

Hospira, Inc., 6.40%, 5/15/15

 

$250,000

$277,344

JPMorgan Chase & Co., 4.75%, 5/1/13

 

250,000

263,881

L-3 Communications Corp., 5.20%, 10/15/19 (e)

 

200,000

199,750

Lockheed Martin Corp., 7.20%, 5/1/36

 

150,000

177,920

McDonald's Corp., 4.30%, 3/1/13

 

100,000

105,788

Merrill Lynch & Co., Inc., 6.875%, 11/15/18

 

123,000

130,448

Metropolitan Life Global Funding I, 5.125%, 4/10/13 (e)

 

100,000

105,772

Northern Trust Corp., 5.50%, 8/15/13

 

100,000

108,508

Oracle Corp., 5.75%, 4/15/18

 

250,000

271,500

Pitney Bowes, Inc., 5.75%, 9/15/17

 

180,000

192,859

Progressive Corp., 6.375%, 1/15/12

 

165,000

176,826

Public Service Co. of North Carolina, Inc., 6.625%, 2/15/11

 

180,000

188,370

Shell International Finance BV, 4.00%, 3/21/14

 

300,000

313,775

Suncor Energy, Inc., 6.50%, 6/15/38

 

250,000

262,681

TCI Communications, Inc., 8.75%, 8/1/15

 

100,000

119,834

Thomson Reuters Corp., 6.20%, 1/5/12

 

100,000

107,601

Time Warner Cable, Inc., 5.00%, 2/1/20

 

100,000

97,265

United Parcel Service, Inc., 6.20%, 1/15/38

 

250,000

277,161

US Bank NA, 4.95%, 10/30/14

 

100,000

106,444

Verizon Communications, Inc., 4.35%, 2/15/13

 

100,000

104,941

Walgreen Co., 4.875%, 8/1/13

 

100,000

106,986

Wal-Mart Stores, Inc., 6.50%, 8/15/37

 

250,000

287,417

Wells Fargo & Co., 4.375%, 1/31/13

 

125,000

129,496

XTO Energy, Inc., 4.625%, 6/15/13

 

200,000

212,635

 

 

 

 

     Total Corporate Bonds (Cost $8,026,144)

 

 

8,396,369

Sovereign Government Bonds - 0.3%

 

 

 

Province of New Brunswick Canada, 6.75%, 8/15/13

 

100,000

113,518

 

 

 

 

     Total Sovereign Government Bonds (Cost $107,274)

 

 

113,518

U.S. Government Agencies And Instrumentalities - 12.8%

 

 

 

Fannie Mae:

 

 

 

     5.05%, 2/7/11

 

1,300,000

1,362,049

     6.125%, 3/15/12

 

550,000

606,612

     4.625%, 10/15/14

 

100,000

108,037

Federal Farm Credit Bank, 4.25%, 2/1/12

 

750,000

794,241

Freddie Mac:

 

 

 

     7.00%, 3/15/10

 

1,300,000

1,317,654

     3.25%, 2/25/11

 

300,000

308,670

     5.00%, 2/16/17

 

200,000

217,186

     4.875%, 6/13/18

 

100,000

107,080

 

 

 

 

     Total U.S. Government Agencies and Instrumentalities (Cost $4,649,394)

 

 

4,821,529

 

 

 

 

 

 

Principal

 

U.S. Government Agency Mortgage-Backed Securities - 35.9%

 

Amount

Value

Fannie Mae:

 

 

 

     5.00%, 12/1/16

 

$616,015

$648,624

     5.00%, 11/1/17

 

97,954

103,231

     5.50%, 8/1/18

 

349,743

372,957

     5.00%, 6/1/20

 

251,417

264,255

     6.50%, 4/1/23

 

62,041

66,578

     6.50%, 8/1/32

 

265,370

285,634

     5.50%, 7/1/33

 

613,353

644,659

     5.50%, 7/1/33

 

464,576

488,289

     6.00%, 8/1/33

 

79,298

84,701

     5.50%, 11/1/33

 

498,099

523,523

     5.50%, 3/1/34

 

837,456

880,201

     6.00%, 6/1/34

 

436,027

466,549

     5.00%, 10/1/34

 

668,346

688,013

     5.50%, 3/1/35

 

1,989,477

2,092,556

     5.50%, 6/1/35

 

943,265

990,821

     5.50%, 2/1/36

 

424,496

445,897

     5.50%, 11/1/36

 

641,849

674,102

     7.50%, 11/1/36

 

347,026

378,945

Freddie Mac:

 

 

 

     4.50%, 9/1/18

 

301,150

313,607

     5.00%, 11/1/20

 

475,664

500,100

     5.00%, 2/1/33

 

886,219

912,436

     5.00%, 4/1/35

 

529,376

543,878

     6.00%, 8/1/36

 

523,050

556,068

Ginnie Mae, 5.50%, 7/20/34

 

564,937

594,845

 

 

 

 

     Total U.S. Government Agency Mortgage-Backed Securities (Cost $13,017,575)

 

 

13,520,469

 

 

 

 

U.S. Treasury - 22.2%

 

 

 

United States Treasury Bonds:

 

 

 

     6.25%, 8/15/23

 

600,000

717,094

     5.50%, 8/15/28

 

500,000

557,578

     4.50%, 2/15/36

 

100,000

98,578

United States Treasury Notes:

 

 

 

     4.50%, 9/30/11

 

150,000

158,977

     4.50%, 4/30/12

 

200,000

214,438

     1.375%, 5/15/12

 

400,000

400,000

     2.75%, 2/28/13

 

300,000

309,188

     3.50%, 5/31/13

 

300,000

316,172

     3.125%, 8/31/13

 

300,000

311,812

     3.125%, 9/30/13

 

350,000

363,836

     2.75%, 10/31/13

 

200,000

204,844

     4.25%, 11/15/13

 

200,000

216,063

     2.00%, 11/30/13

 

350,000

348,141

     1.875%, 2/28/14

 

410,000

403,273

     1.875%, 4/30/14

 

300,000

293,859

     2.25%, 5/31/14

 

540,000

536,372

     2.625%, 7/31/14

 

250,000

$251,328

     2.375%, 8/31/14

 

250,000

248,203

     4.00%, 2/15/15

 

400,000

425,125

 

 

 

 

 

 

Principal

 

U.S. Treasury - Cont'd

 

Amount

Value

United States Treasury Notes - Cont'd:

 

 

 

     4.50%, 11/15/15

 

$250,000

$270,820

     2.625%, 2/29/16

 

100,000

97,328

     2.375%, 3/31/16

 

400,000

382,812

     4.875%, 8/15/16

 

450,000

495,070

     4.625%, 2/15/17

 

400,000

432,187

     4.00%, 8/15/18

 

160,000

163,525

     3.625%, 8/15/19

 

150,000

147,563

 

 

 

 

     Total U.S. Treasury (Cost $8,315,328)

 

 

8,364,186

 

 

 

 

 

 

Principal

 

Time Deposit - 0.0%

 

Amount

Value

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

10,545

10,545

 

 

 

 

     Total Time Deposit (Cost $10,545)

 

 

10,545

          

 

 

 

Exchange Traded Funds - 0.9%

 

Shares

 

iShares Barclays Aggregate Bond Fund

 

3,200

330,208

 

 

 

 

     Total Exchange Traded Funds (Cost $321,764)

 

 

330,208

 

 

 

 

          TOTAL INVESTMENTS (Cost $36,173,631) - 99.0%

 

 

37,250,661

          Other assets and liabilities, net - 1.0%

 

 

378,272

          Net Assets - 100%

 

 

$37,628,933

 

 

 

 

 

 

 

 

Net Assets Consist Of:

 

 

 

Paid-in capital applicable to 740,386 shares of common stock outstanding;

 

 

 

     $0.10 par value, 20,000,000 shares authorized

 

 

$36,318,705

Undistributed net investment income

 

 

224,316

Accumulated net realized gain (loss) on investments

 

 

8,882

Net unrealized appreciation (depreciation) on investments

 

 

1,077,030

 

 

 

 

          Net Assets

 

 

$37,628,933

 

 

 

 

          Net Asset Value Per Share

 

 

$50.82

(e) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

(r) The coupon rate shown on floating or adjustable rate securities represents the rate at year end.

Abbreviations:

STEP: Stepped coupon bond for which the coupon rate of interest will adjust on specified future date(s)

 

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income

$48,663

     Interest income

1,984,910

          Total investment income

2,033,573

 

 

Expenses:

 

     Investment advisory fee

139,683

     Transfer agent fees and expenses

3,471

     Trustees' fees and expenses

7,203

     Administrative fees

46,561

     Accounting fees

5,763

     Custodian fees

26,013

     Reports to shareholders

1,187

     Professional fees

21,057

     Miscellaneous

1,342

          Total expenses

252,280

          Fees paid indirectly

(21)

               Net expenses

252,259

 

 

               Net Investment Income

1,781,314

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

416,495

Change in unrealized appreciation (depreciation)

(60,512)

 

 

               Net Realized and Unrealized Gain

 

                (Loss) on Investments

355,983

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$2,137,297

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$1,781,314

$2,153,031

     Net realized gain (loss)

416,495

164,365

     Change in unrealized appreciation or (depreciation)

(60,512)

731,034

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

2,137,297

3,048,430

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(1,758,972)

(2,284,162)

     Net realized gain

(142,302)

--

          Total capital share transactions

(1,901,274)

(2,284,162)

 

 

 

Capital share transactions:

 

 

     Shares sold

11,942,522

23,271,552

     Reinvestment of distributions

1,901,274

2,284,157

     Shares redeemed

(27,738,019)

(19,528,466)

          Total capital share transactions

(13,894,223)

6,027,243

 

 

 

Total Increase (Decrease) in Net Assets

(13,658,200)

6,791,511

 

 

 

Net Assets

 

 

Beginning of year

51,287,133

44,495,622

End of year (including undistributed net investment

 

 

     income of $224,316 and $165,268, respectively)

$37,628,933

$51,287,133

 

 

 

Capital Share Activity

 

 

Shares sold

230,028

460,877

Reinvestment of distributions

37,324

45,892

Shares redeemed

(529,259)

(389,612)

     Total capital share activity

(261,907)

117,157

 

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Barclays Capital Aggregate Bond Index (formerly Lehman Aggregate Bond Index) Portfolio (the "Portfolio"), a series of Summit Mutal Funds, Inc. (or the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing the average of bid prices or at bid prices based on a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Short-term notes are stated at amortized cost, which approximates fair value. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Asset-Backed Securities

--

$57,107

--

$57,107

Commercial Mortgage-Backed Securities

--

1,636,730

--

1,636,730

Corporate Bonds

--

8,396,369

--

8,396,369

Exchanged Traded Funds

$330,208

--

--

330,208

Other Debt Securities

--

10,545

--

10,545

Sovereign Government Bonds

--

113,518

--

113,518

U.S. Government Obligations

--

26,706,184

--

26,706,184

TOTAL

$330,208

$36,920,453

--

$37,250,661

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Portfolio is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. ("the Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .30% of the Portfolio's average daily net assets. Under the terms of the agreement, $9,643 was payable at year end. In addition, $8,669 was payable at year end for reimbursement of operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is .60%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $3,214 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $86 for year ended December 31, 2009. Under the terms of the agreement, $5 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than U.S. Government and short-term securities, were $8,884,150 and $14,885,618, respectively. U.S. Government security purchases and sales were $23,638,121 and $26,963,842, respectively.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from:

2009

2008

     Ordinary income

$1,758,972

$2,284,162

     Long-term capital gain

142,302

--

          Total

$1,901,274

$2,284,162

As of December 31, 2009 the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$1,211,703

Unrealized (depreciation)               

(144,530)

Net unrealized appreciation/(depreciation)     

$1,067,173

Undistributed ordinary income

$224,316

Undistributed long term capital gain

$18,739

Federal income tax cost of investments     

$36,183,488

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distributions (or available capital loss carryforwards, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to asset-backed securities.

Undistributed net investment income

$36,706

Accumulated net realized gain (loss)

(36,706)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no loans outstanding pursuant to this line of credit at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

Average
Daily
Balance

Weighted
Average
Interest
Rate

Maximum
Amount
Borrowed

Month Of
Maximum
Amount
Borrowed

 

$3,730

1.46%

$471,847

October 2009

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates $142,302 of the long term capital gain distributions paid during the year or the maximum amount allowable but not less than the aforementioned amount as capital gain dividend in accordance with Section 852(b)(3)(C) of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

 

December 31,

December 31,

December 31,

 

2009 (z)

2008

2007

Net asset value, beginning

$51.17

$50.27

$48.85

Income from investment operations

 

 

 

     Net investment income

2.00

2.13

2.13

     Net realized and unrealized gain (loss)

.35

1.07

1.40

          Total from investment operations

2.35

3.20

3.53

Distributions from

 

 

 

     Net investment income

(2.50)

(2.30)

(2.11)

     Net realized gain

(.20)

--

--

          Total distributions

2.70

(2.30)

(2.11)

Total increase (decrease) in net asset value

(.35)

.90

1.42

Net asset value, ending

$50.82

$51.17

$50.27

 

 

 

 

Total return*

4.59%

6.56%

7.43%

Ratios to average net assets: A

 

 

 

     Net investment income

3.83%

4.29%

4.24%

     Total expenses

.54%

.61%

.59%

     Expenses before offsets

.54%

.60%

.59%

     Net expenses

.54%

.60%

.59%

Portfolio turnover

71%

30%

24%

Net assets, ending (in thousands)

$37,629

$51,287

$44,496

 

 

 

 

 

Years Ended

 

 

December 31,

December 31,

 

 

2006

2005

 

Net asset value, beginning

$49.06

$50.13

 

Income from investment operations

 

 

 

     Net investment income

1.97

1.83

 

     Net realized and unrealized gain (loss)

(.24)

(1.06)

 

          Total from investment operations

1.73

.77

 

Distributions from

 

 

 

     Net investment income

(1.94)

(1.84)

 

          Total distributions

(1.94)

(1.84)

 

Total increase (decrease) in net asset value

(.21)

(1.07)

 

Net asset value, ending

$48.85

$49.06

 

 

 

 

 

Total return*

3.64%

1.57%

 

Ratios to average net assets: A

 

 

 

     Net investment income

3.96%

3.54%

 

     Total expenses

.59%

.63%

 

     Expenses before offsets

.59%

.60%

 

     Net expenses

.59%

.60%

 

Portfolio turnover

28%

16%

 

Net assets, ending (in thousands)

$39,160

$37,657

 

 

See notes to financial highlights.

