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 811-3651
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Touchstone Strategic 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: 3/31/09
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Date of reporting period: 3/31/09
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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.
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MARCH 31, 2009
ANNUAL REPORT
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TOUCHSTONE STRATEGIC TRUST
Touchstone Diversified Small Cap Growth Fund
Touchstone Growth Opportunities Fund
Touchstone Large Cap Core Equity Fund
Touchstone Large Cap Growth Fund
Touchstone Large Cap Value Fund
Touchstone Mid Cap Growth 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) 4-19
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Tabular Presentation of Portfolios of Investments (Unaudited) 20
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Statements of Assets and Liabilities 21-24
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Statements of Operations 25-26
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Statements of Changes in Net Assets 27-29
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Financial Highlights 30-40
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Notes to Financial Statements 41-55
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Portfolios of Investments:
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Diversified Small Cap Growth Fund 56-57
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Growth Opportunities Fund 58
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Large Cap Core Equity Fund 59
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Large Cap Growth Fund 60
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Large Cap Value Fund 61
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Mid Cap Growth Fund 62-63
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Report of Independent Registered Public Accounting Firm 64
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Other Items (Unaudited) 65-73
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Management of the Trust (Unaudited) 74-76
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2
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Letter from the President
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Dear Fellow Shareholder,
We are pleased to provide you with the Touchstone Strategic Trust Annual Report.
Inside you will find key financial information and manager commentaries for the
twelve months ended March 31, 2009.
During the past 12 months, investors contended with one of the worst global
recessions in the U.S. and overseas in three decades. Two giant mortgage lenders
were nationalized and several venerable investment firms collapsed, and the
serious problems with the housing slump, the freezing of the credit markets and
fears of bank failures continued. U.S. policymakers and the Federal Reserve have
been working to limit economic deterioration and to restore financial stability
by crafting bold new programs and credible plans to re-open credit markets,
stimulate the economy and boost investor confidence. Congress passed the $700
billion bailout bill which authorized the Treasury to buy up troubled assets
from financial institutions. These actions will play a crucial role in shaping
the course of the economy and financial markets this year and beyond.
Throughout the period, U.S. equity markets continued to be extremely volatile as
the spillover from the housing and credit market bubbles remained very evident.
The main drag to the economy currently appears to be coming from the business
sector which continues to cut back on inventories, capital spending and jobs.
Residential housing also remains depressed, although there are hints of
improvement in this area. In late March, investor sentiment improved somewhat
and the stock market rebounded off its lows. Consumer spending appears to have
stabilized in the first quarter of 2009, after having declined at a more than 4
percent annualized rate in the two previous quarters, and the manufacturing
sector, which suffered steep declines since mid-2008, is also showing signs of
bottoming.
It is important to focus on the long-term composition of your investment
portfolio. We continue to believe that diversification is essential to balancing
risk and return. We recommend that you continue to work with your financial
professional and focus on a sound asset allocation strategy, investing in a
broad mix of stock, bond, and money market mutual funds to help keep your
financial strategy on course.
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 Strategic Trust
3
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE DIVERSIFIED SMALL CAP GROWTH FUND
SUB-ADVISED BY FORT WASHINGTON INVESTMENT ADVISORS
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Diversified Small Cap Growth Fund was -36.02%
for the year ended March 31, 2009. The total return of the Russell 2000(R)
Growth Index was -36.36% for the same period.
Although the second quarter of 2008 finished in positive territory, June's
return was a harbinger of things to come later in the year as the market had one
of its worst June months in decades. The dominant theme in the second quarter
was energy as oil and natural gas prices soared. The third quarter highlighted
the serious problems affecting the global bond and stock markets and included
the demise of former bellwether financial firms, the continued housing slump,
the freezing of the credit markets and fears of bank failures - both domestic
and abroad, and the rapid decline in industrial commodity stocks, which appeared
to be the cause of forced selling by highly leveraged hedge funds that are large
holders of such stocks. Perhaps the most dramatic move of the quarter occurred
in the Energy sector but, unlike the first quarter, this time to the downside.
After a steady rise in the first half, crude oil collapsed in the third quarter
as a result of a rising U.S. dollar and the fear that a slowing global economy
would materially reduce oil demand.
