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 811-8104
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Touchstone Funds Group Trust
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(Exact name of registrant as specified in charter)
303 Broadway, Suite 1100, Cincinnati, Ohio 45202
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(Address of principal executive offices) (Zip code)
Jill T. McGruder, 303 Broadway, Suite 1100, Cincinnati, Ohio 45202
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 878-4066
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Date of fiscal year end: 09/30
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Date of reporting period: 9/30/07
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Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be t 6 0 transmitted to
stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR
270.30e-1). The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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SEPTEMBER 30, 2007
Annual Report
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TOUCHSTONE FUNDS GROUP TRUST
Touchstone Clover Core Fixed Income Fund
Touchstone Diversified Growth Fund
Touchstone Diversified Small Cap Value Fund
Touchstone Diversified Value Fund
Touchstone Family Heritage(R) Fund
Touchstone Healthcare and Biotechnology Fund
Touchstone International Equity Fund
Touchstone Mid Cap Fund
Touchstone Pitcairn Taxable Bond Fund
Touchstone Sands Capital Select Growth Fund
Touchstone Short Duration Fixed Income Fund
Touchstone Small Cap Fund
Touchstone Small Cap Value Opportunities Fund
Touchstone Strategic Value and High Income Fund
Touchstone Tax-Exempt Bond Fund
Touchstone Ultra Short Duration Fixed Income Fund
Touchstone Value Opportunities Fund
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[LOGO] TOUCHSTONE (R)
INVESTMENTS
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Table of Contents
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Page
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Letter from the President 3
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Management's Discussion of Fund Performance (Unaudited) 4-41
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Tabular Presentation of Portfolios of Investments (Unaudited) 42-44
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Statements of Assets and Liabilities 45-54
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Statements of Operations 55-59
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Statements of Changes in Net Assets 60-70
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Financial Highlights 71-94
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Notes to Financial Statements 95-119
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Portfolios of Investments:
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Clover Core Fixed Income Fund 120-121
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Diversified Growth Fund 122-123
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Diversified Small Cap Value Fund 124-125
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Diversified Value Fund 126
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Family Heritage(R) Fund 127
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Healthcare and Biotechnology Fund 128
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International Equity Fund 129-135
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Mid Cap Fund 136-137
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Pitcairn Taxable Bond Fund 138-139
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Sands Capital Select Growth Fund 140
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Short Duration Fixed Income Fund 141-142
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Small Cap Fund 143-144
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Small Cap Value Opportunities Fund 145-147
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Strategic Value and High Income Fund 148
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Tax-Exempt Bond Fund 149-152
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Ultra Short Duration Fixed Income Fund 153-154
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Value Opportunities Fund 155
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Report of Independent Registered Public Accounting Firm 156
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Other Items (Unaudited) 157-160
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Management of the Trust (Unaudited) 161-164
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2
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Letter from the President
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Dear Shareholder:
We are pleased to provide you with the Touchstone Funds Group Trust Annual
Report. Inside you will find key financial information, as well as manager
commentaries for the twelve months ended September 30, 2007.
During the previous twelve months investors contended with concerns related to
the weakening housing market, subprime-mortgage problems that roiled
financial-services companies worldwide, higher oil prices, the weakening dollar,
and the potential for slower economic growth. However, late in the summer
investors seemed to be hopeful that the worst of the credit-related problems
from the housing and subprime-mortgage markets was over and the Federal Reserve
would be aggressive in its effort to keep the economy from sagging into a
recession. This view was confirmed as the Fed cut its short-term interest rate
by one-half percentage point in September, to 4.75%. This was the first rate
reduction in four years and the steepest in nearly five years. This injected the
liquidity needed and confidence in the financial markets returned.
During the year, the U.S. equity markets were extremely volatile, however, most
posted double digit returns for the year. Large cap stocks continued to
outperform small cap stocks; growth outperformed value for the first time in
seven years.
When we examine where the financial markets may be headed in the year to come,
we continue to believe that diversification is key to balancing risk and return.
We recommend that you work with your financial professional to employ a sound
asset allocation strategy that invests in a combination of stock, bond and money
market mutual funds to help keep your financial strategy on course. We also
suggest maintaining a long-term approach to gain the full potential benefits of
investing.
Touchstone is committed to providing investors access to proven institutional
money managers who act in a sub-advisory capacity. Our sub-advisors are
successful investment management firms with demonstrated proficiency in their
declared area of expertise. We hope that you will find the enclosed commentaries
helpful.
We greatly appreciate your continued support. Thank you for including Touchstone
as part of your investment plan.
Sincerely,
/s/ Jill T. McGruder
Jill T. McGruder
President
Touchstone Funds Group Trust
3
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE CLOVER CORE FIXED INCOME FUND
SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Clover Core Fixed Income Fund seeks to produce attractive
long-term total returns and a high level of current income by investing in a
diversified portfolio of bonds. The Fund maintains a laddered maturity structure
and a weighted average duration that is consistent with an intermediate bond
portfolio. However, individual bonds may have a final maturity from one month to
thirty years or more. The Fund managers combine a top down macro economic
outlook with individual security selection evaluation and techniques. Factors
such as the business cycle, Federal Reserve policy, and credit spreads are taken
into account to establish an overall framework for sector allocation and yield
curve positioning, as well as the overall posture of the portfolio.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Clover Core Fixed Income Fund was 4.07% for
the fiscal year ended September 30, 2007. The total return of the Lehman
Aggregate Bond Index was 5.14% for the same period.
During the first half of this period, the market experienced a further pay off
to riskier assets which was to the detriment of the Fund's relative performance.
The Fund began to pick up ground on its benchmark during the summer as a flight
to quality took place in the market, which was a short lived trade as September
saw risk product recover.
Strategies employed for the period succeeded in their primary goal of preserving
capital and providing the safe harbor which is expected from a bond portfolio.
The assessment that investors were not being adequately compensated for the risk
in some of today's securities proved accurate as a significant repricing took
place, especially in the area of sub-prime mortgages. While these securities are
not a big component of the Fund's benchmark, and therefore did not benefit
relative performance, the Fund manager's commitment not to chase yield in this
area protected client assets from the negative price movements seen in other
investment vehicles. The Fund's defensive posture detracted from returns. We
expect this posture to shift somewhat as there is now better value in risk
products than there has been in several years.
The Fund's underweight to corporate bond duration had the most significant
impact to performance from a sector standpoint. Wider corporate bond spreads led
to weak performance from the sector which benefited the Fund's relative
performance.
Special situation holding, SLM Corp 5.375%, due 5/15/14, detracted from
performance as it was purchased shortly before market conditions and company
specific issues caused risk premiums to rise on the company's debt. We believe
this to be a short term factor and that this bond will be one of the key value
added holdings of the Fund over time. The Fund's overweight in long duration
Treasury bonds also hurt performance as yields on 30-year Treasuries were
slightly higher while the rest of the curve saw yields drop.
The Fund had a significant underweight to the mortgage pass through and
corporate bond sector as measured by contribution to duration. While this
provides a lower risk profile, we look to add value in key investments which
continue to be the Fund's holding in SLM Corp. bonds as well as structured
credit floating rate notes.
The Fund's recent defensive bias of taking less risk produced lower returns than
the benchmark. However, the lower risk seemed like a prudent decision as risk
premiums reached record lows as did the transparency in some of today's
investment offerings. We anticipate significant challenges for active fixed
income managers as we continue to expect low absolute returns from the bond
market, especially in comparison to expense ratios. However, the recent market
disruption is providing some sources of value for the first time in a long time.
4
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CLOVER CORE
FIXED INCOME FUND - CLASS I* AND THE LEHMAN BROTHERS AGGREGATE INDEX
[LINE CHART]
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CLOVER CORE FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class I 4.07% 3.11% 5.23%
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Clover Core Fixed Income Fund Lehman Brothers Aggregate Index
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Date Balance Date Balance
9/30/97 10,000 9/30/97 10,000
9/30/98 11,132 9/30/98 11,149
9/30/99 10,934 9/30/99 11,108
9/30/00 11,724 9/30/00 11,883
9/30/01 13,128 9/30/01 13,422
9/30/02 14,290 9/30/02 14,576
9/30/03 14,771 9/30/03 15,363
9/30/04 15,210 9/30/04 15,929
9/30/05 15,558 9/30/05 16,375
9/30/06 16,003 9/30/06 16,976
9/30/07 16,654 9/30/07 17,848
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class I shares commenced on December 6,
1991.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
5
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE DIVERSIFIED GROWTH FUND
SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Diversified Growth Fund seeks long-term capital appreciation by
primarily investing in common stocks of companies believed to have above average
earnings or revenue growth potential. A disciplined investment process is
employed which is focused on risk management and security selection. The risk
management process is designed to emphasize security selection as the primary
driver of relative returns and minimize sector and thematic bets. The security
selection methodology focuses on a company's growth prospects and relative
evaluation.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Diversified Growth Fund was 16.83% for the
fiscal year ended September 30, 2007. The total return of the Russell(R) 1000
Growth Index was 19.35%.
The Fund's stock selection in the Financial Services sector detracted from
performance, while its selection in Energy contributed to performance. The Fund
was impacted by the market's shift from value to growth, with a sizable growth
premium emerging. This environment has negatively impacted our portfolios, which
have a bias towards value as we seek to own attractively valued securities. Top
contributors included National Oilwell Varco, Cisco Systems, and Goodrich.
Detractors from performance included E*TRADE Financial, Children's Place Retail
Stores, and Amgen.
The Fund seeks to invest in stocks of companies that provide solid fundamentals
and trade at attractive prices. We believe that over time, these stocks will
outperform their peers. Pitcairn does not time the market, nor take sector or
thematic bets. Therefore, we concentrate on those aspects of portfolio
management in which we have a high degree of confidence, such as individual
security selection. We remain true to this process through all market cycles.
There were no significant changes made to the Fund's strategy during the year.
The only changes made in regard to positioning were in response to Russell's
mid-year index reconstitution. These changes included some modest increases and
decreases to sector and industry exposures.
We believe that, in general, the Fund's characteristics compare favorably versus
the benchmark. We continue to believe that owning securities that are
undervalued will eventually lead to long-term outperformance. The Fund is
structured to keep risk exposures relative to the benchmark controlled. Excess
returns are expected to be generated by individual security selection.
6
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DIVERSIFIED
GROWTH FUND - CLASS A* AND THE RUSSELL 1000 GROWTH INDEX
[LINE CHART]
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DIVERSIFIED GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 10.15% 10.92% -5.33%
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Diversified Growth Fund Russell 1000 Growth Index
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Date Balance Date Balance
8/4/00 9,425 8/4/00 10,000
9/30/00 9,067 9/30/00 9,818
9/30/01 5,080 9/30/01 5,337
9/30/02 3,789 9/30/02 4,136
9/30/03 4,694 9/30/03 5,207
9/30/04 5,054 9/30/04 5,598
9/30/05 5,493 9/30/05 6,248
9/30/06 5,783 9/30/06 6,625
9/30/07 6,756 9/30/07 7,907
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class A shares commenced on August 4, 2000.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
7
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE DIVERSIFIED SMALL CAP VALUE FUND
SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Diversified Small Cap Value Fund seeks long-term capital
appreciation by investing in a diversified portfolio of common stocks of U.S.
companies with smaller market capitalizations. The Fund focuses on companies
that trade at attractive values relative to cash flow, book value, financial
strength, and historical valuations. Using a combination of valuation screens,
technical analysis, and fundamental research, the Fund seeks companies that
possess attractive long-term return potential due to their lower-than-average
valuations and improving business fundamentals.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Diversified Small Cap Value Fund was 9.12%
for the fiscal year ended September 30, 2007. The total return of the Russell
2000(R) Value Index was 6.09% for the same period.
Materials & Processing and Producer Durables were the top performing sectors.
This strength was offset by a negative return in the Consumer Discretionary
sector, which was impacted by increasing investor concern regarding domestic
consumer spending in the wake of a challenging real estate market.
Stock selection in Financial Services and Materials & Processing was solid.
Performance in Financial Services was achieved by minimizing exposure to credit
risk. Materials & Processing was aided by a focus on the engineering and
construction industries. Good performance in these sectors was partially offset
by weak selection in Health Care, caused by unrelated negative security-specific
events.
Among the top performing stocks were Bucyrus International, which was buoyed by
strength in the mining equipment industry, and Calgon Carbon Corporation, which
benefited from increasing demand for water filtration and coal emission control,
along with beneficial tariffs on competing Chinese goods. Detractors from
performance included mall-based retailer Wet Seal, which was hurt by
consumer-led weakness, and convenience store operator Pantry, whose profits were
squeezed by declining gasoline margins.
Market conditions were variable during the past year, beginning with strong
optimism and ending with a more cautious tone. In this environment, Fund
performance was affected positively as our techniques were able to isolate
stocks with market-beating characteristics.
Looking forward, we expect continued positive influence from Fund holdings in
the sectors that best exploit the "late cycle" dynamics of the economy. However,
we believe these dynamics will eventually give way to new leadership from
out-of-favor groups such as Banks and Consumer Finance. We are keeping an eye
open for indications of stabilization and improvement of the business conditions
in these areas. The Fund remains committed to seeking an optimal portfolio of
inexpensive stocks with improving fundamentals to take advantage of the proven,
superior long term returns of small cap value stocks.
8
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DIVERSIFIED
SMALL CAP VALUE FUND - CLASS Z* AND THE RUSSELL 2000 VALUE INDEX
[LINE CHART]
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DIVERSFIED SMALL CAP VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years 10 Years
Class A 2.90% 15.25% 9.98%
Class C 8.62% 15.81% 9.83%
Class Z 9.12% 16.61% 10.63%
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Diversified Small Cap Value Fund Russell 2000 Value Index
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Date Balance Date Balance
9/30/97 10,000 9/30/97 10,000
9/30/98 7,875 9/30/98 8,721
9/30/99 9,593 9/30/99 9,229
9/30/00 12,432 9/30/00 10,648
9/30/01 13,942 9/30/01 11,244
9/30/02 12,731 9/30/02 11,080
9/30/03 16,125 9/30/03 14,588
9/30/04 19,950 9/30/04 18,331
9/30/05 23,200 9/30/05 21,585
9/30/06 25,165 9/30/06 24,609
9/30/07 27,460 9/30/07 26,108
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class Z shares only, which will
vary from the performance of Class A and Class C shares based on the
differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class A and Class C shares
commenced on November 20, 2006 and the initial public offering of Class Z
shares commenced on February 28, 1996. The Class A and Class C performance
information is calculated using the historical performance of Class Z.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
9
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE DIVERSIFIED VALUE FUND
SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Diversified Value Fund seeks long-term capital appreciation by
primarily investing in common stocks of companies believed to be priced below
their true worth. A disciplined investment process is employed that focuses on
risk management and security selection. The risk management process is designed
to emphasize security selection as the primary driver of relative returns and
minimize sector and thematic bets. The security selection methodology focuses on
stocks with strong fundamental characteristics that are attractively priced
relative to their peers.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Diversified Value Fund was 11.73% for the
fiscal year ended September 30, 2007. The total return of the Russell 1000(R)
Value Index was 14.45% for the same period.
Over the last several months, there has been a shift from value to growth, with
a sizable growth premium emerging. This environment has negatively impacted the
Fund, which has a bias towards value. Stock selection detracted from
performance, specifically in the Financial Services sector. Stocks that
detracted from performance include Pfizer, Capital One Financial, and
CompuCredit. Contributors to performance were ConocoPhillips, Marathon Oil and
Chevron.
The Fund seeks to invest in stocks of companies that provide solid fundamentals
and trade at attractive prices. We believe that over time, these stocks will
outperform their peers. We do not time the market, nor take sector or thematic
bets. Therefore, we concentrate on those aspects of portfolio management in
which we have a high degree of confidence, such as individual security
selection. We remain true to this process through all market cycles.
There were no significant changes made to the Fund's strategy during the year.
The only changes made in regard to positioning were in response to Russell's
mid-year index reconstitution. These changes included some modest increases and
decreases to sector and industry exposures. The Fund is structured to keep risk
exposures relative to the benchmark controlled. Excess returns are expected to
be generated by individual security selection.
10
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
DIVERSIFIED VALUE FUND - CLASS A* AND THE RUSSELL 1000 VALUE INDEX
[LINE CHART]
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DIVERSIFIED VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 5.32% 14.22% 6.34%
Class C 10.97% 14.74% 6.44%
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Diversified Value Fund Russell 1000 Value Index
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Date Balance Date Balance
8/4/00 9,425 8/4/00 10,000
9/30/00 9,693 9/30/00 10,383
9/30/01 8,694 9/30/01 9,458
9/30/02 7,525 9/30/02 7,855
9/30/03 9,360 9/30/03 9,768
9/30/04 11,066 9/30/04 11,774
9/30/05 12,555 9/30/05 13,739
9/30/06 13,896 9/30/06 15,747
9/30/07 15,526 9/30/07 18,023
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares based on the differences in
loads and fees paid by shareholders in the different classes. The initial
public offering of Class A shares commenced on August 4, 2000 and the
initial public offering of Class C shares commenced on November 20, 2006.
The Class C performance information is calculated using the historical
performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
11
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE FAMILY HERITAGE(R) FUND
SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Family Heritage(R) Fund seeks long-term capital appreciation by
primarily investing in common stocks of U.S. companies in which the founding
family still maintains significant influence over the direction of the firm. The
Fund's security selection methodology emphasizes a company's growth prospects
and relative valuations, which seeks to identify stocks that offer significant
growth potential, but are attractively priced relative to their peers.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Family Heritage(R) Fund was 12.91% for the
fiscal year ended September 30, 2007. The total return of the Dow Jones Wilshire
5000SM Index was 16.99% and for the Russell 3000(R) Index was 16.52% for the
same period.
Over the last several months, there has been a shift from value to growth, with
a sizable growth premium emerging. This environment negatively impacted the
Fund, which has a bias towards value. The Fund's security selection, especially
in the Financial Services sector, detracted from performance. Consumer Staples
was the largest contributing sector to performance. Individual companies that
detracted from performance include CompuCredit, Capital One Financial, and
Flagstar Bancorp. The stronger performers among the Fund's holdings were
Stryker, Central European Distribution, and Telephone & Data Systems.
The Fund seeks to invest in stocks of companies that provide solid fundamentals
and trade at attractive prices. We believe that over time, these stocks will
outperform their peers. We do not time the market, nor take sector or thematic
bets. Therefore, we concentrate on those aspects of portfolio management in
which we have a high degree of confidence, such as individual security
selection. We remain true to this process through all market cycles.
With the exception of modest increases and decreases to sector and industry
exposure, there were no significant changes made to the Fund's strategy during
the year. The Fund is structured to keep risk exposure controlled. Excess
returns are expected to be generated by individual security selection. We
believe the Fund's characteristics, in general, compare favorably versus the
benchmark. In addition, we continue to believe that owning securities that are
undervalued versus their potential will eventually lead to long-term
outperformance.
We remain confident that our core approach to portfolio management, along with
our unique focus on companies with significant ownership by the founding family
or related foundation will deliver favorable long-term investment results.
12
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FAMILY
HERITAGE(R) FUND - CLASS A*, THE WILSHIRE 5000 INDEX AND THE RUSSELL 3000 INDEX
[LINE CHART]
- ------------------------------------------------
FAMILY HERITAGE(R) FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 6.37% 10.42% 1.34%
Class C 12.08% 10.91% 1.42%
- ------------------------------------------------
Family Heritage(R) Fund Wilshire 5000 Index Russell 3000 Index
- ----------------------- ------------------- ------------------
Date Balance Date Balance Date Balance
8/4/00 9,425 8/4/00 10,000 8/4/00 10,000
9/30/00 9,340 9/30/00 10,006 9/30/00 10,112
9/30/01 7,229 9/30/01 7,111 9/30/01 7,290
9/30/02 6,315 9/30/02 5,865 9/30/02 5,918
9/30/03 7,616 9/30/03 7,405 9/30/03 7,452
9/30/04 8,846 9/30/04 8,498 9/30/04 8,514
9/30/05 9,440 9/30/05 9,743 9/30/05 9,755
9/30/06 9,741 9/30/06 10,754 9/30/06 10,752
9/30/07 10,999 9/30/07 12,581 9/30/07 12,528
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares based on the differences in
loads and fees paid by shareholders in the different classes. The initial
public offering of Class A shares commenced on August 4, 2000 and the
initial public offering of Class C shares commenced on November 20, 2006.
The Class C performance information is calculated using the historical
performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
13
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE HEALTHCARE AND BIOTECHNOLOGY FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNER, INC.
PHILOSOPHY AND PROCESS
The Touchstone Healthcare and Biotechnology Fund invests primarily in common
stocks of healthcare and biotechnology companies. Turner employs rigorous
fundamental research with supporting qualitative and technical analysis. Its
bottom-up strategy emphasizes fundamental analysis. The Fund seeks companies
with improving fundamentals, superior earnings prospects, reasonable valuations,
and favorable trading-volume and prices patterns.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Healthcare and Biotechnology Fund was 19.25%
for the fiscal year ended September 30, 2007. The total return of the S&P 500
Healthcare Index was 8.70% for the same period.
The main factors contributing to the Fund's performance were stock selection and
positioning. Shire Pharmaceutical's acquisition of New River Pharmaceuticals had
a positive effect on performance. Shire has reported strong earnings results,
and the company also received final FDA and DEA approval for Vyvanse, their next
generation attention deficit disorder drug. Intuitive Surgical Inc. continues to
deliver strong returns. The company is experiencing strong sales of its robotic
surgical tool, the Da Vinci System. The purchases are being fueled by rapid
adoption of the device in gynecology and urology surgeries. Our decision to
eliminate Pfizer was a significant contributor to relative returns. The sale,
based on concerns of the commercial profile of Torcetrapib, was a favorable one
as the benchmark, a 12% weight, suffered when the stock was under pressure.
On a relative basis when compared to the benchmark, the Fund suffered from its
position in Merck, which was much smaller than the benchmark's 7% weight. Merck
reported solid earnings that beat estimates and also boosted its earnings
outlook for the full year. Sepracor, a maker of pharmaceutical products,
declined as Medicare reimbursement for their asthma drug, Xopenox, was cut
dramatically. Medco, a provider of pharmacy benefit management, also contributed
to the benchmarks return and hurt relative performance.
We remain underweight vs. the benchmark in large pharmaceuticals but are
narrowing the gap, as we are finding individual opportunities within this group.
Generally, we expect many large pharmaceutical companies to experience upside
earnings surprises due to favorable foreign currency trends and solid
prescription trends.
Market observers attribute large-cap stocks' strength in recent months to strong
international contributions to the companies' profits (large firms do more
business overseas than their smaller counterparts) and relatively attractive
valuations. As a result of our bottom up research, about 50% of the Fund is
invested in companies over $15 billion in market capitalization. In addition, as
a growing proportion of revenues are being derived outside the U.S. borders,
currently 12% of the Fund is invested in companies outside the United States.
We employ a disciplined investment strategy when selecting stocks by identifying
strong healthcare companies with favorable earnings prospects and reasonable
valuations. We also look for unique characteristics within each industry to
ensure the Fund is invested in only the best companies. For example, when
researching the pharmaceuticals industry, we look at pricing trends,
intellectual property profiles and conduct pipeline analysis. When looking at
biotechnology companies, we focus on clinical trial design, corporate regulatory
expertise, clinician feedback, and reimbursement analysis. We utilize these
tools so the Fund is positioned to achieve consistent investment returns while
maintaining disciplined risk controls.
14
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
We do not make top-down decisions but rather we find opportunities through our
investment discipline of fundamental bottom-up research on a company-by-company
basis. However, as a result of our individual company research, purchases have
increased the Fund's biotech exposure to now compose over 14% of the Fund,
compared to 10% weight for the benchmark.
We continue to anticipate that 2007 will prove to be a year in which
price/earnings ratios expand, a circumstance that typically bodes well for
healthcare stocks. We think the stock market should be higher at the end of the
year than it is now, and we continue to find companies with compelling
fundamentals. In addition, balance sheets in the Health Care sector remain flush
with cash, boosting the possibility of stock buybacks and mergers and
acquisitions in the sector.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HEALTHCARE AND
BIOTECHNOLOGY FUND - CLASS A* AND THE S&P 500 HEALTH CARE INDEX
[LINE CHART]
- ------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 12.40% 14.14% 10.31%
Class C 18.55% 14.68% 10.50%
- ------------------------------------------------
Healthcare and Biotechnology Fund S&P 500 Health Care Index
- --------------------------------- -------------------------
Date Balance Date Balance
2/28/01 9,425 2/28/01 10,000
9/30/01 10,510 9/30/01 9,467
9/30/02 9,284 9/30/02 7,393
9/30/03 11,627 9/30/03 8,239
9/30/04 13,036 9/30/04 8,633
9/30/05 15,787 9/30/05 9,533
9/30/06 16,003 9/30/06 10,252
9/30/07 19,083 9/30/07 11,144
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares based on the differences in
loads and fees paid by shareholders in the different classes. The initial
public offering of Class A shares commenced on February 28, 2001 and the
initial public offering of Class C shares commenced on November 20, 2006.
The Class C performance information is calculated using the historical
performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
15
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE INTERNATIONAL EQUITY FUND
SUB-ADVISED BY AXA ROSENBERG INVESTMENT MANAGEMENT LLC
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone International Equity Fund (the "Fund") seeks long-term capital
appreciation by investing primarily in equity securities of non-U.S. companies
located in a broad array of countries. The Fund's investment approach is
designed to identify attractively priced companies that are believed to have
superior future earnings potential. Focus is placed on evaluating the financial
characteristics of individual stocks and a company's fundamental data rather
than forecasting the trends in markets, investment styles or selectors. Its
stock selection process is driven by proprietary technology designed to analyze
the fundamentals of more than 19,000 securities and to evaluate the relative
attractiveness of stocks in its universe.
AXA Rosenberg's stock selection process includes two fundamental insights on
each company in our universe. The Valuation Model identifies bargains, and
expensive stocks within each industry; and the Earnings Forecast Model
identifies companies with superior/inferior year-ahead earnings.
The fundamental valuation of stocks by the Valuation Model is the heart of our
investment process. The model first classifies companies into one or more of 170
business segments, valuing each company's individual operating businesses, based
on assets, earnings and sales by business segment, in comparison with similar
business operations of other companies. The model then refines the business
segment valuations to account for the financial data only reported at the
company-wide level, including footnote information (over 200 line items in all).
The result is a single valuation for each of the more than 5,500 US broad market
companies we follow. The difference between AXA Rosenberg's valuation and the
market price reflects an opportunity for profit.
A second opportunity for profit is captured by our Earnings Forecast Model,
which combines numerous fundamental variables related to earnings change with
variables that capture investor enthusiasm for companies. These variables
include measures of profitability, measures of operational efficiency,
individual analysts' earnings forecasts, broker recommendations, earnings
surprise and prior market performance. Together, these data are used to predict
earnings changes over the following 12 months. Each company's earnings forecast
alpha is added to its valuation alpha to arrive at a total company alpha.
FUND PERFORMANCE AND POSITIONING
The total return of the Fund was 26.01% for the fiscal year ended September 30,
2007. The total return of the S&P Citigroup World Ex-US Index was 26.54% and the
total return of the MSCI All Country World ex-US Index was 31.06% for the same
period.
From a regional perspective, Asia ex Japan was the strongest performer in both
absolute terms and relative to its regional benchmark. Europe also contributed
to the portfolio's out-performance while contribution from Japan was negative.
Across all regions, industry and sector selection were positive while the Fund's
style relative to the benchmark and stock picking within industries were weak.
The Materials sector produced the best performance for the portfolio. Across all
regions, but particularly in Asia, overweight to the Basic Minerals & Metals
industry was highly rewarded. With holdings that included Anglo American and
Thyssen Krupp in Europe and Rio Tinto and Posco in Asia, the portfolio strongly
outperformed the benchmark in this sector. The portfolio also benefited from its
positioning in the Consumer Discretionary sector. With an overweight in the Cars
and Trucks industry and in individual securities including auto maker
DaimlerChrysler and tire maker Michelin, the portfolio added value both from the
sector overweight and from stock selection. In fact, the overweight in
DaimlerChrysler, which gained more than 100% over the past year, resulted in the
portfolio's top stock contribution. Our Valuation Model has had a favorable view
of this stock for sometime now while our Earnings Model has shown an
increasingly attractive rating since early 2007.
16
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
The most challenging sector over the past year was Financials. With Financials
underperforming the broader market, the sector underweight was a modestly good
call. However, weak stock selection in Misc. Finance (Brokers & Asset
Management), and an underweight in the outperforming REITs industry negated the
small gains from the sector positioning. Among the weaker selections included an
underweight in ABN-Amro, which rose most of the year on merger rumors, and an
overweight in UBS AG, which fell mostly during the third quarter on sub-prime
lending losses. Also contributing weakly to performance was the Industrials
sector where both the industry underweighting and stock selection in
Construction/Homebuilding and Transportation detracted from performance.
Net of industries, the Fund's modest value bias characterized by its lower
Price/Book ratio was the major detractor from performance, as investors have
increasingly shown a preference for growth stocks year to date. Its modestly
higher exposure to Earnings Variation or to companies that produced earnings
surprises (like DaimlerChrysler), offset some of the weakness from the Fund's
relative value positioning.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
INTERNATIONAL EQUITY FUND - CLASS A* AND THE S&P/CITIGROUP BROAD MARKET
INDEX WORLD EX-U.S. COMPOSITE INDEX
[LINE CHART]
- ------------------------------------------------
INTERNATIONAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 18.75% 20.63% 3.53%
Class C 25.20% 21.18% 3.62%
- ------------------------------------------------
S&P/Citigroup Broad Market Index
International Equity Fund World ex-U.S. Composite Index
- ------------------------- --------------------------------
Date Balance Date Balance
8/4/00 9,425 8/4/00 10,000
9/30/00 9,057 9/30/00 9,794
9/30/01 5,735 9/30/01 6,997
9/30/02 4,728 9/30/02 6,107
9/30/03 5,871 9/30/03 7,902
9/30/04 6,972 9/30/04 9,753
9/30/05 8,659 9/30/05 12,614
9/30/06 10,167 9/30/06 15,102
9/30/07 12,812 9/30/07 19,110
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares based on the differences in
loads and fees paid by shareholders in the different classes. The initial
public offering of Class A shares commenced on August 4, 2000 and the
initial public offering of Class C shares commenced on November 20, 2006.
The Class C performance information is calculated using the historical
performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
17
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE MID CAP FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Mid Cap Fund seeks long-term capital appreciation by primarily
investing in stocks of medium capitalization companies. It emphasizes companies
operating in a broad range of industries based on a fundamental analysis of each
company with consideration to such characteristics as price-to-cash flow,
price-to-earnings and price-to-book value ratios. The Fund looks for companies
with quality management teams, strong fundamentals, well-positioned balanced
sheets and distinctive product opportunities that may be positioned to generate
and sustain long-term growth.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Mid Cap Fund was 18.13% for the fiscal year
ended September 30, 2007. The total return of the Russell Midcap(R) Index was
17.87% for the same period.
Strong stock selection in the Financial Services, Energy and Producer Durables
sectors were the largest contributors to relative performance, while Consumer
Discretionary and Health Care stocks detracted from relative results.
At the sector level, Financial Services has struggled throughout much of 2007,
but strong stock selection has made it the strongest performing sector on a
relative basis. Leading the way was IntercontinentalExchange Inc. Shares of the
commodities and futures exchange increased as it continues to be a leader in
terms of product and technological innovation. While unsuccessful, their bidding
war earlier in the year to acquire the Chicago Board of Trade clearly displays
their commitment to grow both organically and through strategic acquisitions.
A.G. Edwards was another top contributor among Financial Services as the stock
surged on news it was being acquired by Wachovia Bank in a deal that would
create the nation's second-largest retail brokerage.
FMC Technologies, the second-largest contributor to the Fund on a relative
basis, has consistently grown revenue about twice as fast as the overall subsea
market by expanding the scope of its subsea offerings and will benefit from the
new five-year agreement they signed with Statoil to provide equipment for
international developments.
Other stocks contributing to performance included Precision Castparts Inc. and
ON Semiconductor Inc. Precision Castparts is a metal components manufacturer
that continued to benefit from improved operating margins. The company reported
robust demand, a sustained aerospace cycle, and better than expected
profitability contribution from recent acquisitions. ON Semiconductor Inc. was
helped by increasing sales to the computer industry and an increase in consumer
electronics demand.
The largest detractor from performance over the last twelve months was Amdocs
Ltd. Shares of the software maker traded lower after management cut its 2007
revenue forecast. Demand for their products and services remains strong, but not
at the same pace that was originally expected. Also detracting from performance
was DaVita Inc. The stock was volatile throughout the year and finished slightly
lower due to integration concerns after acquiring NxStage.
Other stocks that detracted from relative performance were AerCap Holdings and
Security Capital Assurance Ltd. AerCap, an integrated aviation company that
engages in the trading and leasing of aircraft, failed to meet earnings
expectations due to charges related to refinancing some of their bonds. Security
Capital was also down as the insurance provider was negatively impacted by
slower refunding activity.
18
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
We employ a two-pronged approach to select stocks and construct portfolios. For
growth stocks, we perform fundamental analysis to determine if the positive
business momentum identified by our earnings model will persist. In addition,
the company's balance sheet and cash flows are analyzed to verify that the
company has the financial strength required to grow at the rate implied by the
model. For value stocks, we employ a series of screens designed to identify
hidden assets that will signify attractive return potential and downside
protection to share prices. For instance, we seek to identify characteristics
like a large net cash position, undervalued assets such as land, overfunded
pension assets, non-strategic businesses that can be sold, and undervalued
brands or market shares. Then we look for a catalyst for positive change in the
companies' fundamentals or strategies -- a prerequisite if an out-of-favor stock
is to rise in price; otherwise, without that catalyst, an out-of-favor stock can
simply fall even more out of favor. During the last year, we have identified
more opportunities using our earnings model which has resulted in the Fund
having a slight growth tilt. The Fund was positioned this way to take advantage
of owning companies that were experiencing strong earnings momentum while
selling at reasonable valuations.
In managing the Fund, our focus, as always, remains on owning stocks that we
think have either undervalued assets or strong prospective earnings power. We
currently favor shares of companies in the wireless, homeland security, civil
infrastructure, raw materials, semiconductor, industrial parts, premium
retailing, software, managed care, financial data, securities exchange, and
investment management groups. The Fund holds overweight positions in the
Producer Durables, Technology, Health Care, and Materials & Processing sectors.
We think the stock market can draw strength from the continued health of the
global economy, which should help to bolster corporate earnings in the U.S. and
around the world. Corporate America's second-quarter profits rose about 8%, a
rate that was below the double-digit norm of the past three years but
nevertheless was still above the long-term average of 7.6%. We also think profit
growth may again hit the low double digits in the fourth quarter. As long as
earnings stay reasonably healthy, we think the stock market is in little danger
of morphing from a bull to a bear in the near term. In our analysis, the
much-chronicled housing slump and subprime-loan malaise won't in all likelihood
be severe enough to tip the economy into a recession and the stock market into
bearish territory.
19
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
MID CAP FUND - CLASS Y* AND THE RUSSELL MIDCAP INDEX
[LINE CHART]
- --------------------------------------
MID CAP FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year Since Inception*
Class A 11.18% 20.14%
Class C 17.27% 20.80%
Class Y 18.13% 21.93%
Class Z 17.84% 21.62%
- --------------------------------------
Mid Cap Fund Russell Midcap Index
------------ --------------------
Date Balance Date Balance
1/2/03 10,000 1/2/03 10,000
9/30/03 12,520 9/30/03 12,289
9/30/04 14,968 9/30/04 14,814
9/30/05 20,242 9/30/05 18,533
9/30/06 21,679 9/30/06 20,306
9/30/07 25,610 9/30/07 23,935
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class Y shares only, which will
vary from the performance of Class A shares, Class C shares and Class Z
shares based on the differences in loads and fees paid by shareholders in
the different classes. The initial public offering of Class Y shares
commenced on January 2, 2003. The initial public offering of Class A
shares and Class C commenced on May 14, 2007 and the initial public
offering of Class Z shares commenced on April 24, 2006. The Class A, Class
C and Class Z performance information is calculated using the historical
performance of Class Y.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
20
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE PITCAIRN TAXABLE BOND FUND
SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Pitcairn Taxable Bond Fund seeks to deliver maximum total return
consistent with moderate risk of capital and maintenance of liquidity. The Fund
invests in a broad range of investment grade fixed income securities across the
full maturity spectrum. Additional value may be gained by anticipating changing
credit conditions and identifying unique anomalies offered by the market.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Pitcairn Taxable Bond Fund was 4.81% for the
fiscal year ended September 30, 2007. The total return of the Lehman U.S.
Government Credit Index was 5.08% for the same period.
Most of the market activity occurred during the third quarter of 2007. Sub-prime
mortgage fears captured the attention of fixed income investors. Liquidity in
all sectors, with the exception of U.S. Treasuries, dried up for a period of
days, as investors were caught in a quagmire of headlines. This
flight-to-quality was best exhibited in the 3-month U.S. Treasury Bill whose
yield dropped significantly in August. Investors believed that quality could
only be found in very short U.S. Treasuries. The Federal Reserve took action by
lowering the discount rate, and subsequently the Federal Funds Rate, as Chairman
Bernanke faced his first real challenge. When the dust finally settled and the
major mortgage originators were still in business, investors slowly re-entered
markets of riskier assets.
The yield curve steepened during the fiscal year. The major action occurred on
the short end (5-years and shorter) as the Federal rate reductions had its
desired effect of improving liquidity in financial markets. The short duration
of corporate exposure benefitted the Fund, as corporate bonds underperformed
both U.S. Treasuries and agencies.
The Fund continues to be characterized as high quality with a weighted average
rating of AA, and is conservatively structured with corporate-spread risk
concentrated at the short end of the duration spectrum.
21
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PITCAIRN
TAXABLE BOND FUND - CLASS II* AND THE LEHMAN BROTHERS U.S. GOVERNMENT
CREDIT INDEX
[LINE CHART]
- ------------------------------------------------
PITCAIRN TAXABLE BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years Since Inception*
Class II 4.81% 3.97% 5.56%
- ------------------------------------------------
Lehman Brothers U.S.
Pitcairn Taxable Bond Fund Government Credit Index
- -------------------------- -----------------------
Date Balance Date Balance
8/4/00 10,000 8/4/00 10,000
9/30/00 10,166 9/30/00 10,108
9/30/01 11,539 9/30/01 11,439
9/30/02 12,123 9/30/02 12,492
9/30/03 12,990 9/30/03 13,305
9/30/04 13,440 9/30/04 13,751
9/30/05 13,641 9/30/05 14,103
9/30/06 14,045 9/30/06 14,572
9/30/07 14,721 9/30/07 15,313
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class II shares commenced on August 4,
2000.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
22
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE SANDS CAPITAL SELECT GROWTH FUND
SUB-ADVISED BY SANDS CAPITAL MANAGEMENT, LLC
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Sands Capital Select Growth Fund primarily invests in common
stocks of large capitalization U.S. companies that are believed to have
above-average potential for revenue or earnings growth. The Fund invests in 25
to 30 companies that are generally high-quality seasoned and growing businesses,
spread across an array of attractive and growing industries. Sands Capital
generally seeks stocks with sustainable above average earnings growth, and with
capital appreciation potential. In addition, Sands Capital looks for companies
that have a significant competitive advantage, a leadership position or
proprietary niche, a clear mission in an understandable business, financial
strength and that are valued rationally in relation to comparable companies, the
market, and the business prospects for that particular company.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Sands Capital Select Growth Fund was 19.95%
for the fiscal year ended September 30, 2007. The total return of the Russell
1000(R) Growth Index was 19.35% for the same period.
The Fund's security selection contributed to performance for the year. The
securities which had the greatest positive impact on absolute performance as
well as on relative performance were Google, Apple, IntercontinentalExchange,
Schlumberger and Intuitive Surgical. Detractors from absolute performance
include Starbucks, Apollo, Moody's, Varian Medical and Red Hat. The detractors
from relative performance include Starbucks, Genentech, Moody's Corp, Apollo and
Genzyme.
Sands Capital generally considers selling a security when it no longer meets the
investment criteria or when the issues causing such problems are not solvable
within an acceptable time frame. During the year, the Fund sold four stocks -
Red Hat, Apollo Group, eBay and Patterson.
Seven stocks were purchased during the fiscal year - Broadcom, Salesforce,
Expeditor's International, FMC Technologies, Cerner, National Oilwell Varco, and
EMC - all of which met Sands Capital's investment criteria.
Broadcom is a leading designer of semiconductor chips for a number of end
markets in networking, wireless, video processing, and consumer electronics. It
is an intellectual property company that designs and sells semiconductor chips
in the networking, wireless, and consumer electronics end-markets.
Salesforce is the leading provider of Software-as-a-Service (SaaS), focusing
primarily on the Customer Relationship Management (CRM) segment of the
seventy-nine billion dollar enterprise software market. Compared to traditional
licensed software, SaaS offers several compelling benefits to customers
including lower total cost of ownership over time, much lower upfront costs, and
lower implementation risk. The company has a tremendous business model based on
recurring subscription revenues with a scalable, fixed-cost base. Further,
Salesforce is rapidly building a platform and an ecosystem of third-party
developers that will allow it to address other segments of enterprise software
besides CRM.
Expeditor's International is a third party logistics provider (3PL) focused on
international freight forwarding and customs brokerage. Expeditors is
essentially a "travel agent" for freight, making the necessary arrangements to
facilitate the movement of customers' international air or ocean cargo from
origin to destination. Within the rapidly growing 3PL space, Expeditors has
established itself as a standout leader, driving share gains with superior
service, technology, and global reach.
23
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
FMC Technologies is the leading global provider of highly-engineered subsea
equipment used in the production and processing of oil and natural gas from
offshore wells. This market is rapidly expanding as exploration and production
efforts are becoming increasingly focused on offshore fields because of: 1)
their compelling size and economics, 2) the maturation of the world's onshore
basins, and 3) limited onshore access for international oil companies.
Cerner is the leading global provider of healthcare information technology
solutions. The company's flagship product, the Cerner Millennium software suite,
has a broad and deep set of clinical applications designed to improve safety,
quality, and efficiency in the hospital setting. Cerner's organically-built
Millennium architecture, broad product portfolio, and global franchise makes it
uniquely positioned to benefit from the robust secular tailwinds driving
adoption of clinical information systems. Pay-for-performance initiatives from
both private and public payers are pushing hospital adoption of clinical
information systems and electronic medical records past an inflection point.
National Oilwell Varco is an energy equipment and services company. It is the
leading provider of critical drilling rig equipment such as top drives, pipe
handling systems, and control instruments, as well as related consumables and
services. There are few competitors for many of its products, which are often
the de-facto industry-standard brand names.
EMC is the leading provider of enterprise storage solutions, a segment which
Sands Capital expects to grow faster than overall IT spending due to the
continued implementation of compliance and business continuity requirements and
the rapid adoption of Internet video.
Sands Capital Management has always strictly adhered to a bottom-up,
company-focused investment process rather than a top-down, thematic approach.
Yet Sands process also requires a keen awareness of important secular trends and
an ability to anticipate changes to these trends. These trends often lay the
groundwork for attractive industry dynamics. They also act as a growth tailwind
for individual companies within those industries. Consequently, Sands ongoing
quest to invest in the world's greatest growth companies also enables Fund
shareholders to benefit from some of the world's most compelling long-term
trends. Examples include: 1) the trend toward minimally invasive surgery, which
is represented by our ownership in Intuitive Surgical, the leader in robotic
surgery for radical prostatectomies and a growing number of other procedures; 2)
the shift in futures and options trading mechanisms from open outcry pits to
electronic exchanges, which is represented by our ownership in both CME Group
and IntercontinentalExchange; and 3) the proliferation of handheld devices
worldwide, which is represented by the Fund's ownership in QUALCOMM, Broadcom,
America Movil, and Apple. QUALCOMM and Broadcom are the technology leaders in
cell phone chipsets, America Movil is Latin America's leading wireless network
operator, and Apple recently entered the one billion unit-per-year cell phone
market with its revolutionary new iPhone. These are just a few of the many
favorable trends that influence Fund companies and increase the likelihood that
they will continue to achieve above-average earnings growth over the
long-term--the key to common stock price appreciation and wealth creation.
24
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SANDS CAPITAL
SELECT GROWTH FUND - CLASS Y*, SANDS CAPITAL SELECT GROWTH FUND - CLASS Z* AND
THE RUSSELL 1000 GROWTH INDEX
[LINE CHART]
- ------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND - CLASS Y
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years Since Inception*
Class Y 20.39% 16.14% -1.23%
Class Z 19.95% 15.96% -1.34%
- ------------------------------------------------
Sands Capital Select Sands Capital Select
Growth Fund - Class Y Growth Fund - Class Z Russell 1000 Growth Index
- --------------------- --------------------- -------------------------
Date Balance Date Balance Date Balance
8/11/00 10,000 8/11/00 10,000 8/11/00 10,000
9/30/00 9,150 9/30/00 9,150 9/30/00 9,802
9/30/01 5,033 9/30/01 5,033 9/30/01 5,328
9/30/02 4,332 9/30/02 4,332 9/30/02 4,129
9/30/03 5,893 9/30/03 5,893 9/30/03 5,199
9/30/04 6,803 9/30/04 6,803 9/30/04 5,590
9/30/05 7,814 9/30/05 7,804 9/30/05 6,238
9/30/06 7,603 9/30/06 7,574 9/30/06 6,615
9/30/07 9,154 9/30/07 9,085 9/30/07 7,895
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class Y shares and Class Z shares commenced
on August 27, 2004 and August 11, 2000, respectively. The Class Y
performance information is calculated using the historical performance of
Class Z.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
25
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE SHORT DURATION FIXED INCOME FUND
SUB-ADVISED BY CHARTWELL INVESTMENT PARTNERS
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Short Duration Fixed Income Fund seeks to provide above market
income, liquidity and risk-adjusted total return. Fund management targets these
goals using a low risk approach, selecting a core group of securities from
better yielding sectors within the government and corporate markets, and
enhancing liquidity and yield by combining very short maturities with fixed rate
issues in a barbell structure. The Fund avoids higher risk strategies, including
exposure to non-dollar currencies and below "A" rated credits. The Fund
generally has an average duration between 1.5 and 2.0 years and holds no more
than 20% of the portfolio in non-government issues.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Short Duration Fund was 5.19% for the fiscal
year ended September 30, 2007. The total return of the Lehman 1-3 Year U.S.