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

(z) Per share figures calculated using the average shares method.

* Total return is not annualized for periods less than one year.

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory Contracts

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one-, three- and five-year periods ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one-, three- and five-year periods ended June 30, 2009. The Board also took into account management's discussion of the Portfolio's tracking error and performance versus its benchmark index. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee, which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was above the median of its peer group and that total expenses were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio and the relatively small range in total expense ratios among the funds in the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-, three- and five-year periods ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. In addition, the Board considered the subadvisory fee paid to the Subadvisor by the Advisor in comparison to fees paid by similar institutional clients. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit Inflation
Protected Plus
Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments

A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

11

Statement of Operations

12

Statements of Changes in Net Assets

13

Notes to Financial Statements

18

Financial Highlights

20

Explanation of Financial Tables

21

Proxy Voting

22

Availability of Quarterly Portfolio Holdings

22

Basis for Board's Approval of Investment Advisory Contracts

26

Director and Officer Information Table

 

Summit Inflation Protected Plus Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the 12-month period ended December 31, 2009, Summit Inflation Protected Plus Portfolio provided a return of 7.62% compared with a return of 11.41% for the Barclays Capital U.S. Treasury Inflation Protected Securities Index (TIPS Index). The Portfolio underperformed the TIPS Index because it does not invest only in Treasury Inflation Protected Securities (TIPS), which performed well during 2009. The Portfolio also includes floating-rate notes, which underperformed TIPS during the period, and various other fixed-income instruments. When compared to the Lipper General U.S. Government Index, which returned 3.31% for the year, the Portfolio outperformed.

 

Summit Inflation Protected Plus Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

7.62%

Since inception (12.28.06)

5.25%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

In 2009, interest rates rose materially at the longer-maturity end of the yield curve as the 30-year Treasury rate increased from 2.77% to 4.64%. Interest rates at the short-maturity end of the Treasury yield curve remained low and increased less; the two-year Treasury rate increased from 0.76% to 1.14%. Shorter-term rates remained low, as the Federal Reserve continued to pursue an accommodative monetary policy, injecting a massive amount of liquidity into the system.

The rate of inflation, as measured by the Consumer Price Index for Urban Consumers, was up 2.8% in 2009. In 2008, it had risen by 0.1%. Core inflation, which excludes changes in food and energy prices, grew by 1.8% during 2009. The widening difference between yields on 10-year Treasury bonds and 10-year TIPS indicates that investors believe inflation will rise further. At year-end 2008, the yield differential was about 0.10%. By the end of 2009, it had increased to 2.40%.

Portfolio Strategy

The Portfolio primarily invests in TIPS and floating-rate bonds. Throughout 2009, it maintained an intermediate duration. Higher inflation and expectations that inflation will rise in the future pushed returns on TIPS above those of U.S. Treasury securities with similar durations. The Portfolio will continue to hold TIPS in an effort to protect against future inflation expectations. We also plan to continue holding floating-rate notes, which generally provide greater income during times of inflation.

 

Investment Allocation
(at 12.31.09)

% of Total
Investments

Long Term

30%

Intermediate Term

34%

Short Term

36%

Total

100%

Outlook

The outlook for inflation-protected securities depends on expectations for economic growth, money supply, the value of the dollar, and the dollar's impact on inflation. The prospect for inflation in the near term remains low, given the slack labor market and low capacity utilization. However, the prospect for inflation over the intermediate and long term appears much more substantial. Massive economic and fiscal stimulus programs, in tandem with a strengthening economy and a weakening dollar, should create heightened concern over the future rate of inflation. The Federal Reserve will need to withdraw stimulus support at some point. Its skill in determining the magnitude and timing of withdrawal will influence future economic and market performance.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,032.20

$3.84

Hypothetical (5% return per year before expenses)

$1,000.00

$1,021.42

$3.82

* Expenses are equal to the Fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Inflation Protected Plus Portfolio:

We have audited the accompanying statement of net assets of the Summit Inflation Protected Plus Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Inflation Protected Plus Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

 

 

Principal

 

U.S. Treasury(i) - 50.6%

 

Amount

Value

United States Treasury Bonds:

 

 

 

     2.375%, 1/15/25

 

$2,098,662

$2,215,728

     2.00%, 1/15/26

 

2,265,411

2,276,738

     2.375%, 1/15/27

 

1,393,509

1,467,322

     1.75%, 1/15/28

 

1,877,985

1,801,692

     3.625%, 4/15/28

 

1,396,674

1,727,074

     2.50%, 1/15/29

 

604,120

648,579

     3.875%, 4/15/29

 

1,400,432

1,803,276

     3.375%, 4/15/32

 

207,036

256,110

United States Treasury Notes:

 

 

 

     2.00%, 1/15/14

 

216,435

228,914

     1.625%, 1/15/15

 

588,697

612,429

     2.00%, 1/15/16

 

1,323,305

1,397,948

     2.50%, 7/15/16

 

920,553

1,002,683

     2.375%, 1/15/17

 

900,421

972,877

     2.625%, 7/15/17

 

62,581

68,849

     1.625%, 1/15/18

 

670,709

686,743

     2.125%, 1/15/19

 

251,713

267,091

     1.875%, 7/15/19

 

506,210

525,747

 

 

 

 

     Total U.S. Treasury (Cost $17,535,139)

 

 

17,959,800

Corporate Bonds - 44.4%

 

 

 

Affiliated Computer Services, Inc., 5.20%, 6/1/15

 

700,000

722,750

Bank of America Corp.:

 

 

 

     0.581%, 4/30/12 (r)

 

1,000,000

1,008,727

     7.375%, 5/15/14

 

100,000

113,395

Baxter International, Inc., 4.00%, 3/1/14

 

100,000

103,124

BlackRock, Inc., 3.50%, 12/10/14

 

100,000

98,998

Bottling Group LLC, 6.95%, 3/15/14

 

100,000

115,897

BP Capital Markets plc, 3.625%, 5/8/14

 

100,000

102,219

CA, Inc., 5.375%, 12/1/19

 

100,000

101,076

Citibank NA, 0.414%, 11/15/12 (r)

 

1,000,000

999,784

Citigroup Funding, Inc., 0.198%, 5/5/11 (r)

 

500,000

499,743

Eastman Chemical Co., 5.50%, 11/15/19

 

200,000

199,482

Eli Lilly & Co., 4.20%, 3/6/14

 

100,000

105,249

Freeport-McMoRan Copper & Gold, Inc., 3.881%, 4/1/15 (r)

 

250,000

248,783

General Electric Capital Corp.:

 

 

 

     0.454%, 3/12/12 (r)

 

500,000

502,429

     0.225%, 5/8/12 (r)

 

500,000

499,539

     0.505%, 12/7/12 (r)

 

400,000

402,952

General Mills, Inc., 5.65%, 2/15/19

 

100,000

106,717

GMAC LLC, 0.253%, 12/19/12 (r)

 

1,000,000

999,707

Goldman Sachs Group, Inc., 0.525%, 11/9/11 (r)

 

1,000,000

1,005,721

Harley-Davidson Funding Corp., 5.75%, 12/15/14 (e)

 

700,000

695,054

 

 

 

 

 

 

Principal

 

Corporate Bonds - Cont'd

 

Amount

Value

Hewlett-Packard Co., 4.75%, 6/2/14

 

$100,000

$106,811

Hospira, Inc., 6.40%, 5/15/15

 

100,000

110,938

JPMorgan Chase & Co., 0.631%, 6/22/12 (r)

 

1,000,000

1,009,697

Kroger Co., 3.90%, 10/1/15

 

250,000

252,114

L-3 Communications Corp.:

 

 

 

     5.875%, 1/15/15

 

500,000

498,750

     5.20%, 10/15/19 (e)

 

200,000

199,750

Morgan Stanley, 0.603%, 6/20/12 (r)

 

1,500,000

1,514,152

Novartis Capital Corp., 4.125%, 2/10/14

 

100,000

104,877

Potash Corp. of Saskatchewan, Inc., 5.25%, 5/15/14

 

100,000

107,498

Pride International, Inc., 7.375%, 7/15/14

 

$500,000

$516,250

Procter & Gamble Co., 3.50%, 2/15/15

 

100,000

102,331

Shell International Finance BV, 4.00%, 3/21/14

 

100,000

104,592

Southern California Gas Co., 5.50%, 3/15/14

 

290,000

318,176

State Street Bank and Trust Co., 0.454%, 9/15/11 (r)

 

900,000

903,646

SunTrust Bank, 0.904%, 12/16/10 (r)

 

500,000

503,449

Time Warner Cable, Inc., 5.00%, 2/1/20

 

200,000

194,530

Unilever Capital Corp., 4.80%, 2/15/19

 

100,000

102,722

Union Bank, 0.334%, 3/16/11 (r)

 

500,000

500,665

 

 

 

 

     Total Corporate Bonds (Cost $15,684,988)

 

 

15,782,294

 

 

 

 

 

 

 

 

U.S. Government Agencies And Instrumentalities - 4.0%

 

 

 

Fannie Mae, 5.00%, 3/15/16

 

900,000

978,273

Federal Home Loan Bank, 5.125%, 8/14/13

 

200,000

219,963

Freddie Mac, 4.75%, 1/19/16

 

200,000

215,777

 

 

 

 

     Total U.S. Government Agencies and Instrumentalities (Cost $1,431,863)

 

 

1,414,013

 

 

 

 

 

 

 

 

Time Deposit - 0.4%

 

 

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

148,840

148,840

 

 

 

 

     Total Time Deposit (Cost $148,840)

 

 

148,840

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $34,800,830) - 99.4%

 

 

35,304,947

          Other assets and liabilities, net - 0.6%

 

 

220,414

          Net Assets - 100%

 

 

$35,525,361

 

 

 

 

 

 

 

 

Net Assets Consist of:

 

 

 

Paid-in capital applicable to 666,672 shares of common stock outstanding;

 

 

 

$0.10 par value, 20,000,000 shares authorized

 

 

$35,281,745

Undistributed net investment income

 

 

20,198

Accumulated net realized gain (loss) on investments

 

 

(280,699)

Net unrealized appreciation (depreciation) on investments

 

 

504,117

 

 

 

 

          Net Assets

 

 

$35,525,361

 

 

 

 

          Net Asset Value per Share

 

 

$53.29

 

(e) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

(i) Inflation protected security.

(r) The coupon rate shown on floating or adjustable rate securities represents the rate at year end.

 

Abbreviations:

LLC: Limited Liability Corporation

 

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Interest income

$439,944

     Inflation principal income (loss)

(105,615)

          Total investment income

334,329

 

 

Expenses:

 

     Investment advisory fee

126,387

     Transfer agency fees and expenses

1,984

     Accounting fees

3,139

     Directors' fees and expenses

3,961

     Administrative fees

25,277

     Custodian fees

8,928

     Reports to shareholders

15,202

     Professional fees

18,371

     Miscellaneous

951

          Total expenses

204,200

          Reimbursement from Advisor

(14,595)

          Fees paid indirectly

(25)

               Net expenses

189,580

 

 

                    Net Investment Income

144,749

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

(27,478)

Changes in unrealized appreciation (depreciation)

1,678,310

 

 

               Net Realized and Unrealized Gain

 

               (Loss) on Investments

1,650,832

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$1,795,581

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) In Net Assets 

2009

2008

Operations:

 

 

     Net investment income

$144,749

$262,189

     Net realized gain (loss)

(27,478)

(252,456)

     Change in unrealized appreciation (depreciation)

1,678,310

(1,231,292)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting from Operations

1,795,581

(1,221,559)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(124,551)

(269,196)

     Return of capital

-

(159,940)

          Total distributions

(124,551)

(429,136)

 

 

 

Capital share transactions:

 

 

     Shares sold

21,325,384

23,796,424

     Reinvestment of distributions

124,551

429,136

     Shares redeemed

(5,087,708)

(6,240,110)

          Total capital share transactions

16,362,227

17,985,450

 

 

 

Total Increase (Decrease) in Net Assets

18,033,257

16,334,755

 

 

 

 

 

 

Net Assets

 

 

Beginning of year

17,492,104

1,157,349

End of year (including undistributed net investment

 

 

     income of $20,198 and $0, respectively)

$35,525,361

$17,492,104

 

 

 

 

 

 

Capital Share Activity

 

 

Shares sold

411,207

442,165

Shares reinvested

2,334

8,714

Shares redeemed

(98,917)

(120,669)

     Total capital share activity

314,624

330,210

 

See notes to financial statements.