The problems that plagued the markets in the third quarter continued to play out
in the fourth; however, the market seemed to find some solid footing in November
as several catalysts materialized to halt the rapid deterioration in investor
sentiment. Those catalysts included the receipt by Citigroup of some government
intervention bailout funds, the announcement by the Fed that it would buy over
$500 billion in mortgage backed and agency securities, the possibility of a much
more significant than expected stimulus package, and the lowering of the Fed
Funds rate to a range of 0-0.25%. Additionally, the temporary resolution of the
auto company crisis from the Bush administration provided backing to the ailing
industry, and the realization that valuation levels of many stocks and, by some
measures, the major indices, were becoming very attractive, also slowed
deterioration. Oil again declined precipitously in just the final quarter alone,
dropping from the summer high of over $145/barrel to about $35/barrel in
December in response to the rapid decline in the pace of global economic growth,
aided by the aforementioned unwinding in positions in hedge funds.
A strong end to 2008, combined with a positive start to 2009 saw the equity
markets rally significantly off the November lows. However, like all of the
rallies recently, this one also ended in the resumption of the unrelenting bear
market that started in the fourth quarter of 2007. Once again, renewed concerns
about the global economy generally, and the Financials sector specifically,
drove investor sentiment down and prices followed. This negative sentiment
prevailed until early March when equities rallied due to reasonably positive
comments from several bank CEOs and more clarity on new government programs
aimed at preventing further deterioration in bank balance sheets. Furthermore,
the Federal Reserve announced it would buy hundreds of billions in U.S.
Treasuries and other mortgage-related securities in order to force rates lower,
thereby providing homeowners with the ability to refinance, along with valuation
levels in the market that appeared attractive adding to the rally.
PORTFOLIO REVIEW
For the year, the sectors with the most positive impact on relative performance
were Industrials, Consumer Discretionary, Telecommunication Services and
Materials. Sectors detracting from relative performance were driven by weakness
in the Energy, Information Technology, Financials and Health Care sectors.
Individual names that added to performance included Industrials stocks
Aerovironment, Watson Wyatt, Duff & Phelps and Bucyrus International; Consumer
Discretionary stocks Panera Bread, Coinstar, BJ's Restaurant and PetMed Express;
and Telecommunication Services stock Syniverse Holdings. Names that detracted in
underperforming sectors included Energy stocks GMX Resources, McMoRan
Exploration, ION Geophysical, and Berry Petroleum; Information Technology stock
Web.com; Financials stocks Cash America and Portfolio Recovery Associates; and
Health Care stocks BioMarin Pharmaceutical, ArthroCare, Spectranetics, RTI
Biologics and Wright Medical Group.
4
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Management's Discussion of Fund Performance (Continued)
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The quantitative component of our stock selection process was beneficial over
the course of the year as the top three deciles of attractively ranked stocks
outperformed the bottom three deciles. Our process helps to synthesize the key
factors that we believe are important in driving stock returns, including
business prospects of the company, the stock's valuation, as well as price
momentum.
CURRENT STRATEGY AND OUTLOOK
The Fund is positioned to maintain its overweight in Health Care and Consumer
Staples, relative to the benchmark, as we continue to see the greatest number of
opportunities in those sectors for sustained, high growth with less sensitivity
to the broader economy. We believe economic difficulty will continue for several
quarters and feel these holdings should help provide some defensive
characteristics. The Fund is underweight Industrials based on concern for the
impact of slowing global growth on the companies in this sector. However, the
Fund owns positions in stocks that have traded down to extremely depressed
levels due to concerns about domestic and/or global economic activity. Owning
positions in such names help to somewhat balance the more defensive positioning
in Health Care and Consumer Staples. These companies provide leverage to markets
that should benefit from the government stimulus spending as well as some
economic sensitivity. We have modestly reduced the Fund's weight in Energy as we
have exited several names which had increased debt levels relative to the time
of purchase. The Fund is also underweight the Financials sector and still holds
no banks or thrifts due to continuing concerns about the credit cycle. However,
we would begin to initiate positions once we believe we can appropriately assess
the worst-case, credit-cycle scenario. We have increased the underweight in
Technology since balance sheets at technology companies tend to be very strong
with little or no debt, large cash reserves and decent valuation levels.
It is likely the volatility in the equity markets will continue for some time,
so the challenge is to find companies that can increase sales and earnings
during what will be a difficult global economy for the foreseeable future. The
current environment will not provide a tailwind to the Industrials and
commodity-related sectors, nor will the free-spending consumer provide a similar
tailwind to Consumer Discretionary companies; thus the Fund has relatively less
exposure to companies that need strong global growth and robust consumer
spending to increase sales and earnings.