Government Bond Index was 5.72% for the same period.
The Fund benefited from a dramatic rally in short-term rates as investors sought
the safety of U.S. Treasury securities during the credit crisis of 2007. The
Fund's performance lagged the benchmark as U.S. Treasuries dramatically
outperformed all other sectors of the market. The yield curve steepened
dramatically during this yield rally as short rates declined over the year and
ten-year bond yields did not rally significantly. The Fund's strategy to
diversify away from floating rate notes and into more fixed rate debt early in
the year helped performance. Floating rate notes have lagged fixed rate notes in
the recent rally and will continue to outperform in a stable or falling interest
rate environment. Our continuing focus on the high quality source of excess
yield provided by government mortgage-backed securities helped Fund performance
as 98% of the Fund is invested in agency backed bonds.
Looking forward, the Fund's emphasis on high quality, short duration securities
should provide for both attractive relative income and better than average price
performance. The monthly principal cash flows provided by core agency
mortgage-backed securities holdings enhance Fund liquidity and allow us to
continually seek out securities that maximize investor returns consistent with
the Fund's investment philosophy.
26
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SHORT
DURATION FIXED INCOME FUND - CLASS Z* AND THE
LEHMAN BROTHERS 1-3 YEAR U.S. GOVERNMENT BOND INDEX
[LINE CHART]
- ----------------------------------------
SHORT DURATION FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class Z 5.19% 2.90% 4.52%
- ----------------------------------------
Lehman Brothers 1-3 Year U.S.
Short Duration Fixed Income Fund Government Bond Index
- -------------------------------- -----------------------------
Date Balance Date Balance
9/30/97 10,000 9/30/97 10,000
9/30/98 10,807 9/30/98 10,793
9/30/99 11,119 9/30/99 11,137
9/30/00 11,789 9/30/00 11,787
9/30/01 12,889 9/30/01 13,044
9/30/02 13,493 9/30/02 13,807
9/30/03 13,783 9/30/03 14,194
9/30/04 14,037 9/30/04 14,359
9/30/05 14,337 9/30/05 14,515
9/30/06 14,799 9/30/06 15,070
9/30/07 15,567 9/30/07 15,932
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class Z shares commenced on March 1, 1994.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
27
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE SMALL CAP FUND
SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Small Cap Fund seeks long-term capital appreciation by primarily
investing in common stocks of U.S. small capitalization companies. The Fund is
diversified by issuer and industry and typically owns both value and growth
stocks. A disciplined investment process is employed which is focused on risk
management and security selection. The risk management process is designed to
emphasize security selection as the primary driver of relative returns and
minimize sector and thematic bets. The security selection methodology emphasizes
a company's growth prospects and relative valuations which seek to identify
stocks that offer significant growth potential, but are attractively valued
relative to their peers.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Small Cap Fund was 8.44% for the fiscal year
ended September 30, 2007. The total return of the Russell 2000(R) Index was
12.34% for the same period.
Over the last several months there has been a shift from value to growth, with a
sizable growth premium emerging. This environment has negatively impacted the
Fund, which has a bias towards value. The Fund's stock selection in the
Financial Services and Producer Durables sectors detracted from performance,
while its selection in the Consumer Discretionary sector contributed to
performance. Top contributors included Golden Telecom, WMS Industries, and
Tenneco. Detractors from performance included Asyst Technologies, Southwest
Bancorp and Central Pacific Financial.
The Fund seeks to invest in stocks of companies that provide solid fundamentals
and trade at attractive prices. We do not time the market, nor take sector or
thematic bets. Therefore, we concentrate on those aspects of portfolio
management in which we have a high degree of confidence, such as individual
security selection. We remain true to this process through all market cycles.
There were no significant changes made to the Fund's strategy during the year.
The only changes made in regard to positioning were in response to Russell's
mid-year index reconstitution. These changes included some modest increases and
decreases to sector and industry exposures.
Going forward, we remain focused on searching for niche companies with
compelling valuation levels and solid long-term growth prospects as compared to
their peers.
28
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
SMALL CAP FUND - CLASS A* AND THE RUSSELL 2000 INDEX
[LINE CHART]
- ------------------------------------------------
SMALL CAP FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 2.23% 12.23% 8.84%
Class C 7.73% 12.73% 8.95%
- ------------------------------------------------
Small Cap Fund Russell 2000 Index
-------------- ------------------
Date Balance Date Balance
8/25/00 9,425 8/4/00 10,000
9/30/00 9,614 9/30/00 10,467
9/30/01 9,951 9/30/01 8,247
9/30/02 9,663 9/30/02 7,480
9/30/03 12,254 9/30/03 10,210
9/30/04 14,671 9/30/04 12,127
9/30/05 15,945 9/30/05 14,303
9/30/06 16,824 9/30/06 15,722
9/30/07 18,244 9/30/07 17,662
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares based on the differences in
loads and fees paid by shareholders in the different classes. The initial
public offering of Class A shares commenced on August 25, 2000 and the
initial public offering of Class C shares commenced on November 20, 2006.
The Class C performance information is calculated using the historical
performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
29
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE SMALL CAP VALUE OPPORTUNITIES FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC.
DIAMOND HILL CAPITAL MANAGEMENT, INC.
JAMES INVESTMENT RESEARCH, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Small Cap Value Opportunities Fund seeks long-term capital
appreciation by primarily investing in common stocks of companies with small
market capitalizations that are believed to have the potential for growth and
that appear to be trading below their perceived value. It invests in securities
of companies operating in a broad range of industries.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Small Cap Value Opportunities Fund was 10.77%
for the fiscal year ended September 30, 2007. The total return of the Russell
2000(R) Value Index was 6.09% for the same period.
TURNER INVESTMENT PARTNERS, INC.
Strong stock selection in the Financial Services and Producer Durables sectors
were the largest contributors to relative performance, while Energy and Consumer
Staples detracted from relative results of our portion of the Fund. Although
Financial Services struggled throughout much of 2007, strong stock selection
made it the strongest performing sector on a relative basis. Our portion of the
Fund remains underweight in the Financial Services sector overall, and more
specifically, REITS and banks, which helped excess return. Two online software
companies that provide web-based technology services companies contributed to
excess return, Online Resources and S1 Corp. Online Resources completed its
acquisition of a leading bill pay service provider which was viewed as favorable
by investors. S1 Corp. reported solid earnings which also gave investors
confidence in new management for the company. In addition, its acquisition of
HUB International helped performance.
Energy struggled due to the performance of Allis-Chalmers Energy, which provides
high-end drilling services. It reported a pullback in activity and pricing.
Subpar returns in Consumer Staples and Consumer Discretionary were driven by
losses in Cott Corp. and Pantry. The beverage distributor, Cott Corp., reported
lower demand for carbonated soft drinks and rising commodity prices. Pantry, the
convenience store chain, also was a detractor after reporting relatively low
gasoline margins. All three detractors mentioned were sold from the portfolio.
Turner's investment strategy focuses on identifying undervalued securities by
virtue of their being overlooked by industry analysts. Most industry analysts
concentrate on income statements. While we use this metric in our analysis, we
also pay close attention to the balance sheet and cash flows. Through this
process, we seek to find companies with unrecognized intrinsic values that are
not evident in earnings reports. We remain disciplined in this process and will
typically be positioned with companies that display these characteristics. In
managing the portfolio, our focus, as always, remains on owning stocks that we
think have either undervalued assets or strong prospective earnings power.
We currently favor shares of companies in the wireless, homeland security, civil
infrastructure, raw materials, semiconductor, industrial parts, premium
retailing, software, managed care, financial data, securities exchange, and
investment management groups. The portfolio holds overweight positions in the
Technology, Producer Durables, Health Care, and Autos & Transportation sectors.
30
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
We think the stock market can draw strength from the continued health of the
global economy, which should help to bolster corporate earnings in the U.S. and
around the world. Corporate America's second-quarter profits rose about 8%, a
rate that was below the double-digit norm of the past three years but
nevertheless was still above the long-term average of 7.6%. And we think profit
growth may again hit the low double digits in the fourth quarter. As long as
earnings stay reasonably healthy, we think the stock market is in little danger
of morphing from a bull to a bear in the near term. In our analysis, the
much-chronicled housing slump and subprime-loan malaise won't in all likelihood
be severe enough to tip the economy into a recession and the stock market into
bearish territory.
DIAMOND HILL CAPITAL MANAGEMENT, INC.
An overweight allocation as well as stock selection in the Energy sector
contributed to relative performance in our portion of the Fund. The portfolio is
overweight the Energy, Autos & Transportation and Consumer Discretionary sectors
relative to the benchmark as we believe the valuation of the individual holdings
in these sectors are attractive.
Top performers during the year were Energy holdings Helmerich & Payne, Encore
Acquisition and Berry Petroleum primarily due to higher oil prices. Additional
positive contributors were Apria Healthcare Group and Century Aluminum. The
largest detractors were Finish Line based on skepticism related to its potential
acquisition of footwear company Genesco, MoneyGram due to concerns regarding its
exposure to mortgage-backed securities in its portfolio, and Gevity HR Inc.
Higher defaults in the mortgage market led to tightened credit conditions, and
declines in real estate values held back Financial Services and spilled over
into the consumer discretionary sector. During the year, the Consumer
Discretionary sector was one of the sectors that detracted from the absolute
performance of the portfolio. Producer Durables and Health Care contributed to
returns.
Diamond Hill uses an intrinsic value approach, which is price sensitive. Outside
of Energy, we have had more difficulty finding small cap equities at dramatic
discounts to our estimates of intrinsic value. During the year, we were able to
take the opportunity to initiate positions at what we believe are favorable
prices in Toro, Flowers Foods and Hanesbrands. We also eliminated positions from
the Fund including Apria Healthcare, MAF Bancorp and Tidewater after these
companies reached our estimated intrinsic value. Regarding Energy, our
investment thesis remains the same given our long-term expectations that a
long-term tightness in the supply-demand balance that is not fully reflected in
the stock prices.
We believe the portfolio is positioned relatively defensively given the high
cash balance and what we believe are holdings at discounts to their intrinsic
value. Certain segments of the portfolio, Energy for example, will likely depend
on adequate global economic growth (though not necessarily stellar domestic
growth) in order for the stocks within that sector to be solid performers. The
portfolio is underweight in the areas of Technology and Health Care, which could
lead to relative underperformance if those sectors are leaders.
Our 5-year outlook for the equity market is for expected returns in the mid
single digits, which would be below long-term and recent averages. This forecast
has only a minor effect on what we do as bottom-up investors. Our goal for the
Fund is to provide added value by outperforming the relevant benchmark over the
long term, measured as 5 years or more.
JAMES INVESTMENT RESEARCH
James Investment Research became a sub-advisor to the Touchstone Value Small Cap
Opportunities Fund on June 20, 2007.
31
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
The third quarter was a difficult environment for small cap value securities.
The James approach, which seeks companies with good profitability and relative
strength in addition to good relative value, shows the dynamic benefit of not
relying on just one factor in making investment decisions.
Consumer Discretionary, Materials & Processing and Producer Durables contributed
to the relative performance of our portion of the Fund. Consumer Staples,
Financial Services and Technology detracted slightly from performance.
Individual stocks that had the biggest impact include Schnitzer Steel, Matrix
Service Co., Hurco Cos., and Spartan Stores.
Our philosophy relies on a disciplined insistence on buying true small cap value
stocks that are profitable and are exhibiting strong relative price strength,
but still trading at value price levels relative to earnings, cash flow and book
value. We know from our experience that high relative strength stocks are harder
hit at the beginnings of corrections, but that our approach works very well in
down and sideways markets.
We remain fully invested, with our sector weightings set defensively as the U.S.
economy continues to fight the housing market malaise. As we look to the future,
our macro-indicators suggest increased opportunities are ahead for select
Utilities and Producer Durables securities. We will, of course, remain
diversified among all the major sectors and continue to seek the best bargain
stocks for the portfolio.
2007 has presented a challenging landscape for small cap stocks, and our
economic outlook suggests this may continue for a time. However, 2008 is a
Presidential election year and investors may see better things for smaller
securities. Going back to 1926, Ibbotson data indicates that smaller stocks have
typically advanced over 22 percent in election years. Our initial research shows
that most investors will find the upcoming investment environment to be
challenging but there should be opportunities ahead as well.
32
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z*
AND THE RUSSELL 2000 VALUE INDEX
[LINE CHART]
- -----------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A 4.34% 19.23% 15.51%
Class C 10.01% 19.80% 15.90%
Class Z 10.77% 20.72% 16.80%
- -----------------------------------------------
Small Cap Value Opportunities Fund Russell 2000 Value Index
- ---------------------------------- ------------------------
Date Balance Date Balance
3/4/02 10,000 3/4/02 10,000
9/30/02 9,270 9/30/02 8,147
9/30/03 12,727 9/30/03 10,726
9/30/04 16,463 9/30/04 13,479
9/30/05 20,467 9/30/05 15,871
9/30/06 21,458 9/30/06 18,095
9/30/07 23,769 9/30/07 19,197
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class Z shares only, which will
vary from the performance of Class A shares and Class C shares based on
the differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class Z shares commenced on March
4, 2002 and the initial public offering of Class A shares and Class C
shares commenced on July 23, 2007. The Class A and Class C performance
information is calculated using the historical performance of Class Z.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
33
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE STRATEGIC VALUE AND HIGH INCOME FUND
ADVISED BY TOUCHSTONE ADVISORS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Strategic Value and High Income Fund (the "Fund") seeks total
return through a combination of long-term capital growth and high current
income. The Fund is a "fund of funds" which means that it invests substantially
all of its assets in shares of other mutual funds, rather than in individual
securities. Generally, the Fund invests its assets in shares of other Touchstone
Funds - the Touchstone Diversified Small Cap Value Fund and the Touchstone High
Yield Fund. The Fund periodically adjusts its asset allocation among these Funds
in response to changing market and economic conditions, the performance of the
underlying funds, or for other reasons. In addition, the Fund may, under certain
circumstances, invest in other underlying funds within the Touchstone Funds
family.
FUND PERFORMANCE AND POSITIONING
The total return of the Fund was 6.46% for the fiscal year ended September 30,
2007. The total return of the 60/40 blend of the Russell 2000(R) Value Index and
Merrill Lynch High Yield Index was 6.72% and the total return of the S&P 500
Index was 16.44% for the same period.
As of September 30, 2007, the Fund had an allocation of 60% to the Touchstone
Diversified Small Cap Value Fund and 40% to the Touchstone High Yield Fund.
Market conditions in the equity market were variable during the past year,
beginning with strong optimism and ending with a more cautious tone. In this
environment, Touchstone Diversified Small Cap Value Fund performance was
affected positively as investment techniques were able to isolate stocks with
market-beating characteristics. Stock selection in Financial Services and
Materials & Processing was solid. Performance in Financial Services was achieved
by minimizing exposure to credit risk. Materials and Processing was aided by a
focus on the engineering and construction industries. Good performance in these
sectors was partially offset by weak selection in Health Care, caused by
unrelated negative security-specific events. The Fund remains committed to
seeking an optimal portfolio of inexpensive stocks with improving fundamentals
to take advantage of the proven, superior long term returns of small cap value
stocks.
For the twelve month period, the high yield market saw a little bit of
everything. The net result was a high yield market total return that
approximated the yield with little contribution from capital appreciation or
depreciation. The Touchstone High Yield Fund underperformed its benchmark due to
its higher-quality bias as well as its allocation to certain industries. During
the last twelve months, performance of the Touchstone High Yield Fund was aided
by overweight allocations to the Metals, Capital Goods and Healthcare sectors as
well as underweight allocations to the Automotive/Auto Parts and Paper
industries. Conversely, overweight allocation to Homebuilders and Building
Materials detracted from performance. We believe the Fund's strategy of
fundamental credit analysis with particular emphasis on avoiding problem credits
will continue to add value as negative credit events may have a material impact
on returns in this lower return environment. The Fund is designed to exhibit
less volatility than the broad market and deliver attractive risk adjusted
returns for performance over a full cycle, with focus on protecting principal in
down markets.
34
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE STRATEGIC VALUE AND HIGH INCOME - CLASS Y*, THE S&P
500 INDEX, THE RUSSELL 2000 VALUE INDEX, THE
MERRILL LYNCH HIGH YIELD INDEX AND A BLENDED 60/40 INDEX***
[LINE CHART]
- -------------------------------------
STRATEGIC VALUE AND HIGH INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year Since Inception*
Class A 0.13% 12.16%
Class C 5.44% 12.68%
Class Y 6.46% 13.79%
- -------------------------------------
Strategic Value and S&P 500 Russell 2000 Merrill Lynch Blended
High Income Fund Index Value Index High Yield Index Index
- ------------------- ------- ------------ ---------------- -------
Date Balance Date Balance Date Balance Date Balance Date Balance
10/31/02 10,000 10/31/02 10,000 10/31/02 10,000 10/31/02 10,000 10/31/02 10,000
9/30/03 12,857 9/30/03 11,433 9/30/03 12,966 9/30/03 12,931 9/30/03 12,952
9/30/04 14,919 9/30/04 13,019 9/30/04 16,293 9/30/04 14,512 9/30/04 15,580
9/30/05 17,041 9/30/05 14,614 9/30/05 19,185 9/30/05 15,484 9/30/05 17,656
9/30/06 17,728 9/30/06 16,191 9/30/06 21,873 9/30/06 16,707 9/30/06 19,698
9/30/07 18,873 9/30/07 18,852 9/30/07 23,205 9/30/07 17,987 9/30/07 21,022
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class Y shares only, which will
vary from the performance of Class A shares and Class C shares based on
the differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class Y shares commenced on
October 31, 2002 and the initial public offering of Class A shares and
Class C shares commenced on November 20, 2006. The Class A and Class C
performance information is calculated using the historical performance of
Class Y.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
*** The Blended Index is comprised of a 60% weighting in the Russell 2000
Value Index and a 40% weighting in the Merrill Lynch High Yield Index.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
35
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE TAX-EXEMPT BOND FUND
SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Tax-Exempt Bond Fund is managed with a focus on providing income
exempt from federal income taxes; ensuring total returns consistent with
moderate risk of capital; and maintaining adequate liquidity. The Fund invests
in a broad range of investment grade municipal fixed-income securities across
the full maturity spectrum. Additional value may be gained by anticipating
changing credit conditions and identifying unique anomalies offered by the
market.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Tax-Exempt Bond Fund was 2.71% for the fiscal
year ended September 30, 2007. The total return of the Lehman Municipal Bond
Index was 3.10% for the same period.
During the fiscal year, yields rose and the yield curve steepened. Rates rose on
the AAA scale by approximately 25 basis points in the 30-year area of the curve
and only 2 basis points in the 2-year area of the curve. This steepening and
excess return in higher quality sectors illustrates investors' low threshold for
risk during the sub-prime meltdown. Pre-refunded bonds were the best performing
sector followed by general obligations and revenue bonds. Zero coupon bonds
underperformed all other coupon structures during the fiscal year. The long
duration of zero coupon bonds contributed to this underperformance. New issues
remained strong, as low rates continued to entice issuers to bring deals to
market.
The Fund's underexposure to longer duration securities contributed to
performance. The Fund's portfolio is characterized by a solid average credit
rating of AAA/AA and bears a premium yield in comparison to the benchmark.
36
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE TAX-EXEMPT
BOND FUND - CLASS A* AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[LINE CHART]
- ------------------------------------------------
TAX-EXEMPT BOND FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -2.16% 2.27% 4.27%
- ------------------------------------------------
Tax-Exempt Bond Fund Lehman Brothers Municipal Bond Index
- -------------------- ------------------------------------
Date Balance Date Balance
8/4/00 9,525 8/4/00 10,000
9/30/00 9,585 9/30/00 10,052
9/30/01 10,540 9/30/01 11,098
9/30/02 11,467 9/30/02 12,089
9/30/03 11,882 9/30/03 12,560
9/30/04 12,316 9/30/04 13,138
9/30/05 12,666 9/30/05 13,670
9/30/06 13,118 9/30/06 14,278
9/30/07 13,473 9/30/07 14,720
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class A shares commenced on August 11,
2000.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
37
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE ULTRA SHORT DURATION FIXED INCOME FUND
SUB-ADVISED BY CHARTWELL INVESTMENT PARTNERS
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Ultra Short Duration Fixed Income Fund seeks to provide above
market income, liquidity, and risk-adjusted total return. Fund management
targets these goals using a low risk approach, selecting a core group of
securities from better yielding sectors within the government and corporate
markets, and enhancing liquidity and yield by combining very short maturities
with fixed rate issues in a barbell structure. The Fund avoids higher risk
strategies, including exposure to non-dollar currencies and lower quality
credits. The Fund generally has a targeted duration of 0.5 years and has 100% of
its portfolio in government issues.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Ultra Short Duration Fixed Income Fund was
5.48% for the fiscal year ended September 30, 2007. The total return of the
Merrill Lynch 3-Month U.S. Treasury Bill Index was 5.22% for the same period.
The Fund's performance was driven by the fact that short-term interest rates
rallied over the year as the sub-prime credit swoon that began in June continued
into the third quarter and did not subside until the Federal Reserve stepped in
and lowered the Federal Funds rate in mid-September. U.S. Treasury securities
trounced all other sectors of the market as investors fled to the safety of
Treasury-backed securities. The short agency- backed securities rallied right
along with the short end of the market allowing the Fund to outperform its
benchmark for the year.
The Fund's strategy to diversify away from floating rate notes and into more
fixed rate debt early in the year helped performance. Floating rate notes have
lagged fixed rate notes in the recent rally and will continue to outperform in a
stable or falling interest rate environment. Our continuing focus on the high
quality source of excess yield provided by government mortgage-backed securities
helped Fund performance as 97% of the Fund is invested in agency-backed bonds.
Looking forward, the Fund's emphasis on high quality, short duration securities
should provide for both attractive relative income and better than average price
performance. The monthly principal cash flows provided by core agency
mortgage-backed securities holdings enhance Fund liquidity and allow us to
continually seek out securities that maximize investor returns consistent with
the Fund's investment philosophy.
38
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ULTRA SHORT
DURATION FIXED INCOME FUND - CLASS Z* AND
THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX
[LINE CHART]
- ----------------------------------------
ULTRA SHORT DURATION FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class Z 5.48% 3.09% 4.32%
- ----------------------------------------
Ultra Short Duration Merrill Lynch 3-Month
Fixed Income Fund U.S. Treasury Bill Index
- -------------------- --------------------------
Date Balance Date Balance
9/30/97 10,000 9/30/97 10,000
9/30/98 10,622 9/30/98 10,536
9/30/99 11,189 9/30/99 11,034
9/30/00 11,901 9/30/00 11,672
9/30/01 12,742 9/30/01 12,308
9/30/02 13,118 9/30/02 12,553
9/30/03 13,302 9/30/03 12,719
9/30/04 13,519 9/30/04 12,859
9/30/05 13,882 9/30/05 13,196
9/30/06 14,475 9/30/06 13,790
9/30/07 15,268 9/30/07 14,509
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering of Class I shares commenced on March 1, 1994.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
39
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE VALUE OPPORTUNITIES FUND
SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Value Opportunities Fund seeks long-term capital appreciation by
investing in common stocks of U.S. companies with large, medium and small market
capitalizations. The Fund focuses on companies that trade at attractive values
relative to cash flow, book value, financial strength, and historical
valuations. Using a combination of valuation screens, technical analysis, and
fundamental research, the Fund seeks companies that possess attractive long-term
return potential due to their lower-than-average valuations and improving
business fundamentals.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Value Opportunities Fund was 15.83% for the
fiscal year ended September 30, 2007. The total return of the Russell 3000(R)
Value Index was 13.73% for the same period.
From a sector perspective, the Fund finished the year underweight in Financial
Services. Notably, it had no direct exposure to the sub-prime market debacle and
maintained minimal exposure to REITs. As these two "hot" industries within the
sector began their steep correction, the reverberating effects and change in
investor sentiment were felt throughout the sector.
The Materials & Processing sector benefited from strong stock selection. Shaw
Group posted strong returns as the company put its accounting problems to rest
and investors have increasingly come to see Shaw Group as a unique player on the
need to build out power generation infrastructure around the globe.
Partially offsetting performance was the Technology sector where RF Micro
Devices and Fairchild Semiconductor, in particular, turned in disappointing
showings. The Health Care sector also struggled, primarily due to the
performance of Pfizer.
The concerns surrounding sub-prime and the uncertain consequences it might pose
for the economy shook the markets at different times during the past six months.
With the dollar weakening and mixed signals coming from economic data, anxiety
became heightened. Leading investors began to allocate capital to companies with
international exposure and more predictable business profiles. This dynamic
played well to an overweight in Consumer Staples and also benefited key holdings
such as General Electric, McDonalds, and Exxon Mobil.
The Fund continues to focus on identifying inexpensive stocks with improving
fundamentals and improving investor sentiment. We continue to express a
preference for such stocks that also possess international exposure and stable
earnings profiles.
The Fund continues to maintain a somewhat defensive stance given its overweight
in Consumer Staples, Healthcare, and Utilities and underweight in Financial
Services. We are pursuing research work in certain industries within the
Consumer Discretionary and Financial Services sectors where valuation levels
have begun to reflect despair on the part of investors and, perhaps, have also
begun to obscure more positive business attributes that could be worthwhile for
future investment.
40
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE VALUE
OPPORTUNITIES FUND - CLASS Z* AND THE RUSSELL 3000 VALUE INDEX
[LINE CHART]
- ----------------------------------------
VALUE OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years 10 Years
Class A 8.94% 16.70% 9.15%
Class C 15.07% 17.27% 9.02%
Class Z 15.83% 18.13% 9.82%
- ----------------------------------------
Value Opportunities Fund Russell 3000 Value Index
- ------------------------ ------------------------
Date Balance Date Balance
9/30/97 10,000 9/30/97 10,000
9/30/98 9,400 9/30/98 10,197
9/30/99 9,976 9/30/99 11,996
9/30/00 11,340 9/30/00 13,117
9/30/01 11,850 9/30/01 12,071
9/30/02 11,095 9/30/02 10,153
9/30/03 13,493 9/30/03 12,680
9/30/04 16,293 9/30/04 15,328
9/30/05 20,338 9/30/05 17,900
9/30/06 22,037 9/30/06 20,505
9/30/07 25,525 9/30/07 23,320
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The chart above represents performance for Class Z shares only, which will
vary from the performance of Class A shares and Class C shares based on
the differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class Z shares commenced on
December 6, 1991 and the initial public offering of Class A shares and
Class C shares commenced on November 20, 2006. The Class A and Class C
performance information is calculated using the historical performance of
Class Z.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
41
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Unaudited)
September 30, 2007
- --------------------------------------------------------------------------------
The illustrations below provide each Fund's sector allocation. We hope it will
be useful to shareholders as it summarizes key information about each Fund's
investments.
================================================================================
CLOVER CORE FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT ANALYSIS (% OF INVESTMENT SECURITIES)
U.S. Treasury 21.2
U.S. Agency 47.6
AAA/Aaa 10.4
AA/Aa 7.6
A/A 3.3
BBB/Baa 8.0
Other 1.9
-----
Total 100.0
-----
================================================================================
================================================================================
DIVERSIFIED GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Technology 20.9
Consumer Discretionary 20.7
Health Care 17.2
Producer Durables 12.1
Energy 6.9
Consumer Staples 6.7
Financial Services 5.8
Materials and Processing 3.5
Autos and Transportation 3.3
Utilities 1.9
Other 1.0
Investment Fund 7.0
Other Assets/Liabilities (Net) (7.0)
-----
Total 100.0
-----
================================================================================
================================================================================
DIVERSIFIED SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financial Services 29.8
Consumer Discretionary 14.4
Materials and Processing 13.0
Technology 11.8
Producer Durables 6.4
Utilities 6.0
Energy 5.6
Health Care 4.7
Autos and Transportation 4.2
Consumer Staples 3.2
Investment Fund 12.3
Cash Equivalent 0.1
Other Assets/Liabilities (Net) (11.5)
-----
Total 100.0
-----
================================================================================
================================================================================
DIVERSIFIED VALUE FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financial Services 31.1
Energy 15.2
Utilities 12.7
Consumer Discretionary 8.5
Health Care 8.5
Producer Durables 6.7
Consumer Staples 6.3
Materials and Processing 6.0
Technology 3.8
Autos and Transportation 0.9
Other 0.4
Investment Fund 5.3
Other Assets/Liabilities (Net) (5.4)
-----
Total 100.0
-----
42
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Continued)
- --------------------------------------------------------------------------------
================================================================================
FAMILY HERITAGE(R) FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financial Services 22.1
Consumer Discretionary 15.8
Technology 14.4
Health Care 12.4
Energy 10.6
Utilties 8.4
Producer Durables 6.0
Materials and Processing 4.8
Consumer Staples 4.0
Autos and Transportation 0.8
Other 0.5
Investment Fund 4.8
Cash Equivalent 0.3
Other Assets/Liabilities (Net) (4.9)
-----
Total 100.0
-----
================================================================================
================================================================================
HEALTHCARE AND BIOTECHNOLOGY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Health Care 94.0
Materials and Processing 2.5
Investment Fund 7.2
Cash Equivalent 4.6
Other Assets/Liabilities (Net) (8.3)
-----
Total 100.0
-----
================================================================================
================================================================================
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF INVESTMENT SECURITIES)
Financials 24.0
Materials 17.2
Consumer Discretionary 15.8
Industrials 8.5
Energy 8.5
Telecommunication Service 8.1
Utilities 6.2
Health Care 5.6
Information Technology 3.7
Consumer Staples 2.4
-----
Total 100.0
-----
================================================================================
================================================================================
MID CAP FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financial Services 17.7
Consumer Discretionary 16.9
Producer Durables 11.6
Technology 11.5
Materials and Processing 10.9
Health Care 9.7
Energy 6.9
Utilities 6.4
Consumer Staples 4.7
Autos and Transportation 1.0
Investment Fund 10.6
Cash Equivalent 3.0
Other Assets/Liabilities (Net) (10.9)
-----
Total 100.0
-----
================================================================================
================================================================================
PITCAIRN TAXABLE BOND FUND
- --------------------------------------------------------------------------------
CREDIT ANALYSIS (% OF INVESTMENT SECURITIES)
U.S. Treasury 19.2
U.S. Agency 30.8
AAA/Aaa 12.2
AA/Aa 6.7
A/A 14.7
BBB/Baa 14.0
B/B 2.4
-----
Total 100.0
-----
================================================================================
================================================================================
SANDS CAPITAL SELECT GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Health Care 25.3
Consumer Discretionary 20.3
Technology 18.8
Energy 12.2
Financial Services 10.9
Utilities 4.8
Consumer Staples 2.7
Autos and Transportation 2.0
Investment Fund 12.5
Cash Equivalent 0.8
Other Assets/Liabilities (Net) (10.3)
-----
Total 100.0
-----
================================================================================
43
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Continued)
- --------------------------------------------------------------------------------
================================================================================
SHORT DURATION FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT ANALYSIS (% OF INVESTMENT SECURITIES)
U.S. Agency 97.4
A/A 2.6
-----
Total 100.0
-----
================================================================================
================================================================================
SMALL CAP FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Consumer Discretionary 21.6
Financial Services 20.1
Health Care 11.1
Producer Durables 11.0
Technology 10.1
Materials and Processing 6.7
Energy 6.3
Autos and Transportation 5.2
Utilities 3.8
Consumer Staples 3.7
Investment Fund 10.4
Cash Equivalent 0.2
Other Assets/Liabilities (Net) (10.2)
-----
Total 100.0
-----
================================================================================
================================================================================
SMALL CAP VALUE OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financial Services 19.4
Consumer Discretionary 16.8
Energy 13.0
Materials and Processing 9.6
Producer Durables 9.6
Utilities 6.0
Autos and Transportation 4.4
Consumer Staples 4.2
Technology 4.0
Health Care 3.6
Investment Fund 7.2
Cash Equivalent 9.7
Other Assets/Liabilities (Net) (7.5)
-----
Total 100.0
-----
================================================================================
================================================================================
STRATEGIC VALUE AND HIGH INCOME FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Affiliated Equity Fund 59.5
Affiliated Fixed Income Fund 40.8
Other Assets/Liabilities (Net) (0.3)
-----
Total 100.0
-----
================================================================================
================================================================================
TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
CREDIT ANALYSIS (% OF INVESTMENT SECURITIES)
AAA/Aaa 71.5
AA/Aa 15.0
A/A 10.4
BBB/Baa 3.1
-----
Total 100.0
-----
================================================================================
================================================================================
VALUE OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financial Services 22.8
Energy 15.5
Utilities 15.1
Health Care 10.9
Producer Durables 7.8
Consumer Staples 7.5
Materials and Processing 7.2
Consumer Discretionary 6.0
Technology 3.6
Investment Fund 10.6
Cash Equivalent 4.4
Other Assets/Liabilities (Net) (11.4)
-----
Total 100.0
-----
================================================================================
================================================================================
ULTRA SHORT DURATION FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT ANALYSIS (% OF INVESTMENT SECURITIES)
U.S. Agency 97.4
A/A 2.6
-----
Total 100.0
-----
================================================================================
44
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
DIVERSIFIED
CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED
FIXED INCOME GROWTH VALUE VALUE
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 20,133,180 $ 119,031,391 $ 187,302,679 $ 176,153,636
========================================================================================================================
At market value - including $431,982, $8,571,315,
$20,579,210 and $10,257,451 of securities
loaned for the Clover Core Fixed Income Fund,
Diversified Growth Fund, Diversified Small Cap
Value Fund and Diversified Value Fund,
respectively $ 19,852,500 $ 133,600,695 $ 198,714,544 $ 207,980,539
Dividends and interest receivable 222,851 81,623 127,838 190,218
Receivable for capital shares sold 156,365 -- 44,078 76
Receivable for securities sold 513,600 123,138 5,358,006 8,864,285
Receivable for securities lending income 369 3,980 16,353 1,574
Other assets 6,873 1,652 14,626 19,818
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 20,752,558 133,811,088 204,275,445 217,056,510
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdrafts -- 41,813 -- --
Payable upon return of securities loaned 443,438 8,685,782 21,898,722 10,473,364
Dividends payable 2,586 -- -- 506,000
Payable for capital shares redeemed 49,224 52,197 375,753 23,173
Payable for securities purchased 653,510 -- 3,175,773 8,390,783
Payable to Advisor 7,116 70,147 108,312 124,271
Payable to other affiliates 3,503 18,500 156,185 50,919
Payable to Trustees 1,691 -- 6,944 2,958
Other accrued expenses and liabilities 106,167 64,968 273,692 104,306
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,267,235 8,933,407 25,995,381 19,675,774
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 19,485,323 $ 124,877,681 $ 178,280,064 $ 197,380,736
========================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 20,138,297 $ 172,600,815 $ 127,366,427 $ 162,941,879
Accumulated net investment income (loss) (267) -- 278,687 (487,310)
Accumulated net realized gains (losses) on
investments (372,027) (62,292,438) 39,223,085 3,099,264
Net unrealized appreciation (depreciation) on
investments (280,680) 14,569,304 11,411,865 31,826,903
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 19,485,323 $ 124,877,681 $ 178,280,064 $ 197,380,736
========================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ -- $ 124,877,681 $ 205,091 $ 197,374,254
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- 17,543,005 10,487 16,748,449
========================================================================================================================
Net asset value and redemption price per share $ -- $ 7.12 $ 19.56 $ 11.78
========================================================================================================================
Maximum offering price per share $ -- $ 7.55 $ 20.75 $ 12.50
========================================================================================================================
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ -- $ -- $ 79,087 $ 6,482
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- -- 4,060 549
========================================================================================================================
Net asset value, offering price and redemption price
per share* $ -- $ -- $ 19.48 $ 11.80
========================================================================================================================
45
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED
CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED
FIXED INCOME GROWTH VALUE VALUE
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ -- $ -- $ 177,995,886 $ --
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- -- 9,102,690 --
========================================================================================================================
Net asset value, offering price and redemption price
per share $ -- $ -- $ 19.55 $ --
========================================================================================================================
PRICING OF CLASS I SHARES
Net assets attributable to Class I shares $ 19,485,323 $ -- $ -- $ --
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 2,049,969 -- -- --
========================================================================================================================
Net asset value, offering price and redemption price
per share $ 9.51 $ -- $ -- $ --
========================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
46
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL
HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 70,257,073 $ 49,337,966 $ 124,183,307 $ 518,761,530
========================================================================================================================
At market value - including $3,833,606,
$3,847,724 and $49,789,776 of securities
loaned for the Family Heritage (R) Fund,
Healthcare and Biotechnology Fund and Mid Cap
Fund, respectively $ 87,437,596 $ 59,235,034 $ 154,312,525 $ 551,509,961
Cash -- -- 258,871 --
Foreign currency (cost $826,957) -- -- 891,650 --
Dividends and interest receivable 38,356 49,866 364,921 277,259
Receivable for capital shares sold -- 507,497 5,079 2,020,040
Receivable for securities sold -- 243,676 399,857 11,608,457
Receivable for securities lending income 2,785 1,368 -- 13,644
Currency contracts receivable -- 22,506 -- --
Tax reclaim receivable -- 2,000 230,827 --
Other assets 22,322 -- 11,803 53,471
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 87,501,059 60,061,947 156,475,533 565,482,832
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdrafts -- 22,506 -- --
Payable upon return of securities loaned 3,970,776 3,930,823 -- 52,880,591
Dividends payable -- -- -- --
Currency contracts payable -- -- 162,396 --
Payable for capital shares redeemed 75,591 3,578 261 414,749
Payable for securities purchased -- 1,289,264 667,409 14,311,936
Payable to Advisor 58,388 43,509 100,146 340,089
Payable to other affiliates 24,495 23,095 11,860 20,261
Payable to Trustees 4,236 1,682 3,066 2,651
Unrealized depreciation on foreign currency exchange
contracts -- -- 2,399 --
Other accrued expenses and liabilities 51,821 56,406 164,957 16,181
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,185,307 5,370,863 1,112,494 67,986,458
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 83,315,752 $ 54,691,084 $ 155,363,039 $ 497,496,374
========================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 72,396,017 $ 40,042,584 $ 107,990,713 $ 461,820,342
Accumulated net investment income (loss) 50,443 (3,803) 2,000,880 --
Accumulated net realized gains (losses) on
investments and foreign currency transactions (6,311,231) 4,755,235 15,177,535 2,927,601
Net unrealized appreciation on investments 17,180,523 9,896,861 30,129,218 32,748,431
Net unrealized appreciation on foreign currency and
translation of other assets and liabilities
denominated in foreign currency -- 207 64,693 --
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 83,315,752 $ 54,691,084 $ 155,363,039 $ 497,496,374
========================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 83,309,762 $ 53,295,534 $ 154,622,670 $ 210,563
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 7,302,350 2,914,817 12,751,863 11,787
========================================================================================================================
Net asset value and redemption price per share $ 11.41 $ 18.28 $ 12.13 $ 17.86
========================================================================================================================
Maximum offering price per share $ 12.11 $ 19.40 $ 12.85 $ 18.95
========================================================================================================================
47
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL
HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 5,990 $ 1,395,550 $ 740,369 $ 35,712
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 521 76,707 61,349 2,002
========================================================================================================================
Net asset value, offering price and redemption price
per share* $ 11.50 $ 18.19 $ 12.07 $ 17.84
========================================================================================================================
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ -- $ -- $ 482,047,241
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- -- -- 26,912,116
========================================================================================================================
Net asset value, offering price and redemption price
per share $ -- $ -- $ -- $ 17.91
========================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ -- $ -- $ -- $ 15,202,858
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- -- -- 851,788
========================================================================================================================
Net asset value, offering price and redemption price
per share $ -- $ -- $ -- $ 17.85
========================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
48
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION
TAXABLE SELECT FIXED SMALL
BOND GROWTH INCOME CAP
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment securities:
At cost $ 35,523,102 $ 523,816,595 $ 59,762,628 $ 70,796,877
========================================================================================================================
At market value - including $71,549,018 and
$6,813,000 of securities loaned
for the Sands Capital Select Growth
Fund and Small Cap Fund, respectiviely $ 36,093,476 $ 654,763,824 $ 59,112,275 $ 76,395,395
Dividends and interest receivable 621,954 75,332 311,705 113,013
Receivable for capital shares sold -- 13,481,278 -- 4
Receivable for securities sold 1,000,000 5,581,261 -- 1,139,209
Receivable for securities lending income 226 13,313 -- 5,399
Receivable from Advisor -- -- 18,681 --
Other assets 8,981 17,922 7,319 11,160
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 37,724,637 673,932,930 59,449,980 77,664,180
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned -- 74,360,152 -- 7,190,007
Dividends payable 99,916 -- 4,430 --
Payable for capital shares redeemed -- 799,630 122,846 --
Payable for securities purchased -- 4,142,242 -- 1,027,045
Payable to Advisor 12,316 351,243 -- 37,881
Payable to other affiliates 7,510 182,257 35,205 15,455
Payable to Trustees 4,241 6,935 3,727 1,070
Other accrued expenses and liabilities 31,373 393,956 91,464 54,694
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 155,356 80,236,415 257,672 8,326,152
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 37,569,281 $ 593,696,515 $ 59,192,308 $ 69,338,028
========================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 37,705,220 $ 507,167,811 $ 64,106,883 $ 56,210,768
Accumulated net investment income (loss) (166) -- -- 116,008
Accumulated net realized gains (losses) on
investments (706,147) (44,418,525) (4,264,222) 7,412,734
Net unrealized appreciation (depreciation) on
investments 570,374 130,947,229 (650,353) 5,598,518
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 37,569,281 $ 593,696,515 $ 59,192,308 $ 69,338,028
========================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ -- $ -- $ -- $ 69,337,034
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- -- -- 4,775,865
========================================================================================================================
Net asset value and redemption price per share $ -- $ -- $ -- $ 14.52
========================================================================================================================
Maximum offering price per share $ -- $ -- $ -- $ 15.41
========================================================================================================================
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ -- $ -- $ -- $ 994
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- -- -- 69
========================================================================================================================
Net asset value, offering price and redemption price
per share* $ -- $ -- $ -- $ 14.44
========================================================================================================================
49
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION
TAXABLE SELECT FIXED SMALL
BOND GROWTH INCOME CAP
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ 213,671,548 $ -- $ --
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- 23,355,229 -- --
========================================================================================================================
Net asset value, offering price and redemption price
per share $ -- $ 9.15 $ -- $ --
========================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ -- $ 380,024,967 $ 59,192,308 $ --
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- 41,849,517 6,031,938 --
========================================================================================================================
Net asset value, offering price and redemption price
per share $ -- $ 9.08 $ 9.81 $ --
========================================================================================================================
PRICING OF CLASS II SHARES
Net assets attributable to Class II shares $ 37,569,281 $ -- $ -- $ --
========================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 3,633,212 -- -- --
========================================================================================================================
Net asset value, offering price and redemption price
per share $ 10.34 $ -- $ -- $ --
========================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
50
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SMALL CAP STRATEGIC
VALUE VALUE AND HIGH TAX-EXEMPT
OPPORTUNITIES INCOME BOND
FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 209,554,080 $ 1,169,986 $ 99,690,851
====================================================================================================================
Non-affiliated securities, at market value $ 219,513,543 $ -- $ 102,701,363
Affiliated securities, at market value -- 1,155,251 --
- --------------------------------------------------------------------------------------------------------------------
Total investment securities, at market value - including
$14,039,502 of securities loaned for the Small Cap Value
Opportunities Fund 219,513,543 1,155,251 102,701,363
Dividends and interest receivable 185,538 3,026 1,518,870
Receivable for capital shares sold 86,844 -- 81
Receivable for securities sold 1,319,871 27,323 --
Receivable for securities lending income 4,612 -- --
Receivable from Advisor -- 24,795 --
Other assets 58,384 11,923 --
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 221,168,792 1,222,318 104,220,314
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdrafts -- 16,360 --
Payable upon return of securities loaned 14,703,983 -- --
Dividends payable -- 323 287,000
Payable for capital shares redeemed 756,168 3,095 --
Payable for securities purchased 1,349,415 13,952 --
Payable to Advisor 148,047 -- 18,077
Payable to other affiliates 88,450 1,721 19,806
Payable to Trustees 2,545 1,691 1,673
Other accrued expenses and liabilities 4,631 19,709 85,632
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 17,053,239 56,851 412,188
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 204,115,553 $ 1,165,467 $ 103,808,126
====================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 178,939,356 $ 922,227 $ 100,151,749
Accumulated net investment income 11,319 3,072 222,291
Accumulated net realized gains on investments 15,205,415 254,903 423,574
Net unrealized appreciation (depreciation) on investments 9,959,463 (14,735) 3,010,512
====================================================================================================================
NET ASSETS $ 204,115,553 $ 1,165,467 $ 103,808,126
====================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 7,672 $ 150,524 $ 103,808,126
====================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 375 9,949 10,082,312
====================================================================================================================
Net asset value and redemption price per share $ 20.48 $ 15.13 $ 10.30
====================================================================================================================
Maximum offering price per share $ 21.73 $ 16.05 $ 10.81
====================================================================================================================
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 80,681 $ 5,242 $ --
====================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 3,942 346 --
====================================================================================================================
Net asset value, offering price and redemption price per share* $ 20.47 $ 15.16 $ --
====================================================================================================================
51
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SMALL CAP STRATEGIC
VALUE VALUE AND HIGH TAX-EXEMPT
OPPORTUNITIES INCOME BOND
FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ 1,009,701 $ --
====================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 67,272 --
====================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ 15.01 $ --
====================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ 204,027,200 $ -- $ --
====================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 9,960,681 -- --
====================================================================================================================
Net asset value, offering price and redemption price per share $ 20.48 $ -- $ --
====================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
52
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
ULTRA SHORT
DURATION VALUE
FIXED INCOME OPPORTUNITIES
FUND FUND
- -------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 145,398,635 $ 105,007,647
=======================================================================================================
At market value - including $11,068,728 of securities loaned
for the Value Opportunities Fund $ 146,016,204 $ 120,128,184
Dividends and interest receivable 576,887 176,090
Receivable for capital shares sold 133,405 740
Receivable for securities sold 78 2,973,110
Receivable for securities lending income -- 2,397
Other assets 7,671 16,094
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 146,734,245 123,296,615
- -------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned -- 11,407,980
Dividends payable 25,835 19,650
Payable for capital shares redeemed 341,359 218,709
Payable for securities purchased -- 3,691,330
Payable to Advisor 29,094 58,980
Payable to other affiliates 55,111 53,544
Payable to Trustees 4,258 3,462
Other accrued expenses and liabilities 233,154 35,873
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 688,811 15,489,528
- -------------------------------------------------------------------------------------------------------
NET ASSETS $ 146,045,434 $ 107,807,087
=======================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 152,669,737 $ 84,479,571
Accumulated net investment income (loss) 4 (7,541)
Accumulated net realized gains (losses) on investments (7,241,876) 8,214,520
Net unrealized appreciation on investments 617,569 15,120,537
- -------------------------------------------------------------------------------------------------------
NET ASSETS $ 146,045,434 $ 107,807,087
=======================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ -- $ 471,714
=======================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 26,428
=======================================================================================================
Net asset value and redemption price per share $ -- $ 17.85
=======================================================================================================
Maximum offering price per share $ -- $ 18.94
=======================================================================================================
53
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
ULTRA SHORT
DURATION VALUE
FIXED INCOME OPPORTUNITIES
FUND FUND
- -------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ -- $ 423,215
=======================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 23,764
=======================================================================================================
Net asset value, offering price and redemption price per share* $ -- $ 17.81
=======================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ 146,045,434 $ 106,912,158
=======================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 14,493,406 5,996,419
=======================================================================================================
Net asset value, offering price and redemption price per share $ 10.08 $ 17.83
=======================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
54
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
DIVERSIFIED
CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED
FIXED INCOME GROWTH VALUE VALUE
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 9,663 $ 1,364,740 $ 2,947,626 $ 4,235,039
Income from securities loaned 2,066 47,894 121,422 44,737
Interest 1,123,179 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,134,908 1,412,634 3,069,048 4,279,776
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 91,543 850,464 1,927,264 1,243,106
Administration fees 36,531 226,235 405,827 324,095
Distribution expenses, Class A -- 261,539 219 383,797
Distribution expenses, Class C -- -- 332 32
Shareholder servicing fees -- 42,162 350,941 59,979
Transfer agent fees, Class A -- 9,341 600 15,789
Transfer agent fees, Class C -- -- 100 98
Transfer agent fees, Class Z -- -- 199,790 --
Transfer agent fees, Class I 8,259 -- -- --
Transfer agent fees and expenses, Class A -- 12,987 -- 19,156
Transfer agent fees and expenses, Class Z -- -- 89,950 --
Transfer agent fees and expenses, Class I 9,993 -- -- --
Custodian fees 8,281 16,208 95,699 22,478
Postage and supplies -- -- 53,434 --
Professional fees 24,083 21,972 25,432 29,426
Registration fees 6,491 25,039 39,991 25,394
Trustees' fees and expenses 7,166 5,376 12,483 7,178
Reports to shareholders 3,603 -- 14,250 5,214
Compliance fees and expenses 864 1,074 1,280 1,514
Other expenses 4,478 8,555 37,629 1,158
- ------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 201,292 1,480,952 3,255,221 2,138,414
Fees waived by the Administrator (24,325) (146,538) (8,514) (198,094)
Fees waived/and or expenses reimbursed by the
Advisor -- -- -- --
Fees paid indirectly (372) (33) (4,331) (84)
- ------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 176,595 1,334,381 3,242,376 1,940,236
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 958,313 78,253 (173,328) 2,339,540
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains (losses) from security
transactions (133,799) 3,994,236 42,191,085 25,898,731
Net change in unrealized appreciation/
depreciation on investments (29,799) 14,689,118 (17,509,698) (10,441,375)
- ------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS (163,598) 18,683,354 24,681,387 15,457,356
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 794,715 $ 18,761,607 $ 24,508,059 $ 17,796,896
========================================================================================================================
See accompanying notes to financial statements.
