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: 9/30/08
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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 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.
Touchstone Funds Group Trust Annual Report
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SEPTEMBER 30, 2008
Annual Report
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TOUCHSTONE FUNDS GROUP TRUST
Touchstone Clover Core Fixed Income Fund
Touchstone Diversified Small Cap Value Fund
Touchstone Healthcare and Biotechnology Fund
Touchstone International Growth Fund
Touchstone Mid Cap Fund
Touchstone Premium Yield Equity Fund
Touchstone Sands Capital Select Growth Fund
Touchstone Short Duration Fixed Income Fund
Touchstone Small Cap Value Opportunities 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) 4-27
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Tabular Presentation of Portfolios of Investments (Unaudited) 28-30
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Statements of Assets and Liabilities 31-36
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Statements of Operations 37-39
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Statements of Changes in Net Assets 40-47
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Financial Highlights 48-71
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Notes to Financial Statements 72-90
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Portfolios of Investments:
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Clover Core Fixed Income Fund 91-92
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Diversified Small Cap Value Fund 93-94
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Healthcare and Biotechnology Fund 95
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International Growth Fund 96-97
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Mid Cap Fund 98-99
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Premium Yield Equity Fund 100
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Sands Capital Select Growth Fund 101
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Short Duration Fixed Income Fund 102-103
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Small Cap Value Opportunities Fund 104-105
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Ultra Short Duration Fixed Income Fund 106-107
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Value Opportunities Fund 108
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Report of Independent Registered Public Accounting Firm 109
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Other Items (Unaudited) 110-112
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Management of the Trust (Unaudited) 113-116
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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, 2008.
The crisis that began in the subprime mortgage area last year has intensified,
culminating in a series of events that were once unthinkable with the
nationalization of several companies, collapse of venerable investment firms and
a number of government-sponsored rescues. Congress passed a $700 billion bailout
bill, which authorized the Treasury to buy troubled assets from financial
institutions. There is also growing realization that problems are global in
nature, as several institutions in Europe and other parts of the world have
required government assistance.
These developments have taken a heavy toll on financial markets. Credit markets
have seized up in the United States, and the difference in the spreads between
investment-grade and high-yield bonds are at or near all-time highs. In
addition, there has been unprecedented illiquidity in short-term bank financing
and the commercial paper market, and money market funds have come under
scrutiny. In the wake of all this, global equity markets have fallen decisively
into bear territory, with the major world indices down by 30% or more.
During the year, the U.S. equity markets were extremely volatile; however, U.S.
stocks did better than international stocks. Small-cap stocks outperformed
large-cap stocks. Growth surpassed value for the second year in a row.
One positive is that oil and other commodity prices have fallen significantly
from their peaks, and we anticipate significant declines in headline inflation
readings in the U.S. and abroad before too long. With the U.S. dollar having
rebounded off its lows, the Federal Reserve recently eased monetary policy in a
coordinated move with other central banks.
We continue to believe that diversification is essential to balancing risk and
return. We recommend that you continue to 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. In the current market climate, it is critical to maintain a long-term
approach to gain the full potential benefits of investing.
Touchstone is committed to providing investors access to institutional money
managers who act in a sub-advisory capacity. 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 macroeconomic 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 Fund.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Clover Core Fixed Income Fund was -1.95% for
the fiscal year ended September 30, 2008. The total return of the Lehman
Brothers U.S. Aggregate Index was 3.65% for the same period.
The Fund's weak performance was predominantly driven by several individual
security holdings which experienced severe price declines. The negative impact
was magnified due to the steady redemptions from the Fund recently. Adverse
liquidity conditions in the bond market led Clover to sell the most liquid
holdings to meet these redemptions, thus leaving the less liquid and weaker
performing securities at a much higher percentage of the Fund than desired.
The Fund's exposure to corporate bonds, specifically in the Financials sector,
was the primary detractor from performance. Individual holdings exhibited
unprecedented price declines as some companies declared bankruptcy while others
experienced extremely poor liquidity and difficulty in raising capital. These
individual holdings include Key Bank, Lehman Brothers, Morgan Stanley and SLM
Corp.
It was nothing less than an extraordinary environment for the bond market. The
subprime crisis morphed into a full fledged credit crunch and financial
meltdown. This was marked by extremely poor liquidity, limited access to
capital, and waning confidence. These conditions drove companies to a massive
deleveraging effort which led to a series of negative impacts. Balance sheet
assets were marked down significantly. This forced major write downs. The losses
needed to be replaced with fresh capital but there was none available in many
instances. The companies with the heaviest reliance on funding suffered the most
and were forced into bankruptcy, merger or survival mode.
Our strategy, which anticipated a steeper yield curve, led us to structured
credit notes issued by Morgan Stanley and Lehman Brothers. The potential benefit
of this approach was offset by significant price declines in the bonds due to
the weakening credit quality of the issuers. Other investments in financial
bonds appeared to offer good value, but detracted from performance due to market
conditions. The combination of poor market liquidity and Fund redemptions
resulted in higher than desired exposure to spread sectors.
The Fund's positioning is now dominated by what have become several high beta
positions. While the Fund remains predominantly invested in high quality
holdings and is relatively neutral in its sector weights, it has a small
allocation to high yield bonds. However, the most meaningful aspect of the
Fund's positioning is its holdings in the corporate bonds discussed above.
4
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Management's Discussion of Fund Performance (Continued)
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We expect to see a continued level of above average volatility in the bond
market and in the Fund for the foreseeable future. We believe that recent
intervention by global central banks has brought our economy back from the brink
but we will have to work through a generally weak economy for the next twelve
months. With that being said, outside of its Lehman Brothers bond, we believe
that all other holdings are of good quality. With that being the case, we expect
to eventually see some unusual positive returns from these holdings in the
future as they move back towards par from their extremely depressed valuations.
The realization of this may be impacted by cash flows. If redemptions continue
to be significant, some of these holdings may have to be liquidated before their
recovery develops.
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
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CLOVER CORE FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class I -1.95% 2.02% 3.90%
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[LINE CHART]
CLOVER CORE FIXED INCOME FUND - CLASS I LEHMAN BROTHERS AGGREGATE INDEX
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Date Date
9/30/98 10000 9/30/98 10000
9/30/99 9822 9/30/99 9963
9/30/00 10532.13 9/30/00 10658.42
9/30/01 11792.83 9/30/01 12038.68
9/30/02 12836.49 9/30/02 13074.01
9/30/03 13269.08 9/30/03 13780.01
9/30/04 13663.17 9/30/04 14287.11
9/30/05 13976.06 9/30/05 14687.15
9/30/06 14375.78 9/30/06 15226.17
9/30/07 14960.87 9/30/07 16008.79
9/30/08 14668 9/30/08 16593.11
* 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 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 -8.89%
for the fiscal year ended September 30, 2008. The total return of the Russell
2000(R) Value Index was -12.25% for the same period.
The Fund's relative outperformance was driven by stock selection in the
Financials, Energy and Industrials sectors. Strength in the Financials sector
was achieved by careful selection of more conservative credit profiles and
avoidance of troubled real estate geographies. The Energy sector was aided by an
emphasis on the Natural Gas and Coal industries. The Industrials sector was
driven by stock selection in the Machinery industry. These strengths were
partially offset by weak selection in the Health Care and Information Technology
sectors caused by unrelated negative security-specific events.
Among the top performing stocks were Alpha Natural Resources, where a tightening
coal supply/demand balance drove improvement in investor sentiment; Bucyrus
International, which was buoyed by strength in the mining equipment industry;
and Cleveland Cliffs Inc., where emerging economic growth led iron ore prices
higher. Detractors from performance included Dollar Thrifty Automotive Group
which was hurt by declining travel demand and lower auto resale prices;
Pilgrim's Pride Corp. where high feed costs destroyed company profitability,
leading to bankruptcy concerns; and Sotheby's, where investor sentiment weakened
in anticipation of deterioration in the art market.
Market conditions were challenging during the past year, as the stock market
repeatedly absorbed bad economic news and large dislocations in the Financials
sector. Clover's strategies involve identifying inexpensive stocks with
improving fundamentals. We also manage portfolio-level risk as we deploy capital
into Fund holdings. These strategies and techniques have allowed the Fund to
historically produce attractive returns relative to the benchmark both during
the past year and since inception. We believe the Fund is positioned prudently
with respect to both risk and opportunity. The Fund remains fully diversified
with representation in all major economic sectors.
Looking forward, in the near-term we expect a continuation of recent market
conditions, with volatility remaining at elevated levels. In this environment,
the Fund's diversified structure is useful for diminishing security specific
risk, in effect reducing the damage any single issue can cause. Simultaneously,
the environment remains excellent for patient stock selection, with valuations
in many sectors approaching extremely attractive levels. As always, our goal is
to provide an optimal portfolio of inexpensive stocks with improving
fundamentals to take advantage of the historically excellent long-term returns
of small-cap value stocks.
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
SMALL CAP VALUE FUND - CLASS Z* AND THE RUSSELL 2000 VALUE INDEX
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DIVERSIFIED SMALL CAP VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years 10 Years
Class A -14.08% 7.92% 11.60%
Class C -9.56% 8.43% 11.45%
Class Z -8.89% 9.18% 12.25%
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[LINE CHART]
DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z RUSSELL 2000 VALUE INDEX
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Date Date
9/30/98 10000 9/30/98 10000
9/30/99 12182 9/30/99 10583
9/30/00 15786.65 9/30/00 12209.61
9/30/01 17704.73 9/30/01 12893.35
9/30/02 16166.19 9/30/02 12705.1
9/30/03 20476.1 9/30/03 16727.54
9/30/04 25333.03 9/30/04 21019.82
9/30/05 29459.78 9/30/05 24750.84
9/30/06 31955.02 9/30/06 28218.44
9/30/07 34869.32 9/30/07 29936.94
9/30/08 31761 9/30/08 26269.66
* 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.
7
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE HEALTHCARE & BIOTECHNOLOGY FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Healthcare and Biotechnology Fund invests primarily in common
stocks of healthcare and biotechnology companies. The Fund 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 price patterns.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Healthcare and Biotechnology Fund was -7.82%
for the fiscal year ended September 30, 2008. The total return of the S&P 500
Healthcare Index was -12.21% for the same period.
During the 12-month period ending September 30, 2008, stock selection in Health
Care Providers & Services and positioning in the Biotechnology industry
contributed the most to the Fund's relative performance. From a positioning
standpoint, stock selection in Health Care Providers & Services helped relative
returns. This industry continues to come under significant pressure, as
companies in this group have reported lackluster quarterly earnings reports with
costs trending worse than expected. Lower "Medicare Advantage" enrollment
figures have also hurt the group and the upcoming election will also be a
detriment to the group regardless of the political outcome.
Within the Biotechnology industry, the Fund emphasized companies that produce
orphan drugs, which are for diseases that afflict a small population (less than
200,000 in the U.S.). Companies that receive this designation from the FDA have
seven years of market exclusivity within the United States. Also, these
companies typically benefit from excellent pricing power, as there are not other
competing therapies, and the small population size leads to limited
reimbursement pushback. Alexion Pharmaceutical Inc. and BioMarin Pharmaceutical
Inc. are two examples of companies that have benefited from launching drugs with
the orphan drug status. Alexion Pharmaceuticals Inc. is a Biotechnology company
that has benefited from the development of Soliris. This is a drug that treats
paroxysmal nocturnal hemoglobinuria or PNH, a rare blood disorder that can lead
to disability and premature death. Shares of BioMarin Pharmaceuticals soared
after the Food & Drug Administration (FDA) gave approval for its drug, Kuvan,
which treats a rare metabolic disease called phenylketonuria. The pricing of the
drug exceeded investor expectations.
Other Biotechnology contributors were Gilead Sciences and Genzyme Corp. Gilead
Sciences continues to deliver strong earnings growth, as their infectious
disease drugs for the treatment of HIV continue to gain market share. The
company is benefiting from the trend of earlier diagnosis of HIV, leading to
higher demand for their drugs, particularly Viread and Atripla. Leitaris was
also recently launched; it is a promising compound for the treatment of
pulmonary arterial hypertension. Genzyme has positive momentum for its drug,
Myozyme, which treats Pompe disease. The company also has benefited from strong
pricing power.
The Health Care Equipment & Supplies industry detracted from relative
performance. This decline was led by Immucor Inc. which agreed to acquire a
privately held company, Bioarray Solutions. Shares fell sharply on this news as
there was significant dilution incurred from the transaction. The stock was sold
as the company was not able to provide any clarity on future product revenues or
timeline of new product launches.
8
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Management's Discussion of Fund Performance (Continued)
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For U.S. equity investors, small-cap stocks outperformed large-cap and mid-cap
stocks. Stylistically, value outperformed growth among small-cap and mid-cap
stocks. The magnitude of outperformance was the most extreme among small-cap
stocks where value outperformed growth.
Turner employs a disciplined investment strategy by identifying strong Health
Care 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 analyze pricing trends, intellectual property
profiles, and product pipelines. 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.
We do not make top-down decisions but instead find opportunities through our
investment discipline of fundamental bottom-up research on a company-by-company
basis. The Fund remains significantly underweight to the benchmark's 51%
concentration in large-cap pharmaceutical companies, as we have found few
opportunities with attractive growth prospects. However, as a result of our
individual company research, the Fund now has significant weights in two
large-cap pharmaceutical companies, Wyeth and Abbott Labs. It also holds Johnson
& Johnson, but its weight is significantly underweight the benchmark.
Another area in which we are finding opportunities is with Contract Research
Organization (CRO) companies which assist large pharmaceutical companies by
offering regulatory, pre-clinical, and clinical trial services. They can assist
in moving a new drug from its conception to FDA approval without the
pharmaceutical company making mistakes in the crucial trial or having to
maintain a staff for these services. Examples of CROs that are currently held in
the Fund include Charles River Laboratories, Icon, and Kendle International.
Historically, the stock market has confounded the levels of extremely bearish
sentiment that prevail today and turned upward several months before the economy
did. In fact, even in the midst of three of the last four recessions, the stock
market actually produced positive returns. In our judgment, corporate profits
may hit bottom early next year, and stocks could trough before year's end.
We continue to find companies with compelling fundamentals. Balance sheets in
the Health Care sector remain flush with cash, keeping open the possibility of
stock buybacks, mergers and acquisitions in the sector. The Health Care sector
is generally a defensive area during an economic slowdown, leading to good
returns on both a relative and absolute basis.
9
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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 HEALTHCARE
AND BIOTECHNOLOGY FUND - CLASS A* AND THE S&P 500 HEALTH CARE INDEX
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HEALTHCARE AND BIOTECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -13.15% 7.36% 7.73%
Class C -8.53% 7.85% 7.78%
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[LINE CHART]
HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A S&P 500 HEALTH CARE INDEX
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Date Date
2/28/01 9425 2/28/01 10000
9/30/01 10509.82 9/30/01 9467
9/30/02 9284.373 9/30/02 7392.78
9/30/03 11626.82 9/30/03 8238.514
9/30/04 13035.99 9/30/04 8633.139
9/30/05 15786.58 9/30/05 9532.712
9/30/06 16002.86 9/30/06 10252.43
9/30/07 19083.41 9/30/07 11144.39
9/30/08 17589 9/30/08 9783.719
* 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.
10
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE INTERNATIONAL GROWTH FUND
SUB-ADVISED BY NAVELLIER & ASSOCIATES, INC.
INVESTMENT PHILOSOPHY & PROCESS
The Touchstone International Growth Fund seeks long-term capital growth by
primarily investing in foreign stocks and ADRs of foreign companies believed to
have superior reward/risk characteristics. A disciplined quantitative,
objective, bottom-up stock selection process is utilized to identify stocks
believed to have superior fundamentals relative to the underlying market with
above-average potential returns adjusted for risk. This process selects and
weights countries based upon the analysis of a country's reward/risk potential
and weights stocks using a disciplined methodology.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone International Growth Fund was -26.17 for the
year ended September 30, 2008. The total return of the MSCI EAFE(R) Growth Index
was -28.19% and the MSCI EAFE(R) Index was -30.13% for the same period.
During the past year, the Touchstone International Growth Fund outperformed the
MSCI EAFE(R) Growth Index. Through 2007, the MSCI EAFE(R) Index was the Fund's
primary benchmark, with the MSCI EAFE(R) Growth Index the secondary. In 2008,
the MSCI EAFE(R) Growth Index became the Fund's primary benchmark as it reflects
the Fund's growth investment style and allows for flexibility in positioning as
an all-cap Fund.
The past year was a continuation of the Fund's strong performance on both a
relative and absolute basis. Factors affecting the relative outperformance
included the Fund's larger than benchmark capitalization bias, higher historical
five year EPS growth, market P/E and good sector and country overweights and
underweights. Although all sectors posted negative returns for the year, the
Fund had relative outperformance in the Financials, Energy and Health Care
sectors, while relative underperformance was a result of the Utilities,
Telecommunication Services and Information Technology sectors. A country
weighting decision to increase the Fund's position in Japan also aided
performance.
Over the past year, we have seen the last stage of the "Greatest Global Boom
Ever" and the subsequent bursting of the commodity bubble over the past 100
days. Oil peaked in July and it, as well as most other commodities, has fallen
substantially since that month. When the commodity bubble burst along with one
of the greatest liquidity and housing devaluations seen in the past 50 years,
major financial institutions fell. The subsequent global recession has cost jobs
and bankrupted numerous institutions around the globe. We expect a large bounce
from the October lows as the global, coordinated effort to increase liquidity
and the global governmental guarantee of financial assets led by the United
States take hold. We believe these efforts will provide a base for the next
global expansion.
The disciplined investment strategy used to manage the Touchstone International
Growth Fund helped performance in the volatile environment that the market
exhibited in 2007 into 2008. The Fund has strong fundamentals and is diversified
with a bias toward defensive companies and companies with strong earnings
potential. We expect that the Fund will perform in line with the market over the
coming year as it forms a new base and the next trends emerge. In addition, we
believe that diversified growth investing will do well in the coming year as
global economies lock hands in an effort to prevent a severe global recession.
11
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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 INTERNATIONAL GROWTH FUND - CLASS A* AND THE MSCI EAFE GROWTH INDEX
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INTERNATIONAL GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -30.40% 9.36% -0.50%
Class C -26.66% 9.98% -0.38%
Class Y -26.16% 10.65% 0.23%
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[LINE CHART]
INTERNATIONAL GROWTH FUND - CLASS A MSCI EAFE GROWTH INDEX
- ----------------------------------- ----------------------
Date Date
9/5/00 9425 9/5/00 10000
9/30/00 8631.415 9/30/00 9353
9/30/01 5147.776 9/30/01 5953.185
9/30/02 4973.781 9/30/02 5188.796
9/30/03 5785.502 9/30/03 6314.764
9/30/04 6657.956 9/30/04 7388.274
9/30/05 8364.39 9/30/05 9266.373
9/30/06 9685.127 9/30/06 10843.51
9/30/07 12997.44 9/30/07 13900.3
9/30/08 9596.01 9/30/08 9981.802
MSCI EAFE INDEX
---------------
Date
9/5/00 10000
9/30/00 9408
9/30/01 6748.358
9/30/02 5718.559
9/30/03 7236.264
9/30/04 8865.871
9/30/05 11199.37
9/30/06 13400.04
9/30/07 16800.98
9/30/08 11738.84
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares and Class Y 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
September 5, 2000. The initial public offering of Class C shares and Class
Y commenced on September 29, 2008. The Class C and Class Y 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.
12
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
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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 stock 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 for the Touchstone Mid Cap Fund was -25.92% for the fiscal year
ended September 30, 2008. The total return of the Russell Midcap(R) Index was
- -22.36% for the same period.
The largest detractors from the Fund's relative performance were in the
Materials and Energy sectors, with Chemicals and Energy Equipment & Services
holdings detracting the most. Good relative returns in the Utilities,
Industrials, and Information Technology sectors contributed positively to
results. Independent Power Producers & Energy Traders, Commercial Services &
Supplies, and IT Services holdings were among the outperformers in those
sectors.
Holdings that contributed positively to Fund performance included Alliance Data
Systems and Alexandria Real Estate Equities (a REIT) in the Financials sector.
Alliance Data Systems was purchased at a pullback when a proposed merger fell
through and since that time the company has experienced continued improving
earnings trends. Alexandria Real Estate Equities operates in the area of life
sciences real estate, which has held up well because of its association with the
Health Care industry. In Utilities, MDU Resources Group Inc., a natural resource
company with a solid balance sheet, was another positive contributor.
The stocks that detracted from performance in the Materials sector include
AbitibiBowater, Inc, a paper and newsprint company. The stock suffered this year
due to falling demand for newspaper and some unexpected one-time charges payable
by the company. Cleveland-Cliffs, a supplier of iron ore, also performed poorly.
For U.S. equity investors, small-cap stocks outperformed large-cap and mid-cap
stocks. Stylistically, value outperformed growth among small-cap and mid-cap
stocks. The magnitude of outperformance was the most extreme among small-cap
stocks where value outperformed growth.
The markets have been more volatile this year than they had been in the past 30
years, an environment in which this strategy will typically be challenged. From
a style perspective, value companies in the benchmark did the best, a group in
which the Fund is underweight due to our bottom-up approach. Risk controls allow
the strategy to hold up to 60% in either style. The Fund's tilt to growth hurt
relative returns.
Turner's focus in managing the Fund remains, as always, on owning stocks that we
think have either undervalued assets or strong prospective earnings power. We
currently favor shares of companies in the Packaged Software, Data Processing
Services, and Commercial Services industries. The Fund is underweight Materials
and Utilities, while overweight in Information Technology and Industrials.
Although the market faces many hurdles in the near term, from a fundamental
standpoint the market seems to be slightly undervalued and earnings outside the
Financials sector remain strong. From a valuation standpoint, the S&P 500 Index
is trading at 12.6 times next year's earnings. In addition, both corporations
and investors have historically high levels of cash on the sidelines patiently
waiting to re-enter the market. Inflation concerns appear to be subsiding and
the U.S. Government is actively working to shore up investor confidence.
Historically, the stock market has confounded the levels of extremely bearish
sentiment that prevail today and turned upward several months before the economy
did. In fact, even in the midst of three of the last four recessions, the stock
market actually produced positive returns. In our judgment, corporate profits
may hit bottom early next year, and stocks could trough before year's end.
13
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
MIDCAP FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -30.36% 7.15% 10.39%
Class C -25.74% 7.92% 10.98%
Class Y -25.92% 8.67% 11.80%
Class Z -26.18% 8.37% 11.50%
- --------------------------------------------------------------------------------
[LINE CHART]
MID CAP FUND - CLASS Y RUSSELL MIDCAP INDEX
---------------------- --------------------
Date Date
1/2/03 10000 1/2/03 10000
9/30/03 12520 9/30/03 12289
9/30/04 14967.66 9/30/04 14814.39
9/30/05 20242.26 9/30/05 18532.8
9/30/06 21679.46 9/30/06 20306.39
9/30/07 25609.95 9/30/07 23935.14
9/30/08 18971 9/30/08 18583.24
* 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.
14
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE PREMIUM YIELD EQUITY FUND
SUB-ADVISED BY MILLER/HOWARD INVESTMENTS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Premium Yield Equity Fund seeks long-term growth of capital and
high current income by focusing on dividend-paying equity securities of U.S.
companies believed to possess attractive long-term return potential primarily
due to lower than average valuations and improving business outlooks.
FUND PERFORMANCE AND POSITIONING
Miller/Howard Investments assumed responsibility for sub-advising the Premium
Yield Equity Fund on May 23, 2008. From December 3, 2007 (inception of the Fund)
through May 22, 2008, Chartwell Investment Partners was sub-advisor to the Fund.
The total return of the Touchstone Premium Yield Equity Fund was -21.48% since
inception. The total return of the Russell 3000(R) Value Index was -18.63% for
the same period.
Since inception, the Energy sector had the highest returns. The worst performing
sectors since inception of the Fund were Industrials and Materials. Financials
and Industrials detracted from performance of the Fund the most. Also since
inception, Wilmington Trust, Johnson & Johnson, and Colgate-Palmolive have been
among the Fund's best contributors. Detractors include Macquarie Infrastructure,
Teck Cominco, and Diana Shipping Inc.
The challenges in the global financial markets created a difficult and volatile
market environment since Miller/Howard took over the management of the Fund on
May 23, 2008.
As the impact from the credit crisis began to threaten global economic activity,
investors rushed from Industrials and Commodities into core companies with
recurring business, stable cash flows and more reliable growth. As the
deleveraging and position liquidation "trading noise" settles out of the market
(a process that admittedly might take some more time) we expect a reawakening of
investors' beliefs in fundamentals to benefit the Fund. The Fund's underweight
in the Financials sector helped relative performance in the second quarter, but
the bounce-back in banks and Financials from deeply sold levels detracted from
relative performance in the third quarter.
Companies in the Consumer Staples sector like Procter & Gamble, Sysco Corp., and
Colgate-Palmolive fared well as investors looked for safe havens in a slowing
economy. Economically sensitive companies (or at least those perceived to be so)
were also discounted by the market. Macquarie Infrastructure, Nucor Corp., and
Teck Cominco were under pressure. Though we have often extolled the virtues of
industry diversification in the Fund for helping to create excellent
risk-adjusted returns, this was one period when diversification was no help at
all. We have recently seen studies indicating that correlation across markets
increases during downturns and decreases during upturns; frankly, it has long
been our view that over longer time frames, nearly all equity groups show
similar returns but quite different levels of volatility. It is important to
keep that reality in mind when the markets run from pillar to post. We, like
most participants and observers, were astonished at both the volatility across
the various market sectors and the uniformity of negative returns in both
domestic sectors and international markets.
The Premium Yield Equity Fund is constructed with high-quality dividend-paying
companies that are positioned to grow their dividends. Historically, financially
strong companies that deliver a consistent level of positive dividend cash flow
to investors act as a buffer in a down market. We believe the Fund is well
positioned to continue to deliver and grow a high level of current cash flow
going forward. The markets and the economy face many challenges, but over time
the power of compounding (the redeployment of cash flow into buying more shares
that then deliver higher levels of cash flow) will continue to work for
long-term investors.
15
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
The clearest takeaway we have from a great deal of discussion and thought about
the current situation is not new to us. We want to emphasize, even more than
usual, businesses with recurring revenue streams, financial strength, and
stability since we do not foresee high levels of economic activity for some time
ahead. Since equity prices tend to discount the future rather than the present,
we do not necessarily think stocks will have a rough time of it from here, but
we do think the risks for cyclically oriented stocks have risen. That said, we
do not see the prospects for Materials and Energy fading, since we hardly think
the developing world is going to cease developing, and stop needing resources.