 

Notes to Financial Statements

Note A -- Significant Accounting Policies

General: Summit Inflation Protected Plus Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund"), is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing the average of bid prices or at bid prices based on a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Short-term notes are stated at amortized cost, which approximates fair value. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

U.S. government obligations

--

$19,373,813

--

$19,373,813

Corporate debt Obligations

--

15,782,294

--

15,782,294

Other debt obligations

--

148,840

--

148,840

TOTAL

--

$35,304,947

--

$35,304,947

Repurchase Agreements: The Portfolio may enter into repurchase agreements with recognized financial institutions or registered broker/dealers and, in all instances, holds underlying securities with a value exceeding the total repurchase price, including accrued interest. Although risk is mitigated by the collateral, the Portfolio could experience a delay in recovering its value and a possible loss of income or value if the counterparty fails to perform in accordance with the terms of the agreement.

Treasury Inflation-Protected Securities: The Portfolio invests in Treasury Inflation-Protected Securities ("TIPS"), in which the principal amount is adjusted daily to keep pace with inflation. Interest is accrued based on the adjusted principal amount. The adjustments to principal due to inflation are reflected as increases or decreases to inflation principal income in the accompanying Statement of Operations. Such adjustments may have a significant impact on the Portfolio's distributions.

Security Transactions and Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date. Interest income, which includes amortization of premium and accretion of discount on debt securities is accrued as earned. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .50%, of the Portfolio's average daily net assets. Under the terms of the agreement, $14,849 was payable at year end. In addition, $6,608 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is 0.75%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services to the Portfolio for an annual fee, payable monthly, of .10% based on the Portfolio's average daily net assets. Under the terms of the agreement, $2,970 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $56 for the year ended December 31, 2009. Under the terms of the agreement, $5 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term and U.S. Government securities, were $27,507,816 and $10,452,514, respectively. U.S. Government security purchases and sales were $19,840,484 and $20,428,832, respectively.

Capital Loss Carryforwards

Expiration Date

31-Dec-15

$765

31-Dec-16

109,614

31-Dec-17

83,290

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

 

2009

2008

Distributions paid from:

 

 

     Ordinary income

$124,551

$269,196

     Return of capital

--

159,940

          Total

$124,551

$429,136

As of December 31, 2009, the components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$468,149

Unrealized (depreciation)               

(51,062)

Net unrealized appreciation/(depreciation)     

$417,087

Undistributed ordinary income          

$20,198

Capital loss carryforward     

($193,669)

Federal income tax cost of investments     

$34,887,860

The differences between components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales.

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at December 31, 2009. For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

Average
Daily
Balance

Weighted
Average
Interest
Rate

Maximum
Amount
Borrowed

Month Of
Maximum
Amount
Borrowed

 

$3,995

1.45%

$599,207

October 2009

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

 

Financial Highlights

 

Years Ended

 

December 31,

December 31,

 

2009

2008 (z)

Net asset value, beginning

$49.69

$53.00

Income from investment operations

 

 

     Net investment income

.22

1.35

     Net realized and unrealized gain (loss)

3.57

(2.47)

     Total from investment operations

3.79

(1.12)

Distributions from

 

 

     Net investment income

(.19)

(1.37)

     Return of capital

--

(.82)

          Total distributions

(.19)

(2.19)

Total increase (decrease) in net asset value

3.60

(3.31)

Net asset value, ending

$53.29

$49.69

 

 

 

Total return*

7.62%

(2.33%)

Ratios to average net assets: A

 

 

     Net investment income

.57%

2.59%

     Total expenses

.81%

1.25%

     Expenses before offsets

.75%

.75%

     Net expenses

.75%

.75%

Portfolio turnover

123%

56%

Net assets, ending (in thousands)

$35,525

$17,492

 

 

 

 

 

 

 

Periods Ended

 

December 31,

December 31,

 

2007

2006^

Net asset value, beginning

$50.09

$50.00

Income from investment operations

 

 

     Net investment income

2.64

--

     Net realized and unrealized gain (loss)

2.59

.09

          Total from investment operations

5.23

.09

Distributions from

 

 

     Net investment income

(2.32)

--

     Return of capital

--

--

          Total distributions

(2.32)

--

Total increase (decrease) in net asset value

2.91

.09

Net asset value, ending

$53.00

$50.09

 

 

 

Total return*

10.80%

.18%

Ratios to average net assets: A

 

 

     Net investment income (loss)

5.19%

(2.28%) (a)

     Total expenses

5.27%

33.70% (a)

     Expenses before offsets

.75%

.75% (a)

     Net expenses

.75%

.75% (a)

Portfolio turnover

8%

0%

Net assets, ending (in thousands)

$1,157

$1,002

 

See notes to financial highlights.

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

(a) Annualized.

(z) Per share figures are calculated using Average Shares Method.

* Total return is not annualized for periods less than one year.

^ From December 28, 2006 inception.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory Contracts

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed below the median of its peer universe for the one-year period ended June 30, 2009. The data also indicated that the Portfolio underperformed its Lipper index for the one-year period ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance, including the impact of current market conditions on the Portfolio's investment strategy and differences in the investment strategies used by the funds in the Portfolio's peer universe that also affect relative performance. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was below the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-year period ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

 

Summit Lifestyle
ETF Market Strategy
Target
Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Schedule of Investments

9

Statement of Assets and Liabilities

10

Statement of Operations

11

Statements of Changes in Net Assets

12

Notes to Financial Statements

17

Financial Highlights

19

Explanation of Financial Tables

20

Proxy Voting

21

Availability of Quarterly Portfolio Holdings

21

Basis for Board's Approval of Investment Advisory Contracts

25

Director and Officer Information Table

 

Summit Lifestyle ETF Market Strategy Target Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Lifestyle ETF Market Strategy Target Portfolio returned 17.02% compared to 26.46% for the Standard & Poor's (S&P) 500 Index, its benchmark. For context, the composite index, which is comprised of 60% S&P 500 Index and 40% Barclays Capital Aggregate Bond Index, returned 18.25%. The Portfolio underperformed relative to this composite primarily because of slight weighting differences between the stock and bond components of the Portfolio and the weighting of stocks and bonds in the composite index. The incorporation of certain stock and bond exposures in the Portfolio that are not in the composite index also contributed to the difference in performance.

 

Summit Lifestyle ETF Market Strategy Target Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

17.02%

Since inception (12.28.06)

-2.47%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

**In December 2009 the Portfolio changed its broad-based benchmark to the S&P 500 Index from the Summit Lifestyle ETF Market Strategy Target Composite in order to adopt an index that is not blended. The Portfolio also continues to show the Summit Lifestyle ETF Market Strategy Target Composite because it is more consistent with the Portfolio's construction process and represents a more accurate reflection of the Portfolio's anticipated risk and return patterns.

*** 60% S&P 500 Index and 40% Barclays Capital Aggregate Bond Index.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed-income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve (Fed) and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

Fixed-income markets opened up for both investment-grade and high-yield issuers, which was critical in breaking the credit crunch that began in 2008. Bond investments provided a wide range of returns during 2009. The corporate bond sector produced a return of 18.68% for the year, while the U.S. Treasury sector returned -3.57%. Mortgage-backed securities returned 5.89% as the government launched a trillion dollar purchase program to support that market. In general, riskier assets performed well, while lower-risk assets lagged. This was a complete reversal from 2008, when riskier assets were shed by investors and delivered strongly negative returns.

After posting negative returns during the first few months of the year, equity markets rallied. As liquidity and risk-taking returned to the marketplace, a more positive economic outlook prevailed and share prices moved higher.

Asset Allocation
(at 12.31.09)

% of Total
Investments

Domestic Equity Exchange Traded Funds

 

International and Global Equity Exchange Traded Funds

10%

Fixed Income Exchange Traded Funds

37%

Time Deposit

2%

Total

100%

Portfolio Strategy

The Portfolio was slightly underweight in equities during much of the fourth quarter. The Portfolio includes ETFs investing in domestic and international stocks, investment-grade bonds and, to a lesser extent, high-yield bonds. As a 'fund of funds,' the Portfolio holds a variety of ETFs that focus on specific asset classes.

During 2009, the Portfolio's positions in large, mid-sized, and smaller company growth ETFs helped performance relative to the composite, as did small positions in emerging markets and international ETFs. Positions in large-cap value ETFs detracted from relative performance. On the fixed-income side of the portfolio, high-yield bond ETFs and Treasury Inflation Protected Securities (TIPS) outperformed the index, while a Treasury ETF underperformed on a relative basis. Throughout the year, the Portfolio was reallocated periodically in an effort to optimize returns.

Outlook

During 2010, we expect to see modest economic growth in the United States and throughout the world, and improved corporate earnings. We anticipate that recovery will remain modest as many challenges remain. Unemployment is above 10%, creating slack in the American economy. Consumers continue to reduce debt and limit spending. Many financial institutions have not yet addressed problem assets on their books, which will become problematic if the commercial real estate market experiences weakness as the year unfolds. Finally, the Fed will have to drain liquidity from the system at some point. The Fed's timing and the magnitude of its actions will significantly influence economic and market performance.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,147.80

$4.06

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,021.42

$3.82

* Expenses are equal to the Fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the Underlying Funds in which the Portfolio invests are not included in the annualized expense ratios.

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Lifestyle ETF Market Strategy Target Portfolio:

We have audited the accompanying statement of assets and liabilities of the Summit Lifestyle ETF Market Strategy Target Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., including the schedule of investments, as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Lifestyle ETF Market Strategy Target Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

Schedule of Investments

December 31, 2009

Exchange Traded Funds - 97.2%

Shares

Value

iShares Barclays 3-7 Year Treasury Bond Fund

2,143

$236,073

iShares Barclays Aggregate Bond Fund

48,043

4,957,557

iShares Barclays Intermediate Credit Bond Fund

9,185

943,391

iShares Barclays MBS Bond Fund

13,002

1,378,732

iShares Barclays TIPS Bond Fund

4,546

472,329

iShares iBoxx $ High Yield Corporate Bond Fund

8,059

707,903

iShares MSCI EAFE Index Fund

33,931

1,876,384

iShares Russell 2000 Index Fund

7,460

464,460

iShares S&P 500 Growth Index Fund

68,645

3,980,724

iShares S&P 500 Index Fund

23,028

2,570,155

iShares S&P 500 Value Index Fund

75,081

3,980,044

Midcap SPDR Trust Series 1

7,083

933,256

Vanguard Emerging Markets Fund

11,443

469,163

 

 

 

     Total Exchange Traded Funds (Cost $21,644,131)

 

22,970,171

 

 

 

 

Principal

 

Time Deposit - 2.5%

Amount

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

$584,358

584,358

 

 

 

     Total Time Deposit (Cost $584,358)

 

584,358

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $22,228,489) - 99.7%

 

23,554,529

          Other assets and liabilities, net - 0.3%

 

61,747

          Net Assets - 100%

 

$23,616,276

 

 

See notes to financial statements.

 

Statement of Assets and Liabilities

December 31, 2009

Assets

 

Investments in securities, at value (Cost $22,228,489) - see accompanying schedule

$23,554,529

Receivable for securities sold

1,210,758

Receivable for shares sold

62,259

Interest and dividends receivable

32,533

Other assets

469

     Total assets

24,860,548

 

 

Liabilities

 

Payable for securities purchased

1,211,781

Payable for shares redeemed

19

Payable to Calvert Asset Management Co., Inc.

15,931

Payable to Calvert Administrative Services Company

2,016

Payable to Calvert Shareholder Services, Inc.

5

Accrued expenses and other liabilities

14,520

     Total liabilities

1,244,272

          Net Assets

$23,616,276

 

 

Net Assets Consist of:

 

Paid in capital applicable to 531,242 shares of common stock

 

     outstanding; $0.10 par value, 20,000,000 shares authorized

$25,554,083

Undistributed net investment income

92,039

Accumulated net realized gain (loss) on investments

(3,355,886)

Net unrealized appreciation (depreciation) on investments

1,326,040

 

 

          Net Assets

$23,616,276

 

 

          Net Asset Value per Share

$44.45

 

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income

$457,289

     Interest income

25

          Total investment income

457,314

 

 

Expenses:

 

     Investment advisory fee

79,540

     Transfer agent fees and expenses

2,242

     Accounting fees

1,589

     Trustees' fees and expenses

2,239

     Administrative fees

14,462

     Custodian fees

5,106

     Reports to shareholders

408

     Professional fees

16,766

     Miscellaneous

467

          Total expenses

122,819

          Reimbursement from Advisor

(14,327)

          Fees paid indirectly

(28)

               Net expenses

108,464

 

 

               Net Investment Income

348,850

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

(2,144,203)

Change in unrealized appreciation (depreciation)

3,964,367

 

 

               Net Realized and Unrealized Gain

 

               (Loss) on Investments

1,820,164

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$2,169,014

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$348,850

$324,091

     Net realized gain (loss)

(2,144,203)

(1,212,625)

     Change in unrealized appreciation or (depreciation)

3,964,367

(2,471,324)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

2,169,014

(3,359,858)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(323,160)

(310,151)

     Net realized gain

--

(2,098)

          Total distributions

(323,160)

(312,249)

 

 

 

Capital share transactions:

 

 

     Shares sold

13,148,996

12,266,373

     Reinvestment of distributions

323,158

312,250

     Shares redeemed

(2,373,267)

(2,921,273)

          Total capital share transactions

11,098,887

9,657,350

 

 

 

Total Increase (Decrease) in Net Assets

12,944,741

5,985,243

 

 

 

Net Assets

 

 

Beginning of year

10,671,535

4,686,292

End of year (including undistributed net investment

 

 

     income of $92,039 and $73,109, respectively)

$23,616,276

$10,671,535

Capital Share Activity

 

 

Shares sold

304,546

235,845

Reinvestment of distributions

7,223

8,273

Shares redeemed

(57,634)

(56,064)

     Total capital share activity

254,135

188,054

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Lifestyle ETF Market Strategy Target Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio invests primarily in various exchange traded funds (the "Underlying Funds"), representing different market exposure.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Exchange Traded Funds

$22,970,171

--

--

$22,970,171

Other Debt Obligations

--

$584,358

--

584,358

TOTAL

$22,970,171

$584,358

--

$23,554,529

Security Transactions and Investment Income: Security transactions, normally shares of the Underlying Funds, are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis. Income and capital gain distributions from the Underlying Funds, if any, are recorded on ex-dividend date. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Expenses included in the accompanying financial statements reflect the expenses of the Portfolio and do not include any expenses associated with the Underlying Funds.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements: In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of 0.55% of the Portfolio's average daily net assets.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is 0.75%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $62 for the year ended December 31, 2009. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $22,126,368 and $11,505,525, respectively.