55
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL
HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (A) $ 2,239,154 $ 489,890 $ 3,993,344 $ 3,888,559
Income from securities loaned 45,025 28,840 -- 44,964
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,284,179 518,730 3,993,344 3,933,523
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 753,558 500,196 1,486,895 2,470,376
Administration fees 152,840 89,901 282,392 584,259
Distribution expenses, Class A 180,904 105,365 336,609 24
Distribution expenses, Class C 15 1,636 2,187 39
Shareholder servicing fees 28,689 17,803 54,197 15,149
Transfer agent fees, Class A 8,792 31,812 25,641 9,801
Transfer agent fees, Class C 84 144 -- 968
Transfer agent fees, Class Y -- -- -- 17,454
Transfer agent fees, Class Z -- -- -- 139
Transfer agent fees and expenses, Class A 13,500 28,800 15,548 --
Transfer agent fees and expenses, Class Y -- -- -- 20,136
Transfer agent fees and expenses, Class Z -- -- -- 2,299
Registration fees 12,418 40,020 30,114 18,923
Custodian fees 18,217 15,392 494,163 68,984
Postage and supplies 6,919 8,675 -- 280
Professional fees 20,405 22,600 32,219 38,363
Reports to shareholders 2,192 21,993 958 3,254
Trustees' fees and expenses 9,727 7,166 8,576 8,185
Compliance fees and expenses 913 921 1,147 1,554
Other expenses 8,518 6,914 96,709 3,778
- ------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,217,691 899,338 2,867,355 3,263,965
Fees waived by the Administrator (130,698) (65,060) (282,392) (484,841)
Fees waived/and or expenses reimbursed by the
Advisor -- -- (318,444) --
Fees paid indirectly (47) (1,432) (73) (185)
- ------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 1,086,946 832,846 2,266,446 2,778,939
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,197,233 (314,116) 1,726,898 1,154,584
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains from security transactions 4,928,815 5,819,353 16,686,708 3,549,738
Net realized gains (losses) from foreign currency
transactions -- (3,803) 364,297 --
Net change in unrealized appreciation/
depreciation on investments 3,922,586 3,150,465 17,335,430 31,725,301
Net change in unrealized appreciation/
depreciation on foreign currency transactions -- 207 10,101 --
- ------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 8,851,401 8,966,222 34,396,536 35,275,039
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 10,048,634 $ 8,652,106 $ 36,123,434 $ 36,429,623
========================================================================================================================
(A) Net of foreign tax withholding of: $ -- $ 2,796 $ 551,003 $ 917
See accompanying notes to financial statements.
56
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION
TAXABLE SELECT FIXED SMALL
BOND GROWTH INCOME CAP
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (A) $ 50,231 $ 1,864,141 $ 2,743 $ 858,474
Income from securities loaned 2,366 150,959 643 40,791
Interest 2,135,877 -- 3,550,357 --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,188,474 2,015,100 3,553,743 899,265
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 158,551 4,376,477 165,561 558,485
Administration fees 71,881 1,010,955 117,850 145,326
Shareholder servicing fees 99,056 934,767 105,077 29,872
Transfer agent fees, Class A -- -- -- 15,804
Transfer agent fees, Class C -- -- -- 19
Transfer agent fees, Class Y -- 16,267 -- --
Transfer agent fees, Class Z -- 241,592 46,607 --
Transfer agent fees, Class II 5,103 -- -- --
Transfer agent fees and expenses, Class A -- -- -- 12,979
Transfer agent fees and expenses, Class Y -- 43,048 -- --
Transfer agent fees and expenses, Class Z -- 85,438 28,793 --
Transfer agent fees and expenses, Class II 9,306 -- -- --
Registration fees 8,113 71,287 15,159 23,344
Professional fees 21,709 36,459 23,672 25,052
Custodian fees 5,602 52,319 14,344 14,632
Reports to shareholders 3,182 37,973 12,516 1,281
Trustees' fees and expenses 9,720 12,555 9,214 6,561
Distribution expenses, Class A -- -- -- 167,316
Distribution expenses, Class C -- -- -- 7
Compliance fees and expenses 904 1,946 958 988
Other expenses 1,926 2,891 9,993 2,844
- ------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 395,053 6,923,974 549,744 1,004,510
Fees waived by the Administrator (41,943) (243,779) (56,171) (124,672)
Fees paid indirectly (23) (2,380) (344) (93)
- ------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 353,087 6,677,815 493,229 879,745
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,835,387 (4,662,715) 3,060,514 19,520
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains (losses) from security
transactions 281,261 (7,733,494) (339,021) 10,664,099
Net change in unrealized appreciation/
depreciation on investments (238,115) 114,689,804 645,398 (3,560,710)
- ------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 43,146 106,956,310 306,377 7,103,389
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,878,533 $ 102,293,595 $ 3,366,891 $ 7,122,909
========================================================================================================================
(A) Net of foreign tax withholding of: $ -- $ 18,752 $ -- $ --
See accompanying notes to financial statements.
57
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
SMALL CAP STRATEGIC
VALUE VALUE AND HIGH TAX-EXEMPT
OPPORTUNITIES INCOME BOND
FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ -- $ 44,357 $ --
Dividends from non-affiliated securities (A) 3,357,856 -- 41,329
Income from securities loaned 65,470 -- --
Interest -- -- 5,048,747
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,423,326 44,357 5,090,076
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 2,175,657 2,009 340,227
Administration fees 411,942 3,248 206,284
Distribution expenses, Class A 3 162 243,350
Distribution expenses, Class C 75 11 --
Shareholder servicing fees 572,540 -- 40,888
Custodian fees 62,108 4,023 12,631
Postage and supplies 25,123 -- --
Professional fees 34,947 21,913 28,398
Transfer agent fees, Class A 840 488 10,094
Transfer agent fees, Class C 47 99 --
Transfer agent fees, Class Y -- 2,463 --
Transfer agent fees, Class Z 324,901 -- --
Transfer agent fees and expenses, Class A -- -- 13,773
Transfer agent fees and expenses, Class Y -- 7,299 --
Transfer agent fees and expenses, Class Z 33,808 -- --
Reports to shareholders 28,703 3,103 1,251
Trustees' fees and expenses 8,088 7,160 7,173
Registration fees 35,966 24,394 38,357
Compliance fees and expenses 1,286 -- 1,059
Other expenses 18,846 419 16,869
- --------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 3,734,880 76,791 960,354
Fees waived by the Administrator (278,835) (3,248) (164,892)
Fees waived/and or expenses reimbursed by the Advisor -- (68,465) --
Fees paid indirectly (7,416) (179) (50)
- --------------------------------------------------------------------------------------------------------------------
NET EXPENSES 3,448,629 4,899 795,412
- --------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (25,303) 39,458 4,294,664
- --------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains from affiliated security transactions -- 259,854 --
Net realized gains from non-affiliated security transactions 15,610,150 -- 465,983
Net change in unrealized appreciation/
depreciation on affiliated investments -- (137,843) --
Net change in unrealized appreciation/
depreciation on non-affiliated investments 10,302,517 -- (1,810,157)
- --------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS 25,912,667 122,011 (1,344,174)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 25,887,364 $ 161,469 $ 2,950,490
====================================================================================================================
(A) Net of foreign tax withholding of: $ 608 $ -- $ --
See accompanying notes to financial statements.
58
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
ULTRA SHORT
DURATION VALUE
FIXED INCOME OPPORTUNITIES
FUND FUND
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (A) $ 7,790 $ 2,171,978
Income from securities loaned 244 21,853
Interest 9,255,257 --
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 9,263,291 2,193,831
- -------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 390,257 755,058
Administration fees 280,675 172,854
Distribution expenses, Class A -- 456
Distribution expenses, Class C -- 1,210
Shareholder servicing fees 249,308 55,721
Transfer agent fees, Class Z 69,019 77,495
Transfer agent fees and expenses, Class Z 53,344 25,038
Custodian fees 27,689 15,018
Professional fees 26,695 24,979
Postage and supplies -- 1,447
Reports to shareholders 12,618 9,785
Trustees' fees and expenses 9,771 8,960
Registration fees 37,326 37,890
Compliance fees and expenses 1,140 1,029
Other expenses 11,915 11,291
- -------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,169,757 1,198,231
Fees waived by the Administrator (97,596) (50,202)
Fees paid indirectly (1,211) (2,029)
- -------------------------------------------------------------------------------------------------------
NET EXPENSES 1,070,950 1,146,000
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,192,341 1,047,831
- -------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 70,532 9,316,813
Net change in unrealized appreciation/
depreciation on investments 152,845 4,431,805
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 223,377 13,748,618
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,415,718 $ 14,796,449
=======================================================================================================
(A) Net of foreign tax withholding of: $ -- $ 139
See accompanying notes to financial statements.
59
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
CLOVER CORE
FIXED INCOME DIVERSIFIED
FUND GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 958,313 $ 1,033,314 $ 78,253 $ 114,799
Net realized gains (losses) from security
transactions (133,799) (217,802) 3,994,236 6,209,237
Net change in unrealized appreciation/depreciation
on investments (29,799) (174,709) 14,689,118 (323,638)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 794,715 640,803 18,761,607 6,000,398
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- -- (110,282) (121,417)
From net investment income, Class I (961,663) (1,047,680) -- --
From net realized gains, Class I -- (608,327) -- --
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (961,663) (1,656,007) (110,282) (121,417)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold -- -- 782,858 7,078,282
Reinvested distributions -- -- 7,296 7,657
Payments for shares redeemed -- -- (12,062,138) (12,026,814)
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS -- -- (11,271,984) (4,940,875)
- ------------------------------------------------------------------------------------------------------------------------
CLASS I
Proceeds from shares sold 2,861,301 4,777,848 -- --
Reinvested distributions 921,355 1,601,713 -- --
Payments for shares redeemed (5,819,674) (9,841,174) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS I SHARE
TRANSACTIONS (2,037,018) (3,461,613) -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,203,966) (4,476,817) 7,379,341 938,106
NET ASSETS
Beginning of year 21,689,289 26,166,106 117,498,340 116,560,234
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 19,485,323 $ 21,689,289 $ 124,877,681 $ 117,498,340
========================================================================================================================
ACCUMULATED NET INVESTMENT LOSS $ (267) $ -- $ -- $ (3,964)
========================================================================================================================
See accompanying notes to financial statements.
60
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
DIVERSIFED
SMALL CAP DIVERSIFIED
VALUE FUND VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006 2007(B) 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (173,328) $ (1,220,521) $ 2,339,540 $ 2,212,710
Net realized gains from security transactions 42,191,085 74,451,036 25,898,731 5,167,491
Net change in unrealized appreciation/depreciation
on investments (17,509,698) (44,693,056) (10,441,375) 9,322,847
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 24,508,059 28,537,459 17,796,896 16,703,048
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- -- (2,337,948) (2,246,752)
From net investment income, Class C -- -- (34) --
From net realized gains, Class A (3,401) -- (28,344,396) (13,479,191)
From net realized gains, Class C (4,650) -- (873) --
From net realized gains, Class Z (74,856,107) (60,867,084) -- --
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (74,864,158) (60,867,084) (30,683,251) (15,725,943)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 266,468 -- 2,002,099 7,837,850
Reinvested distributions 3,401 -- 3,198,512 4,209,554
Proceeds from shares issued in connection with
acquisition (C) -- -- 53,968,745 --
Payments for shares redeemed (61,472) -- (16,506,005) (13,970,168)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A
SHARE TRANSACTIONS 208,397 -- 42,663,351 (1,922,764)
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 80,986 -- 6,260 --
Reinvested distributions 4,650 -- 907 --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS 85,636 -- 7,167 --
- ------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 17,327,622 37,823,898 -- --
Reinvested distributions 71,871,313 59,757,740 -- --
Payments for shares redeemed (120,135,425) (255,984,525) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS Z SHARE
TRANSACTIONS (30,936,490) (158,402,887) -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (80,998,556) (190,732,512) 29,784,163 (945,659)
NET ASSETS
Beginning of year 259,278,620 450,011,132 167,596,573 168,542,232
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 178,280,064 $ 259,278,620 $ 197,380,736 $ 167,596,573
========================================================================================================================
ACCUMULATED NET INVESTMENT LOSS $ 278,687 $ -- $ (487,310) $ (4,944)
========================================================================================================================
(A) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
(B) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
(C) See Footnote 9 in notes to financial statements.
See accompanying notes to financial statements.
61
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND
HERITAGE(R) FUND BIOTECHNOLOGY FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006 2007(A) 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 1,197,233 $ 198,532 $ (314,116) $ (626,652)
Net realized gains from security transactions 4,928,815 3,637,615 5,819,353 1,219,117
Net realized losses from foreign currency
transactions -- -- (3,803) --
Net change in unrealized appreciation/depreciation
on investments 3,922,586 (1,310,466) 3,150,465 (456,843)
Net change in unrealized appreciation/depreciation
from foreign currency transactions -- -- 207 --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 10,048,634 2,525,681 8,652,106 135,622
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (1,156,587) (202,429) -- --
In excess of net investment income, Class A -- (24,705) -- --
From net realized gains, Class A -- -- (1,868,667) (1,786,077)
From net realized gains, Class C -- -- (37)
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (1,156,587) (227,134) (1,868,704) (1,786,077)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 5,842,108 2,147,532 9,785,368 25,828,040
Reinvested distributions 147,757 28,791 1,828,887 1,767,486
Payments for shares redeemed (11,953,129) (8,542,152) (20,162,439) (30,566,992)
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS (5,963,264) (6,365,829) (8,548,184) (2,971,466)
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 5,995 -- 1,353,028 --
Reinvested distributions -- -- 37 --
Payments for shares redeemed -- -- (17,481) --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS 5,995 -- 1,335,584 --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,934,778 (4,067,282) (429,198) (4,621,921)
NET ASSETS
Beginning of year 80,380,974 84,448,256 55,120,282 59,742,203
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 83,315,752 $ 80,380,974 $ 54,691,084 $ 55,120,282
========================================================================================================================
ACCUMULATED NET INVESTMENT INCOME (LOSS) $ 50,443 $ -- $ (3,803) $ --
========================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
See accompanying notes to financial statements.
62
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL
EQUITY MID CAP
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006 2007(B) 2006(C)
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 1,726,898 $ 1,529,624 $ 1,154,584 $ 72,092
Net realized gains (losses) from security
transactions 16,686,708 31,702,789 3,549,738 (334,728)
Net realized gains from foreign currency
transactions 364,297 30,160 -- --
Net change in unrealized appreciation/depreciation
on investments 17,335,430 (11,427,749) 31,725,301 906,899
Net change in unrealized appreciation/depreciation
from foreign currency transactions 10,101 57,041 -- --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 36,123,434 21,891,865 36,429,623 644,263
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (1,945,480) (1,747,820) -- --
From net investment income, Class C (204) -- -- --
From net investment income, Class Y -- -- (1,499,729) (1,586)
From net investment income, Class Z -- -- (12,723) --
From net realized gains, Class A (6,592,570) -- -- --
From net realized gains, Class C (703) -- -- --
From net realized gains, Class Z -- -- -- (61,105)
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (8,538,957) (1,747,820) (1,512,452) (62,691)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 6,650,827 14,416,258 219,426 --
Reinvested distributions 2,039,158 168,196 -- --
Payments for shares redeemed (32,944,162) (11,321,379) (8,322) --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A
SHARE TRANSACTIONS (24,254,177) 3,263,075 211,104 --
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 700,214 -- 35,447 --
Reinvested distributions 907 -- -- --
Payments for shares redeemed (4,445) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS 696,676 -- 35,447 --
- ------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold -- -- 397,263,466 86,237,355
Reinvested distributions -- -- 84,244 62,687
Payments for shares redeemed -- -- (37,176,701) (689,660)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Y SHARE
TRANSACTIONS -- -- 360,171,009 85,610,382
- ------------------------------------------------------------------------------------------------------------------------
63
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL
EQUITY MID CAP
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006 2007(B) 2006(C)
- ------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold $ -- $ -- $ 16,658,928 $ 348,562
Reinvested distributions -- -- 1,880 --
Payments for shares redeemed -- -- (1,881,297) --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Z SHARE
TRANSACTIONS -- -- 14,779,511 348,562
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 4,026,976 23,407,120 410,114,242 86,540,516
NET ASSETS
Beginning of year 151,336,063 127,928,943 87,382,132 841,616
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 155,363,039 $ 151,336,063 $ 497,496,374 $ 87,382,132
========================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 2,000,880 $ 1,654,774 $ -- $ 70,818
========================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
(B) Classes A and C represent the period from commencement of operations (May
14, 2007) through September 30, 2007.
(C) Class Z represents the period from commencement of operations (April 24,
2006) through September 30, 2006.
See accompanying notes to financial statements.
64
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL
TAXABLE BOND SELECT GROWTH
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 1,835,387 $ 2,108,755 $ (4,662,715) $ (3,883,664)
Net realized gains (losses) from security
transactions 281,261 (356,274) (7,733,494) (6,346,760)
Net change in unrealized appreciation/depreciation
on investments (238,115) (516,570) 114,689,804 (17,798,702)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS 1,878,533 1,235,911 102,293,595 (28,029,126)
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class II (1,835,524) (2,110,784) -- --
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (1,835,524) (2,110,784) -- --
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS Y
Proceeds from shares sold -- -- 71,602,921 148,235,482
Payments for shares redeemed -- -- (74,861,403) (36,499,523)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y
SHARE TRANSACTIONS -- -- (3,258,482) 111,735,959
- ------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold -- -- 90,095,417 284,523,520
Payments for shares redeemed -- -- (142,825,600) (65,813,872)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z
SHARE TRANSACTIONS -- -- (52,730,183) 218,709,648
- ------------------------------------------------------------------------------------------------------------------------
CLASS II
Proceeds from shares sold 2,820,055 4,636,284 -- --
Reinvested distributions 400,806 497,557 -- --
Payments for shares redeemed (9,875,964) (8,046,185) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS II SHARE
TRANSACTIONS (6,655,103) (2,912,344) -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,612,094) (3,787,217) 46,304,930 302,416,481
NET ASSETS
Beginning of year 44,181,375 47,968,592 547,391,585 244,975,104
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 37,569,281 $ 44,181,375 $ 593,696,515 $ 547,391,585
========================================================================================================================
ACCUMULATED NET INVESTMENT LOSS $ (166) $ -- $ -- $ --
========================================================================================================================
See accompanying notes to financial statements.
65
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SHORT DURATION
FIXED INCOME FUND SMALL CAP FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 3,060,514 $ 3,665,400 $ 19,520 $ (138,000)
Net realized gains (losses) from security
transactions (339,021) (583,772) 10,664,099 7,012,032
Net change in unrealized appreciation/depreciation
on investments 645,398 (409,885) (3,560,710) (1,834,993)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 3,366,891 2,671,743 7,122,909 5,039,039
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class Z (3,020,621) (3,966,690) -- --
From net realized gains, Class A -- -- (10,130,964) (12,655,814)
From net realized gains, Class C -- -- (116) --
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (3,020,621) (3,966,690) (10,131,080) (12,655,814)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold -- -- 1,423,144 3,652,966
Reinvested distributions -- -- 3,273,099 4,109,146
Payments for shares redeemed -- -- (15,248,355) (13,187,462)
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS -- -- (10,552,112) (5,425,350)
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold -- -- 1,000 --
Reinvested distributions -- -- 116 --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS -- -- 1,116 --
- ------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 2,206,972 2,811,911 -- --
Reinvested distributions 2,965,843 3,910,664 -- --
Payments for shares redeemed (22,416,499) (42,170,628) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS Z SHARE
TRANSACTIONS (17,243,684) (35,448,053) -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (16,897,414) (36,743,000) (13,559,167) (13,042,125)
NET ASSETS
Beginning of year 76,089,722 112,832,722 82,897,195 95,939,320
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 59,192,308 $ 76,089,722 $ 69,338,028 $ 82,897,195
========================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ -- $ -- $ 116,008 $ --
========================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
See accompanying notes to financial statements.
66
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE
VALUE OPPORTUNITIES AND HIGH INCOME
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (25,303) $ (784,311) $ 39,458 $ 27,877
Net realized gains from affiliated security
transactions -- -- 259,854 174
Net realized gains from non-affiliated security
transactions 15,610,150 6,793,128 -- --
Net change in unrealized appreciation/depreciation
on affiliated investments -- -- (137,843) (13,494)
Net change in unrealized appreciation/
depreciation on non-affiliated investments 10,302,517 (5,773,884) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 25,887,364 234,933 161,469 14,557
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- -- (1,133) --
From net investment income, Class C -- -- (4) --
From net investment income, Class Y -- -- (35,355) (27,885)
From net investment income, Class Z -- (123,995) -- --
From net realized gains, Class A -- -- (3) --
From net realized gains, Class C -- -- (1) --
From net realized gains, Class Y -- -- (3,430) (5,832)
From net realized gains, Class Z (6,056,120) (1,644,383) -- --
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (6,056,120) (1,768,378) (39,926) (33,717)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 7,500 -- 157,168 --
Reinvested distributions -- -- 1,135 --
Payments for shares redeemed -- -- (4,085) --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS 7,500 -- 154,218 --
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 77,703 -- 5,052 --
Reinvested distributions -- -- 6 --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS 77,703 -- 5,058 --
- ------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold -- -- 60,968 2,524,125
Reinvested distributions -- -- 35,712 33,401
Payments for shares redeemed -- -- (1,753,724) (802,978)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y
SHARE TRANSACTIONS -- -- (1,657,044) 1,754,548
- ------------------------------------------------------------------------------------------------------------------------
67
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE
VALUE OPPORTUNITIES AND HIGH INCOME
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold $ 69,825,768 $ 234,392,976 $ -- $ --
Reinvested distributions 5,737,368 1,751,676 -- --
Payments for shares redeemed (140,795,265) (59,414,549) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z
SHARE TRANSACTIONS (65,232,129) 176,730,103 -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (45,315,682) 175,196,658 (1,376,225) 1,735,388
NET ASSETS
Beginning of year 249,431,235 74,234,577 2,541,692 806,304
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 204,115,553 $ 249,431,235 $ 1,165,467 $ 2,541,692
========================================================================================================================
ACCUMULATED NET INVESTMENT INCOME (LOSS) $ 11,319 $ -- $ 3,072 $ --
========================================================================================================================
(A) Classes A and C represent the period from commencement of operations (July
23, 2007) through September 30, 2007.
(B) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
See accompanying notes to financial statements.
68
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
ULTRA SHORT
TAX-EXEMPT DURATION FIXED
BOND FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 4,294,664 $ 4,544,266 $ 8,192,341 $ 9,687,262
Net realized gains (losses) from security
transactions 465,983 353,485 70,532 (336,961)
Net change in unrealized appreciation/depreciation
on investments (1,810,157) (890,993) 152,845 (571,064)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 2,950,490 4,006,758 8,415,718 8,779,237
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (4,294,666) (4,431,540) -- --
From net investment income, Class Z -- -- (8,051,978) (9,755,714)
From net realized gains, Class A (185,535) (1,409,044) -- --
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (4,480,201) (5,840,584) (8,051,978) (9,755,714)
- ------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 7,241,080 18,284,442 -- --
Reinvested distributions 143,759 492,024 -- --
Payments for shares redeemed (19,713,572) (10,850,595) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A
SHARE TRANSACTIONS (12,328,733) 7,925,871 -- --
- ------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold -- -- 28,974,657 36,786,959
Reinvested distributions -- -- 7,727,531 9,413,370
Payments for shares redeemed -- -- (64,736,725) (176,729,225)
- ------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS Z SHARE
TRANSACTIONS -- -- (28,034,537) (130,528,896)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (13,858,444) 6,092,045 (27,670,797) (131,505,373)
NET ASSETS
Beginning of year 117,666,570 111,574,525 173,716,231 305,221,604
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 103,808,126 $ 117,666,570 $ 146,045,434 $ 173,716,231
========================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 222,291 $ 221,760 $ 4 $ --
========================================================================================================================
See accompanying notes to financial statements.
69
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES
FUND
- -------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2007(A) 2006
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 1,047,831 $ 546,164
Net realized gains from security transactions 9,316,813 17,333,397
Net change in unrealized appreciation/depreciation on investments 4,431,805 (9,531,377)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 14,796,449 8,348,184
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (2,180) --
From net investment income, Class C (1,687) --
From net investment income, Class Z (1,049,665) (549,006)
From net realized gains, Class A (183) --
From net realized gains, Class C (1,928) --
From net realized gains, Class Z (18,377,100) (9,232,072)
- -------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (19,432,743) (9,781,078)
- -------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 520,044 --
Reinvested distributions 2,363 --
Payments for shares redeemed (61,639) --
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 460,768 --
- -------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 434,119 --
Reinvested distributions 3,422 --
Payments for shares redeemed (31,321) --
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 406,220 --
- -------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 17,359,285 21,531,751
Reinvested distributions 18,415,427 9,501,446
Payments for shares redeemed (24,236,609) (100,813,313)
- -------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS 11,538,103 (69,780,116)
- -------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 7,768,797 (71,213,010)
NET ASSETS
Beginning of year 100,038,290 171,251,300
- -------------------------------------------------------------------------------------------------------
End of year $ 107,807,087 $ 100,038,290
=======================================================================================================
ACCUMULATED NET INVESTMENT LOSS $ (7,541) $ (3,117)
=======================================================================================================
(A) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
See accompanying notes to financial statements.
70
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
CLOVER CORE FIXED INCOME FUND - CLASS I
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 9.58 $ 9.94 $ 10.27 $ 10.40 $ 10.55
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.45 0.39 0.42 0.43 0.45
Net realized and unrealized losses on investments (0.07) (0.12) (0.19) (0.13) (0.10)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.38 0.27 0.23 0.30 0.35
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.45) (0.40) (0.42) (0.43) (0.47)
Distributions from net realized gains -- (0.23) (0.14) -- (0.03)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.45) (0.63) (0.56) (0.43) (0.50)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 9.51 $ 9.58 $ 9.94 $ 10.27 $ 10.40
===============================================================================================================================
Total return 4.07% 2.87% 2.27% 2.97% 3.37%
===============================================================================================================================
Net assets at end of year (000's) $ 19,485 $ 21,689 $ 26,166 $ 32,334 $ 43,391
===============================================================================================================================
Ratio of net expenses to average net assets 0.87% 0.91%(A) 0.80% 0.80% 0.78%
Ratio of gross expenses to average net assets 0.99% 0.95% 0.86% 0.85% 0.87%
Ratio of net investment income to average net assets 4.72% 4.13% 3.91% 3.94% 4.25%
Portfolio turnover rate 71% 62% 70% 45% 46%
(A) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 0.89%.
DIVERSIFED GROWTH FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 6.10 $ 5.80 $ 5.36 $ 5.25 $ 4.40 $ 5.66
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.01 0.01 0.03 -- -- (0.01)
Net realized and unrealized gains
(losses) on investments 1.02 0.30 0.44 0.11 0.85 (1.25)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.03 0.31 0.47 0.11 0.85 (1.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.01) (0.01) (0.03) (0.00)(B) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 7.12 $ 6.10 $ 5.80 $ 5.36 $ 5.25 $ 4.40
=================================================================================================================================
Total return (C) 16.83% 5.28% 8.71% 2.14%(D) 19.32% (22.26%)
=================================================================================================================================
Net assets at end of period (000s) $124,878 $117,498 $116,560 $104,528 $ 95,724 $ 82,368
=================================================================================================================================
Ratio of net expenses to average net assets 1.10% 1.05% 1.10% 1.02%(E) 1.01% 1.01%
Ratio of gross expenses to average net assets 1.22% 1.19% 1.23% 1.15%(E) 1.16% 1.14%
Ratio of net investment income (loss)
to average net assets 0.06% 0.10% 0.48% 0.00%(E) 0.05% (0.15%)
Portfolio turnover rate 62% 73% 56% 53%(E) 70% 35%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Amount rounds to less than $0.01 per share.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
71
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP VALUE FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 26.95
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gains on investments 0.38
- --------------------------------------------------------------------------------
Total from investment operations 0.40
- --------------------------------------------------------------------------------
Distributions from net realized gains (7.79)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 19.56
================================================================================
Total return (B) 1.68%(C)
================================================================================
Net assets at end of period (000s) $ 205
================================================================================
Ratio of net expenses to average net assets 1.28%(D)
Ratio of gross expenses to average net assets 1.81%(D)
Ratio of net investment income to average net assets 0.23%(D)
Portfolio turnover rate 79%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
DIVERSIFIED SMALL CAP VALUE FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 26.95
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.04)
Net realized and unrealized gains on investments 0.36
- --------------------------------------------------------------------------------
Total from investment operations 0.32
- --------------------------------------------------------------------------------
Distributions from net realized gains (7.79)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 19.48
================================================================================
Total return (B) 1.26%(C)
================================================================================
Net assets at end of period (000s) $ 79
================================================================================
Ratio of net expenses to average net assets 1.86%(D)
Ratio of gross expenses to average net assets 1.86%(D)
Ratio of net investment loss to average net assets (0.38%)(D)
Portfolio turnover rate 79%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
72
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 25.10 $ 27.63 $ 23.76 $ 19.23 $ 15.20
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.03) (0.12) (0.14) (0.01) 0.01
Net realized and unrealized gains on investments 2.27 2.12 4.01 4.57 4.04
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.24 2.00 3.87 4.56 4.05
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- -- -- (0.03) (0.02)(A)
Distributions from net realized gains (7.79) (4.53) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (7.79) (4.53) -- (0.03) (0.02)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 19.55 $ 25.10 $ 27.63 $ 23.76 $ 19.23
===============================================================================================================================
Total return 9.12% 8.47% 16.29% 23.72% 26.66%
===============================================================================================================================
Net assets at end of year (000's) $ 177,996 $ 259,279 $ 450,011 $ 540,278 $ 394,946
===============================================================================================================================
Ratio of net expenses to average net assets 1.43% 1.32%(B) 1.23% 1.22% 1.27%
Ratio of gross expenses to average net assets 1.43% 1.32% 1.23% 1.22% 1.27%
Ratio of net investment income (loss) to average net
assets (0.08%) (0.37%) (0.48%) (0.09%) 0.08%
Portfolio turnover rate 79% 98% 78% 61% 52%
(A) Includes return of capital of $0.004.
(B) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.31%.
See accompanying notes to financial statements.
73
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED VALUE FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 12.66 $ 12.60 $ 11.22 $ 10.26 $ 8.50 $ 9.19
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.17 0.17 0.13 0.10 0.12 0.10
Net realized and unrealized gains
(losses) on investments 1.36 1.08 1.38 0.97 1.77 (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.53 1.25 1.51 1.07 1.89 (0.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.17) (0.17) (0.13) (0.11) (0.13) (0.10)
Distributions from net realized gains (2.24) (1.02) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.41) (1.19) (0.13) (0.11) (0.13) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.78 $ 12.66 $ 12.60 $ 11.22 $ 10.26 $ 8.50
=================================================================================================================================
Total return (B) 11.73% 10.68% 13.47% 10.50%(C) 22.43% (6.43%)
=================================================================================================================================
Net assets at end of period (000's) $197,374 $167,597 $168,542 $152,202 $143,641 $122,391
=================================================================================================================================
Ratio of net expenses to average net assets 1.10% 1.06% 1.09% 1.02%(D) 1.01% 1.02%
Ratio of gross expenses average net assets 1.21% 1.20% 1.21% 1.14%(D) 1.14% 1.13%
Ratio of net investment income to average net
assets 1.32% 1.34% 1.04% 1.06%(D) 1.32% 1.17%
Portfolio turnover rate 107% 48% 64% 75%(D) 59% 26%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
74
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED VALUE FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 13.22
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06
Net realized and unrealized gains on investments 0.83
- --------------------------------------------------------------------------------
Total from investment operations 0.89
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.08)
Distributions from net realized gains (2.23)
- --------------------------------------------------------------------------------
Total distributions (2.31)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 11.80
================================================================================
Total return (B) 6.38%(C)
================================================================================
Net assets at end of period (000s) $ 7
================================================================================
Ratio of net expenses to average net assets 1.78%(D)
Ratio of gross expenses to average net assets 3.91%(D)
Ratio of net investment income to average net assets 0.57%(D)
Portfolio turnover rate 107%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
75
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
FAMILY HERITAGE(R) FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.25 $ 9.96 $ 9.38 $ 8.55 $ 6.97 $ 7.82
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.16 0.03 0.05 -- -- (0.01)
Net realized and unrealized gains
(losses) on investments 1.15 0.29 0.58 0.83 1.58 (0.84)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.31 0.32 0.63 0.83 1.58 (0.85)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.15) (0.03) (0.05) 0.00(B) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.41 $ 10.25 $ 9.96 $ 9.38 $ 8.55 $ 6.97
=================================================================================================================================
Total return (C) 12.91% 3.19% 6.72% 9.77%(D) 22.67% (10.87%)
=================================================================================================================================
Net assets at end of period (000's) $ 83,310 $ 80,381 $ 84,448 $ 78,103 $ 73,490 $ 66,126
=================================================================================================================================
Ratio of net expenses to average net assets 1.30% 1.25% 1.29% 1.23%(E) 1.23% 1.27%
Ratio of gross expenses to average net assets 1.46% 1.42% 1.44% 1.37%(E) 1.38% 1.36%
Ratio of net investment income (loss)
to average net assets 1.43% 0.24% 0.50% 0.01%(E) 0.06% (0.18%)
Portfolio turnover rate 25% 27% 25% 19%(E) 12% 24%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Amount rounds to less than $0.01 per share.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
FAMILY HERITAGE(R) FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.84
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.02)
Net realized and unrealized gains on investments 0.68
- --------------------------------------------------------------------------------
Total from investment operations 0.66
- --------------------------------------------------------------------------------
Net asset value at end of period $ 11.50
================================================================================
Total return (B) 6.09%(C)
================================================================================
Net assets at end of period (000s) $ 6
================================================================================
Ratio of net expenses to average net assets 1.99%(D)
Ratio of gross expenses to average net assets 6.20%(D)
Ratio of net investment loss to average net assets (0.55%)(D)
Portfolio turnover rate 25%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
76
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 15.91 $ 16.13 $ 13.79 $ 12.31 $ 9.83
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.14) (0.18) (0.16) (0.06) (0.11)
Net realized and unrealized gains on investments 3.10 0.40 3.02 1.55 2.59
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.96 0.22 2.86 1.49 2.48
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.59) (0.44) (0.52) (0.01) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 18.28 $ 15.91 $ 16.13 $ 13.79 $ 12.31
===============================================================================================================================
Total return (A) 19.25% 1.37% 21.10% 12.12% 25.23%
===============================================================================================================================
Net assets at end of year (000's) $ 53,295 $ 55,120 $ 59,742 $ 35,371 $ 14,853
===============================================================================================================================
Ratio of net expenses to average net assets 1.67% 1.85%(B) 1.88% 1.61% 1.47%
Ratio of gross expenses to average net assets 1.80% 1.85% 1.88% 1.84% 1.63%
Ratio of net investment loss to average net assets (0.63%) (0.99%) (1.35%) (1.10%) (1.16%)
Portfolio turnover rate 156% 158% 169% 163% 274%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.84%.
HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 15.98
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.03)
Net realized and unrealized gains on investments 2.83
- --------------------------------------------------------------------------------
Total from investment operations 2.80
- --------------------------------------------------------------------------------
Distributions from net realized gains (0.59)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 18.19
================================================================================
Total return (B) 18.15%(C)
================================================================================
Net assets at end of period (000s) $ 1,396
================================================================================
Ratio of net expenses to average net assets 2.23%(D)
Ratio of gross expenses to average net assets 2.57%(D)
Ratio of net investment loss to average net assets (1.27%)(D)
Portfolio turnover rate 156%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
77
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.14 $ 8.75 $ 7.06 $ 6.47 $ 5.23 $ 6.19
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.12 0.10(B) 0.07 0.05 0.06 0.04
Net realized and unrealized gains
(losses) on investments 2.45 1.41(B) 1.64 0.71 1.21 (0.94)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.57 1.51 1.71 0.76 1.27 (0.90)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.13) (0.12) (0.02) (0.17) (0.03) (0.06)
Distributions from net realized gains (0.45) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.58) (0.12) (0.02) (0.17) (0.03) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 12.13 $ 10.14 $ 8.75 $ 7.06 $ 6.47 $ 5.23
=================================================================================================================================
Total return (C) 26.22% 17.42% 24.19% 11.97%(D) 24.40% (14.68%)
=================================================================================================================================
Net assets at end of period (000's) $154,623 $151,336 $127,929 $107,001 $ 97,817 $ 83,513
=================================================================================================================================
Ratio of net expenses to average net assets 1.45% 1.41% 1.44% 1.35%(E) 1.30% 1.32%
Ratio of gross expenses to average net assets 1.83% 1.64% 1.64% 1.60%(E) 1.60% 1.48%
Ratio of net investment income to average net
assets 1.11% 1.09% 0.80% 0.90%(E) 1.15% 0.63%
Portfolio turnover rate 61% 140% 53% 62%(E) 128% 69%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Per share data calculated using average shares method.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
78
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.56
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17
Net realized and unrealized gains on investments 1.92
- --------------------------------------------------------------------------------
Total from investment operations 2.09
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.13)
Distributions from net realized gains (0.45)
- --------------------------------------------------------------------------------
Total distributions (0.58)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 12.07
================================================================================
Total return (B) 20.54%(C)
================================================================================
Net assets at end of period (000s) $ 740
================================================================================
Ratio of net expenses to average net assets 2.19%(D)
Ratio of gross expenses to average net assets 2.49%(D)
Ratio of net investment income to average net assets 0.89%(D)
Portfolio turnover rate 61%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
79
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 18.14
- --------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.00)(B)
Net realized and unrealized losses on investments (0.28)
- --------------------------------------------------------------------------------
Total from investment operations (0.28)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 17.86
================================================================================
Total return (C) (1.54%)(D)
================================================================================
Net assets at end of period (000s) $ 210
================================================================================
Ratio of net expenses to average net assets 0.94%(E)
Ratio of gross expenses to average net assets 14.21%(E)
Ratio of net investment loss to average net assets (0.09%)(E)
Portfolio turnover rate 193%
(A) Represents the period from commencement of operations (May 14, 2007)
through September 30, 2007.
(B) Amount rounds to less than $0.01 per share.
(C) Total return shown excludes the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
MID CAP FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 18.14
- --------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.02)
Net realized and unrealized losses on investments (0.28)
- --------------------------------------------------------------------------------
Total from investment operations (0.30)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 17.84
================================================================================
Total return (B) (1.65%)(C)
================================================================================
Net assets at end of period (000s) $ 36
================================================================================
Ratio of net expenses to average net assets 1.35%(D)
Ratio of gross expenses to average net assets 28.68%(D)
Ratio of net investment loss to average net assets (0.51%)(D)
Portfolio turnover rate 193%
(A) Represents the period from commencement of operations (May 14, 2007)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
80
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
YEAR ENDED SEPT. 30, ENDED ENDED
------------------------------------------ DEC. 31, DEC. 31,
2007 2006 2005(A) 2004 2003(B)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 15.28 $ 15.36 $ 13.29 $ 12.79 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.11 0.04 (0.01) 0.08 0.01
Net realized and unrealized gains on investments 2.65 1.00 2.47 2.70 3.99
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.76 1.04 2.46 2.78 4.00
- -------------------------------------------------------------------------------------------------------------------------------
Less Distributions
Dividends from net investment income (0.13) (0.03) -- (0.09) --
Distributions from net realized gains -- (1.09) (0.39) (2.19) (1.21)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.13) (1.12) (0.39) (2.28) (1.21)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79
===============================================================================================================================
Total return 18.13% 7.10% 18.53%(C) 21.78% 40.24%(C)
===============================================================================================================================
Net assets at end of period (000's) $ 482,047 $ 87,032 $ 842 $ 410 $ 337
===============================================================================================================================
Ratio of net expenses to average net assets 0.90% 0.91%(D) 1.00%(E) 0.90% 0.90%(E)
Ratio of gross expenses to average net assets 1.06% 1.81% 8.23%(E) 0.90% 0.90%(E)
Ratio of net investment income (loss) to average net
assets 0.39% 0.82% (0.02%)(E) 0.59% 0.12%(E)
Portfolio turnover rate 193% 323% 120%(E) 193% 141%(E)
(A) For the nine-month period ended September 30, 2005. Effective January 1,
2005, the Fund changed its fiscal year end from December 31 to September
30.
(B) Represents the period from commencement of operations (January 2, 2003)
through December 31, 2003.
(C) Not annualized.
(D) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 0.90%.
(E) Annualized.
See accompanying notes to financial statements.
81
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
2007 2006(A)
- -------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 15.26 $ 16.73
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.09 0.01
Net realized and unrealized gains (losses) on investments 2.62 (1.48)
- -------------------------------------------------------------------------------------------------------
Total from investment operations 2.71 (1.47)
- -------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.12) --
- -------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 17.85 $ 15.26
=======================================================================================================
Total return 17.84% (8.79%)(B)
=======================================================================================================
Net assets at end of period (000's) $ 15,203 $ 350
=======================================================================================================
Ratio of net expenses to average net assets 1.14% 1.16%(C)(D)
Ratio of gross expenses to average net assets 1.25% 1.82%(C)
Ratio of net investment income (loss) to average net assets (0.12%) 0.63%(C)
Portfolio turnover rate 193% 323%
(A) Represents the period from commencement of operations (April 24, 2006)
through September 30, 2006.
(B) Not annualized
(C) Annualized.
(D) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.15%.
See accompanying notes to financial statements.