But continued dividend growth is critical to our investment strategy, and we
suspect that fears, at least, of a difficult economy will keep more cyclical
kinds of stocks from raising their dividends in the near future.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
PREMIUM YIELD EQUITY FUND - CLASS A* AND THE RUSSELL 3000 VALUE INDEX
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND
TOTAL RETURNS**
Since Inception*
Class A -21.48%
Class C -21.95%
Class Y -21.56%
- --------------------------------------------------------------------------------
[LINE CHART]
PREMIUM YIELD EQUITY FUND - CLASS A RUSSELL 3000 VALUE INDEX
----------------------------------- ------------------------
Date Date
12/3/07 9425 12/3/07 10000
12/31/07 9343.003 12/31/07 9904
1/31/08 9025.34 1/31/08 9506.85
2/29/08 8632.738 2/29/08 9110.414
3/31/08 8507.563 3/31/08 9057.574
4/30/08 8717.7 4/30/08 9486.903
5/31/08 8845.85 5/31/08 9498.287
6/30/08 8181.527 6/30/08 8589.301
7/31/08 7930.354 7/31/08 8594.454
8/31/08 8040.586 8/31/08 8762.046
9/30/08 7400 9/30/08 8137.312
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares and Class Y shares based on
the differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class A shares and Class C shares
commenced on December 3, 2007. The initial public offering of Class Y
shares commenced on August 12, 2008. The Class C and Class Y performance
information is calculated using the historical performance of Class A.
** The 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.
16
- --------------------------------------------------------------------------------
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
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 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 (Class Z)
was -25.22% for the fiscal year ended September 30, 2008. The total return of
the Russell 1000(R) Growth Index was -20.88% for the same period.
The Fund's underperformance versus the benchmark during the year was primarily
attributable to the negative effects from security selection. Overweight
positions in Las Vegas Sands, National Oilwell Varco, Google, EMC Corp. and
Broadcom were the largest detractors from relative performance during the
period. Contributors to relative performance for the year include overweight
positions in Genzyme, Visa, Genentech, Varian Medical Systems, Amazon.com, and
Intuitive Surgical.
An overweight position relative to the benchmark in the Health Care sector was
the largest contributor to relative performance. No exposure to the Utilities
and Materials sectors also positively impacted relative performance. The largest
detractor from relative performance was an underweight position in Consumer
Staples. Other significant relative detractors include an overweight position in
Energy and security selection in the Information Technology sector.
We cannot foretell the ultimate macroeconomic and market impacts of the present
credit crisis and all of the related dramatic events that have occurred in the
worldwide financial system over the last few weeks. The situation clearly had
its genesis in the housing bubble and the easy credit that fueled it, which has
now engulfed the entire credit market. Its impact will obviously be felt most
directly in the Financials sector, but it is also safe to say that most other
sectors are likely to be negatively affected as the economy slows down from
overall credit sclerosis. Many would describe the state of equity markets with
the term, "uncertainty" - uncertainty about the nature and effect of a bailout
package, uncertainty regarding the depth to which a tighter credit market
affects the overall U.S. and global economies, and simply overall uncertainty
about the future. Despite the "feeling" of uncertainty that may seem to pervade
now, the reality is that uncertainty is always at the core of equity investing.
Uncertainty is literally what defines any market where the value of what is
being traded incorporates future cash flows.
As unnerving as recent events have been, there is only one question on which we,
with our commitment to a bottom-up investment approach, are focused: has the
present situation fundamentally changed our investment cases for the businesses
owned in the Fund? On this point, we have far greater conviction than any
macroeconomic prognosis. In analyzing each of the Fund's holdings relative to
its sensitivity to the present macroeconomic malaise, assuming no quick fix for
the credit markets in the coming quarters, we conclude that the large majority
of these businesses are relatively shielded from continued turmoil in the credit
markets specifically and from a macroeconomic slowdown generally. We believe
most of the companies in the Fund are likely to weather tough times much better
than their competitors, either because their products or services offer such a
compelling return-on-investment for the customer that it becomes comparably more
attractive as buying decisions become more price-sensitive (e.g., Intuitive
Surgical, Salesforce.com, Amazon, EMC, and Google), or because the product or
service is relatively non-discretionary and/or customers have few competitive
alternatives (e.g., National Oilwell Varco, FMC Technologies, Schlumberger,
Visa, Stryker, Genzyme, Varian Medical Systems, Iron Mountain, Chicago
Mercantile Exchange, and IntercontinentalExchange).
17
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
Though each of the Fund companies vary in terms of exposure to the potential
impact of the present predicament in the credit market, we find a consistent
theme resonates as loudly as ever across the businesses: disconnect.
Specifically, there is a disconnect between the reality of the state of the
businesses and their stock prices. In general, the recent stock prices of
companies in the Fund appear to reflect capital outflows and de-leveraging in
the equity markets overall rather than significant deterioration in the health
of these businesses or even material changes to the future health of these
businesses. When the smoke clears and the market reconnects the reality of the
businesses to the stock prices, patient investors should benefit tremendously --
and this reconnect process often occurs very quickly. We believe that two
businesses are particularly stark reflections of this present disconnect:
National Oilwell Varco and IntercontinentalExchange.
We believe there are a number of other companies in the Fund that exhibit this
disconnect between their stock prices and their business fundamentals. While we
fully appreciate how frustrating periods of disconnect are, we can say with
confidence that they do not last, even if the market itself does not rebound due
to macroeconomic reasons. Over time, stock price appreciation reflects earnings
growth. This basic tenet remains as true as ever - even in times when logic
takes a backseat to human emotion and the psychology of fear.
18
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years Since Inception*
Class Y -25.03% 3.10% -4.52%
Class Z -25.22% 2.88% -4.64%
- --------------------------------------------------------------------------------
[LINE CHART]
SANDS CAPITAL SELECT GROWTH FUND - CLASS Y
- ------------------------------------------
Date
8/11/00 10000
9/30/00 9150
9/30/01 5032.5
9/30/02 4331.976
9/30/03 5892.787
9/30/04 6803.223
9/30/05 7813.501
9/30/06 7603.318
9/30/07 9153.634
9/30/08 6863
SANDS CAPITAL SELECT GROWTH FUND - CLASS Z RUSSELL 1000 GROWTH INDEX
- ------------------------------------------ -------------------------
Date Date
8/11/00 10000 8/11/00 10000
9/30/00 9150 9/30/00 9802
9/30/01 5032.5 9/30/01 5328.367
9/30/02 4331.976 9/30/02 4128.952
9/30/03 5892.787 9/30/03 5199.176
9/30/04 6803.223 9/30/04 5589.634
9/30/05 7803.977 9/30/05 6238.032
9/30/06 7573.759 9/30/06 6614.809
9/30/07 9084.724 9/30/07 7894.774
9/30/08 6793 9/30/08 6246.345
* 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.
19
- --------------------------------------------------------------------------------
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 lower quality credits. While the Fund may
invest in securities with any maturity or duration, interest rate risk is
managed by maintaining an effective duration that is comparable to or less than
that of three year U.S. Treasury Notes.
FUND PERFORMANCE AND POSITIONING
The total return of the Fund was 2.36% for the fiscal year ended September 30,
2008. The total return of the Lehman 1-3 Year U.S. Government Bond Index was
5.90% for the same period. Tremendous financial market volatility and the
resulting adverse price performance of non-Treasury securities, including those
backed by the agencies, caused the Fund to underperform its index. While the
Index had a 63% allocation to Treasury securities, the Fund had none as of the
fiscal year end.
The Fund's fiscal year was a particularly challenging one where unprecedented
illiquidity culminated in the highest spreads (risk premiums) ever seen in
modern-day credit markets. Fannie Mae and Freddie Mac, hard hit by the worst
housing slump since the Great Depression, were placed in conservatorship by the
Federal Housing Finance Agency on September 7, 2008. However, the Treasury
stepped in, effectively guaranteeing all obligations of Fannie and Freddie. This
is particularly important as almost two thirds of the Fund's assets are
ultimately guaranteed by these two entities.
The increasing pressure on all financial assets has had a profound impact on
shorter duration securities, including many of those purchased by the Fund. As
institutional investors, in an effort to meet redemptions, are forced to
liquidate security holdings, they often turn to those securities that are
easiest to sell and have the smallest price declines. As a result, shorter
duration securities, including those backed by the government sponsored
enterprises (GSE's), have experienced significant selling pressure.
The third quarter of 2008 will likely go down in the history books as a
significant transition point for the U.S. financial markets. This historic time
culminated with the U.S. House of Representatives failing to pass the Troubled
Asset Relief Plan (TARP) on September 29, 2008. While a comprehensive bill was
eventually passed in early October, the confidence of the financial markets was
badly shaken. In the following weeks, credit spreads, including the often quoted
TED spread (a proxy for counterparty risk), hit unprecedented levels. The
Federal Reserve, in a coordinated global effort, has responded with lower rates
and a host of emergency liquidity measures. We are now beginning to see signs of
more efficient flows of capital.
We enter the fourth quarter of 2008 with a cautious outlook. Both corporate bond
and agency mortgage-backed security spreads are near their all time wides. The
Fund currently maintains substantial positions in mortgage-backed securities
along with a smaller, but still significant exposure to corporate securities.
Given the recent price volatility in these sectors, we will seek to
opportunistically reduce the Fund's spread duration (or sensitivity to changes
in spread). In an effort to maintain as much upside potential as possible, we
will attempt to do this by reducing the Fund's absolute duration which is
currently positioned at the longer end of the allowable range. Over the longer
term, we believe the Fund should perform well as the liquidity and stimulus
programs begin to work their way through the financial system and risk and
liquidity premiums begin to normalize in 2009.
20
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class Z 2.36% 2.94% 3.96%
- --------------------------------------------------------------------------------
[LINE CHART]
LEHMAN BROTHERS 1-3 YEAR
SHORT DURATION FIXED INCOME FUND - CLASS Z U.S. GOVERNMENT BOND INDEX
- ------------------------------------------ --------------------------
Date Date
9/30/98 10000 9/30/98 10000
9/30/99 10289 9/30/99 10319
9/30/00 10908.4 9/30/00 10920.6
9/30/01 11926.15 9/30/01 12085.83
9/30/02 12485.49 9/30/02 12792.85
9/30/03 12753.93 9/30/03 13151.05
9/30/04 12988.6 9/30/04 13303.6
9/30/05 13266.55 9/30/05 13448.61
9/30/06 13693.74 9/30/06 13962.34
9/30/07 14404.44 9/30/07 14760.99
9/30/08 14744.39 9/30/08 15631.89
* 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.
21
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE SMALL CAP VALUE OPPORTUNITIES FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, 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
- -16.81% for the fiscal year ended September 30, 2008. The total return of the
Russell 2000(R) Value Index was -12.25% for the same period.
The Industrials and Information Technology sectors were the largest relative
detractors from performance during the year. In particular, KHD Humboldt Wedag
International LTD, a world leader in the supply of proprietary technologies,
equipment and engineering/design services for cement, coal and minerals
processing, declined significantly during the year. In the Information
Technology sector, Online Resources Corporation and Zoran Corporation were both
detractors. Online Resources Corp. is a maker of web-based financial technology.
Although the stock price spiked during the third quarter because of its
acquisition of a bill payer service, it was not enough to make up for the drag
on the overall Financials sector throughout the year. Zoran Corporation, a
leading provider of digital solutions for applications in the digital
entertainment and imaging markets, also contributed to the sector decline.
The Consumer Discretionary sector contributed the most to relative
outperformance during the year, led by Multiline Retailers Fred's, Inc. and Zale
Corporation. Zale Corp., a leading jewelry company, efficiently cut costs during
the year which has resulted in a strong balance sheet.
For the one year period, small-cap stocks outperformed large-cap and mid-cap
stocks. Stylistically, value outperformed growth among small-cap and mid-cap
stocks. The magnitude of outperformance was the most extreme among small-cap
stocks where value outperformed growth.
The Fund allows for the flexibility to over/underweight a particular sector by
up to 5%. As a result of our bottom-up research process, the Fund has been
underweight Financials for a significant period of time, which has been
beneficial to performance. However, Financials rebounded in the third quarter
and our underweight allocation and its lack of exposure to Regional and Savings
Banks, which were the best performers, hurt relative returns.
In managing the Fund, our focus as always remains on owning undervalued
securities with hidden/unrecognized intrinsic value. We currently favor shares
of companies in the Medical Specialties, Industrial Machinery, and
Property/Casualty industries. The Fund has an underweight in Financials and
Information Technology sectors and holds overweight positions in the Health Care
and Consumer Staples sectors.
Although the market faces many hurdles in the near term, from a fundamental
standpoint the market seems to be slightly undervalued and earnings outside the
Financials sector remain strong. From a valuation standpoint, the S&P 500 Index
is trading at 12.6 times next year's earnings. In addition, both corporations
and investors have historically high levels of cash on the sidelines patiently
waiting to re-enter the market. Inflation concerns appear to be subsiding and
the U.S. Government is actively working to shore up investor confidence.
Historically, the stock market has confounded the levels of extremely bearish
sentiment that prevail today and turned upward several months before the economy
did. In fact, even in the midst of three of the last four recessions, the stock
market actually produced positive returns. In our judgment, corporate profits
may hit bottom early next year, and stocks could trough before year's end.
22
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years Since Inception*
Class Z -16.81% 9.21% 10.93%
- --------------------------------------------------------------------------------
[LINE CHART]
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z RUSSELL 2000 VALUE INDEX
- -------------------------------------------- ------------------------
Date Date
3/4/02 10000 3/4/02 10000
9/30/02 9270 9/30/02 8147
9/30/03 12726.78 9/30/03 10726.34
9/30/04 16463.37 9/30/04 13478.72
9/30/05 20467.26 9/30/05 15871.19
9/30/06 21457.87 9/30/06 18094.75
9/30/07 23768.89 9/30/07 19196.72
9/30/08 19775 9/30/08 16845.12
* The initial public offering of Class Z shares commenced on March 4, 2002.
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.
23
- --------------------------------------------------------------------------------
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. While the Fund may invest in securities with any maturity or duration,
interest rate risk is managed by maintaining an effective duration that is
comparable to or less than that of one year U.S. Treasury bills.
FUND PERFORMANCE AND POSITIONING
The total return of the Fund was 1.26% for the fiscal year ended September 30,
2008. The total return of the Merrill Lynch 3-Month U.S. Treasury Bill Index was
2.90% for the same period. The Fund's emphasis on non-Treasury securities drove
underperformance versus the benchmark as the U.S. financial crisis came to a
head and securities not carrying an "explicit" government guarantee found little
demand.
The Fund's fiscal year was a particularly challenging one where unprecedented
illiquidity culminated in the highest spreads (risk premiums) ever seen in
modern-day credit markets. Fannie Mae and Freddie Mac, hard hit by the worst
housing slump since the Great Depression, were placed in conservatorship by the
Federal Housing Finance Agency on September 7, 2008. However, the Treasury
stepped in, effectively guaranteeing all obligations of Fannie and Freddie. This
is particularly important as over two thirds of the Fund's assets are ultimately
guaranteed by these two entities.
The increasing pressure on all financial assets has had a profound impact on
shorter duration securities, including many of those purchased by the Fund. As
institutional investors, in an effort to meet redemptions, are forced to
liquidate security holdings, they often turn to those securities that are
easiest to sell and have the smallest price declines. As a result, shorter
duration securities, including those backed by the government sponsored
enterprises (GSE's), have experienced significant selling pressure.
The third quarter of 2008 will likely go down in the history books as a
significant transition point for the U.S. financial markets. This historic time
culminated with the U.S. House of Representatives failing to pass the Troubled
Asset Relief Plan (TARP) on September 29, 2008.
While a comprehensive bill was eventually passed in early October, the
confidence of the financial markets was badly shaken. In the following weeks,
credit spreads, including the often quoted TED spread (a proxy for counterparty
risk), hit unprecedented levels. The Federal Reserve, in a coordinated global
effort, has responded with lower rates and a host of emergency liquidity
measures. We are now beginning to see signs of more efficient flows of capital.
We enter the fourth quarter of 2008 with a guarded stance. Both corporate bond
and agency mortgage-backed security spreads are near their all time wides. The
Fund currently maintains substantial positions in mortgage-backed securities
along with a smaller, but still significant exposure to corporate securities.
Given the recent price volatility in these sectors, we will seek to
opportunistically reduce the Fund's spread duration (or sensitivity to changes
in spread). In an effort to maintain as much upside potential as possible, we
will attempt to do this by reducing the Fund's absolute duration which is
currently positioned at the longer end of the allowable range. Over the longer
term, we believe the Fund should perform well as the liquidity and stimulus
programs begin to work their way through the financial system and risk and
liquidity premiums begin to normalize in 2009.
24
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
ULTRA SHORT DURATION FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class Z 1.26% 3.06% 3.83%
- --------------------------------------------------------------------------------
[LINE CHART]
MERRILL LYNCH 3-MONTH
ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z U.S. TREASURY BILL INDEX
- ------------------------------------------------ ------------------------
Date Date
9/30/98 10000 9/30/98 10000
9/30/99 10534 9/30/99 10472.6
9/30/00 11203.96 9/30/00 11078.23
9/30/01 11996.08 9/30/01 11681.33
9/30/02 12349.97 9/30/02 11914.02
9/30/03 12522.87 9/30/03 12071.17
9/30/04 12726.99 9/30/04 12204.43
9/30/05 13069.35 9/30/05 12524.07
9/30/06 13627.41 9/30/06 13087.65
9/30/07 14374.19 9/30/07 13770.43
9/30/08 14555.3 9/30/08 14169.09
* 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.
25
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Unaudited)
- --------------------------------------------------------------------------------
TOUCHSTONE VALUE OPPORTUNITIES FUND
SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT
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 -16.92% for the
fiscal year ended September 30, 2008. The total return of the Russell 3000(R)
Value Index was -22.70% for the same period.
Stock selection in the Consumer Discretionary and Energy sectors helped
contribute to the Fund's positive relative outperformance. Zale Corporation
contributed to both absolute and relative returns as the company emerged from
its restructuring and repurchased 35% of its stock. Chesapeake Energy, Cabot Oil
& Gas and Noble Energy benefited from a combination of growing production and
reserve replacement profiles, coupled with favorable industry supply/demand
characteristics.
Detracting from Fund performance were the Industrials and Materials sectors.
While the Fund benefited from late 2006 through mid 2008 from its various
holdings that were related to the secular need to build out power generation
capacity, the sudden and steep drop in commodity prices in late 2008 negatively
impacted these holdings. General Electric, Shaw Group, Stillwater Mining, and
Alcoa posted steep price declines.
The most significant economic development that impacted the Fund was sudden and
swift decline in commodity prices that began in July. Beyond the Industrials and
Materials sectors, which were the most directly affected, the Utilities sector
was also negatively impacted. Growing concerns about the implications of the
upcoming presidential election seemed to weigh on the Health Care sector as
well.
The Touchstone Value Opportunities Fund is taking advantage of the current
market turmoil and buying stocks with favorable fundamentals and at historically
attractive valuations. At the heart of the current market decline and economic
anxiety is a financial system that is being reshaped before our eyes. Rather
than close our eyes and hope for the best, our eyes are wide open as we are
actively and diligently investing in companies that are positioned to deliver
superior returns to shareholders as the environment improves. We also anticipate
becoming more aggressive in certain industries within the Consumer Discretionary
sector, due to historically low valuations.
26
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years 10 Years
Class A -21.78% 8.10% 7.80%
Class C -17.62% 8.65% 7.67%
Class Z -16.92% 9.46% 8.48%
- --------------------------------------------------------------------------------
[LINE CHART]
VALUE OPPORTUNITIES FUND - CLASS Z RUSSELL 3000 VALUE INDEX
---------------------------------- ------------------------
Date Date
9/30/98 10000 9/30/98 10000
9/30/99 10613 9/30/99 11764
9/30/00 12063.8 9/30/00 12863.93
9/30/01 12606.67 9/30/01 11837.39
9/30/02 11803.62 9/30/02 9956.43
9/30/03 14354.39 9/30/03 12434.59
9/30/04 17332.92 9/30/04 15032.17
9/30/05 21636.69 9/30/05 17554.57
9/30/06 23443.35 9/30/06 20108.76
9/30/07 27154.43 9/30/07 22869.69
9/30/08 22558 9/30/08 17678.27
* 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.