Capital Loss Carryforwards

Expiration Date

31-Dec-16

$826,659

31-Dec-17

1,480,970

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows:

Distributions paid from:

2009

2008

Ordinary income

$323,160

$312,249

     Total

$323,160

$312,249

As of December 31, 2009, the components of distributable earnings / (accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$430,577

Unrealized (depreciation)               

(152,794)

Net unrealized appreciation/(depreciation)     

$277,783

Undistributed ordinary income

$92,039

Capital loss carryforward     

($2,307,629)

Federal income tax cost of investments     

$23,276,746

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the statement of assets and liabilities are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales and exchange traded funds.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to exchange traded funds.

Undistributed net investment income

($6,760)

Accumulated net realized gain (loss)

6,760

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no loans outstanding pursuant to this line of credit at December 31, 2009.

For the year ended December 31, 2009, borrowing information by the Portfolio under the Agreement was as follows:

Average
Daily
Balance

Average
Interest
Rate

Weighted
Maximum
Amount
Borrowed

Month Of
Maximum
Amount
Borrowed

 

$602

1.46%

$88,795

October 2009

 

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 37.3% of the ordinary dividends paid during the year or the maximum amount allowable but not less than the aforementioned percentage as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

 

Years Ended

 

December 31,

December 31,

 

2009 (z)

2008

Net asset value, beginning

$38.51

$52.62

Income from investment operations

 

 

     Net investment income

.97

.74

     Net realized and unrealized gain (loss)

5.59

(13.70)

          Total from investment operations

6.56

(12.96)

Distributions from

 

 

     Net investment income

(.62)

(1.14)

     Net realized gain

--

(.01)

          Total distributions

(.62)

(1.15)

Total increase (decrease) in net asset value

5.94

(14.11)

Net asset value, ending

$44.45

$38.51

 

 

 

Total return*

17.02%

(24.72%)

Ratios to average net assets: A,B

 

 

     Net investment income

2.41%

2.58%

     Total expenses

.85%

1.13%

     Expenses before offsets

.75%

.75%

     Net expenses

.75%

.75%

Portfolio turnover

80%

79%

Net assets, ending (in thousands)

$23,616

$10,672

 

 

 

 

Periods Ended

 

December 31,

December 31,

 

2007 (z)

2006^

Net asset value, beginning

$49.84

$50.00

Income from investment operations

 

 

     Net investment income

2.33

--

     Net realized and unrealized gain (loss)

.45

(.16)

          Total from investment operations

2.78

(.16)

Distributions from 

 

 

     Net investment income

--

--

     Net realized gain

--

--

          Total distributions

--

--

Total increase (decrease) in net asset value

2.78

(.16)

Net asset value, ending

$52.62

$49.84

Total return*

5.58%

(.32%)

Ratios to average net assets: A,B

 

 

     Net investment income (loss)

4.46%

(.59%) (a)

     Total expenses

4.09%

220.56% (a)

     Expenses before offsets

.75%

.75% (a)

     Net expenses

.75%

.75% (a)

Portfolio turnover

17%

0%

Net assets, ending (in thousands)

$4,686

$150

 

See notes to financial highlights.

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

B Amounts do not include the activity of the underlying funds.

(a) Annualized.

(z) Per share figures calculated using the average shares method.

* Total return is not annualized for periods less than one year.

^ From December 28, 2006 inception.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory Contracts

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed below the median of its peer universe for the one-year period ended June 30, 2009. The data also indicated that the Portfolio underperformed its Lipper index for the one-year period ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance, including the impact of current market conditions on the Portfolio's investment strategy. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was at the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. The Board also took into account management's discussion of the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-year period ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit Lifestyle
ETF Market Strategy
Conservative
Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

9

Statement of Operations

10

Statements of Changes in Net Assets

11

Notes to Financial Statements

16

Financial Highlights

18

Explanation of Financial Tables

19

Proxy Voting

20

Availability of Quarterly Portfolio Holdings

20

Basis for Board's Approval of Investment Advisory Contracts

24

Director and Officer Information Table

 

Summit Lifestyle ETF Market Strategy Conservative Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Lifestyle ETF Market Strategy Conservative Portfolio returned 12.40% compared to 5.93% for the Barclays Capital Aggregate Bond Index, its benchmark. For context, the composite index, which is comprised of 40% S&P 500 Index and 60% Barclays Capital Aggregate Bond Index, returned 14.14%. The Portfolio underperformed relative to this composite primarily because of slight weighting differences between the stock and bond components of the Portfolio and the weighting of stocks and bonds in the composite index. The incorporation of certain stock and bond exposures in the Portfolio that are not in the composite index also contributed to the difference in performance.

 

Summit Lifestyle ETF Market Strategy Conservative Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

12.40%

Since inception (12.28.06)

1.07%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

**In December 2009 the Portfolio changed its broad-based benchmark to the Barclays Capital Aggregate Bond Index from the Summit Lifestyle ETF Conservative Composite in order to adopt an index that is not blended. The Portfolio also continues to show the Summit Lifestyle ETF Conservative Composite because it is more consistent with the Portfolio's construction process and represents a more accurate reflection of the Portfolio's anticipated risk and return patterns.

*** 40% S&P 500 Index and 60% Barclays Capital Aggregate Bond Index.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed-income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve (Fed) and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

Fixed-income markets opened up for both investment-grade and high-yield issuers, which was critical in breaking the credit crunch that began in 2008. Bond investments provided a wide range of returns during 2009. The corporate bond sector produced a return of 18.68% for the year, while the U.S. Treasury sector returned -3.57%. Mortgage-backed securities returned 5.89% as the government launched a trillion dollar purchase program to support that market. In general, riskier assets performed well, while lower-risk assets lagged. This was a complete reversal from 2008, when riskier assets were shed by investors and delivered strongly negative returns.

After posting negative returns during the first few months of the year, equity markets rallied. As liquidity and risk-taking returned to the marketplace, a more positive economic outlook prevailed and share prices moved higher.

Asset Allocation
(at 12.31.09)

% of Total
Investments

Domestic Equity Exchange Traded Funds

34%

International and Global Equity Exchange Traded Funds

7%

Fixed Income Exchange Traded Funds

54%

Time Deposit

5%

Total

100%

Portfolio Strategy

The Lifestyle ETF Market Strategy Conservative Portfolio was slightly underweight in equities during much of the fourth quarter. The Portfolio includes ETFs investing in domestic and international stocks, investment-grade bonds and, to a lesser extent, high-yield bonds. As a "fund of funds," the Portfolio holds a variety of ETFs that focus on specific asset classes.

During 2009, the Portfolio's positions in large, mid-sized, and smaller company growth ETFs helped performance relative to the composite, as did small positions in emerging markets and international ETFs. Positions in large-cap value ETFs detracted from annual performance. On the fixed-income side of the Portfolio, high-yield bond and Treasury Inflation Protected Securities (TIPS) ETFs outperformed the index, while a Treasury ETF underperformed on a relative basis. Throughout the year, the Portfolio was reallocated periodically in an effort to optimize returns.

Outlook

During 2010, we expect to see modest economic growth in the United States and throughout the world, and improved corporate earnings. We anticipate that recovery will remain modest as many challenges remain. Unemployment is above 10%, creating slack in the American economy. Consumers continue to reduce debt and limit spending. Many financial institutions have not yet addressed problem assets on their books, which will become problematic if the commercial real estate market experiences weakness as the year unfolds. Finally, the Fed will have to drain liquidity from the system at some point. The Fed's timing and the magnitude of its actions will significantly influence economic and market performance.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,111.50

$3.99

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,021.42

$3.82

* Expenses are equal to the Fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the Underlying Funds in which the Portfolio invests are not included in the annualized expense ratios.

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Lifestyle ETF Market Strategy Conservative Portfolio:

We have audited the accompanying statement of net assets of the Summit Lifestyle ETF Market Strategy Conservative Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Lifestyle ETF Market Strategy Conservative Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

Exchange Traded Funds - 96.2%

 

 

Shares

Value

iShares Barclays 3-7 Year Treasury Bond Fund

 

 

1,170

$128,887

iShares Barclays Aggregate Bond Fund

 

 

26,279

2,711,730

iShares Barclays Intermediate Credit Bond Fund

 

 

5,024

516,015

iShares Barclays MBS Bond Fund

 

 

6,921

733,903

iShares Barclays TIPS Bond Fund

 

 

2,391

248,425

iShares iBoxx $ High Yield Corporate Bond Fund

 

 

4,411

387,462

iShares MSCI EAFE Index Fund

 

 

8,253

456,391

iShares Russell 2000 Index Fund

 

 

1,808

112,566

iShares S&P 500 Growth Index Fund

 

 

16,693

968,027

iShares S&P 500 Index Fund

 

 

5,595

624,458

iShares S&P 500 Value Index Fund

 

 

18,257

967,804

Midcap SPDR Trust Series 1

 

 

1,723

227,022

Vanguard Emerging Markets Fund

 

 

2,773

113,693

 

 

 

 

 

     Total Exchange Traded Funds (Cost $7,996,871)

 

 

 

8,196,383

 

 

 

 

 

 

 

 

Principal

 

Time deposit - 4.9%

 

 

Amount

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

 

$417,249

417,249

 

 

 

 

 

     Total Time Deposit (Cost $417,249)

 

 

 

417,249

 

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $8,414,120) - 101.1%

 

 

 

8,613,632

          Other assets and liabilities, net - (1.1%)

 

 

 

(92,378)

          Net Assets - 100%

 

 

 

$8,521,254

 

 

 

 

 

Net Assets Consist Of:

 

 

 

 

Paid-in capital applicable to 175,975 shares of common stock outstanding;

 

 

 

 

$0.10 par value, 20,000,000 shares authorized

 

 

 

$8,471,177

Undistributed net investment income

 

 

 

14,955

Accumulated net realized gain (loss) on investments

 

 

 

(164,390)

Net unrealized appreciation (depreciation) on investments

 

 

 

199,512

 

 

 

 

 

          Net Assets

 

 

 

$8,521,254

 

 

 

 

 

          Net Asset Value per Share

 

 

 

$48.42

 

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income

$148,910

     Interest Income

34

          Total investment income

148,944

 

 

Expenses:

 

     Investment advisory fee

22,338

     Transfer agent fees and expenses

2,232

     Directors' fees and expenses

633

     Administrative fees

4,061

     Custodian fees

3,938

     Reports to shareholders

350

          Professional fees

15,793

     Miscellaneous

76

          Total expenses

49,421

          Reimbursement from Advisor

(18,946)

          Fees paid indirectly

(14)

               Net expenses

30,461

                    Net Investment Income

118,483

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

(57,916)

Change in unrealized appreciation (depreciation)

331,267

 

 

          Net Realized and Unrealized Gain

 

          (Loss) on Investments

273,351

 

 

          Increase (Decrease) in Net Assets

 

          Resulting From Operations

$391,834

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$118,483

$47,659

     Net realized gain (loss)

(57,916)

(108,357)

     Change in unrealized appreciation or (depreciation)

331,267

(134,151)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

391,834

(194,849)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(102,530)

(70,432)

     Net realized gain

--

(776)

          Total distributions

(102,530)

(71,208)

 

 

 

Capital share transactions:

 

 

     Shares sold

8,529,761

1,830,907

     Reinvestment of distributions

102,529

71,207

     Shares redeemed

(2,595,680)

(351,647)

          Total capital share transactions

6,036,610

1,550,467

 

 

 

Total Increase (Decrease) in Net Assets

6,325,914

1,284,410

 

 

 

Net Assets

 

 

Beginning of year

2,195,340

910,930

End of year (including undistributed net investment

 

 

     income of $14,955 and $926, respectively)

$8,521,254

$2,195,340

 

 

 

Capital Share Activity

 

 

Shares sold

180,606

38,698

Reinvestment of distributions

2,108

1,672

Shares redeemed

(57,087)

(7,256)

     Total capital share activity

125,627

33,114

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Lifestyle ETF Market Strategy Conservative Portfolio (the "Portfolio"), a series of Summit Mutal Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio invests primarily in various exchange traded funds (the "Underlying Funds"), representing different market exposure.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Exchange traded funds

$8,196,383

--

--

$8,196,383

Other debt obligations

--

$417,249

--

417,249

TOTAL

$8,196,383

$417,249

--

$8,613,632

Security Transactions and Investment Income: Security transactions, normally shares of the Underlying Funds, are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis. Income and capital gain distributions from the Underlying Funds, if any, are recorded on the ex-dividend date. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Expenses included in the accompanying financial statements reflect the expenses of the Portfolio and do not include any expenses associated with the Underlying Funds.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements:

In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. ("the Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of 0.55% of the Portfolio's average daily net assets. Under the terms of the agreement, $3,984 was payable at year end. In addition, $3,541 was payable to the Advisor for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is 0.75%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement, $724 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $62 for the year ended December 31, 2009. Under the terms of the agreement, $5 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $9,286,273 and $3,546,714, respectively.