82
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PITCAIRN TAXABLE BOND FUND - CLASS II
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.33 $ 10.50 $ 10.77 $ 10.73 $ 10.47 $ 10.98
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.48 0.47 0.43 0.43 0.51 0.56
Net realized and unrealized gains
(losses) on investments 0.01 (0.17) (0.27) 0.04 0.26 (0.42)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.49 0.30 0.16 0.47 0.77 0.14
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.48) (0.47) (0.43) (0.43) (0.51) (0.56)
Distributions from net realized gains -- -- -- -- -- (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.48) (0.47) (0.43) (0.43) (0.51) (0.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 10.34 $ 10.33 $ 10.50 $ 10.77 $ 10.73 $ 10.47
=================================================================================================================================
Total return 4.81% 2.98% 1.50% 4.42%(B) 7.44% 1.46
=================================================================================================================================
Net assets at end of period (000's) $ 37,569 $ 44,181 $ 47,969 $ 43,239 $ 43,432 $ 40,058
=================================================================================================================================
Ratio of net expenses to average net assets 0.89% 0.87% 0.89% 0.75%(C) 0.73% 0.78%
Ratio of gross expenses to average net assets 1.00% 0.95% 0.96% 0.94%(C) 0.97% 0.98%
Ratio of net investment income to average net
assets 4.63% 4.56% 4.05% 4.36%(C) 4.74% 5.35%
Portfolio turnover rate 28% 32% 37% 26%(C) 24% 58%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
83
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2007 2006 2005 2004(A)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 7.60 $ 7.81 $ 6.80 $ 6.74
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.05) (0.06) (0.06) --
Net realized and unrealized gains (losses) on
investments 1.60 (0.15) 1.07 0.06
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.55 (0.21) 1.01 0.06
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 9.15 $ 7.60 $ 7.81 $ 6.80
========================================================================================================================
Total return 20.39% (2.69%) 14.85% 0.89%(B)
========================================================================================================================
Net assets at end of period (000s) $ 213,672 $ 182,001 $ 81,976 $ 32,591
========================================================================================================================
Ratio of net expenses to average net assets 1.03% 1.10% 1.11% 1.10%(C)
Ratio of gross expenses to average net assets 1.03% 1.23% 1.19% 1.10%(C)
Ratio of net investment loss to average net assets (0.67%) (0.74%) (0.62%) (0.79%)(C)
Portfolio turnover rate 24% 24% 24% 11%(C)
(A) Represents the period from commencement of operations (August 27, 2004)
through September 30, 2004.
(B) Not annualized.
(C) Annualized.
SANDS CAPITAL SELECT GROWTH FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 7.57 $ 7.80 $ 6.80 $ 6.13 $ 4.81 $ 5.55
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.09) (0.05) (0.03) (0.06) (0.04)(B) (0.04)
Net realized and unrealized gains
(losses) on investments 1.60 (0.18) 1.03 0.73 1.36 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.51 (0.23) 1.00 0.67 1.32 (0.74)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 9.08 $ 7.57 $ 7.80 $ 6.80 $ 6.13 $ 4.81
=================================================================================================================================
Total return 19.95% (2.95%) 14.71% 10.93%(C) 27.44% (13.33%)
=================================================================================================================================
Net assets at end of period (000s) $380,025 $365,390 $162,999 $ 70,027 $ 43,878 $ 32,818
=================================================================================================================================
Ratio of net expenses to average net assets 1.29% 1.35% 1.36% 1.20%(D) 1.17% 1.16%
Ratio of gross expenses to average net assets 1.35% 1.48% 1.44% 1.35%(D) 1.45% 1.43%
Ratio of net investment loss to average net
assets (0.92%) (0.99%) (0.84%) (0.95%)(D) (0.81%) (0.69%)
Portfolio turnover rate 24% 24% 24% 11%(D) 28% 24%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Based on average shares outstanding.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
84
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 9.76 $ 9.87 $ 10.04 $ 10.14 $ 10.24
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.45 0.38 0.31 0.28 0.17(A)
Net realized and unrealized gains (losses) on
investments 0.05 (0.07) (0.10) (0.10) 0.05
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.50 0.31 0.21 0.18 0.22
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.45) (0.42) (0.38) (0.28) (0.25)
Distributions from net realized gains -- -- -- -- (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.45) (0.42) (0.38) (0.28) (0.32)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 9.81 $ 9.76 $ 9.87 $ 10.04 $ 10.14
===============================================================================================================================
Total return 5.19% 3.23% 2.12% 1.84% 2.15%
===============================================================================================================================
Net assets at end of year (000's) $ 59,192 $ 76,090 $ 112,833 $ 172,213 $ 252,772
===============================================================================================================================
Ratio of net expenses to average net assets 0.74% 0.72% 0.61% 0.46% 0.41%
Ratio of gross expenses to average net assets 0.82% 0.74% 0.66% 0.60% 0.62%
Ratio of net investment income to average net assets 4.62% 3.97% 3.18% 2.49% 1.65%
Portfolio turnover rate 21% 10% 46% 84% 200%
(A) Based on average shares outstanding.
See accompanying notes to financial statements.
85
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 15.14 $ 16.51 $ 15.30 $ 13.78 $ 9.87 $ 10.67
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.00(B) (0.03) (0.04) (0.04) --(C) 0.07
Net realized and unrealized gains
(losses) on investments 1.29 0.87 1.37 1.56 3.91 (0.78)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.29 0.84 1.33 1.52 3.91 (0.71)
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- -- -- 0.00(B) 0.00(B) (0.09)
Distributions from net realized gains (1.91) (2.21) (0.12) -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.91) (2.21) (0.12) -- -- (0.09)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 14.52 $ 15.14 $ 16.51 $ 15.30 $ 13.78 $ 9.87
================================================================================================================================
Total return (D) 8.44% 5.51% 8.69% 11.03%(E) 39.65% (6.78%)
================================================================================================================================
Net assets at end of period (000s) $ 69,337 $ 82,897 $ 95,939 $ 92,848 $ 87,520 $ 50,096
================================================================================================================================
Ratio of net expenses to average net assets 1.10% 1.06% 1.10% 1.08%(F) 1.20%(G) 1.28%(G)
Ratio of gross expenses to average net assets 1.26% 1.23% 1.24% 1.15%(F) 1.17% 1.38%
Ratio of net investment income (loss)
to average net assets 0.02% (0.16%) (0.27%) (0.26%)(F) (0.04%) 0.58%
Portfolio turnover rate 146% 145% 100% 72%(F) 149%(H) 93%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Amount rounds to less than $0.01 per share.
(C) Based on average shares outstanding.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Not annualized.
(F) Annualized.
(G) The ratio of expenses to average net assets excluding interest expense for
the periods ended October 31, 2003 and October 31, 2002 were 1.10% and
1.19%, respectively.
(H) Excludes effect of in-kind transfers and mergers.
See accompanying notes to financial statements.
86
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 16.43
- --------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.06)
Net realized and unrealized losses on investments (0.02)
- --------------------------------------------------------------------------------
Total from investment operations (0.08)
- --------------------------------------------------------------------------------
Distributions from net realized gains (1.91)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 14.44
================================================================================
Total return (B) (0.63%)(C)
================================================================================
Net assets at end of period (000s) $ 1
================================================================================
Ratio of net expenses to average net assets 1.68%(D)
Ratio of gross expenses to average net assets 3.77%(D)
Ratio of net investment loss to average net assets (0.48%)(D)
Portfolio turnover rate 146%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 21.55
- --------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.00)(B)
Net realized and unrealized losses on investments (1.07)
- --------------------------------------------------------------------------------
Total from investment operations (1.07)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 20.48
================================================================================
Total return (C) (4.97%)(D)
================================================================================
Net assets at end of period (000s) $ 8
================================================================================
Ratio of net expenses to average net assets 1.49%(E)
Ratio of gross expenses to average net assets 72.28%(E)
Ratio of net investment loss to average net assets (0.11%)(E)
Portfolio turnover rate 127%
(A) Represents the period from commencement of operations (July 23, 2007)
through September 30, 2007.
(B) Amount rounds to less than $0.01 per share.
(C) Total return shown excludes the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
87
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 21.55
- --------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.02)
Net realized and unrealized losses on investments (1.06)
- --------------------------------------------------------------------------------
Total from investment operations (1.08)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 20.47
================================================================================
Total return (B) (5.01%)(C)
================================================================================
Net assets at end of period (000s) $ 81
================================================================================
Ratio of net expenses to average net assets 2.09%(D)
Ratio of gross expenses to average net assets 2.37%(D)
Ratio of net investment loss to average net assets (0.69%)(D)
Portfolio turnover rate 127%
(A) Represents the period from commencement of operations (July 23, 2007)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 18.94 $ 18.35 $ 16.21 $ 12.72 $ 9.27
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.02) (0.08) 0.02 (0.04) (0.01)
Net realized and unrealized gains on investments 2.05 0.96 3.76 3.75 3.47
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.03 0.88 3.78 3.71 3.46
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.02) -- -- (0.01)
Distributions from net realized gains (0.49) (0.27) (1.64) (0.22) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.49) (0.29) (1.64) (0.22) (0.01)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 20.48 $ 18.94 $ 18.35 $ 16.21 $ 12.72
===============================================================================================================================
Total return 10.77% 4.84% 24.32% 29.36% 37.29%
===============================================================================================================================
Net assets at end of year (000s) $ 204,027 $ 249,431 $ 74,235 $ 14,533 $ 5,740
===============================================================================================================================
Ratio of net expenses to average net assets 1.58% 1.63%(A) 1.46% 1.45% 1.40%
Ratio of gross expenses to average net assets 1.71% 1.65% 2.04% 1.82% 3.64%
Ratio of net investment income (loss) to average net
assets (0.01%) (0.43%) 0.29% (0.23%) (0.26%)
Portfolio turnover rate 127% 99% 193% 272% 245%
(A) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.62%.
See accompanying notes to financial statements.
88
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
STRATEGIC VALUE AND HIGH INCOME FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 15.15
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.25
Net realized and unrealized losses on investments (0.05)
- --------------------------------------------------------------------------------
Total from investment operations 0.20
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.20)
Distributions from net realized gains (0.02)
- --------------------------------------------------------------------------------
Total distributions (0.22)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 15.13
================================================================================
Total return (B) 1.22%(C)
================================================================================
Net assets at end of period (000s) $ 150
================================================================================
Ratio of net expenses to average net assets 0.50%(D)
Ratio of gross expenses to average net assets 8.51%(D)
Ratio of net investment income to average net assets 2.63%(D)
Portfolio turnover rate 124%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
89
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
STRATEGIC VALUE AND HIGH INCOME FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 15.15
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.13
Net realized and unrealized losses on investments (0.03)
- --------------------------------------------------------------------------------
Total from investment operations 0.10
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.07)
Distributions from net realized gains (0.02)
- --------------------------------------------------------------------------------
Total distributions (0.09)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 15.16
================================================================================
Total return (B) 0.57%(C)
================================================================================
Net assets at end of period (000s) $ 5
================================================================================
Ratio of net expenses to average net assets 1.25%(D)
Ratio of gross expenses to average net assets 20.52%(D)
Ratio of net investment income to average net assets 1.69%(D)
Portfolio turnover rate 124%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
90
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
STRATEGIC VALUE AND HIGH INCOME FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003(A)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 14.44 $ 14.21 $ 14.01 $ 12.58 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.38 0.25 0.72 0.47 0.25
Net realized and unrealized gains on investments 0.55 0.32(B) 1.18 1.53 2.58
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.93 0.57 1.90 2.00 2.83
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.34) (0.25) (0.72) (0.47) (0.25)
Distributions from net realized gains (0.02) (0.09) (0.98) (0.10) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.36) (0.34) (1.70) (0.57) (0.25)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 15.01 $ 14.44 $ 14.21 $ 14.01 $ 12.58
===============================================================================================================================
Total return 6.46% 4.03% 14.22% 16.04% 28.57%(C)
===============================================================================================================================
Net assets at end of period (000s) $ 1,010 $ 2,542 $ 806 $ 706 $ 443
===============================================================================================================================
Ratio of net expenses to average net assets 0.25% 0.30%(D) 0.25% 0.25% 0.25%(E)
Ratio of gross expenses to average net assets 3.88% 2.62% 4.71% 1.36% 21.93%(E)
Ratio of net investment income to average net assets 2.07% 1.76% 5.51% 3.23% 3.27%(E)
Portfolio turnover rate 124% 84% 130% 411% 397%(E)
(A) Represents the period from commencement of operations (October 31, 2002)
through September 30, 2003.
(B) The amount shown for a share outstanding throughout the period does not
accord with the aggregate net losses on investments for the period because
of sale and repurchases of fund shares in relation to fluctuating market
value of the investment of the Fund.
(C) Not annualized.
(D) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 0.25%.
(E) Annualized.
See accompanying notes to financial statements.
91
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
TAX-EXEMPT BOND FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, OCTOBER 31,
-------------------------------------------------- ----------------------
2007 2006 2005 2004(A) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.43 $ 10.60 $ 10.78 $ 10.77 $ 10.71 $ 10.60
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.39 0.41 0.41 0.39 0.44 0.44
Net realized and unrealized gains
(losses) on investments (0.11) (0.05) (0.11) 0.05 0.09 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.28 0.36 0.30 0.44 0.53 0.56
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.39) (0.40) (0.41) (0.39) (0.44) (0.44)
Distributions from net realized gains (0.02) (0.13) (0.07) (0.04) (0.03) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.41) (0.53) (0.48) (0.43) (0.47) (0.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 10.30 $ 10.43 $ 10.60 $ 10.78 $ 10.77 $ 10.71
=================================================================================================================================
Total return (B) 2.71% 3.59% 2.78% 4.20%(C) 4.96% 5.41%
=================================================================================================================================
Net assets at end of period (000s) $103,808 $117,667 $111,575 $113,880 $111,470 $115,905
=================================================================================================================================
Ratio of net expenses to average net assets 0.70% 0.68% 0.69% 0.62%(D) 0.60% 0.60%
Ratio of gross expenses to average net assets 0.85% 0.82% 0.82% 0.75%(D) 0.74% 0.74%
Ratio of net investment income to average net
assets 3.79% 3.97% 3.80% 3.97%(D) 4.06% 4.19%
Portfolio turnover rate 12% 55% 38% 25%(D) 14% 14%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its
fiscal year end from October 31 to September 30.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
92
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 10.06 $ 10.08 $ 10.12 $ 10.17 $ 10.23
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.53 0.44 0.30 0.21 0.08(A)
Net realized and unrealized gains (losses)
on investments 0.01 (0.02) (0.03) (0.05) 0.06
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.54 0.42 0.27 0.16 0.14
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.52) (0.44) (0.31) (0.21) (0.19)
Distributions from net realized gains -- -- -- -- (0.01)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.52) (0.44) (0.31) (0.21) (0.20)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 10.08 $ 10.06 $ 10.08 $ 10.12 $ 10.17
===============================================================================================================================
Total return 5.48% 4.28% 2.67% 1.63% 1.40%
===============================================================================================================================
Net assets at end of year (000s) $ 146,045 $ 173,716 $ 305,222 $ 391,934 $ 462,567
===============================================================================================================================
Ratio of net expenses to average net assets 0.69% 0.69% 0.59% 0.46% 0.41%
Ratio of gross expenses to average net assets 0.75% 0.69% 0.62% 0.58% 0.62%
Ratio of net investment income to average net
assets 5.25% 4.30% 2.93% 2.08% 0.78%
Portfolio turnover rate 26% 38% 68% 44% 222%
(A) Based on average shares outstanding.
VALUE OPPORTUNITIES FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 19.51
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09
Net realized and unrealized gains on investments 1.95
- --------------------------------------------------------------------------------
Total from investment operations 2.04
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.12)
Distributions from net realized gains (3.58)
- --------------------------------------------------------------------------------
Total distributions (3.70)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 17.85
================================================================================
Total return (B) 11.90%(C)
================================================================================
Net assets at end of period (000s) $ 472
================================================================================
Ratio of net expenses to average net assets 1.31%(D)
Ratio of gross expenses to average net assets 1.31%(D)
Ratio of net investment income to average net assets 0.77%(D)
Portfolio turnover rate 62%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized
See accompanying notes to financial statements.
93
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2007 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 19.51
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05
Net realized and unrealized gains on investments 1.93
- --------------------------------------------------------------------------------
Total from investment operations 1.98
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.10)
Distributions from net realized gains (3.58)
- --------------------------------------------------------------------------------
Total distributions (3.68)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 17.81
================================================================================
Total return (B) 11.52%(C)
================================================================================
Net assets at end of period (000s) $ 423
================================================================================
Ratio of net expenses to average net assets 1.86%(D)
Ratio of gross expenses to average net assets 1.86%(D)
Ratio of net investment income to average net assets 0.20%(D)
Portfolio turnover rate 62%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized
VALUE OPPORTUNITIES FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 18.89 $ 19.00 $ 16.51 $ 14.18 $ 11.71
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.10 0.04 0.06 0.05
Net realized and unrealized gains on investments 2.52 1.38 3.90 2.84 2.47
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.70 1.48 3.94 2.90 2.52
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.18) (0.10) (0.04) (0.06) (0.05)
Distributions from net realized gains (3.58) (1.49) (1.41) (0.51) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (3.76) (1.59) (1.45) (0.57) (0.05)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 17.83 $ 18.89 $ 19.00 $ 16.51 $ 14.18
===============================================================================================================================
Total return 15.83% 8.35% 24.83% 20.75% 21.61%
===============================================================================================================================
Net assets at end of year (000s) $ 106,912 $ 100,038 $ 171,251 $ 59,714 $ 46,673
===============================================================================================================================
Ratio of net expenses to average net assets 1.12% 1.19%(A) 1.13% 1.08% 1.13%
Ratio of gross expenses to average net assets 1.17% 1.19% 1.13% 1.08% 1.13%
Ratio of net investment income to average net assets 1.03% 0.49% 0.24% 0.39% 0.43%
Portfolio turnover rate 62% 80% 75% 55% 67%
(A) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.18%.
See accompanying notes to financial statements.
94
- --------------------------------------------------------------------------------
Notes to Financial Statements
September 30, 2007
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Touchstone Funds Group Trust (the Trust), formerly Constellation Funds, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust consists of the following seventeen
mutual funds, individually, a Fund, and collectively, the Funds:
CURRENT FUND FORMERLY KNOWN AS
- -----------------------------------------------------------------------------------------------------------------------------------
Touchstone Clover Core Fixed Income Fund Constellation Clover Core Fixed Income Fund
Touchstone Diversified Growth Fund Constellation Pitcairn Diversified Growth Fund
Touchstone Diversified Small Cap Value Fund Constellation Clover Small Cap Value Fund
Touchstone Diversified Value Fund Constellation Pitcairn Diversified Value Fund
Touchstone Family Heritage(R) Fund Constellation Pitcairn Family Heritage(R) Fund
Touchstone Healthcare and Biotechnology Fund Constellation TIP Healthcare and Biotechnology Fund
Touchstone International Equity Fund Constellation International Equity Fund
Touchstone Mid Cap Fund Constellation TIP Mid Cap Fund
Touchstone Pitcairn Taxable Bond Fund Constellation Pitcairn Taxable Bond Fund
Touchstone Sands Capital Select Growth Fund Constellation Sands Capital Select Growth Fund
Touchstone Short Duration Fixed Income Fund Constellation Chartwell Short Duration Fixed Income Fund
Touchstone Small Cap Fund Constellation Pitcairn Small Cap Fund
Touchstone Small Cap Value Opportunities Fund Constellation Small Cap Value Opportunities Fund
Touchstone Strategic Value and High Income Fund Constellation Strategic Value and High Income Fund
Touchstone Tax-Exempt Bond Fund Constellation Pitcairn Tax-Exempt Bond Fund
Touchstone Ultra Short Duration Fixed Income Fund Constellation Chartwell Ultra Short Duration Fixed Income Fund
Touchstone Value Opportunities Fund Constellation Clover Core Value Fund
The Strategic Value and High Income Fund is a "Fund of Funds" and offers
shareholders the opportunity to invest in certain underlying affiliated
investment companies.
Each Fund is registered as a diversified portfolio of the Trust with the
exception of the Family Heritage(R) Fund, Healthcare and Biotechnology Fund,
Pitcairn Taxable Bond Fund, and Sands Capital Select Growth Fund, each of which
is non-diversified.
The Funds are registered to offer different classes of shares: Class A shares,
Class C shares, Class Y shares, Class Z shares, Class I shares, and Class II
shares. The assets of each Fund are segregated, and a shareholder's interest is
limited to the Fund in which shares are held. The Funds' prospectus provides a
description of each Fund's investment objectives, policies, and strategies along
with information on the classes of shares currently being offered.
Based on approval by the Board of Trustees, the following changes took place
effective November 20, 2006:
(i) Class II shares of the Diversified Growth Fund, Diversified Value Fund,
Family Heritage(R) Fund, Healthcare and Biotechnology Fund, International
Equity Fund, Small Cap Fund, and Tax-Exempt Bond Fund were each
redesignated as Class A shares.
(ii) Diversified Small Cap Value Fund, Strategic Value and High Income and
Value Opportunities Fund began offering Class A shares.
(iii) Diversified Small Cap Value Fund, Diversified Value Fund, Family
Heritage(R) Fund, Healthcare and Biotechnology Fund, International Equity
Fund, Small Cap Fund, Strategic Value and High Income Fund, and Value
Opportunities Fund, began offering Class C shares.
95
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
(iv) Class I shares of the Mid Cap Fund, Sands Capital Select Growth Fund, and
Strategic Value and High Income Fund were each redesignated as Class Y
Shares.
(v) Class I shares of the Diversified Small Cap Value Fund, Short Duration
Fixed Income Fund, Ultra Short Duration Fixed Income Fund, and Value
Opportunities Fund, were each redesignated as Class Z shares.
(vi) Class II shares of the Mid Cap Fund, Sands Capital Select Growth Fund, and
Small Cap Value Opportunities Fund, were each redesignated as Class Z
shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
SECURITY VALUATION -- The Funds' portfolio securities are valued as of the close
of the regular session of trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time). Portfolio securities traded on stock exchanges are valued
at the last sale price and portfolio securities quoted by NASDAQ are valued at
the NASDAQ Official Closing Price (NOCP). Securities not traded on a particular
day, or for which the last sale price is not readily available, are valued at
their last broker-quoted bid prices as obtained from one or more of the major
market makers for such securities by an independent pricing service. Debt
securities for which market quotations are readily available are valued at their
most recent bid prices as obtained from one or more of the major market makers
for such securities by an independent pricing service. Money market instruments
and other debt securities with a remaining maturity of less than 60 days are
valued at amortized cost, which approximates market. Securities for which market
quotations or the NOCP are not readily available are valued based on fair value
as determined by or under the direction of the Board of Trustees. Shares of
open-end mutual funds in which the Funds invest are valued at their respective
net asset values as reported by the underlying funds. The prices for foreign
securities are reported in local currency and converted to U.S. dollars using
currency exchange rates.
For securities that principally trade on a foreign market or exchange, a
significant gap in time can exist between the time of a particular security's
last trade and the time at which a Fund calculates its net asset value. The
closing prices of such securities may no longer reflect their market value at
the time the Fund calculates its net asset value if an event that could
materially affect the value of those securities (a "Significant Event") has
occurred between the time of the security's last close and the time that the
Fund calculates its net asset value. A Significant Event may relate to a single
issuer or to an entire market sector. If the advisor or sub-advisor of a Fund
becomes aware of a Significant Event that has occurred with respect to a
security or group of securities after the closing of the exchange or market on
which the security or securities principally trade, but before the time at which
the Fund calculates its net asset value, it may request that a Fair Value
Committee Meeting be called. In addition, the Funds' administrator or
sub-administrator monitors price movements among certain selected indices,
securities and/or baskets of securities that may be an indicator that the
closing prices received earlier from foreign exchanges or markets may not
reflect market value at the time the Fund calculates its net asset value. If
price movements in a monitored index or security exceed levels established by
the Advisor, the Sub-Administrator notifies the Advisor or Sub-Advisor for any
Fund holding the relevant securities that such limits have been exceeded. In
such event, the Advisor makes the determination whether a Fair Value Committee
meeting should be called based on the information provided.
The International Equity Fund also uses a third-party fair valuation vendor. The
vendor provides a fair value for foreign securities held by the Fund based on
certain factors and methodologies (involving, generally, tracking valuation
correlations between the U.S. market and each non-U.S. security). Values from
the fair value vendor are applied in the event that there is a movement in the
U.S. market that exceeds a specific threshold that has been established by the
Fair Value Committee. The Fair Value Committee has also established a
"confidence interval" which is used to determine the level of historical
correlation between the value of a specific foreign security and movements in
the U.S. market before a particular security will be fair valued when the
threshold is exceeded. In the event that the threshold established by the Fair
Value Committee is exceeded on a specific day, the Fund will value the non- U.S.
securities in its portfolio that exceed the applicable "confidence interval"
based upon the adjusted prices provided by the fair valuation vendor.
96
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The assets of the Strategic Value and High Income Fund consist of investments in
underlying affiliated investment companies, which are valued at their respective
net asset value per share.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles (GAAP) from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of September 30, 2007, the Trust does not believe the
adoption of SFAS No. 157 will impact the amounts reported in the financial
statements, however, additional disclosures may be required about the inputs
used to develop the measurements and the effect of certain of the measurements
reported on the statement of changes in net assets for a fiscal period.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International
Equity Fund are maintained in U.S. dollars and translated into U.S. dollars on
the following basis:
(1) market value of investment securities, assets and liabilities at the
current rate of exchange on the valuation date; and
(2) purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The International Equity Fund does not isolate that portion of gains and losses
on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
FORWARD FOREIGN CURRENCY CONTRACTS - The International Equity Fund may enter
into forward foreign currency contracts as hedges against specific transactions.
All commitments are "marked-to-market" daily at the applicable foreign exchange
rate, and any resulting unrealized gains or losses are recorded currently. The
International Equity Fund realizes gains or losses at the time forward contracts
are extinguished. Unrealized gains or losses on outstanding positions in forward
foreign currency contracts held at the close of the year are recognized as
ordinary income or loss for income tax purposes. As of September 30, 2007, the
International Equity Fund had the following forward foreign currency exchange
contracts outstanding as follows:
SETTLEMENT TO RECEIVE/ INITIAL MARKET NET UNREALIZED NET UNREALIZED
DATE TO DELIVER VALUE VALUE APPRECIATION DEPRECIATION
- -------------------------------------------------------------------------------------------------------
Contract to Buy
10/2/2007 2,000,000 HKD $257,756 $257,273 $ -- $ (483)
Contract to Sell
10/2/2007 292,624 AUD $257,756 $259,672 $ -- $ (1,916)
-------------- --------------
$ -- $ (2,399)
============== ==============
- -------------------------------------------------------------------------------------------------------
AUD - Australian Dollar
HKD - Hong Kong Dollar
97
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
PORTFOLIO SECURITIES LOANED -- Each Fund may lend its portfolio securities.
Lending portfolio securities exposes a Fund to the risk that the borrower may
fail to return the loaned securities or may not be able to provide additional
collateral or that the Fund may experience delays in recovery of the loaned
securities or loss of rights in the collateral if the borrower fails
financially. To minimize these risks, the borrower must agree to maintain
collateral marked to market daily, in the form of cash and/or liquid securities,
with the Fund's Custodian in an amount at least equal to the market value of the
loaned securities. As of September 30, 2007, the following Funds loaned
securities and received collateral as follows:
FAIR VALUE OF VALUE OF
SECURITIES COLLATERAL
LOANED RECEIVED
- --------------------------------------------------------------------------------
Clover Core Fixed Income Fund $ 431,982 $ 443,438
- --------------------------------------------------------------------------------
Diversified Growth Fund $ 8,571,315 $ 8,685,782
- --------------------------------------------------------------------------------
Diversified Small Cap Value Fund $ 20,579,210 $ 21,898,722
- --------------------------------------------------------------------------------
Diversified Value Fund $ 10,257,451 $ 10,473,364
- --------------------------------------------------------------------------------
Family Heritage(R) Fund $ 3,833,606 $ 3,970,776
- --------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ 3,847,724 $ 3,930,823
- --------------------------------------------------------------------------------
Mid Cap Fund $ 49,789,776 $ 52,880,591
- --------------------------------------------------------------------------------
Sands Capital Select Growth Fund $ 71,549,018 $ 74,360,152
- --------------------------------------------------------------------------------
Small Cap Fund $ 6,813,000 $ 7,190,007
- --------------------------------------------------------------------------------
Small Cap Value Opportunities Fund $ 14,039,502 $ 14,703,983
- --------------------------------------------------------------------------------
Value Opportunities Fund $ 11,068,728 $ 11,407,980
- --------------------------------------------------------------------------------
All collateral received as cash and securities is received, held and
administered by the Funds' custodian for the benefit of the Funds in the
applicable custody account or other account established for the purpose of
holding collateral.
Funds participating in securities lending receive compensation in the form of
fees, or retain a portion of interest or dividends on the investment of any cash
received as collateral. The Funds also continue to receive interest or dividends
on the securities loaned. The loans are secured by collateral valued at least
equal, at all times, to the fair value of the securities loaned plus accrued
interest. Unrealized gain or loss on the fair value of the securities loaned
that may occur during the term of the loan is recognized by the Funds. The Funds
have the right under the lending agreement to recover the securities from the
borrower on demand.
DELAYED DELIVERY TRANSACTIONS -- The Funds may purchase or sell securities on a
when-issued or delayed delivery basis. These transactions involve a commitment
by the Funds to purchase or sell securities for a predetermined price or yield,
with payment and delivery taking place beyond the customary settlement period.
When delayed delivery purchases are outstanding, the Funds will set aside liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery basis, the Funds assume the rights and risks of
ownership of the security, including the risk of price and yield fluctuations,
and take such fluctuations into account when determining net asset value. The
Funds may dispose of or renegotiate a delayed delivery transaction after it is
entered into, and may sell when-issued securities before they are delivered,
which may result in a capital gain or loss. When the Funds have sold a security
on a delayed delivery basis, the Funds do not participate in future gains and
losses with respect to the security.
98
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- Repurchase agreements, which are collateralized by U.S.
Government obligations, are valued at cost, which together with accrued interest
approximates market. At the time each Fund enters into a repurchase agreement,
the seller agrees that the value of the underlying collateral securities,
including accrued interest, will at all times be equal to or exceed the face
amount of the repurchase agreement.
SHARE VALUATION -- The net asset value per share of each class of shares of each
Fund is calculated daily by dividing the total value of a Fund's assets
attributable to that class, less liabilities attributable to that class, by the
number of outstanding shares of that class.
The maximum offering price per share of Class A shares of the Funds is equal to
the net asset value per share plus a sales load equal to 6.10% of the net asset
value (or 5.75% of the offering price). The maximum offering price per share of
Class C, Class Y, Class Z, Class I, and Class II shares of the Funds is equal to
the net asset value per share.
The redemption price per share of each class of shares of the Funds is equal to
the net asset value per share. However, Class C shares of the Funds are subject
to a contingent deferred sales load of 1.00% of the original purchase price if
redeemed within a one-year period from the date of purchase.
INVESTMENT INCOME -- Interest income is accrued as earned and includes, where
applicable, the pro-rata amortization of premium or accretion of discount.
Dividend income is recorded on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS -- The Healthcare and Biotechnology Fund,
International Equity Fund, Mid Cap Fund, and Small Cap Value Opportunities Fund
declare and distribute net investment income, if any, annually, as a dividend to
shareholders. The Diversified Growth Fund, Diversified Small Cap Value Fund,
Diversified Value Fund, Family Heritage(R) Fund, Sands Capital Select Growth
Fund, Small Cap Fund, Strategic Value and High Income Fund, and Value
Opportunities Fund declare and distribute net investment income, if any,
quarterly, as a dividend to shareholders. The Clover Core Fixed Income Fund,
Pitcairn Taxable Bond Fund, Short Duration Fixed Income Fund, Tax-Exempt Bond
Fund, and Ultra Short Duration Fixed Income Fund declare net investment income
daily and distribute it monthly, as a dividend to shareholders. Any net realized
capital gains on sales of securities for all Funds are distributed to
shareholders at least annually.
ALLOCATIONS -- Investment income earned, realized capital gains and losses, and
unrealized appreciation and depreciation for the Funds are allocated daily to
each class of shares based upon its proportionate share of total net assets of
the Fund. Class specific expenses are charged directly to the class incurring
the expense. Common expenses, which are not attributable to a specific class,
are allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund. Expenses not directly billed to a Fund are
allocated proportionally among all Funds daily in relation to net assets of each
Fund or another reasonable measure. In addition to the Fund's direct expense,
shareholders of the Strategic Value and High Income Fund also bear a
proportionate share of the underlying funds' expenses.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
ESTIMATES -- The preparation of financial statements in conformity with U.S.
GAAP 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.
99
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and U.S. Government
securities) were as follows for the year ended September 30, 2007:
DIVERSIFIED
CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED
FIXED INCOME GROWTH VALUE VALUE
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
Purchases of investment securities $ 818,982 $ 74,645,350 $ 176,834,695 $193,190,145
- -----------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $3,064,939 $ 85,812,191 $ 280,984,424 $189,522,272
- -----------------------------------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL
HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
Purchases of investment securities $21,021,966 $ 74,292,115 $ 94,402,760 $ 942,032,241
- -----------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $27,026,315 $ 83,132,583 $ 121,577,629 $ 569,290,204
- -----------------------------------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION
TAXABLE SELECT FIXED SMALL
BOND GROWTH INCOME CAP
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
Purchases of investment securities $7,160,682 $ 133,417,234 $ -- $ 115,939,430
- -----------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $15,105,311 $ 208,607,791 $ -- $ 136,514,832
- -----------------------------------------------------------------------------------------------------------
SMALL CAP STRATEGIC ULTRA
VALUE VALUE AND HIGH TAX-EXEMPT SHORT DURATION
OPPORTUNITIES INCOME BOND FIXED-INCOME
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------
Purchases of investment securities $264,311,264 $ 2,324,388 $ 12,739,252 $ --
- -----------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $338,046,568 $ 3,793,362 $ 21,981,102 $ --
- -----------------------------------------------------------------------------------------------------------
VALUE
OPPORTUNITIES
FUND
- -----------------------------------------------------
Purchases of investment securities $62,365,117
- -----------------------------------------------------
Proceeds from sales and maturities $69,129,965
100
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of the Advisor (Touchstone
Advisors, Inc.), the Underwriter (Touchstone Securities, Inc.) and/or JPMorgan
Chase Bank, N.A. ("JPMorgan" and the Sub-Administrator and Transfer Agent to the
Funds). The Advisor, Underwriter and Integrated Investment Services, Inc.
("Integrated" and the former administrator, transfer agent and fund accountant
to the Funds) were each wholly-owned indirect subsidiaries of The Western and
Southern Life Insurance Company (Western-Southern). On April 1, 2007,
Western-Southern sold Integrated to JPMorgan.
MANAGEMENT & EXPENSE LIMITATIONS AGREEMENTS
The Advisor provides general investment supervisory services for the Funds,
under terms of an Advisory Agreement. Under the Advisory Agreement, the Funds
pay the Advisor a fee, which is computed and accrued daily and paid monthly, at
an annual rate based on average daily net assets as shown in the table below.
Effective January 1, 2007, the Advisor entered into an Expense Limitation
Agreement to contractually limit operating expenses of the Funds. The maximum
operating expense limit in any year with respect to the Funds is based on a
percentage of the average daily net assets of the Funds. The Advisor has agreed
to waive advisory fees and reimburse expenses in order to maintain expense
limitations for the Funds as follows through January 1, 2008:
"OTHER TOTAL
ADVISORY EXPENSE" EXPENSE
FEES CAP CAP
- --------------------------------------------------------------------------------
Clover Core Fixed Income Fund - Class I 0.45% 0.40% 0.85%
Diversified Growth Fund - Class A 0.70 0.15 1.10
Diversified Small Cap Value Fund - Class A 0.85 0.35 1.45
Diversified Small Cap Value Fund - Class C 0.85 0.35 2.20
Diversified Small Cap Value Fund - Class Z 0.85 0.35 1.45
Diversified Value Fund - Class A 0.70 0.15 1.10
Diversified Value Fund - Class C 0.70 0.15 1.85
Family Heritage(R) Fund - Class A 0.90 0.15 1.30
Family Heritage(R) Fund - Class C 0.90 0.15 2.05
Healthcare and Biotechnology Fund - Class A 1.00 0.30 1.55
Healthcare and Biotechnology Fund - Class C 1.00 0.30 2.30
International Equity Fund - Class A 0.95 0.25(1) 1.45(1)
International Equity Fund - Class C 0.95 0.25(1) 2.20(1)
Mid Cap Fund - Class A 0.80 0.10 1.15
Mid Cap Fund - Class C 0.80 0.10 1.90
Mid Cap Fund - Class Y 0.80 0.10 0.90
Mid Cap Fund - Class Z 0.80 0.10 1.15
Pitcairn Taxable Bond Fund - Class II 0.40 0.24 0.89
Sands Capital Select Growth Fund - Class Y 0.85 0.25 1.10
Sands Capital Select Growth Fund - Class Z 0.85 0.25 1.35
Short Duration Fixed Income Fund - Class Z 0.25 0.24 0.74
Small Cap Fund - Class A 0.70 0.15(1) 1.10(1)
Small Cap Fund - Class C 0.70 0.15(1) 1.85(1)
Small Cap Value Opportunities Fund - Class A 0.95 0.30 1.50
101
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
"OTHER TOTAL
ADVISORY EXPENSE" EXPENSE
FEES CAP CAP
- --------------------------------------------------------------------------------
Small Cap Value Opportunities Fund - Class C 0.95% 0.30% 2.25%
Small Cap Value Opportunities Fund - Class Z 0.95 0.30 1.50
Strategic Value and High Income Fund - Class A 0.10 0.15 0.50
Strategic Value and High Income Fund - Class C 0.10 0.15 1.25
Strategic Value and High Income Fund - Class Y 0.10 0.15 0.25
Tax-Exempt Bond Fund - Class A 0.30 0.15 0.70
Ultra Short Duration Fixed Income Fund - Class Z 0.25 0.19 0.69
Value Opportunities Fund - Class A 0.74 0.35 1.34
Value Opportunities Fund - Class C 0.74 0.35 2.09
Value Opportunities Fund - Class Z 0.74 0.35 1.34
(1) This fee waiver obligation may be reduced by up to 0.01% to the extent
that the Fund earns revenues from securities lending activities. See the
Funds' Prospectus for additional information.
In addition to the base advisory fee shown above, for the Sands Capital Select
Growth Fund, a performance fee adjustment will be added to or subtracted from
the base advisory fee depending on the performance of the Fund in relation to
the investment performance of the Fund's benchmark index, for the preceding
twelve month period, as follows:
BASE ANNUAL
ADVISORY ADJUSTMENT BENCHMARK BENCHMARK
FEES RATE INDEX THRESHOLD(1)
- ----------------------------------------------------------------------------------------------------------
Russell 1000
Sands Capital Select Growth Fund 0.85% +/-0.15% Growth Index +/-2.50%
(1) See the Funds' Prospectus and Statement of Additional Information for more
information regarding the Fund's benchmark performance.
The performance fee adjustment was not applied until the Advisory Agreement had
been in effect for twelve months which was on February 28, 2007. For the fiscal
year ended September 30, 2007, the Advisor's base fee was reduced by $339,953 as
a result of the performance fee adjustment.
102
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
During the year ended September 30, 2007, the Advisor waived investment advisory
fees, administration fees and/or reimbursed expenses of the Funds as follows:
INVESTMENT OTHER OPERATING
ADVISORY ADMINISTRATION EXPENSES
FEES WAIVED FEES WAIVED REIMBURSED
- ----------------------------------------------------------------------------------------
Clover Core Fixed Income Fund $ -- $ 24,325 $ --
- ----------------------------------------------------------------------------------------
Diversified Growth Fund $ -- $ 146,538 $ --
- ----------------------------------------------------------------------------------------
Diversified Small Cap Value Fund $ -- $ 8,514 $ --
- ----------------------------------------------------------------------------------------
Diversified Value Fund $ -- $ 198,094 $ --
- ----------------------------------------------------------------------------------------
Family Heritage(R) Fund $ -- $ 130,698 $ --
- ----------------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ -- $ 65,060 $ --
- ----------------------------------------------------------------------------------------
International Equity Fund $ -- $ 282,392 $ 318,444
- ----------------------------------------------------------------------------------------
Mid Cap Fund $ -- $ 484,841 $ --
- ----------------------------------------------------------------------------------------
Pitcairn Taxable Bond Fund $ -- $ 41,943 $ --
- ----------------------------------------------------------------------------------------
Sands Capital Select Growth Fund $ -- $ 243,779 $ --
- ----------------------------------------------------------------------------------------
Short Duration Fixed Income Fund $ -- $ 56,171 $ --
- ----------------------------------------------------------------------------------------
Small Cap Fund $ -- $ 124,672 $ --
- ----------------------------------------------------------------------------------------
Small Cap Value Opportunities Fund $ -- $ 278,835 $ --
- ----------------------------------------------------------------------------------------
Strategic Value and High Income Fund $ 68,292 $ 3,248 $ 173
- ----------------------------------------------------------------------------------------
Tax-Exempt Bond Fund $ -- $ 164,892 $ --
- ----------------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund $ -- $ 97,596 $ --
- ----------------------------------------------------------------------------------------
Value Opportunities Fund $ -- $ 50,202 $ --
- ----------------------------------------------------------------------------------------
The Advisor has entered into investment sub-advisory agreements with the
following parties:
PITCAIRN INVESTMENT MANAGEMENT AXA ROSENBERG INVESTMENT MANAGEMENT LLC
Diversified Growth Fund International Equity Fund
Diversified Value Fund
Family Heritage(R) Fund DIAMOND HILL CAPITAL MANAGEMENT, INC.
Pitcairn Taxable Bond Fund Small Cap Value Opportunities Fund
Small Cap Fund
Tax-Exempt Bond Fund SANDS CAPITAL MANAGEMENT, LLC
Sands Capital Select Growth Fund
CLOVER CAPITAL MANAGEMENT, INC.
Clover Core Fixed Income Fund TURNER INVESTMENT PARTNERS, INC.
Diversified Small Cap Value Fund Healthcare and Biotechnology Fund
Value Opportunities Fund Mid Cap Fund
Small Cap Value Opportunities Fund
CHARTWELL INVESTMENT PARTNERS
Short Duration Fixed Income Fund JAMES INVESTMENT RESEARCH, INC.
Ultra Short Duration Fixed Income Fund Small Cap Value Opportunities Fund
The Advisor, not the Funds, pays sub-advisory fees to each Sub-Advisor.
103
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
ADMINISTRATION AGREEMENT
The Advisor provides administrative services for the Funds. Effective January 1,
2007, for its services, the Advisor receives an annual fee of 0.20% of the
aggregate average daily net assets of the Trust, Touchstone Strategic Trust,
Touchstone Tax-Free Trust, and Touchstone Investment Trust (excluding
Institutional Money Market Fund) up to and including $6 billion; 0.16% of the
next $4 billion of aggregate average daily net assets; and 0.12% of the
aggregate average daily net assets of all such assets in excess of $10 billion.
However, through February 28, 2008, the administration fees are limited to an
annual fee of 0.146% of the aggregate average daily net assets of the Trust. The
fee is allocated among the Funds on the basis of relative daily net assets.
Prior to January 1, 2007, the Advisor received an annual fee of 0.15% of the
aggregate average daily net assets of the Trust up to $2 billion and 0.12% of
the aggregate average daily net assets of the Trust over $2 billion. The fee was
allocated among the Funds on the basis of relative daily net assets.
TRANSFER AGENT AGREEMENT
Under the terms of the Transfer Agent Agreement, effective November 20, 2006,
between the Trust and JPMorgan Chase Bank, N.A. (JPMorgan and formerly
Integrated Investment Services, Inc.), JPMorgan maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, JP Morgan receives a monthly fee per
shareholder account from each Fund. In addition, each Fund pays JPMorgan
out-of-pocket expenses including, but not limited to, postage and supplies.
Prior to November 20, 2006, DST Systems, Inc. served as the transfer agent and
dividend disbursing agent for the Funds under a transfer agency agreement with
the Trust.
104
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
For the year ended September 30, 2007, the following Funds reimbursed the
Advisor for amounts paid to third parties that provide sub-transfer agency and
other administrative services to the Funds. These amounts are included in
transfer agent fees on the Statements of Operations:
AMOUNT
- -------------------------------------------------
Diversified Growth Fund $ 1,484
Diversified Small Cap Value Fund $ 84,447
Diversified Value Fund $ 3,885
Family Heritage(R) Fund $ 24
Healthcare and Biotechnology Fund $ 34,579
International Equity Fund $ 20,876
Mid Cap Fund $ 781
Pitcairn Taxable Bond Fund $ 1,092
Sands Capital Select Growth Fund $194,642
Short Duration Fixed Income Fund $ 36,518
Small Cap Fund $ 2,198
Small Cap Value Opportunities Fund $ 86,826
Tax-Exempt Bond Fund $ 2,626
Ultra Short Duration Fixed Income Fund $ 36,618
Value Opportunities Fund $ 14,476
Prior to November 20, 2006, the Funds could earn cash management credits, from
DST Systems Inc., which could be used to offset transfer agent expenses. These
amounts are listed as fees paid indirectly on the Statements of Operations.
PLANS OF DISTRIBUTION
The Trust has adopted a Distribution and Shareholder Services Plan for Class A
shares of the Diversified Growth Fund, Diversified Small Cap Value Fund,
Diversified Value Fund, Family Heritage(R) Fund, Healthcare and Biotechnology
Fund, International Equity Fund, Mid Cap Fund, Small Cap Fund, Small Cap Value
Opportunities Fund, Strategic Value and High Income Fund, Tax-Exempt Bond Fund,
and Value Opportunities Fund (Class A Plan) under which each Fund may directly
or indirectly bear expenses relating to the distribution of Class A shares of
the Trust and for providing shareholder services to Class A shares. The Fund
will incur and/or reimburse expenses for distribution and shareholder service of
Class A shares at an annual rate not to exceed 0.25% of the average daily net
assets of Class A shares.