27
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Unaudited)
September 30, 2008
- --------------------------------------------------------------------------------
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 QUALITY (% OF INVESTMENT SECURITIES)
U.S. Treasury 12.8
U.S. Agency 56.6
AAA/Aaa 6.9
AA/Aa 6.5
A/A 1.1
BBB/Baa 14.8
BB/Ba 0.8
B/B 0.5
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financials 31.4
Information Technology 13.7
Industrials 11.4
Consumer Discretionary 10.9
Utilities 7.3
Consumer Staples 7.0
Health Care 6.2
Materials 4.9
Energy 4.2
Miscellaneous 1.4
Investment Funds 19.8
Other Assets/Liabilities (Net) (18.2)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Health Care 97.5
Investment Funds 21.5
Other Assets/Liabilities (Net) (19.0)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 19.0
Health Care 16.7
Financials 13.8
Telecommunication Services 7.7
Energy 7.4
Consumer Staples 7.2
Consumer Discretionary 6.7
Materials 6.4
Industrials 5.5
Utilities 3.8
Investment Fund 78.8
Other Assets/Liabilities (Net) (73.0)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MID CAP FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Industrials 22.1
Information Technology 17.6
Financials 12.3
Health Care 10.6
Consumer Discretionary 10.6
Consumer Staples 6.5
Energy 5.8
Utilities 5.4
Materials 1.8
Miscellaneous 1.4
Telecommunication Services 1.2
Investment Funds 28.8
Other Assets/Liabilities (Net) (24.1)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financials 16.8
Consumer Staples 14.7
Energy 14.7
Health Care 10.7
Telecommunication Services 10.4
Information Technology 7.3
Utilities 6.7
Industrials 6.6
Materials 3.4
Investment Fund 4.6
Other Assets/Liabilities (Net) 4.1
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 26.6
Health Care 24.6
Energy 14.8
Consumer Discretionary 14.0
Financials 10.5
Industrials 3.2
Telecommunication Services 3.1
Investment Funds 21.2
Other Assets/Liabilities (Net) (18.0)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT QUALITY (% OF INVESTMENT SECURITIES)
U.S. Agency 81.7
AAA 11.0
AA 5.8
A 1.5
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financials 33.5
Industrials 14.1
Information Technology 11.6
Consumer Discretionary 11.3
Health Care 6.9
Materials 6.3
Consumer Staples 5.7
Utilities 4.3
Energy 3.5
Telecommunication Services 1.7
Investment Fund 17.7
Other Assets/Liabilities (Net) (16.6)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
29
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ULTRA SHORT DURATION FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT QUALITY (% OF INVESTMENT SECURITIES)
U.S. Agency 82.3
AAA 9.8
AA 5.7
A 2.2
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financials 27.5
Energy 13.0
Health Care 11.7
Consumer Staples 11.6
Consumer Discretionary 9.7
Utilities 6.6
Industrials 6.0
Information Technology 5.2
Telecommunication Services 3.8
Materials 3.3
Investment Funds 22.4
Other Assets/Liabilities (Net) (20.8)
------
TOTAL 100.0
------
- --------------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
September 30, 2008
- --------------------------------------------------------------------------------
DIVERSIFIED
CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL
FIXED INCOME VALUE BIOTECHNOLOGY GROWTH
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 16,817,998 $ 156,838,663 $ 73,065,926 $ 45,021,741
==================================================================================================================================
Affiliated securities, at market value $ 292,543 $ 3,533,567 $ 1,237,068 $ 20,207,886
Non-affiliated securities, at market value 14,975,142 143,007,571 78,379,358 24,152,757
- ----------------------------------------------------------------------------------------------------------------------------------
At market value - including $ 21,122,404 and $ 13,304,645
of securities loaned for the Diversified Small Cap Value Fund
and Healthcare and Biotechnology Fund, respectively. $ 15,267,685 $ 146,541,138 $ 79,616,426 $ 44,360,643
Foreign currency (cost $6,444) -- -- 5,931 --
Dividends and interest receivable 157,384 157,249 44,348 12,882
Receivable for capital shares sold 3,941 61,980 187,414 52,295
Receivable for securities sold -- 643,250 3,001,539 68,425
Receivable for securities lending income -- 11,139 3,102 --
Receivable from Advisor 8,712 -- -- 54,390
Tax reclaim receivable -- -- 2,000 --
Other assets 1,595 7,379 14,318 7,013
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 15,439,317 147,422,135 82,875,078 44,555,648
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdrafts -- 502,857 -- 15,000
Dividends payable 2,854 26,550 -- 972
Payable upon return of securities loaned -- 20,978,164 13,160,939 --
Payable for capital shares redeemed 18,606 399,168 146,846 6,310
Payable for securities purchased -- 1,156,283 2,559,781 18,821,982
Payable to Advisor -- 77,628 56,368 --
Payable to other affiliates 3,605 38,270 23,883 8,387
Payable to Trustees 6,073 4,721 3,794 9,000
Other accrued expenses and liabilities 31,615 269,836 35,952 57,192
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 62,753 23,453,477 15,987,563 18,918,843
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 15,376,564 $ 123,968,658 $ 66,887,515 $ 25,636,805
==================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 17,013,541 $ 129,191,166 $ 64,506,228 $ 26,633,255
Accumulated (distributions in excess of) net investment income (267) 158,648 -- 1
Accumulated net realized gains (losses) on investments
and foreign currency transactions (86,397) 4,916,369 (4,169,213) (335,353)
Net unrealized appreciation (depreciation) on investments (1,550,313) (10,297,525) 6,551,234 (661,098)
Net unrealized depreciation on foreign currency and
translation of other assets and liabilities denominated in
foreign currency -- -- (734) --
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 15,376,564 $ 123,968,658 $ 66,887,515 $ 25,636,805
==================================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ -- $ 624,653 $ 60,959,219 $ 25,631,755
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 49,414 4,036,755 2,995,076
==================================================================================================================================
Net asset value and redemption price per share $ -- $ 12.64 $ 15.10 $ 8.56
==================================================================================================================================
Maximum offering price per share $ -- $ 13.41 $ 16.02 $ 9.08
==================================================================================================================================
31
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED
CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL
FIXED INCOME VALUE BIOTECHNOLOGY GROWTH
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ -- $ 618,571 $ 5,928,296 $ 2,525
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 49,548 397,815 294
==================================================================================================================================
Net asset value, offering price and redemption price per share* $ -- $ 12.48 $ 14.90 $ 8.57
==================================================================================================================================
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ -- $ -- $ 2,525
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- -- -- 296
==================================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ -- $ -- $ 8.54
==================================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ -- $ 122,725,434 $ -- $ --
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 9,722,503 -- --
==================================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ 12.62 $ -- $ --
==================================================================================================================================
PRICING OF CLASS I SHARES
Net assets attributable to Class I shares $ 15,376,564 $ -- $ -- $ --
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 1,727,199 -- -- --
==================================================================================================================================
Net asset value, offering price and redemption price per share $ 8.90 $ -- $ -- $ --
==================================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
32
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 555,031,789 $ 22,985,867 $ 618,596,396 $ 47,459,938
====================================================================================================================================
Affiliated securities, at market value $ 17,311,821 $ 925,785 $ 20,526,773 $ 511,399
Non-affiliated securities, at market value 511,047,697 18,240,421 563,705,615 46,476,137
- ------------------------------------------------------------------------------------------------------------------------------------
At market value - including $ 106,517,607 and $ 89,069,993
of securities loaned for the Mid Cap Fund and Sands Capital
Select Growth Fund, respectively. $ 528,359,518 $ 19,166,206 $ 584,232,388 $ 46,987,536
Cash -- -- -- 491,916
Dividends and interest receivable 459,583 73,021 332,521 206,239
Receivable for capital shares sold 636,433 -- 521,639 --
Receivable for securities sold 11,525,145 771,563 3,424,479 --
Receivable for securities lending income 42,755 -- 60,437 --
Other assets 14,468 19,506 17,715 5,147
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 541,037,902 20,030,296 588,589,179 47,690,838
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdraft 63,110 -- -- --
Dividends payable -- 212 -- 2,249
Payable upon return of securities loaned 105,177,730 -- 84,147,388 --
Payable for capital shares redeemed 696,983 92 840,009 105,092
Payable for securities purchased 8,922,416 -- 7,824,315 491,916
Payable to Advisor 211,648 964 343,265 9,828
Payable to other affiliates 7,497 4,979 139,264 17,791
Payable to Trustees 4,298 4,718 4,491 4,093
Other accrued expenses and liabilities 141,740 39,118 415,486 71,119
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 115,225,422 50,083 93,714,218 702,088
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 425,812,480 $ 19,980,213 $ 494,874,961 $ 46,988,750
====================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 533,734,648 $ 26,186,748 $ 564,613,306 $ 53,014,577
Accumulated net investment income 109,780 6,082 -- --
Accumulated net realized losses on investments (81,359,677) (2,392,956) (35,374,337) (5,553,425)
Net unrealized depreciation on investments (26,672,271) (3,819,661) (34,364,008) (472,402)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 425,812,480 $ 19,980,213 $ 494,874,961 $ 46,988,750
====================================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 158,495 $ 19,411,195 $ -- $ --
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 12,122 2,568,518 -- --
====================================================================================================================================
Net asset value and redemption price per share $ 13.07 $ 7.56 $ -- $ --
====================================================================================================================================
Maximum offering price per share $ 13.87 $ 8.02 $ -- $ --
====================================================================================================================================
33
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 30,047 $ 566,726 $ -- $ --
=================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 2,290 74,971 -- --
=================================================================================================================================
Net asset value, offering price and redemption price per share* $ 13.12 $ 7.56 $ -- $ --
=================================================================================================================================
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ 422,356,459 $ 2,292 $ 130,919,630 $ --
=================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 32,147,736 303 19,072,886 --
=================================================================================================================================
Net asset value, offering price and redemption price per share $ 13.14 $ 7.55 $ 6.86 $ --
=================================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ 3,267,479 $ -- $ 363,955,331 $ 46,988,750
=================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 250,334 -- 53,566,758 4,899,607
=================================================================================================================================
Net asset value, offering price and redemption price per share $ 13.05 $ -- $ 6.79 $ 9.59
=================================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
34
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA
VALUE SHORT DURATION VALUE
OPPORTUNITIES FIXED INCOME OPPORTUNITIES
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 153,344,435 $ 147,479,404 $ 234,467,807
=====================================================================================================================
Affiliated securities, at market value $ -- $ 7,436,454 $ 4,653,025
Non-affiliated securities, at market value 153,871,867 138,259,649 213,841,208
- ---------------------------------------------------------------------------------------------------------------------
At market value - including $ 23,050,058 and $ 37,564,761
of securities loaned for the Small Cap Value Opportunities
Fund and Value Opportunities Fund, respectively. $ 153,871,867 $ 145,696,103 $ 218,494,233
Cash -- 1,210,266 --
Dividends and interest receivable 189,801 861,969 327,216
Receivable for capital shares sold 168,970 195,022 501,945
Receivable for securities sold 3,977,770 -- 4,756,967
Receivable for securities lending income 31,783 -- 37,182
Other assets 8,743 8,902 27,609
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 158,248,934 147,972,262 224,145,152
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdrafts 991,152 -- 551,446
Dividends payable -- 14,750 60,436
Payable upon return of securities loaned 23,350,696 -- 35,830,066
Payable for capital shares redeemed 537,680 772,669 745,272
Payable for securities purchased 1,029,241 3,137,304 5,823,333
Payable to Advisor 109,117 17,124 101,055
Payable to other affiliates 54,878 52,102 46,874
Payable to Trustees 3,710 4,490 3,697
Other accrued expenses and liabilities 59,946 136,565 126,873
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 26,136,420 4,135,004 43,289,052
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 132,112,514 $ 143,837,258 $ 180,856,100
=====================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 153,340,652 $ 156,077,107 $ 198,387,523
Accumulated (distributions in excess of) net investment income 19,450 -- (50,745)
Accumulated net realized losses on investments (21,775,020) (10,456,548) (1,507,104)
Net unrealized appreciation (depreciation) on investments 527,432 (1,783,301) (15,973,574)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 132,112,514 $ 143,837,258 $ 180,856,100
=====================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ -- $ -- $ 8,231,417
=====================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- -- 611,421
=====================================================================================================================
Net asset value and redemption price per share $ -- $ -- $ 13.46
=====================================================================================================================
Maximum offering price per share $ -- $ -- $ 14.28
=====================================================================================================================
35
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA
VALUE SHORT DURATION VALUE
OPPORTUNITIES FIXED INCOME OPPORTUNITIES
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ -- $ -- $ 3,864,670
==================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- -- 287,958
==================================================================================================================
Net asset value, offering price and redemption price per share* $ -- $ -- $ 13.42
==================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ 132,112,514 $ 143,837,258 $ 168,760,013
==================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 8,550,474 14,763,312 12,550,287
==================================================================================================================
Net asset value, offering price and redemption price per share $ 15.45 $ 9.74 $ 13.45
==================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
36
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended September 30, 2008
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
------------------------------
DIVERSIFIED PERIOD YEAR
CLOVER CORE SMALL CAP HEALTHCARE AND ENDED ENDED
FIXED INCOME VALUE BIOTECHNOLOGY SEPTEMBER 30, DECEMBER 31,
FUND FUND FUND 2008 (B) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 2,926 $ 64,357 $ 75,823 $ 2,251 $ --
Dividends from non-affiliated securities (A) 1,793 2,624,700 458,515 99,239 62,622
Interest 1,005,987 183 36 -- 2,614
Income from securities loaned 4,193 166,495 25,711 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,014,899 2,855,735 560,085 101,490 65,236
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 83,811 1,170,221 676,816 37,748 23,086
Administration fees 37,249 275,348 135,364 61 --
Shareholder servicing fees -- 290,487 -- -- --
Transfer Agent fees, Class A -- 6,439 91,603 3,439 1,974
Transfer Agent fees, Class C -- 462 6,236 -- --
Transfer Agent fees, Class Z -- 124,571 -- -- --
Transfer Agent fees, Class I 9,436 -- -- -- --
Distribution expenses, Class A -- 771 158,121 9,444 5,772
Distribution expenses, Class C -- 3,492 44,399 -- --
Professional fees 27,463 27,590 23,737 41,250 16,747
Reports to shareholders 10,116 38,118 32,626 32,381 31,800
Registration fees, Class A -- 7,582 2,580 13,136 17,970
Registration fees, Class C -- 7,507 7,428 -- --
Registration fees, Class Z -- 30,853 -- -- --
Registration fees, Class I 15,289 -- -- -- --
Accounting and pricing fees -- -- -- 65,625 74,365
Custodian fees 8,450 20,914 13,471 11,196 8,283
Trustees' fees and expenses 8,788 2,192 6,521 27,000 18,000
Postage and supplies 4,690 -- 6,595 1,587 120
Compliance fees and expenses 1,523 2,113 1,806 90 1,491
Other expenses 6,547 4,032 2,486 3,782 5,502
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 213,362 2,012,692 1,209,789 246,739 205,110
Fees waived by the Administrator (37,249) (21,337) (127,367) (61) --
Fees waived and/or expenses reimbursed by the Advisor (17,994) -- -- (189,821) (170,469)
- ------------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 158,119 1,991,355 1,082,422 56,857 34,641
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 856,780 864,380 (522,337) 44,633 30,595
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions 292,998 6,992,973 (3,152,100) (320,230) 217,507
Net realized gains from foreign currency transactions -- -- 3,538 -- --
Net change in unrealized appreciation/
depreciation on investments (1,269,633) (21,709,390) (3,345,627) (1,265,129) 197,015
Net change in unrealized appreciation/
depreciation on foreign currency transactions -- -- (941) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (976,635) (14,716,417) (6,495,130) (1,585,359) 414,522
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (119,855) $ (13,852,037) $ (7,017,467) $ (1,540,726) $ 445,117
====================================================================================================================================
(A) Net of foreign tax withholding of: $ -- $ -- $ 9,673 $ 143 $ 4,407
(B) Effective after the close of business on December 31, 2007, the Fund changed its fiscal year end to September 30.
See accompanying notes to financial statements.
37
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND (B) FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 305,977 $ 18,517 $ 216,484 $ 42,087
Dividends from non-affiliated securities (A) 3,962,249 1,045,982 2,532,016 234
Interest 721 346 45 2,773,696
Income from securities loaned 411,483 -- 499,379 7,616
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,680,430 1,064,845 3,247,924 2,823,633
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 3,785,848 126,397 5,322,750 132,307
Administration fees 946,442 36,045 1,152,887 105,846
Shareholder servicing fees 16,530 -- 903,298 132,307
Transfer Agent fees, Class A -- 757 -- --
Transfer Agent fees, Class C -- 497 -- --
Transfer Agent fees, Class Y -- 15 30,108 --
Transfer Agent fees, Class Z 15,761 -- 185,464 40,734
Professional fees 61,937 22,428 65,938 29,769
Registration fees, Class A 4,175 12,835 34,511 --
Registration fees, Class C 11,332 11,418 3,877 --
Registration fees, Class Y 6,276 1,494 -- --
Registration fees, Class Z 399 -- -- 16,262
Reports to shareholders 14,615 2,483 70,401 13,390
Custodian fees 30,547 5,031 39,574 9,635
Distribution expenses, Class A 372 44,313 -- --
Distribution expenses, Class C 386 3,809 -- --
Trustees' fees and expenses 6,055 9,041 1,966 4,772
Compliance fees and expenses 3,635 988 4,035 1,703
Postage and supplies 15,798 11,790 -- --
Other expenses 16,563 2,487 24,160 8,886
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 4,936,671 291,828 7,838,969 495,611
Fees waived by the Administrator (661,074) (36,045) (153,618) (104,399)
Other operating expenses reimbursed by the Advisor -- (36,254) -- --
- -----------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 4,275,597 219,529 7,685,351 391,212
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 404,833 845,316 (4,437,427) 2,432,421
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions (79,816,887) (2,420,818) 9,044,188 (1,271,833)
Net change in unrealized appreciation/
depreciation on investments (59,420,702) (3,819,661) (165,311,237) 177,951
- -----------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (139,237,589) (6,240,479) (156,267,049) (1,093,882)
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(138,832,756) $ (5,395,163) $(160,704,476) $ 1,338,539
=============================================================================================================================
(A) Net of foreign tax withholding of: $ 20,393 $ 8,541 $ -- $ --
(B)Represents the period from commencement of operations (December 3, 2007) through September 30, 2008.
See accompanying notes to financial statements.
38
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA
VALUE SHORT DURATION VALUE
OPPORTUNITIES FIXED INCOME OPPORTUNITIES
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 127,233 $ 112,153 $ 120,154
Dividends from non-affiliated securities (A) 2,011,295 -- 3,026,257
Interest 1,893 8,635,197 1,295
Income from securities loaned 220,694 14,992 130,263
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,361,115 8,762,342 3,277,969
- ----------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 1,525,525 404,936 1,011,976
Administration fees 321,165 323,951 273,508
Shareholder servicing fees 376,858 349,866 99,589
Transfer Agent fees, Class A 425 -- 6,512
Transfer Agent fees, Class C 148 -- 2,232
Transfer Agent fees, Class Z 227,735 112,966 46,461
Postage and supplies 134,839 10,427 9,343
Registration fees, Class A 745 -- 8,888
Registration fees, Class C 594 -- 5,896
Registration fees, Class Z 57,747 20,443 26,461
Reports to shareholders 50,012 22,536 41,105
Professional fees 35,915 35,436 27,457
Custodian fees 36,705 18,419 11,436
Distribution expenses, Class A 994 -- 8,989
Distribution expenses, Class C 1,006 -- 15,011
Trustees' fees and expenses 5,587 4,640 4,645
Compliance fees and expenses 2,219 2,224 1,851
Other expenses 9,266 17,109 4,391
- ----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,787,485 1,322,953 1,605,751
Fees waived by the Administrator (321,165) (205,930) (26,614)
Fees waived and/or expenses reimbursed by the Advisor (61,602) -- --
- ----------------------------------------------------------------------------------------------------------
NET EXPENSES 2,404,718 1,117,023 1,579,137
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (43,603) 7,645,319 1,698,832
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses from security transactions (20,405,279) (3,298,587) (1,035,681)
Net change in unrealized appreciation/
depreciation on investments (9,432,031) (2,400,870) (31,094,111)
- ----------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (29,837,310) (5,699,457) (32,129,792)
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (29,880,913) $ 1,945,862 $ (30,430,960)
==========================================================================================================
(A) Net of foreign tax withholding of: $ 276 $ -- $ 1,981
See accompanying notes to financial statements.
39
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
CLOVER CORE DIVERSIFIED
FIXED INCOME SMALL CAP
FUND VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2008 2007 2008 2007 (A)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 856,780 $ 958,313 $ 864,380 $ (173,328)
Net realized gains (losses) from security transactions 292,998 (133,799) 6,992,973 42,191,085
Net change in unrealized appreciation/depreciation on investments (1,269,633) (29,799) (21,709,390) (17,509,698)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (119,855) 794,715 (13,852,037) 24,508,059
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- -- (3,956) --
From net investment income, Class C -- -- (2,925) --
From net investment income, Class Z -- -- (857,493) --
From net investment income, Class I (864,148) (961,663) -- --
From net realized gains, Class A -- -- (63,928) (3,401)
From net realized gains, Class C -- -- (23,056) (4,650)
From net realized gains, Class Z -- -- (41,283,195) (74,856,107)
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (864,148) (961,663) (42,234,553) (74,864,158)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold -- -- 549,659 266,468
Reinvested distributions -- -- 67,890 3,401
Payments for shares redeemed -- -- (88,324) (61,472)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS -- -- 529,225 208,397
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold -- -- 631,196 80,986
Reinvested distributions -- -- 22,064 4,650
Payments for shares redeemed -- -- (69,868) --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS -- -- 583,392 85,636
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold -- -- 19,684,903 17,327,622
Reinvested distributions -- -- 41,080,333 71,871,313
Payments for shares redeemed -- -- (60,102,669) (120,135,425)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS -- -- 662,567 (30,936,490)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS I
Proceeds from shares sold 3,365,524 2,861,301 -- --
Reinvested distributions 827,891 921,355 -- --
Payments for shares redeemed (7,318,171) (5,819,674) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS I SHARE TRANSACTIONS (3,124,756) (2,037,018) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (4,108,759) (2,203,966) (54,311,406) (80,998,556)
NET ASSETS
Beginning of year 19,485,323 21,689,289 178,280,064 259,278,620
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 15,376,564 $ 19,485,323 $ 123,968,658 $ 178,280,064
- ------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME $ (267) $ (267) $ 158,648 $ 278,687
====================================================================================================================================
(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.
40
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND
BIOTECHNOLOGY FUND INTERNATIONAL GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2008 2007 (A) 2008 (B)(C) 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (522,337) $ (314,116) $ 44,633 $ 30,595 $ 749
Net realized gains (losses) from security transactions (3,152,100) 5,819,353 (320,230) 217,507 74,677
Net realized gains (losses) from
foreign currency transactions 3,538 (3,803) -- -- --
Net change in unrealized appreciation/
depreciation on investments (3,345,627) 3,150,465 (1,265,129) 197,015 212,024
Net change in unrealized appreciation/depreciation
from foreign currency transactions (941) 207 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS (7,017,467) 8,652,106 (1,540,726) 445,117 287,450
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- -- (44,621) (30,744) (751)
From net investment income, Class Y -- -- (11) -- --
From net realized gains, Class A (5,166,603) -- (96,726) -- (61,868)
From net realized gains, Class C (220,880) (1,868,667) (10) (143,085) --
From net realized gains, Class Y -- (37) (10) -- --
From return of capital, Class A (1,016,771) -- -- -- --
From return of capital, Calss C (43,469) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (6,447,723) (1,868,704) (141,378) (173,829) (62,619)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 48,340,108 9,785,368 25,035,840 2,060,415 1,095,954
Reinvested distributions 5,512,885 1,828,887 140,376 171,620 61,344
Payments for shares redeemed* (33,569,549) (20,162,439) (1,691,354) (545,390) (310,977)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CLASS A SHARE TRANSACTIONS 20,283,444 (8,548,184) 23,484,862 1,686,645 846,321
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 6,624,608 1,353,028 2,500 -- --
Reinvested distributions 117,545 37 10 -- --
Payments for shares redeemed (1,363,976) (17,481) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CLASS C SHARE TRANSACTIONS 5,378,177 1,335,584 2,510 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold -- 1,353,028 2,500 -- --
Reinvested distributions -- 37 20 -- --
Payments for shares redeemed -- (17,481) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CLASS Y SHARE TRANSACTIONS -- 1,335,584 2,520 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 12,196,431 (429,198) 21,807,788 1,957,933 1,071,152
41
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND
BIOTECHNOLOGY FUND INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2008 2007 (A) 2008 (B)(C) 2007 2006
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 54,691,084 55,120,282 3,829,017 1,871,084 799,932
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 66,887,515 $ 54,691,084 $ 25,636,805 $ 3,829,017 $ 1,871,084
==========================================================================================================================
ACCUMULATED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ -- $ (3,803) $ 1 $ -- $ --
==========================================================================================================================
(A) Class C represents the period from commencement of operations (November
20, 2006) through September 30, 2007.
(B) Effective after the close of business on December 31, 2007, the Fund
changed its fiscal year end to September 30.
(C) Classes C and Y represent the period from commencement of operations
(September 29, 2008) through September 30, 2008.
* The cost of shares redeemed for the International Growth Fund is net of
the 2% redemption fee on Fund shares which have been held 60 days or less.
For the nine months ended September 30, 2008, these fees were $6,466. For
the years ended December 31, 2007 and 2006, these fees were $938 and $161,
respectively.
See accompanying notes to financial statements.
42
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
PREMIUM
MID CAP YIELD EQUITY
FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A) 2008 (B)(C)
- --------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 404,833 $ 1,154,584 $ 845,316
Net realized gains (losses) from security transactions (79,816,887) 3,549,738 (2,420,818)
Net change in unrealized appreciation/depreciation on investments (59,420,702) 31,725,301 (3,819,661)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (138,832,756) 36,429,623 (5,395,163)
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- -- (797,478)
From net investment income, Class C -- -- (13,875)
From net investment income, Class Y -- (1,499,729) (18)
From net investment income, Class Z -- (12,723) --
From net realized gains, Class A (1,305) -- --
From net realized gains, Class C (475) -- --
From net realized gains, Class Y (4,618,823) -- --
From net realized gains, Class Z (144,841) -- --
From return of capital, Class A -- -- (33,941)
From return of capital, Class C -- -- (592)
- --------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (4,765,444) (1,512,452) (845,904)
- --------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 115,793 219,426 24,689,913
Reinvested distributions 1,304 -- 831,173
Payments for shares redeemed (122,798) (8,322) (11,228)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (5,701) 211,104 25,509,858
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 31,391 35,447 696,948
Reinvested distributions 475 -- 14,290
Payments for shares redeemed (26,190) -- (2,334)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 5,676 35,447 708,904
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold 211,911,977 397,263,466 2,500
Reinvested distributions 1,066,871 84,244 18
Payments for shares redeemed (130,941,824) (37,176,701) --
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS 82,037,024 360,171,009 2,518
- --------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 2,136,325 16,658,928 --
Reinvested distributions 142,147 1,880 --
Payments for shares redeemed (12,401,165) (1,881,297) --
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (10,122,693) 14,779,511 --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (71,683,894) 410,114,242 19,980,213
43
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
PREMIUM
MID CAP YIELD EQUITY
FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A) 2008 (B)(C)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 497,496,374 87,382,132 --
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 425,812,480 $ 497,496,374 $ 19,980,213
==========================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 109,780 $ -- $ 6,082
==========================================================================================================================
(A) Classes A and C represent the period from commencement of operations (May
14, 2007) through September 30, 2007.
(B) Represents the period from commencement of operations (December 3, 2007)
through September 30, 2008.
(C) Class Y represents the period from commencement of operations (August 12,
2008) through September 30, 2008.
See accompanying notes to financial statements.
44
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL
SELECT GROWTH SHORT DURATION
FUND FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2008 2007 2008 2007
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (4,437,427) $ (4,662,715) $ 2,432,421 $ 3,060,514
Net realized (gains) losses from security transactions 9,044,188 (7,733,494) (1,271,833) (339,021)
Net change in unrealized appreciation/depreciation on investments (165,311,237) 114,689,804 177,951 645,398
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (160,704,476) 102,293,595 1,338,539 3,366,891
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class Z -- -- (2,449,791) (3,020,621)
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS -- -- (2,449,791) (3,020,621)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS Y
Proceeds from shares sold 60,693,615 71,602,921 -- --
Payments for shares redeemed (95,239,473) (74,861,403) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS (34,545,858) (3,258,482) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 235,792,575 90,095,417 904,404 2,206,972
Reinvested distributions -- -- 2,409,375 2,965,843
Payments for shares redeemed (139,363,795) (142,825,600) (14,406,085) (22,416,499)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS 96,428,780 (52,730,183) (11,092,306) (17,243,684)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (98,821,554) 46,304,930 (12,203,558) (16,897,414)
NET ASSETS
Beginning of year 593,696,515 547,391,585 59,192,308 76,089,722
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 494,874,961 $ 593,696,515 $ 46,988,750 $ 59,192,308
====================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ -- $ -- $ -- $ --
====================================================================================================================================
See accompanying notes to financial statements.
45
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA SHORT
VALUE OPPORTUNITIES DURATION FIXED
FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2008 (A) 2007 (B) 2008 2007
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (43,603) $ (25,303) $ 7,645,319 $ 8,192,341
Net realized gains (losses) from security transactions (20,405,279) 15,610,150 (3,298,587) 70,532
Net change in unrealized appreciation/depreciation on investments (9,432,031) 10,302,517 (2,400,870) 152,845
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (29,880,913) 25,887,364 1,945,862 8,415,718
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (372) -- -- --
From net investment income, Class Z (174,221) -- (7,561,408) (8,051,978)
From net realized gains, Class A (30,785) -- -- --
From net realized gains, Class C (7,330) -- -- --
From net realized gains, Class Z (16,312,232) (6,056,120) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (16,524,940) (6,056,120) (7,561,408) (8,051,978)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 1,275,883 7,500 -- --
Reinvested distributions 31,157 -- -- --
Payments for shares redeemed (1,293,212) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 13,828 7,500 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 135,921 77,703 -- --
Reinvested distributions 7,044 -- -- --
Payments for shares redeemed (214,704) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS (71,739) 77,703 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 27,377,000 69,825,768 75,996,643 28,974,657
Reinvested distributions 15,630,203 5,737,368 7,319,453 7,727,531
Payments for shares redeemed (68,546,478) (140,795,265) (79,908,726) (64,736,725)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (25,539,275) (65,232,129) 3,407,370 (28,034,537)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (72,003,039) (45,315,682) (2,208,176) (27,670,797)
NET ASSETS
Beginning of year 204,115,553 249,431,235 146,045,434 173,716,231
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 132,112,514 $ 204,115,553 $ 143,837,258 $ 146,045,434
====================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 19,450 $ 11,319 $ -- $ 4
====================================================================================================================================
(A) Classes A and C represent the period from October 1, 2007 through June 13,
2008.
(B) Classes A and C represent the period from commencement of operations (July
23, 2007) through September 30, 2007.
See accompanying notes to financial statements.
46
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES
FUND
- -------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 1,698,832 $ 1,047,831
Net realized gains (losses) from security transactions (1,035,681) 9,316,813
Net change in unrealized appreciation/depreciation on investments (31,094,111) 4,431,805
- -------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (30,430,960) 14,796,449
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (56,168) (2,180)
From net investment income, Class C (10,708) (1,687)
From net investment income, Class Z (1,663,047) (1,049,665)
From net realized gains, Class A (92,498) (183)
From net realized gains, Class C (51,999) (1,928)
From net realized gains, Class Z (8,553,559) (18,377,100)
- -------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (10,427,979) (19,432,743)
- -------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 10,517,094 520,044
Reinvested distributions 147,326 2,363
Payments for shares redeemed (1,512,627) (61,639)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 9,151,793 460,768
- -------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 4,244,880 434,119
Reinvested distributions 51,418 3,422
Payments for shares redeemed (245,732) (31,321)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 4,050,566 406,220
- -------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 118,208,342 17,359,285
Reinvested distributions 9,637,603 18,415,427
Payments for shares redeemed (27,140,352) (24,236,609)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS 100,705,593 11,538,103
- -------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 73,049,013 7,768,797
NET ASSETS
Beginning of year 107,807,087 100,038,290
- -------------------------------------------------------------------------------------------------------
End of year $ 180,856,100 $ 107,807,087
=======================================================================================================
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (50,745) $ (7,541)
=======================================================================================================
(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.
47
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
CLOVER CORE FIXED INCOME FUND - CLASS I
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
2008 2007 2006 2005 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 9.51 $ 9.58 $ 9.94 $ 10.27 $ 10.40
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.44 0.45 0.39 0.42 0.43
Net realized and unrealized losses on investments (0.60) (0.07) (0.12) (0.19) (0.13)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.16) 0.38 0.27 0.23 0.30
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.45) (0.45) (0.40) (0.42) (0.43)
Distributions from net realized gains -- -- (0.23) (0.14) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.45) (0.45) (0.63) (0.56) (0.43)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 8.90 $ 9.51 $ 9.58 $ 9.94 $ 10.27
==================================================================================================================================
Total return (1.95%) 4.07% 2.87% 2.27% 2.97%
==================================================================================================================================
Net assets at end of year (000's) $ 15,377 $ 19,485 $ 21,689 $ 26,166 $ 32,334
==================================================================================================================================
Ratio of net expenses to average net assets 0.85% 0.87% 0.91%(A) 0.80% 0.80%
Ratio of gross expenses to average net assets 1.15% 0.99% 0.95% 0.86% 0.85%
Ratio of net investment income to average net assets 4.61% 4.72% 4.13% 3.91% 3.94%
Portfolio turnover rate 62% 71% 62% 70% 45%
(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%.
See accompanying notes to financial statements.