5
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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 GROWTH FUND - CLASS A*
AND THE RUSSELL 2000(R) GROWTH INDEX
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DIVERSIFIED SMALL CAP GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year Since Inception*
Class A (39.71%) (15.42%)
Class C* (36.41%) (14.04%)
Class Y (35.98%) (13.30%)
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Diversified Small Cap Growth Fund - Class A Russell 2000(R) Growth Index
DATE BALANCE DATE BALANCE
---- ------- ---- -------
9/6/2006 9,425 9/6/2006 10,000
9/30/2006 9,510 9/30/2006 9,962
12/31/2006 10,368 12/31/2006 10,836
3/31/2007 10,971 3/31/2007 11,104
6/30/2007 12,008 6/30/2007 11,847
9/30/2007 12,309 9/30/2007 11,850
12/31/2007 12,113 12/31/2007 11,601
3/31/2008 10,173 3/31/2008 10,112
6/30/2008 10,536 6/30/2008 10,564
9/30/2008 9,664 9/30/2008 9,826
12/31/2008 6,944 12/31/2008 7,129
3/31/2009 6,508 3/31/2009 6,434
Past performance is not predictive of future performance.
* The chart above represents performance of 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 Y shares
commenced on September 6, 2006. The initial public offering of Class C
shares commenced on August 1, 2007. The returns for Class C shares include
performance of the Fund that was achieved prior to the creation of Class C
shares (August 1, 2007), which is the same as the performance for Class A
shares through August 1, 2007. The returns have been restated for sales
charges and for fees applicable to Class C shares.
** 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.
6
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE GROWTH OPPORTUNITIES FUND
SUB-ADVISED BY WESTFIELD CAPITAL MANAGEMENT, LLC
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Growth Opportunities Fund was -33.53% for the
twelve month period ended March 31, 2009. The total return of the Russell
3000(R) Growth Index was -34.42% for the same period.
PORTFOLIO REVIEW
Over the twelve month period ending March 31, 2009, the Fund achieved relative
gains across multiple economic sectors, including Industrials, Information
Technology, and Materials. Energy, Consumer Staples, and Financials were areas
of relative underperformance.
The Industrials sector contributed significantly to relative returns during the
period. Ametek, a global manufacturer of electronic instruments and
electromechanical devices, was one of the biggest drivers of sector returns.
Acquisitions completed in the last twelve months, combined with effective cost
management augmented earnings growth. We believe that Ametek's exposure to the
Aerospace & Defense and Power markets will help the company outperform its peers
within the industry. Corrections Corp., a leader of outsourced correctional
services, was purchased in early 2009 and has contributed positively to returns.
Concerns about state budgetary pressures weighed heavily on the stock and
created a buying opportunity. Our long-term view on the industry is that a major
mismatch between supply and demand for prison beds has not improved and managing
the supply shortfall will be most economically addressed through further
outsourcing of prison populations to companies like Corrections Corp.
The Information Technology sector also contributed positively to relative
returns. Check Point Software, which markets a range of network security
products, contributed meaningfully to relative results. We favor the stock given
the company's indirect sales operating model and accelerating growth potential
in its core business. Systems software vendor BMC Software reported quarterly
earnings that were ahead of Wall Street expectations driven by a dramatic
increase in operating margins. A near doubling of large deals (over a million in
contract value) gives us confidence in the sustainability of the margin
improvement. The company also benefitted from Cisco's entry into the data center
server market where BMC will be their systems management partner. NICE Systems,
a provider of solutions for the management and analysis of unstructured content
and data, reported better-than-expected earnings in the fourth quarter of 2008
on revenue growth of 12 percent. Given the uncertainty around corporate spending
on technology, its focus on improving operational efficiencies and mitigating
risk helped to differentiate fundamental performance. Large deal activity in the
security space should provide good revenue visibility throughout 2009.
Health Care stocks also contributed positively to relative returns during the
period. Pharmaceutical giant Wyeth traded higher after the company entered into
a definitive merger agreement with Pfizer in late January. While the prospect of
an acquisition was not a cornerstone of our investment thesis, the deal
highlights the value of Wyeth's products in the late stages of development.
Biogen Idec reported total revenue growth of more than 20 percent with solid
contribution from both Rituxin (Rheumatoid Arthritis, Non-Hodgkin's Lymphoma)
and Avonex (Multiple Sclerosis). Prescription trends for Tysabri (Multiple
Sclerosis) stabilized in the fourth quarter of 2008 and appear to have continued
this trend in the first quarter of 2009 despite the reporting of a fifth case of
PML in early February. We continue to believe the lack of patient satisfaction
with current therapies will drive further growth in Tysabri despite the
identified side-effect profile.