The Trust has adopted a Distribution and Shareholder Services Plan for Class C
shares of the Diversified Small Cap Value Fund, Diversified Value Fund, Family
Heritage(R) Fund, Healthcare and Biotechnology Fund, International Equity Fund,
Mid Cap Fund, Small Cap Fund, Small Cap Value Opportunities Fund, Strategic
Value and High Income Fund, and Value Opportunities Fund (Class C Plan) under
which each Fund may directly or indirectly bear expenses relating to the
distribution of Class C shares of the Trust and for providing shareholder
services to Class C shares. The Fund will incur and/or reimburse expenses for
distribution and shareholder services of Class C shares at an annual rate not to
exceed 0.75% and 0.25%, respectively, of the average daily net assets of Class C
shares.
The Trust has adopted a Shareholder Services Plan for Class Z shares of the
Small Cap Value Opportunities Fund, Mid Cap Fund, and Sands Capital Select
Growth Fund, and effective February 1, 2007, the Diversified Small Cap Value
Fund, Short Duration Fixed Income Fund, Ultra Short Duration Fixed Income Fund,
and Value Opportunities Fund (Class Z Plan) under which each Fund may directly
or indirectly bear expenses for providing shareholder services. The Fund will
incur and/or reimburse expense for shareholder service of Class Z shares at an
annual rate not to exceed 0.25% of the average daily net assets of Class Z
shares.
105
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The Trust has adopted a Distribution and Shareholder Services Plan for Class II
shares of the Pitcairn Taxable Bond Fund (Class II Plan). Under the Class II
Plan, the Advisor currently receives fees equal to 0.25% of each Fund's Class II
shares' average daily net assets to provide or procure shareholder services. The
Class II Plan may directly or indirectly bear expenses related to the
distribution of Class II shares at an annual rate not to exceed 0.75% of the
average daily net assets of Class II shares; however, no fees are currently
being paid for distribution expenses.
UNDERWRITING AGREEMENT
Touchstone Securities, Inc. (the Underwriter) is the Funds' principal
underwriter and, as such, acts as the exclusive agent for distribution of the
Funds' shares. Under the terms of the Underwriting Agreement between the Trust
and Underwriter, the Underwriter earned the following from underwriting and
broker commissions on the sale of shares of the following Funds for the year
ended September 30, 2007:
AMOUNT
- -----------------------------------------------
Diversified Growth Fund $ 44
Diversified Small Cap Value Fund $ 1,239
Diversified Value Fund $ 441
Family Heritage(R) Fund $ 52
Healthcare and Biotechnology Fund $13,820
International Equity Fund $ 5,504
Mid Cap Fund $ 445
Small Cap Fund $ 533
Strategic Value and High Income Fund $ 976
Tax-Exempt Bond Fund $ 1,581
Value Opportunities Fund $ 4,660
In addition, the Underwriter collected $44 and $99 of contingent deferred sales
charges on the redemption of Class C shares of the International Equity Fund and
Value Opportunities Fund, respectively, during the year ended September 30,
2007.
COMPLIANCE SERVICES AGREEMENT
Under the terms of the Compliance Services Agreement between the Trust and
JPMorgan, JPMorgan provides certain compliance services to the Trust for a fee,
including developing and assisting in implementing a compliance program for
JPMorgan on behalf of the Funds and providing administrative support services to
the Funds' Compliance Program and Chief Compliance Officer.
106
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
AFFILIATED INVESTMENTS
Investments made by the Strategic Value and High Income Fund in other Funds are
considered to be investments in Affiliated Companies as defined under section
2(a)(3) of the 1940 Act.
A summary of the investment and income activity of the Strategic Value and High
Income Fund in each Affiliated Company's shares is as follows:
SHARE ACTIVITY
----------------------------------------
BALANCE BALANCE REALIZED VALUE
AFFILIATED INVESTMENT 09/30/06 PURCHASES SALES 09/30/07 DIVIDENDS GAIN(LOSS) 09/30/07
- --------------------------------------------------------------------------------------------------------------------------
Touchstone Funds Group Trust
Clover Core Fixed Income Fund 54,204 1,212 (55,416) -- $ 7,162 $ 742 $ --
- --------------------------------------------------------------------------------------------------------------------------
Touchstone Funds Group Trust
Diversified Small Cap Value Fund -- 67,747 (32,815) 34,932 $ -- $ 5,505 $ 682,923
- --------------------------------------------------------------------------------------------------------------------------
Touchstone Investment Trust
High Yield Fund -- 98,061 46,609 51,452 $ 29,344 $ (2,114) $ 472,328
- --------------------------------------------------------------------------------------------------------------------------
Touchstone Funds Group Trust
Small Cap Value Opportunities Fund 79,627 2,389 (82,016) -- $ -- $ 217,765 $ --
- --------------------------------------------------------------------------------------------------------------------------
Touchstone Funds Group Trust
Ultra Short Duration Fixed Income Fund 51,908 1,233 (53,141) -- $ 7,850 $ 3,556 $ --
- --------------------------------------------------------------------------------------------------------------------------
107
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes in
Net Assets are the result of the following capital share transactions for the
periods shown:
CLOVER CORE DIVERSIFIED DIVERSIFIED
FIXED INCOME GROWTH SMALL CAP
FUND FUND VALUE FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT.30, SEPT. 30,
2007 2006 2007 2006 2007(A) 2006
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- 118,600 1,181,515 13,314 --
Shares reinvested -- -- 1,129 1,269 175 --
Shares redeemed -- -- (1,825,424) (2,030,910) (3,002) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- (1,705,695) (848,126) 10,487 --
Shares outstanding, beginning of period -- -- 19,248,700 20,096,826 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 17,543,005 19,248,700 10,487 --
===================================================================================================================================
CLASS C
Shares issued -- -- -- -- 3,821 --
Shares reinvested -- -- -- -- 239 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- -- -- 4,060 --
Shares outstanding, beginning of period -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- 4,060 --
===================================================================================================================================
CLASS Z
Shares issued -- -- -- -- 835,178 1,478,125
Shares reinvested -- -- -- -- 3,697,084 2,558,122
Shares redeemed -- -- -- -- (5,758,231) (9,992,145)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- -- -- (1,225,969) (5,955,898)
Shares outstanding, beginning of year -- -- -- -- 10,328,659 16,284,557
- -----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- -- -- 9,102,690 10,328,659
===================================================================================================================================
CLASS I
Shares issued 299,959 497,849 -- -- -- --
Shares reinvested 96,670 166,712 -- -- -- --
Shares redeemed (609,712) (1,034,234) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding (213,083) (369,673) -- -- -- --
Shares outstanding, beginning of year 2,263,052 2,632,725 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 2,049,969 2,263,052 -- -- -- --
===================================================================================================================================
(A) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
108
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND
DIVERSIFIED VALUE FAMILY HERITAGE(R) BIOTECHNOLOGY
FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2007(A) 2006 2007(A) 2006 2007(A) 2006
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued 156,793 639,769 532,813 211,849 577,797 1,623,755
Shares reinvested 250,243 357,813 13,759 2,838 118,145 110,261
Shares issued in connection with acquisition(B) 4,385,381 -- -- -- -- --
Shares redeemed (1,283,826) (1,137,859) (1,088,810) (846,932) (1,244,584) (1,975,402)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 3,508,591 (140,277) (542,238) (632,245) (548,642) (241,386)
Shares outstanding, beginning of year 13,239,858 13,380,135 7,844,588 8,476,833 3,463,459 3,704,845
- -----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 16,748,449 13,239,858 7,302,350 7,844,588 2,914,817 3,463,459
===================================================================================================================================
CLASS C
Shares issued 476 -- 521 -- 77,729 --
Shares reinvested 73 -- -- -- 2 --
Shares redeemed -- -- -- -- (1,024) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 549 -- 521 -- 76,707 --
Shares outstanding, beginning of period -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 549 -- 521 -- 76,707 --
===================================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
(B) See Footnote 9 in notes to financial statements.
109
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY MID CAP PITCAIRN TAXABLE BOND
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2007(A) 2006 2007(B) 2006(C) 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued 597,932 1,472,241 12,263 -- -- --
Shares reinvested 190,932 18,380 -- -- -- --
Shares redeemed (2,964,722) (1,188,479) (476) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (2,175,858) 302,142 11,787 -- -- --
Shares outstanding, beginning of period 14,927,721 14,625,579 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 12,751,863 14,927,721 11,787 -- -- --
====================================================================================================================================
CLASS C
Shares issued 61,670 -- 2,002 -- -- --
Shares reinvested 85 -- -- -- -- --
Shares redeemed (406) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 61,349 -- 2,002 -- -- --
Shares outstanding, beginning of period -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 61,349 -- 2,002 -- -- --
====================================================================================================================================
CLASS Y
Shares issued -- -- 23,351,224 5,683,473 -- --
Shares reinvested -- -- 5,229 4,315 -- --
Shares redeemed -- -- (2,141,213) (45,711) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 21,215,240 5,642,077 -- --
Shares outstanding, beginning of year -- -- 5,696,876 54,799 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 26,912,116 5,696,876 -- --
====================================================================================================================================
CLASS Z
Shares issued -- -- 938,463 22,956 -- --
Shares reinvested -- -- 117 -- -- --
Shares redeemed -- -- (109,748) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 828,832 22,956 -- --
Shares outstanding, beginning of period -- -- 22,956 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 851,788 22,956 -- --
====================================================================================================================================
CLASS II
Shares issued -- -- -- -- 272,618 451,916
Shares reinvested -- -- -- -- 38,773 48,542
Shares redeemed -- -- -- -- (955,861) (789,947)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- -- -- (644,470) (289,489)
Shares outstanding, beginning of year -- -- -- -- 4,277,682 4,567,171
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- -- -- 3,633,212 4,277,682
====================================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
(B) Classes A and C represent the period from commencement of operations (May
14, 2007) through September 30, 2007.
(C) Class Z represents the period from commencement of operations (April 24,
2006) through September 30, 2006.
110
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT SHORT DURATION FIXED SMALL CAP
GROWTH FUND INCOME FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT.30, SEPT. 30,
2007 2006 2007 2006 2007(A) 2006
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- -- -- 95,077 236,192
Shares reinvested -- -- -- -- 224,032 280,488
Shares redeemed -- -- -- -- (1,018,102) (852,883)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- -- -- (698,993) (336,203)
Shares outstanding, beginning of year -- -- -- -- 5,474,858 5,811,061
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- -- -- 4,775,865 5,474,858
====================================================================================================================================
CLASS C
Shares issued -- -- -- -- 61 --
Shares reinvested -- -- -- -- 8 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- -- -- 69 --
Shares outstanding, beginning of period -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- 69 --
====================================================================================================================================
CLASS Y
Shares issued 8,624,881 18,234,418 -- -- -- --
Shares redeemed (9,208,013) (4,787,555) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (583,132) 13,446,863 -- -- -- --
Shares outstanding, beginning of year 23,938,361 10,491,498 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 23,355,229 23,938,361 -- -- -- --
====================================================================================================================================
CLASS Z
Shares issued 11,118,165 35,871,834 225,346 288,649 -- --
Shares reinvested -- -- 302,626 401,811 -- --
Shares redeemed (17,560,077) (8,490,899) (2,289,520) (4,330,971) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (6,441,912) 27,380,935 (1,761,548) (3,640,511) -- --
Shares outstanding, beginning of year 48,291,429 20,910,494 7,793,486 11,433,997 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 41,849,517 48,291,429 6,031,938 7,793,486 -- --
====================================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
111
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE STRATEGIC VALUE AND TAX-EXEMPT BOND
OPPORTUNITIES FUND HIGH INCOME FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT.30, SEPT. 30,
2007(A) 2006 2007(B) 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued 375 -- 10,145 -- 695,892 1,754,327
Shares reinvested -- -- 74 -- 13,839 47,266
Shares redeemed -- -- (270) -- (1,911,353) (1,043,394)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 375 -- 9,949 -- (1,201,622) 758,199
Shares outstanding, beginning of period -- -- -- -- 11,283,934 10,525,735
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 375 -- 9,949 -- 10,082,312 11,283,934
====================================================================================================================================
CLASS C
Shares issued 3,942 -- 346 -- -- --
Shares outstanding, beginning of period -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 3,942 -- 346 -- -- --
====================================================================================================================================
CLASS Y
Shares issued -- -- 3,986 171,775 -- --
Shares reinvested -- -- 2,341 2,318 -- --
Shares redeemed -- -- (115,037) (54,863) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- (108,710) 119,230 -- --
Shares outstanding, beginning of year -- -- 175,982 56,752 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 67,272 175,982 -- --
====================================================================================================================================
CLASS Z
Shares issued 3,458,155 12,145,070 -- -- -- --
Shares reinvested 284,028 96,491 -- -- -- --
Shares redeemed (6,948,731) (3,119,676) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (3,206,548) 9,121,885 -- -- -- --
Shares outstanding, beginning of year 13,167,229 4,045,344 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 9,960,681 13,167,229 -- -- -- --
====================================================================================================================================
(A) Classes A and C represent the period from commencement of operations (July
23, 2007) through September 30, 2007.
(B) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
112
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE OPPORTUNITIES
FIXED INCOME FUND FUND
- ---------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2007 2006 2007(A) 2006
- ---------------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- 29,890 --
Shares reinvested -- -- 134 --
Shares redeemed -- -- (3,596) --
- ---------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 26,428 --
Shares outstanding, beginning of period -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 26,428 --
=========================================================================================================
CLASS C
Shares issued -- -- 25,258 --
Shares reinvested -- -- 201 --
Shares redeemed -- -- (1,695) --
- ---------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 23,764 --
Shares outstanding, beginning of year -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 23,764 --
=========================================================================================================
CLASS Z
Shares issued 2,872,100 3,667,531 985,780 1,178,316
Shares reinvested 765,481 938,389 1,102,429 534,579
Shares redeemed (6,416,115) (17,613,166) (1,388,951) (5,427,049)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (2,778,534) (13,007,246) 699,258 (3,714,154)
Shares outstanding, beginning of period 17,271,940 30,279,186 5,297,161 9,011,315
- ---------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 14,493,406 17,271,940 5,996,419 5,297,161
=========================================================================================================
(A) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
6. FEDERAL TAX INFORMATION
It is each Fund's policy to continue to comply with the special provisions of
the Internal Revenue Code applicable to regulated investment companies. As
provided therein, in any fiscal year in which a Fund so qualifies and
distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made. In order to avoid
imposition of the excise tax applicable to regulated investment companies, it is
also each Fund's intention to declare and pay as dividends in each calendar year
at least 98% of its net investment income (earned during the calendar year) and
98% of its net realized capital gains (earned during the twelve months ending
October 31) plus undistributed amounts from prior years.
113
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
THE TAX CHARACTER OF DISTRIBUTIONS PAID FOR THE PERIODS ENDED SEPTEMBER 30, 2007
AND 2006 WAS AS FOLLOWS:
CLOVER CORE DIVERSIFIED DIVERSIFIED
FIXED INCOME GROWTH SMALL CAP VALUE
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006 2007 2006
- -------------------------------------------------------------------------------------------------------------------
From ordinary income $ 961,663 $ 1,134,635 $ 110,282 $ 121,417 $15,097,780 $ --
From long-term capital gains -- 521,373 -- -- 59,766,378 60,867,084
- -------------------------------------------------------------------------------------------------------------------
$ 961,663 $ 1,656,008 $ 110,282 $ 121,417 $74,864,158 $60,867,084
- -------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FAMILY HEALTHCARE AND
VALUE HERITAGE BIOTECHNOLOGY
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006 2007 2006
- -------------------------------------------------------------------------------------------------------------------
From ordinary income $ 3,249,112 $ 5,641,097 $ 1,156,587 $ 227,134 $ -- $ 955,188
From long-term capital gains 27,434,139 10,084,845 -- -- 1,868,704 830,889
- -------------------------------------------------------------------------------------------------------------------
$30,683,251 $15,725,942 $ 1,156,587 $ 227,134 $ 1,868,704 $ 1,786,077
- -------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PITCAIRN
EQUITY MID CAP TAXABLE BOND
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006 2007 2006
- -------------------------------------------------------------------------------------------------------------------
From ordinary income $ 1,945,684 $ 1,747,820 $ 1,512,452 $ 38,696 $ 1,835,524 $ 2,110,784
From long-term capital gains 6,593,273 -- -- 23,995 -- --
- -------------------------------------------------------------------------------------------------------------------
$ 8,538,957 $ 1,747,820 $ 1,512,452 $ 62,691 $ 1,835,524 $ 2,110,784
- -------------------------------------------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
SELECT GROWTH FIXED INCOME SMALL CAP
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006 2007 2006
- -------------------------------------------------------------------------------------------------------------------
From ordinary income $ -- $ -- $ 3,020,621 $ 3,966,690 $ -- $ --
From long-term capital gains -- -- -- -- 10,131,080 12,655,814
- -------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ 3,020,621 $ 3,966,690 $10,131,080 $12,655,814
- -------------------------------------------------------------------------------------------------------------------
114
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE AND
VALUE OPPORTUNITIES HIGH INCOME TAX-EXEMPT BOND
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006 2007 2006
- -------------------------------------------------------------------------------------------------------------------
From tax-exempt income $ -- $ -- $ -- $ -- $ 4,294,666 $ 4,395,127
From ordinary income 2,373,051 627,630 36,492 32,346 -- 36,413
From long-term capital gains 3,683,069 1,140,748 3,434 1,372 185,535 1,409,043
- -------------------------------------------------------------------------------------------------------------------
$ 6,056,120 $ 1,768,378 $ 39,926 $ 33,718 $ 4,480,201 $ 5,840,583
- -------------------------------------------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE
FIXED INCOME OPPORTUNITIES
FUND FUND
- ----------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
- ----------------------------------------------------------------------------------------
From ordinary income $ 8,051,978 $ 9,755,714 $ 6,672,464 $ 2,017,717
From long-term capital gains -- -- 12,760,280 7,763,361
- ----------------------------------------------------------------------------------------
$ 8,051,978 $ 9,755,714 $19,432,744 $ 9,781,078
The following information is computed on a tax basis for each item as of
September 30, 2007:
DIVERSIFIED
CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED FAMILY HEALTHCARE AND
FIXED INCOME GROWTH VALUE VALUE HERITAGE BIOTECHNOLOGY
FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 20,133,188 $ 119,031,391 $ 187,438,518 $ 176,159,023 $ 70,323,090 $ 49,362,508
- -----------------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 83,484 21,024,209 22,625,692 33,529,460 21,651,905 10,195,738
Gross unrealized depreciation (364,172) (6,454,905) (11,349,666) (1,707,944) (4,537,399) (323,212)
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) (280,688) 14,569,304 11,276,026 31,821,516 17,114,506 9,872,526
Post-October losses (79,667) -- -- -- -- (3,803)
Capital loss carryforward (292,352) (62,292,438) -- -- (6,194,771) --
Undistributed ordinary income 2,319 -- 14,495,138 -- -- 1,403,820
Undistributed long-term capital gains -- -- 25,142,473 3,123,341 -- 3,375,957
Other temporary differences (2,586) -- -- (506,000) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated earnings (deficit) $ (652,974) $ (47,723,134) $ 50,913,637 $ 34,438,857 $ 10,919,735 $ 14,648,500
===================================================================================================================================
115
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
PITCAIRN SANDS SHORT
INTERNATIONAL TAXABLE CAPITAL SELECT DURATION
EQUITY MID CAP BOND GROWTH FIXED INCOME SMALL CAP
FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 124,290,418 $ 520,516,124 $ 35,523,102 $ 525,618,974 $ 59,762,633 $ 70,697,039
- -----------------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 33,558,583 43,090,789 923,928 150,193,629 212,137 8,249,076
Gross unrealized depreciation (3,536,476) (12,096,952) (353,554) (21,048,779) (862,495) (2,550,720)
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) 30,022,107 30,993,837 570,374 129,144,850 (650,358) 5,698,356
Post-October losses -- (22,027) -- -- (293,890) --
Capital loss carryforward -- -- (706,147) (42,616,146) (3,970,327) --
Undistributed ordinary income 9,413,237 4,685,264 99,750 -- 4,430 3,929,410
Undistributed long-term capital gains 7,936,982 18,958 -- -- -- 3,499,494
Other temporary difference -- -- (99,916) -- (4,430) --
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated earnings (deficit) $ 47,372,326 $ 35,676,032 $ (135,939) $ 86,528,704 $ (4,914,575) $ 13,127,260
===================================================================================================================================
SMALL CAP STRATEGIC ULTRA SHORT
VALUE VALUE AND TAX-EXEMPT DURATION VALUE
OPPORTUNITIES HIGH INCOME BOND FIXED INCOME OPPORTUNITIES
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 210,496,264 $ 1,173,059 $ 99,510,969 $ 145,398,638 $ 105,038,095
- --------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 19,494,475 3,753 3,760,492 1,442,607 16,187,653
Gross unrealized depreciation (10,477,196) (21,561) (570,098) (825,041) (1,097,564)
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) 9,017,279 (17,808) 3,190,394 617,566 15,090,089
Capital loss carryforward -- -- -- (7,241,873) --
Undistributed ordinary income 4,172,469 69,656 111,052 25,839 12,109
Undistributed long-term capital gains 11,986,449 191,715 354,931 -- 8,244,968
Undistributed tax-exempt income -- -- 286,463 -- --
Other temporary difference -- (323) (286,463) (25,835) (19,650)
- --------------------------------------------------------------------------------------------------------------------------
Accumulated earnings (deficit) $ 25,176,197 $ 243,240 $ 3,656,377 $ (6,624,303) $ 23,327,516
==========================================================================================================================
The difference between the tax cost of portfolio investments and the financial
statement cost is primarily due to wash sales.
As of September 30, 2007, the Funds had the following capital loss carryforwards
for federal income tax purposes.
AMOUNT EXPIRATION DATE
- ----------------------------------------------------------------------------
Clover Core Fixed Income Fund $ 4,682 2014
287,670 2015
-------------
$ 292,352
-------------
Diversified Growth Fund $ 13,685,911 2009
35,398,494 2010
11,331,155 2011
1,876,878 2013
-------------
$ 62,292,438
-------------
Family Heritage Fund $ 4,367,662 2011
1,827,109 2013
-------------
$ 6,194,771
-------------
116
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Pitcairn Taxable Bond Fund $ 473,083 2010
129,200 2014
103,864 2015
-------------
$ 706,147
-------------
Sands Capital Select Growth Fund $ 8,044,957 2009
12,366,467 2010
5,719,519 2011
2,692,298 2014
13,792,905 2015
-------------
$ 42,616,146
-------------
Short Duration Fixed Income Fund $ 1,994,293 2012
96,050 2013
1,027,850 2014
852,134 2015
-------------
$ 3,970,327
-------------
Ultra Short Duration Fixed Income Fund $ 6,705,867 2012
371,187 2014
164,819 2015
-------------
$ 7,241,873
-------------
The capital loss carryforwards may be utilized in future years to offset net
realized capital gains, if any, prior to distributing such gains to
shareholders.
During the year ended September 30, 2007, the funds utilized capital loss
carryforwards as follows:
AMOUNT
- --------------------------------------------------------------------------------
Diversified Growth Fund $3,656,477
Family Heritage Fund $4,984,006
Mid Cap Fund $ 8,814
117
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Certain reclassifications, the result of permanent differences between financial
statement and income tax reporting requirements have been made to the components
of capital. These reclassifications have no impact on the net assets or net
asset value per share of the Funds and are designed to present the Funds'
capital accounts on a tax basis. The following reclassifications of net
investment loss have been made to the following Funds for the year ended
September 30, 2007:
ACCUMULATED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME (LOSS) GAINS (LOSSES)
- -------------------------------------------------------------------------------------
Clover Core Fixed Income Fund $ 3 $ 3,351 $ (3,354)
Diversified Growth Fund $ (35,993) $ 35,993 $ --
Diversified Small Cap Value Fund $ 5 $ 452,011 $ (452,016)
Diversified Value Fund $ -- $ (483,924) $ 483,924
Family Heritage Fund $ (9,797) $ 9,797 $ --
Healthcare and Biotechnology Fund $ -- $ 310,313 $ (310,313)
International Equity Fund $ 3 $ 564,892 $ (564,895)
Mid Cap Fund $ 33 $ 287,050 $ (287,083)
Pitcairn Taxable Bond Fund $ 133 $ (133) $ --
Sands Capital Select Growth Fund $(4,662,714) $ 4,662,715 $ (1)
Short Duration Fixed Income Fund $ 2 $ (39,817) $ 39,815
Small Cap Fund $ -- $ 96,488 $ (96,488)
Small Cap Value Opportunities Fund $ -- $ 36,621 $ (36,621)
Tax-Exempt Bond Fund $ 42,413 $ (4) $ (42,409)
Ultra Short Duration Fixed Income Fund $ -- $ (140,497) $ 140,497
Value Opportunities Fund $ (2) $ -- $ 2
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretatin No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Funds' tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet a more-likely-than-not threshold would be recorded
as a tax expense in the current year. Adoption of FIN 48 is required for fiscal
years beginning after December 15, 2006 and is to be applied to all open tax
years as of the effective date. Recent SEC guidance allows implementing FIN 48
in fund NAV calculations as late as the Fund's last NAV calculation in the first
required financial statement reporting period. As a result, the Funds will
incorporate FIN 48 in their semi annual report on March 31, 2008. Management is
in the process of determing the impact of adoption.
DIVIDENDS RECEIVED DEDUCTION
For corporate shareholders, the following ordinary dividends paid during the
year ended September 30, 2007 qualify for the corporate dividends received
deduction:
Diversified Growth Fund 74%
Diversified Value Fund 86%
Family Heritage Fund 95%
Mid Cap Fund 34%
Strategic Value and High Income Fund 21%
Value Opportunities Fund 18%
118
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
The Funds indemnify the Trust's Officers and Trustees for certain liabilities
that might arise from their performance of their duties to the Funds.
Additionally, in the normal course of business, the Funds enter into contracts
that contain a variety of representations and warranties and which provide
general indemnifications. The Funds' maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made against the
Funds that have not yet occurred. However, based on experience, the Funds expect
the risk of loss to be remote.
8. CONCENTRATIONS/RISKS
Certain Funds invest a high percentage of their assets in specific sectors of
the market in order to achieve a potentially greater investment return. As a
result, the Funds may be more susceptible to economic, political, and regulatory
developments in a particular sector of the market, positive or negative, and may
experience increased volatility on the Fund's net asset value and magnified
effect on the total return.
The International Equity Fund invests in securities of foreign issuers in
various countries. These investments may involve certain considerations and
risks not typically associated with investments in the United States of America,
as a result of, among other factors, the possibility of future political and
economic developments and the level of governmental supervision and regulation
of securities markets in the respective countries.
9. SPECIAL MEETING OF SHAREHOLDERS/ACQUISITION
On July 13, 2007, a Special Meeting of Shareholders was held to approve or
disapprove an Agreement and Plan of Reorganization providing for the transfer of
all of assets and liabilities of the Pitcairn Select Value Fund to the
Diversified Value Fund in exchange for shares of the Diversified Value Fund and
the subsequent liquidation of the Pitcairn Select Value Fund.
The acquisition was approved as follows:
NUMBER OF VOTES
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
4,895,423 -- --
The following is a summary of shares outstanding, net assets, net asset value
per share, unrealized appreciation and realized gain immediately before and
after the reorganization:
BEFORE AFTER
REORGANIZATION REORGANIZATION
- --------------------------------------------------------------------------------
PITCAIRN DIVERSIFIED DIVERSIFIED
SELECT VALUE VALUE VALUE
FUND FUND FUND
- --------------------------------------------------------------------------------
SHARES:
Class A 4,828,626 12,243,103 17,071,729
Class C -- 549 549
NET ASSETS:
Class A $ 53,968,888 $156,169,584 $210,138,472
Class C $ -- $ 6,763 $ 6,763
NET ASSET VALUE:
Class A $ 11.18 $ 12.31 $ 12.31
Class C $ -- $ 12.32 $ 12.32
UNREALIZED APPRECIATION $ 10,452,450 $ 30,014,913 $ 40,467,363
ACCUMULATED NET REALIZED GAIN $ -- $ 3,027,167 $ 3,027,167
119
- --------------------------------------------------------------------------------
Portfolio of Investments
Clover Core Fixed Income Fund - September 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 43.1%
$ 295,496 FHLMC ARM Pool #Q10089 (A),
4.51%, 1/1/36 $ 292,264
951,808 FHLMC CMO Ser 3225 Class
EO PO (B), .00%, 10/15/36 725,759
763,651 FHLMC CMO/REMIC Ser 3100
PO (B), .00%, 1/15/36 603,769
301,010 FHLMC CMO/REMIC Ser 3139,
Class YB, 4.38%, 4/15/15 289,732
707,209 FHLMC Gold #08168, 6.00%, 12/1/36 708,176
539,431 FHLMC Pool #C01844, 4.50%, 4/1/34 501,238
621,350 FHLMC Pool #G08062, 5.00%, 6/1/35 593,679
54,955 FNMA CMO/REMIC Ser 1994-17,
Class H, 6.00%, 2/25/09 55,177
503,449 FNMA Pool #254759, 4.50%, 6/1/18 486,040
621,077 FNMA Pool #255111, 5.50%, 3/1/34 609,583
12,991 FNMA Pool #369214, 5.00%, 4/1/09 12,916
47,729 FNMA Pool #535301, 6.50%, 4/1/15 49,046
740,487 FNMA Pool #689022, 5.00%, 5/1/33 708,843
421,791 FNMA Pool #694431, 5.00%, 3/1/18 414,612
329,599 FNMA Pool #738783, 7.00%, 2/1/25 342,802
297,608 FNMA Pool #G11570, 5.00%, 4/1/19 292,549
697,245 GNMA CMO PAC-1(11) Ser 2006-26
PO (B), .00%, 6/20/36 543,489
115,031 GNMA CMO/REMIC Ser 2004-59,
Class DA, 5.00%, 6/16/34 113,174
4,201 GNMA Pool #196477, 10.00%, 4/15/10 4,549
14,358 GNMA Pool #202886, 8.00%, 3/15/17 15,171
4,962 GNMA Pool #221235, 8.50%, 7/15/17 5,328
13,730 GNMA Pool #331786, 8.00%, 8/15/22 14,570
76,350 GNMA Pool #376400, 6.50%, 2/15/24 78,323
63,003 GNMA Pool #439478, 7.00%, 1/15/27 66,076
152,036 GNMA Pool #457921, 5.50%, 12/15/28 150,318
94,378 GNMA Pool #462622, 6.50%, 3/15/28 96,846
43,795 GNMA Pool #533974, 6.50%, 5/15/32 44,865
113,555 GNMA Pool #570400, 6.50%, 9/15/31 116,386
32,259 GNMA Pool #781029, 6.50%, 5/15/29 33,096
151,038 GNMA Pool #781096, 6.50%, 12/15/28 155,010
73,165 GNMA Pool #781231, 7.00%, 12/15/30 75,860
117,991 GNMA Pool #781276, 6.50%, 4/15/31 121,002
70,244 GNMA Pool #781328, 7.00%, 9/15/31 73,589
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 8,393,837
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 18.8%
FINANCIALS -- 7.9%
650,000 Lehman Brothers Holdings,
MTN (A), 8.00%, 9/5/16 636,999
500,000 Morgan Stanley, MTN (A),
7.50%, 10/23/18 495,000
450,000 SLM, MTN Ser A, 5.38%, 5/15/14 392,711
- -------------------------------------------------------------------------------
1,524,710
- -------------------------------------------------------------------------------
INDUSTRIALS -- 3.3%
650,000 Toyota Motor Credit, MTN (A),
8.00%, 9/1/16 643,500
- -------------------------------------------------------------------------------
UTILITIES -- 3.0%
350,000 AES, 9.38%, 9/15/10 369,250
215,000 Consolidated Natural Gas,
Ser C, 6.25%, 11/1/11 221,068
- -------------------------------------------------------------------------------
590,318
- -------------------------------------------------------------------------------
ENERGY -- 2.6%
475,000 XTO Energy, 7.50%, 4/15/12 513,240
- -------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.0%
367,000 Conagra Foods, 7.88%, 9/15/10 395,140
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 3,666,908
- -------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 20.9%
1,150,000 U.S. Treasury Bond, 6.25%, 8/15/23 1,321,152
175,000 U.S. Treasury Bond, 4.50%, 2/15/36 165,908
500,000 U.S. Treasury Note, 4.88%, 4/30/11 512,930
1,000,000 U.S. Treasury Note, 4.25%, 8/15/13 998,984
100,000 U.S. Treasury Note, 4.00%, 2/15/15 97,289
980,000 U.S. Treasury Note, 4.63%, 2/15/17+ 984,517
- -------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 4,080,780
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 9.6%
300,000 Countrywide Alternative Loan
Trust, Ser 2005-J13, Class 2A8,
5.50%, 11/25/35 280,010
500,000 CS First Boston Mortgage Securities,
Ser 2005-C5, Class A3 (A),
5.10%, 8/15/38 493,622
500,000 Merrill Lynch Mortgage
Investors, Ser 1998-C1, Class A3 (A),
6.72%, 11/15/26 530,694
600,000 Wachovia Bank Commercial
Mortgage Trust, Ser 2003-C5,
Class B, 4.11%, 6/15/35 563,023
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES $ 1,867,349
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATION -- 4.2%
750,000 TVA, 5.88%, 4/1/36 $ 811,492
- -------------------------------------------------------------------------------
MUNICIPAL BOND -- 2.0%
VIRGINIA -- 2.0%
400,000 State Housing Authority RB,
Taxable Rental, Ser C,
5.00%, 5/1/13 $ 392,740
- -------------------------------------------------------------------------------
120
- --------------------------------------------------------------------------------
Clover Core Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- -------------------------------------------------------------------------------
INVESTMENT FUND -- 2.3%
443,438 BlackRock Institutional Money
Market Trust, 5.37% * ^ $ 443,438
- -------------------------------------------------------------------------------
CASH EQUIVALENT -- 1.0%
195,956 BlackRock TempFund,
Institutional Shares, 5.34% ^ $ 195,956
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 101.9%
(Cost $20,133,180) $ 19,852,500
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (1.9%) (367,177)
- -------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 19,485,323
===============================================================================
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $431,982.
* Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2007.
(B) Zero Coupon security - The rate reported was the effective yield at the
time of purchase.
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
PO - Principal Only Security
MTN - Medium Term Note
RB - Revenue Bond
REMIC - Real Estate Mortgage Investment Conduit
TVA - Tennessee Valley Authority
See accompanying notes to financial statements.
121
- --------------------------------------------------------------------------------
Portfolio of Investments
Diversified Growth Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 100.0% SHARES VALUE
- -------------------------------------------------------------------------
TECHNOLOGY -- 20.9%
ADC Telecommunications* 74,823 $ 1,467,279
Apple* 13,528 2,077,089
Cisco Systems* 149,531 4,950,972
Hewlett-Packard 73,927 3,680,825
Intel 93,906 2,428,409
International Business Machines 20,923 2,464,729
Microsoft 140,436 4,137,246
Oracle* 173,813 3,763,051
QUALCOMM 28,212 1,192,239
- -------------------------------------------------------------------------
26,161,839
- -------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 20.7%
Accenture+ 57,568 2,317,112
Best Buy 56,141 2,583,609
Brinker International 34,515 947,092
Dollar Tree Stores* 44,401 1,800,017
eBay* 46,561 1,816,810
Google, Class A* 4,632 2,627,595
Jarden* 31,778 983,211
Marriott International - Class A 42,233 1,835,869
NIKE, Class B 34,264 2,009,926
Omnicom Group 43,368 2,085,567
Staples 67,508 1,450,747
Wal-Mart Stores 63,819 2,785,698
Walt Disney 76,627 2,635,203
- -------------------------------------------------------------------------
25,878,456
- -------------------------------------------------------------------------
HEALTH CARE -- 17.2%
Aetna 46,441 2,520,353
Amgen* 40,622 2,297,987
Barr Pharmaceuticals* 20,703 1,178,208
Biogen Idec* 28,226 1,872,231
Eli Lilly 63,791 3,631,621
Johnson & Johnson 39,685 2,607,305
Patterson* 68,378 2,640,074
Stryker 42,010 2,888,607
WellPoint* 23,074 1,821,000
- -------------------------------------------------------------------------
21,457,386
- -------------------------------------------------------------------------
PRODUCER DURABLES -- 12.1%
Applied Materials 101,145 2,093,702
Caterpillar 23,993 1,881,771
Danaher 15,520 1,283,659
Goodrich 43,490 2,967,322
Novellus Systems* 66,863 1,822,685
Parker Hannifin+ 23,301 2,605,751
United Technologies 30,018 2,415,849
- -------------------------------------------------------------------------
15,070,739
- -------------------------------------------------------------------------
ENERGY -- 6.9%
Chesapeake Energy 44,421 1,566,284
Global Industries* 57,441 1,479,680
National-Oilwell Varco* 21,995 3,178,277
Unit* 22,209 1,074,916
Valero Energy 20,198 1,356,902
- -------------------------------------------------------------------------
8,656,059
- -------------------------------------------------------------------------
CONSUMER STAPLES -- 6.7%
Altria Group 32,475 2,257,987
PepsiCo 57,953 4,245,636
Procter & Gamble 27,258 1,917,328
- -------------------------------------------------------------------------
8,420,951
- -------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.8%
American International Group 17,778 1,202,682
First Marblehead+ 30,359 1,151,517
Goldman Sachs Group 10,244 2,220,284
Host Hotels & Resorts+ 53,818 1,207,676
Morgan Stanley Dean Witter & Co. 22,539 1,419,957
- -------------------------------------------------------------------------
7,202,116
- -------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 3.5%
Alcoa 34,953 1,367,361
Celanese 37,962 1,479,759
E.I. du Pont de Nemours 30,815 1,527,192
- -------------------------------------------------------------------------
4,374,312
- -------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 3.3%
FedEx 17,790 1,863,502
Harley-Davidson+ 27,900 1,289,259
Norfolk Southern 17,868 927,528
- -------------------------------------------------------------------------
4,080,289
- -------------------------------------------------------------------------
UTILITIES -- 1.9%
AES* 61,574 1,233,943
Telephone & Data Systems 17,523 1,086,426
- -------------------------------------------------------------------------
2,320,369
- -------------------------------------------------------------------------
OTHER -- 1.0%
iShares Russell 1000 Growth Index Fund 9,841 606,402
iShares S&P MidCap 400 Growth Index Fund 7,570 685,995
- -------------------------------------------------------------------------
1,292,397
- -------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 124,914,913
- -------------------------------------------------------------------------
122
- --------------------------------------------------------------------------------
Diversified Growth Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
INVESTMENT FUND -- 7.0%
BlackRock Institutional Money
Market Trust, 5.37% ** ^ 8,685,782 $ 8,685,782
- -------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 107.0%
(Cost $119,031,391) $ 133,600,695
LIABILITIES IN EXCESS OF OTHER ASSETS -- (7.0%) (8,723,014)
- -------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 124,877,681
=========================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $8,571,315.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
See accompanying notes to financial statements.
123
- --------------------------------------------------------------------------------
Portfolio of Investments
Diversified Small Cap Value Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.1% SHARES VALUE
- --------------------------------------------------------------------------
FINANCIAL SERVICES -- 29.8%
American Campus Communities 45,620 $ 1,336,210
Anworth Mortgage Asset+ 189,700 1,022,483
Argo Group International Holdings* 22,490 978,540
Central Pacific Financial 27,100 791,320
City Holding 43,190 1,572,548
Columbia Banking System 89,845 2,858,867
Delphi Financial Group, Class A 24,585 993,726
FelCor Lodging Trust 87,845 1,750,751
FirstMerit 117,335 2,318,539
Flushing Financial 83,380 1,400,784
Glacier Bancorp+ 40,350 908,682
Hanover Insurance Group 40,625 1,795,219
HCC Insurance Holdings+ 44,105 1,263,167
Highwoods Properties 26,300 964,421
Home Properties 22,160 1,156,309
Horace Mann Educators 71,775 1,414,685
IBERIABANK 34,065 1,793,522
Independent Bank 42,820 1,271,754
IPC Holdings+ 41,075 1,185,014
Lexington Realty Trust+ 76,600 1,532,766
LTC Properties 57,765 1,367,298
National Penn Bancshares+ 107,105 1,752,242
National Retail Properties+ 51,825 1,263,494
Navigators Group* 28,005 1,519,271
Northwest Bancorp+ 46,905 1,334,916
Old National Bancorp 54,100 896,437
Pacific Capital Bancorp 64,350 1,692,405
Phoenix Companies 116,725 1,646,990
Potlatch 26,196 1,179,606
Prosperity Bancshares 32,200 1,067,752
Sotheby's 38,790 1,853,773
Sovran Self Storage 19,450 891,588
Sterling Bancshares 126,887 1,447,781
Sun Communities 37,800 1,137,024
United America Indemnity, Class A* 38,535 828,888
Waddell & Reed Financial, Class A 68,525 1,852,231
West Coast Bancorp 31,910 906,563
Westamerica Bancorp+ 17,225 857,977
Zenith National Insurance 23,825 1,069,504
- --------------------------------------------------------------------------
52,875,047
- --------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 14.4%
99 Cents Only Stores* 85,400 877,058
AFC Enterprises* 55,000 827,750
Brown Shoe 43,392 841,805
CEC Entertainment* 25,850 694,590
Consolidated Graphics* 14,010 879,688
Dollar Thrifty Automotive Group* 29,400 1,019,886
Dollar Tree Stores* 31,305 1,269,105
Elizabeth Arden* 64,920 1,750,242
Ethan Allen Interiors+ 30,100 983,969
Harris Interactive* 172,285 742,548
HOT Topic* 103,700 773,602
Kellwood+ 30,315 516,871
Kforce* 71,425 918,526
K-Swiss, Class A 53,750 1,231,413
Lee Enterprises 46,450 723,227
Maidenform Brands* 55,905 887,771
Multimedia Games* 47,010 400,525
OfficeMax 21,130 724,125
Pantry*+ 14,350 367,791
Scholastic* 37,100 1,293,305
School Specialty* 33,650 1,165,300
Service Corporation International 84,000 1,083,600
Steiner Leisure* 14,375 623,875
Tractor Supply* 24,450 1,126,901
United Online 94,525 1,418,819
Wet Seal, Class A*+ 204,800 792,576
Wolverine World Wide 34,350 941,190
Zale* 36,275 839,404
- --------------------------------------------------------------------------
25,715,462
- --------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 13.0%
Ampco-Pittsburgh 29,220 1,150,684
Barnes Group 41,050 1,310,316
Buckeye Technologies* 72,205 1,093,184
Calgon Carbon*+ 150,575 2,102,026
Chemtura 114,775 1,020,350
Cleveland-Cliffs+ 16,900 1,486,693
Compass Minerals International 37,275 1,268,841
EMCOR Group* 58,175 1,824,368
Ferro 46,025 919,580
Graphic Packaging* 209,670 947,708
Innospec 39,295 895,140
OM Group* 18,405 971,968
Quanta Services* 76,640 2,027,127
Royal Gold 39,925 1,307,544
RTI International Metals* 12,275 972,917
Stillwater Mining* 101,500 1,044,435
URS* 29,815 1,683,057
Washington Group International* 13,595 1,193,777
- --------------------------------------------------------------------------
23,219,715
- --------------------------------------------------------------------------
TECHNOLOGY -- 11.8%
Atmel* 214,865 1,108,703
Black Box 35,025 1,497,669
Brocade Communications Systems* 127,385 1,090,416
CommScope* 34,270 1,721,724
CSG Systems International* 36,995 786,144
Digital River* 17,920 801,920
Fairchild Semiconductor International* 71,105 1,328,241
Finisar*+ 290,675 813,890
j2 Global Communications* 32,040 1,048,669
Macrovision* 46,500 1,145,295
Mentor Graphics* 40,790 615,929
MicroStrategy, Class A* 8,930 708,506
Omnivision Technologies*+ 24,775 563,136
124
- --------------------------------------------------------------------------------
Diversified Small Cap Value Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.1% (CONTINUED) SHARES VALUE
- ---------------------------------------------------------------------------
TECHNOLOGY -- 11.8% (CONTINUED)
Oplink Communications* 70,825 $ 967,470
Perot Systems, Class A* 57,700 975,707
SeaChange International* 173,955 1,203,769
SPSS* 27,305 1,123,328
Sykes Enterprises* 59,960 995,936
Vignette* 63,000 1,264,410
Zoran* 67,315 1,359,763
- ---------------------------------------------------------------------------
21,120,625
- ---------------------------------------------------------------------------
PRODUCER DURABLES -- 6.4%
Bucyrus International, Class A 40,680 2,966,793
CTS 56,335 726,722
EnPro Industries* 26,425 1,072,855
Flowserve 12,595 959,487
Itron*+ 17,415 1,620,814
Mine Safety Appliances 15,825 745,516
NICE Systems ADR* 37,885 1,357,798
Orbital Sciences* 67,360 1,498,086
SymmetriCom, Inc.* 98,150 461,305
- ---------------------------------------------------------------------------
11,409,376
- ---------------------------------------------------------------------------
UTILITIES -- 6.0%
AGL Resources 32,030 1,269,029
Atmos Energy 43,775 1,239,708
Avista 70,825 1,441,288
Black Hills+ 33,675 1,381,349
Cleco 51,995 1,313,914
MGE Energy 26,150 874,456
Nicor 24,340 1,044,186
ONEOK 18,365 870,501
Westar Energy 51,875 1,274,050
- ---------------------------------------------------------------------------
10,708,481
- ---------------------------------------------------------------------------
ENERGY -- 5.6%
Alpha Natural Resources* 43,225 1,004,117
Cabot Oil & Gas 68,705 2,415,667
Forest Oil*+ 54,019 2,324,977
Foundation Coal Holdings 39,420 1,545,264
Petrohawk* 90,825 1,491,347
Whiting Petroleum* 26,110 1,160,590
- ---------------------------------------------------------------------------
9,941,962
- ---------------------------------------------------------------------------
HEALTH CARE -- 4.7%
Albany Molecular Research* 69,950 1,056,245
CONMED* 33,070 925,629
Greatbatch* 42,075 1,118,774
Invacare 58,800 1,374,744
MedCath* 60,925 1,673,001
PSS World Medical* 65,795 1,258,658
Salix Pharmaceuticals*+ 85,050 1,056,321
- ---------------------------------------------------------------------------
8,463,372
- ---------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 4.2%
ArvinMeritor+ 55,525 933,931
HUB Group, Class A* 37,280 1,119,518
Pacer International 37,740 718,947
Republic Airways Holdings* 59,110 1,251,359
Skywest 44,425 1,118,177
Tenneco* 77,330 2,398,003
- ---------------------------------------------------------------------------
7,539,935
- ---------------------------------------------------------------------------
CONSUMER STAPLES -- 3.2%
Church & Dwight+ 25,695 1,208,693
Spartan Stores 45,235 1,019,145
TreeHouse Foods* 73,235 1,981,006
Universal 30,150 1,475,843
- ---------------------------------------------------------------------------
5,684,687
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 176,678,662
- ---------------------------------------------------------------------------
INVESTMENT FUND -- 12.3%
BlackRock Institutional Money
Market Trust, 5.37% ** ^ 21,898,722 $ 21,898,722
- ---------------------------------------------------------------------------
CASH EQUIVALENT -- 0.1%
BlackRock TempFund, Institutional
Shares, 5.34% ^ 137,160 $ 137,160
- ---------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 111.5%
(Cost $187,302,679) $ 198,714,544
LIABILITIES IN EXCESS OF OTHER ASSETS -- (11.5%) (20,434,480)
- ---------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 178,280,064
===========================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $20,579,210.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
ADR - American Depository Receipt
See accompanying notes to financial statements.