48
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP VALUE FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- ---------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 19.56 $ 26.95
- ---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.04 0.02
Net realized and unrealized gains (losses) on investments (1.62) 0.38
- ---------------------------------------------------------------------------------------------------
Total from investment operations (1.58) 0.40
- ---------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.08) --
Distributions from net realized gains (5.26) (7.79)
- ---------------------------------------------------------------------------------------------------
Total distributions (5.34) (7.79)
- ---------------------------------------------------------------------------------------------------
Net asset value at end of period $ 12.64 $ 19.56
===================================================================================================
Total return (B) (8.85%) 1.68%(C)
===================================================================================================
Net assets at end of period (000s) $ 625 $ 205
===================================================================================================
Ratio of net expenses to average net assets 1.45% 1.28%(D)
Ratio of gross expenses to average net assets 5.87% 1.81%(D)
Ratio of net investment income to average net assets 0.67% 0.23%(D)
Portfolio turnover rate 67% 79%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
49
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP VALUE FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- -----------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 19.48 $ 26.95
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.01) (0.04)
Net realized and unrealized gains (losses) on investments (1.67) 0.36
- -----------------------------------------------------------------------------------------------------
Total from investment operations (1.68) 0.32
- -----------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.06) --
Distributions from net realized gains (5.26) (7.79)
- -----------------------------------------------------------------------------------------------------
Total distributions (5.32) (7.79)
- -----------------------------------------------------------------------------------------------------
Net asset value at end of period $ 12.48 $ 19.48
=====================================================================================================
Total return (B) (9.56%) 1.26%(C)
=====================================================================================================
Net assets at end of period (000s) $ 619 $ 79
=====================================================================================================
Ratio of net expenses to average net assets 2.20% 1.86%(D)
Ratio of gross expenses to average net assets 4.39% 1.86%(D)
Ratio of net investment loss to average net assets (0.09%) (0.38%)(D)
Portfolio turnover rate 67% 79%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
50
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2008 2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 19.55 $ 25.10 $ 27.63 $ 23.76 $ 19.23
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.09 (0.03) (0.12) (0.14) (0.01)
Net realized and unrealized gains (losses)
on investments (1.67) 2.27 2.12 4.01 4.57
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.58) 2.24 2.00 3.87 4.56
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.09) -- -- -- (0.03)
Distributions from net realized gains (5.26) (7.79) (4.53) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (5.35) (7.79) (4.53) -- (0.03)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 12.62 $ 19.55 $ 25.10 $ 27.63 $ 23.76
===================================================================================================================================
Total return (8.89%) 9.12% 8.47% 16.29% 23.72%
===================================================================================================================================
Net assets at end of year (000's) $ 122,725 $ 177,996 $ 259,279 $ 450,011 $ 540,278
===================================================================================================================================
Ratio of net expenses to average net assets 1.45% 1.43% 1.32%(A) 1.23% 1.22%
Ratio of gross expenses to average net assets 1.45% 1.43% 1.32% 1.23% 1.22%
Ratio of net investment income (loss) to average
net assets 0.63% (0.08%) (0.37%) (0.48%) (0.09%)
Portfolio turnover rate 67% 79% 98% 78% 61%
(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 1.31%.
See accompanying notes to financial statements.
51
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------
2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 18.28 $ 15.91 $ 16.13 $ 13.79 $ 12.31
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.11) (0.14) (0.18) (0.16) (0.06)
Net realized and unrealized gains (losses) on investments (1.09) 3.10 0.40 3.02 1.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.20) 2.96 0.22 2.86 1.49
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net realized gains (1.65) (0.59) (0.44) (0.52) (0.01)
Distributions from return of capital (0.33) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.98) (0.59) (0.44) (0.52) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 15.10 $ 18.28 $ 15.91 $ 16.13 $ 13.79
====================================================================================================================================
Total return (A) (7.82%) 19.25% 1.37% 21.10% 12.12%
====================================================================================================================================
Net assets at end of year (000's) $ 60,959 $ 53,295 $ 55,120 $ 59,742 $ 35,371
====================================================================================================================================
Ratio of net expenses to average net assets 1.55% 1.67% 1.85%(B) 1.88% 1.61%
Ratio of gross expenses to average net assets 1.73% 1.80% 1.85% 1.88% 1.84%
Ratio of net investment loss to average net assets (0.72%) (0.63%) (0.99%) (1.35%) (1.10%)
Portfolio turnover rate 127% 156% 158% 169% 163%
(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%.
See accompanying notes to financial statements.
52
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- --------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 18.19 $ 15.98
- --------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.16) (0.03)
Net realized and unrealized gains (losses) on investments (1.15) 2.83
- --------------------------------------------------------------------------------------------------
Total from investment operations (1.31) 2.80
- --------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net realized gains (1.65) --
Distributions from return of capital (0.33) --
- --------------------------------------------------------------------------------------------------
Total distributions (1.98) (0.59)
- --------------------------------------------------------------------------------------------------
Net asset value at end of period $ 14.90 $ 18.19
==================================================================================================
Total return (B) (8.53%) 18.15%(C)
==================================================================================================
Net assets at end of period (000s) $ 5,929 $ 1,396
==================================================================================================
Ratio of net expenses to average net assets 2.30% 2.23%(D)
Ratio of gross expenses to average net assets 2.64% 2.57%(D)
Ratio of net investment loss to average net assets (1.46%) (1.27%)(D)
Portfolio turnover rate 127% 156%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
53
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------------
2008 (A) 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 11.88 $ 10.25 $ 8.62 $ 7.76 $ 6.79 $ 5.08
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.02 0.10 0.01 0.04 0.01 0.10
Net realized and unrealized gains
(losses) on investments (3.30) 2.23 1.97 1.09 0.96 1.71
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.28) 2.33 1.98 1.13 0.97 1.81
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.10) (0.01) (0.04) -- (0.10)
Distributions from net realized gains (0.03) (0.60) (0.34) (0.23) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.70) (0.35) (0.27) -- (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital from redemption fees 0.01 0.00(B) 0.00(B) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 8.56 $ 11.88 $ 10.25 $ 8.62 $ 7.76 $ 6.79
====================================================================================================================================
Total return(C) (27.55%)(D) 22.77% 23.01% 14.57% 14.29% 35.82%
====================================================================================================================================
Net assets at end of period (000s) $ 25,631 $ 3,829 $ 1,871 $ 800 $ 609 $ 640
====================================================================================================================================
Ratio of net expenses to average net assets 1.48%(E) 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of gross expenses to average net assets 6.42%(E) 8.88% 15.14% 25.80% 23.37% 11.33%
Ratio of net investment income (loss)
to average net assets 1.16%(E) 1.32% 0.06% 0.64% 0.10% (0.02%)
Portfolio turnover rate 35%(E) 91% 67% 75% 86% 161%
(A) Effective after the close of business on December 31, 2007, the Fund
changed its fiscal year end to September 30.
(B) Amount rounds to less than $0.01.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
54
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2008 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 8.52
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00(B)
Net realized and unrealized gains on investments 0.08
- --------------------------------------------------------------------------------
Total from investment operations 0.08
- --------------------------------------------------------------------------------
Distributions from net realized gains (0.03)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 8.57
================================================================================
Total return (C) 0.97%(D)
================================================================================
Net assets at end of period (000s) $ 3
================================================================================
Ratio of net expenses to average net assets 0.73%(E)
Ratio of gross expenses to average net assets 832.55%(E)
Ratio of net investment income to average net assets 0.80%(E)
Portfolio turnover rate 35%(E)
(A) Represents the period from commencement of operations (September 29, 2008)
through September 30, 2008.
(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.
55
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2008 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 8.52
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00(B)
Net realized and unrealized gains on investments 0.09
- --------------------------------------------------------------------------------
Total from investment operations 0.09
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.04)
Distributions from net realized gains (0.03)
- --------------------------------------------------------------------------------
Total distributions (0.07)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 8.54
================================================================================
Total return 1.04%(C)
================================================================================
Net assets at end of period (000s) $ 3
================================================================================
Ratio of net expenses to average net assets 0.22%(D)
Ratio of gross expenses to average net assets 834.03%(D)
Ratio of net investment income to average net assets 1.32%(D)
Portfolio turnover rate 35%(D)
(A) Represents the period from commencement of operations (September 29, 2008)
through September 30, 2008.
(B) Amount rounds to less than $0.01 per share.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
56
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- -------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.86 $ 18.14
- -------------------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.02) (0.00)(B)
Net realized and unrealized losses on investments (4.60) (0.28)
- -------------------------------------------------------------------------------------------
Total from investment operations (4.62) (0.28)
- -------------------------------------------------------------------------------------------
Distributions from net realized gains (0.17) --
- -------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.07 $ 17.86
===========================================================================================
Total return (C) (26.11%) (1.54%)(D)
===========================================================================================
Net assets at end of period (000s) $ 159 $ 210
===========================================================================================
Ratio of net expenses to average net assets 1.15% 0.94%(E)
Ratio of gross expenses to average net assets 4.09% 14.21%(E)
Ratio of net investment loss to average net assets (0.16%) (0.09%)(E)
Portfolio turnover rate 157% 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 returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
MID CAP FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- -------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.84 $ 18.14
- -------------------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.15) (0.02)
Net realized and unrealized losses on investments (4.40) (0.28)
- -------------------------------------------------------------------------------------------
Total from investment operations (4.55) (0.30)
- -------------------------------------------------------------------------------------------
Distributions from net realized gains (0.17) --
- -------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.12 $ 17.84
===========================================================================================
Total return (B) (25.74%) (1.65%)(C)
===========================================================================================
Net assets at end of period (000s) $ 30 $ 36
===========================================================================================
Ratio of net expenses to average net assets 1.90% 1.35%(D)
Ratio of gross expenses to average net assets 31.40% 28.68%(D)
Ratio of net investment loss to average net assets (0.91%) (0.51%)(D)
Portfolio turnover rate 157% 193%
(A) Represents the period from commencement of operations (May 14, 2007)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
57
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
YEAR ENDED SEPTEMBER 30, ENDED ENDED
-------------------------------------------------------- DEC. 31, DEC. 31,
2008 2007 2006 2005 (A) 2004 2003 (B)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.01 0.11 0.04 (0.01) 0.08 0.01
Net realized and unrealized gains
(losses) on investments (4.61) 2.65 1.00 2.47 2.70 3.99
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (4.60) 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 (0.17) -- (1.09) (0.39) (2.19) (1.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.17) (0.13) (1.12) (0.39) (2.28) (1.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.14 $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79
====================================================================================================================================
Total return (25.92%) 18.13% 7.10% 18.53%(C) 21.78% 40.24%(C)
====================================================================================================================================
Net assets at end of period (000's) $ 422,356 $ 482,047 $ 87,032 $ 842 $ 410 $ 337
====================================================================================================================================
Ratio of net expenses to average net assets 0.90% 0.90% 0.91%(D) 1.00%(E) 0.90% 0.90%(E)
Ratio of gross expenses to average net assets 1.03% 1.06% 1.81% 8.23%(E) 0.90% 0.90%(E)
Ratio of net investment income (loss)
to average net assets 0.09% 0.39% 0.82% (0.02%)(E) 0.59% 0.12%(E)
Portfolio turnover rate 157% 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.
58
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR ENDED PERIOD
SEPTEMBER 30, ENDED
------------------------ SEPTEMBER 30,
2008 2007 2006 (A)
- ----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.85 $ 15.26 $ 16.73
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.08) 0.09 0.01
Net realized and unrealized gains (losses) on investments (4.55) 2.62 (1.48)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations (4.63) 2.71 (1.47)
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.12) --
Distributions from net realized gains (0.17) -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (0.17) (0.12) --
- ----------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.05 $ 17.85 $ 15.26
================================================================================================================
Total return (26.18%) 17.84% (8.79%)(B)
================================================================================================================
Net assets at end of period (000's) $ 3,267 $ 15,203 $ 350
================================================================================================================
Ratio of net expenses to average net assets 1.15% 1.14% 1.16%(C)(D)
Ratio of gross expenses to average net assets 1.48% 1.25% 1.82%(C)
Ratio of net investment income (loss) to average net assets (0.27%) (0.12%) 0.63%(C)
Portfolio turnover rate 157% 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.
59
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2008 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.33
Net realized and unrealized losses on investments (2.44)
- --------------------------------------------------------------------------------
Total from investment operations (2.11)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.32)
Distributions from return of capital (0.01)
- --------------------------------------------------------------------------------
Total distributions (0.33)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 7.56
================================================================================
Total return (B) (21.48%)(C)
================================================================================
Net assets at end of period (000s) $ 19,411
================================================================================
Ratio of net expenses to average net assets 1.20%(D)
Ratio of gross expenses to average net assets 1.53%(D)
Ratio of net investment income to average net assets 4.68%(D)
Portfolio turnover rate 181%(D)
(A) Represents the period from commencement of operations (December 3, 2007)
through September 30, 2008.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
60
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2008 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.29
Net realized and unrealized losses on investments (2.45)
- --------------------------------------------------------------------------------
Total from investment operations (2.16)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.27)
Distributions from return of capital (0.01)
- --------------------------------------------------------------------------------
Total distributions (0.28)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 7.56
================================================================================
Total return (B) (21.95%)(C)
================================================================================
Net assets at end of period (000s) $ 567
================================================================================
Ratio of net expenses to average net assets 1.94%(D)
Ratio of gross expenses to average net assets 5.31%(D)
Ratio of net investment income to average net assets 3.93%(D)
Portfolio turnover rate 181%(D)
(A) Represents the period from commencement of operations (December 3, 2007)
through September 30, 2008.
(B) Total return shown excludes the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
61
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2008 (A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 8.30
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.04
Net realized and unrealized losses on investments (0.73)
- --------------------------------------------------------------------------------
Total from investment operations (0.69)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.05)
Distributions from return of capital (0.01)
- --------------------------------------------------------------------------------
Total distributions (0.06)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 7.55
================================================================================
Total return (8.37%)(B)
================================================================================
Net assets at end of period (000s) $ 2
================================================================================
Ratio of net expenses to average net assets 0.90%(C)
Ratio of gross expenses to average net assets 453.70%(C)
Ratio of net investment income to average net assets 3.16%(C)
Portfolio turnover rate 181%(C)
(A) Represents the period from commencement of operations (August 12, 2008)
through September 30, 2008.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
62
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2008 2007 2006 2005 2004 (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 9.15 $ 7.60 $ 7.81 $ 6.80 $ 6.74
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.06) (0.05) (0.06) (0.06) --
Net realized and unrealized gains (losses) on investments (2.23) 1.60 (0.15) 1.07 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.29) 1.55 (0.21) 1.01 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 6.86 $ 9.15 $ 7.60 $ 7.81 $ 6.80
====================================================================================================================================
Total return (25.03%) 20.39% (2.69%) 14.85% 0.89% (B)
====================================================================================================================================
Net assets at end of period (000s) $130,920 $ 213,672 $ 182,001 $ 81,976 $ 32,591
====================================================================================================================================
Ratio of net expenses to average net assets 1.16% 1.03% 1.10% 1.11% 1.10% (C)
Ratio of gross expenses to average net assets 1.19% 1.03% 1.23% 1.19% 1.10% (C)
Ratio of net investment loss to average net assets (0.59%) (0.67%) (0.74%) (0.62%) (0.79%)(C)
Portfolio turnover rate 39% 24% 24% 24% 11% (C)
(A) Represents the period from commencement of operations (August 27, 2004)
through Septembr 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
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------------------------------------- OCTOBER 31,
2008 2007 2006 2005 2004 (A) 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 9.08 $ 7.57 $ 7.80 $ 6.80 $ 6.13 $ 4.81
====================================================================================================================================
Income (loss) from investment operations:
Net investment loss (0.06) (0.09) (0.05) (0.03) (0.06) (0.04) (B)
Net realized and unrealized gains
(losses) on investments (2.23) 1.60 (0.18) 1.03 0.73 1.36
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.29) 1.51 (0.23) 1.00 0.67 1.32
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 6.79 $ 9.08 $ 7.57 $ 7.80 $ 6.80 $ 6.13
====================================================================================================================================
Total return (25.22%) 19.95% (2.95%) 14.71% 10.93% (C) 27.44%
====================================================================================================================================
Net assets at end of period (000s) $ 363,955 $ 380,025 $ 365,390 $ 162,999 $ 70,027 $ 43,878
====================================================================================================================================
Ratio of net expenses to average net assets 1.41% 1.29% 1.35% 1.36% 1.20% (D) 1.17%
Ratio of gross expenses to average net assets 1.43% 1.35% 1.48% 1.44% 1.35% (D) 1.45%
Ratio of net investment loss to average net assets (0.85%) (0.92%) (0.99%) (0.84%) (0.95%)(D) (0.81%)
Portfolio turnover rate 39% 24% 24% 24% 11% (D) 28%
(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.
63
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $9.81 $9.76 $9.87 $10.04 $10.14
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.45 0.45 0.38 0.31 0.28
Net realized and unrealized gains (losses) on investments (0.22) 0.05 (0.07) (0.10) (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.23 0.50 0.31 0.21 0.18
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.45) (0.45) (0.42) (0.38) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $9.59 $9.81 $9.76 $9.87 $10.04
====================================================================================================================================
Total return 2.36% 5.19% 3.23% 2.12% 1.84%
====================================================================================================================================
Net assets at end of year (000's) $46,989 $59,192 $76,090 $112,833 $172,213
====================================================================================================================================
Ratio of net expenses to average net assets 0.74% 0.74% 0.72% 0.61% 0.46%
Ratio of gross expenses to average net assets 0.94% 0.82% 0.74% 0.66% 0.60%
Ratio of net investment income to average net assets 4.60% 4.62% 3.97% 3.18% 2.49%
Portfolio turnover rate 25% 21% 10% 46% 84%
See accompanying notes to financial statements.
64
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
PERIOD PERIOD
ENDED ENDED
JUNE 13, SEPTEMBER 30,
2008(A) 2007(B)
- -----------------------------------------------------------------------------------
Net asset value at beginning of period $ 20.48 $ 21.55
- -----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.01 (0.00) (C)
Net realized and unrealized losses on investments (1.20) (1.07)
- -----------------------------------------------------------------------------------
Total from investment operations (1.19) (1.07)
- -----------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) --
Distributions from net realized gains (1.79) --
- -----------------------------------------------------------------------------------
Total distributions (1.81) --
- -----------------------------------------------------------------------------------
Net asset value at end of period $ 17.48 $ 20.48
===================================================================================
Total return (D) (5.87%)(E) (4.97%)(E)
===================================================================================
Net assets at end of period (000s) $ 1,219 $ 8
===================================================================================
Ratio of net expenses to average net assets 1.50% (F) 1.49% (F)
Ratio of gross expenses to average net assets 1.89% (F) 72.28% (F)
Ratio of net investment loss to average net assets (0.03%)(F) (0.11%)(F)
Portfolio turnover rate 222% 127%
(A) On June 13, 2008, Class A merged into Class Z shares.
(B) Represents the period from commencement of operations (July 23, 2007)
through September 30, 2007.
(C) Amount rounds to less than $0.01 per share. (D) Total returns shown
exclude the effect of applicable sales loads.
(E) Not annualized.
(F) Annualized.
See accompanying notes to financial statements.
65
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
PERIOD PERIOD
ENDED ENDED
JUNE 13, SEPTEMBER 30,
2008(A) 2007(B)
- -----------------------------------------------------------------------------------
Net asset value at beginning of period $ 20.47 $ 21.55
- -----------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.05) (0.02)
Net realized and unrealized losses on investments (1.24) (1.06)
- -----------------------------------------------------------------------------------
Total from investment operations (1.29) (1.08)
- -----------------------------------------------------------------------------------
Distributions from net realized gains (1.79) --
- -----------------------------------------------------------------------------------
Net asset value at end of period $ 17.39 $ 20.47
===================================================================================
Total return (C) (6.38%)(D) (5.01%)(D)
===================================================================================
Net assets at end of period (000s) $ 212 $ 81
===================================================================================
Ratio of net expenses to average net assets 2.23% (E) 2.09% (E)
Ratio of gross expenses to average net assets 3.54% (E) 2.37% (E)
Ratio of net investment loss to average net assets (0.73%)(E) (0.69%)(E)
Portfolio turnover rate 222% 127%
(A) On June 13, 2008, Class C merged into Class Z shares.
(B) Represents the period from commencement of operations (July 23, 2007)
through September 30, 2007.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
66
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 20.48 $ 18.94 $ 18.35 $ 16.21 $ 12.72
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.00) (A) (0.02) (0.08) 0.02 (0.04)
Net realized and unrealized gains (losses) on investments (3.22) 2.05 0.96 3.76 3.75
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.22) 2.03 0.88 3.78 3.71
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) -- (0.02) -- --
Distributions from net realized gains (1.79) (0.49) (0.27) (1.64) (0.22)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (1.81) (0.49) (0.29) (1.64) (0.22)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 15.45 $ 20.48 $ 18.94 $ 18.35 $ 16.21
========================================================================================================================
Total return (16.81%) 10.77% 4.84% 24.32% 29.36%
========================================================================================================================
Net assets at end of year (000s) $132,113 $204,027 $249,431 $74,235 $14,533
========================================================================================================================
Ratio of net expenses to average net assets 1.50% 1.58% 1.63% (B) 1.46% 1.45%
Ratio of gross expenses to average net assets 1.74% 1.71% 1.65% 2.04% 1.82%
Ratio of net investment income (loss) to average net assets (0.03%) (0.01%) (0.43%) 0.29% (0.23%)
Portfolio turnover rate 222% 127% 99% 193% 272%
(A) Amount rounds to less than $0.01 per share.
(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 1.62%.
See accompanying notes to financial statements.
67
- --------------------------------------------------------------------------------
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,
---------------------------------------------------------------------
2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 10.08 $ 10.06 $ 10.08 $ 10.12 $ 10.17
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.47 0.53 0.44 0.30 0.21
Net realized and unrealized gains (losses) on investments (0.34) 0.01 (0.02) (0.03) (0.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.13 0.54 0.42 0.27 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.47) (0.52) (0.44) (0.31) (0.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 9.74 $ 10.08 $ 10.06 $ 10.08 $ 10.12
====================================================================================================================================
Total return 1.26% 5.48% 4.28% 2.67% 1.63%
====================================================================================================================================
Net assets at end of year (000s) $ 143,837 $ 146,045 $ 173,716 $ 305,222 $ 391,934
====================================================================================================================================
Ratio of net expenses to average net assets 0.69% 0.69% 0.69% 0.59% 0.46%
Ratio of gross expenses to average net assets 0.82% 0.75% 0.69% 0.62% 0.58%
Ratio of net investment income to average net assets 4.72% 5.25% 4.30% 2.93% 2.08%
Portfolio turnover rate 56% 26% 38% 68% 44%
See accompanying notes to financial statements.
68
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- ---------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.85 $ 19.51
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.18 0.09
Net realized and unrealized gains (losses) on investments (2.97) 1.95
- ---------------------------------------------------------------------------------------------
Total from investment operations (2.79) 2.04
- ---------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.17) (0.12)
Distributions from net realized gains (1.43) (3.58)
- ---------------------------------------------------------------------------------------------
Total distributions (1.60) (3.70)
- ---------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.46 $ 17.85
=============================================================================================
Total return (B) (17.01%) 11.90% (C)
=============================================================================================
Net assets at end of period (000s) $ 8,231 $ 472
=============================================================================================
Ratio of net expenses to average net assets 1.20% 1.31% (D)
Ratio of gross expenses to average net assets 1.68% 1.31% (D)
Ratio of net investment income to average net assets 1.25% 0.77% (D)
Portfolio turnover rate 96% 62%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
69
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 (A)
- -----------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 17.81 $ 19.51
- -----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.11 0.05
Net realized and unrealized gains (losses) on investments (3.01) 1.93
- -----------------------------------------------------------------------------------------------
Total from investment operations (2.90) 1.98
- -----------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.06) (0.10)
Distributions from net realized gains (1.43) (3.58)
- -----------------------------------------------------------------------------------------------
Total distributions (1.49) (3.68)
- -----------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.42 $ 17.81
===============================================================================================
Total return (B) (17.62%) 11.52% (C)
===============================================================================================
Net assets at end of period (000s) $ 3,865 $ 423
===============================================================================================
Ratio of net expenses to average net assets 1.95% 1.86% (D)
Ratio of gross expenses to average net assets 2.56% 1.86% (D)
Ratio of net investment income to average net assets 0.55% 0.20% (D)
Portfolio turnover rate 96% 62%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
70
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------
2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 17.83 $ 18.89 $ 19.00 $ 16.51 $ 14.18
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.18 0.18 0.10 0.04 0.06
Net realized and unrealized gains (losses) on investments (2.95) 2.52 1.38 3.90 2.84
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.77) 2.70 1.48 3.94 2.90
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.18) (0.18) (0.10) (0.04) (0.06)
Distributions from net realized gains (1.43) (3.58) (1.49) (1.41) (0.51)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.61) (3.76) (1.59) (1.45) (0.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 13.45 $ 17.83 $ 18.89 $ 19.00 $ 16.51
====================================================================================================================================
Total return (16.92%) 15.83% 8.35% 24.83% 20.75%
====================================================================================================================================
Net assets at end of year (000s) $ 168,760 $ 106,912 $ 100,038 $ 171,251 $ 59,714
====================================================================================================================================
Ratio of net expenses to average net assets 1.14% 1.12% 1.19%(A) 1.13% 1.08%
Ratio of gross expenses to average net assets 1.14% 1.17% 1.19% 1.13% 1.08%
Ratio of net investment income to average net assets 1.25% 1.03% 0.49% 0.24% 0.39%
Portfolio turnover rate 96% 62% 80% 75% 55%
(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.
71
- --------------------------------------------------------------------------------
Notes to Financial Statements
September 30, 2008
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Touchstone Funds Group Trust (the Trust), is registered under the Investment
Company Act of 1940, as amended, (the Act), as an open-end management investment
company. The Trust consists of the following eleven mutual funds, individually,
a Fund, and collectively, the Funds:
Touchstone Clover Core Fixed Income Fund
Touchstone Diversified Small Cap Value Fund
Touchstone Healthcare and Biotechnology Fund
Touchstone International Growth Fund
Touchstone Mid Cap Fund
Touchstone Premium Yield Equity Fund
Touchstone Sands Capital Select Growth Fund
Touchstone Short Duration Fixed Income Fund
Touchstone Small Cap Value Opportunities Fund
Touchstone Ultra Short Duration Fixed Income Fund
Touchstone Value Opportunities Fund
Prior to September 26, 2008, the International Growth Fund (formerly the
Navellier International Growth Portfolio) was part of the Navellier Millennium
Funds, registered under the Act as an open-end management investment company.
Effective September 26, 2008, the Fund was merged into the Trust and its fiscal
year end was subsequently changed from December 31 to September 30. Prior to
September 26, 2008, the Fund charged a redemption fee of 2.00% of the amount
redeemed if the shares sold were held for fewer than 60 days. Redemption fees
were paid directly to the Fund. Effective September 26, 2008, the Fund no longer
charges a redemption fee.
Each Fund is registered as a diversified portfolio of the Trust with the
exception of the Healthcare and Biotechnology Fund, International Growth 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, and Class I 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. Effective June 13, 2008, Class A
and Class C shares of the Small Cap Value Opportunities Fund were exchanged for
Class Z shares of the Small Cap Value Opportunities Fund.
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.
72
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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.
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, 2008, 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 statements of changes in net assets for a fiscal period.
FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds 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 Funds do 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.
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, 2008, the following Funds loaned
securities and received collateral as follows:
73
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
FAIR VALUE OF VALUE OF
SECURITIES COLLATERAL
LOANED RECEIVED
- --------------------------------------------------------------------------------
Diversified Small Cap Value Fund $ 21,122,404 $ 20,978,164
Healthcare and Biotechnology Fund $ 13,304,645 $ 13,160,939
Mid Cap Fund $106,517,607 $105,177,730
Sands Capital Select Growth Fund $ 89,069,993 $ 84,147,388
Small Cap Value Opportunities Fund $ 23,050,058 $ 23,350,696
Value Opportunities Fund $ 37,564,761 $ 35,830,066
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. Pursuant to the Fund's securities lending agreement, and
according to normal operating procedures, the custodian segregated an additional
$144,240, $143,706, $1,339,877, $4,922,605 and $1,734,695 in collateral the
following business day for securities on loan in the Diversified Small Cap Value
Fund, Healthcare and Biotechnology Fund, Mid Cap Fund, Sands Capital Select
Growth Fund, and Value Opportunities Fund, respectively, as of September 30,
2008.