 

Capital Loss Carryforward

Expiration Date

31-Dec-16

$56,593

31-Dec-17

39,392

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 was as follows:

 

2009

2008

Distributions paid from:

 

 

     Ordinary income

$102,530

$71,208

          Total

$102,530

$71,208

As of December 31, 2009, the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$154,290

Unrealized (depreciation)               

(23,183)

Net unrealized appreciation/(depreciation)     

$131,107

Undistributed ordinary income

$14,955

Capital loss carryforward     

($95,985)

Federal income tax cost of investments     

$8,482,525

The differences between components of distributable earnings on a tax basis and the amounts reflected in the statement of net assets are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales and exchange traded funds.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distributions (or available capital loss carryforwards, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to exchange traded funds and excise taxes.

Undistributed net investment income

($1,924)

Accumulated net realized gain (loss)

1,938

Paid-in capital

(14)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no borrowings under the agreement during the year ended December 31, 2009.

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (Unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 27.5% of the ordinary dividends paid during the year or the maximum amount allowable but not less than the aforementioned percentage as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

Years Ended

 

 

December 31,

December 31,

 

 

2009

2008

 

Net asset value, beginning

$43.60

$52.86

 

Income from investment operations

 

 

 

     Net investment income

.67

1.09

 

     Net realized and unrealized gain (loss)

4.74

(7.85)

 

          Total from investment operations

5.41

(6.76)

 

Distributions from

 

 

 

     Net investment income

(.59)

(2.45)

 

     Net realized gain

--

(.05)

 

          Total distributions

(.59)

(2.50)

 

Total increase (decrease) in net asset value

4.82

(9.26)

 

Net asset value, ending

$48.42

$43.60

 

 

 

 

 

Total return*

12.40%

(13.12%)

 

Ratios to average net assets: A,B

 

 

 

     Net investment income (loss)

2.92%

3.50%

 

     Total expenses

1.22%

4.48%

 

     Expenses before offsets

.75%

.75%

 

     Net expenses

.75%

.75%

 

Portfolio turnover

88%

66%

 

Net assets, ending (in thousands)

$8,521

$2,195

 

 

 

 

 

 

Periods Ended

 

 

December 31,

December 31,

 

 

2007(z)

2006^

 

Net asset value, beginning

$49.89

$50.00

 

Income from investment operations

 

 

 

     Net investment income

1.80

--

 

     Net realized and unrealized gain (loss)

1.17

(.11)

 

          Total from investment operations

2.97

(.11)

 

Distributions from

 

 

 

     Net investment income

--

--

 

     Net realized gain

--

--

 

          Total distributions

--

--

 

Total increase (decrease) in net asset value

2.97

(.11)

 

Net asset value, ending

$52.86

$49.89

 

 

 

 

 

Total return*

5.95%

(.22%)

 

Ratios to average net assets: A,B

 

 

 

     Net investment income (loss)

3.47%

(.52%) (a)

 

     Total expenses

7.28%

220.34% (a)

 

     Expenses before offsets

.75%

.75% (a)

 

     Net expenses

.75%

.75% (a)

 

Portfolio turnover

15%

0%

 

Net assets, ending (in thousands)

$911

$150

 

 

See notes to financial highlights.

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

B Amounts do not include the activity of the underlying funds.

(a) Annualized.

(z) Per share figures calculated using the average shares method.

* Total return is not annualized for periods less than one year.

^ From December 28, 2006 inception.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one-year period ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one-year period ended June 30, 2009. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was at the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also noted that the Advisor was reimbursing expenses of the Portfolio in an amount that exceeded its entire advisory fee. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. The Board also took into account management's discussion of the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation.

The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-year period ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

Summit Lifestyle
ETF Market Strategy
Aggressive
Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

 

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

9

Statement of Operations

10

Statements of Changes in Net Assets

11

Notes to Financial Statements

16

Financial Highlights

18

Explanation of Financial Tables

19

Proxy Voting

19

Availability of Quarterly Portfolio Holdings

20

Basis for Board's Approval of Investment Advisory Contracts

24

Director and Officer Information Table

 

Summit Lifestyle ETF Market Strategy Aggressive Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Lifestyle ETF Market Strategy Aggressive Portfolio returned 20.09% compared to 26.46% for the Standard & Poor's (S&P) 500 Index, its benchmark. For context, a composite index, which is comprised of 80% S&P 500 Index and 20% Barclays Capital Aggregate Bond Index, returned 22.36% for the reporting period. The Portfolio underperformed relative to this composite primarily because of slight weighting differences between the stock and bond components of the Portfolio and the weighting of stocks and bonds in the composite index. The incorporation of certain stock and bond exposures in the Portfolio that are not in the composite index also contributed to the difference in performance.

 

Summit Lifestyle ETF Market Strategy Aggressive Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

20.09%

Since inception (12.28.06)

-3.16%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

**In December 2009 the Portfolio changed its broad-based benchmark to the S&P 500 Index from the Summit Lifestyle ETF Market Strategy Aggresive Composite in order to adopt an index that is not blended. The Portfolio also continues to show the Summit Lifestyle ETF Market Strategy Aggressive Composite because it is more consistent with the Portfolio's construction process and represents a more accurate reflection of the Portfolio's anticipated risk and return patterns.

***80% S&P 500 Index and 20% Barclays Capital Aggregate Bond Index.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

Economic and market performance in early 2009 closely resembled that of late 2008. Equity markets were weak. Fixed-income markets were frozen. Economies around the world were in recession. The stability of the global financial system was uncertain, as was the viability of many of the world's leading financial institutions. In an effort to prevent economic depression, the Federal Reserve (Fed) and central banks around the world flooded the system with liquidity and stabilized markets. Severely negative GDP growth in the United States, which persisted from late 2008 into 2009, turned positive during the last two quarters of the year, albeit off a lower base.

Fixed-income markets opened up for both investment-grade and high-yield issuers, which was critical in breaking the credit crunch that began in 2008. Bond investments provided a wide range of returns during 2009. The corporate bond sector produced a return of 18.68% for the year, while the U.S. Treasury sector returned -3.57%. Mortgage-backed securities returned 5.89% as the government launched a trillion dollar purchase program to support that market. In general, riskier assets performed well, while lower-risk assets lagged. This was a complete reversal from 2008, when riskier assets were shed by investors and delivered strongly negative returns.

After posting negative returns during the first few months of the year, equity markets rallied. As liquidity and risk-taking returned to the marketplace, a more positive economic outlook prevailed and share prices moved higher.

Asset Allocation

% of Total
Investments

Domestic Equity Exchange Traded Funds

67%

International and Global Equity Exchange Traded Funds

13%

Fixed Income Exchange Traded Funds

18%

Time Deposit

2%

Total

100%

Portfolio Strategy

The Portfolio was slightly underweight in equities during much of the fourth quarter; however, it finished 2009 with an equity weighting that was roughly in-line with the composite. The Portfolio includes ETFs investing in domestic and international stocks, investment-grade bonds and, to a lesser extent, high-yield bonds. As a "fund of funds," the Portfolio holds a variety of ETFs that focus on specific asset classes. 


During 2009, the Portfolio's positions in large, mid-sized, and smaller company growth ETFs helped performance relative to the composite, as did small positions in emerging markets and international ETFs. Positions in large-cap value ETFs detracted from annual performance. On the fixed-income side of the portfolio, high-yield bond ETFs and Treasury Inflation Protected Securities (TIPS) outperformed the index, while a Treasury ETF underperformed on a relative basis. Throughout the year, the Portfolio was reallocated periodically in an effort to optimize returns.

Outlook

During 2010, we expect to see some economic growth in the United States and throughout the world, and improved corporate earnings. We anticipate that recovery will remain modest as many challenges remain. Unemployment is above 10%, creating slack in the American economy. Consumers continue to reduce debt and limit spending. Many financial institutions have not yet addressed problem assets on their books, which may become problematic if the commercial real estate market experiences weakness as the year unfolds. Finally, the Fed will have to drain liquidity from the system at some point. The Fed's timing and the magnitude of its actions will significantly influence economic and market performance.

January 2010

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,186.80

$4.13

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,021.42

$3.82

* Expenses are equal to the Fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the Underlying Funds in which the Portfolio invests are not included in the annualized expense ratios.

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Lifestyle ETF Market Strategy Aggressive Portfolio:

We have audited the accompanying statement of net assets of the Summit Lifestyle ETF Market Strategy Aggressive Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Lifestyle ETF Market Strategy Aggressive Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

December 31, 2009

Exchange Traded Funds - 99.2%

 

 

Shares

Value

iShares Barclays 3-7 Year Treasury Bond Fund

 

 

469

$51,665

iShares Barclays Aggregate Bond Fund

 

 

10,453

1,078,645

iShares Barclays Intermediate Credit Bond Fund

 

 

1,995

204,906

iShares Barclays MBS Bond Fund

 

 

3,119

330,739

iShares Barclays TIPS Bond Fund

 

 

1,077

111,900

iShares iBoxx $ High Yield Corporate Bond Fund

 

 

1,753

153,984

iShares MSCI EAFE Index Fund

 

 

20,118

1,112,525

iShares Russell 2000 Index Fund

 

 

4,432

275,936

iShares S&P 500 Growth Index Fund

 

 

40,705

2,360,483

iShares S&P 500 Index Fund

 

 

13,670

1,525,709

iShares S&P 500 Value Index Fund

 

 

44,521

2,360,058

Midcap SPDR Trust Series 1

 

 

4,200

553,392

Vanguard Emerging Markets Fund

 

 

6,798

278,718

 

 

 

 

 

     Total Exchanged Traded Funds (Cost $10,069,061)

 

 

 

10,398,660

 

 

 

 

 

 

 

 

Principal

 

Time Deposit - 1.7%

 

 

Amount

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

 

$182,232

182,232

 

 

 

 

 

     Total Time Deposit (Cost $182,232)

 

 

 

182,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $10,251,293) - 100.9%

 

 

 

10,580,892

          Other assets and liabilities, net - (0.9%)

 

 

 

(97,074)

          Net Assets - 100%

 

 

 

$10,483,818

 

 

 

 

 

Net Assets Consist of:

 

 

 

 

Paid-in capital applicable to 242,288 shares of common stock outstanding;

 

 

 

 

     $0.10 par value, 20,000,000 shares authorized

 

 

 

$10,409,625

Undistributed net investment income

 

 

 

7,450

Accumulated net realized gain (loss) on investments

 

 

 

(262,856)

Net unrealized appreciation (depreciation) on investments

 

 

 

329,599

 

 

 

 

 

          Net Assets

 

 

 

$10,483,818

 

 

 

 

 

          Net Asset Value per Share

 

 

 

$43.27

 

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income

$122,847

          Total investment income

122,847

 

 

Expenses:

 

     Investment advisory fee

20,348

     Transfer agent fees and expenses

2,230

     Directors' fees and expenses

565

     Administrative fees

3,700

     Custodian fees

3,619

     Reports to shareholders

230

     Professional fees

15,735

     Miscellaneous

3

          Total expenses

46,430

          Reimbursement from Advisor

(18,675)

          Fees paid indirectly

(7)

               Net expenses

27,748

 

 

               Net Investment Income

95,099

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

(156,438)

Change in unrealized appreciation (depreciation)

600,809

 

 

               Net Realized and Unrealized Gain

 

               (Loss) on Investments

444,371

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$539,470

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$95,099

$26,354

     Net realized gain (loss)

(156,438)

(107,257)

     Change in unrealized appreciation or (depreciation)

600,809

(264,832)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

539,470

(345,735)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(87,313)

(42,235)

     Net realized gain

--

(125)

          Total distributions

(87,313)

(42,360)

 

 

 

Capital share transactions:

 

 

     Shares sold

10,628,986

640,683

     Reinvestment of distributions

87,312

42,360

     Shares redeemed

(1,896,196)

(61,545)

          Total capital share transactions

8,820,102

621,498

 

 

 

Total Increase (Decrease) in Net Assets

9,272,259

233,403

 

 

 

Net Assets

 

 

Beginning of year

1,211,559

978,156

End of year (including undistributed net investment

 

 

     income of $7,450 and $531, respectively)

$10,438,818

$1,211,559

 

 

 

Capital Share Activity

 

 

Shares sold

252,978

14,956

Reinvestment of distributions

2,002

1,201

Shares redeemed

(46,038)

(1,520)

Total capital share activity

208,942

14,637

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: The Summit Lifestyle ETF Market Strategy Aggressive Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio invests primarily in various exchange traded funds (the "Underlying Funds"), representing different market exposure.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entity, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Exchanged Traded Funds

$10,398,660

--

--

$10,398,660

Other Debt Obligations

--

$182,232

--

182,232

TOTAL

$10,398,660

$182,232

--

$10,580,892

Security Transactions and Investment Income: Security transactions, normally shares of the Underlying Funds, are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis. Income and capital gain distributions from the Underlying Funds, if any, are recorded on ex-dividend date. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Expenses included in the accompanying financial statements reflect the expenses of the Portfolio and do not include any expenses associated with the Underlying Funds.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements:

In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. ("the Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly owned by UNIFI Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of 0.55% of the Portfolio's average daily net assets. Under the terms of the agreement, $4,910 was payable at year end. In addition, $3,642 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is 0.75%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services for the Portfolio. For its services, CASC receives an annual fee, payable monthly, of .10% of the Portfolio's average daily net assets. Under the terms of the agreement $893 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $56 for the year ended December 31, 2009. Under the terms of the agreement, $5 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $10,822,129 and $2,081,745, respectively.