7
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Management's Discussion of Fund Performance (Continued)
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Energy was a source of weakness in relative returns during the period. Crude oil
prices dropped dramatically from their July 2008 peak and portfolio investments
with exposure to the pursuit of oil and natural gas were punished in the second
half of 2008. Shares of Exterran Holdings, a manufacturer of compression
equipment used for the movement of natural gas, declined more than the Energy
sector broadly. Investors were disappointed with the quarterly earnings results
which were light of expectations after a one-time charge for cost overruns at
two international fabrication projects. However, the economics of the company's
business are not tied to the absolute price of the commodity but rather global
gas production. Oil services company Weatherford International underperformed
its industry peers despite industry-leading international growth and
considerable exposure to more stable production-related businesses. National
Oilwell Varco, a provider of drilling rigs and rig-related services, also traded
lower as Wall Street estimates of forward earnings were revised downward. While
there has no doubt been a moderation in demand for fossil fuels with the
slowdown in economic growth, the supply outlook has not changed and we believe
that powerful demographic trends should buoy world-wide demand.
The Financials sector was the most significant detractor from relative returns
during the period. Relative gains within Investment Banking & Brokerage were
overshadowed by weakness in shares of regional banks. After a long period of
time with minimal banking exposure, the Fund increased its exposure to regional
banks at the end of 2008. However, following an initial period of relative
outperformance, these holdings came under tremendous pressure. We were concerned
that current credit and capital deterioration would continue to suppress
earnings prospects for banks and erode their balance sheets; therefore positions
in the Regional Banks industry were sold.
CURRENT STRATEGY AND OUTLOOK
The deeply oversold condition in the U.S. equity market reversed course in the
beginning of March, after a series of macro events and the release of some
economic data that appeared "less negative." Although we remain loath to chase
this market, there are signs of life that are likely to lead to incremental
changes to the Fund as some defensive growth stocks will be used as a source for
more pro-cyclical investments. Modest credit market improvement, easy financial
comparisons, a positively sloped yield curve and huge cash balances that are at
risk of missing a market move all heighten our interest in a more offensive
portfolio posture. This, as always, will happen one stock at a time.
8
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
GROWTH OPPORTUNITIES FUND - CLASS A* AND THE RUSSELL 3000(R) GROWTH INDEX
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GROWTH OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS**
Cumulative
1 Year 5 years 10 Years Since Inception* Since Inception*
Class A (37.35%) (5.54%) (2.32%) 4.44% --
Class C* (33.64%) (4.87%) (2.36%) 4.20% --
Class Y -- -- -- -- 0.28%
Inst. Class -- -- -- -- 0.35%
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Growth Opportunities Fund - Class A Russell 3000(R) Growth Index
DATE DATE
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03/31/99 9,425 03/31/99 10,000
06/30/99 10,238 06/30/99 10,460
09/30/99 10,298 09/30/99 10,067
12/31/99 15,239 12/31/99 12,654
03/31/00 17,802 03/31/00 13,576
06/30/00 17,681 06/30/00 13,165
09/30/00 18,614 09/30/00 12,470
12/31/00 14,849 12/31/00 9,818
03/31/01 10,963 03/31/01 7,805
06/30/01 12,105 06/30/01 8,518
09/30/01 8,872 09/30/01 6,812
12/31/01 10,623 12/31/01 7,891
03/31/02 9,980 03/31/02 7,690
06/30/02 7,603 06/30/02 6,270
09/30/02 6,412 09/30/02 5,299
12/31/02 6,824 12/31/02 5,679
03/31/03 6,972 03/31/03 5,608
06/30/03 8,290 06/30/03 6,444
09/30/03 8,597 09/30/03 6,726
12/31/03 9,536 12/31/03 7,437
03/31/04 9,915 03/31/04 7,522
06/30/04 9,805 06/30/04 7,657
09/30/04 9,130 09/30/04 7,252
12/31/04 10,348 12/31/04 7,952
03/31/05 9,838 03/31/05 7,609
06/30/05 10,266 06/30/05 7,803
09/30/05 10,957 09/30/05 8,131
12/31/05 11,287 12/31/05 8,364
03/31/06 11,842 03/31/06 8,704
06/30/06 10,837 06/30/06 8,337
09/30/06 10,579 09/30/06 8,624
12/31/06 11,299 12/31/06 9,155
03/31/07 11,393 03/31/07 9,273
06/30/07 12,732 06/30/07 9,907
09/30/07 13,122 09/30/07 10,289
12/31/07 13,237 12/31/07 10,198
03/31/08 11,903 03/31/08 9,139
06/30/08 12,958 06/30/08 9,277
09/30/08 10,575 09/30/08 8,170
12/31/08 8,033 12/31/08 6,279
03/31/09 7,912 03/31/09 5,994
Past performance is not predictive of future performance.