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.
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.
74
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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, and Class I 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 Growth 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 Small Cap Value Fund, Sands Capital Select Growth
Fund, and Value Opportunities Fund declare and distribute net investment income,
if any, quarterly, as a dividend to shareholders. The Premium Yield Equity Fund
declares and distributes net investment income, if any, monthly as a dividend to
shareholders. The Clover Core Fixed Income Fund, Short Duration Fixed Income
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.
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.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and U.S. Government
securities) were as follows for the year ended September 30, 2008:
DIVERSIFIED
CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL
FIXED INCOME VALUE BIOTECHNOLOGY GROWTH
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------
Purchases of investment securities $ 1,994,512 $ 90,913,598 $100,332,001 $ 23,782,214
- ---------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $ 661,301 $130,483,375 $ 81,416,256 $ 1,780,276
- ---------------------------------------------------------------------------------------------------
75
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------
Purchases of investment securities $ 783,967,967 $ 53,780,674 $ 278,932,637 $ 3,716,473
- ------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $ 722,459,759 $ 29,299,211 $ 218,833,799 $ 715,338
- ------------------------------------------------------------------------------------------------------
SMALL CAP ULTRA
VALUE SHORT DURATION VALUE
OPPORTUNITIES FIXED INCOME OPPORTUNITIES
FUND FUND FUND
- -------------------------------------------------------------------------------------
Purchases of investment securities $ 339,167,886 $ 9,667,370 $ 233,994,762
- -------------------------------------------------------------------------------------
Proceeds from sales and maturities $ 363,820,851 $ 777,379 $ 127,625,444
- -------------------------------------------------------------------------------------
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 and Underwriter are each wholly owned, indirect subsidiaries
of The Western and Southern Life Insurance Company (Western-Southern).
As of September 30, 2008, 79% and 98% of the International Growth Fund and
Premium Yield Equity Fund, respectively, were owned by Western-Southern and
subsidiaries.
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.
Prior to March 2, 2008, 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. For the period October 1, 2007
through March 2, 2008, the Advisor agreed to waive advisory fees and reimburse
expenses in order to maintain expense limitations for the Funds as follows:
"OTHER TOTAL
ADVISORY EXPENSE" EXPENSE
FEES CAP CAP
- ------------------------------------------------------------------------------
Clover Core Fixed Income Fund - Class I 0.45% 0.40% 0.85%
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
Healthcare and Biotechnology Fund - Class A 1.00 0.30 1.55
Healthcare and Biotechnology Fund - Class C 1.00 0.30 2.30
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
Premium Yield Equity Fund - Class A 0.70 0.25 1.20
Premium Yield Equity Fund - Class C 0.70 0.25 1.95
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
76
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
"OTHER TOTAL
ADVISORY EXPENSE" EXPENSE
FEES CAP CAP
- ------------------------------------------------------------------------------
Short Duration Fixed Income Fund - Class Z 0.25 0.24 0.74
Small Cap Value Opportunities Fund - Class A 0.95 0.30 1.50
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
Ultra Short Duration Fixed Income Fund - Class Z 0.25 0.19 0.69
Value Opportunities Fund - Class A 0.74 0.20 1.19
Value Opportunities Fund - Class C 0.74 0.20 1.94
Value Opportunities Fund - Class Z 0.74 0.20 1.19
The "Other Expense Cap" was terminated for all of the Funds except the Sands
Capital Select Growth Fund effective March 1, 2008.
Effective March 2, 2008, 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 31, 2009:
CLASS A CLASS C CLASS Y CLASS Z CLASS I
- ----------------------------------------------------------------------------------------
Clover Core Fixed Income Fund -- -- -- -- 0.85%
Diversified Small Cap Value Fund 1.45% 2.20% -- 1.45% --
Healthcare and Biotechnology Fund 1.55% 2.30% -- -- --
Mid Cap Fund 1.15% 1.90% 0.90% 1.15% --
Premium Yield Equity Fund 1.20% 1.95% 0.95% -- --
Short Duration Fixed Income Fund -- -- -- 0.74% --
Small Cap Value Opportunities Fund -- -- -- 1.50% --
Ultra Short Duration Fixed Income Fund -- -- -- 0.69% --
Value Opportunities Fund 1.19% 1.94% -- 1.19% --
The Advisor entered into an Expense Limitation Agreement to contractually limit
operating expenses of the International Growth Fund. The Advisor agreed to waive
a portion of its advisory fee and/or reimburse certain Fund expenses in order to
limit "Net Expenses" to 1.35%, 2.10%, and 1.10% for Class A, Class C, and Class
Y shares, respectively. This expense limitation will remain in effect until at
least September 30, 2009.
The Advisor has agreed to limit certain Funds other operating expenses ("Other
Expenses") to the following levels. These expense limitations will remain in
effect until at least January 31, 2009.
CLASS Y CLASS Z
- ------------------------------------------------------
Sands Capital Select Growth Fund 0.25% 0.25%
- ------------------------------------------------------
77
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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.
For the year ended September 30, 2008, the Advisor's base fee was increased by
$423,009 as a result of the performance fee adjustment.
During the year ended September 30, 2008, 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 $ 17,994 $ 37,249 $ --
Diversified Small Cap Value Fund $ -- $ 21,337 $ --
Healthcare and Biotechnology Fund $ -- $ 127,367 $ --
International Growth Fund $ 37,748 $ 61 $ 152,073
Mid Cap Fund $ -- $ 661,074 $ --
Premium Yield Equity Fund $ -- $ 36,045 $ 36,254
Sands Capital Select Growth Fund $ -- $ 153,618 $ --
Short Duration Fixed Income Fund $ -- $ 104,399 $ --
Small Cap Value Opportunities Fund $ 59,602 $ 321,165 $ 2,000
Ultra Short Duration Fixed Income Fund $ -- $ 205,930 $ --
Value Opportunities Fund $ -- $ 26,614 $ --
- --------------------------------------------------------------------------------------------
The Advisor has entered into investment sub-advisory agreements with the
following parties:
CHARTWELL INVESTMENT PARTNERS NAVELLIER & ASSOCIATES, INC.
Short Duration Fixed Income Fund International Growth Fund
Ultra Short Duration Fixed Income Fund
SANDS CAPITAL MANAGEMENT, LLC
CLOVER CAPITAL MANAGEMENT, INC. Sands Capital Select Growth Fund
Clover Core Fixed Income Fund
Diversified Small Cap Value Fund TURNER INVESTMENT PARTNERS, INC.
Value Opportunities Fund Healthcare and Biotechnology Fund
Mid Cap Fund
MILLER/HOWARD INVESTMENTS, INC. Small Cap Value Opportunities Fund
Premium Yield Equity Fund
The Advisor, not the Funds, pays sub-advisory fees to each Sub-Advisor.
78
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
ADMINISTRATION AGREEMENT
The Advisor entered into an Administration and Accounting Services Agreement
with the Trust, whereby the Advisor is responsible for supplying executive and
regulatory compliance services, supervises the preparation of tax returns, and
coordinates the preparation of reports to shareholders and reports to, and
filings with, the Securities and Exchange Commission and state securities
authorities, materials for meetings of the Board of Trustees, calculating the
daily net asset value per share and maintaining the financial books and records
of each Fund. For its services, the Advisor receives an annual fee of 0.20% of
the aggregate average daily net assets of the Trust, Touchstone Investment Trust
(excluding Institutional Money Market Fund), Touchstone Strategic Trust, and
Touchstone Tax-Free Trust 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. The fee is
allocated among the Funds on the basis of relative daily net assets. However,
through February 28, 2008, the administration fees were 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.
The Advisor has engaged JPMorgan as the Sub-Administrator to the Trust. JPMorgan
provides administrative and accounting services to the Trust and is compensated
directly by the Advisor, not the Trust.
TRANSFER AGENT AGREEMENT
Under the terms of the Transfer Agent Agreement between the Trust and JPMorgan,
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,
JPMorgan 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.
For the year ended September 30, 2008, 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
- ------------------------------------------------
Clover Core Fixed Income Fund $ 1,838
Diversified Small Cap Value Fund $ 55,936
Healthcare and Biotechnology Fund $ 45,882
Mid Cap Fund $ 4,328
Premium Yield Equity Fund $ 398
Sands Capital Select Growth Fund $134,699
Short Duration Fixed Income Fund $ 34,480
Small Cap Value Opportunities Fund $111,663
Ultra Short Duration Fixed Income Fund $ 68,964
PLANS OF DISTRIBUTION
The Trust has adopted a Distribution and Shareholder Services Plan for Class A
shares of the Diversified Small Cap Value Fund, Healthcare and Biotechnology
Fund, International Growth Fund, Mid Cap Fund, Premium Yield Equity Fund, Small
Cap Value Opportunities 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.
79
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The Trust has adopted a Distribution and Shareholder Services Plan for Class C
shares of the Diversified Small Cap Value Fund, Healthcare and Biotechnology
Fund, Mid Cap Fund, Premium Yield Equity Fund, Small Cap Value Opportunities
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 1.00% and 0.25%,
respectively, of the average daily net assets of Class C shares. The combination
of these fees is not to exceed 1.00% of the average daily net assets of Class C
shares.
The Trust has adopted a Shareholder Services Plan for Class Z shares of the
Diversified Small Cap Value Fund, Mid Cap Fund, Sands Capital Select Growth
Fund, Short Duration Fixed Income Fund, Small Cap Value Opportunities 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.
UNDERWRITING AGREEMENT
The Underwriter is the Funds' principal underwriter and, as such, acts as
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, 2008:
AMOUNT
- --------------------------------------------
Diversified Small Cap Value Fund $ 819
Healthcare and Biotechnology Fund $ 42,073
International Growth Fund $240,000
Mid Cap Fund $ 644
Premium Yield Equity Fund $ 63
Small Cap Value Opportunities Fund $ 909
Value Opportunities Fund $ 6,906
In addition, the Underwriter collected $65, $6,923, $23, $20 and $72 of
contingent deferred sales charges on the redemption of Class C shares of the
Diversified Small Cap Value Fund, Healthcare and Biotechnology Fund, Premium
Yield Equity Fund, Small Cap Value Opportunities Fund and Value Opportunities
Fund, respectively, for the year ended September 30, 2008.
COMPLIANCE SERVICES AGREEMENT
Under the terms of the Compliance Services Agreement between the Trust and
JPMorgan, JPMorgan provides certain compliance services to the Trust and
provides administrative support services to the Funds' Compliance Program and
Chief Compliance Officer. For these services, JPMorgan receives a quarterly fee
from each Fund.
80
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
AFFILIATED INVESTMENTS
Each Fund may invest in the Touchstone Institutional Money Market Fund, subject
to compliance with several conditions set forth in an order received by the
Trust from the Securities and Exchange Commission. To the extent that the other
Touchstone Funds are invested in the Touchstone Institutional Money Market Fund,
the Advisor and Administrator will be paid additional fees from the Touchstone
Institutional Money Market Fund that will not be waived or reimbursed.
A summary of each Fund's investment, as applicable, in the Touchstone
Institutional Money Market Fund for the year ended September 30, 2008, is as
follows:
SHARE ACTIVITY
--------------------------------------------
BALANCE BALANCE VALUE
09/30/07 PURCHASES SALES 09/30/08 DIVIDENDS 09/30/08
- ---------------------------------------------------------------------------------------------------------------------------------
Clover Core Fixed Income Fund -- 6,231,409 (5,938,866) 292,543 $ 2,926 $ 292,543
- ---------------------------------------------------------------------------------------------------------------------------------
Diversified Small Cap Value Fund -- 40,136,418 (36,602,851) 3,533,567 $ 64,357 $ 3,533,567
- ---------------------------------------------------------------------------------------------------------------------------------
Healthcare and Biotechnology Fund -- 46,985,146 (45,748,078) 1,237,068 $ 75,823 $ 1,237,068
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth Fund -- 20,207,886 -- 20,207,886 $ 2,251 $ 20,207,886
- ---------------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund -- 223,454,745 (206,142,924) 17,311,821 $ 305,977 $ 17,311,821
- ---------------------------------------------------------------------------------------------------------------------------------
Premium Yield Equity Fund -- 4,785,956 (3,860,171) 925,785 $ 18,517 $ 925,785
- ---------------------------------------------------------------------------------------------------------------------------------
Sands Capital Select Growth Fund -- 174,330,328 (153,803,555) 20,526,773 $ 216,484 $ 20,526,773
- ---------------------------------------------------------------------------------------------------------------------------------
Short Duration Fixed Income Fund -- 35,347,843 (34,836,444) 511,399 $ 42,087 $ 511,399
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Opportunities Fund -- 55,970,551 (55,970,551) -- $ 127,233 $ --
- ---------------------------------------------------------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund -- 95,744,498 (88,308,044) 7,436,454 $ 112,153 $ 7,436,454
- ---------------------------------------------------------------------------------------------------------------------------------
Value Opportunities Fund -- 120,221,027 (115,568,002) 4,653,025 $ 120,154 $ 4,653,025
- ---------------------------------------------------------------------------------------------------------------------------------
81
- --------------------------------------------------------------------------------
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 HEALTHCARE AND
FIXED INCOME SMALL CAP BIOTECHNOLOGY
FUND VALUE 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,
2008 2007 2008 2007(A) 2008 2007(B)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- 40,375 13,314 2,903,539 577,797
Shares reinvested -- -- 5,193 175 322,958 118,145
Shares redeemed -- -- (6,641) (3,002) (2,104,559) (1,244,584)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- 38,927 10,487 1,121,938 (548,642)
Shares outstanding, beginning of period -- -- 10,487 -- 2,914,817 3,463,459
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 49,414 10,487 4,036,755 2,914,817
====================================================================================================================================
CLASS C
Shares issued -- -- 49,334 3,821 399,569 77,729
Shares reinvested -- -- 1,702 239 6,931 2
Shares redeemed -- -- (5,548) -- (85,392) (1,024)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 45,488 4,060 321,108 76,707
Shares outstanding, beginning of period -- -- 4,060 -- 76,707 --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 49,548 4,060 397,815 76,707
====================================================================================================================================
CLASS Z
Shares issued -- -- 1,467,825 835,178 -- --
Shares reinvested -- -- 3,138,321 3,697,084 -- --
Shares redeemed -- -- (3,986,333) (5,758,231) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- 619,813 (1,225,969) -- --
Shares outstanding, beginning of year -- -- 9,102,690 10,328,659 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 9,722,503 9,102,690 -- --
====================================================================================================================================
CLASS I
Shares issued 348,886 299,959 -- -- -- --
Shares reinvested 86,355 96,670 -- -- -- --
Shares redeemed (758,011) (609,712) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding (322,770) (213,083) -- -- -- --
Shares outstanding, beginning of year 2,049,969 2,263,052 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 1,727,199 2,049,969 -- -- -- --
====================================================================================================================================
(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.
82
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH MID CAP PREMIUM YIELD
FUND FUND EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, DEC. 31, DEC. 31, SEPT. 30, SEPT. 30, SEPT. 30,
2008(A) 2007 2006 2008 2007(B) 2008(C)(D)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued 2,815,460 174,634 116,198 7,252 12,263 2,474,926
Shares reinvested 16,399 14,495 6,102 77 -- 95,010
Shares redeemed (158,988) (49,485) (32,565) (6,994) (476) (1,418)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 2,672,871 139,644 89,735 335 11,787 2,568,518
Shares outstanding, beginning of period 322,205 182,561 92,826 11,787 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 2,995,076 322,205 182,561 12,122 11,787 2,568,518
================================================================================================================================
CLASS C
Shares issued 293 -- -- 1,930 2,002 73,588
Shares reinvested 1 -- -- 28 -- 1,637
Shares redeemed -- -- -- (1,670) -- (254)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 294 -- -- 288 2,002 74,971
Shares outstanding, beginning of period -- -- -- 2,002 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 294 -- -- 2,290 2,002 74,971
================================================================================================================================
CLASS Y
Shares issued 294 -- -- 13,570,336 23,351,224 301
Shares reinvested 2 -- -- 62,610 5,229 2
Shares redeemed -- -- -- (8,397,326) (2,141,213) --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 296 -- -- 5,235,620 21,215,240 303
Shares outstanding, beginning of period -- -- -- 26,912,116 5,696,876 --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 296 -- -- 32,147,736 26,912,116 303
================================================================================================================================
CLASS Z
Shares issued -- -- -- 130,930 938,463 --
Shares reinvested -- -- -- 8,376 117 --
Shares redeemed -- -- -- (740,760) (109,748) --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- -- (601,454) 828,832 --
Shares outstanding, beginning of year -- -- -- 851,788 22,956 --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- -- 250,334 851,788 --
================================================================================================================================
(A) Effective after the close of business on December 31, 2007, the Fund
changed its fiscal year end to September 30.
(B) Classes A and C represent the period from commencement of operations (May
14, 2007) through September 30, 2007.
(C) Classes A and C represent the period from commencement of operations
(December 3, 2007) through September 30, 2008.
(D) Class Y represents the period from commencement of operations (August 12,
2008) through September 30, 2008.
83
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT SHORT DURATION FIXED SMALL CAP VALUE
GROWTH FUND INCOME FUND OPPORTUNITIES 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,
2008 2007 2008 2007 2008(A) 2007(B)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- -- -- 71,759 375
Shares reinvested -- -- -- -- 1,773 --
Shares redeemed -- -- -- -- (73,907) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- -- -- (375) 375
Shares outstanding, beginning of period -- -- -- -- 375 --
- ---------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- -- 375
=================================================================================================================================
CLASS C
Shares issued -- -- -- -- 8,000 3,942
Shares reinvested -- -- -- -- 402 --
Shares redeemed -- -- -- -- (12,344) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- -- -- (3,942) 3,942
Shares outstanding, beginning of period -- -- -- -- 3,942 --
- ---------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- -- 3,942
=================================================================================================================================
CLASS Y
Shares issued 7,214,667 8,624,881 -- -- -- --
Shares redeemed (11,497,010) (9,208,013) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding (4,282,343) (583,132) -- -- -- --
Shares outstanding, beginning of year 23,355,229 23,938,361 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 19,072,886 23,355,229 -- -- -- --
=================================================================================================================================
CLASS Z
Shares issued 28,675,860 11,118,165 92,468 225,346 1,576,959 3,458,155
Shares reinvested -- -- 246,218 302,626 889,469 284,028
Shares redeemed (16,958,619) (17,560,077) (1,471,017) (2,289,520) (3,876,635) (6,948,731)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
shares outstanding 11,717,241 (6,441,912) (1,132,331) (1,761,548) (1,410,207) (3,206,548)
Shares outstanding, beginning of year 41,849,517 48,291,429 6,031,938 7,793,486 9,960,681 13,167,229
- ---------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 53,566,758 41,849,517 4,899,607 6,031,938 8,550,474 9,960,681
=================================================================================================================================
(A) Classes A and C represent the period from October 1, 2007 through June 13,
2008.
(B) Classes A and C represent the period from commencement of operations (July
23, 2007) through September 30, 2007.
84
- --------------------------------------------------------------------------------
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,
2008 2007 2008 2007(A)
- ----------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- 675,272 29,890
Shares reinvested -- -- 9,547 134
Shares redeemed -- -- (99,826) (3,596)
- ----------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 584,993 26,428
Shares outstanding, beginning of period -- -- 26,428 --
- ----------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 611,421 26,428
====================================================================================================
CLASS C
Shares issued -- -- 276,218 25,258
Shares reinvested -- -- 3,269 201
Shares redeemed -- -- (15,293) (1,695)
- ----------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 264,194 23,764
Shares outstanding, beginning of period -- -- 23,764 --
- ----------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 287,958 23,764
====================================================================================================
CLASS Z
Shares issued 7,586,012 2,872,100 7,691,116 985,780
Shares reinvested 735,459 765,481 605,666 1,102,429
Shares redeemed (8,051,565) (6,416,115) (1,742,914) (1,388,951)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 269,906 (2,778,534) 6,553,868 699,258
Shares outstanding, beginning of year 14,493,406 17,271,940 5,996,419 5,297,161
- ----------------------------------------------------------------------------------------------------
Shares outstanding, end of year 14,763,312 14,493,406 12,550,287 5,996,419
====================================================================================================
(A) Classes A and C represent the period from commencement of operations
(November 20, 2006) through September 30, 2007.
6. FEDERAL TAX INFORMATION
FEDERAL INCOME TAX - 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 an amount equal to the sum of 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.
85
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid for the periods ended September 30, 2008
and 2007 was as follows:
CLOVER CORE DIVERSIFIED HEALTHCARE AND
FIXED INCOME SMALL CAP VALUE 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,
2008 2007 2008 2007 2008 2007
- ----------------------------------------------------------------------------------------------------------------------------
From ordinary income $ 864,148 $ 961,663 $ 15,124,522 $ 15,097,780 $ 1,403,820 $ --
From long-term capital gains -- -- 27,110,031 59,766,378 3,983,663 1,868,704
From return of capital -- -- -- -- 1,060,240 --
- ----------------------------------------------------------------------------------------------------------------------------
$ 864,148 $ 961,663 $ 42,234,553 $ 74,864,158 $ 6,447,723 $ 1,868,704
- ----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PREMIUM
GROWTH MID CAP YIELD EQUITY
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2008* 2007** 2008 2007 2008
- ----------------------------------------------------------------------------------------------------------
From ordinary income $ 52,616 $ 83,830 $ 4,685,264 $ 1,512,452 $ 811,372
From long-term capital gains 88,762 89,999 80,180 -- --
From return of capital -- -- -- -- 34,532
- ----------------------------------------------------------------------------------------------------------
$ 141,378 $ 173,829 $ 4,765,444 $ 1,512,452 $ 845,904
- ----------------------------------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION SMALL CAP
SELECT GROWTH FIXED INCOME VALUE OPPORTUNITIES
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,
2008 2007 2008 2007 2008 2007
- ----------------------------------------------------------------------------------------------------------------------
From ordinary income $ -- $ -- $ 2,449,791 $ 3,020,621 $ 4,124,200 $ 2,373,051
From long-term capital gains -- -- -- -- 12,400,740 3,683,069
- ----------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ 2,449,791 $ 3,020,621 $ 16,524,940 $ 6,056,120
- ----------------------------------------------------------------------------------------------------------------------
86
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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,
2008 2007 2008 2007
- ----------------------------------------------------------------------------------------
From ordinary income $ 7,561,408 $ 8,051,978 $ 1,739,423 $ 6,672,464
From long-term capital gains -- -- 8,688,556 12,760,280
- ----------------------------------------------------------------------------------------
$ 7,561,408 $ 8,051,978 $ 10,427,979 $ 19,432,744
- ----------------------------------------------------------------------------------------
* Represents the period from January 1, 2008 through September 30, 2008.
** Effective January 1, 2008, the Fund changed its tax year end from December
31 to September 30.
The following information is computed on a tax basis for each item as of
September 30, 2008:
DIVERSIFIED
CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL PREMIUM
FIXED INCOME VALUE BIOTECHNOLOGY GROWTH MID CAP YIELD EQUITY
FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 16,818,006 $ 157,246,889 $ 73,295,990 $ 45,166,243 $ 556,485,739 $ 22,979,578
- ------------------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 43,014 8,668,470 8,643,305 501,242 10,881,586 172,653
Gross unrealized depreciation (1,593,335) (19,374,221) (2,322,869) (1,306,842) (39,007,807) (3,986,025)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) (1,550,321) (10,705,751) 6,320,436 (805,600) (28,126,221) (3,813,372)
Post-October losses -- -- (3,939,149) -- (80,456,822) (2,392,951)
Capital loss carryforward (86,389) -- -- (190,851) -- --
Undistributed ordinary income 2,587 -- -- 973 109,780 --
Undistributed long-term capital gains -- 5,509,793 -- -- 551,095 --
Other temporary differences (2,854) (26,550) -- (972) -- (212)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated earnings (deficit) $ (1,636,977) $ (5,222,508) $ 2,381,287 $ (996,450) $(107,922,168) $ (6,206,535)
====================================================================================================================================
SMALL CAP ULTRA
SANDS CAPITAL SHORT DURATION VALUE SHORT DURATION VALUE
SELECT GROWTH FIXED INCOME OPPORTUNITIES FIXED INCOME OPPORTUNITIES
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 624,038,534 $ 47,459,943 $ 154,204,845 $ 147,479,407 $ 235,508,011
- ---------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 54,406,260 216,326 8,628,854 976,028 7,172,052
Gross unrealized depreciation (94,212,406) (688,733) (8,961,832) (2,759,332) (24,185,830)
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation (39,806,146) (472,407) (332,978) (1,783,304) (17,013,778)
Post-October losses -- (1,287,774) (21,030,436) (3,221,493) (466,900)
Capital loss carryforward (29,932,199) (4,265,646) -- (7,235,052) --
Undistributed ordinary income -- 2,249 -- 14,750 9,691
Undistributed long-term capital gains -- -- 135,276 -- --
Other temporary difference -- (2,249) -- (14,750) (60,436)
- ---------------------------------------------------------------------------------------------------------------------
Accumulated deficit $ (69,738,345) $ (6,025,827) $ (21,228,138) $ (12,239,849) $ (17,531,423)
=====================================================================================================================
The difference between the tax cost of portfolio investments and the financial
statement cost of portfolio investments is primarily due to wash sales.
87
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of September 30, 2008, the Funds had the following capital loss carryforwards
for federal income tax purposes.
EXPIRES
FUND AMOUNT SEPTEMBER 30,
- ------------------------------------------------------------------------
Clover Core Fixed Income Fund $ 86,389 2015
------------
International Growth Fund $ 190,851 2016
------------
Sands Capital Select Growth Fund $ 7,727,477 2010
5,719,519 2011
2,692,298 2014
13,792,905 2015
------------
$ 29,932,199
------------
Short Duration Fixed Income Fund $ 1,994,293 2012
96,050 2013
1,027,850 2014
852,134 2015
295,319 2016
------------
$ 4,265,646
------------
Ultra Short Duration Fixed Income Fund $ 6,699,046 2012
371,187 2014
164,819 2015
------------
$ 7,235,052
------------
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, 2008, the funds utilized
capital loss carryforwards as follows:
AMOUNT
- -------------------------------------------------------------------
Clover Core Fixed Income Fund $ 205,963
Sands Capital Select Growth Fund $ 12,683,947
Ultra Short Duration Fixed Income Fund $ 6,821
Certain reclassifications of the components of net assets, as presented below,
are the result of permanent differences between financial statement and income
tax reporting requirements. 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, tax character of distributions, paydown and real estate
investment trust gains and losses have been made to the following Funds for the
year ended September 30, 2008:
ACCUMULATED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME (LOSS) GAINS (LOSSES)
- --------------------------------------------------------------------------------------
Clover Core Fixed Income Fund $ -- $ 7,368 $ (7,368)
Diversified Small Cap Value Fund $ 49,555 $ (120,045) $ 70,490
Healthcare and Biotechnology Fund $ (1,197,977) $ 526,140 $ 671,837
Mid Cap Fund $ -- $ (295,053) $ 295,053
Premium Yield Equity Fund $ (34,532) $ 6,670 $ 27,862
Sands Capital Select Growth Fund $ (4,437,427) $ 4,437,427 $ --
Short Duration Fixed Income Fund $ -- $ 17,370 $ (17,370)
Small Cap Value Opportunities Fund $ (1,518) $ 226,327 $ (224,809)
Ultra Short Duration Fixed Income Fund $ -- $ (83,915) $ 83,915
Value Opportunities Fund $ -- $ (12,113) $ 12,113
88
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation 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. On October 1, 2007, the Funds adopted FIN 48.