125
- --------------------------------------------------------------------------------
Portfolio of Investments
Diversified Value Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 100.1% SHARES VALUE
- ----------------------------------------------------------------------------
FINANCIAL SERVICES -- 31.1%
American International Group 94,357 $ 6,383,251
Bear Stearns+ 31,325 3,847,023
Capital One Financial 71,854 4,773,261
CapitalSource 111,250 2,251,700
Citigroup 187,572 8,753,986
Everest Re Group 33,814 3,727,655
Goldman Sachs Group 11,060 2,397,144
Host Hotels & Resorts+ 111,198 2,495,283
JPMorgan Chase 201,253 9,221,413
RenaissanceRe Holdings 28,151 1,841,357
TCF Financial 168,663 4,415,597
Torchmark 52,845 3,293,300
Washington Mutual 36,360 1,283,872
Wells Fargo 189,329 6,743,899
- ----------------------------------------------------------------------------
61,428,741
- ----------------------------------------------------------------------------
ENERGY -- 15.2%
Anadarko Petroleum 82,702 4,445,233
Chevron Texaco 62,545 5,852,961
ConocoPhillips 78,826 6,918,558
Exxon Mobil 97,020 8,980,171
Marathon Oil 66,161 3,772,500
- ----------------------------------------------------------------------------
29,969,423
- ----------------------------------------------------------------------------
UTILITIES -- 12.7%
American Electric Power 83,338 3,840,215
NSTAR 137,632 4,790,970
SCANA 87,746 3,399,280
Telephone & Data Systems 46,228 2,866,136
Verizon Communications 231,669 10,258,303
- ----------------------------------------------------------------------------
25,154,904
- ----------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 8.5%
Citadel Broadcasting 1 3
Dollar Tree Stores* 64,625 2,619,898
J.C. Penney Company 61,066 3,869,752
News, Class A 93,574 2,057,692
Walt Disney 238,916 8,216,322
- ----------------------------------------------------------------------------
16,763,667
- ----------------------------------------------------------------------------
HEALTH CARE -- 8.5%
Aetna 60,151 3,264,395
Eli Lilly 37,890 2,157,078
Johnson & Johnson 74,809 4,914,951
Pfizer 259,686 6,344,129
- ----------------------------------------------------------------------------
16,680,553
- ----------------------------------------------------------------------------
PRODUCER DURABLES -- 6.7%
Alliant Techsystems*+ 16,650 1,819,845
Caterpillar 36,457 2,859,322
Dover 42,366 2,158,548
Goodrich 40,135 2,738,411
Novellus Systems* 37,184 1,013,636
Parker Hannifin+ 23,624 2,641,872
- ----------------------------------------------------------------------------
13,231,634
- ----------------------------------------------------------------------------
CONSUMER STAPLES -- 6.3%
Altria Group 80,805 5,618,371
J.M. Smucker 63,122 3,371,977
Procter & Gamble 48,081 3,382,018
- ----------------------------------------------------------------------------
12,372,366
- ----------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 6.0%
Alcoa 88,287 3,453,788
Dow Chemical 44,156 1,901,357
International Paper 35,913 1,288,199
Lyondell Chemical 58,634 2,717,686
Pactiv* 84,219 2,413,717
- ----------------------------------------------------------------------------
11,774,747
- ----------------------------------------------------------------------------
TECHNOLOGY -- 3.8%
Computer Sciences* 25,280 1,413,152
Hewlett-Packard 91,562 4,558,872
PerkinElmer 53,617 1,566,153
- ----------------------------------------------------------------------------
7,538,177
- ----------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 0.9%
Norfolk Southern 33,163 1,721,491
- ----------------------------------------------------------------------------
OTHER -- 0.4%
iShares S&P 500 Value Index Fund+ 9,824 799,772
- ----------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 197,435,475
- ----------------------------------------------------------------------------
INVESTMENT FUND -- 5.3%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 10,473,364 $ 10,473,364
- ----------------------------------------------------------------------------
CASH EQUIVALENT -- 0.0%
PNC Bank Money Market Fund, 4.43% ^ 71,700 $ 71,700
- ----------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 105.4%
(Cost $176,153,636) $ 207,980,539
LIABILITIES IN EXCESS OF OTHER ASSETS -- (5.4%) (10,599,803)
- ----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 197,380,736
============================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $10,257,451.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
See accompanying notes to financial statements.
126
- --------------------------------------------------------------------------------
Portfolio of Investments
Family Heritage(R) Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.8% SHARES VALUE
- ---------------------------------------------------------------------------
FINANCIAL SERVICES -- 22.1%
Berkshire Hathaway, Class B* 335 $ 1,323,920
Capital One Financial 30,245 2,009,175
CapitalSource+ 76,739 1,553,197
Commerce Bancshares 42,749 1,961,752
CompuCredit* 52,888 1,148,198
Federated Investors, Class B 56,956 2,261,153
Fiserv* 25,024 1,272,721
Flagstar Bancorp 86,724 843,825
Paychex 35,143 1,440,863
Philadelphia Consolidated Holding* 16,387 677,439
TCF Financial 100,559 2,632,634
W. R. Berkley 44,309 1,312,876
- ---------------------------------------------------------------------------
18,437,753
- ---------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 15.8%
Aaron Rents 29,755 663,537
Best Buy 35,215 1,620,594
Carnival 21,855 1,058,438
Central European Distribution* 37,715 1,806,925
eBay*+ 33,097 1,291,445
Lifetime Brands+ 41,544 842,928
Marriott International, Class A 25,514 1,109,094
NIKE, Class B 19,059 1,118,001
Viacom, Class B* 28,230 1,100,123
Wal-Mart Stores 58,226 2,541,564
- ---------------------------------------------------------------------------
13,152,649
- ---------------------------------------------------------------------------
TECHNOLOGY -- 14.4%
Dell* 61,024 1,684,262
General Dynamics 22,118 1,868,307
Microsoft 99,501 2,931,300
Oracle* 100,238 2,170,153
Qualcomm 26,695 1,128,131
Sirenza Microdevices* 49,227 851,135
Vishay Intertechnology* 104,411 1,360,475
- ---------------------------------------------------------------------------
11,993,763
- ---------------------------------------------------------------------------
HEALTH CARE -- 12.4%
Cephalon* 21,753 1,589,274
Eli Lilly 68,853 3,919,801
ICU Medical* 19,745 765,119
Stryker 45,401 3,121,773
Universal Health Services, Class B 17,901 974,172
- ---------------------------------------------------------------------------
10,370,139
- ---------------------------------------------------------------------------
ENERGY -- 10.6%
Apache 16,438 1,480,406
CARBO Ceramics+ 14,104 715,496
Chesapeake Energy 34,269 1,208,325
Devon Energy 16,585 1,379,872
Global Industries* 33,237 856,185
Hess Corporation 29,548 1,965,829
Murphy Oil 16,944 1,184,216
- ---------------------------------------------------------------------------
8,790,329
- ---------------------------------------------------------------------------
UTILITIES -- 8.4%
AES* 134,235 2,690,070
Comcast, Class A*+ 67,896 1,641,725
Telephone & Data Systems 43,292 2,684,104
- ---------------------------------------------------------------------------
7,015,899
- ---------------------------------------------------------------------------
PRODUCER DURABLES -- 6.0%
Danaher 36,361 3,007,418
Illinois Tool Works 33,834 2,017,860
- ---------------------------------------------------------------------------
5,025,278
- ---------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 4.8%
E.I. du Pont de Nemours 47,627 2,360,394
Worthington Industries 69,378 1,634,546
- ---------------------------------------------------------------------------
3,994,940
- ---------------------------------------------------------------------------
CONSUMER STAPLES -- 4.0%
Hansen Natural* 13,523 766,484
Wm. Wrigley Jr. 39,394 2,530,276
- ---------------------------------------------------------------------------
3,296,760
- ---------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 0.8%
Werner Enterprises 40,661 697,336
- ---------------------------------------------------------------------------
OTHER -- 0.5%
SPDR Trust Series 1 2,679 408,923
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 83,183,769
- ---------------------------------------------------------------------------
INVESTMENT FUND -- 4.8%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 3,970,776 $ 3,970,776
- ---------------------------------------------------------------------------
CASH EQUIVALENT -- 0.3%
PNC Bank Money Market Fund, 4.43% ^ 283,051 $ 283,051
- ---------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 104.9%
(Cost $70,257,073) $ 87,437,596
LIABILITIES IN EXCESS OF OTHER ASSETS -- (4.9%) (4,121,844)
- ---------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 83,315,752
===========================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $3,833,606.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
See accompanying notes to financial statements.
127
- -------------------------------------------------------------------------------
Portfolio of Investments
Healthcare and Biotechnology Fund - September 30, 2007
- -------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 96.5% SHARES VALUE
- -------------------------------------------------------------------------------
HEALTH CARE -- 94.0%
Abbott Laboratories 20,440 $ 1,095,993
Aetna 24,950 1,354,037
Alexion Pharmaceuticals* 30,210 1,968,182
Allergan 30,650 1,976,006
AMERIGROUP* 31,710 1,093,361
Baxter International 43,710 2,459,998
Beckman Coulter 3,460 255,210
BioMarin Pharmaceutical* 13,650 339,885
Bristol-Myers Squibb 45,140 1,300,935
Celgene*+ 17,240 1,229,384
Charles River Laboratories International* 12,350 693,453
CSL 6,840 651,284
Cypress Bioscience* 18,090 247,652
DENTSPLY International 40,680 1,693,915
Express Scripts* 25,110 1,401,640
Gilead Sciences* 75,380 3,080,780
Henry Schein* 13,762 837,280
Hologic*+ 14,060 857,660
Humana* 12,220 853,934
ICON Plc ADR* 15,630 797,599
Intermune*+ 22,310 426,790
Intuitive Surgical* 2,760 634,800
Inverness Medical Innovations* 11,460 633,967
Johnson & Johnson 29,150 1,915,155
Kendle International* 10,670 443,125
KV Pharmaceutical, Class A* 20,680 591,448
Kyphon* 11,490 804,300
Laboratory Corp. of America Holdings* 14,660 1,146,852
Medco Health Solutions* 17,790 1,608,038
Merck & Co., Inc. 44,240 2,286,765
MGI Pharma* 20,250 562,545
Novo Nordisk A/S ADR 3,900 472,056
Onyx Pharmaceuticals* 13,400 583,168
Progenics Pharmaceuticals*+ 16,580 366,584
Quality Systems+ 13,360 489,377
Respironics* 10,800 518,724
Schering-Plough 74,920 2,369,719
Seattle Genetics* 28,020 314,945
Shire ADR 32,338 2,392,364
Smith & Nephew ADR+ 16,240 994,538
St. Jude Medical* 33,810 1,490,007
Sunrise Senior Living* 22,680 802,192
Thermo Fisher Scientific* 49,770 2,872,723
United Therapeutics*+ 7,840 521,674
Universal Health Services, Class B 8,400 457,128
VCA Antech*+ 6,490 270,958
Xenoport* 10,800 508,140
Zimmer Holdings* 9,200 745,108
- -------------------------------------------------------------------------------
51,411,378
- -------------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 2.5%
Bayer AG ADR 17,540 1,391,799
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 52,803,177
- -------------------------------------------------------------------------------
INVESTMENT FUND -- 7.2%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 3,930,823 $ 3,930,823
- -------------------------------------------------------------------------------
CASH EQUIVALENT -- 4.6%
BlackRock TempFund,
Institutional Shares, 5.34% ^ 2,501,034 $ 2,501,034
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 108.3%
(Cost $49,337,966) $ 59,235,034
LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.3%) (4,543,950)
- -------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 54,691,084
===============================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $3,847,724.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
ADR - American Depository Receipt
See accompanying notes to financial statements.
128
- --------------------------------------------------------------------------------
Portfolio of Investments
International Equity Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
FOREIGN COMMON STOCKS -- 99.1% SHARES VALUE
- --------------------------------------------------------------------------------
AUSTRALIA -- 4.8%
Adelaide Brighton Ltd. 44,000 $ 154,228
Aditya Birla Minerals Ltd.* 2,000 7,401
Amcor Ltd. 18,500 121,155
Asx Ltd. 1,900 90,625
Bhp Billiton Ltd. 36,400 1,439,010
Bluescope Steel Ltd. 24,700 235,624
Boral Ltd. 14,400 91,877
Coca-Cola Amatil Ltd.* 8,600 68,684
Felix Resources Ltd. 1,400 7,131
Fortescue Metals Group Ltd.* 1,200 50,784
Goodman Fiedler Ltd. 75,200 172,168
Incitec Pivot Ltd. 200 15,181
Independence Group Nl 9,400 54,637
Insurance Aust Group 24,900 116,004
Jabiru Metals Ltd.* 27,000 36,179
Jubilee Mines Nl 10,300 158,672
Lend Lease Ltd. 5,400 90,567
Macmahon Holdings Ltd. 84,200 124,779
Minara Resouces Ltd. 25,000 144,423
Mincor Resources 12,500 47,143
National Australia Bank Ltd. 25,800 909,147
Oakton Ltd. 2,800 16,871
Onesteel Ltd. 18,041 110,462
Orica Ltd. 10,200 272,447
Origin Energy Ltd. 27,900 255,009
Pacific Brands Ltd. 18,400 50,617
Perilya Ltd. 20,700 73,292
Portman Ltd. 2,300 23,471
Qantas Airways Ltd. 35,800 177,269
Rio Tinto Ltd. 5,600 537,787
Sally Malay Mining* 32,100 138,723
Santos Limited 18,500 247,072
Sims Group Ltd. 7,100 203,379
Tabcorp Holdings Ltd. 13,300 178,805
Telstra Corp Ltd. 51,900 200,802
Woolworths Ltd. 20,400 537,833
WorleyParsons Ltd. 700 26,344
Zinifex Ltd. 17,600 276,752
- --------------------------------------------------------------------------------
7,462,354
- --------------------------------------------------------------------------------
AUSTRIA -- 0.8%
Immofinanz AG* 28,607 356,950
Omv AG 3,427 228,858
Voestalpine AG 8,000 691,337
- --------------------------------------------------------------------------------
1,277,145
- --------------------------------------------------------------------------------
BELGIUM -- 1.8%
Agfa-gevaert Nv 620 11,936
Delhaize Group 6,387 612,059
D'ieteren SA 225 100,425
Fortis 42,000 1,236,791
Immobiliere De Belgique 172 9,284
Recticel 1,651 24,956
Solvay SA 2,321 336,839
Umicore 1,800 430,203
- --------------------------------------------------------------------------------
2,762,493
- --------------------------------------------------------------------------------
CANADA -- 7.6%
Addax Petroleum 7,910 311,963
Agrium, Inc. 148 8,061
Angiotech Pharmaceuticals* 5,600 34,905
Aspreva Pharmaceuticals* 2,500 51,573
Atco Ltd, Class I 4,200 245,278
Axcan Pharma* 3,340 69,741
Bank of Montreal 7,420 484,870
Bank of Nova Scotia 15,300 803,685
Barrick Gold 15,800 634,573
Biovail 10,000 174,123
Bpo Properties Ltd. 1,670 113,309
Canadian Natural Resources 9,248 702,502
Canadian Utilities Ltd., Class A 8,100 396,165
Cascades 8,100 81,024
Celestica* 2,210 13,464
Cogeco 1,240 47,122
Dorel Industries, Inc., Class B 600 18,096
Dundee Corp, Class A* 5,400 119,324
Empire Co., Ltd, Class A 2,550 126,257
EnCana 12,000 741,932
Finning International 100 3,223
FirstService* 2,040 63,741
George Weston Ltd. 5,840 416,849
Gerdau Ameristeel 8,600 101,588
Goldcorp 30 917
Groupe CGI* 22,900 262,221
Husky Energy 710 29,586
Husky Injection Molding Systems Ltd. 420 3,382
Industrial Alliance Insurance
and Financial Services 4,600 180,356
Inmet Mining 4,000 401,126
Kinross Gold* 4,690 70,065
Laurentian Bank of Canada 1,792 76,836
Linamar 5,320 136,650
Lundin Mining Corp.* 200 2,572
Manulife Financial 3,100 127,808
Martinrea International* 4,800 82,517
Methanex 7,200 181,176
MI Developments, Inc., Class A 3,600 119,216
Nexen 11,820 361,124
Nortel Networks Ltd.* 3,470 59,235
Northbridge Financial Corp. 3,200 112,275
Open Text Corp.* 4,200 109,613
Petro-Canada 5,140 294,903
Potash Corp. of Saskatchewan 1,300 137,293
Power Corp. of Canada 12,670 507,717
QLT, Inc.* 5,420 30,459
Rothmans, Inc. 4,900 113,547
Royal Bank of Canada 3,110 172,118
Savanna Energy Services Corp. 4,300 73,489
129
- --------------------------------------------------------------------------------
International Equity Fund (Continued)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 99.1% MARKET
(CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
CANADA -- 7.6% (CONTINUED)
Sherritt International Corp. 11,150 $ 178,454
Sierra Wireless, Inc.* 2,000 41,721
Teck Cominco Ltd., Class B 11,906 565,197
Telus Corp. 9,207 518,339
Tesco Corp.* 2,700 73,696
Toronto-Dominion Bank 9,345 716,823
Transcontinental, Inc., Class B 6,200 135,631
Yamana Gold 10,870 128,840
- --------------------------------------------------------------------------------
11,768,270
- --------------------------------------------------------------------------------
CHINA -- 1.2%
BOC Hong Kong Holdings Ltd. 84,500 214,135
China Mobile Ltd. 2,000 32,751
China Petroleum & Chemical
Corp. (Sinopec) 16,000 19,985
China Unicom Ltd. 16,000 33,096
CITIC International Financial Holdings Ltd. 188,000 150,422
Digital China Holdings Ltd. 25,000 14,504
Guangdong Investment Ltd. 94,000 64,449
Guangzhou Investment Co., Ltd. 350,000 109,405
Hopson Development 28,000 93,287
Industrial & Commercial
Bank of China (Asia) Ltd. 54,000 150,736
PetroChina Co., Ltd., Class H 242,000 458,856
Shanghai Industrial Holdings 36,000 179,679
Shenzhen Expressway Co., Ltd. 8,000 8,305
Sinotrans Ltd. 234,000 143,280
TPV Technology Ltd. 66,000 47,544
Weiqiao Textile Co., Ltd., Class H 39,000 73,246
- --------------------------------------------------------------------------------
1,793,680
- --------------------------------------------------------------------------------
DENMARK -- 0.4%
A P Moeller - Maersk A/S 46 624,726
Danske Bank A/S 1,387 56,311
- --------------------------------------------------------------------------------
681,037
- --------------------------------------------------------------------------------
FINLAND -- 1.0%
Elisa Oyj 4,550 141,447
Nokia Oyj 10,400 395,385
Outokumpu Oyj 10,500 377,176
Sampo Oyj 22,500 686,953
- --------------------------------------------------------------------------------
1,600,961
- --------------------------------------------------------------------------------
FRANCE -- 9.2%
Air France-KLM 10,971 403,170
Atos Origin SA* 1,385 80,582
BNP Paribas SA 16,200 1,772,817
Cap Gemini SA 8,100 499,226
Christian Dior SA 6,000 767,829
Ciments Francais SA 1,200 210,960
Club Mediterranee* 217 14,080
CNP Assurances SA 3,692 472,313
Compagnie Generale des Etablissements
Michelin, Class B 7,301 981,588
Credit Agricole SA 21,923 845,657
France Telecom 43,558 1,459,077
Natixis 22,462 498,088
Nexans 2,586 425,376
Nexity 885 54,558
Peugeot SA 10,500 866,652
Renault 455 65,935
Saint-Gobain (cie De) 11,600 1,210,701
Sanofi-Aventis 20,200 1,710,483
Sequana Capital 437 14,426
Sodexho Alliance SA 7,600 525,633
Sucriere de Pithiviers-Le-Vieil 3 2,545
Thales SA 2,727 159,867
Thomson 6,000 91,380
Total SA 9,000 731,807
Valeo 7,200 400,633
- --------------------------------------------------------------------------------
14,265,383
- --------------------------------------------------------------------------------
GERMANY -- 8.4%
Allianz SE 1,100 257,020
Bayer AG 22,550 1,791,137
Bechtle AG 391 16,984
BMW-Bayerische Motoren Werke AG 1,600 103,472
DaimlerChrysler AG 24,300 2,451,311
Deutsche Bank AG 11,800 1,520,160
Draegerwerk AG 102 9,382
E.ON AG 14,200 2,620,899
Fresenius AG 7,500 565,989
Infineon Technologies AG* 41,429 714,263
MTU Aero Engines Holding AG 679 41,345
MVV Energie AG 678 28,512
RWE AG 5,993 752,405
Siemens AG 2,533 347,667
ThyssenKrupp AG 15,600 993,506
Volkswagen AG 3,595 812,560
- --------------------------------------------------------------------------------
13,026,612
- --------------------------------------------------------------------------------
GREECE -- 0.4%
Bank of Greece* 1,568 205,154
Public Power Corp., S.A. (PPC) 10,000 396,435
- --------------------------------------------------------------------------------
601,589
- --------------------------------------------------------------------------------
HONG KONG -- 1.7%
Asia Financial Holdings Ltd. 12,000 7,132
Chevalier International Holdings Ltd. 32,000 35,812
China Oriental Group Co., Ltd. 199,000 113,914
Chow Sang Sang Holdings
International Ltd. 36,000 50,384
CLP Holdings Ltd. 50,500 349,493
Esprit Holdings Ltd. 2,500 39,716
Great Eagle Holdings Ltd. 4,000 15,179
Guoco Group Ltd. 10,000 136,355
Hang Lung Properties Ltd. 21,000 94,007
Hang Seng Bank Ltd. 4,700 83,494
Henderson Land Development Co., Ltd. 16,000 126,887
Hong Kong and China Gas Co., Ltd. 26,000 60,536
130
- --------------------------------------------------------------------------------
International Equity Fund (Continued)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 99.1% MARKET
(CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
HONG KONG -- 1.7% (CONTINUED)
Hongkong Electric Holdings Ltd. 29,000 $ 150,710
Hopewell Holdings 30,000 143,172
Hutchison Whampoa Ltd. 11,000 117,657
Jardine Matheson Holdings Ltd. 5,200 148,720
Jardine Strategic 3,000 47,400
New World Development Ltd. 11,000 30,423
Pacific Century Premium
Developments Ltd. 151,000 47,201
Sinolink Worldwide Holdings Ltd. 286,000 91,607
Sun Hung Kai & Co., Ltd. 35,000 49,975
Tai Cheung Holdings 63,000 50,489
Transport International Holdings Ltd. 20,400 115,726
Truly International Holdings 18,000 48,509
Vislink plc 6,265 8,666
Wheelock & Co., Ltd. 57,000 156,911
Wheelock Properties Ltd. 105,000 116,429
Wing On Co. International Ltd. 23,100 43,324
Winsor Properties Holdings Ltd. 21,000 39,170
Yue Yuen Industrial Holdings 20,500 61,311
- --------------------------------------------------------------------------------
2,580,309
- --------------------------------------------------------------------------------
INDIA -- 0.0%
Reliance Energy Ltd. GDR, 144a 380 28,500
- --------------------------------------------------------------------------------
IRELAND -- 0.1%
DCC plc 2,934 86,608
- --------------------------------------------------------------------------------
ITALY -- 4.3%
ACEA S.p.A 3,000 59,123
Acegas-APS S.p.A 22,475 240,535
C.I.R. - Compagnie Industriali Riunite 77,500 302,540
Danieli S.p.A 5,852 199,448
Enel S.p.A 36,000 407,615
Engineering Ingegneria Informatica S.p.A 3,869 190,347
Eni S.p.A 28,200 1,045,159
Fiat S.p.A 32,900 995,093
IFIL - Investments S.p.A 4,022 43,360
Immobiliare Lombarda S.p.A.* 553,194 135,449
Intek S.p.A 116,440 132,837
Intesa Sanpaolo 24,000 185,326
Iride S.p.A 36,272 133,450
Italcementi S.p.A 18,000 398,888
Italmobiliare S.p.A 78 9,729
KME Group* 149,529 394,905
Mittel S.p.A 5,691 43,337
Pirelli & C. S.p.A.* 147,475 177,706
Reply S.p.A 2,720 88,087
Telecom Italia S.p.A 403,210 1,226,160
UniCredito Italiano S.p.A 26,800 229,305
- --------------------------------------------------------------------------------
6,638,399
- --------------------------------------------------------------------------------
JAPAN -- 18.4%
Adeka 4,300 45,109
Aichi Bank 700 60,332
Aichi Machine Industry Co., Ltd. 7,000 17,551
Aida Engineering Ltd. 5,000 32,125
Aioi Insurance Co., Ltd. 24,000 139,573
Aiphone Co., Ltd. 1,200 20,069
Aizawa Securities Co., Ltd. 500 3,613
Akita Bank Ltd. 2,000 8,741
Alpen Co., Ltd. 1,900 25,490
Amada 2,000 22,357
Aoyama Trading 2,900 73,721
Arakawa Chemical Industrial Ltd. 1,200 13,675
Asahi Breweries Ltd. 19,400 295,564
Asahi Diamond Industrial Co., Ltd. 4,000 28,451
Asahi Glass Co., Ltd. 23,000 309,363
Asahi Kasei 26,000 210,055
Autobacs Seven Co., Ltd. 1,400 36,382
Bosch 13,000 63,152
Bridgestone Corp. 14,600 322,849
Canon 16,550 903,395
Canon Finetech 400 6,881
Casio Computer Co., Ltd. 9,600 137,567
Cawachi Ltd. 1,700 45,732
Central Glass Co., Ltd. 14,000 70,570
Central Japan Railway 5 53,106
Chiyoda Co., Ltd. 2,200 31,621
Chubu Steel Plate Co., Ltd. 1,700 11,840
Chubu-Nippon Broadcasting Co., Ltd. 200 2,298
Chudenko 1,400 25,352
Chukyo Bank Ltd. 14,000 41,440
Cleanup 2,600 18,040
Coca-Cola Central Japan Co., Ltd. 6 46,124
Corona 1,900 29,046
Cosmo Oil 3,000 14,312
Cosmos Initia Co., Ltd. 1,000 4,179
Dai Nippon Printing Co., Ltd. 11,000 157,245
Daiichikosho 3,100 34,599
Daikoku Denki Co., Ltd. 900 12,145
Dainippon Ink & Chemicals 33,000 146,233
Dainippon Screen Mfg. Co., Ltd. 10,000 60,245
Dainippon Sumitomo Pharma Co., Ltd. 8,000 74,383
Daisyo 1,500 20,137
DyDo Drinco 200 7,975
Eighteenth Bank Ltd. 11,000 44,147
Eizo Nanao 100 3,291
Espec 1,200 8,117
Fields 19 25,804
Fuji Electric Holdings Co., Ltd. 27,000 120,350
Fuji Fire and Marine Insurance Co., Ltd. 18,000 61,429
Fuji Heavy Industries Ltd. 33,000 145,083
Fuji Machine Mfg Co. Ltd. 2,800 54,481
Fuji Television Network 1 2,011
Fujifilm Holdings 12,300 568,607
131
- --------------------------------------------------------------------------------
International Equity Fund (Continued)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 99.1% MARKET
(CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
JAPAN -- 18.4% (CONTINUED)
Fujikura Ltd. 12,000 $ 75,950
Fujishoji Co. Ltd. 1 888
Fujitsu Business Systems Ltd. 1,800 30,087
Fujitsu Ltd. 49,000 346,389
Fukuda Denshi Co., Ltd. 100 3,230
Futaba 3,100 68,280
Futaba Industrial Co., Ltd. 3,200 82,462
H.I.S. Co., Ltd. 1,900 35,729
Hakuhodo DY Holdings, Inc. 240 16,841
Hakuto Co., Ltd. 1,100 16,088
Hankyu Hanshin Holdings, Inc. 41,000 209,524
Heiwa 5,000 58,852
Heiwado Co., Ltd. 3,300 52,603
Hi-Lex 1,500 23,088
Hitachi Cable Ltd. 14,000 86,780
Hitachi Koki Co., Ltd. 3,100 53,437
Hitachi Ltd. 83,000 552,779
Hitachi Maxell Ltd. 4,600 49,658
Hitachi Systems & Services 400 7,835
Hokkaido Electric Power 7,500 162,256
Honda Motor Co., Ltd. 27,300 917,407
Hyakugo Bank Ltd. 13,000 75,149
Idemitsu Kosan Co., Ltd. 1,900 213,877
Inabata & Co., Ltd. 4,300 28,076
Ines 300 1,745
Ishikawajima-Harima Heavy Industries 45,000 141,427
Itochu 28,000 340,051
Itoham Foods 1,000 4,074
Jalux 100 1,798
Japan Airlines 18,000 39,020
Japan Digital Laboratory Co., Ltd. 1,200 17,185
Japan Wool Textile Co., Ltd. 7,000 56,553
JFE Holdings 11,700 829,130
Kaken Pharmaceutical Co., Ltd. 8,000 58,016
Kamei 3,000 17,264
Kaneka 11,000 92,509
Kansai Electric Power Co. 200 4,571
Kasumi Co. 5,000 25,639
Kato Sangyo Co., Ltd. 1,900 24,961
Kawasaki Heavy Industries Ltd. 58,000 227,223
KDDI Corp. 20 148,348
Keihanshin Real Estate Co., Ltd. 4,000 21,556
Kirin Brewery Co., Ltd. 22,000 291,124
Kissei Pharmaceutical Ltd. 3,000 54,325
Kitagawa Industries Co. 700 11,091
Kobe Steel Ltd. 76,000 283,846
Komori 4,000 98,028
Konaka Co. Ltd. 970 7,372
Kurabo Industries Ltd. 18,000 44,818
Kyokuto Kaihatsu Kogyo Co., Ltd. 2,300 17,481
Kyorin Co., Ltd. 1,000 14,321
Maeda Road Construction Co., Ltd. 7,000 61,307
Maezawa Kasei Industries Co., Ltd. 1,100 15,964
Marubeni 2,000 18,352
Marudai Food Company Ltd. 2,000 7,139
Matsushita Electric Industrial Co., Ltd. 47,000 881,774
Matsuya Foods Co., Ltd. 1,300 15,573
Max Co., Ltd. 1,000 14,809
Mazda Motor 37,000 187,150
Meiko Trans Co., Ltd. 1,000 12,275
Mercian 3,000 6,582
Mikuni Coca-Cola Bottling Co., Ltd. 3,600 40,242
Millea Holdings, Inc. 8,000 321,769
Mitsubishi 30,600 969,694
Mitsubishi Heavy Industries Ltd. 85,000 555,739
Mitsubishi UFJ Financial Group 70 615,505
Mitsui High-tec 500 5,820
Mitsui Mining & Smelting Co., Ltd. 29,000 124,973
Mitsui Sumitomo Insurance Co., Ltd. 40,000 469,769
Mitsuuroko Co., Ltd. 100 710
Mizuho Financial Group 75 427,676
Mochida Pharmaceutical Co., Ltd. 4,000 37,923
NAFCO Co., Ltd. 100 2,472
Nagase & Co., Ltd. 6,000 71,040
Nakayama Steel Works Ltd. 9,000 21,312
NAMCO BANDAI Holdings 9,200 133,757
NEC Corp. 54,000 262,325
NEC Electronics* 1,800 51,713
NEC Leasing Ltd. 100 1,705
NEC Networks & System Integration 2,900 31,988
NGK SPARK PLUG Co., Ltd. 8,000 124,320
NICHICON Corp. 3,300 41,887
NIDEC COPAL 500 5,689
Nihon Yamamura Glass Co., Ltd. 1,000 2,420
Nippo 2,000 16,001
Nippon Electric Glass Co., Ltd. 15,000 241,588
Nippon Koei Co., Ltd. 1,000 2,821
Nippon Light Metal Co., Ltd. 5,000 11,013
Nippon Mining Holdings 33,500 336,560
Nippon Steel Corp. 131,000 943,167
Nippon Telegraph & Telephone Corp. (NTT) 146 682,558
Nippon Television Network 140 18,026
Nippon Yusen Kabushiki Kaisha 21,000 205,128
Nishimatsu Construction Co., Ltd. 8,000 24,168
Nissan Motor Co., Ltd. 64,900 650,328
Nissan Shatai Co., Ltd. 10,000 61,551
Nissay Dowa General Insurance Co., Ltd. 16,000 97,924
Nisshin Steel Co., Ltd. 43,000 193,915
Nitto Kogyo 2,200 33,901
Noritake Co., Ltd. 5,000 23,854
NTT DoCoMo, Inc. 179 255,570
OHARA, Inc.* 1,200 22,461
Ohmoto Gumi Co., Ltd. 3,000 18,779
Oiles 800 17,307
OJI Paper Co., Ltd. 9,000 43,564
OMRON Corp. 7,500 198,494
Onward Kashiyama Co., Ltd. 10,000 101,162
132
- --------------------------------------------------------------------------------
International Equity Fund (Continued)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 99.1% MARKET
(CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
JAPAN -- 18.4% (CONTINUED)
Osaka Steel Co., Ltd. 1,800 $ 33,300
Piolax, Inc. 1,000 20,676
Pioneer 7,400 90,773
Rakuten, Inc. 423 165,900
Ricoh Co., Ltd. 5,000 105,776
Right On Co., Ltd. 500 5,372
Riso Kagaku Corp. 1,100 22,313
Rohm Co., Ltd. 100 8,836
Roland 1,200 33,431
Royal Holdings Co., Ltd. 2,400 28,374
Ryosan Co., Ltd. 2,500 62,573
Sanden Corp. 8,000 44,644
San-In Godo Bank Ltd. 11,000 87,146
Sankyo Co., Ltd. 3,300 133,592
Sanwa Shutter 2,000 11,213
Sazaby League Ltd. 1,400 37,905
Sega Sammy Holdings, Inc. 9,300 123,876
Seikagaku Corp. 400 4,618
Seiko Epson Corp. 6,800 168,424
Sekisui Jushi Corp. 4,000 35,276
SENSHUKAI CO., LTD 100 1,258
SHiDAX Corp. 23 15,678
Shinkawa Ltd. 1,300 23,824
Shin-Kobe Electric Machinery Co., Ltd. 3,000 12,223
ShinMaywa Industries Ltd. 8,000 38,236
Shinsei Bank Ltd. 44,000 138,667
Showa Corp. 3,400 40,522
Showa Denko K.K 46,000 174,205
Showa Shell Sekiyu 8,100 104,154
Sintokogio Ltd. 3,500 52,623
SOFTBANK Corp. 1,900 35,067
Sojitz Corp.* 35,500 154,529
SSP CO., LTD 6,000 27,894
Sumisho Computer Systems Corp. 100 1,959
Sumitom Pipe & Tube Co., Ltd. 2,000 15,392
Sumitomo Chemical Co., Ltd. 34,000 291,560
Sumitomo Corp. 23,200 448,387
Sumitomo Electric Industries Ltd. 19,170 305,412
Sumitomo Forestry Co., Ltd. 8,000 66,025
Sumitomo Metal Mining Co., Ltd. 15,000 364,341
Sumitomo Mitsui Financial Group, Inc. 51 397,380
Sumitomo Precision Products Co., Ltd. 3,000 14,104
T&D Holdings, Inc. 4,900 301,598
Taiheiyo Cement 12,000 45,654
Taisho Pharmaceutical Co., Ltd. 4,000 78,701
Takagi Securities Co., Ltd. 4,000 13,059
Takeda Pharmaceutical* 5,200 365,786
Techno Associe Co., Ltd. 1,000 12,101
Teijin Ltd. 38,000 185,592
Teikoku Tsushin Kogyo Co., Ltd. 2,000 8,567
TKC Corp. 2,000 36,129
Toagosei Co., Ltd. 15,000 55,892
Toho Bank Ltd. 12,000 44,713
Tokyo Steel Mfg. Co., Ltd. 6,800 105,613
Tokyo Style Co., Ltd. 7,000 72,764
Toppan Printing Co., Ltd. 19,000 195,682
Topre Corp. 3,000 26,692
Topy Industries Ltd. 12,000 32,072
Torii Pharmaceutical Co., Ltd. 2,000 35,172
Toshiba Corp.* 36,000 336,290
Toshiba TEC Corp. 15,000 92,718
Tosoh Corp. 20,000 129,717
TOTO Ltd. 12,000 87,024
Toyo Ink Mfg. Co., Ltd. 16,000 54,185
Toyo Kohan Co., Ltd. 6,000 38,393
Toyo Securities Co., Ltd. 5,000 17,629
Toyota Auto Body Co., Ltd. 4,700 77,866
Toyota Motor Corp. 18,000 1,062,464
Trusco Nakayama Corp. 2,200 38,114
TSUGAMI Corporation 4,000 15,218
Tsurumi Mfg. Co., Ltd. 3,000 27,554
TV Asahi Corp. 41 66,034
Uchida Yoko Co., Ltd. 4,000 18,178
Unimat Life Corp. 1,200 14,156
Unipres Corp. 2,900 22,596
UNY Co., Ltd. 9,000 78,431
VITAL-NET, Inc. 400 2,497
Wacoal Holdings Corp. 1,000 12,284
Yachiyo Industry Co., Ltd. 200 2,716
Yamaha Motor Co., Ltd. 8,100 206,616
Yamato Kogyo Co., Ltd. 3,600 173,003
Yokogawa Electric Corp. 9,800 119,274
Yonekyu Corp. 2,000 20,598
Yuraku Real Estate Co., Ltd. 4,000 17,412
- --------------------------------------------------------------------------------
28,792,123
- --------------------------------------------------------------------------------
NETHERLANDS -- 2.3%
ABN Amro Holding N.V 4,500 237,112
Aegon N.V 17,927 343,329
Akzo Nobel N.V 1,800 148,364
Corporate Express 14,900 162,333
Hunter Douglas N.V 1,200 107,807
ING Groep N.V 39,600 1,757,930
Koninklijke DSM N.V 11,700 631,508
Van der Moolen Holding N.V.* 2,081 9,407
Vedior N.V 7,800 171,628
- --------------------------------------------------------------------------------
3,569,418
- --------------------------------------------------------------------------------
NEW ZEALAND -- 0.0%
Air New Zealand Ltd. 8,200 15,347
- --------------------------------------------------------------------------------
NORWAY -- 0.3%
Aker ASA 3,502 247,470
Aker Yards A/S 4,587 54,024
Ementor ASA* 13,228 119,728
- --------------------------------------------------------------------------------
421,222
- --------------------------------------------------------------------------------
133
- --------------------------------------------------------------------------------
International Equity Fund (Continued)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 99.1% MARKET
(CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
PORTUGAL -- 0.7%
Cimpor - Cimentos de Portugal SGPS S.A 30,000 $ 248,556
EDP - Energias de Portugal S.A 124,108 725,622
Sonae Industria-SGPS S.A.* 12,324 138,486
Teixeira Duarte - Engenharia E
Construcoes, S.A 8,551 24,876
- --------------------------------------------------------------------------------
1,137,540
- --------------------------------------------------------------------------------
SINGAPORE -- 1.2%
Chartered Semiconductor Manufacturing* 66,000 48,428
DBS Group Holdings Ltd. 26,000 378,055
Haw Par Corp. Ltd. 1,000 5,453
Ho Bee Investment Ltd. 21,000 30,818
Hotel Plaza Ltd. 42,000 61,353
Jardine Cycle & Carriage Limited 15,000 186,806
K1 Ventures Ltd.* 165,000 35,544
Keppel Corp Ltd.* 12,000 116,324
Kingboard Copper Foil Holdings Ltd. 129,000 37,775
MCL Land Ltd. 7,000 12,440
Metro Holdings Ltd. 16,000 11,202
Neptune Orient Lines Ltd. 26,000 92,763
Singapore Airlines Ltd. 20,533 257,099
Singapore Technologies Engineering Ltd. 66,000 173,275
SP Chemicals Ltd. 65,000 51,632
United Overseas Bank 5,000 74,386
UOB-Kay Hian Holdings Ltd. 70,000 101,313
Wing Tai Holdings 52,000 135,119
- --------------------------------------------------------------------------------
1,809,785
- --------------------------------------------------------------------------------
SOUTH KOREA -- 3.9%
Doosan Co., Ltd.* 1,060 220,073
GS Home Shopping 610 53,924
Hanil Cement Co., Ltd. 720 81,823
Hanwha Chemical 5,190 136,960
Hyundai Heavy Industries Co., Ltd. 1,300 600,885
Hyundai Mipo Dockyard Co., Ltd. 500 172,103
Hyundai Mobis 2,250 238,731
KCC Engineering & Construction Co., Ltd. 260 20,399
Korea Development Financing Corp.* 1,060 61,389
Korea Electric Power Corp. 6,630 310,798
Korea Kumho Petrochemical Co., Ltd. 800 61,629
Korea Petrochemical Industrial Co., Ltd. 360 35,404
Korea Zinc Co., Ltd. 750 141,780
KT Corp. 1,200 60,252
KT Freetel Co., Ltd. 5,110 185,382
Kyeryong Construction Industrial Co., Ltd. 1,010 61,252
LG Electronics, Inc.* 2,140 199,934
LS Cable Ltd. 1,210 150,729
Nong Shim Holdings Co., Ltd. 120 11,670
Pacific 590 122,816
POSCO 830 610,382
Samho International Co., Ltd.* 580 17,112
Samsung Electronics Co., Ltd. 990 622,030
Samsung Heavy Industries Co., Ltd. 8,090 430,070
Samwhan Corp. 1,680 58,102
Samyang Genex Co., Ltd. 400 45,238
SFA Engineering Corp. 920 54,688
Shinhan Financial Group Co., Ltd. 5,490 358,741
SK Energy Co., Ltd.* 2,229 389,777
SK Gas Co., Ltd. 680 64,497
SK Holdings Co., Ltd. 911 194,030
SK Telecom Co., Ltd. 1,010 231,765
- --------------------------------------------------------------------------------
6,004,365
- --------------------------------------------------------------------------------
SPAIN -- 4.7%
Banco Bilbao Vizcaya Argentaria S.A 8,400 196,928
Banco Santander Central Hispano S.A 132,000 2,565,647
Cementos Portland Valderrivas S.A 1,745 189,866
Iberdrola S.A 2,700 158,631
Iberia Lineas Aereas de Espana S.A 45,398 221,406
Repsol YPF S.A 25,402 907,408
Sol Melia S.A 17,600 331,545
Telefonica S.A 98,590 2,759,818
- --------------------------------------------------------------------------------
7,331,249
- --------------------------------------------------------------------------------
SWEDEN -- 2.0%
SAAB AB, Class B 8,195 193,947
SAS AB* 20,000 358,490
Svenska Cellulosa AB (SCA) 580 10,824
Tele2 AB 27,800 600,765
Telefonaktiebolaget LM Ericsson, Class B 45,255 181,197
TeliaSonera AB 102,000 922,063
Volvo AB 48,000 836,166
- --------------------------------------------------------------------------------
3,103,452
- --------------------------------------------------------------------------------
SWITZERLAND -- 5.4%
Bobst Group AG 166 12,119
Bucher Industries AG 2,096 389,225
Ciba Specialty Chemicals AG 6,590 335,939
Clariant AG* 2,679 32,928
Credit Suisse Group 2,700 179,266
Energiediedienst Holding AG 92 49,467
Georg Fischer AG* 540 371,750
Holcim AG 8,400 927,842
Jungfraubahn Holding AG 661 34,633
Nestle S.A 1,250 561,520
Novartis AG 11,268 621,833
Roche Holding AG 2,893 524,554
Schweizerische National-
Versicherungs-Gesellschaft 195 150,741
SEZ Holding AG 10,800 251,389
Siegfried Holding AG 1,687 278,933
Swiss Life Holding* 1,890 490,256
Swiss Reinsurance 12,400 1,104,471
UBS AG 5,200 279,596
Walter Meier Holding AG* 93 17,733
Zueblin Immobilien Holding AG* 34,000 293,494
Zurich Financial Services AG 4,960 1,487,893
- --------------------------------------------------------------------------------
8,395,582
- --------------------------------------------------------------------------------
134
- --------------------------------------------------------------------------------
International Equity Fund (Continued)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 99.1% MARKET
(CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 18.5%
3i Group plc 21,763 $ 444,166
Anglo American plc 30,667 2,063,708
AstraZeneca PLC 6,810 341,371
Aviva PLC 82,343 1,240,831
BAE Systems PLC 113,955 1,151,208
Barclays PLC 16,800 204,694
Barratt Developments plc 1,776 27,181
BHP Billiton 5,100 182,609
BP plc 71,000 824,399
Brit Insurance Holdings PLC 16,944 118,391
British Airways* 46,000 360,706
British Energy Group PLC 49,000 535,867
Carphone Warehouse Group PLC 43,282 308,619
Centrica PLC 109,715 854,150
COLT Telecom Group SA* 72,000 250,435
Compass Group PLC 116,000 716,767
Cookson Group PLC 19,800 309,103
Delta PLC 9,608 25,851
Elementis PLC 10,330 20,766
G4S PLC 26,024 107,557
GKN PLC 64,000 463,550
GlaxoSmithKline PLC 24,209 642,932
HBOS PLC 8,500 159,043
Home Retail Group plc 2,548 19,433
HSBC Holdings PLC 18,800 343,891
HSBC Holdings PLC 24,400 451,806
Imperial Chemical Industries PLC 222 2,959
Kazakhmys PLC 27,500 790,537
Kelda Group PLC 3,600 63,493
LogicaCMG PLC 90,246 279,278
Millennium & Copthorne Hotels PLC 28,800 282,844
NETeller PLC* 42,809 67,443
Old Mutual PLC 243,000 796,990
Prudential PLC 80,500 1,237,765
Rio Tinto PLC 1,824 157,788
RM PLC 26,178 102,570
Royal Bank of Scotland Group PLC 190,083 2,043,756
Royal Dutch Shell PLC, Class A 42,000 1,734,503
Royal Dutch Shell PLC, Class B 73,700 3,033,951
Smiths Group PLC 19,508 426,681
Standard Life PLC 32,047 189,167
Tesco PLC 17,000 152,783
Trinity Mirror PLC 14,633 123,351
United Utilities PLC 47,200 676,010
Vodafone Group PLC 591,300 2,135,333
Wolseley 21,687 366,738
WPP Group PLC 53,200 720,581
Xstrata PLC 19,200 1,274,369
- --------------------------------------------------------------------------------
28,827,924
- --------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS $153,981,347
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.1%
PNC Bank Money Market Fund, 4.43^ 108,376 $ 108,376
- --------------------------------------------------------------------------------
MARKET
RIGHT -- 0.1% PAR VALUE VALUE
- --------------------------------------------------------------------------------
BELGIUM -- 0.1%
Fortis Rights, .00%, 10/9/07 $ 42,000 $ 222,802
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.3%
(Cost $124,183,307) $154,312,525
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7% 1,050,514
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $155,363,039
================================================================================
* Non-income producing security.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
GDR - Global Depository Receipt
144a- This is a restricted security that was sold in a transaction exempt from
Rule 144a of the Securities Act of 1933. This security may be sold in
transactions exempt from registration, normally to qualified institutional
buyers.