* The chart above represents performance of 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 September 29, 1995, and the
initial public offering of Class C shares commenced on August 2, 1999. The
returns for Class C shares include performance of the Fund that was
achieved prior to the creation of Class C shares (August 2, 1999), which
is the same as the performance for Class A shares through August 2, 1999.
The returns have been restated for sales charges and for fees applicable
to Class C shares.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
*** The initial public offering of Class Y and Institutional Class shares
commenced on February 2, 2009.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
9
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE LARGE CAP CORE EQUITY FUND
SUB-ADVISED BY TODD INVESTMENT ADVISORS
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Large Cap Core Equity Fund was -35.73% for
the twelve months ended March 31, 2009. The total return of the Russell 1000(R)
Index was -38.27% for the same period.
The past year has been record setting, and not necessarily in a good way. During
the second quarter of 2008, the record spike in oil prices and market influences
ending the second quarter were dominated by a fear of stagflation and
anticipation that the Fed would need to raise rates to head off inflation. Third
quarter fundamentals were dominated by a rescue package, the Troubled Assets
Relief Program (TARP), which Congress voted down two days before the end of the
quarter. This led to a loss of confidence and some of the worst performance we
had ever seen to that point from global markets. Stocks weakened during the
quarter with the market ending well below its peak from the prior year. While
the plan was ultimately approved, caution and fear continued to dominate
investor sentiment. It was also generally accepted that the economy had been in
a recession for most of 2008. During the fourth quarter, the commercial paper
market effectively shut down for some borrowers. Banks who relied on commercial
paper pulled in credit, so businesses, homeowners and auto buyers were unable to
get financing. In addition, shipments from foreign ports could not get
financing, so goods were not shipped and demand for energy, copper, iron, steel,
aluminum and other commodities plummeted. As financing dried up, economic
activity began to stall leading to one of the worst GDP quarters on record. The
first quarter of 2009 started poorly for the stock market, declining for all of
January and February before bottoming in early March.
PORTFOLIO REVIEW
The Touchstone Large Cap Core Equity Fund outperformed the Russell 1000(R) Index
over the past year as investors sought high-quality stocks with limited earnings
variability. We believe the index is likely to underperform for some time to
come as investors find earnings growth hard to come by. These factors aided the
Fund's performance and should continue to do so.
The Fund was overweight the Information Technology and Industrials sectors, and
underweight the Financials sector during the year. With the surge in Financials
since March 6th, the Fund is modestly underweight this sector again, as the
names that recovered after the bottom were the most speculative. We expect to
make additional changes within the Financials sector in the near future. We are
starting to look at increasing the Fund's exposure to Consumer Discretionary
names as we believe this sector could be a leader when the economy begins its
rebound. The Fund's relative performance was aided by stock selection and
allocation in the Consumer Discretionary, Industrials, Information Technology,
Materials and Utilities sectors. Stock selection in Financials and Health Care
detracted from performance. Stocks that contributed to performance were Best Buy
(Consumer Discretionary), PNC Financial Services (Financials), Transocean Ltd.,
(Energy), Teva Pharmaceuticals (Health Care) and QUALCOMM (Information
Technology). Stock detractors were AFLAC, Wells Fargo, American Express and
Lincoln National (Financials), and ConcoPhillips (Energy).
CURRENT STRATEGY AND OUTLOOK
In summary, the market is expecting some form of economic recovery, and has
staged a great rally from the low point. Bottoms in markets are built over time
though, and we would not be surprised to see the market give up some of its
recent gains as first quarter earnings come in weak. We believe that, after a
period of digestion, the market should start to make a comeback as the year goes
on. Massive government spending, coupled with low rates and pent up demand
should lead to a modestly better economy as the year wears on. We are not
talking about a record setting recovery, but the market doesn't need that to
have a substantial rebound after one of the worst declines on record. As the
economic news improves, we are watching the market closely for continued clues
that the reflation trade plays out. When this occurs, we are prepared to
increase our weightings in those stocks that should benefit from this trend.