The Funds have analyzed their tax positions taken on Federal income tax returns
for all open tax years (tax years ended September 30, 2005 through 2008) for
purposes of implementing FIN 48 and have concluded that no provision for income
tax is required in their financial statements.
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.
89
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
9. SPECIAL MEETING OF SHAREHOLDERS
On September 26, 2008, a Special Meeting of Shareholders was held to approve or
disapprove an Agreement and Plan of Reorganization providing for the transfer of
all of the assets and liabilities of the Navellier International Growth
Portfolio to the Touchstone International Growth Fund in exchange for shares of
the Touchstone International Growth Fund and the subsequent liquidation of the
Navellier International Growth Portfolio.
The acquisition was approved as follows:
NUMBER OF VOTES
-----------------------------------------------------------
FOR AGAINST ABSTAIN
-----------------------------------------------------------
268,330 5,607 4,041
BEFORE AFTER
REORGANIZATION REORGANIZATION
- -------------------------------------------------------------------------------
NAVELLIER TOUCHSTONE TOUCHSTONE
INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH GROWTH GROWTH
PORTFOLIO FUND FUND
- -------------------------------------------------------------------------------
Shares 627,111 -- 627,111
Net Assets $ 5,783,631 $ -- $ 5,783,631
Net Asset Value $ 9.22 $ -- $ 9.22
Unrealized Depreciation $ (501,657) $ -- $ (501,657)
Accumulated Net Realized Loss $ (208,792) $ -- $ (208,792)
10. SUBSEQUENT EVENT
On September 30, 2008, the Board of Trustees approved a change of sub-advisor to
the Short Duration Fixed Income Fund and the Ultra Short Duration Fixed Income
Fund (the "Funds"). Effective October 1, 2008, the Funds' sub-advisor changed
from Chartwell Investment Partners to Fort Washington Investment Advisors, Inc.
Fort Washington Investment Advisors, Inc. is a wholly-owned, indirect subsidiary
of Western-Southern.
90
- --------------------------------------------------------------------------------
Portfolio of Investments
Clover Core Fixed Income Fund - September 30, 2008
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 46.8%
$ 862,464 FHLMC CMO Ser 3225 Class
EO PO (A), .00%, 10/15/36 $ 658,672
674,709 FHLMC CMO/REMIC Ser 3100
PO (A), .00%, 1/15/36 529,545
245,613 FHLMC Giant Gold Pool #11570,
5.00%, 4/1/19 245,992
566,595 FHLMC Gold #08062, 5.00%, 6/1/35 552,805
593,513 FHLMC Gold #08168, 6.00%, 12/1/36 601,377
511,470 FHLMC Pool #C01844, 4.50%, 4/1/34 485,277
6,764 FNMA CMO/REMIC Ser 1994-17,
Class H, 6.00%, 2/25/09 6,773
423,401 FNMA Pool #254759, 4.50%, 6/1/18 417,175
557,229 FNMA Pool #255111, 5.50%, 3/1/34 556,803
3,471 FNMA Pool #369214, 5.00%, 4/1/09 3,476
35,034 FNMA Pool #535301, 6.50%, 4/1/15 36,393
352,378 FNMA Pool #694431, 5.00%, 3/1/18 353,537
303,980 FNMA Pool #738783, 7.00%, 2/1/25 321,233
366,401 FNMA Pool #888284, 5.50%, 4/1/37 365,719
290,566 FNMA Pool #890042, 5.50%, 7/1/22 293,338
297,374 FNMA Pool #975116, 5.00%, 5/1/38 289,951
616,230 GNMA CMO PAC-1(11) Ser 2006-26
PO (A), .00%, 6/20/36 478,801
93,806 GNMA CMO/REMIC Ser 2004-59,
Class DA, 5.00%, 6/16/34 93,206
1,518 GNMA Pool #196477, 10.00%, 4/15/10 1,643
13,215 GNMA Pool #202886, 8.00%, 3/15/17 14,418
3,572 GNMA Pool #221235, 8.50%, 7/15/17 3,928
12,244 GNMA Pool #331786, 8.00%, 8/15/22 13,417
65,457 GNMA Pool #376400, 6.50%, 2/15/24 67,459
61,177 GNMA Pool #439478, 7.00%, 1/15/27 64,570
130,963 GNMA Pool #457921, 5.50%, 12/15/28 132,014
88,075 GNMA Pool #462622, 6.50%, 3/15/28 90,769
35,783 GNMA Pool #533974, 6.50%, 5/15/32 36,810
86,552 GNMA Pool #570400, 6.50%, 9/15/31 89,091
27,092 GNMA Pool #781029, 6.50%, 5/15/29 27,879
127,988 GNMA Pool #781096, 6.50%, 12/15/28 131,719
62,011 GNMA Pool #781231, 7.00%, 12/15/30 64,963
98,751 GNMA Pool #781276, 6.50%, 4/15/31 101,572
59,455 GNMA Pool #781328, 7.00%, 9/15/31 62,605
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 7,192,930
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 24.7%
FINANCIALS -- 9.6%
$ 250,000 Associates Corp. NA, 6.95%, 11/1/18 206,255
300,000 Ford Motor Credit Company LLC,
8.63%, 11/1/10 212,736
200,000 Goldman Sachs Group,
6.13%, 2/15/33 144,322
300,000 Key Bank NA, 5.80%, 7/1/14 200,093
650,000 Lehman Brothers Holdings,
MTN (B), 8.00%, 3/5/09 81,250
500,000 Morgan Stanley, MTN (B),
7.50%, 10/23/08 349,999
450,000 SLM, MTN Ser A, 5.38%, 5/15/14 279,000
- --------------------------------------------------------------------------------
1,473,655
- --------------------------------------------------------------------------------
UTILITIES -- 7.4%
350,000 AES, 9.38%, 9/15/10 350,000
215,000 Consolidated Natural Gas,
Ser C, 6.25%, 11/1/11 216,920
320,000 Dominion Resources, Inc.,
7.00%, 6/15/38 301,085
300,000 Exelon Generation,
6.20%, 10/1/17 263,646
- --------------------------------------------------------------------------------
1,131,651
- --------------------------------------------------------------------------------
ENERGY -- 3.2%
475,000 XTO Energy, 7.50%, 4/15/12 497,455
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.5%
367,000 Conagra Foods, 7.88%, 9/15/10 387,295
- --------------------------------------------------------------------------------
MATERIALS -- 2.0%
351,000 Alcoa, 5.72%, 2/23/19 310,368
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 3,800,424
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 9.3%
150,000 U.S. Treasury Bond, 6.25%, 8/15/23 180,105
250,000 U.S. Treasury Bond, 5.50%, 8/15/28 284,746
180,000 U.S. Treasury Note, 4.38%, 12/15/10 189,183
400,000 U.S. Treasury Note, 3.38%, 11/30/12 409,624
105,000 U.S. Treasury Note, 4.63%, 2/15/17 111,735
250,000 U.S. Treasury Note, 4.25%, 11/15/17 259,102
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 1,434,495
- --------------------------------------------------------------------------------
91
- --------------------------------------------------------------------------------
Clover Core Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
Asset-Backed Securities -- 11.2%
$ 300,000 Countrywide Alternative Loan
Trust, Ser 2005-J13, Class 2A8,
5.50%, 11/25/35 $ 208,905
500,000 CS First Boston Mortgage
Securities, Ser 2005-C5,
Class A3, 5.10%, 8/15/38 470,151
500,000 Merrill Lynch Mortgage
Investors, Ser 1998-C1,
Class A3, 6.72%, 11/15/26 501,164
600,000 Wachovia Bank Commercial
Mortgage Trust, Ser 2003-C5,
Class B, 4.11%, 6/15/35 536,793
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES $ 1,717,013
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION -- 5.4%
750,000 TVA, 5.88%, 4/1/36 $ 830,280
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 1.9%
292,543 Touchstone Institutional Money
Market Fund^ $ 292,543
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.3%
(Cost $16,817,998) $ 15,267,685
OTHER ASSETS IN EXCESS
OF LIABILITIES -- 0.7% 108,879
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 15,376,564
================================================================================
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
(A) Zero Coupon security - The rate reported was the effective yield at the
time of purchase.
(B) Variable rate security - the rate reflected is the rate in effect on
September 30, 2008.
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
REMIC - Real Estate Mortgage Investment Conduit
TVA - Tennessee Valley Authority
See accompanying notes to financial statements.
92
- --------------------------------------------------------------------------------
Portfolio of Investments
Diversified Small Cap Value Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.4% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 31.4%
American Campus Communities, Inc. 46,995 $ 1,592,190
Anworth Mortgage Asset Corp. 136,070 805,534
Argo Group International Holdings Ltd.* 32,296 1,190,108
Aspen Insurance Holdings Ltd. 38,915 1,070,163
Astoria Financial Corp. 40,455 838,632
BioMed Realty Trust, Inc. 30,000 793,500
City Holding Co. 28,550 1,206,238
Columbia Banking System, Inc. 60,170 1,066,814
F.N.B. Corp. + 51,080 816,258
First Merchants Corp. 18,465 421,002
First Niagara Financial Group, Inc. 66,160 1,042,020
FirstMerit Corp. 48,375 1,015,875
Flushing Financial Corp. 64,450 1,127,875
Flushing Financial Corp. 31,920 1,452,997
Highwoods Properties, Inc. 28,615 1,017,549
Home Properties, Inc. + 22,965 1,330,822
IBERIABANK Corp. 26,735 1,412,944
Independent Bank Corp. 33,535 1,045,286
Investment Technology Group, Inc.* 30,030 913,813
IPC Holdings Ltd. 32,280 975,179
Lexington Realty Trust + 77,865 1,340,835
LTC Properties, Inc. 45,170 1,324,384
MFA Mortgage Investments, Inc. 101,135 657,378
Montpelier Re Holdings Ltd. 43,590 719,671
Nara Bancorp, Inc. + 68,310 765,072
National Penn Bancshares, Inc. + 24,480 357,408
National Retail Properties, Inc. + 53,755 1,287,432
Navigators Group, Inc.* 16,715 969,470
New Alliance Bancshares, Inc. + 79,675 1,197,515
Phoenix Companies, Inc. 122,070 1,127,927
Platinum Underwriters Holdings Ltd. 32,585 1,156,116
Potlatch Corp. + 22,921 1,063,305
Prosperity Bancshares, Inc. 30,070 1,022,079
Senior Housing Properties Trust 32,685 778,884
South Financial Group, Inc. + 54,500 399,485
Sterling Bancshares, Inc. 86,602 904,991
Sun Communities, Inc. 52,400 1,038,044
United Bankshares, Inc. + 12,090 423,150
Waddell & Reed Financial, Inc., Class A 24,090 596,228
Webster Financial Corp. 23,370 590,093
- --------------------------------------------------------------------------------
38,854,266
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 13.7%
Arris Group, Inc.* 78,250 604,873
Avocent Corp.* 31,005 634,362
Black Box Corp. 32,385 1,118,254
Brocade Communications Systems, Inc.* 98,520 573,386
CommScope, Inc.* 17,370 601,697
CSG Systems International, Inc.* 28,580 501,007
CTS Corp. 43,645 557,783
Digital River, Inc.* 19,095 618,678
EarthLink, Inc.* 102,120 868,020
Fairchild Semiconductor International, Inc.* 73,320 651,815
Finisar Corp.* 388,744 392,631
Insight Enterprises, Inc.* 53,450 716,765
j2 Global Communications, Inc.* 33,240 776,154
NICE Systems Ltd. ADR* 29,735 809,981
Perot Systems Corp., Class A* 54,040 937,594
SeaChange International, Inc.* 174,325 1,683,979
SonicWALL, Inc.* 94,540 495,390
SPSS, Inc.* 21,520 631,827
Symmetricom, Inc.* 76,215 378,789
Technitrol, Inc. 42,300 625,617
United Online, Inc. 112,635 1,059,895
VeriFone Holdings, Inc.* 36,600 605,364
Vignette Corp.* 49,270 529,160
Zoran Corp.* 78,935 644,110
- --------------------------------------------------------------------------------
17,017,131
- --------------------------------------------------------------------------------
INDUSTRIALS -- 11.4%
A.O. Smith Corp. 22,680 888,829
American Commercial Lines, Inc.* + 68,650 730,436
Ampco-Pittsburgh Corp. 22,545 583,916
Ceradyne, Inc.* 35,635 1,306,378
Consolidated Graphics, Inc.* 10,720 325,138
EnPro Industries, Inc.* 20,785 772,371
HUB Group, Inc., Class A* 29,225 1,100,321
Hubbell, Inc., Class B 26,460 927,423
Interline Brands, Inc.* 52,510 851,187
Orbital Sciences Corp.* + 52,670 1,262,499
Pacer International, Inc. + 29,610 487,677
Quanta Services, Inc.* + 28,555 771,271
School Specialty, Inc.* 26,415 823,884
SkyWest, Inc. 34,775 555,705
Sykes Enterprises, Inc.* 32,755 719,300
URS Corp.* 33,703 1,235,889
YRC Worldwide, Inc.* + 64,400 770,224
- --------------------------------------------------------------------------------
14,112,448
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 10.9%
99 Cents Only Stores* 76,890 843,483
ArvinMeritor, Inc. + 49,240 642,090
Asbury Automotive Group, Inc. 65,660 756,403
Brown Shoe Co., Inc. 91,725 1,502,455
Build-A-Bear Workshop, Inc.* + 89,012 648,007
CEC Entertainment, Inc.* 19,895 660,514
Dollar Tree, Inc.* 15,260 554,854
Ethan Allen Interiors, Inc. + 23,205 650,204
Hot Topic, Inc.* 75,160 496,808
Jackson Hewitt Tax Service, Inc. 41,470 636,150
JAKKS Pacific, Inc.* 51,455 1,281,743
OfficeMax, Inc. 56,795 504,908
Rent-A-Center, Inc.* 45,560 1,015,077
Service Corp. International 65,280 545,741
Skechers U.S.A., Inc., Class A* 57,305 964,443
Tenneco, Inc.* + 45,565 484,356
Wet Seal, Inc., Class A* + 128,955 468,107
Zale Corp.* + 33,670 841,750
- --------------------------------------------------------------------------------
13,497,093
- --------------------------------------------------------------------------------
93
- --------------------------------------------------------------------------------
Diversified Small Cap Value Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.4% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
UTILITIES -- 7.3%
AGL Resources, Inc. 24,680 $ 774,458
Atmos Energy Corp. 33,890 902,152
Avista Corp. 54,975 1,193,508
Black Hills Corp. 26,035 808,907
Cleco Corp. 40,270 1,016,818
MGE Energy, Inc. 20,555 730,730
Nicor, Inc. + 18,955 840,654
ONEOK, Inc. 14,540 500,176
Southwest Gas Corp. 23,230 702,940
UniSource Energy Corp. 22,045 643,494
Westar Energy, Inc. 40,660 936,806
- --------------------------------------------------------------------------------
9,050,643
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 7.0%
Church & Dwight Co., Inc. 13,870 861,188
Elizabeth Arden, Inc.* 43,390 851,746
Pantry, Inc.* 85,755 1,817,148
Pilgrim's Pride Corp., Class B + 60,090 149,624
Sanderson Farms, Inc. + 20,200 742,148
Spartan Stores, Inc. + 41,265 1,026,673
TreeHouse Foods, Inc.* 65,460 1,944,163
Universal Corp. + 27,165 1,333,530
- --------------------------------------------------------------------------------
8,726,220
- --------------------------------------------------------------------------------
HEALTH CARE -- 6.2%
AMERIGROUP Corp.* 40,400 1,020,100
Celera Corp.* 36,980 571,341
Chemed Corp. 9,505 390,275
Haemonetics Corp.* 14,525 896,483
ICU Medical, Inc.* 30,000 912,300
Invacare Corp. + 25,550 616,777
Par Pharmaceutical Cos., Inc.* 63,880 785,085
PSS World Medical, Inc.* + 59,215 1,154,692
Symmetry Medical, Inc.* 36,185 671,594
Varian, Inc.* 14,505 622,265
- --------------------------------------------------------------------------------
7,640,912
- --------------------------------------------------------------------------------
MATERIALS -- 4.9%
Buckeye Technologies, Inc.* 55,995 458,599
Chemtura Corp. 105,900 482,904
Compass Minerals International, Inc. 23,870 1,250,548
Ferro Corp. 35,685 717,269
Hecla Mining Co.* + 77,905 364,595
Innospec, Inc. 30,780 371,207
Kaiser Aluminum Corp. 10,645 457,203
Myers Industries, Inc. 62,695 790,584
OM Group, Inc.* 20,685 465,413
Spartech Corp. 17,075 169,043
Stillwater Mining Co.* + 100,105 581,610
- --------------------------------------------------------------------------------
6,108,975
- --------------------------------------------------------------------------------
ENERGY -- 4.2%
Bronco Drilling Co., Inc.* 19,310 197,348
Cabot Oil & Gas Corp. 32,010 1,156,842
Forest Oil Corp.* 15,174 752,630
Foundation Coal Holdings, Inc. 25,370 902,665
GulfMark Offshore, Inc.* 11,750 527,340
Nordic American Tanker Shipping Ltd. 8,295 265,938
Pioneer Drilling Co.* 33,910 451,003
USEC, Inc.* + 117,730 636,919
Whiting Petroleum Corp.* 4,900 349,174
- --------------------------------------------------------------------------------
5,239,859
- --------------------------------------------------------------------------------
MISCELLANEOUS -- 1.4%
iShares Russell 2000 Value Index + 26,500 1,781,860
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 122,029,407
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 19.8%
BBH Securities Lending Fund ** 20,978,164 20,978,164
Touchstone Institutional
Money Market Fund^ 3,533,567 3,533,567
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 24,511,731
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 118.2%
(Cost $156,838,663) $ 146,541,138
LIABILITIES IN EXCESS OF OTHER ASSETS -- (18.2%) (22,572,480)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 123,968,658
================================================================================
* 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, 2008, was $ 21,122,404.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
See accompanying notes to financial statements.
94
- --------------------------------------------------------------------------------
Portfolio of Investments
Healthcare and Biotechnology Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 92.5% SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE -- 92.5%
Abbott Laboratories 62,200 $ 3,581,476
Aetna, Inc. 35,610 1,285,877
Alcon, Inc. 3,020 487,760
Alexion Pharmaceuticals, Inc.* 16,400 644,520
Allergan, Inc. 38,020 1,958,030
Amedisys, Inc.* 14,450 703,282
Auxilium Pharmaceuticals, Inc.* 20,390 660,636
Baxter International, Inc. 78,200 5,132,265
Beckman Coulter, Inc. 24,340 1,727,897
Becton, Dickinson & Co. 18,330 1,471,166
Celgene Corp.* 23,430 1,482,650
Charles River Laboratories
International, Inc.* + 23,500 1,304,955
Covance, Inc.* + 23,890 2,112,115
Covidien Ltd. 40,510 2,177,818
DENTSPLY International, Inc. 67,270 2,525,316
Express Scripts, Inc.* + 46,600 3,440,012
Genentech, Inc.* 22,950 2,035,206
Genzyme Corp.* 33,040 2,672,606
Gilead Sciences, Inc.* 91,660 4,177,862
Haemonetics Corp.* 9,260 571,527
Henry Schein, Inc.* + 27,952 1,504,936
ICON PLC ADR* 55,220 2,112,165
Intuitive Surgical, Inc.* 3,210 773,546
Johnson & Johnson 72,040 4,990,930
Kendle International, Inc.* + 29,750 1,330,123
Medco Health Solutions, Inc.* 36,440 1,639,800
Myriad Genetics, Inc.* 11,510 746,769
Onyx Pharmaceuticals, Inc.* 17,740 641,833
Perrigo Co. + 21,440 824,582
Rigel Pharmaceuticals, Inc.* + 14,670 342,545
Thermo Fisher Scientific, Inc.* + 47,230 2,597,650
United Therapeutics Corp.* 8,220 864,497
Wyeth 51,720 1,910,537
XenoPort, Inc.* 29,140 1,412,999
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 61,845,888
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCK -- 5.0%
HEALTH CARE -- 5.0%
CSL Ltd. 114,440 3,372,531
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 21.5%
BBH Securities Lending Fund ** 13,160,939 13,160,939
Touchstone Institutional
Money Market Fund^ 1,237,068 1,237,068
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 14,398,007
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 119.0%
(Cost $73,065,926) $ 79,616,426
LIABILITIES IN EXCESS OF OTHER ASSETS -- (19.0%) (12,728,911)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 66,887,515
================================================================================
* 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, 2008, was $13,304,645.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
See accompanying notes to financial statements.
95
- --------------------------------------------------------------------------------
Portfolio of Investments
International Growth Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 94.2% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 19.0%
Aixtron AG ADR (Germany) 31,631 $ 189,786
ARM Holdings PLC ADR (Britain) 59,481 309,301
Canon, Inc. ADR (Japan) 12,332 465,533
Hitachi Ltd. ADR (Japan) 9,249 641,788
Konami Corp. ADR (Japan) 11,417 289,878
Logitech International S.A. ADR (Switzerland)* 17,975 419,177
Nidec Corp. ADR (Japan) 16,375 249,719
Nintendo Co., Ltd. ADR (Japan) 12,143 620,504
Nokia Oyj ADR (Finland) 19,299 359,926
Research In Motion Ltd. (Canada)* 5,323 363,561
SAP AG ADR (Germany) 11,867 634,054
Trend Micro, Inc. ADR (Japan) 9,191 341,962
- --------------------------------------------------------------------------------
4,885,189
- --------------------------------------------------------------------------------
HEALTH CARE -- 16.7%
Alcon, Inc. ADR (Switzerland) 4,072 657,669
Bayer AG ADR (Germany) 7,664 558,932
Covidien, Ltd. (United States) 5,715 307,238
Fresenius Medical Care AG & Co.
KGaA ADR (Germany) 6,515 338,389
GlaxoSmithKline PLC ADR (Britain) 9,278 403,222
ICON PLC ADR (Ireland)* 23,298 891,148
Novo-Nordisk A/S ADR (Denmark) 15,154 775,885
Teva Pharmaceutical Industries
Ltd. ADR (Israel) 8,042 368,243
- --------------------------------------------------------------------------------
4,300,726
- --------------------------------------------------------------------------------
FINANCIALS -- 13.8%
Allianz SE ADR (Germany) 31,427 430,864
AXA ADR (France) 21,945 716,723
Banco Santander S.A. ADR (Spain) 39,513 593,485
Credit Suisse Group ADR (Switzerland) 11,722 565,938
HSBC Holdings PLC ADR (Britain) 7,650 618,350
ING Groep N.V. ADR (Netherlands) 14,354 307,176
Mitsubishi UFJ Financial Group, Inc.
ADR (MUFG) (Japan) 33,769 295,141
- --------------------------------------------------------------------------------
3,527,677
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 7.7%
America Movil ADR (Mexico) 5,686 263,603
BT Group PLC ADR (Britain) 7,271 210,932
China Mobile Ltd. ADR (Hong Kong) 7,271 364,132
Telefonica S.A. ADR (Spain) 8,508 608,236
Telenor ASA ADR (Norway) 5,992 218,304
Vodafone Group PLC ADR (Britain) 13,612 300,825
- --------------------------------------------------------------------------------
1,966,032
- --------------------------------------------------------------------------------
ENERGY -- 7.4%
EnCana Corp. (Canada) 5,541 364,210
Santos Ltd. ADR (Australia) 5,497 350,819
Schlumberger Ltd. (United States) 5,526 431,525
StatoilHydro ASA ADR (Norway) 19,197 456,888
Total S.A. ADR (France) 5,017 304,432
- --------------------------------------------------------------------------------
1,907,874
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 7.2%
British American Tobacco PLC ADR (Britain) 9,642 597,804
Diageo PLC ADR (Britain) 4,159 286,389
Nestle S.A. ADR (Switzerland) 14,281 613,369
Tesco PLC ADR (Britain) 16,783 347,848
- --------------------------------------------------------------------------------
1,845,410
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.7%
Honda Motor Co., Ltd. ADR (Japan) 16,564 498,742
Makita Corp. ADR (Japan) 9,347 192,455
Matsushita Electric Industrial Co.,
Ltd. ADR (Japan) 37,564 650,984
Sony Corp. ADR (Japan) 12,362 381,615
- --------------------------------------------------------------------------------
1,723,796
- --------------------------------------------------------------------------------
MATERIALS -- 6.4%
Alumina Ltd. ADR (Australia) 13,510 136,451
ArcelorMittal ADR (Luxembourg) 5,308 262,109
Barrick Gold Corp. (Canada) 5,701 209,455
BASF AG ADR (Germany) 6,835 328,059
Companhia Vale do Rio Doce ADR (Brazil) 10,544 201,918
Potash Corp. of Saskatchewan, Inc. (Canada) 2,080 274,580
Syngenta AG ADR (Switzerland) 5,090 215,409
- --------------------------------------------------------------------------------
1,627,981
- --------------------------------------------------------------------------------
INDUSTRIALS -- 5.5%
ABB Ltd. ADR (Switzerland)* 15,517 301,030
BAE Systems PLC ADR (Britain) 10,035 294,773
Chicago Bridge & Iron Co. N.V.
ADR (Netherlands) 8,929 171,794
Kubota Corp. ADR (Japan) 11,954 375,356
Siemens AG ADR (Germany) 2,734 256,695
- --------------------------------------------------------------------------------
1,399,648
- --------------------------------------------------------------------------------
UTILITIES -- 3.8%
E.ON AG ADR (Germany) 12,216 616,017
Veolia Environnement ADR (France) 8,537 352,407
- --------------------------------------------------------------------------------
968,424
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 24,152,757
- --------------------------------------------------------------------------------
96
- --------------------------------------------------------------------------------
International Growth Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 78.8%
Touchstone Institutional
Money Market Fund^ 20,207,886 $ 20,207,886
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 173.0%
(Cost $45,021,741) $ 44,360,643
LIABILITIES IN EXCESS OF OTHER ASSETS -- (73.0%) (18,723,838)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 25,636,805
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
See accompanying notes to financial statements.