 

Capital Loss Carryforwards

Expiration Date

31-Dec-16

$48,485

31-Dec-17

110,750

Capital losses may be utilized to offset future capital gains to expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 was as follows:

 

2009

2008

Distributions paid from:

 

 

     Ordinary income

$87,313

$42,360

          Total

$87,313

$42,360

As of December 31, 2009, the tax basis components of distributable earnings (accumulated losses) and the federal taxt cost were as follows:

Unrealized appreciation               

$254,974

Unrealized (depreciation)               

(28,996)

Net unrealized appreciation/(depreciation)

$225,978

Undistributed ordinary income

$7,450

Capital loss carryforward

($159,235)

Federal income tax cost of investments     

$10,354,914

The differences between components of distributable earnings on a tax basis and the amounts reflected in the statement of assets and liabilities are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales and exchange traded funds.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distribution (or available capital loss carryovers, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have no impact on net assets. The primary -permanent differences causing such reclassifications for the Portfolio are due to exchange traded funds and excise taxes.

Undistributed net investment income

($867)

Accumulated net realized gain (loss)

917

Paid-in capital

(50)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no borrowings under the agreement during the year ended December 31, 2009.

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions occurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements were issued, that would have materially impacted the financial statements as presented.

Notice to Shareholders (unaudited)

For the year ended December 31, 2009, in order to meet certain requirements of the Internal Revenue Code, we are advising you that the Portfolio designates 69.3% of the ordinary dividends paid during the year or the maximum amount allowable but not less than the aforementioned percentage as eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code.

 

Financial Highlights

 

Years Ended

 

December 31,

December 31,

 

2009

2008

Net asset value, beginning

$36.33

$52.28

Income from investment operations

 

 

     Net investment income

.38

.78

     Net realized and unrealized gain (loss)

6.92

(15.08)

          Total from investment operations

7.30

(14.30)

Distributions from

 

 

     Net investment income

(.36)

(1.64)

     Net realized gain

--

(.01)

          Total distributions

(.36)

(1.65)

Total increase (decrease) in net asset value

6.94

(15.95)

Net asset value, ending

$43.27

$36.33

 

 

 

Total return*

20.09%

(27.72%)

Ratios to average net assets: A,B

 

 

     Net investment income

2.57%

2.50%

     Total expenses

1.25%

5.55%

     Expenses before offsets

.75%

.75%

     Net expenses

.75%

.75%

Portfolio turnover

54%

69%

Net assets, ending (in thousands)

$10,484

$1,212

 

 

 

 

Periods Ended

 

December 31,

December 31,

 

2007 (z)

2006^

Net asset value, beginning

$49.79

$50.00

Income from investment operations

 

 

     Net investment income

1.23

--

     Net realized and unrealized gain (loss)

1.26

(.21)

          Total from investment operations

2.49

(.21)

Total increase (decrease) in net asset value

2.49

(.21)

Net asset value, ending

$52.28

$49.79

 

 

 

Total return*

5.00%

(.42%)

Ratios to average net assets: A,B

 

 

     Net investment income

2.35%

(.72%) (a)

     Total expenses

7.14%

220.77% (a)

     Expenses before offsets

.75%

.75% (a)

     Net expenses

.75%

.75% (a)

Portfolio turnover

27%

0%

Net assets, ending (in thousands)

$978

$149

 

See notes to financial highlights.

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses be fore offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

B Amounts do not include the activity of the underlying funds.

(a) Annualized.

(z) Per share figures calculated using the average shares method.

* Total return is not annualized for periods less than one year.

^ From December 28, 2006 inception.

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory Contracts

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed below the median of its peer universe for the one-year period ended June 30, 2009. The data also indicated that the Portfolio underperformed its Lipper index for the one-year period ended June 30, 2009. The Board took into account management's discussion of the Portfolio's performance. Based upon its review, the Board concluded that the Portfolio's performance was being addressed.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was at the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also noted that the Advisor was reimbursing expenses of the Portfolio in an amount that exceeded its entire advisory fee. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. The Board also took into account management's discussion of the Portfolio's peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-year period ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is being addressed; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

 

Summit Natural
Resources Portfolio

Annual Report

December 31, 2009

 

E-Delivery Sign-Up --

Details Inside

 

Calvert Investments
A UNIFI Company

TABLE OF CONTENTS

4

Portfolio Manager Remarks

6

Shareholder Expense Example

7

Report of Independent Registered Public Accounting Firm

8

Statement of Net Assets

9

Statement of Operations

10

Statements of Changes in Net Assets

11

Notes to Financial Statements

16

Financial Highlights

18

Explanation of Financial Tables

19

Proxy Voting

20

Availability of Quarterly Portfolio Holdings

20

Basis for Board's Approval of Investment Advisory Contracts

24

Director and Officer Information Table

 

Summit Natural Resources Portfolio

Managed by Summit Investment Partners, Inc.

Performance

For the year ended December 31, 2009, Summit Natural Resources Portfolio returned 31.04% compared to 26.46% for its benchmark, the Standard & Poor's (S&P) 500 Index. Concentrated holdings in the commodity and natural resource sectors were behind the Portfolio's strong performance. The S&P 500 Index has a more diversified allocation of holdings across sectors.

 

Summit Natural Resources Portfolio*

Comparison of change in
value of a hypothetical $10,000 investment.

 

 

Average Annual Total Return
(period ended 12.31.09)

One year

31.04%

Since inception (12.28.06)

-1.44%

*Performance information is for the Portfolio only and does not reflect charges and expenses of the variable annuity or variable universal life contract.

The performance data shown represents past performance, and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Current performance may be lower or higher than the performance data quoted.

 

Investment Climate

Investor sentiment was positive for both commodities and natural resources in general during 2009. The price of crude oil futures, for example, increased 32% and closed the year at $79 per barrel. Metal prices also rose dramatically during 2009. Copper futures were up 131%, and gold and materials prices gained substantially, as well.

Natural gas was one of the few commodities to experience a price reduction in 2009. Its price fell by roughly 25%. An improved global economic environment provided pricing support to natural resources as the year progressed. The weakening U.S. dollar also provided pricing support, in dollar-denominated terms, throughout the year.

Portfolio Strategy

The Portfolio invests in exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that track various commodity, natural resource, raw material, and utility indexes. The Portfolio's positions in the iShares S&P Global Materials ETF and the Vanguard Materials ETF provided some of the best returns during the year. In addition, exposure to the Claymore Clear Global Timber ETF provided a positive relative return. The iShares Dow Jones Utilities Sector ETF and the Powershares Water Resources ETF delivered the worst performance in the portfolio. The Powershares DB Commodity Index and the iPath Dow Jones UBS Commodity Index ETNs also provided relatively poor returns.

The Portfolio reduced its exposure to commodity index ETFs during the year and increased exposure to global utilities, materials, and water resource ETFs. Commodity index ETFs have a reasonable amount of energy-related exposure, but they did not perform as well as other ETFs during 2009.

Economic Sectors

% of Total
Investments

Material Stocks

27.4%

Forestry Stocks

2.0%

Energy Stocks

23.4%

Water Stocks

4.0%

Utilities Stocks

4.1%

Energy Commodities

16.9%

Grain Commodities

6.2%

Industrial Metals Commodities

7.9%

Precious Metals Commodities

3.9%

Soft Commodities

3.2%

Livestock Commodities

1.0%

Total

100%

Outlook

Global economic growth generally turned positive in 2009. Central bank and government intervention helped to support demand, reduce uncertainty, and lower systemic risk in financial markets. While it appears that many countries may be at or near recovery, the pace of recovery is likely to be characterized by slow or moderate growth in many places. Financial systems are recovering and the current unprecedented government support will need to be withdrawn over time.

Ongoing global economic recovery should bode well for commodity and natural resource prices in 2010. In addition, fiscal and monetary stimulus in the United States should support commodity and natural resource prices. If the U.S. dollar continues to weaken, it will support higher dollar-denominated commodity prices.

 

January 2010

 

As of December 31, 2009, the following holdings represented the following percentages of Portfolio net assets: iShares S&P Global Materials (22.92%), Vanguard Materials (18.88%), Claymore Clear Global Timber (1.99%), iShares Dow Jones Utilities Sector (3.99%), Powershares Water Resources (3.96%), Powershares DB Commodity Index (19.11%), and iPath Dow Jones UBS Commodity Index (19.14%). All holdings are subject to change without notice.

 

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009 to December 31, 2009).

Note: Expenses do not reflect charges and expenses of the variable annuity or variable universal life contract.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund'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 Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Beginning
Account Value
7/1/09

Ending
Account Value
12/31/09

Expenses Paid
During Period*
7/1/09 - 12/31/09

 

 

 

 

Actual

$1,000.00

$1,194.30

$4.15

Hypothetical
(5% return per year before expenses)

$1,000.00

$1,021.42

$3.82

* Expenses are equal to the Fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the Underlying Funds in which the Portfolio invests are not included in the annualized expense ratios.

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors of Summit Mutual Funds, Inc. and
Shareholders of Summit Natural Resources Portfolio:

We have audited the accompanying statement of net assets of the Summit Natural Resources Portfolio (the Portfolio), a series of Summit Mutual Funds, Inc., as of December 31, 2009, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The accompanying financial highlights of the Portfolio for the periods presented through December 31, 2007 were audited by other auditors whose report thereon dated February 22, 2008, expressed an unqualified opinion.

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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 the Summit Natural Resources Portfolio as of December 31, 2009, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/KPMG LLP
Philadelphia, Pennsylvania
February 24, 2010

 

STATEMENT OF NET ASSETS

DECEMBER 31, 2009

Investment Companies - 98.1%

 

Shares

Value

Claymore/Beacon Global Timber Index ETF

 

19,270

$346,089

iPath Dow Jones-UBS Commodity Index Total Return ETN*

 

78,748

3,327,891

iShares Dow Jones US Utilities Sector Index ETF

 

9,266

693,004

iShares S&P Global Materials Index ETF

 

22,383

1,392,670

iShares S&P North American Natural Resources Sector Index ETF

 

116,176

3,985,999

PowerShares DB Commodity Index Tracking Fund*

 

134,971

3,322,986

PowerShares Water Resources Portfolio ETF

 

40,791

687,736

Vanguard Materials ETF

 

48,403

3,282,692

 

 

 

 

     Total Investment Companies (Cost $15,836,387)

 

 

17,039,067

 

 

Principal

 

Time Deposit - 3.0%

 

Amount

 

State Street Corp. Time Deposit, 0.00%, 1/4/10

 

$517,649

517,649

 

 

 

 

     Total Time Deposit (Cost $517,649)

 

 

517,649

 

 

 

 

 

 

 

 

 

 

 

 

          TOTAL INVESTMENTS (Cost $16,354,036) - 101.1%

 

 

17,556,716

          Other assets and liabilities, net - (1.1%)

 

 

(187,736)

          NET ASSETS - 100%

 

 

$17,368,980

 

 

 

 

Net Assets Consist Of:

 

 

 

Paid-in capital applicable to 364,814 shares of common

 

 

 

     stock outstanding; $0.10 par value, 20,000,000 shares authorized

 

 

$20,691,405

Undistributed net investment income

 

 

12,181

Accumulated net realized gain (loss) on investments

 

 

(4,537,286)

Net unrealized appreciation (depreciation) on investments

 

 

1,202,680

 

 

 

 

          Net Assets

 

 

$17,368,980

 

 

 

 

          Net Asset Value Per Share

 

 

$47.61

 

* Non-income producing security.

 

Abbreviations:

ETF: Exchange-traded fund
ETN: Exchange-traded note

See notes to financial statements.

 

Statement of Operations

Year Ended December 31, 2009

Net Investment Income

 

Investment Income:

 

     Dividend income

$115,267

     Interest income

48

          Total investment income

115,315

 

 

Expenses:

 

     Investment advisory fee

66,676

     Transfer agent fees and expenses

2,322

     Accounting fees

1,186

     Directors' fees and expenses

1,940

     Administrative fees

12,123

     Custodian fees

4,728

     Reports to shareholders

2,058

          Professional fees

17,277

     Miscellaneous

365

          Total expenses

108,675

          Reimbursement from Advisor

(17,725)

          Fees paid indirectly

(29)

               Net expenses

90,921

 

 

               Net Investment Income

24,394

 

 

Realized and Unrealized Gain (Loss) on Investments

 

Net realized gain (loss)

(2,288,408)

Change in unrealized appreciation (depreciation)

5,748,315

 

 

               Net Realized and Unrealized Gain

 

               (Loss) on Investments

3,459,907

 

 

               Increase (Decrease) in Net Assets

 

               Resulting From Operations

$3,484,301

 

See notes to financial statements.