10
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
LARGE CAP CORE EQUITY FUND - CLASS A* AND THE RUSSELL 1000(R) INDEX
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LARGE CAP CORE EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 years Since Inception*
Class A (39.41%) (5.94%) (4.26%)
Class C (36.23%) (5.50%) (4.28%)
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Large Cap Core Equity - Class A Russell(R) 1000 Index
DATE DATE
---- ----
05/16/00 9,425 05/16/00 10,000
05/31/00 9,341 05/31/00 9,793
06/30/00 9,273 06/30/00 10,043
07/31/00 9,171 07/31/00 9,876
08/31/00 9,571 08/31/00 10,607
09/30/00 9,318 09/30/00 10,115
10/31/00 9,588 10/31/00 9,993
11/30/00 9,188 11/30/00 9,080
12/31/00 9,263 12/31/00 9,190
01/31/01 9,263 01/31/01 9,492
02/28/01 8,936 02/28/01 8,607
03/31/01 8,313 03/31/01 8,035
6/30/2001 8,475 6/30/2001 8,542
9/30/2001 7,414 9/30/2001 7,241
12/31/2001 8,434 12/31/2001 8,046
3/31/2002 8,634 3/31/2002 8,105
6/30/2002 7,522 6/30/2002 7,014
9/30/2002 6,003 9/30/2002 5,828
12/31/2002 6,607 12/31/2002 6,304
3/31/2003 6,373 3/31/2003 6,118
6/30/2003 7,571 6/30/2003 7,081
9/30/2003 7,707 9/30/2003 7,294
12/31/2003 8,646 12/31/2003 8,188
3/31/2004 8,693 3/31/2004 8,344
6/30/2004 8,904 6/30/2004 8,460
9/30/2004 8,493 9/30/2004 8,307
12/31/2004 9,368 12/31/2004 9,121
3/31/2005 9,155 3/31/2005 8,947
6/30/2005 9,175 6/30/2005 9,131
9/30/2005 9,435 9/30/2005 9,491
12/31/2005 9,675 12/31/2005 9,692
3/31/2006 10,138 3/31/2006 10,128
6/30/2006 10,004 6/30/2006 9,959
9/30/2006 10,616 9/30/2006 10,463
12/31/2006 11,331 12/31/2006 11,191
3/31/2007 11,135 3/31/2007 11,326
6/30/2007 11,841 6/30/2007 11,994
9/30/2007 12,173 9/30/2007 12,232
12/31/2007 11,850 12/31/2007 11,837
3/31/2008 10,573 3/31/2008 10,715
6/30/2008 10,492 6/30/2008 10,512
9/30/2008 9,890 9/30/2008 9,529
12/31/2008 7,611 12/31/2008 7,387
3/31/2009 6,796 3/31/2009 6,615
Past performance is not predictive of future performance.
* The chart above represents performance of 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 May 1, 2000 and the initial
public offering of Class C shares commenced on May 16, 2000.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
11
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE LARGE CAP GROWTH FUND
SUB-ADVISED BY NAVELLIER & ASSOCIATES
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Large Cap Growth Fund was -39.71% for the
year ended March 31, 2009. The total return of the Russell 1000(R) Growth Index
was -34.28% for the same period.
The good news for growth investors is that the growth style is substantially
beating the value style so far in 2009. The stock market continued to digest the
impact of the various economic stimulus packages and bailouts, as evidenced by
significant swings in the market averages. For the period, the Touchstone Large
Cap Growth Fund fell behind its benchmark, the Russell 1000(R) Growth Index. Not
surprisingly, the Financials sector proved to be a drag on the Fund's
performance along with the Industrials sector. Yet the Information Technology
and Consumer Discretionary sectors helped to mitigate against additional Fund
declines. This performance differential between growth and value may be due
largely to the lack of financial stocks in the Russell Growth indices. Given
that the large value style has a considerable weighting of financial stocks
relative to the large growth style, the performance advantage of growth will
likely continue given the current stresses in the Financials sector. Thus,
outlook for growth stocks continues to be positive. Further, investors seem to
be sensing a turn for the better in both the domestic and foreign economies.
Stabilization signs are emerging in housing, consumer spending and
manufacturing, and the worst appears to be behind for the banking industry.
These improvements should continue given rock-bottom interest rates and the
revised rescue plan for banks. Finally, due to the record federal budget
deficits, possible nationalization of major banks, and struggles related to the
auto and related industries, there is little doubt that there is a flight to
quality.