97
- --------------------------------------------------------------------------------
Portfolio of Investments
Mid Cap Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 95.3% SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIALS -- 22.1%
AMETEK, Inc. 151,440 $ 6,174,209
Armstrong World Industries, Inc. 185,270 5,354,303
Brink's Co. 129,770 7,918,564
Copart, Inc.* 145,130 5,514,940
Corrections Corp. of America* 212,540 5,281,619
Covanta Holding Corp.* + 267,260 6,398,204
FTI Consulting, Inc.* 67,360 4,866,086
Kansas City Southern* + 123,470 5,477,129
Kirby Corp.* 85,635 3,248,992
Lincoln Electric Holdings, Inc. 82,460 5,303,003
Republic Services, Inc. 256,430 7,687,771
Roper Industries, Inc. + 119,970 6,833,491
SunPower Corp., Class A* + 41,250 2,925,863
Teleflex, Inc. 83,480 5,300,145
Thomas & Betts Corp.* 101,450 3,963,652
Trinity Industries, Inc. + 135,250 3,479,983
URS Corp.* 106,110 3,891,054
Wabtec Corp. 84,470 4,327,398
- --------------------------------------------------------------------------------
93,946,406
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 17.6%
Alliance Data Systems Corp.* + 177,430 11,245,512
Amphenol Corp., Class A 77,790 3,122,491
BMC Software, Inc.* 152,610 4,369,224
Convergys Corp.* 278,450 4,115,491
Global Payments, Inc. 151,960 6,816,926
Harris Corp. 76,730 3,544,926
Itron, Inc.* + 82,720 7,323,202
McAfee, Inc.* 226,900 7,705,524
Novell, Inc.* 809,090 4,158,723
QLogic Corp.* 313,900 4,821,504
Sybase, Inc.* + 357,977 10,961,255
Synopsys, Inc.* 345,900 6,900,705
- --------------------------------------------------------------------------------
75,085,483
- --------------------------------------------------------------------------------
FINANCIALS -- 12.3%
Alexandria Real Estate Equities, Inc. + 64,600 7,304,969
Arch Capital Group Ltd.* 98,690 7,207,331
Douglas Emmett, Inc. 267,820 6,178,607
Essex Property Trust + 38,340 4,536,772
Hanover Insurance Group, Inc. 130,720 5,950,374
KeyCorp + 251,200 2,999,328
Nationwide Health Properties, Inc. + 151,600 5,454,568
New York Community Bancorp, Inc. 194,764 3,270,088
Rayonier, Inc. + 126,220 5,976,517
SLM Corp.* 272,060 3,357,220
- --------------------------------------------------------------------------------
52,235,774
- --------------------------------------------------------------------------------
HEALTH CARE -- 10.6%
Cephalon, Inc.* + 94,650 7,334,428
Covance, Inc.* + 61,090 5,400,967
Hill-Rom Holdings, Inc. + 238,310 7,223,176
King Pharmaceuticals, Inc.* 422,010 4,042,856
Omnicare, Inc. 254,550 7,323,403
OSI Pharmaceuticals, Inc.* + 48,050 2,368,385
Perrigo Co. + 144,550 5,559,393
Varian Medical Systems, Inc.* + 105,120 6,005,506
- --------------------------------------------------------------------------------
45,258,114
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 10.6%
Burger King Holdings, Inc. 233,940 5,745,566
Dollar Tree, Inc.* 178,980 6,507,713
DreamWorks Animation SKG, Class A* 204,530 6,432,469
H&R Block, Inc. 342,270 7,718,188
Hasbro, Inc. 152,420 5,292,022
Jarden Corp.* 217,390 5,097,796
O'Reilly Automotive, Inc.* 92,530 2,477,028
PetSmart, Inc. + 236,480 5,843,421
- --------------------------------------------------------------------------------
45,114,203
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 6.5%
Alberto-Culver Co. 262,500 7,150,500
Church & Dwight Co., Inc. + 139,190 8,642,307
Constellation Brands, Inc., Class A* 278,370 5,973,820
Herbalife Ltd 149,540 5,909,821
- --------------------------------------------------------------------------------
27,676,448
- --------------------------------------------------------------------------------
ENERGY -- 5.8%
Alpha Natural Resources, Inc.* 44,940 2,311,264
FMC Technologies, Inc.* 67,740 3,153,297
Frontier Oil Corp. 154,720 2,849,942
Mariner Energy, Inc.* 195,800 4,013,900
Penn Virginia Corp. 94,620 5,056,494
Petrohawk Energy Corp.* 104,680 2,264,228
Pioneer Natural Resources Co. + 45,220 2,364,102
Superior Energy Services, Inc.* 92,180 2,870,485
- --------------------------------------------------------------------------------
24,883,712
- --------------------------------------------------------------------------------
UTILITIES -- 5.4%
Integrys Energy Group, Inc. 125,890 6,286,947
MDU Resources Group, Inc. 117,710 3,413,590
NSTAR + 184,380 6,176,730
UGI Corp. 274,550 7,077,899
- --------------------------------------------------------------------------------
22,955,166
- --------------------------------------------------------------------------------
MATERIALS -- 1.8%
Celanese Corp. 73,450 2,049,990
Sigma-Aldrich Corp. + 105,770 5,544,463
- --------------------------------------------------------------------------------
7,594,453
- --------------------------------------------------------------------------------
MISCELLANEOUS -- 1.4%
iShares Russell Midcap Index Fund + 73,400 6,030,544
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.2%
SBA Communications Corp., Class A* + 196,740 5,089,664
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 405,869,967
- --------------------------------------------------------------------------------
98
- --------------------------------------------------------------------------------
Mid Cap Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 28.8%
BBH Securities Lending Fund ** 105,177,730 $ 105,177,730
Touchstone Institutional
Money Market Fund^ 17,311,821 17,311,821
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 122,489,551
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 124.1%
(Cost $555,031,789) $ 528,359,518
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (24.1%) (102,547,038)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 425,812,480
================================================================================
* 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, 2008, was $106,517,607.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
See accompanying notes to financial statements.
99
- --------------------------------------------------------------------------------
Portfolio of Investments
Premium Yield Equity Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 91.3% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 16.8%
Apartment Investment & Management Co. 15,272 $ 534,840
Arthur J. Gallagher & Co. 18,000 461,880
First Industrial Realty Trust, Inc. 22,205 636,840
ING Groep N.V. ADR 9,900 211,860
Lloyds TSB Group PLC ADR 14,400 240,912
Northstar Realty Finance Corp. 41,000 317,750
Potlatch Corp. 9,800 454,622
Wilmington Trust Corp. 16,830 485,209
- --------------------------------------------------------------------------------
3,343,913
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 14.7%
Colgate-Palmolive Co. 10,600 798,710
Kraft Foods, Inc., Class A 15,815 517,941
McCormick & Co., Inc. 12,800 492,160
Procter & Gamble Co. 8,300 578,427
Sysco Corp. 17,700 545,691
- --------------------------------------------------------------------------------
2,932,929
- --------------------------------------------------------------------------------
ENERGY -- 14.7%
Enerplus Resources Fund 19,300 717,767
Hugoton Royalty Trust 25,700 689,788
Kinder Morgan Management LLC* 17,206 846,535
Spectra Energy Corp. 28,500 678,300
- --------------------------------------------------------------------------------
2,932,390
- --------------------------------------------------------------------------------
HEALTH CARE -- 10.7%
Abbott Laboratories 9,100 523,978
Brookdale Senior Living, Inc. 17,400 382,626
Johnson & Johnson 10,600 734,368
Merck & Co., Inc. 15,900 501,804
- --------------------------------------------------------------------------------
2,142,776
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 10.4%
AT&T, Inc. 19,600 547,232
BCE, Inc. 21,265 738,108
BT Group PLC ADR 15,300 443,853
Windstream Corp. 32,700 357,738
- --------------------------------------------------------------------------------
2,086,931
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 7.3%
Microchip Technology, Inc. 17,300 509,139
Paychex, Inc. 17,600 581,328
Taiwan Semiconductor
Manufacturing Co. Ltd. ADR 39,784 372,776
- --------------------------------------------------------------------------------
1,463,243
- --------------------------------------------------------------------------------
UTILITIES -- 6.7%
National Grid PLC ADR 7,400 475,228
NiSource, Inc. 35,400 522,504
Pepco Holdings, Inc. 15,200 348,232
- --------------------------------------------------------------------------------
1,345,964
- --------------------------------------------------------------------------------
INDUSTRIALS -- 6.6%
Diana Shipping, Inc. 18,000 354,420
Macquarie Infrastructure Company Trust 20,700 273,447
R. R. Donnelley & Sons Co. 13,000 318,890
Seaspan Corp. 20,400 369,036
- --------------------------------------------------------------------------------
1,315,793
- --------------------------------------------------------------------------------
MATERIALS -- 3.4%
Nucor Corp. 7,100 280,450
Teck Cominco Ltd., Class B 13,600 396,032
- --------------------------------------------------------------------------------
676,482
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 18,240,421
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 4.6%
Touchstone Institutional
Money Market Fund^ 925,785 $ 925,785
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 95.9%
(Cost $22,985,867) $ 19,166,206
OTHER ASSETS IN EXCESS OF LIABILITIES -- 4.1% 814,007
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 19,980,213
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
See accompanying notes to financial statements.
100
- --------------------------------------------------------------------------------
Portfolio of Investments
Sands Capital Select Growth Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 96.9% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 26.7%
Apple, Inc.* 234,120 $ 26,610,079
Broadcom Corp., Class A* 753,600 14,039,568
EMC Corp.* + 1,544,600 18,473,416
Google, Inc., Class A* 95,200 38,129,505
Salesforce.com, Inc.* + 321,600 15,565,440
Visa, Inc., Class A 309,544 19,002,906
- --------------------------------------------------------------------------------
131,820,914
- --------------------------------------------------------------------------------
HEALTH CARE -- 24.6%
Abraxis BioScience* + 47,025 3,242,844
Allergan, Inc. 520,600 26,810,900
Cerner Corp.* + 146,000 6,517,440
Genzyme Corp.* 407,200 32,938,408
Intuitive Surgical, Inc.* 79,000 19,037,420
Mindray Medical International Ltd. ADR 53,913 1,818,485
Stryker Corp. + 216,700 13,500,410
Varian Medical Systems, Inc.* + 314,000 17,938,820
- --------------------------------------------------------------------------------
121,804,727
- --------------------------------------------------------------------------------
ENERGY -- 14.8%
FMC Technologies, Inc.* + 319,000 14,849,450
National-Oilwell Varco, Inc.* + 588,433 29,556,989
Schlumberger Ltd. 371,200 28,987,008
- --------------------------------------------------------------------------------
73,393,447
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 14.0%
Amazon.com, Inc.* + 505,170 36,756,169
Las Vegas Sands Corp.* + 375,800 13,570,138
Starbucks Corp.* 1,266,000 18,825,420
- --------------------------------------------------------------------------------
69,151,727
- --------------------------------------------------------------------------------
FINANCIALS -- 10.5%
CME Group, Inc. 44,600 16,569,346
IntercontinentalExchange, Inc.* 240,187 19,378,287
Moody's Corp. + 466,900 15,874,600
- --------------------------------------------------------------------------------
51,822,233
- --------------------------------------------------------------------------------
INDUSTRIALS -- 3.2%
Expeditors International of Washington, Inc. 284,600 9,915,464
Iron Mountain, Inc.* 252,200 6,156,202
- --------------------------------------------------------------------------------
16,071,666
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.1%
America Movil SAB de C.V. ADR 334,200 15,493,513
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 479,558,227
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 21.2%
BBH Securities Lending Fund ** 84,147,388 $ 84,147,388
Touchstone Institutional
Money Market Fund^ 20,526,773 20,526,773
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 104,674,161
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 118.1%
(Cost $618,596,396) $ 584,232,388
LIABILITIES IN EXCESS OF OTHER ASSETS -- (18.1%) (89,357,427)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 494,874,961
================================================================================
* 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, 2008, was $89,069,993.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
See accompanying notes to financial statements.
101
- --------------------------------------------------------------------------------
Portfolio of Investments
- --------------------------------------------------------------------------------
Short Duration Fixed Income Fund - September 30, 2008
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 64.4%
$ 617,431 FHLMC CMO/REMIC Ser 2510,
Class TA, 4.000%, 6/15/32 $ 594,463
748,251 FHLMC CMO/REMIC Ser 2515,
Class ED, 5.000%, 3/15/17 752,808
1,139,225 FHLMC CMO/REMIC Ser 2543,
Class YJ, 4.500%, 3/15/32 1,131,351
791,767 FHLMC CMO/REMIC Ser 2566,
Class LM, 4.500%, 4/15/32 785,185
704,174 FHLMC CMO/REMIC Ser 2575,
Class QP, 4.500%, 11/15/31 702,027
624,362 FHLMC CMO/REMIC Ser 2583,
Class ND, 4.250%, 12/15/10 625,245
704,618 FHLMC CMO/REMIC Ser 2590,
Class QY, 3.750%, 4/15/28 669,496
1,337,308 FHLMC CMO/REMIC Ser 2590,
Class UL, 3.750%, 3/15/32 1,274,722
1,053,895 FHLMC CMO/REMIC Ser 2596,
Class QE, 4.000%, 3/15/33 1,003,714
2,263,354 FHLMC CMO/REMIC Ser 2649,
Class PJ, 3.500%, 6/15/33 2,117,725
1,087,061 FHLMC CMO/REMIC Ser 2682,
Class HG, 4.000%, 4/15/17 1,081,878
1,712,326 FHLMC CMO/REMIC Ser 2744,
Class TA, 5.500%, 3/15/26 1,716,415
404,536 FHLMC CMO/REMIC Ser 2892,
Class A, 5.000%, 5/15/21 407,848
998,921 FHLMC CMO/REMIC Ser 3138,
Class PA, 5.500%, 2/15/27 1,016,662
783,289 FHLMC CMO/REMIC Ser 3178,
Class MA, 6.000%, 10/15/26 797,763
132,736 FHLMC Pool #C66916,
7.000%, 5/1/32 139,516
123,370 FHLMC Pool #D94598,
6.500%, 4/1/21 127,754
95,139 FHLMC Pool #E97227,
7.000%, 9/1/14 98,691
2,867 FHLMC Pool #G10288,
6.000%, 9/1/09 2,899
16,850 FHLMC Pool #G10446,
6.500%, 2/1/11 17,456
163,422 FHLMC Pool #G30085,
7.500%, 10/1/17 177,896
13,035 FNMA CMO/REMIC Ser 1999-15,
Class PC, 6.000%, 9/25/18 13,163
804,717 FNMA CMO/REMIC Ser 2002-71,
Class AP, 5.000%, 11/25/32 793,344
1,000,000 FNMA CMO/REMIC Ser 2003-106,
Class WC, 4.500%, 8/25/18 1,001,343
798,726 FNMA CMO/REMIC Ser 2003-119,
Class PU, 4.000%, 11/25/33 785,382
547,886 FNMA CMO/REMIC Ser 2003-19,
Class ME, 4.000%, 1/25/33 528,988
260,029 FNMA CMO/REMIC Ser 2003-30,
Class MB, 4.000%, 6/25/27 259,822
2,632,050 FNMA CMO/REMIC Ser 2003-34,
Class GJ, 4.000%, 2/25/33 2,522,446
776,192 FNMA CMO/REMIC Ser 2003-42,
Class CA, 4.000%, 5/25/33 734,519
240,511 FNMA CMO/REMIC Ser 2003-66,
Class AP, 3.500%, 11/25/32 226,879
1,920,100 FNMA CMO/REMIC Ser 2006-2,
Class GH, 5.500%, 6/25/32 1,938,904
10,131 FNMA Pool #250477,
6.000%, 1/1/11 10,329
9,722 FNMA Pool #303096,
7.500%, 12/1/09 9,812
94,929 FNMA Pool #313429,
7.000%, 3/1/12 99,217
175,194 FNMA Pool #323441,
7.000%, 12/1/13 179,685
172,630 FNMA Pool #323832,
7.500%, 7/1/29 187,055
10,152 FNMA Pool #334593,
7.000%, 5/1/24 10,753
398,506 FNMA Pool #546474,
7.000%, 1/1/15 417,843
972 FNMA Pool #6222,
9.000%, 4/1/16 977
493,502 FNMA Pool #647567,
6.000%, 6/1/17 504,996
269,287 FNMA Pool #665773,
7.500%, 6/1/31 291,907
625,307 FNMA Pool #725284,
7.000%, 11/1/18 655,649
1,941,305 FNMA Pool #838790,
4.500%, 8/1/35 1,839,202
19,172 GNMA ARM Pool #8426 (A),
5.125%, 11/20/18 19,431
891,691 GNMA CMO/REMIC Ser 2002-72,
Class AB, 4.500%, 10/20/32 864,155
6,116 GNMA Pool #2707,
5.500%, 1/20/14 6,328
6,234 GNMA Pool #2802,
5.500%, 7/20/14 6,450
99,215 GNMA Pool #2843,
5.500%, 11/20/14 102,647
78,904 GNMA Pool #344233,
8.000%, 2/15/23 86,520
191,482 GNMA Pool #345123,
8.000%, 12/15/23 209,963
39,203 GNMA Pool #462486,
6.500%, 1/15/13 40,897
56,215 GNMA Pool #569337,
6.500%, 4/15/22 57,547
75,851 GNMA Pool #578189,
6.000%, 2/15/32 77,253
102
Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 64.4% (CONTINUED)
$ 91,470 GNMA Pool #780322,
8.000%, 11/15/22 $ 100,167
41,637 GNMA Pool #780327,
8.000%, 11/15/17 45,307
315,457 GNMA Pool #780604,
7.000%, 7/15/12 331,203
95,915 GNMA Pool #814,
8.000%, 8/20/17 104,261
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 30,305,858
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 5.6%
FINANCIALS -- 5.6%
1,000,000 American Express Credit
Company, MTN (A),
5.109%, 10/27/08 940,402
500,000 CIT Group, Inc., 5.000%, 11/24/08 484,369
500,000 Goldman Sachs Group, Inc.,
MTN (A), 3.294%, 12/22/08 498,995
250,000 Morgan Stanley, 3.875%, 1/15/09 230,005
500,000 Wells Fargo & Company,
MTN, 3.980%, 10/29/10 491,200
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 2,644,971
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 17.0%
3,000,000 FHLB (A), 8.000%, 12/3/08 2,977,500
4,500,000 FHLB Discount Note, 10/30/08 4,498,187
500,000 FHLMC, 4.050%, 6/30/10 501,552
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 7,977,239
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 2.7%
PENNSYLVANIA -- 2.7%
750,000 Commonwealth Fing Auth
RB, Ser A, 3.860%, 6/1/11 745,658
500,000 Pennsylvania State Tpk Commn
BANS RB, Ser B, 5.290%, 10/15/09 500,700
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $ 1,246,358
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 9.2%
750,000 Caterpillar Financial Asset
Trust Ser 2008-A, Class A2B (A),
4.360%, 10/25/08 750,000
1,500,000 CNH Equipment Trust, Ser 2008-B,
Class A3B (A), 3.888%, 10/16/08 1,464,990
1,631,251 Harley-Davidson Motorcycle
Trust Ser 2006-1, Class A2,
5.040%, 10/15/12 1,633,632
459,527 Wells Fargo Mortgage Backed
Securities, Ser 2006-16,
Class A12, 5.000%, 11/25/36 453,089
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES $ 4,301,711
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 1.1%
511,399 Touchstone Institutional
Money Market Fund^ $ 511,399
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $47,459,938) $ 46,987,536
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 0.0% 1,214
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 46,988,750
================================================================================
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2008.
ARM - Adjustable Rate Mortgage
BANS - Bond Anticipation Notes
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
RB - Revenue Bond
REMIC - Real Estate Mortgage Investment Conduit
See accompanying notes to financial statements.
103
- --------------------------------------------------------------------------------
Portfolio of Investments
Small Cap Value Opportunities Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.8% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 33.4%
Argo Group International Holdings Ltd.* 48,840 $ 1,799,754
Berkshire Hills Bancorp, Inc. 7,810 249,920
BioMed Realty Trust, Inc. 92,360 2,442,921
Cash America International, Inc. 40,860 1,472,594
Corporate Office Properties Trust 51,290 2,069,552
CVB Financial Corp. 108,930 1,514,127
Dime Community Bancshares, Inc. 82,170 1,250,627
DuPont Fabros Technology, Inc. 91,280 1,392,020
EastGroup Properties, Inc. 35,410 1,718,801
EZCORP, Class A* 101,780 1,913,464
First Citizens BancShares, Inc. 6,410 1,147,390
First Financial Northwest, Inc. 87,310 901,039
FPIC Insurance Group, Inc.* 34,856 1,791,250
Green Bankshares, Inc. + 20,583 483,906
Investors Bancorp, Inc.* + 84,880 1,277,444
IPC Holdings Ltd. 53,470 1,615,329
Kearny Financial Corp. 97,370 1,191,809
Mid-America Apartment Communities, Inc. + 31,250 1,535,625
Navigators Group, Inc.* 33,150 1,922,700
NGP Capital Resources Co. + 101,110 1,473,173
PICO Holdings, Inc.* 16,460 591,079
Platinum Underwriters Holdings Ltd. 49,990 1,773,645
Potlatch Corp. + 43,520 2,018,893
ProAssurance Corp.* 22,350 1,251,600
Prosperity Bancshares, Inc. 50,840 1,728,052
Signature Bank* 65,360 2,279,757
South Financial Group, Inc. + 95,670 701,261
SVB Financial Group* + 35,860 2,077,011
SWS Group, Inc. 85,560 1,724,890
UCBH Holdings + 123,740 793,173
UMB Financial Corp. 1,940 101,889
- --------------------------------------------------------------------------------
44,204,695
- --------------------------------------------------------------------------------
INDUSTRIALS -- 14.1%
Altra Holdings, Inc.* 120,670 1,781,089
Atlas Air Worldwide Holdings, Inc.* 29,640 1,194,788
Casella Waste Systems, Inc., Class A* 116,040 1,362,310
DXP Enterprises, Inc.* 34,880 1,859,453
EnPro Industries, Inc.* 32,050 1,190,978
Genesee & Wyoming, Inc.* 39,150 1,468,908
KHD Humboldt Wedag International Ltd.* 60,160 1,153,869
L.B. Foster Co., Class A* 39,760 1,209,499
Michael Baker Corp.* 38,630 1,344,324
Moog, Inc., Class A* 31,550 1,352,864
NN, Inc. 69,050 887,293
Powell Industries, Inc.* 34,860 1,422,637
Titan International, Inc. + 35,770 762,616
Werner Enterprises, Inc. + 75,810 1,645,835
- --------------------------------------------------------------------------------
18,636,463
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 11.6%
Avid Technology, Inc.* + 46,520 1,119,271
CyberSource Corp.* 63,170 1,017,669
EMS Technologies, Inc.* 51,750 1,154,543
Exar Corp.* 169,310 1,296,915
Interwoven, Inc.* 96,491 1,362,453
Mentor Graphics Corp.* 93,120 1,056,912
Plexus Corp.* 50,480 1,044,936
S1 Corp.* 136,130 833,116
Silicon Laboratories, Inc.* + 33,630 1,032,441
Take-Two Interactive Software, Inc.* 90,200 1,479,280
TNS, Inc.* 80,520 1,559,671
Verigy Ltd.* 71,318 1,161,057
Websense, Inc.* 54,740 1,223,439
- --------------------------------------------------------------------------------
15,341,703
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 11.3%
99 Cents Only Stores* 39,090 428,817
Aaron Rents, Inc. 65,030 1,760,362
America's Car-Mart, Inc.* + 54,820 1,019,104
ATC Technology Corp.* 74,990 1,780,263
California Pizza Kitchen, Inc.* 67,520 868,982
Career Education Corp.* 37,840 618,684
Children's Place Retail Stores, Inc.* 29,110 970,819
Fred's, Inc. + 124,470 1,769,963
Jo-Ann Stores, Inc.* 66,090 1,386,568
Jos. A. Bank Clothiers, Inc.* + 30,850 1,036,560
Mediacom Communications Corp.* + 164,750 975,320
PetMed Express, Inc.* 41,490 651,393
Zale Corp.* + 64,590 1,614,750
- --------------------------------------------------------------------------------
14,881,585
- --------------------------------------------------------------------------------
HEALTH CARE -- 6.9%
Amedisys, Inc.* + 26,210 1,275,641
AmSurg Corp.* 62,990 1,604,355
Analogic Corp. 22,087 1,099,049
CONMED Corp.* 59,120 1,891,840
Invacare Corp. + 48,370 1,167,652
STERIS Corp. 54,430 2,045,479
- --------------------------------------------------------------------------------
9,084,016
- --------------------------------------------------------------------------------
MATERIALS -- 6.3%
Koppers Holdings, Inc. 25,120 939,739
Minerals Technologies, Inc. 19,280 1,144,461
Pan American Silver Corp.* 38,030 845,407
Rock-Tenn Co. 26,540 1,061,069
Sensient Technologies Corp. 54,860 1,543,212
Solutia, Inc.* 88,120 1,233,680
Stepan Co. 29,290 1,598,355
- --------------------------------------------------------------------------------
8,365,923
- --------------------------------------------------------------------------------
104
- --------------------------------------------------------------------------------
Small Cap Value Opportunities Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.8% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 5.7%
BJ's Wholesale Club, Inc.* 26,420 $ 1,026,681
Chiquita Brands International, Inc.* + 87,300 1,380,213
Omega Protein Corp.* 113,950 1,340,052
Pantry, Inc.* 65,360 1,384,979
SunOpta, Inc.* 168,140 1,035,742
TreeHouse Foods, Inc.* 44,980 1,335,906
- --------------------------------------------------------------------------------
7,503,573
- --------------------------------------------------------------------------------
UTILITIES -- 4.3%
Avista Corp. 86,950 1,887,685
New Jersey Resources Corp. + 64,725 2,322,980
Piedmont Natural Gas Co., Inc. + 46,240 1,477,830
- --------------------------------------------------------------------------------
5,688,495
- --------------------------------------------------------------------------------
ENERGY -- 3.5%
Delek US Holdings, Inc. 77,890 722,040
International Coal Group, Inc.* + 185,020 1,154,525
Petroleum Development Corp.* 20,580 913,135
PetroQuest Energy, Inc. 38,930 597,576
Trico Marine Services, Inc.* + 71,930 1,228,564
- --------------------------------------------------------------------------------
4,615,840
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.7%
General Communication, Inc., Class A* 148,870 1,378,536
Shenandoah Telecommunications Co. 37,170 820,342
- --------------------------------------------------------------------------------
2,198,878
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 130,521,171
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 17.7%
BBH Securities Lending Fund ** 23,350,696 $ 23,350,696
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 116.5%
(Cost $153,344,435) $ 153,871,867
LIABILITIES IN EXCESS OF OTHER ASSETS -- (16.5%) (21,759,353)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 132,112,514
================================================================================
* 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, 2008, was $23,050,058.
** Represents collateral for securities loaned.
See accompanying notes to financial statements.