 

Statements of Changes in Net Assets

 

Year Ended

Year Ended

 

December 31,

December 31,

Increase (Decrease) in Net Assets

2009

2008

Operations:

 

 

     Net investment income

$24,394

$32,764

     Net realized gain (loss)

(2,288,408)

(2,232,758)

     Change in unrealized appreciation or (depreciation)

5,748,315

(4,718,312)

 

 

 

          Increase (Decrease) in Net Assets

 

 

          Resulting From Operations

3,484,301

(6,918,306)

 

 

 

Distributions to shareholders from:

 

 

     Net investment income

(41,810)

(18,369)

 

 

 

Capital share transactions:

 

 

     Shares sold

10,788,926

21,854,364

     Reinvestment of distributions

41,810

18,369

     Shares redeemed

(4,578,253)

(8,516,773)

          Total capital share transactions

6,252,483

13,355,960

 

 

 

Total Increase (Decrease) in Net Assets

9,694,974

6,419,285

 

 

 

 

 

 

Net Assets

 

 

Beginning of year

7,674,006

1,254,721

End of year (including undistributed net

 

 

     investment income of $12,181 and $16,370, respectively)

$17,368,980

$7,674,006

 

 

 

Capital Share Activity

 

 

Shares sold

266,524

342,208

Reinvestment of distributions

874

516

Shares redeemed

(113,298)

(152,612)

     Total capital share activity

154,100

190,112

 

See notes to financial statements.

 

NOTES TO FINANCIAL STATEMENTS

Note A --- Significant Accounting Policies

General: Summit Natural Resources Portfolio (the "Portfolio"), a series of Summit Mutual Funds, Inc. (the "Fund"), is registered under the Investment Company Act of 1940 as a non-diversified, open-end management investment company. The Fund is comprised of thirteen separate portfolios. The operations of each series of the Fund are accounted for separately. The shares of the Portfolio are sold to affiliated and unaffiliated insurance companies for allocation to certain of their variable separate accounts. The Portfolio invests primarily in exchange traded funds and exchange traded notes (the "Underlying Funds") representing different natural resources exposures.

On December 12, 2008, Calvert Asset Management Company, Inc. ("CAMCO") consummated a transaction with Summit Investment Partners, Inc. ("Summit"), an affiliated entitiy, whereby CAMCO acquired Summit's mutual fund business and became investment advisor for the portfolios of Summit Mutual Funds, Inc.

Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Portfolio uses independent pricing services approved by the Board of Directors to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Directors.

In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. At December 31, 2009, no securities were fair valued under the direction of the Board of Directors.

The Portfolio utilizes various methods to measure the fair value of its investments. Generally Accepted Accounting Principles (GAAP) establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

Level 1 -- quoted prices in active markets for identical securities

Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an investment's assigned level within the hierarchy during the period. For additional information on the Portfolio's policy regarding valuation of investments, please refer to the Portfolio's most recent prospectus.

The following is a summary of the inputs used to value the Portfolio's net assets as of December 31, 2009:

 

Valuation Inputs

Investments in Securities

Level 1

Level 2

Level 3

Total

Exchange traded funds & notes

$17,039,067

--

--

$17,039,067

Other debt obligations

--

$517,649

--

517,649

TOTAL

$17,039,067

$517,649

--

$17,556,716

Security Transactions and Investment Income: Security transactions, normally shares of the Underlying Funds, are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis. Income and capital gain distributions from the Underlying Funds, if any, are recorded on ex-dividend date. Interest income, which includes amortization of premium and accretion of discount on debt securities is accrued as earned. Expenses included in the accompanying financial statements reflect the expenses of the Portfolio and do not include any expenses associated with the Underlying Funds.

Distributions to Shareholders: Distributions to shareholders are recorded by the Portfolio on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Portfolio's capital accounts to reflect income and gains available for distribution under income tax regulations.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Expense Offset Arrangements: The Portfolio has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Portfolio's cash on deposit with the bank. These credits are used to reduce the Portfolio's expenses. Such a deposit arrangement may be an alternative to overnight investments.

Federal Income Taxes: No provision for federal income or excise tax is required since the Portfolio intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.

Management has analyzed the Portfolio's tax positions taken for all open federal income tax years and has concluded that no provision for federal income tax is required in the Portfolio's financial statements. A Portfolio's federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

New Accounting Pronouncements:

In July 2009, the Financial Accounting Standards Board (FASB) launched the FASB Accounting Standards CodificationTM as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. All other accounting literature not included in the Codification is nonauthoritative.

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06 will require reporting entities to make new disclosures about amount and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements and input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, and information on purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measures, which are effective for fiscal years beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

Note B -- Related Party Transactions

Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Directors of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of 0.55%, of the Portfolio's average daily net assets. Under the terms of the agreement, $7,870 was payable at year end. In addition, $4,270 was payable at year end for operating expenses paid by the Advisor during December 2009.

The Advisor has contractually agreed to limit net annual portfolio operating expenses through December 12, 2010. The contractual expense cap is 0.75%. For the purpose of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.

Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services to the Portfolio for an annual fee, payable monthly, of .10% based on the Portfolio's average daily net assets. Under the terms of the agreement, $1,431 was payable at year end.

Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, acts as shareholder servicing agent for the Portfolio. For its services, CSSI received a fee of $72 for the year ended December 31, 2009. Under the terms of the agreement, $6 was payable at year end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.

Each Director of the Fund who is not an employee of the Advisor or its affiliates receives a fee of $1,500 for each Board and Committee meeting attended plus an annual fee of $20,000. Director's fees are allocated to each of the portfolios served.

Note C -- Investment Activity

During the year, the cost of purchases and proceeds from sales of investments, other than short-term securities were $10,331,784 and $4,139,376, respectively.

Capital Loss Carryforwards

Expiration Date

31-Dec-16

$1,893,101

Capital losses may be utilized to offset future capital gains until expiration.

The tax character of dividends and distributions paid during the years ended December 31, 2009 and December 31, 2008 was as follows:

 

2009

2008

Distributions paid from:

 

 

     Ordinary income

$41,810

$18,369

          Total

$41,810

$18,369

 

As of December 31, 2009, the tax basis components of distributable earnings/(accumulated losses) and the federal tax cost were as follows:

Unrealized appreciation               

$240,733

Unrealized (depreciation)               

(1,682,238)

Net unrealized appreciation/(depreciation)     

($1,441,505)

Undistributed ordinary income

$12,181

Capital loss carryforward     

($1,893,101)

Federal income tax cost of investments     

$18,998,221

The differences between components of distributable earnings on a tax basis and the amounts reflected in the statement of assets and liabilities are primarily due to temporary book-tax differences that will reverse in a subsequent period. These differences are due to wash sales and partnerships.

Reclassifications, as shown in the table below, have been made to the Portfolio's components of net assets to reflect income and gains available for distributions (or available capital loss carryforwards, as applicable) under income tax law and regulations. These reclassifications are due to permanent book-tax differences and have not impact on net assets. The primary permanent differences causing such reclassifications for the Portfolio are due to partnerships and prior year adjustments to real estate investment trusts.

Undistributed net investment income

$13,227

Accumulated net realized gain (loss)

(13,227)

Note D -- Line of Credit

A financing agreement is in place with all Calvert Group Funds and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the higher of the London Interbank Offered Rate, (LIBOR) or the overnight Federal Funds Rate plus 1.25% per annum. A commitment fee of .15% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Portfolio had no borrowings under the agreement during the year ended December 31, 2009.

Note E -- Subsequent Events

In preparing the financial statements as of December 31, 2009, no subsequent events or transactions ocurred through February 24, 2010, the date the financial statements were issued, that would have materially impacted the financial statements as presented.

 

Financial Highlights

 

Years Ended

 

December 31,

December 31,

 

2009 (z)

2008

Net asset value, beginning

$36.42

$60.90

Income from investment operations

 

 

     Net investment income

.08

.10

     Net realized and unrealized gain (loss)

11.22

(24.46)

          Total from investment operations

11.30

(24.36)

Distributions from

 

 

     Net investment income

(.11)

(.12)

          Total distributions

(.11)

(.12)

Total increase (decrease) in net asset value

11.19

(24.48)

Net asset value, ending

$47.61

$36.42

 

 

 

Total return*

31.04%

(40.03%)

Ratios to average net assets: A,B

 

 

     Net investment income

.20%

.40%

     Total expenses

.90%

1.38%

     Expenses before offsets

.75%

.75%

     Net expenses

.75%

.75%

Portfolio turnover

35%

101%

Net assets, ending (in thousands)

$17,369

$7,674

 

 

 

 

Periods Ended

 

December 31,

December 31,

 

2007

2006^

Net asset value, beginning

$49.98

$50.00

Income from investment operations

 

 

     Net investment income

.10

--

     Net realized and unrealized gain (loss)

10.82

(.02)

          Total from investment operations

10.92

(.02)

Distributions from

 

 

     Net investment income

--

--

          Total distributions

--

--

Total increase (decrease) in net asset value

10.92

(.02)

Net asset value, ending

$60.90

$49.98

 

 

 

Total return*

21.85%

(.04%)

Ratios to average net assets: A,B

 

 

     Net investment income (loss)

.23%

(.75%) (a)

     Total expenses

6.33%

133.46% (a)

     Expenses before offsets

.75%

.75% (a)

     Net expenses

.75%

.75% (a)

     Portfolio turnover

28%

0%

Net assets, ending (in thousands)

$1,255

$250

 

See notes to financial highlights.

 

A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the portfolio.

B Amounts do not include the activity of the underlying funds.

(a) Annualized.

(z) Per share figures are calculated using the Average Shares Method.

*      Total return is not annualized for periods less than one year.

^     From December 28, 2006, inception.

 

 

See notes to financial statements.

 

Explanation of Financial Tables

Schedule of Investments

The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.

Statement of Assets and Liabilities

The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities typically include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.

Statement of Net Assets

The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.

At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.

Statement of Operations

The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.

Statement of Changes in Net Assets

The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.

The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.

Financial Highlights

The Financial Highlights table provides a per-share breakdown by class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business, expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.

Proxy Voting

The Proxy Voting Guidelines that the Portfolio uses to determine how to vote proxies relating to portfolio securities is provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745 or by visiting the SEC's website at www.sec.gov.

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by calling the Fund or visiting the SEC's website at www.sec.gov.

Availability of Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings 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 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.

Basis for Board's Approval of Investment Advisory ContractS

At a meeting held on December 10, 2009, the Board of Directors, and by a separate vote, the disinterested Directors, approved the continuance of the Investment Advisory Agreement between the Portfolio and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Portfolio.

In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Portfolio and the Advisor. The disinterested Directors reviewed a report prepared by the Advisor regarding various services provided to the Portfolio by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Portfolio, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Portfolio's investment performance, expenses, and fees to comparable mutual funds.

The disinterested Directors were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement. Prior to voting, the disinterested Directors reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.

In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Portfolio's advisory fee; comparative performance, fee and expense information for the Portfolio; the profitability of the Calvert Group of Funds to the Advisor and its affiliates; the allocation of the Portfolio's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor and its affiliates from their relationship with the Portfolio; the effect of the Portfolio's growth and size on the Portfolio's performance and expenses; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.

In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's management through Board of Directors' meetings, discussions and other reports. The Board considered the Advisor's current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Portfolio, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Advisor under the Investment Advisory Agreement.

In considering the Portfolio's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. In addition, the Board took into account overall financial market conditions. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Portfolio's total return with its Lipper index and with that of other mutual funds deemed to be in its peer universe by an independent third party in its report. This comparison indicated that the Portfolio performed above the median of its peer universe for the one-year period ended June 30, 2009. The data also indicated that the Portfolio outperformed its Lipper index for the one-year period ended June 30, 2009. Based upon its review, the Board concluded that the Portfolio's performance was satisfactory.

In considering the Portfolio's fees and expenses, the Board compared the Portfolio's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Portfolio's management fee (after taking into account expense reimbursements), which includes the advisory fee paid to the Advisor and the administrative fee paid to an affiliate of the Advisor, was at the median of its peer group and that total expenses (net of expense reimbursements) were above the median of its peer group. The Board noted that the allocation of advisory and administrative fees may vary among the Portfolio's peer group. In addition, the Board took into account the fees the Advisor charged to its other clients and considered these fee comparisons in light of the differences in managing these other accounts. The Board noted that the Advisor paid the Subadvisor's subadvisory fee under the Investment Subadvisory Agreement with respect to the Portfolio and that the Advisor had agreed to limit the Portfolio's net annual operating expenses through December 12, 2010. The Board also took into account management's discussion of the Portfolio's expenses and certain factors that affected the level of such expenses, including the current size of the Portfolio. Based upon its review, the Board determined that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.

The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Portfolio's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Portfolio for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Portfolio in terms of the total amount of annual advisory fees it received with respect to the Portfolio and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Portfolio. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Portfolio. In addition, the Board took into account that affiliates of the Advisor may benefit from certain indirect tax benefits relating to dividend received deductions and foreign tax credits. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor, an affiliate of the Advisor, and that the Advisor had reimbursed expenses of the Portfolio. Based upon its review, the Board concluded that the Advisor's and its affiliates' level of profitability from their relationship with the Portfolio was reasonable.