PORTFOLIO REVIEW
Contributors to relative performance were the Consumer Discretionary and Energy
sectors. Detractors to performance were the Industrials, Health Care and
Financials sectors, which were especially hard hit. The combination of systemic
financial instability, macro-economic slowdown, and the political calculus of
proposed changes to national health care policies are some of the reasons
contributing to the sufferings of these sectors. Under current market
conditions, we believe it is imperative to identify and select stocks of
exceptional quality. At an individual stock level, while fundamental factors
used in the stock selection process can and do change over time, the Navellier
investment modeling methodology found that as of year-end, five fundamental
factors were especially effective in screening for quality stocks. The factors
in order of importance were: return on equity, standardized earnings estimates,
analyst revisions, margin changes, and earnings momentum.
Stocks that detracted most from the Fund's performance included CSX Corp.,
Leucadia National Corp., AFLAC Inc., Intuitive Surgical and Lockheed Martin. It
is likely that CSX struggled as the market discounted the use of the company's
rail service offerings in the face of an economic slowdown. Given the earnings
exposure of Leucadia National to the real estate and gaming industries, it is
likely that investors looked unfavorably upon the outlook for the company over
the short term. The same may be said for AFLAC since, as an insurance company,
investors may be uncertain as to the impact of the current financial turmoil on
the future earnings of the company. Contributors to performance include Consumer
Discretionary stocks Kohl's and Amazon.com, Consumer Staples stock Wrigley (Wm)
Jr., Energy stocks Andarko Petroleum and Chevron, and Health Care stock St.
Jude's Medical Center.
12
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
CURRENT STRATEGY AND OUTLOOK
For the coming year, it appears that we may be in a very narrow stock market
environment for some time, which we believe is an ideal environment for an
individual stock-picking style of investment management, in contrast to passive
index investing. The valuations that now exist for quality stocks, especially
relative to interest rates, remain exceptional and are increasingly compelling.
In addition, with record levels of money market assets "on the sidelines," the
potential exists for an unexpected rally in stock prices in coming months. We
continue to feel that, in this type of climate, it makes more sense to
concentrate on stocks that are still exhibiting strong earnings and to stay
focused and disciplined. Thus, we believe the Fund should be well positioned to
benefit from future market advances.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE LARGE CAP GROWTH FUND - CLASS A* AND THE RUSSELL 1000(R) GROWTH INDEX
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 years 10 years Since Inception*
Class A (43.17%) (4.31%) (1.71%) 2.99%
Class B (42.35%) (3.97%) -- (1.68%)
Class C* (39.97%) (3.74%) (1.79%) 2.82%
Class Y* (39.58%) (2.97%) (1.02%) 3.62%
- --------------------------------------------------------------------------------
Large Cap Growth Fund - Class A Russell 1000(R) Growth Index
DATE DATE
---- ----
03/31/99 9,425 03/31/99 10,000
06/30/99 9,579 06/30/99 10,385
09/30/99 9,602 09/30/99 10,004
12/31/99 13,442 12/31/99 12,520
03/31/00 16,212 03/31/00 13,412
06/30/00 15,482 06/30/00 13,050
09/30/00 16,981 09/30/00 12,348
12/31/00 12,412 12/31/00 9,712
03/31/01 8,939 03/31/01 7,682
06/30/01 9,413 06/30/01 8,329
09/30/01 7,985 09/30/01 6,713
12/31/01 9,499 12/31/01 7,729
03/31/02 9,179 03/31/02 7,529
06/30/02 8,402 06/30/02 6,123
09/30/02 7,260 09/30/02 5,202
12/31/02 6,963 12/31/02 5,574
03/31/03 7,129 03/31/03 5,514
06/30/03 8,088 06/30/03 6,303
09/30/03 8,442 09/30/03 6,550
12/31/03 9,442 12/31/03 7,232
03/31/04 9,888 03/31/04 7,289
06/30/04 10,299 06/30/04 7,430
09/30/04 9,933 09/30/04 7,042
12/31/04 11,059 12/31/04 7,688
03/31/05 11,333 03/31/05 7,373
06/30/05 11,401 06/30/05 7,554
09/30/05 12,184 09/30/05 7,857
12/31/05 12,869 12/31/05 8,092
03/31/06 13,287 03/31/06 8,342
06/30/06 12,281 06/30/06 8,016
09/30/06 11,864 09/30/06 8,332
12/31/06 12,367 12/31/06 8,826
03/31/07 12,601 03/31/07 8,931
06/30/07 13,658 06/30/07 9,544
09/30/07 15,360 09/30/07 9,946
12/31/07 15,633 12/31/07 9,869
03/31/08 13,965 03/31/08 8,864
06/30/08 14,719 06/30/08 8,975
09/30/08 11,989 09/30/08 7,869
12/31/08 9,124 12/31/08 6,075
03/31/09 8,420 03/31/09 5,825
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will
vary from the performance of Class B, Class C 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
December 19, 1997 and the initial public offering of Class B and Class C
shares commenced on October 4, 2003. The initial public offering of Class
Y commenced on November 10, 2004. The returns for Class C and Class Y
shares include performance of the Fund that was achieved prior to the
creation of Class C and Class Y shares (October 4, 2003 and November 10,
2004, respectively), which is the same performance for Class A shares
through October 4, 2003 and November 10, 2004, respectively. The returns
have been restated for sales charges and for fees applicable to Class C
and Class Y shares.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
13
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE LARGE CAP VALUE FUND
SUB-ADVISED BY JS ASSET MANAGEMENT
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Large Cap Value Fund was -70.60% for the
twelve months ended March 31, 2009. The total return of the Russell 1000(R)
Value Index was -42.42% for the same period.