See accompanying notes to financial statements.
135
- --------------------------------------------------------------------------------
Portfolio of Investments
Mid Cap Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 97.3% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 17.7%
AerCap Holdings NV* 279,670 $ 6,960,986
Alexandria Real Estate Equities 28,240 2,718,382
Alliance Data Systems* 50,640 3,921,562
Arch Capital Group* 101,300 7,537,733
Everest Re Group 75,010 8,269,102
Factset Research Systems 106,740 7,317,027
Fidelity National Information Services 128,669 5,709,044
Global Payments+ 145,560 6,436,663
Hanover Insurance Group 125,260 5,535,239
IntercontinentalExchange* 61,780 9,384,382
Markel Corporation* 12,570 6,083,880
Nasdaq Stock Market* 159,110 5,995,265
Rayonier, REIT 104,980 5,043,239
Ryder System 132,690 6,501,810
- --------------------------------------------------------------------------------
87,414,314
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 16.9%
Brink's 112,430 6,282,588
Columbia Sportswear+ 78,340 4,332,985
Corrections Corporation of America* 136,340 3,568,018
Dollar Tree Stores* 89,080 3,611,303
DreamWorks Animation SKG, Class A* 253,730 8,479,657
Hanesbrands* 170,450 4,782,827
Hewitt Associates, Class A* 176,060 6,170,903
Jarden* 123,380 3,817,377
O'Reilly Automotive*+ 175,590 5,866,462
PetSmart 218,760 6,978,444
R.H. Donnelley* 72,770 4,076,575
Rebublic Services 265,540 8,685,813
Saks+ 284,100 4,872,315
Sally Beauty Holdings* 612,270 5,173,682
Tech Data* 181,330 7,274,960
- --------------------------------------------------------------------------------
83,973,909
- --------------------------------------------------------------------------------
PRODUCER DURABLES -- 11.6%
Carlisle+ 158,560 7,706,016
Covanta Holding* 370,750 9,087,083
Lincoln Electric Holdings 102,640 7,965,890
Manitowoc 180,570 7,995,640
Roper Industries+ 145,420 9,525,010
SBA Communications, Class A* 261,750 9,234,540
Verigy* 241,930 5,978,090
- --------------------------------------------------------------------------------
57,492,269
- --------------------------------------------------------------------------------
TECHNOLOGY -- 11.5%
Amphenol, Class A 210,490 8,369,083
Check Point Software Technologies*+ 311,800 7,851,124
Harris 132,660 7,666,421
Intersil, Class A 147,080 4,916,884
McAfee* 166,930 5,820,849
Novell* 702,110 5,364,120
ON Semiconductor* 838,300 10,529,049
Trimble Navigation* 176,330 6,913,899
- --------------------------------------------------------------------------------
57,431,429
- --------------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 10.9%
Carpenter Technology 38,250 4,972,883
Celanese Corporation 192,560 7,505,989
Chicago Bridge & Iron 161,690 6,962,371
Harsco 156,760 9,291,165
Nalco Holding 273,700 8,115,205
Pactiv* 124,800 3,576,768
Sigma-Aldrich 183,900 8,963,286
Titanium Metals*+ 147,530 4,951,107
- --------------------------------------------------------------------------------
54,338,774
- --------------------------------------------------------------------------------
HEALTH CARE -- 9.7%
Cephalon*+ 73,330 5,357,490
Charles River Laboratories International* 134,980 7,579,127
Cubist Pharmaceuticals* 195,420 4,129,225
Health Net* 96,820 5,233,121
Henry Schein* 123,820 7,533,209
IMS Health 168,690 5,168,662
Pediatrix Medical Group* 127,960 8,371,142
Respironics* 100,370 4,820,771
- --------------------------------------------------------------------------------
48,192,747
- --------------------------------------------------------------------------------
ENERGY -- 6.9%
Acergy ADR 126,590 3,759,723
Cameron International* 83,460 7,702,523
Exterran Holdings* 92,910 7,464,389
FMC Technologies* 135,160 7,793,326
Range Resources 190,025 7,726,417
- --------------------------------------------------------------------------------
34,446,378
- --------------------------------------------------------------------------------
UTILITIES -- 6.4%
Allegheny Energy* 140,880 7,362,389
MDU Resources Group 152,150 4,235,856
National Fuel Gas+ 143,490 6,716,767
NII Holdings*+ 117,230 9,630,444
Telephone & Data Systems 56,350 3,761,363
- --------------------------------------------------------------------------------
31,706,819
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 4.7%
Herbalife ADR 176,410 8,019,599
Molson Coors Brewing, Class B 74,690 7,444,352
PepsiAmericas 248,120 8,049,013
- --------------------------------------------------------------------------------
23,512,964
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 1.0%
Goodyear Tire & Rubber* 168,920 5,136,857
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 483,646,460
- --------------------------------------------------------------------------------
136
- --------------------------------------------------------------------------------
Mid Cap Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 10.6%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 52,880,591 $ 52,880,591
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 3.0%
BlackRock TempFund,
Institutional Shares, 5.34% ^ 14,982,910 $ 14,982,910
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 110.9%
(Cost $518,761,530) $ 551,509,961
LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.9%) (54,013,587)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 497,496,374
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $49,789,776.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
ADR - American Depository Receipt
See accompanying notes to financial statements.
137
- --------------------------------------------------------------------------------
Portfolio of Investments
Pitcairn Taxable Bond Fund - September 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
VALUE AMOUNT
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 39.3%
FINANCIALS -- 18.3%
$1,500,000 21st Century Insurance,
5.90%, 12/15/13 $ 1,521,008
1,000,000 American General Finance,
MTN, Ser I, 4.63%, 5/15/09 991,342
439,000 Berkley (WR), 6.15%, 8/15/19 435,668
904,000 Ford Motor Credit, 7.38%, 10/28/09 886,424
750,000 General Electric Capital, 5.50%, 10/6/17 732,269
1,000,000 HSBC Finance, 4.75%, 5/15/09 993,649
450,000 Kimco Realty, MTN, Ser B,
7.90%, 12/7/07 451,682
1,000,000 Radian Group, 5.63%, 2/15/13 850,154
- --------------------------------------------------------------------------------
6,862,196
- --------------------------------------------------------------------------------
INDUSTRIALS -- 5.4%
1,000,000 Gannet, 6.38%, 4/1/12 1,027,624
1,000,000 General Electric Capital,
MTN, 5.72%, 8/22/11 1,003,337
- --------------------------------------------------------------------------------
2,030,961
- --------------------------------------------------------------------------------
ENERGY -- 5.3%
1,000,000 Entergy Louisiana, 5.83%, 11/1/10 998,579
1,000,000 Sunoco, 5.75%, 1/15/17 983,691
- --------------------------------------------------------------------------------
1,982,270
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.3%
1,000,000 Verizon Communications,
8.75%, 11/1/21 1,239,345
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 2.8%
1,000,000 May Department Stores,
7.63%, 8/15/13 1,053,338
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.8%
1,045,000 H.J. Heinz, 6.00%, 3/15/08 1,047,593
- --------------------------------------------------------------------------------
SOVEREIGN BOND -- 1.4%
500,000 Aid-Israel, 5.50%, 4/26/24 526,817
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 14,742,520
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 33.1%
1,635,000 FHLB, Ser RA18, 5.13%, 6/26/18 1,592,400
1,000,000 FHLMC, 5.25%, 1/11/10 1,001,975
500,000 FHLMC, 5.20%, 3/5/19 491,910
1,500,000 FHLMC, MTN, 4.65%, 10/10/13 1,470,899
750,000 FHLMC, MTN, 6.00%, 6/18/14 756,229
1,544,000 FHLMC, MTN, 5.00%, 12/14/18 1,504,779
1,000,000 FHLMC, MTN (A), .00%, 3/4/19 502,773
5,000,000 FHLMC, MTN (A), .00%, 4/4/36 669,265
1,000,000 FNMA, 8.20%, 3/10/16 1,222,655
2,000,000 FNMA, 5.55%, 2/16/17 2,018,287
1,175,000 TVA, Ser B, 6.24%, 7/15/45 1,216,418
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 12,447,590
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 16.3%
830,000 U.S. Treasury Bonds, 7.50%, 11/15/16 1,008,256
1,500,000 U.S. Treasury Bonds, 8.75%, 5/15/17 1,975,546
1,500,000 U.S. Treasury Bonds, 8.13%, 8/15/19 1,953,867
913,000 U.S. Treasury Bonds, 7.63%, 11/15/22 1,180,766
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 6,118,435
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 4.4%
MARYLAND -- 3.1%
1,185,000 Baltimore, Consolidated
Public Improvement GO, Ser B,
AMBAC, 5.00%, 10/15/10 1,190,273
- --------------------------------------------------------------------------------
NEW YORK -- 1.3%
500,000 Sales Tax Asset Receivable RB,
Ser B, FGIC, 4.76%, 10/15/15 481,245
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $ 1,671,518
- --------------------------------------------------------------------------------
138
- --------------------------------------------------------------------------------
Pitcairn Taxable Bond Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 3.0%
1,113,413 PNC Bank Money
Market Fund, 4.43% ^ $ 1,113,413
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 96.1%
(Cost $35,523,102) $ 36,093,476
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 3.9% 1,475,805
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 37,569,281
================================================================================
^ The rate shown is the 7-day effective yield as of September 30, 2007.
(A) Zero Coupon Security - The rate shown was the effective yield at the time
of purchase.
AMBAC - American Municipal Bond Assurance Corporation
FGIC - Financial Guaranty Insurance Corporation
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GO - General Obligation
MTN - Medium Term Note RB - Revenue Bond
TVA - Tennessee Valley Authority
See accompanying notes to financial statements.
139
- --------------------------------------------------------------------------------
Portfolio of Investments
Sands Capital Select Growth Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 97.0% SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE -- 25.3%
Abraxis BioScience*+ 202,100 $ 4,613,943
Allergan 416,800 26,871,096
Cerner*+ 141,000 8,433,210
Genentech* 289,200 22,563,384
Genzyme* 361,100 22,373,756
Intuitive Surgical*+ 94,300 21,689,000
Stryker 192,200 13,215,672
Teva Pharmaceutical Industries ADR+ 264,100 11,744,527
Varian Medical Systems* 278,500 11,666,365
Zimmer Holdings* 88,500 7,167,615
- --------------------------------------------------------------------------------
150,338,568
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 20.3%
Google, Class A* 98,800 56,046,276
Iron Mountain*+ 223,700 6,818,376
Lowe's 630,100 17,655,402
Starbucks* 1,122,800 29,417,360
Yahoo!*+ 391,658 10,512,101
- --------------------------------------------------------------------------------
120,449,515
- --------------------------------------------------------------------------------
TECHNOLOGY -- 18.8%
Apple* 170,200 26,132,508
Broadcom, Class A*+ 825,500 30,081,220
EMC* 898,300 18,684,640
QUALCOMM 522,800 22,093,528
Salesforce.com* 285,200 14,636,464
- --------------------------------------------------------------------------------
111,628,360
- --------------------------------------------------------------------------------
ENERGY -- 12.2%
FMC Technologies* 139,200 8,026,272
National-Oilwell Varco* 207,500 29,983,750
Schlumberger 329,200 34,566,000
- --------------------------------------------------------------------------------
72,576,022
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 10.9%
CME Group 39,500 23,200,325
Intercontinental Exchange* 146,900 22,314,110
Moody's+ 376,343 18,967,687
- --------------------------------------------------------------------------------
64,482,122
- --------------------------------------------------------------------------------
UTILITIES -- 4.8%
America Movil S.A. ADR+ 442,400 28,313,600
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.7%
Walgreen 339,100 16,019,084
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 2.0%
Expeditors International of Washington 252,400 11,938,520
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 575,745,791
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 12.5%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 74,360,152 $ 74,360,152
- --------------------------------------------------------------------------------
CASH EQUIVALENTS -- 0.8%
PNC Bank Money Market Fund, 4.43% ^ 4,657,881 $ 4,657,881
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 110.3%
(Cost $523,816,595) $ 654,763,824
LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.3%) (61,067,309)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 593,696,515
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $71,549,018.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
ADR - American Depository Receipt
See accompanying notes to financial statements.
140
- --------------------------------------------------------------------------------
Portfolio of Investments
Short Duration Fixed Income Fund - September 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 67.0%
$ 33,663 FHLMC CMO/REMIC Ser 1538,
Class J, 6.500%, 6/15/08 $ 33,608
214,274 FHLMC CMO/REMIC Ser 2509,
Class EA, 4.000%, 12/15/12 213,855
744,737 FHLMC CMO/REMIC Ser 2510,
Class TA, 4.000%, 6/15/32 718,158
1,223,272 FHLMC CMO/REMIC Ser 2515,
Class ED, 5.000%, 3/15/17 1,222,515
1,378,464 FHLMC CMO/REMIC Ser 2543,
Class YJ, 4.500%, 3/15/32 1,346,824
939,144 FHLMC CMO/REMIC Ser 2566,
Class LM, 4.500%, 4/15/32 919,309
943,017 FHLMC CMO/REMIC Ser 2575,
Class QP, 4.500%, 11/15/31 931,442
780,251 FHLMC CMO/REMIC Ser 2583,
Class ND, 4.250%, 12/15/10 773,568
830,295 FHLMC CMO/REMIC Ser 2590,
Class QY, 3.750%, 4/15/28 792,764
1,542,521 FHLMC CMO/REMIC Ser 2590,
Class UL, 3.750%, 3/15/32 1,479,295
1,227,546 FHLMC CMO/REMIC Ser 2596,
Class QE, 4.000%, 3/15/33 1,175,393
2,646,426 FHLMC CMO/REMIC Ser 2649,
Class PJ, 3.500%, 6/15/33 2,565,193
2,582,779 FHLMC CMO/REMIC Ser 2744,
Class TA, 5.500%, 3/15/26 2,583,724
2,056,724 FHLMC CMO/REMIC Ser 3092,
Class TA, 7.250%, 11/15/35 2,008,261
564,523 FHLMC CMO/REMIC Ser 3251,
Class TA, 7.400%, 6/15/36 567,073
135,062 FHLMC Pool #C66916, 7.000%, 5/1/32 140,023
130,349 FHLMC Pool #D94598, 6.500%, 4/1/21 133,913
188,535 FHLMC Pool #E97227, 7.000%, 9/1/14 193,027
14,965 FHLMC Pool #G10288, 6.000%, 9/1/09 15,044
31,207 FHLMC Pool #G10446, 6.500%, 2/1/11 31,800
213,494 FHLMC Pool #G30085, 7.500%, 10/1/17 224,571
326,239 FHLMC Pool #M90771, 5.000%, 12/1/07 325,315
3,811 FNMA CMO/REMIC Ser 1994-27,
Class PJ, 6.500%, 6/25/23 3,802
23,334 FNMA CMO/REMIC Ser 1999-15,
Class PC, 6.000%, 9/25/18 23,559
943,773 FNMA CMO/REMIC Ser 2002-71,
Class AP, 5.000%, 11/25/32 928,929
959,821 FNMA CMO/REMIC Ser 2003-119,
Class PU, 4.000%, 11/25/33 938,833
668,668 FNMA CMO/REMIC Ser 2003-19,
Class ME, 4.000%, 1/25/33 639,915
834,062 FNMA CMO/REMIC Ser 2003-30,
Class MB, 4.000%, 6/25/27 827,670
2,995,514 FNMA CMO/REMIC Ser 2003-34,
Class GJ, 4.000%, 2/25/33 2,845,824
920,848 FNMA CMO/REMIC Ser 2003-42,
Class CA, 4.000%, 5/25/33 868,080
282,670 FNMA CMO/REMIC Ser 2003-66,
Class AP, 3.500%, 11/25/32 263,047
4,196,516 FNMA CMO/REMIC Ser 2005-93,
Class XT (A), 7.000%, 10/25/35 4,080,056
2,283,537 FNMA CMO/REMIC Ser 2006-14,
Class DT (A), 7.000%, 3/25/36 2,272,434
16,646 FNMA Pool #250477, 6.000%, 1/1/11 16,840
26,737 FNMA Pool #303096, 7.500%, 12/1/09 27,004
150,432 FNMA Pool #313429, 7.000%, 3/1/12 155,005
261,137 FNMA Pool #323441, 7.000%, 12/1/13 270,245
207,441 FNMA Pool #323832, 7.500%, 7/1/29 217,697
13,011 FNMA Pool #334593, 7.000%, 5/1/24 13,664
523,344 FNMA Pool #546474, 7.000%, 1/1/15 541,597
9,543 FNMA Pool #6222, 9.000%, 4/1/16 9,867
568,445 FNMA Pool #647567, 6.000%, 6/1/17 577,242
389,104 FNMA Pool #665773, 7.500%, 6/1/31 408,467
956,716 FNMA Pool #725284, 7.000%, 11/1/18 990,085
8,609 FNMA Pool #8245, 8.000%, 12/1/08 8,682
1,973,815 FNMA Pool #838790, 4.500%, 8/1/35 1,832,152
24,991 GNMA ARM Pool #8426 (A),
5.125%, 11/20/18 25,237
1,059,023 GNMA CMO/REMIC Ser 2002-72,
Class AB, 4.500%, 10/20/32 1,015,325
8,893 GNMA Pool #2707, 5.500%, 1/20/14 8,890
11,041 GNMA Pool #2802, 5.500%, 7/20/14 11,038
117,210 GNMA Pool #2843, 5.500%, 11/20/14 117,175
94,816 GNMA Pool #344233, 8.000%, 2/15/23 100,683
223,153 GNMA Pool #345123, 8.000%, 12/15/23 236,959
6,322 GNMA Pool #351122, 6.500%, 7/15/08 6,362
3,957 GNMA Pool #357343, 6.500%, 10/15/08 3,982
47,544 GNMA Pool #462486, 6.500%, 1/15/13 48,860
59,222 GNMA Pool #569337, 6.500%, 4/15/22 60,420
77,195 GNMA Pool #578189, 6.000%, 2/15/32 77,862
105,944 GNMA Pool #780322, 8.000%, 11/15/22 112,348
51,784 GNMA Pool #780327, 8.000%, 11/15/17 54,590
479,597 GNMA Pool #780604, 7.000%, 7/15/12 495,339
119,879 GNMA Pool #814, 8.000%, 8/20/17 126,186
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 39,656,627
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 28.5%
7,000,000 FHLB (A), 6.125%, 8/20/08 6,965,700
7,000,000 FHLB (A), 9.000%, 8/16/22 6,975,500
3,000,000 FHLB Discount Note, 6/18/08 2,906,040
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 16,847,240
- --------------------------------------------------------------------------------
CORPORATE BOND -- 1.7%
FINANCIAL -- 1.7%
1,000,000 Countrywide Financial Corp, MTN (A),
5.440%, 2/28/08 $ 990,085
- --------------------------------------------------------------------------------
141
- --------------------------------------------------------------------------------
Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
FACE
VALUE VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.7%
$1,618,000 PNC Bank, National Association
4.42% dated 09/28/07 due 10/01/07
repurchase proceeds $1,618,596
(Collateralized by $1,915,000 U.S.
Government Obligation FGG 02480
6.50% due 12/01/36; fair value
$1,960,481) $ 1,618,000
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.0%
323 BlackRock TempFund,
Institutional Shares, 5.341%^ $ 323
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES
AND REPURCHASE AGREEMENT -- 99.9%
(Cost $59,762,628) $ 59,112,275
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 0.1% 80,033
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 59,192,308
- --------------------------------------------------------------------------------
^ The rate shown is the 7-day effective yield as of September 30, 2007.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2007.
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
See accompanying notes to financial statements.
142
- --------------------------------------------------------------------------------
Portfolio of Investments
Small Cap Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.6% SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 21.6%
Aaron Rents 37,522 $ 836,741
CNET Networks*+ 121,115 902,307
Consolidated Graphics* 16,298 1,023,351
Dover Downs Gaming & Entertainment 63,119 655,806
EarthLink* 105,244 833,532
EZCORP - Class A* 49,880 670,886
Jos. A. Bank Clothiers* 15,518 518,612
Matthews International 32,874 1,439,880
Sonic* 45,259 1,059,061
Steiner Leisure Limited* 22,953 996,160
TeleTech Holdings* 36,590 874,867
Toro 22,219 1,307,144
Tupperware 30,822 970,585
UniFirst 14,509 543,507
WMS Industries* 41,947 1,388,446
Wolverine World Wide 31,905 874,197
- --------------------------------------------------------------------------------
14,895,082
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 20.1%
Central Pacific Financial+ 44,932 1,312,014
CompuCredit* 15,666 340,109
Corporate Office Properties Trust 17,555 730,815
Cowen Group* 35,150 485,773
First Industrial Realty Trust+ 36,140 1,404,762
First Marblehead+ 13,641 517,403
Flagstar Bancorp 42,952 417,923
FPIC Insurance Group* 20,984 903,361
Jefferies Group 27,606 768,275
Montpelier Re Holdings+ 53,641 949,446
Southwest Bancorp 48,944 921,126
Strategic Hotels & Resorts 63,801 1,313,663
Sunstone Hotel Investors 77,131 1,977,638
TNS 31,716 509,359
TriCo Bancshares 63,043 1,403,968
- --------------------------------------------------------------------------------
13,955,635
- --------------------------------------------------------------------------------
HEALTH CARE -- 11.1%
Centene* 26,814 576,769
Enzon Pharmaceuticals* 36,682 323,168
Exelixis* 31,692 335,618
ICU Medical* 19,339 749,386
Incyte* 39,611 283,219
Integra LifeSciences Holdings*+ 24,960 1,212,557
Isis Pharmaceuticals*+ 33,971 508,546
Kendle International*+ 17,319 719,258
Nabi Biopharmaceuticals*+ 60,896 247,238
Perrigo 75,152 1,604,494
Progenics Pharmaceuticals*+ 14,270 315,510
Sepracor* 11,529 317,048
Trubion Pharmaceuticals*+ 15,730 190,805
ViroPharma* 34,701 308,839
- --------------------------------------------------------------------------------
7,692,455
- --------------------------------------------------------------------------------
PRODUCER DURABLES -- 11.0%
Astec Industries* 16,422 943,444
Asyst Technologies* 76,394 404,124
Axcelis Technologies* 160,975 822,582
Belden CDT 15,920 746,807
Genlyte Group* 8,700 559,062
ICF International* 37,335 1,029,699
MKS Instruments* 33,038 628,383
Plantronics 44,140 1,260,197
Regal-Beloit 15,046 720,553
Watts Water Technologies, Class A+ 15,568 477,938
- --------------------------------------------------------------------------------
7,592,789
- --------------------------------------------------------------------------------
TECHNOLOGY -- 10.1%
ADC Telecommunications* 52,802 1,035,447
AMIS Holdings* 49,737 482,946
COMSYS IT Partners* 28,713 482,666
DRS Technologies 15,840 873,101
MicroStrategy - Class A* 5,081 403,127
Palm*+ 27,675 450,272
Radiant Systems* 47,469 751,434
Vignette* 44,513 893,376
Vishay Intertechnology* 57,768 752,717
Xyratex* 47,058 903,043
- --------------------------------------------------------------------------------
7,028,129
- --------------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 6.7%
Arch Chemicals 27,491 1,288,778
Hercules 34,114 717,076
Koppers Holdings 27,150 1,048,262
Quanex 23,053 1,083,030
US Concrete* 78,030 514,218
- --------------------------------------------------------------------------------
4,651,364
- --------------------------------------------------------------------------------
ENERGY -- 6.3%
Global Industries* 37,600 968,577
Lufkin Industries 9,217 507,119
Rosetta Resources* 35,269 646,833
Swift Energy* 11,123 455,153
T-3 Energy Services* 21,309 908,616
Unit* 18,928 916,115
- --------------------------------------------------------------------------------
4,402,413
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 5.2%
AAR* 29,713 901,492
Con-way 15,448 710,608
SkyWest 30,669 771,939
Tenneco* 39,435 1,222,880
- --------------------------------------------------------------------------------
3,606,919
- --------------------------------------------------------------------------------
UTILITIES -- 3.8%
Golden Telecom+ 11,808 950,426
Laclede Group 26,108 842,766
NSTAR 24,533 853,994
- --------------------------------------------------------------------------------
2,647,186
- --------------------------------------------------------------------------------
143
- --------------------------------------------------------------------------------
Small Cap Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.6% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 3.7%
Hain Celestial Group* 46,678 $ 1,499,764
Longs Drug Stores 21,451 1,065,471
- --------------------------------------------------------------------------------
2,565,235
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 69,037,207
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 10.4%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 7,190,007 $ 7,190,007
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.2%
PNC Bank Money Market Fund, 4.43% ^ 168,181 $ 168,181
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 110.2%
(Cost $70,796,877) $ 76,395,395
LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.2%) (7,057,367)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 69,338,028
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $6,813,000.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
See accompanying notes to financial statements.
144
- --------------------------------------------------------------------------------
Portfolio of Investments
Small Cap Value Opportunities Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 90.6% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 19.4%
1st Source 52,800 $ 1,209,120
Advanta, Class B 40,650 1,114,623
American Physicans Capital 37,500 1,461,000
Argo Group International Holdings* 8,400 365,484
ASTA Funding 21,032 805,946
BioMed Realty Trust 26,050 627,805
Boston Private Financial Holdings+ 23,500 654,240
Centennial Bank Holdings*+ 126,600 810,240
CNA Surety* 64,900 1,144,187
Corporate Office Properties Trust 13,480 561,172
Delphi Financial Group, Class A 21,680 876,306
DiamondRock Hospitality 52,740 918,203
EastGroup Properties 16,520 747,695
Employers Holdings 37,730 777,615
Encore Capital Group* 28,014 330,565
First State Bancorp 52,900 1,038,956
FPIC Insurance Group* 48,570 2,090,938
Hanmi Financial 61,860 958,211
Hanover Insurance Group 28,400 1,254,996
Heritage Commerce 16,870 357,138
Investment Technology Group* 17,890 768,912
IPC Holdings+ 26,620 767,987
Max Capital Group 52,100 1,460,884
Mercer Insurance Group 16,700 295,423
Mid-America Apartment Communities 19,956 994,807
Midland 11,400 626,544
MoneyGram International 60,300 1,362,177
Navigators Group* 18,490 1,003,083
NGP Capital Resources+ 51,690 838,929
Online Resources* 86,590 1,094,498
Phoenix Companies 48,840 689,132
Pico Holdings 14,140 587,517
Potlatch 19,290 868,629
ProAssurance* 14,390 775,189
Renasant+ 32,220 696,919
RLI 11,300 640,936
S1* 80,380 727,439
Signature Bank* 30,230 1,065,003
SVB Financial Group*+ 15,640 740,710
Taylor Capital Group 31,300 874,209
UCBH Holdings+ 39,000 681,720
UMB Financial 23,410 1,003,353
United America Indemnity, Class A* 92,780 1,995,697
United Fire & Casualty 26,000 1,016,340
- --------------------------------------------------------------------------------
39,680,477
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 16.8%
Aaron Rents 67,000 1,494,100
American Greetings, Class A 60,102 1,586,693
Belo, Class A 42,000 729,120
BJ's Wholesale Club* 29,830 989,163
Bob Evans Farms 44,400 1,339,992
Bright Horizons Family Solutions* 22,280 954,475
Brink's 26,000 1,452,880
Brown Shoe Company 22,540 437,276
Buckle 46,800 1,775,591
Cabela's*+ 28,040 663,146
Callaway Golf 143,090 2,290,870
Charming Shoppes* 101,100 849,240
Crown Crafts* 21,250 88,400
E Com Ventures* 12,250 300,125
Entravision Communications* 59,280 546,562
EZCORP, Class A* 59,100 794,895
Finish Line, Class A 87,850 381,269
First Consulting Group* 54,890 565,367
FTI Consulting* 19,580 985,070
Gevity HR 33,180 340,095
Hanesbrands* 50,100 1,405,806
Hartmarx* 58,450 286,405
Helen of Troy* 19,980 385,814
Jakks Pacific* 53,500 1,428,985
K-Swiss, Class A 56,850 1,302,434
Landry's Restaurants+ 25,260 668,380
Morton's Restaurant Group* 35,530 564,927
Movado Group 21,050 671,916
Penske Automotive Group 50,300 1,018,072
R.G. Barry* 20,300 195,895
Steiner Leisure* 30,600 1,328,040
Steinway Musical Instruments 30,580 905,780
Toro+ 27,200 1,600,176
Tupperware Brands 60,100 1,892,548
United Online 81,600 1,224,816
Universal Security Instruments* 10,700 187,250
WMS Industries* 17,035 563,859
Zones* 11,300 116,842
- --------------------------------------------------------------------------------
34,312,274
- --------------------------------------------------------------------------------
ENERGY -- 13.0%
Basic Energy Services* 8,100 170,262
Berry Petroleum, Class A 27,700 1,096,643
Bill Barrett* 11,050 435,481
Bolt Technology* 13,700 447,442
Cimarex Energy 60,000 2,235,000
Copano Energy 36,000 1,322,280
Delek US Holdings 22,500 564,300
Encore Acquisition*+ 80,000 2,532,000
Grey Wolf* 23,400 153,270
Helmerich & Payne 81,000 2,659,230
Hornbeck Offshore Services*+ 40,100 1,471,670
ICO* 86,800 1,222,144
Lufkin Industries 31,810 1,750,186
Matrix Service* 107,060 2,242,907
Parker Drilling* 45,200 367,024
Penn Virginia Corporation 18,230 801,755
Petrohawk Energy* 61,180 1,004,576
Petroleum Development* 14,940 662,589
Southwestern Energy* 30,000 1,255,500
145
- --------------------------------------------------------------------------------
Small Cap Value Opportunities Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 90.6% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY -- 13.0% (CONTINUED)
Trico Marine Services*+ 20,670 $ 615,966
W-H Energy Services* 17,800 1,312,750
Whiting Petroleum*+ 50,500 2,244,725
- --------------------------------------------------------------------------------
26,567,700
- --------------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 9.6%
A.M. Castle & Co. 46,500 1,515,900
AEP Industries* 7,500 317,550
Arch Chemicals 12,700 595,376
Barnes Group+ 36,850 1,176,252
Century Aluminum* 5,600 294,840
Chase 21,500 399,900
Compass Minerals International 30,210 1,028,348
Eastern 11,849 266,010
EnerSys* 35,590 632,434
Haynes International* 6,640 566,857
Innospec 32,600 742,628
Kaiser Aluminum 8,870 625,956
Kaydon 17,400 904,626
KHD Humboldt Wedag International* 22,540 687,470
Koppers Holdings 14,440 557,528
L.B. Foster, Class A*+ 18,020 783,149
LSB Industries* 27,400 648,010
Minerals Technologies 5,500 368,500
Neenah Paper 20,120 665,771
North American Galvanizing & Coatings* 127,200 966,720
Olin 30,000 671,400
Quanex 37,200 1,747,656
Schnitzer Steel Industries, Class A 35,600 2,609,125
Sterling Construction* 23,850 550,458
Universal Stainless & Alloy Products* 7,500 298,425
- --------------------------------------------------------------------------------
19,620,889
- --------------------------------------------------------------------------------
PRODUCER DURABLES -- 9.6%
ACCO Brands* 68,000 1,525,920
Applied Industrial Technologies 22,500 693,675
Arris Group*+ 46,710 576,869
ASE Test Limited* 69,600 1,000,152
Cascade 32,600 2,124,542
ECI Telecom Limited* 52,100 518,916
Gehl* 28,100 627,473
Hurco* 39,400 2,129,964
Kadant* 30,440 852,320
Ladish* 21,440 1,189,491
Lincoln Electric Holdings 15,200 1,179,672
LMI Aerospace* 32,100 743,115
Measurement Specialties 20,210 563,859
Park-Ohio Holdings* 14,400 373,680
Powell Industries* 15,280 578,959
Preformed Line Products 7,500 390,150
Regal-Beloit 9,570 458,307
Trinity Industries+ 24,600 923,484
Trio-Tech International 19,500 212,355
Triumph Group 11,300 923,323
Verigy Limited* 35,960 888,572
VSE 24,000 1,134,720
- --------------------------------------------------------------------------------
19,609,518
- --------------------------------------------------------------------------------
UTILITIES -- 6.0%
Alaska Communications Systems Group 85,900 1,241,255
Allete 9,710 434,620
Central Vermont Public Service 39,900 1,457,946
El Paso Electric* 30,490 705,234
Integrys Energy Group+ 23,090 1,182,901
New Jersey Resources 27,890 1,383,065
Northwest Natural Gas 34,100 1,558,369
NTELOS Holdings 40,480 1,192,541
PAETEC Holding* 71,890 896,468
Suburban Propane Partners 11,100 492,840
UGI 45,000 1,169,100
WGL Holdings 16,100 545,629
- --------------------------------------------------------------------------------
12,259,968
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION -- 4.4%
AAR* 24,650 747,881
AirTran Holdings* 180,000 1,771,199
Cooper Tire & Rubber 26,300 641,720
Greenbrier 15,900 424,689
Hayes Lemmerz International* 149,929 623,705
Miller Industries* 26,300 450,256
Republic Airways Holdings* 17,500 370,475
Spartan Motors+ 38,190 642,738
TBS International, Class A* 15,700 647,625
Titan International+ 32,430 1,035,166
Tsakos Energy Navigation 11,300 795,633
Werner Enterprises 43,700 749,455
- --------------------------------------------------------------------------------
8,900,542
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 4.2%
Del Monte Foods 85,300 895,650
Flower Foods 53,640 1,169,352
Fresh Del Monte Produce 26,300 756,125
Ingles Markets, Class A 41,500 1,189,390
Lance 14,789 340,443
Longs Drug Stores 17,440 866,245
Nutraceutical International* 20,000 304,200
Spartan Stores 89,600 2,018,687
Susser Holdings* 48,730 1,035,513
- --------------------------------------------------------------------------------
8,575,605
- --------------------------------------------------------------------------------
TECHNOLOGY -- 4.0%
Ariba* 43,170 465,373
Avici Systems 38,100 406,146
BroadVision* 133,200 293,040
Cirrus Logic* 77,800 497,920
146
- --------------------------------------------------------------------------------
Small Cap Value Opportunities Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 90.6% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY -- 4.0% (CONTINUED)
Corel* 11,300 $ 144,753
EDO+ 12,910 723,089
EMS Technologies* 17,580 431,237
Foundry Networks* 40,770 724,483
Ixia* 85,590 746,345
Macrovision* 28,270 696,290
Progress Software* 28,780 872,034
Semtech*+ 43,450 889,856
UTEK 25,500 376,125
Zoran* 44,040 889,608
- --------------------------------------------------------------------------------
8,156,299
- --------------------------------------------------------------------------------
HEALTH CARE -- 3.6%
Alliance Imaging* 114,150 1,034,199
Amedisys* 16,790 645,072
AMERIGROUP* 22,500 775,800
Analogic 33,262 2,120,785
Axcan Pharma* 67,550 1,403,014
Owens & Minor 16,190 616,677
STERIS 27,810 760,047
- --------------------------------------------------------------------------------
7,355,594
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 185,038,866
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 7.2%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 14,703,983 $ 14,703,983
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 9.7%
PNC Bank Money Market Fund, 4.43% ^ 19,770,694 $ 19,770,694
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 107.5%
(Cost $209,554,080) $ 219,513,543
LIABILITIES IN EXCESS OF OTHER ASSETS -- (7.5%) (15,397,990)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 204,115,553
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $14,039,502.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
See accompanying notes to financial statements.
147
- --------------------------------------------------------------------------------
Portfolio of Investments
Strategic Value and High Income Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
AFFILIATED EQUITY FUND -- 58.6%
Touchstone Funds Group Trust
Diversified Small Cap Value Fund* 34,932 $ 682,923
- --------------------------------------------------------------------------------
AFFILIATED FIXED INCOME FUND -- 40.5%
Touchstone Investment Trust High Yield Fund** 51,452 $ 472,328
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.1%
(Cost $1,169,986) $ 1,155,251
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9% 10,216
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 1,165,467
================================================================================
* Affiliated Fund, sub-advised by Clover Capital Management, Inc.
** Affiliated Fund, sub-advised by Fort Washington Investment Advisers, Inc.
See accompanying notes to financial statements.