105
- --------------------------------------------------------------------------------
Portfolio of Investments
Ultra Short Duration Fixed Income Fund - September 30, 2008
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 61.1%
$ 7,137,179 FHLMC CMO/REMIC Ser 2553,
Class IH, 5.500%, 10/15/32 $ 2,071,893
6,224,251 FHLMC CMO/REMIC Ser 2571,
Class FN (A), 3.138%, 10/15/08 6,044,789
1,040,164 FHLMC CMO/REMIC Ser 2575
Class LM, 4.500%, 5/15/32 1,037,667
1,556,063 FHLMC CMO/REMIC Ser 2586,
Class WA, 4.000%, 12/15/32 1,516,920
1,064,382 FHLMC CMO/REMIC Ser 2590,
Class UL, 3.750%, 3/15/32 1,014,569
1,384,693 FHLMC CMO/REMIC Ser 2594,
Class YA, 4.000%, 4/15/23 1,359,752
10,829,122 FHLMC CMO/REMIC Ser 2625,
Class IO, 5.000%, 12/15/31 1,228,694
1,256,162 FHLMC CMO/REMIC Ser 2649,
Class PJ, 3.500%, 6/15/33 1,175,338
4,815,635 FHLMC CMO/REMIC Ser 2660,
Class PB, 5.000%, 8/15/26 4,850,154
450,959 FHLMC CMO/REMIC Ser 2682,
Class HG, 4.000%, 4/15/17 448,809
52,200 FHLMC CMO/REMIC Ser 2684,
Class GN, 3.250%, 5/15/23 52,144
442,895 FHLMC CMO/REMIC Ser 2744,
Class JX, 3.500%, 1/15/23 442,643
3,088,954 FHLMC CMO/REMIC Ser 2770,
Class FH (A), 2.888%, 10/15/08 3,007,048
1,745,651 FHLMC CMO/REMIC Ser 2886,
Class BF (A), 2.988%, 10/15/08 1,616,272
3,640,823 FHLMC CMO/REMIC Ser 2892,
Class A, 5.000%, 5/15/21 3,670,628
4,215,951 FHLMC CMO/REMIC Ser 2921,
Class JF (A), 2.988%, 1/15/35 3,944,435
319,930 FHLMC CMO/REMIC Ser 2925,
Class CF (A), 2.988%, 10/15/08 301,505
1,060,155 FHLMC CMO/REMIC Ser 2956,
Class YB, 6.950%, 1/15/35 916,720
2,286,378 FHLMC CMO/REMIC Ser 3025,
Class FC (A), 4.464%, 10/1/08 2,084,045
4,000,000 FHLMC CMO/REMIC Ser 3033,
Class AT, 5.000%, 1/15/27 4,021,317
1,206,720 FHLMC CMO/REMIC Ser 3033,
Class BY (A), 4.714%, 10/1/08 1,083,314
705,482 FHLMC CMO/REMIC Ser 3038,
Class TA, 6.700%, 9/15/35 600,174
1,956,033 FHLMC CMO/REMIC Ser 3073,
Class LA, 5.000%, 12/15/17 1,973,091
4,921,716 FHLMC CMO/REMIC Ser 3137,
Class PJ, 5.125%, 12/15/13 4,948,489
2,151,269 FHLMC CMO/REMIC Ser 3196,
Class PA, 5.250%, 8/15/11 2,175,615
6,793,948 FHLMC CMO/REMIC Ser 3405,
Class CI, 5.500%, 1/15/38 1,438,235
140,901 FHLMC Pool #B15413,
8.000%, 3/1/11 147,169
42,368 FHLMC Pool #E64944,
7.000%, 7/1/11 44,322
326,411 FHLMC Pool #G11072,
7.500%, 12/1/15 344,028
400,879 FNMA CMO/REMIC Ser 2002-67,
Class AM, 5.000%, 11/25/15 401,827
2,000,000 FNMA CMO/REMIC Ser 2003-106,
Class WC, 4.500%, 8/25/18 2,002,686
1,514,377 FNMA CMO/REMIC Ser 2003-119,
Class PU, 4.000%, 11/25/33 1,489,077
627,356 FNMA CMO/REMIC Ser 2003-19,
Class ME, 4.000%, 1/25/33 605,717
2,321,763 FNMA CMO/REMIC Ser 2003-27,
Class PC, 4.500%, 5/25/26 2,320,952
715,436 FNMA CMO/REMIC Ser 2003-33,
Class AM, 4.250%, 5/25/33 694,133
1,057,508 FNMA CMO/REMIC Ser 2003-33,
Class AU, 4.000%, 3/25/33 1,018,039
856,861 FNMA CMO/REMIC Ser 2003-34,
Class AD, 4.000%, 1/25/32 848,566
3,844,103 FNMA CMO/REMIC Ser 2003-69,
Class NF (A), 3.964%, 10/1/08 3,878,229
12,494,841 FNMA CMO/REMIC Ser 2003-79,
Class XI, 5.000%, 2/25/32 1,772,854
4,448,438 FNMA CMO/REMIC Ser 2003-81,
Class FE (A), 3.707%, 10/25/08 4,234,037
8,133,204 FNMA CMO/REMIC Ser 2004-95,
Class BI, 5.500%, 12/25/24 1,434,979
3,271,270 FNMA CMO/REMIC Ser 2004-96,
Class LF (A), 4.207%, 10/25/08 3,083,882
936,673 FNMA CMO/REMIC Ser 2005-108,
Class GU, 5.750%, 7/25/35 948,256
2,258,497 FNMA CMO/REMIC Ser 2006-109,
Class JS (A), 6.750%, 10/1/08 2,041,947
960,050 FNMA CMO/REMIC Ser 2006-2,
Class GH, 5.500%, 6/25/32 969,452
1,525,599 FNMA CMO/REMIC Ser 2006-73,
Class PJ, 6.000%, 2/25/28 1,554,118
1,232,840 FNMA CMO/REMIC Ser 2007-9,
Class YA, 5.500%, 3/25/37 1,228,159
3,907,136 FNMA CMO/REMIC Ser 2008-35,
Class IO, 4.500%, 4/25/23 529,999
12,063,438 FNMA CMO/REMIC Ser 2008-36,
Class IA, 4.500%, 10/25/22 1,529,639
7,963 FNMA Pool #190658, 7.000%, 2/1/09 8,024
60,234 FNMA Pool #253472, 7.500%, 9/1/10 61,473
137,196 FNMA Pool #519992, 7.000%, 10/1/14 144,726
178,311 FNMA Pool #534851, 7.500%, 4/1/15 187,727
131,732 FNMA Pool #535219, 7.500%, 3/1/15 138,688
68,053 FNMA Pool #535635, 8.500%, 6/1/12 70,755
559,055 FNMA Pool #555646, 7.500%, 9/1/16 588,674
106
- --------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 61.1% (CONTINUED)
$ 31,258 GNMA ARM Pool #8103 (A),
5.500%, 2/20/16 $ 32,017
35,462 GNMA ARM Pool #8287 (A),
5.125%, 11/20/17 36,196
52,015 GNMA ARM Pool #8297 (A),
5.125%, 12/20/17 52,341
87,030 GNMA ARM Pool #8333 (A),
5.500%, 10/1/08 89,341
51,824 GNMA ARM Pool #8345 (A),
5.500%, 4/20/18 53,134
72,864 GNMA ARM Pool #8366 (A),
5.375%, 10/1/08 74,078
2,774 GNMA ARM Pool #8404 (A),
5.625%, 9/20/18 2,821
29,690 GNMA ARM Pool #8405 (A),
5.625%, 9/20/18 30,238
6,042 GNMA ARM Pool #8462 (A),
5.375%, 10/1/08 6,112
39,427 GNMA ARM Pool #8489 (A),
5.500%, 10/1/08 40,445
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 87,763,117
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 4.7%
750,000 Caterpillar Financial Asset Trust
Ser 2008-A, Class A2B (A),
4.360%, 10/25/08 750,000
1,500,000 CNH Equipment Trust Ser 2008-B,
Class A3B (A), 3.888%, 10/16/08 1,464,990
880,282 Harley-Davidson Motorcycle
Trust Ser 2005-2, Class A2,
4.070%, 2/15/12 875,730
856,407 Harley-Davidson Motorcycle
Trust Ser 2006-1, Class A2,
5.040%, 10/15/12 857,657
1,000,000 Nissan Auto Lease Trust Ser
2008-A, Class A2B (A),
4.038%, 10/15/08 1,000,000
1,838,108 Wells Fargo Mortgage Backed
Securities, Ser 2006-16,
Class A12, 5.000%, 11/25/36 1,812,358
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES $ 6,760,735
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 20.8%
7,000,000 FHLB (A), 8.000%, 12/3/08 6,947,500
8,000,000 FHLB Discount Note, 10/2/08 7,999,887
5,000,000 FHLB Discount Note, 10/30/08 4,997,985
3,500,000 FHLMC, 4.050%, 6/30/10 3,510,864
2,000,000 FNMA, 4.750%, 12/17/12 2,009,844
2,000,000 FNMA, 4.750%, 7/23/13 2,008,130
2,500,000 FNMA, 4.510%, 1/16/14 2,507,148
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 29,981,358
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 5.9%
FINANCIALS -- 5.9%
2,000,000 American Express Credit Company,
MTN (A), 5.109%, 10/27/08 1,880,806
1,500,000 CIT Group, Inc., MTN,
5.000%, 11/24/08 1,453,106
1,935,000 Goldman Sachs Group, Inc.,
MTN (A), 3.294%, 12/22/08 1,931,113
750,000 Morgan Stanley, 3.875%, 1/15/09 690,014
1,000,000 PNC Funding Corp., 4.500%, 3/10/10 989,984
1,600,000 Wells Fargo & Company,
MTN, 3.980%, 10/29/10 1,571,838
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 8,516,861
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 3.6%
PENNSYLVANIA -- 3.6%
2,750,000 Commonwealth Fing Auth
PA Rev, Ser A, 3.860%, 6/1/11 2,734,078
2,500,000 Pennsylvania State Tpk Commn
BANS, Ser B, 5.290%, 10/15/09 2,503,500
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $ 5,237,578
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 5.2%
7,436,454 Touchstone Institutional
Money Market Fund^ $ 7,436,454
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 101.3%
(Cost $147,479,404) $ 145,696,103
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (1.3%) (1,858,845)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 143,837,258
================================================================================
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2008.
ARM - Adjustable Rate Mortgage
BANS - Bond Anticipation Notes
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.
107
- --------------------------------------------------------------------------------
Portfolio of Investments
Value Opportunities Fund - September 30, 2008
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.4% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 27.5%
Assurant, Inc. 71,760 $ 3,946,800
Bank of New York Mellon Corp. 154,390 5,030,026
Citigroup, Inc. 217,775 4,466,565
Fifth Third Bancorp + 299,710 3,566,549
Invesco Ltd. + 255,520 5,360,810
JPMorgan Chase & Co. 121,920 5,693,663
KeyCorp + 319,825 3,818,711
Lincoln National Corp. 57,800 2,474,418
Loews Corp. 90,946 3,591,458
PNC Financial Services Group, Inc. 45,315 3,385,031
Simon Property Group, Inc. + 44,115 4,279,155
US Bancorp + 116,605 4,200,112
- --------------------------------------------------------------------------------
49,813,298
- --------------------------------------------------------------------------------
ENERGY -- 13.0%
Cabot Oil & Gas Corp. 60,555 2,188,458
Chevron Texaco Corp. 99,785 8,230,267
Exxon Mobil Corp. 89,590 6,957,559
Oceaneering International, Inc.* 58,820 3,136,282
Peabody Energy Corp. 65,110 2,929,950
- --------------------------------------------------------------------------------
23,442,516
- --------------------------------------------------------------------------------
HEALTH CARE -- 11.7%
Boston Scientific Corp.* 193,020 2,368,355
Hospira, Inc.* 74,800 2,857,360
Johnson & Johnson 61,565 4,265,223
Merck & Co., Inc. 166,970 5,269,574
WellPoint, Inc.* 67,170 3,141,541
Wyeth 90,195 3,331,803
- --------------------------------------------------------------------------------
21,233,856
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 11.6%
CVS/Caremark Corp. + 72,580 2,443,043
HJ Heinz Co. 98,315 4,906,901
Kraft Foods, Inc.- Class A 88,510 2,898,703
Lorillard, Inc. 52,257 3,718,086
Philip Morris International, Inc. 53,375 2,567,338
Procter & Gamble Co. 64,120 4,468,522
- --------------------------------------------------------------------------------
21,002,593
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 9.7%
H&R Block, Inc. + 195,350 4,405,143
McDonald's Corp. 38,205 2,357,249
Time Warner, Inc. + 335,030 4,392,243
Walt Disney Co. 67,960 2,085,692
Zale Corp.* + 172,270 4,306,750
- --------------------------------------------------------------------------------
17,547,077
- --------------------------------------------------------------------------------
UTILITIES -- 6.6%
DPL, Inc. + 105,975 2,628,180
Exelon Corp. 77,720 4,866,827
National Fuel Gas Co. + 105,635 4,455,684
- --------------------------------------------------------------------------------
11,950,691
- --------------------------------------------------------------------------------
INDUSTRIALS -- 6.0%
General Cable Corp.* 74,525 2,655,326
Raytheon Co. 49,025 2,623,328
Shaw Group, Inc.* 94,635 2,908,133
Waste Management, Inc. 83,075 2,616,032
- --------------------------------------------------------------------------------
10,802,819
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 5.2%
Corning, Inc. 143,525 2,244,731
International Business Machines Corp. 23,845 2,788,911
Symantec Corp.* 126,080 2,468,646
TriQuint Semiconductor, Inc.* 410,850 1,967,972
- --------------------------------------------------------------------------------
9,470,260
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.8%
AT&T, Inc. 148,495 4,145,980
Verizon Communications, Inc. 84,200 2,701,978
- --------------------------------------------------------------------------------
6,847,958
- --------------------------------------------------------------------------------
MATERIALS -- 3.3%
Alcoa, Inc. 107,630 2,430,285
Ball Corp. 87,865 3,469,789
- --------------------------------------------------------------------------------
5,900,074
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 178,011,142
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 22.4%
BBH Securities Lending Fund ** 35,830,066 35,830,066
Touchstone Institutional
Money Market Fund^ 4,653,025 4,653,025
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 40,483,091
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 120.8%
(Cost $234,467,807) $ 218,494,233
LIABILITIES IN EXCESS OF OTHER ASSETS -- (20.8%) (37,638,133)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 180,856,100
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
+ All or a portion of the security is on loan. The total value of securities
on loan, as of September 30, 2008, was $37,564,761.
** Represents collateral for securities loaned.
See accompanying notes to financial statements.
108
- --------------------------------------------------------------------------------
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 Value Opportunities Fund
(collectively, the "Former Turner Funds"), Touchstone Mid Cap Fund, Touchstone
Sands Capital Select Growth Fund and Touchstone Premium Yield Equity Fund as of
September 30, 2008, and the related statements of operations for the year then
ended and the statements of changes in net assets for each of the two years in
the period then ended and financial highlights for each of the three years in
the period then ended, and the accompanying statement of assets and liabilities,
including the portfolio of investments of Touchstone International Growth Fund
(formerly, the Navellier International Growth Fund) as of September 30, 2008,
and the related statements of operations and changes in net assets and financial
highlights for the nine month period then ended (collectively, the "Funds").
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 Touchstone Mid Cap Fund were audited by other
auditors whose report dated November 29, 2005, expressed an unqualified opinion
on those financial highlights. The financial highlights for the year ended
October 31, 2003 of the Touchstone Sands Capital Select Growth Fund were audited
by other auditors whose report dated December 12, 2003, expressed an unqualified
opinion on those financial highlights. The statement of operations for the year
ended December 31, 2007, the statements of changes in net assets for each of the
two years in the period then ended and financial highlights for each of the five
years in the period then ended of the Touchstone International Growth Fund were
audited by other auditors whose report dated February 27, 2008, expressed an
unqualified opinion on those financial statements and 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, 2008, 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 for the
first ten of the eleven Funds referred to above of the Touchstone Funds Group
Trust at September 30, 2008, the results of their operations for the year then
ended and the changes in their net assets for each of the two years in the
period then ended and financial highlights for each of the three years in the
period then ended and the financial position of the Touchstone International
Growth Fund at September 30, 2008 and the related statements of its operations
and changes in net assets and financial highlights for the nine month period
then ended, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
November 25, 2008
109
- --------------------------------------------------------------------------------
Other Items (Unaudited)
- --------------------------------------------------------------------------------
DIVIDENDS RECEIVED DEDUCTION
For corporate shareholders, the following ordinary dividends paid during the
year ended September 30, 2008 qualify for the corporate dividends received
deduction:
Diversified Small Cap Value Fund 6%
International Growth Fund 97%
Mid Cap Fund 34%
Premium Yield Equity Fund 100%
Value Opportunities Fund 99%
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, 2008" 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.
110
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2008 2008 2008 2008*
- --------------------------------------------------------------------------------------------------------
CLOVER CORE FIXED INCOME FUND
Class I Actual 0.85% $ 1,000.00 $ 932.10 $ 4.11
Class I Hypothetical 0.85% $ 1,000.00 $ 1,020.75 $ 4.30
DIVERSIFIED SMALL CAP VALUE FUND
Class A Actual 1.45% $ 1,000.00 $ 1,012.80 $ 7.29
Class A Hypothetical 1.45% $ 1,000.00 $ 1,017.75 $ 7.31
Class C Actual 2.20% $ 1,000.00 $ 1,009.60 $ 11.03
Class C Hypothetical 2.20% $ 1,000.00 $ 1,014.02 $ 11.06
Class Z Actual 1.45% $ 1,000.00 $ 1,012.60 $ 7.27
Class Z Hypothetical 1.45% $ 1,000.00 $ 1,017.78 $ 7.29
HEALTHCARE AND BIOTECHNOLOGY FUN D
Class A Actual 1.55% $ 1,000.00 $ 966.70 $ 7.63
Class A Hypothetical 1.55% $ 1,000.00 $ 1,017.25 $ 7.82
Class C Actual 2.34% $ 1,000.00 $ 961.90 $ 11.49
Class C Hypothetical 2.34% $ 1,000.00 $ 1,013.29 $ 11.79
INTERNATIONAL GROWTH FUND
Class A Actual 1.48% $ 1,000.00 $ 792.60 $ 6.62
Class A Hypothetical 1.48% $ 1,000.00 $ 1,017.62 $ 7.45
Class C Actual** 1.46% $ 1,000.00 $ 1,009.70 $ 0.04
Class C Hypothetical** 1.46% $ 1,000.00 $ 1,000.10 $ 0.04
Class Y Actual** 0.44% $ 1,000.00 $ 1,010.40 $ 0.01
Class Y Hypothetical** 0.44% $ 1,000.00 $ 1,000.12 $ 0.01
MID CAP FUND
Class A Actual 1.15% $ 1,000.00 $ 860.40 $ 5.35
Class A Hypothetical 1.15% $ 1,000.00 $ 1,019.25 $ 5.80
Class C Actual 1.90% $ 1,000.00 $ 868.30 $ 8.87
Class C Hypothetical 1.90% $ 1,000.00 $ 1,015.50 $ 9.57
Class Y Actual 0.90% $ 1,000.00 $ 861.60 $ 4.19
Class Y Hypothetical 0.90% $ 1,000.00 $ 1,020.49 $ 4.55
Class Z Actual 1.15% $ 1,000.00 $ 860.30 $ 5.36
Class Z Hypothetical 1.15% $ 1,000.00 $ 1,019.24 $ 5.81
111
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2008 2008 2008 2008*
- ---------------------------------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND
Class A Actual 1.20% $ 1,000.00 $ 869.70 $ 5.61
Class A Hypothetical 1.20% $ 1,000.00 $ 1,019.00 $ 6.06
Class C Actual 1.95% $ 1,000.00 $ 866.60 $ 9.09
Class C Hypothetical 1.95% $ 1,000.00 $ 1,015.26 $ 9.81
Class Y Actual*** 0.90% $ 1,000.00 $ 916.30 $ 1.18
Class Y Hypothetical*** 0.90% $ 1,000.00 $ 1,005.60 $ 1.23
SANDS CAPITAL SELECT GROWTH FUND
Class Y Actual 1.10% $ 1,000.00 $ 870.60 $ 5.14
Class Y Hypothetical 1.10% $ 1,000.00 $ 1,019.51 $ 5.55
Class Z Actual 1.35% $ 1,000.00 $ 869.40 $ 6.30
Class Z Hypothetical 1.35% $ 1,000.00 $ 1,018.26 $ 6.81
SHORT DURATION FIXED INCOME FUND
Class Z Actual 0.74% $ 1,000.00 $ 991.80 $ 3.69
Class Z Hypothetical 0.74% $ 1,000.00 $ 1,021.30 $ 3.74
SMALL CAP VALUE OPPORTUNITIES FUND
Class Z Actual 1.50% $ 1,000.00 $ 927.40 $ 7.23
Class Z Hypothetical 1.50% $ 1,000.00 $ 1,017.50 $ 7.57
ULTRA SHORT DURATION FIXED INCOME FUND
Class Z Actual 0.69% $ 1,000.00 $ 1,002.00 $ 3.45
Class Z Hypothetical 0.69% $ 1,000.00 $ 1,021.55 $ 3.49
VALUE OPPORTUNITIES FUND
Class A Actual 1.19% $ 1,000.00 $ 878.90 $ 5.58
Class A Hypothetical 1.19% $ 1,000.00 $ 1,019.07 $ 5.99
Class C Actual 1.93% $ 1,000.00 $ 875.30 $ 9.04
Class C Hypothetical 1.93% $ 1,000.00 $ 1,015.35 $ 9.72
Class Z Actual 1.08% $ 1,000.00 $ 879.30 $ 5.06
Class Z Hypothetical 1.08% $ 1,000.00 $ 1,019.62 $ 5.44
* 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 [or366]] (to reflect the one-half year
period).
** The example is based on an investment of $1,000 invested at the beginning
of the period (September 29, 2008) and held for the entire period through
September 30, 2008.
*** The example is based on an investment of $1,000 invested at the beginning
of the period (August 12, 2008) and held for the entire period through
September 30, 2008.
112
- --------------------------------------------------------------------------------
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 OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS POSITION(S) LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder Trustee and Until Senior Vice President of The Western and 42 Director of
Touchstone President retirement at Southern Life Insurance Company; President and LaRosa's (a
Advisors, Inc age 75 or until a director of IFS Financial Services, Inc. (a restaurant
303 Broadway she resigns or holding company); Director of Capital Analysts chain)
Cincinnati, OH is removed Incorporated (an investment advisor and
Year of Birth: Trustee since broker-dealer), Integrated Investment
1955 1999 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.
- ------------------------------------------------------------------------------------------------------------------------------------
113
- --------------------------------------------------------------------------------
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 42 Director of the Federal Reserve
303 Broadway retirement at Executive Officer of Cox Bank of Cleveland and Duke Energy
Cincinnati, OH age 75 or until Financial Corp. (a (a utility company); Chairman of
Year of Birth: he resigns or is financial services The Cincinnati Bell Telephone
1947 removed company). Company LLC; Director of The
Trustee since Timken Company (a manufacturer of
1994 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 42 None
303 Broadway retirement at Enterprises (a privately
Cincinnati, OH age 75 or until held investment
Year of Birth: he resigns or is company).
1938 removed
Trustee since
1999
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Trustee Until Executive for Duro Bag 42 Trustee of Jewish Hospital,
Siekmann retirement at Manufacturing Co. (a bag Greater Cincinnati Arts &
303 Broadway age 75 or until manufacturer); President Education Center and Cincinnati
Cincinnati, OH he resigns or is of Shor Foundation for Arts Association
Year of Birth: removed Epilepsy
1938 Trustee since Research (a charitable
2005 foundation); Trustee of
Riverfront
Funds (mutual funds) from
1999 - 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
114
- --------------------------------------------------------------------------------
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. Trustee Until Retired Partner of KPMG LLP (a 42 Trustee of Tri-Health
Stautberg retirement at certified public accounting firm). Physician
303 Broadway age 75 or until Vice President of St. Xavier High Enterprise Corporation.
Cincinnati, OH he resigns or is School.
Year of removed
Birth: 1934 Trustee since
1994
- ------------------------------------------------------------------------------------------------------------------------------------
John P. Trustee Until CEO, Chairman and Director of 42 None
Zanotti retirement at Avaton, Inc. (a wireless
303 Broadway age 75 or until entertainment company). President
Cincinnati, OH he resigns or is of Cincinnati Biomedical (a life
Year of removed science and economic development
Birth: 1948 Trustee since company) from July 2003 until
2002 2005. 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 11 series of the Trust, 4 series
of Touchstone Institutional Funds Trust, 5 series of Touchstone Investment
Trust, 7 series of Touchstone Strategic Trust, 4 series of Touchstone
Tax-Free Trust, and 11 variable annuity series of Touchstone Variable
Series Trust.
(4) Each Trustee is also a Trustee of Touchstone Institutional Funds Trust,
Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone
Tax-Free Trust, and Touchstone Variable Series Trust.
115
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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 See biography above. 42 See biography
Touchstone and Trustee resignation, above.
Advisors, Inc. removal or
303 Broadway disqualification
Cincinnati, OH President since
Year of Birth: 1955 2004; President
from 2000-2002
- ------------------------------------------------------------------------------------------------------------------------------------
Brian E. Hirsch Until Senior Vice 42 None
Touchstone Vice resignation, President-Compliance of IFS
Advisors, Inc. President removal or Financial
303 Broadway and Chief disqualification Services, Inc., Director of
Cincinnati, OH Compliance Vice President Compliance of W&S Brokerage
Year of Birth: 1956 Officer since 2003 Services, Inc.; Chief
Compliance Officer
of Puglisi & Co. from 2001
until 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
William A. Dent Vice Until Senior Vice President of 42 None
Touchstone President resignation, Touchstone Advisors, Inc.;
Advisors, Inc. removal or Marketing Director of
303 Broadway disqualification Promontory Interfinancial
Cincinnati, OH Vice President Network from 2002-2003;
Year of Birth: 1963 since 2004 Senior Vice President of
McDonald Investments from
1998 - 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft Controller Until Senior Vice President, Chief 42 None
Touchstone and Treasurer resignation, Financial Officer and
Advisors, Inc. removal or Treasurer of Integrated
303 Broadway disqualification Investment Services, Inc.
Cincinnati, OH Controller since (until April 2007),
Year of Birth: 1962 2000 IFS Fund Distributors,
Treasurer since Inc. and W&S Brokerage
2003 Services, Inc.; Chief
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 Assistant Vice President and 42 None
JPMorgan resignation, Senior Counsel of JPMorgan;
303 Broadway removal or Director and Senior Counsel
Cincinnati, OH disqualification of Integrated Investment
Year of Birth: 1970 Secretary since Services, Inc. and IFS Fund
2006 Distributors, Inc. until
April 2007
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Each Trustee is also a Trustee of Touchstone Institutional Funds Trust,
Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone
Tax-Free Trust, and Touchstone Variable Series Trust.
(2) The Touchstone Fund Complex consists of 11 series of the Trust, 4 series
of Touchstone Institutional Funds Trust, 5 series of Touchstone Investment
Trust, 7 series of Touchstone Strategic Trust, 4 series of Touchstone
Tax-Free Trust, and 11 series of Touchstone Variable Series Trust.
116
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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
JPMorgan Chase Bank, N.A.
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
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.
Donald Siekmann 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 $172,700 for the September 30,
2008 fiscal year and approximately $247,100 for the September 30, 2007 fiscal
year, including fees associated with the annual audit and filings of the
registrant's Form N-1A and Form N-SAR. $16,000 of the 2008 fees are associated
with additional filings of Form N1-A and Form N-14. $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 $6,000 for the
September 30, 2008 fiscal year and $116,000 for the September 30, 2007 fiscal
year and consisted of limited internal control testing in fiscal year 2008 and
SAS 70 internal control reviews of the registrant's fund accountant and transfer
agent in fiscal year 2007.
(c) Tax Fees. Tax fees totaled approximately $100,600 for the September 30, 2008
fiscal year and $96,750 for the September 30, 2007 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, 2008 or September 30, 2007 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 advisor that provides ongoing services to the
registrant were approximately $135,600 for the fiscal year ended September 30,
2008 and $295,500 for the fiscal year ended September 30, 2007.
(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 John P.
Zanotti, 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 7, 2008
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 7, 2008
/s/ Terrie A. Wiedenheft
- ----------------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: December 3, 2008