The Board considered the effect of the Portfolio's current size and potential growth on its performance and fees. Although the Portfolio's advisory fee did not have breakpoints that reduced the fee rate on assets above specified levels, the Board noted that if the Portfolio's assets increased over time, the Portfolio might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board also noted that given the Portfolio's current level of assets, the Portfolio would be unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee at this time.

In reapproving the Investment Advisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

In evaluating the Investment Subadvisory Agreement, the disinterested Directors reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.

The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Portfolio's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Portfolio by the Subadvisor under the Investment Subadvisory Agreement.

As noted above, the Board considered, among other information, the Portfolio's performance during the one-year period ended June 30, 2009 as compared to the Portfolio's peer universe and noted that it reviewed on a quarterly basis detailed information about the Portfolio's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor.

In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Portfolio, the Board noted that the Advisor and Subadvisor were affiliated and the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. Based upon its review, the Board determined that the subadvisory fee was reasonable. Because the Advisor would pay the Subadvisor's subadvisory fee, the cost of services to be provided by the Subadvisor and the level of profitability to the Subadvisor from its relationship with the Portfolio were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Portfolio to be a material factor in its consideration.

In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Directors, did not identify any single factor as controlling, and each Director may have attributed different weight to various factors.

Conclusions

The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Portfolio's assets in accordance with the Portfolio's investment objective and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) the performance of the Portfolio is satisfactory in relation to the performance of funds with similar investment objectives and to relevant indices; and (f) the Portfolio's advisory and subadvisory fees are reasonable in relation to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best interests of the Portfolio and its shareholders.

 

This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.

Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.

 

Director and Officer Information Table

 

Name &
Age


Position
with
Fund


Position
Start
Date

Principal Occupation
During Last 5 Years

(Not Applicable to Officers)

# of Calvert
Portfolios
Overseen

Other
Directorships

INDEPENDENT DIRECTORS

FRANK H. BLATZ, JR., Esq.

AGE: 74

Director

1982

CVS

2008

Summit

Of counsel to firm of Schiller & Pittenger, P.C. Mr. Blatz was an attorney in private practice in Fanwood, NJ from 1999 to 2004.

24

 

ALICE GRESHAM

AGE: 59

Director

 

 

1999

CVS

2008

Summit

Dean and Professor at Howard University School of Law. She was formerly Deputy Director of the Association of American Law Schools.

25

 

M. CHARITO KRUVANT

AGE: 64

Director

1999

CVS

2008

Summit

President and CEO of Creative Associates International, Inc., a firm that specializes in human resources development, information management, public affairs and private enterprise development.

37
  • Acacia Federal Savings Bank
  • Summit Foundation
  • The Community Foundation for the National Capital Region

CYNTHIA MILLIGAN

AGE: 63

 

 

 

 

Director

1999

CVS

2008

Summit

Dean Emeritus (as of May 2009), College of Business Administration, University of Nebraska, Lincoln. Formerly, she was the President and Chief Executive Officer for CMA, a consulting firm for financial institutions.

25
  • Wells Fargo Company- NYSE
  • Gallup, Inc.
  • W.K. Kellogg Foundation
  • Raven Industries - NASDAQ
  • Colonial Williamsburg Foundation (Non-Profit)
  • Prison Fellowship Ministries (Non-Profit)

ARTHUR J. PUGH

AGE: 72

Director

1982

CVS

2008

Summit

Retired executive.

24
  • Acacia Federal Savings Bank

INTERESTED DIRECTORS

BARBARA J. KRUMSIEK

AGE: 57

Director & Chair-person

1997

CVS

2008

Summit

 

President, Chief Executive Officer and Chair of Calvert Group, Ltd.

54
  • Calvert Social Investment Foundation
  • Pepco Holdings, Inc.
  • Acacia Life Insurance Company (Chair)

WILLIAM LESTER

AGE: 52

Director

& President

2004

CVS

2008

Summit

As of May 2009, Executive Vice President Finance/Investments and Corporate Treasurer of UNIFI Companies. Mr. Lester also continues to serve as President and Chair of Summit Investment Advisors, Inc.

24
  • Acacia Federal Savings Bank
  • Summit Investment Advisors, Inc.
  • Ameritas Investment Corp.

OFFICERS

KAREN BECKER

AGE: 57

Chief Compliance Officer

2005

CVS

2008

Summit

Chief Compliance Officer for the Calvert Funds. In March 2009, Ms. Becker also became Head of the Securities Operations Department for Calvert Asset Management Company, Inc. Prior to 2005, Ms. Becker was Senior Vice President of Calvert Group, Ltd. and Head of Calvert Client Services.

SUSAN WALKER BENDER, Esq.

AGE: 51

Assistant Vice President & Assistant Secretary

1988

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

JENNIFER BERG

AGE: 36

Assistant Fund Controller

2009

Fund Administration Manager for Calvert Group Ltd.

THOMAS DAILEY

AGE: 45

Vice President

2004

CVS

2008

Summit

Vice President of Calvert Asset Management Company, Inc.

IVY WAFFORD DUKE, Esq.

AGE: 41

Assistant Vice President & Assistant Secretary

1996

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Deputy General Counsel of Calvert Group, Ltd., and Chief Compliance Officer for Calvert Asset Management Company, Inc. and Calvert Distributors, Inc.

TRACI L. GOLDT

AGE: 36

Assistant Secretary

2004

CVS

2008

Summit

Executive Assistant to General Counsel, Calvert Group, Ltd.

 

GREGORY B. HABEEB

AGE: 60

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc.

HUI PING HO, CPA

Age: 45

Assistant Treasurer

2000

CVS

2008

Summit

Tax Compliance Manager of Calvert Group, Ltd.

LANCELOT A. KING, Esq.

AGE: 39

Assistant Vice President & Assistant Secretary

2002

CVS

2008

Summit

Assistant Vice President, Assistant Secretary and Associate General Counsel of Calvert Group, Ltd.

 

EDITH LILLIE

AGE: 53

Assistant Secretary

2007

CVS

2008

Summit

Assistant Secretary (since 2007) and Regulatory Matters Manager of Calvert Group, Ltd.

AUGUSTO DIVO MACEDO, Esq.

AGE: 47

Assistant Vice President & Assistant Secretary

2007

CVS

2008

Summit

Assistant Vice President, Assistant Secretary, and Assistant Counsel Compliance of Calvert Group, Ltd. Prior to joining Calvert in 2005, Mr. Macedo served as 2nd Vice President at Acacia Life Insurance Company and The Advisors Group, Acacia's broker-dealer and federally registered investment adviser.

JANE B. MAXWELL Esq.

AGE: 57

Assistant Vice President & Assistant Secretary

2005

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Assistant General Counsel of Calvert Group, Ltd. Prior to joining Calvert in 2004, Ms. Maxwell was an associate with Sullivan & Worcester LLP.

 

JAMES R. MCGLYNN, CFA

AGE: 50

Vice President

2009

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in December 2008, Mr. McGlynn was the large cap value manager of Summit Investment Partners.

ANDREW K. NIEBLER, Esq.

AGE: 42

Assistant Vice President & Assistant Secretary

2006

CVS

2008

Summit

Assistant Vice President, Assistant Secretary & Associate General Counsel of Calvert Group, Ltd.  Prior to joining Calvert in 2006, Mr. Niebler was an associate with Cleary, Gottlieb, Steen & Hamilton LLP. 

CATHERINE P. ROY

AGE: 54

Vice President

2004

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc. Prior to joining Calvert in 2004, Ms. Roy was Senior Vice President of US Fixed Income for Baring Asset Management, and SVP and Senior Portfolio Manager of Scudder Insurance Asset Management.

WILLIAM M. TARTIKOFF, Esq.

AGE: 62

Vice President & Secretary

1990

CVS

2008

Summit

Senior Vice President, Secretary, and General Counsel of Calvert Group, Ltd.

NATALIE TRUNOW

AGE: 42

Vice President

2008

CVS

2008

Summit

Senior Vice President of Calvert Asset Management Company, Inc., and Chief Investment Officer - Equities. Prior to joining Calvert in August 2008, Ms. Trunow was the Section Head (2005-2008) and Portfolio Manager (2001-2008) for the Global Public Markets Group of General Motors Asset Management.

RONALD M. WOLFSHEIMER, CPA

AGE: 57

Treasurer

1982

CVS

2008

Summit

Senior Vice President and Chief Financial and Administrative Officer of Calvert Group, Ltd.

MICHAEL V. YUHAS JR., CPA

AGE: 48

Fund Controller

1999

CVS

2008

Summit

Vice President of Fund Administration of Calvert Administrative Services Company.

 

The address of Directors and Officers is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Ms. Krumsiek is an interested person of the Fund since she is an officer and director of the Fund's Advisor and its affiliates. Mr. Lester is an interested person of the Fund since he is an officer and director of the parent company of the Fund's Advisor.

Additional information about the Fund's Directors can be found in the Statement of Additional Information (SAI). You can get a free copy of the SAI by contacting your broker, or the Fund at 1-800-368-2745.

 

 

<PAGE>

 

Item 2. Code of Ethics.

(a) The registrant has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer and principal financial officer (also referred to as "principal accounting officer").

(b) No information need be disclosed under this paragraph.

(c) The registrant has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto.

(d) The registrant has not granted a waiver or implicit waiver from a provision of its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto.

(e) Not applicable.

(f) The registrant's Code of Ethics is attached as an Exhibit hereto.

 

Item 3. Audit Committee Financial Expert.

The registrant's Board of Trustees/Directors has determined that M. Charito Kruvant, an "independent" Trustee/Director serving on the registrant's audit committee, is an "audit committee financial expert," as defined in Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.

 

Item 4. Principal Accountant Fees and Services.

Services fees paid to auditing firm:

Fiscal Year ended 12/31/08

Fiscal Year ended 12/31/09

$

%*

$

% *

(a) Audit Fees

$211,750

0%

$200,805

0%

(b) Audit-Related Fees

$0

0%

$0

0%

(c) Tax Fees (tax return preparation for the registrant)

$38,967

0%

$36,959

0%

(d) All Other Fees

$0

0%

$0

0%

Total

$250,717

0%

$237,764

0%

* Percentage of fees approved by the Audit Committee pursuant to (c)(7)(i)(C) of Rule 2-01 of Reg. S-X (statutory de minimis waiver of Committee's requirement to pre-approve)

(e) Audit Committee pre-approval policies and procedures:

The Audit Committee is required to pre-approve all audit and non-audit services provided to the registrant by the auditors, and to the registrant's investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant. In determining whether to pre-approve non-audit services, the Audit Committee considers whether the services are consistent with maintaining the independence of the auditors. The Committee may delegate its authority to pre-approve certain matters to one or more of its members. In this regard, the Committee has delegated authority jointly to the Audit Committee Chair together with another Committee member with respect to non-audit services not exceeding $25,000 in each instance. In addition, the Committee has pre-approved the retention of the auditors to provide tax-related services related to the tax treatment and tax accounting of newly acquired securities, upon request by the investment advisor in each instance.

On December 12, 2008, Calvert Asset Management Company, Inc ("CAMCO") consummated a transaction with Summit Investment Partners, Inc.("Summit") whereby CAMCO acquired Summit's mutual fund business. In connection with this transaction, Deloitte & Touche LLP ("Deloitte") resigned in the normal course of business as independent accountant to the registrant. KPMG LLP was selected as the registrant's independent accountant and principal accountant to audit the registrant's financial statements. Prior to December 2008, the registrant followed a different pre-approval policy for non-audit services, as disclosed in registrant's last report in response to this Item.

(f) Not applicable.

(g) Aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for each of the last two fiscal years of the registrant:

Fiscal Year ended 12/31/08

Fiscal Year ended 12/31/09

$

%*

$

% *

$25,500

0%*

$4,000

0%*

* Percentage of fees approved by the Audit Committee pursuant to (c)(7)(i)(C) of Rule 2-01 of Reg. S-X (statutory de minimis waiver of Committee's requirement to pre-approve)

(h) The registrant's Audit Committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment advisor, and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c) (7)(ii) of Rule 2-01 of Reg. S-X is compatible with maintaining the principal accountant's independence and found that the provision of such services is compatible with maintaining the principal accountant's independence.

 

Item 5. Audit Committee of Listed Registrants.

Not applicable.

 

Item 6. Schedule of Investments.

  1. This Schedule is included as part of the report to shareholders filed under Item 1 of this Form.
  2. Not applicable.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

 

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Directors since registrant last provided disclosure in response to this Item.

 

Item 11. Controls and Procedures.

(a) The principal executive and financial officers concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) are effective, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Exchange Act, as of a date within 90 days of the filing date of this report.

(b) There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

 

Item 12. Exhibits.

(a)(1) A copy of the Registrant's Code of Ethics.

Attached hereto.

(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2).

Attached hereto.

(a)(3) Not applicable.

(b) A certification for the registrant's Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached hereto. The certification furnished pursuant to this paragraph is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment 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/ Barbara J. Krumsiek
Barbara J. Krumsiek
Chairman -- Principal Executive Officer

Date:

March 4, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment 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.

 

/s/ Barbara J. Krumsiek
Barbara J. Krumsiek
Chairman -- Principal Executive Officer
Date: March 4, 2010

 

/s/ Ronald M. Wolfsheimer
Ronald M. Wolfsheimer
Treasurer -- Principal Financial Officer
Date: March 4, 2010