148
- --------------------------------------------------------------------------------
Portfolio of Investments
Tax-Exempt Bond Fund - September 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.9%
ALABAMA -- 1.0%
$1,000,000 Bessemer RB, AMBAC,
Callable 02/01/10 @ 102,
5.600%, 2/1/30 $ 1,054,750
- --------------------------------------------------------------------------------
CALIFORNIA -- 10.7%
2,000,000 California Health Facilities
Finance Authority RB, St. Francis
Memorial Hospital, Ser C, ETM,
5.875%, 11/1/23 2,354,200
1,840,000 California State GO, Callable
02/01/13 @ 100, 5.250%, 2/1/33 1,904,768
2,000,000 California State GO, Callable
09/01/16 @ 100, 4.750%, 9/1/30 1,994,380
2,000,000 California State, Department of
Veteran Affairs Home Purchase
RB, Ser A, Callable 11/30/11 @ 101,
4.400%, 12/1/21 1,995,300
2,000,000 California State, Economic
Recovery GO, Ser A, Callable
07/01/11 @ 100, 5.000%, 7/1/17 2,093,920
500,000 California State, Statewide
Communities Developmental
Authority, Pollution Control RB,
Southern California Edison, Ser A,
XLCA, 4.100%, 4/1/28 509,385
285,000 Stockton Housing Facility RB,
O'Connor Woods Project, Ser A,
ETM, GNMA, Callable 05/06/05 @ 100,
5.200%, 9/20/09 285,373
- --------------------------------------------------------------------------------
11,137,326
- --------------------------------------------------------------------------------
COLORADO -- 1.0%
1,000,000 South Suburban Park & Recreation
District GO, AMBAC, Callable
09/15/10 @ 100, 5.375%, 9/15/18 1,051,470
- --------------------------------------------------------------------------------
DELAWARE -- 1.0%
1,000,000 Delaware State, Economic
Development Authority, Pollution
Control RB, Delmarva Power, AMBAC,
Callable 05/01/11 @ 100 (A),
4.900%, 5/1/26 1,038,270
- --------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.3%
1,000,000 District of Columbia RB,
Howard University Project,
MBIA, 5.500%, 10/1/16 1,120,150
200,000 Washington D.C., Convention
Center Authority RB, Dedicated Tax
Revenue, Senior Lien, AMBAC,
Callable 10/01/08 @ 101,
5.250%, 10/1/09 205,428
- --------------------------------------------------------------------------------
1,325,578
- --------------------------------------------------------------------------------
FLORIDA -- 1.1%
405,000 Orlando Utilities Commission,
Water & Electric RB, Callable
10/01/11 @ 101, 5.250%, 10/1/20 429,968
685,000 Orlando Utilities Commission,
Water & Electric RB, Pre-Refunded
10/01/11 @ 101, 5.250%, 10/1/20 733,834
- --------------------------------------------------------------------------------
1,163,802
- --------------------------------------------------------------------------------
GEORGIA -- 2.3%
2,000,000 Henry County, Water & Sewer
Authority RB, AMBAC, 6.150%, 2/1/20 2,378,880
- --------------------------------------------------------------------------------
HAWAII -- 4.3%
1,680,000 Honolulu, City & County GO,
Ser B, ETM, 8.000%, 10/1/10 1,890,504
2,385,000 University of Hawaii RB, Ser A,
FGIC, Callable 07/15/12 @ 100,
5.500%, 7/15/21 2,585,078
- --------------------------------------------------------------------------------
4,475,582
- --------------------------------------------------------------------------------
ILLINOIS -- 8.3%
1,000,000 Chicago, Park District GO,
Aquarium & Museum Project,
FGIC, Callable 01/01/08 @ 100,
5.500%, 1/1/10 1,004,710
2,350,000 Illinois Development Finance
Authority RB, Elgin School
District Project, FSA (B), .000%, 1/1/18 1,525,009
1,000,000 Illinois Health Facilities
Authority RB, Hospital Sisters
Services Project, Ser A, MBIA,
Callable 06/01/08 @ 101,
5.250%, 6/1/12 1,019,600
1,000,000 Illinois State, Toll Highway
Authority Revenue RB,
Senior Priority, Ser A-1, Callable
07/01/2016 @ 100, 5.000%, 1/1/26 1,045,370
1,200,000 Metropolitan Pier & Exposition
Authority RB, Illinois Dedicated
State Tax Revenue, AMBAC,
Callable 06/01/07 @ 101,
5.125%, 6/1/13 1,213,392
500,000 Metropolitan Pier & Exposition
Authority RB, Illinois Dedicated
State Tax Revenue, Ser A, FGIC,
5.500%, 12/15/23 564,485
500,000 Metropolitan Pier & Exposition
Authority RB, Illinois Dedicated
State Tax Revenue, Ser A, FGIC,
ETM, 5.500%, 12/15/23 567,935
2,000,000 Will County, Community
School District GO, USD
#365, FSA (B), .000%, 11/1/12 1,648,680
- --------------------------------------------------------------------------------
8,589,181
- --------------------------------------------------------------------------------
149
- --------------------------------------------------------------------------------
Tax-Exempt Bond Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.9% (CONTINUED)
INDIANA -- 4.2%
$1,000,000 Indiana Transportation Finance
Authority RB, Ser A, MBIA,
6.800%, 12/1/16 $ 1,164,870
3,000,000 Indiana University RB, Student
Fee, Ser P, AMBAC, Callable
01/01/10 @ 100, 5.000%, 8/1/18 3,165,720
- --------------------------------------------------------------------------------
4,330,590
- --------------------------------------------------------------------------------
KENTUCKY -- 1.1%
1,050,000 Kentucky State, Property
& Buildings Commission RB,
Project Number 67, Pre-Refunded
09/01/10 @ 100, 5.625%, 9/1/13 1,110,291
- --------------------------------------------------------------------------------
LOUISIANA -- 2.2%
2,115,000 Louisiana Public Facilites
Authority RB, Franciscan
Missionaries Project, Ser A, FSA,
5.500%, 7/1/11 2,249,599
- --------------------------------------------------------------------------------
MASSACHUSETTS -- 3.1%
1,000,000 Massachusetts State, Housing
Finance Agency RB, Ser B,
MBIA, Callable 06/01/08 @ 101,
5.300%, 12/1/17 1,006,600
70,000 Massachusetts State, Special
Obligation RB, Consolidated
Loan, Ser A, Callable 06/01/08
@ 101, 5.000%, 6/1/15 71,299
930,000 Massachusetts State, Special
Obligation RB, Consolidated
Loan, Ser A, Pre-Refunded
06/01/08 @ 101, 5.000%, 6/1/15 946,945
1,060,000 Massachusetts State, Water
Resources Authority RB,
Ser D, MBIA, GOA, 6.000%, 8/1/14 1,208,039
- --------------------------------------------------------------------------------
3,232,883
- --------------------------------------------------------------------------------
MISSISSIPPI -- 0.7%
745,000 Mississippi Development
Bank RB, Capital Project &
Equipment Acquisition, Ser A2,
AMBAC, 5.000%, 7/1/24 745,782
- --------------------------------------------------------------------------------
NEVADA -- 2.0%
2,000,000 Nevada Systems, Higher
Education University RB,
Ser B, AMBAC, Callable,
01/01/16 @ 100, 5.000%, 7/1/35 2,058,460
- --------------------------------------------------------------------------------
NEW JERSEY -- 0.4%
150,000 New Jersey State GO, Ser D,
6.000%, 2/15/11 161,603
250,000 New Jersey State, Transportation
System RB, Ser A, 5.625%, 6/15/14 278,992
- --------------------------------------------------------------------------------
440,595
- --------------------------------------------------------------------------------
NEW YORK -- 10.0%
3,715,000 New York City, Transitional
Finance Authority RB, Ser A,
Callable 11/01/11 @ 100 (A),
5.500%, 11/1/26 3,975,979
1,000,000 New York State, Mortgage
Agency RB, Homeowner
Mortgage, Ser 80, Callable
03/01/09 @ 101, 5.100%, 10/1/17 1,022,060
3,000,000 New York State, Municipal
Bond Bank Agency RB, Special
School Purpose, Ser C, Callable
06/01/2013 @ 100, 5.500%, 6/1/15 3,250,320
2,000,000 New York State, Thruway
Authority RB, Highway and
Bridge Project, Callable
04/01/12 @ 100, 5.500%, 4/1/15 2,148,220
- --------------------------------------------------------------------------------
10,396,579
- --------------------------------------------------------------------------------
NORTH CAROLINA -- 4.8%
230,000 Charlotte, Mecklenburg
Hospital Authority, North
Carolina Health Care Systems
RB, Ser A, Pre-Refunded
01/15/11 @ 101, 5.000%, 1/15/31 242,034
770,000 Charlotte, Mecklenburg
Hospital Authority, North
Carolina Health Care Systems
RB, Ser A, Unrefunded, 5.000%, 1/15/31 775,567
2,200,000 Greensboro, Enterprise
System RB, 5.250%, 6/1/24 2,449,589
1,380,000 University of North Carolina
Wilmington, RB, AMBAC,
Callable 01/01/13 @ 100,
5.250%, 1/1/21 1,467,037
- --------------------------------------------------------------------------------
4,934,227
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 18.5%
1,345,000 Chester County, Health
& Education Facilities
Authority RB, Devereux
Foundation, Callable 11/01/16
@ 100, 5.000%, 11/1/22 1,365,565
2,730,000 Coatesville School District GO,
FSA, Callable 08/15/14 @ 100,
5.250%, 8/15/18 2,947,008
150
- --------------------------------------------------------------------------------
Tax-Exempt Bond Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.9% (CONTINUED)
PENNSYLVANIA -- 18.5% (CONTINUED)
$ 270,000 Coatesville School District GO,
FSA, Pre-Refunded 8/15/14 @ 100,
5.250%, 8/15/18 $ 295,893
3,000,000 Delaware County Authority,
Hospital RB, Crozer Keystone
Obigation Group A, Callable
12/15/16 @ 100, 5.000%, 12/15/26 2,923,860
2,820,000 Lancaster Area Sewer Authority
Revenue RB, FGIC, Callable
4/1/15 @ 100, 5.000%, 4/1/17 3,031,245
2,000,000 Norwin Penn School District
GO, FGIC, Pre-Refunded
04/01/10 @ 100, 6.000%, 4/1/24 2,116,100
1,000,000 Owen J Roberts School
District, FSA, Callable
05/15/2016 @ 100, 4.750%, 5/15/25 1,024,140
1,035,000 Pennsylvania State, Higher
Educational Facilities Authority
RB, Saint Joseph's University,
Callable 05/01/06 @ 100
(LOC: Allied Irish Banks PLC) (A),
5.000%, 5/1/11 1,035,932
1,000,000 Pennsylvania State, Public
School Building Authority RB,
Harrisburg Area Community
College Project, AMBAC,
Callable 04/01/14 @ 100,
5.250%, 4/1/24 1,069,810
1,500,000 Philadelphia, Authority for
Industrial Development
Lease Revenue RB, Ser B, FSA,
Callable 10/01/11 @ 101,
5.500%, 10/1/12 1,615,575
1,300,000 Philadelphia, Hospital &
Higher Education Authority RB,
Presbyterian Medical Center
Project, ETM, 6.500%, 12/1/11 1,375,803
525,000 Philadelphia, Water & Waste
Water RB, MBIA, 6.250%, 8/1/09 550,410
- --------------------------------------------------------------------------------
19,351,341
- --------------------------------------------------------------------------------
PUERTO RICO -- 0.8%
250,000 Puerto Rico, Commonwealth
Public Improvements, Ser A,
5.000%, 7/1/09 255,728
500,000 Puerto Rico, Electric Power
Authority RB, Ser RR, Callable
07/01/15 @ 100, 5.000%, 7/1/29 544,515
- --------------------------------------------------------------------------------
800,243
- --------------------------------------------------------------------------------
RHODE ISLAND -- 1.2%
1,000,000 Rhode Island, Depositors
Economic Protection
Authority RB, Special Obligation,
Ser A, ETM, 6.375%, 8/1/22 1,235,200
- --------------------------------------------------------------------------------
SOUTH CAROLINA -- 6.0%
2,530,000 Darlington County, Water
& Sewer Authority RB, AMBAC,
Callable 12/01/12 @ 101,
5.625%, 12/1/23 2,748,339
3,415,000 South Carolina State,
Public Service Authority RB,
Ser A, AMBAC Callable
01/01/14 @ 100, 5.000%, 1/1/39 3,484,598
- --------------------------------------------------------------------------------
6,232,937
- --------------------------------------------------------------------------------
TEXAS -- 6.6%
10,000 Duncanville, Independent
School District, GO, PSF-GTD,
Callable 02/15/13 @ 100,
5.650%, 2/15/28 10,716
1,340,000 Duncanville, Independent
School District, GO, PSF-GTD,
Pre-Refunded 02/15/13 @ 100,
5.650%, 2/15/28 1,471,856
975,000 Fort Worth Water &
Sewer RB, Unrefunded,
5.750%, 2/15/14 1,028,001
1,850,000 Harris County, Healthcare
Facilities Development
Authority RB, Christus Health
Project, Ser A, MBIA, Callable
07/01/09 @ 101, 5.375%, 7/1/24 1,924,352
1,140,000 Houston, Water & Sewer
Systems Authority RB,
Junior Lien, Ser C, FGIC,
Pre-Refunded 12/01/07 @ 101,
5.375%, 12/1/27 1,154,649
1,250,000 Texas Water Development
Board RB, Revolving Fund,
Senior Lein, Ser B, Callable
01/15/10 @ 100, 5.500%, 7/15/15 1,299,600
- --------------------------------------------------------------------------------
6,889,174
- --------------------------------------------------------------------------------
UTAH -- 2.1%
2,000,000 Utah Transit Authority
Sales Tax RB, Ser A, FSA,
Callable 12/15/12 @ 100,
5.000%, 6/15/24 2,133,880
- --------------------------------------------------------------------------------
151
- --------------------------------------------------------------------------------
Tax-Exempt Bond Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.9% (CONTINUED)
WASHINGTON -- 4.2%
$1,000,000 Central Pugent Sound,
Regional Transportation
Authority RB, Sales Tax &
Motor Project, FGIC, 5.250%, 2/1/21 $ 1,093,500
1,000,000 Clark County, School
District No. 177 GO, AMBAC,
5.250%, 12/1/14 1,095,650
1,000,000 Washington State GO, Ser A,
FSA, 5.000%, 7/1/20 1,049,060
1,000,000 Washington State, Economic
Development Finance
Authority, Biomedical Research
Property II RB, MBIA, Callable
12/01/15 @ 100, 5.250%, 6/1/19 1,072,390
- --------------------------------------------------------------------------------
4,310,600
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $ 102,667,220
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.0%
34,143 ABN Amro Tax Exempt
Money Market Fund, 3.460%^ $ 34,143
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 98.9%
(Cost $99,690,851) $ 102,701,363
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 1.1% 1,106,763
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 103,808,126
================================================================================
^ The rate shown is the 7-day effective yield as of September 30, 2007.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2007.
(B) Zero coupon security - the rate reported was the effective yield at time
of purchase.
AMBAC - American Municipal Bond Assurance Corporation
ETM - Escrowed to Maturity
FGIC - Financial Guaranty Insurance Corporation
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation
GOA - General Obligation of Authority
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
PLC - Public Limited Company
PSF-GTD - Permanent School Fund - Guaranteed
RB - Revenue Bond
USD - Unified School District XLCA - XL Capital Assurance
See accompanying notes to financial statements.
152
- --------------------------------------------------------------------------------
Portfolio of Investments
Ultra Short Duration Fixed Income Fund - September 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 76.5%
$ 418,423 FHLMC Pool #G11072,
7.500%, 12/1/15 $ 435,115
19,371 FHLMC CMO/REMIC Ser 1544,
Class L (A), 4.210%, 7/15/08 19,278
7,101,084 FHLMC CMO/REMIC Ser 2571,
Class FN (A), 6.400%, 8/15/32 7,182,810
1,271,618 FHLMC CMO/REMIC Ser 2575
Class LM, 4.500%, 5/15/32 1,246,180
1,940,904 FHLMC CMO/REMIC Ser 2586,
Class WA, 4.000%, 12/15/32 1,871,293
1,227,715 FHLMC CMO/REMIC Ser 2590,
Class UL, 3.750%, 3/15/32 1,177,392
1,669,483 FHLMC CMO/REMIC Ser 2594,
Class YA, 4.000%, 4/15/23 1,619,101
748,863 FHLMC CMO/REMIC Ser 2640,
Class OT, 2.000%, 4/15/22 742,978
1,468,766 FHLMC CMO/REMIC Ser 2649,
Class PJ, 3.500%, 6/15/33 1,423,682
864,807 FHLMC CMO/REMIC Ser 2684,
Class GN, 3.250%, 5/15/23 858,979
237,895 FHLMC CMO/REMIC Ser 2715,
Class QB, 3.500%, 9/15/22 237,211
1,428,518 FHLMC CMO/REMIC Ser 2744,
Class JX, 3.500%, 1/15/23 1,416,532
3,513,653 FHLMC CMO/REMIC Ser 2770,
Class FH (A), 6.150%, 3/15/34 3,539,874
1,795,707 FHLMC CMO/REMIC Ser 2886,
Class BF (A), 6.250%, 11/15/34 1,803,352
4,215,951 FHLMC CMO/REMIC Ser 2921,
Class JF (A), 6.250%, 1/15/35 4,270,159
324,442 FHLMC CMO/REMIC Ser 2925,
Class CF (A), 6.250%, 1/15/35 321,952
1,060,199 FHLMC CMO/REMIC Ser 2956,
Class YB, 6.950%, 1/15/35 979,417
2,415,861 FHLMC CMO/REMIC Ser 3025,
Class FC (A), 7.000%, 8/15/35 2,351,687
1,238,832 FHLMC CMO/REMIC Ser 3033,
Class BY (A), 7.000%, 9/15/35 1,289,751
736,541 FHLMC CMO/REMIC Ser 3038,
Class TA, 6.700%, 9/15/35 734,038
703,998 FHLMC CMO/REMIC Ser 3069,
Class KT, 7.000%, 10/15/34 706,701
4,459,695 FHLMC CMO/REMIC Ser 3092,
Class TA, 7.250%, 11/15/35 4,354,609
6,540,339 FHLMC CMO/REMIC Ser 3137,
Class PJ, 5.125%, 12/15/13 6,489,509
637,417 FHLMC CMO/REMIC Ser 3144,
Class TB, 7.200%, 3/15/34 637,752
4,999,732 FHLMC CMO/REMIC Ser 3157,
Class TB, 7.800%, 1/15/35 4,934,950
6,577,712 FHLMC CMO/REMIC Ser 3177,
Class SW, 7.650%, 6/15/35 6,585,935
$2,258,093 FHLMC CMO/REMIC Ser 3251,
Class TA, 7.400%, 6/15/36 2,268,290
352 FHLMC Pool #184967, 7.750%, 8/1/08 353
258,177 FHLMC Pool #B15413, 8.000%, 3/1/11 267,139
76,292 FHLMC Pool #E64944, 7.000%, 7/1/11 78,552
1,058,976 FNMA CMO/REMIC Ser 2002-67,
Class AM, 5.000%, 11/25/15 1,057,513
494,589 FNMA CMO/REMIC Ser 2002-87,
Class PY, 3.920%, 9/25/27 492,047
1,819,811 FNMA CMO/REMIC Ser 2003-119,
Class PU, 4.000%, 11/25/33 1,780,018
765,659 FNMA CMO/REMIC Ser 2003-19,
Class ME, 4.000%, 1/25/33 732,734
849,893 FNMA CMO/REMIC Ser 2003-33,
Class AM, 4.250%, 5/25/33 818,168
1,284,791 FNMA CMO/REMIC Ser 2003-33,
Class AU, 4.000%, 3/25/33 1,226,020
1,031,043 FNMA CMO/REMIC Ser 2003-34,
Class AD, 4.000%, 1/25/32 1,008,423
10,868,258 FNMA CMO/REMIC Ser 2003-61,
Class FK (A), 6.630%, 8/25/33 11,565,323
3,844,103 FNMA CMO/REMIC Ser 2003-69,
Class NF (A), 6.820%, 7/25/33 3,875,916
4,866,805 FNMA CMO/REMIC Ser 2003-81,
Class FE (A), 5.630%, 9/25/33 4,931,331
3,271,270 FNMA CMO/REMIC Ser 2004-96,
Class LF (A), 6.130%, 12/25/34 3,319,908
1,280,346 FNMA CMO/REMIC Ser 2005-108,
Class GU, 5.750%, 7/25/35 1,284,409
3,137,395 FNMA CMO/REMIC Ser 2005-93,
Class XT, 7.000%, 10/25/35 3,050,329
3,619,229 FNMA CMO/REMIC Ser 2006-109,
Class JS (A), 6.750%, 5/25/36 3,566,976
5,547,065 FNMA CMO/REMIC Ser 2006-14,
Class DT, 7.000%, 3/25/36 5,520,097
1,689,560 FNMA CMO/REMIC Ser 2007-9,
Class YA, 5.500%, 3/25/37 1,683,670
225,094 FNMA Pool #190658, 7.000%, 2/1/09 226,763
116,232 FNMA Pool #253472, 7.500%, 9/1/10 118,982
173,048 FNMA Pool #519992, 7.000%, 10/1/14 179,038
249,922 FNMA Pool #534851, 7.500%, 4/1/15 259,354
180,625 FNMA Pool #535219, 7.500%, 3/1/15 187,441
154,668 FNMA Pool #535635, 8.500%, 6/1/12 155,320
822,994 FNMA Pool #555646, 7.500%, 9/1/16 854,010
40,845 GNMA ARM Pool #8103 (A),
5.625%, 2/20/16 41,245
39,479 GNMA ARM Pool #8287 (A),
5.125%, 11/20/17 39,711
66,066 GNMA ARM Pool #8297 (A),
5.125%, 12/20/17 66,754
114,066 GNMA ARM Pool #8333 (A),
6.500%, 3/20/18 115,252
55,961 GNMA ARM Pool #8345 (A),
5.875%, 4/20/18 56,387
153
- --------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 76.5% (CONTINUED)
$ 79,818 GNMA ARM Pool #8366 (A),
6.375%, 6/20/18 $ 80,635
3,479 GNMA ARM Pool #8404 (A),
5.750%, 9/20/18 3,512
34,235 GNMA ARM Pool #8405 (A),
6.000%, 9/20/18 34,513
6,578 GNMA ARM Pool #8462 (A),
6.375%, 2/20/19 6,655
50,310 GNMA ARM Pool #8489 (A),
6.500%, 4/20/19 50,698
3,530,752 GNMA CMO/REMIC Ser 2003-34,
Class PM, 4.000%, 4/20/33 3,455,669
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 111,689,392
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 18.9%
2,000,000 FFCB, 5.250%, 9/27/11 2,004,176
5,000,000 FHLB, 4.250%, 9/12/08 4,983,385
3,000,000 FHLB (A), 6.125%, 8/20/08 2,985,300
3,000,000 FHLB (A), 9.000%, 8/16/22 2,989,500
10,000,000 FHLB Discount Note, 6/18/08 9,686,800
3,000,000 FNMA, 6.250%, 6/6/22 2,995,641
2,000,000 FNMA, 6.000%, 9/24/27 1,980,750
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS $ 27,625,552
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 2.9%
FINANCIALS -- 2.9%
3,750,000 Countrywide Financial Corp,
MTN (A), 5.440%, 2/28/08 3,712,818
500,000 John Deere Capital Corp, MTN (A),
5.383%, 9/25/08 499,871
- --------------------------------------------------------------------------------
4,250,000 TOTAL CORPORATE BONDS $ 4,212,689
- --------------------------------------------------------------------------------
FACE
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
$2,488,000 PNC Bank, National Association
4.42% dated 09/28/07 due 10/01/07
repurchase proceeds $2,488,916
(Collateralized by $2,940,000 U.S.
Government Obligation FGG 02480
6.50% due 12/01/36; fair
value $3,009,825) $ 2,488,000
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.0%
571 BlackRock TempFund,
Institutional Shares, 5.341%^ $ 571
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES
AND REPURCHASE AGREEMENT -- 100.0%
(Cost $145,398,635) $ 146,016,204
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 0.0% 29,230
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 146,045,434
================================================================================
^ The rate shown is the 7-day effective yield as of September 30, 2007.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2007.
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
FFCB - Federal Farm Credit Bank
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
See accompanying notes to financial statements.
154
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Portfolio of Investments
Value Opportunities Fund - September 30, 2007
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 96.4% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 22.8%
Ace 33,350 $ 2,020,010
Assurant 26,100 1,396,350
Bank of New York 36,149 1,595,617
CIT Group 36,000 1,447,200
Citigroup 72,325 3,375,407
Host Hotels & Resorts+ 52,525 1,178,661
Loews 61,850 2,990,447
Morgan Stanley+ 21,400 1,348,200
PNC Financial Services Group 51,550 3,510,554
RenaissanceRe Holdings 32,475 2,124,190
US Bancorp 40,925 1,331,290
Wachovia+ 46,850 2,349,528
- --------------------------------------------------------------------------------
24,667,454
- --------------------------------------------------------------------------------
ENERGY -- 15.5%
Chesapeake Energy 44,250 1,560,255
Chevron Texaco 33,750 3,158,325
Exxon Mobil 58,625 5,426,330
Noble Energy 27,350 1,915,594
Peabody Energy 61,600 2,948,792
Valero Energy 25,400 1,706,372
- --------------------------------------------------------------------------------
16,715,668
- --------------------------------------------------------------------------------
UTILITIES -- 15.1%
AT&T 86,775 3,671,449
Comcast, Class A*+ 109,075 2,637,434
DPL+ 55,475 1,456,774
Edison International 23,475 1,301,689
Exelon 47,375 3,570,180
National Fuel Gas+ 37,100 1,736,651
Verizon Communications 44,225 1,958,283
- --------------------------------------------------------------------------------
16,332,460
- --------------------------------------------------------------------------------
HEALTH CARE -- 10.9%
Abbott Laboratories 28,575 1,532,192
Barr Pharmaceuticals* 29,800 1,695,918
CVS/Caremark 76,225 3,020,796
Johnson & Johnson 25,000 1,642,500
McKesson 26,350 1,549,117
Pfizer 51,225 1,251,427
WellPoint* 13,350 1,053,582
- --------------------------------------------------------------------------------
11,745,532
- --------------------------------------------------------------------------------
PRODUCER DURABLES -- 7.8%
General Electric 133,875 5,542,425
Joy Global 28,475 1,448,239
Teradyne* 102,575 1,415,535
- --------------------------------------------------------------------------------
8,406,199
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 7.5%
Altria Group 26,775 1,861,666
HJ Heinz 34,575 1,597,365
Kraft Foods, Class A 65,075 2,245,738
Procter & Gamble 33,425 2,351,115
- --------------------------------------------------------------------------------
8,055,884
- --------------------------------------------------------------------------------
MATERIALS AND PROCESSING -- 7.2%
Goldcorp+ 130,700 3,994,192
Shaw Group* 64,275 3,734,378
- --------------------------------------------------------------------------------
7,728,570
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.0%
McDonald's 38,350 2,088,925
Republic Services 55,287 1,808,438
Walt Disney 73,500 2,527,664
- --------------------------------------------------------------------------------
6,425,027
- --------------------------------------------------------------------------------
TECHNOLOGY -- 3.6%
Hewlett Packard 29,575 1,472,538
RF Micro Devices*+ 170,850 1,149,821
TriQuint Semiconductor* 261,350 1,283,229
- --------------------------------------------------------------------------------
3,905,588
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 103,982,382
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 10.6%
BlackRock Institutional
Money Market Trust, 5.37% ** ^ 11,407,980 $ 11,407,980
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 4.4%
BlackRock TempFund,
Institutional Shares, 5.34% ^ 4,737,822 $ 4,737,822
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 111.4%
(Cost $105,007,647) $ 120,128,184
LIABILITIES IN EXCESS OF OTHER ASSETS -- (11.4%) (12,321,097)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 107,807,087
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan as of September 30, 2007, was $11,068,728.
** Represents collateral for securities loaned.
^ The rate shown is the 7-day effective yield as of September 30, 2007.
See accompanying notes to financial statements.
155
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of Touchstone Funds Group Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Touchstone Funds Group Trust, comprised of
Touchstone Clover Core Fixed Income Fund, Touchstone Diversified Small Cap Value
Fund, Touchstone Short Duration Fixed Income Fund, Touchstone Ultra Short
Duration Fixed Income Fund, Touchstone Small Cap Value Opportunities Fund,
Touchstone Healthcare & Biotechnology Fund, Touchstone Strategic Value and High
Income Fund, Touchstone Value Opportunities Fund (collectively, the "Former
Turner Funds"), Touchstone Mid Cap Fund ("Former Westlake Fund"), Touchstone
Diversified Value Fund, Touchstone Diversified Growth Fund, Touchstone Small Cap
Fund, Touchstone Family Heritage Fund, Touchstone Pitcairn Taxable Bond Fund,
Touchstone Tax-Exempt Bond Fund, Touchstone Sands Capital Select Growth Fund,
and Touchstone International Equity Fund (collectively, the "Former Pitcairn
Funds"), (the seventeen funds collectively referred to as the "Funds", and
formerly known as the "Constellation Funds" which were comprised of the former
funds listed in Note 1 to the Financial Statements) as of September 30, 2007,
and the related statements of operations for the year then ended and the
statements of changes in net assets and financial highlights for each of the two
years in the period then ended. We have also audited the financial highlights of
the Former Turner Funds for each of the two years or periods in the period ended
September 30, 2003 and the Former Westlake Fund for the period ended December
31, 2003. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period ended
September 30, 2005 of the Former Turner Funds and Former Westlake Fund were
audited by other auditors whose report dated November 29, 2005, expressed an
unqualified opinion on those financial highlights. The financial highlights for
each of the two years in the period ended October 31, 2003 of the Former
Pitcairn Funds were audited by other auditors whose report dated December 12,
2003, expressed an unqualified an unqualified opinion on those financial
highlights.
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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Funds' internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Funds' internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of September 30, 2007, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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 each
of the respective Funds comprising Touchstone Funds Group Trust at September 30,
2007, the results of their operations for the year then ended and the changes in
their net assets and financial highlights for each of the two years in the
period then ended, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the financial highlights referred to
above are presented fairly, in all material respects, for the Former Turner
Funds for each of the two years or periods in the period ended September 30,
2003, and for the Former Westlake Fund for the period ended December 31, 2003 in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
November 26, 2007
156
- --------------------------------------------------------------------------------
Other Items (Unaudited)
- --------------------------------------------------------------------------------
PROXY VOTING DISCLOSURE
The Sub-Advisor is responsible for exercising the voting rights associated with
the securities purchased and held by the Funds. A description of the policies
and procedures that the Sub-Advisor uses in fulfilling this responsibility and
information regarding how those proxies were voted during the twelve month
period ended June 30, are available without charge upon request by calling toll
free 1.800.543.0407. These items are also available on the Securities and
Exchange Commission's (the Commission) website at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The Trust files a complete listing of portfolio holdings for each Fund as of the
end of the first and third quarters of each fiscal year on Form N-Q. The
complete listing (i) is available on the Commission's website; (ii) may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC;
and (iii) will be made available to shareholders upon request by calling
1.800.543.0407. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
SCHEDULE OF SHAREHOLDER EXPENSES
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including reinvested dividends or other distributions; and (2) ongoing
costs, including investment advisory fees; distribution (12b-1) fees; and other
Fund expenses. This example is intended to help you understand your ongoing
costs (in dollars) of investing in the Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
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 the Six
Months Ended September 30, 2007" 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 Funds' actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Funds' 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 Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
157
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2007 2007 2007 2007*
- -----------------------------------------------------------------------------------------------------------------
CLOVER CORE FIXED INCOME FUND
Class I Actual 0.85% $ 1,000.00 $ 1,018.10 $ 4.30
Class I Hypothetical 0.85% $ 1,000.00 $ 1,020.81 $ 4.31
DIVERSIFIED GROWTH FUND
Class A Actual 1.10% $ 1,000.00 $ 1,097.10 $ 5.78
Class A Hypothetical 1.10% $ 1,000.00 $ 1,019.55 $ 5.57
DIVERSIFIED SMALL CAP VALUE FUND
Class A Actual 1.25% $ 1,000.00 $ 986.90 $ 6.21
Class A Hypothetical 1.25% $ 1,000.00 $ 1,018.82 $ 6.31
Class C Actual 1.82% $ 1,000.00 $ 983.30 $ 9.07
Class C Hypothetical 1.82% $ 1,000.00 $ 1,015.93 $ 9.21
Class Z Actual 1.45% $ 1,000.00 $ 986.40 $ 7.22
Class Z Hypothetical 1.45% $ 1,000.00 $ 1,017.79 $ 7.34
DIVERSIFIED VALUE FUND
Class A Actual 1.09% $ 1,000.00 $ 1,038.50 $ 5.58
Class A Hypothetical 1.09% $ 1,000.00 $ 1,019.60 $ 5.53
Class C Actual 1.82% $ 1,000.00 $ 1,035.20 $ 9.29
Class C Hypothetical 1.82% $ 1,000.00 $ 1,015.94 $ 9.20
FAMILY HERITAGE(R) FUND
Class A Actual 1.30% $ 1,000.00 $ 1,051.60 $ 6.69
Class A Hypothetical 1.30% $ 1,000.00 $ 1,018.55 $ 6.58
Class C Actual 2.04% $ 1,000.00 $ 1,046.40 $ 10.45
Class C Hypothetical 2.04% $ 1,000.00 $ 1,014.86 $ 10.29
HEALTHCARE & BIOTECHNOLOGY FUND
Class A Actual 1.55% $ 1,000.00 $ 1,137.50 $ 8.30
Class A Hypothetical 1.55% $ 1,000.00 $ 1,017.30 $ 7.84
Class C Actual 2.23% $ 1,000.00 $ 1,134.70 $ 11.92
Class C Hypothetical 2.23% $ 1,000.00 $ 1,013.90 $ 11.25
INTERNATIONAL EQUITY FUND
Class A Actual 1.45% $ 1,000.00 $ 1,090.00 $ 7.60
Class A Hypothetical 1.45% $ 1,000.00 $ 1,017.80 $ 7.33
Class C Actual 2.20% $ 1,000.00 $ 1,085.60 $ 11.48
Class C Hypothetical 2.20% $ 1,000.00 $ 1,014.06 $ 11.09
158
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2007 2007 2007 2007*
- --------------------------------------------------------------------------------------------------------------
MID CAP FUND
Class A Actual** 0.95% $ 1,000.00 $ 984.60 $ 3.60
Class A Hypothetical** 0.95% $ 1,000.00 $ 1,015.56 $ 3.65
Class C Actual** 1.35% $ 1,000.00 $ 983.50 $ 5.12
Class C Hypothetical** 1.35% $ 1,000.00 $ 1,014.01 $ 5.20
Class Y Actual 0.90% $ 1,000.00 $ 1,046.10 $ 4.62
Class Y Hypothetical 0.90% $ 1,000.00 $ 1,020.56 $ 4.56
Class Z Actual 1.14% $ 1,000.00 $ 1,045.70 $ 5.84
Class Z Hypothetical 1.14% $ 1,000.00 $ 1,019.36 $ 5.76
PITCAIRN TAXABLE BOND FUND
Class II Actual 0.89% $ 1,000.00 $ 1,018.20 $ 4.50
Class II Hypothetical 0.89% $ 1,000.00 $ 1,020.61 $ 4.51
SANDS CAPITAL SELECT GROWTH FUND
Class Y Actual 0.97% $ 1,000.00 $ 1,142.30 $ 5.23
Class Y Hypothetical 0.97% $ 1,000.00 $ 1,020.19 $ 4.93
Class Z Actual 1.22% $ 1,000.00 $ 1,140.70 $ 6.57
Class Z Hypothetical 1.22% $ 1,000.00 $ 1,018.93 $ 6.20
SHORT DURATION FIXED INCOME FUND
Class Z Actual 0.74% $ 1,000.00 $ 1,022.60 $ 3.75
Class Z Hypothetical 0.74% $ 1,000.00 $ 1,021.36 $ 3.75
SMALL CAP FUND
Class A Actual 1.10% $ 1,000.00 $ 982.40 $ 5.47
Class A Hypothetical 1.10% $ 1,000.00 $ 1,019.55 $ 5.57
Class C Actual 1.84% $ 1,000.00 $ 978.30 $ 9.12
Class C Hypothetical 1.84% $ 1,000.00 $ 1,015.84 $ 9.30
SMALL CAP VALUE OPPORTUNITIES FUND
Class A Actual*** 1.49% $ 1,000.00 $ 950.30 $ 2.79
Class A Hypothetical*** 1.49% $ 1,000.00 $ 1,006.73 $ 2.87
Class C Actual*** 2.09% $ 1,000.00 $ 949.90 $ 3.91
Class C Hypothetical*** 2.09% $ 1,000.00 $ 1,005.58 $ 4.02
Class Z Actual 1.44% $ 1,000.00 $ 1,015.90 $ 7.26
Class Z Hypothetical 1.44% $ 1,000.00 $ 1,017.86 $ 7.27
159
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2007 2007 2007 2007*
- ------------------------------------------------------------------------------------------------------------
STRATEGIC VALUE AND HIGH INCOME FUND
Class A Actual 0.50% $ 1,000.00 $ 990.60 $ 2.49
Class A Hypothetical 0.50% $ 1,000.00 $ 1,022.56 $ 2.53
Class C Actual 1.25% $ 1,000.00 $ 987.60 $ 6.23
Class C Hypothetical 1.25% $ 1,000.00 $ 1,018.80 $ 6.33
Class Y Actual 0.25% $ 1,000.00 $ 991.80 $ 1.25
Class Y Hypothetical 0.25% $ 1,000.00 $ 1,023.82 $ 1.27
TAX-EXEMPT BOND FUND
Class A Actual 0.70% $ 1,000.00 $ 1,012.30 $ 3.53
Class A Hypothetical 0.70% $ 1,000.00 $ 1,021.56 $ 3.55
ULTRA SHORT DURATION FIXED INCOME FUND
Class Z Actual 0.69% $ 1,000.00 $ 1,023.20 $ 3.50
Class Z Hypothetical 0.69% $ 1,000.00 $ 1,021.61 $ 3.50
VALUE OPPORTUNITIES FUND
Class A Actual 1.31% $ 1,000.00 $ 1,071.20 $ 6.82
Class A Hypothetical 1.31% $ 1,000.00 $ 1,018.49 $ 6.64
Class C Actual 1.88% $ 1,000.00 $ 1,068.00 $ 9.73
Class C Hypothetical 1.88% $ 1,000.00 $ 1,015.66 $ 9.48
Class Z Actual 1.11% $ 1,000.00 $ 1,071.90 $ 5.77
Class Z Hypothetical 1.11% $ 1,000.00 $ 1,019.50 $ 5.62
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by [number of days
in most recent fiscal half-year/365] (to reflect the one-half year
period).
** The example is based on an investment of $1,000 invested at the beginning
of the period (May 14, 2007) and held for the entire period through
September 30, 2007.
*** The example is based on an investment of $1,000 invested at the beginning
of the period (July 23, 2007) and held for the entire period through
September 30, 2007.
160
- --------------------------------------------------------------------------------
Management of the Trust (Unaudited)
- --------------------------------------------------------------------------------
Listed below is basic information regarding the Trustees and principal officers
of the Trust. The Trust's Statement of Additional Information includes
additional information about the Trustees and is available, without charge, upon
request by calling 1.800.543.0407.
INTERESTED TRUSTEES(1):
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder Trustee and Until Senior Vice President of The Western 52 Director of
Touchstone Advisors, Inc President retirement at and Southern Life Insurance Company; LaRosa's (a
303 Broadway age 75 or until President and a director of IFS restaurant chain).
Cincinnati, OH she resigns or Financial Services, Inc. (a holding
Year of Birth: 1955 is removed company); Director of Capital
Trustee since Analysts Incorporated (an investment
1999 advisor and broker-dealer),
Integrated Investment Services, Inc.
until April 2007 (the Trust's former
administrator, accounting and
transfer agent), IFS Fund
Distributors, Inc. (a
broker-dealer), Touchstone Advisors,
Inc. (the Trust's investment
advisor) and Touchstone Securities,
Inc. (the Trust's distributor);
President and a director of IFS
Agency Services, Inc. (an insurance
agency), W&S Financial Group
Distributors, Inc. (an annuity
distributor) and IFS Systems, Inc.;
Senior Vice President and a director
of W&S Brokerage Services, Inc. (a
broker-dealer); Director, President
and Chief Executive Officer of
Integrity Life Insurance Company and
National Integrity Life Insurance
Company; President of Touchstone
Tax-Free Trust, Touchstone
Investment Trust, Touchstone
Variable Series Trust, Touchstone
Strategic Trust, Touchstone Funds
Group Trust and Touchstone
Institutional Funds Trust; President
of Touchstone Advisors, Inc., and
Touchstone Securities, Inc. until
2004.
- -----------------------------------------------------------------------------------------------------------------------------------
John F. Barrett Trustee Until Chairman of the Board, President and 52 Director of The
The Western and retirement at Chief Executive Officer of The Andersons (an
Southern Life age 75 or until Western and Southern Life Insurance agribusiness and
Insurance Company he resigns or Company, Western-Southern Life retailing
400 Broadway is Assurance Company and Western & company);
Cincinnati, OH removed Southern Financial Group, Inc.; Convergys
Year of Birth: 1949 Trustee since Director and Chairman of Columbus Corporation (a
2002 Life Insurance Company; Fort provider of
Washington Investment Advisors, business support
Inc., Integrity Life Insurance systems and
Company and National Integrity Life customer care
Insurance Company; Director of Eagle operations) and
Realty Group, Inc., Eagle Realty Fifth Third Bancorp.
Investments, Inc. and Integrated
Investment Services, Inc. (until
April 2007); Director, Chairman and
CEO of WestAd, Inc.; President and
Trustee of Western & Southern
Financial Fund, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
161
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Phillip R. Cox Trustee Until President and Chief Executive 52 Director of the
303 Broadway retirement at Officer of Cox Financial Corp. Federal Reserve
Cincinnati, OH age 75 or until (a financial services company). Bank of Cleveland
Year of Birth: 1947 he resigns or and Duke Energy (a
is removed utility company);
Trustee since Chairman of The
1994 Cincinnati Bell
Telephone Company
LLC; Director of The
Timken Company (a
manufacturer of
bearings, alloy
steels and related
products and
services); Director
of Diebold,
Incorporated (a
provider of
integrated
self-service
delivery and
security systems).
- -----------------------------------------------------------------------------------------------------------------------------------
H. Jerome Lerner Trustee Until Principal of HJL Enterprises (a 52 None
303 Broadway retirement at privately held investment company).
Cincinnati, OH age 75 or until
Year of Birth: 1938 he resigns or
is removed
Trustee since
1999
- -----------------------------------------------------------------------------------------------------------------------------------
Donald C. Siekmann Trustee Until Executive for Duro Bag Manufacturing 52 Trustee of Jewish
303 Broadway retirement at Co. (a bag manufacturer); President Hospital, Greater
Cincinnati, OH age 75 or until of Shor Foundation for Epilepsy Cincinnati Arts &
Year of Birth: 1938 he resigns or Research (a charitable foundation); Education Center
is removed Trustee of Riverfront Funds (mutual and Cincinnati Arts
Trustee since funds) from 1999 - 2004. Association
2005
- -----------------------------------------------------------------------------------------------------------------------------------
162
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED):
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Robert E. Stautberg Trustee Until Retired Partner of KPMG LLP (a 52 Trustee of Tri-Health
303 Broadway retirement at certified public accounting Physician Enterprise
Cincinnati, OH age 75 or until firm). Vice President of St. Xavier Corporation.
Year of Birth: 1934 he resigns or High School.
is removed
Trustee since
1994
- -----------------------------------------------------------------------------------------------------------------------------------
John P. Zanotti Trustee Until CEO, Chairman and Director of 52 None
303 Broadway retirement at Avaton, Inc. (a wireless
Cincinnati, OH age 75 or until entertainment company). President
Year of Birth: 1948 he resigns or is of Cincinnati Biomedical (a life
removed science and economic development
Trustee since company) from July 2003 until 2005.
2002 CEO, Chairman and Director of
Astrum Digital Information (an
information monitoring company)
from 2000 until 2001; President of
Great American Life Insurance
Company from 1999 until 2000.
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Ms. McGruder, as a director of Touchstone Advisors, Inc., the Trust's
investment advisor, and Touchstone Securities, Inc., the Trust's
distributor and an officer of affiliates of the advisor and distributor,
is an "interested person" of the Trust within the meaning of Section
2(a)(19) of the 1940 Act. Mr. Barrett, as President and Chairman of The
Western and Southern Life Insurance Company and Western-Southern Life
Assurance Company, parent companies of Touchstone Advisors, Inc. and
Touchstone Securities, Inc., Chairman of Fort Washington Investment
Advisors, Inc., a Trust sub-advisor and an officer of other affiliates of
the advisor and distributor is an "interested person" of the Trust within
the meaning of Section 2(a)(19) of the 1940 Act.
(2) Each Trustee is elected to serve until the age of 75 or until he or she
sooner resigns or is removed.
(3) The Touchstone Fund Complex consists of 17 series of the Trust, 5 series
of Touchstone Investment Trust, 8 series of Touchstone Strategic Trust, 4
series of Touchstone Tax-Free Trust, 15 variable annuity series of
Touchstone Variable Series Trust, and 3 series of Touchstone Institutional
Funds Trust.
(4) Each Trustee is also a Trustee of Touchstone Strategic Trust, Touchstone
Tax-Free Trust, Touchstone Variable Series Trust, Touchstone Investment
Trust, and Touchstone Institutional Funds Trust.
163
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS(1):
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(2) HELD
- ----------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder President Until resignation, See biography above. 52 See biography
Touchstone and Trustee removal or above.
Advisors, Inc. disqualification
303 Broadway President since
Cincinnati, OH 2004; President
Year of Birth: 1955 from 2000-2002
- ----------------------------------------------------------------------------------------------------------------------------------
Brian E. Hirsch Vice Until resignation, Senior Vice President-Compliance 52 None
Touchstone Advisors, Inc. President removal or of IFS Financial Services, Inc.,
303 Broadway and Chief disqualification Director of Compliance of W&S
Cincinnati, OH Compliance Vice President Brokerage Services, Inc.; Chief
Year of Birth: 1956 Officer since 2003 Compliance Officer of Puglisi &
Co. from 2001 until 2002.
- ----------------------------------------------------------------------------------------------------------------------------------
James H. Grifo Vice Until resignation, President of Touchstone 52 None
Touchstone Securities, Inc. President removal or Securities, Inc. and Touchstone
303 Broadway disqualification Advisors, Inc.; Managing Director,
Cincinnati, OH Vice President Deutsche Asset Management until
Year of Birth: 1951 since 2004 2001.
- ----------------------------------------------------------------------------------------------------------------------------------
William A. Dent Vice Until resignation, Senior Vice President of 52 None
Touchstone Advisors, Inc. President removal or Touchstone Advisors, Inc.;
303 Broadway disqualification Marketing Director of Promontory
Cincinnati, OH Vice President Interfinancial Network from
Year of Birth: 1963 since 2004 2002-2003; Senior Vice President
of McDonald Investments from 1998
- 2001.
- ----------------------------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft Controller Until resignation, Senior Vice President, Chief 52 None
Touchstone and Treasurer removal or Financial Officer and Treasurer of
Advisors, Inc. disqualification Integrated Investment Services,
303 Broadway Controller since Inc. (until April 2007), IFS Fund
Cincinnati, OH 2000 Distributors, Inc. and W&S
Year of Birth: 1962 Treasurer since Brokerage Services, Inc.; Chief
2003 Financial Officer of IFS Financial
Services, Inc., Touchstone
Advisors, Inc. and Touchstone
Securities, Inc. and Assistant
Treasurer of Fort Washington
Investment Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Jay S. Fitton Secretary Until resignation, Assistant Vice President and 52 None
JP Morgan removal or Senior Counsel of JP Morgan;
303 Broadway disqualification Director and Senior Counsel of
Cincinnati, OH Secretary since 2006 Integrated Investment Services,
Year of Birth: 1970 Inc. and IFS Fund Distributors,
Inc. until April 2007.
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Each officer also holds the same office with Touchstone Tax-Free Trust,
Touchstone Strategic Trust, Touchstone Variable Series Trust, Touchstone
Investment Trust, and Touchstone Institutional Funds Trust.
(2) The Touchstone Fund Complex consists of 17 series of the Trust, 5 series
of Touchstone Investment Trust, 8 series of Touchstone Strategic Trust, 4
series of Touchstone Tax-Free Trust, 15 series of Touchstone Variable
Series Trust, and 3 series of Touchstone Institutional Funds Trust.
164
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TOUCHSTONE INVESTMENTS
DISTRIBUTOR
Touchstone Securities, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
800.638.8194
www.touchstoneinvestments.com
INVESTMENT ADVISOR
Touchstone Advisors, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
TRANSFER AGENT
JP Morgan
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
800.543.0407
* A Member of Western & Southern Financial Group(R)
- --------------------------------------------------------------------------------
[LOGO] TOUCHSTONE(R)
INVESTMENTS
303 Broadway, Suite 1100
Cincinnati, OH 45202-4203
TSF-56-TFGT-AR-0710
ITEM 2. CODE OF ETHICS.
At the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to its principal executive officer and principal
financial officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. Mr.
Robert Stautberg is the registrant's audit committee financial expert and is an
independent trustee within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. Audit fees totaled approximately $247,100 for the September 30,
2007 fiscal year and approximately $342,000 for the September 30, 2006 fiscal
year, including fees associated with the annual audit and filings of the
registrant's Form N-1A and Form N-SAR. $14,000 of the 2007 fees are associated
with additional filings of Form N1-A and Form N-14.
(b) Audit-Related Fees. Audit-related fees totaled approximately $116,000 for
the September 30, 2007 fiscal year and $0 for the September 30, 2006 fiscal year
and consisted of SAS 70 internal control reviews of the registrant's fund
accountant and transfer agent during both years.
(c) Tax Fees. Tax fees totaled approximately $96,750 for the September 30, 2007
fiscal year and $38,000 for the September 30, 2006 fiscal year and consisted of
fees for tax compliance and tax consultation services during both years.
(d) All Other Fees. There were no fees for all other services to the registrant
during the September 30, 2007 or September 30, 2006 fiscal years.
(e) (1) Audit Committee Pre-Approval Policies. The Audit Committee's
pre-approval policies describe the types of audit, audit-related, tax and other
services that have the general pre-approval of the Audit Committee. The
pre-approval policies provide that annual audit service fees, tax services not
specifically granted pre-approval, services exceeding pre-approved cost levels
and other services that have not received general pre-approval will be subject
to specific pre-approval by the Audit Committee. The pre-approval policies
further provide that the Committee may grant general pre-approval to other audit
services (statutory audits and services associated with SEC registration
statements, periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings), audit-related
services (accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "audit services," assistance with
understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities, agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters and assistance with
internal control reporting requirements under Form N-SAR and Form N-CSR), tax
services that have historically been provided by the auditor that the Committee
believes would not impair the independence of the auditor and are consistent
with the SEC's rules on auditor independence and permissible non-audit services
classified as "all other services" that are routine and recurring services.
(e)(2) All services described in paragraphs (b) through (d) of Item 4 were
approved by the Audit Committee.
(f) Not applicable
(g) The aggregate non-audit fees for services to the registrant, its investment
adviser (excluding its sub-advisor) and any entity controlling, controlled by or
under common control with the adviser that provides ongoing services to the
registrant were approximately $295,500 for the fiscal year ended September 30,
2007 and $101,700 for the fiscal year ended September 30, 2006.
(h) Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments in securities of unaffiliated issuers is included in
the Annual Report.
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.
The Governance Committee will consider shareholder recommendations for
nomination to the Board only in the event that there is a vacancy on the Board.
Shareholders who wish to submit recommendations for nominations to the Board to
fill the vacancy must submit their recommendations in writing to Phillip R. Cox,
Chairman of the Governance Committee, c/o Touchstone, 303 Broadway, Suite 1100,
Cincinnati, OH 45202. Shareholders should include appropriate information on the
background and qualifications of any person recommended to the Governance
Committee (e.g., a resume), as well as the candidate's contact information and a
written consent from the candidate to serve if nominated and elected.
Shareholder recommendations for nominations to the Board will be accepted on an
ongoing basis and such recommendations will be kept on file for consideration in
the event of a future vacancy on the Board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's
principal executive officer and principal financial officer have concluded that
the registrant's disclosure controls and procedures are effective as of a date
within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the registrant's second fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The Code of Ethics for Senior Financial Officers was filed on December 9,
2005 with Registrant's N-CSR for the September 30, 2005 fiscal year and is
hereby incorporated by reference.
(a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed
herewith.
(b) Certification required by Item 11(b) of Form N-CSR is filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Touchstone Funds Group Trust
----------------------------
By (Signature and Title)
/s/ Jill T. McGruder
- --------------------------------------------
Jill T. McGruder
President
Date: December 3, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ Jill T. McGruder
- --------------------------------------------
Jill T. McGruder
President
Date: December 3, 2007
/s/ Terrie A. Wiedenheft
- --------------------------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: December 3, 2007