In November 2008, deep value stocks were over four standard deviations
undervalued relative to the market average; the widest spread we had ever seen.
Valuation spreads remain three standard deviations undervalued and we still see
tremendous opportunities. Historically, a deep value strategy has meaningfully
outperformed coming out of an economic downturn. In fact, over the last 80
years, more than 70% of all outperformance from the value style has come when
business conditions were poor. We remain committed to our deep value strategy of
exploiting fear and not running from it. The Fund's portfolio remains
undervalued more than the Russell 1000(R) Value Index on several valuation
metrics.
PORTFOLIO REVIEW
The Financials sector sharply underperformed versus the benchmark. Overweight
positions in the Information Technology sector as well as stock selection and an
undervalued allocation in the Energy sector detracted from performance. Relative
contributors to performance were the Industrials and Consumer Staples sectors.
The largest detractors to performance were Citigroup Inc., Genworth Financial,
Bank of America and Fannie Mae from the Financials sector and Reliant Energy
Inc. from the Utilities sector. Relative contributors included Morgan Stanley
and Torchmark Corp. from the Financials sector, Tyson Foods Inc. from the
Consumer Staples sector, and Lam Research Corp. and Novellus Systems Inc. from
the Information Technology sector.
CURRENT STRATEGY AND OUTLOOK
We believe the nationalization of several financial firms and the failure of
others caused the market to go into a tailspin. Volatility reached levels not
seen since the Depression. The Financials sector and cyclical stocks were
devastated and only stocks perceived as safe from the Utilities and Consumer
Staples sectors did relatively well.
The current U.S. recession will likely be the longest and deepest in 60 years.
Declines in GDP are expected to continue through the 3rd quarter, making it the
longest recession since the Great Depression. The recession is global, with much
of Asia and Europe seeing even larger GDP declines than the U.S.
We believe there is hope. Inventories declined at the sharpest rate in the
nearly three decades for which we have data, so restocking will potentially
boost GDP in the second half of this year. The Stimulus Plan should boost U.S.
GDP by 2% per year starting in the second half of this year. Unlike the Great
Depression in the U.S., or the early 1990s in Japan, the U.S. Federal Reserve
has dramatically grown the monetary base (up 95% in 12 months). The Fed's
quantitative easing has driven down interest rates on mortgages, auto loans and
when implemented, "toxic" RMBS and CMBS securities. With mortgage rates now
around 4.75% and the current rental yield at 7.2%, the equation to buy a home
has never been better. Corporate bond spreads peaked in December, and have
dropped meaningfully since then.
With all of these actions, we believe the chance of a U.S. depression is now
low. The stock market led the economy on the way down and will lead the
recovery. Unemployment, on the other hand, historically lags the recovery, so it
will likely peak above 9%, potentially as high as 10%.
14
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
The long term U.S. savings rate has been 7% to 9%. In the bubble period of the
late 1990s, U.S. savings rates dropped to zero and the U.S. personal consumption
rate approximated 70% of GDP. After the worst decade for stocks and housing
prices ever, wealth destruction has caused a dramatic change in behavior and the
savings rate jumped to 4.2% in January. The Stimulus Package should boost the
savings rate back to normal by year end and push the consumption rate down to
the low 60% range, which is the norm of most developed nations.
The stock and bond markets are pricing in a repeat of the Great Depression.
Credit spreads are at levels only seen during the 1930s. The consensus earnings
forecast for the U.S. market is down 58% from the peak, a decline not seen since
that same period and much worse than the typical 20-30% decline seen in a
recession. The P/E on those earnings is low. The S&P 500 P/E, using a five year
average, is approximately 11x, the lowest since 1984. Historically, buying stock
anywhere near this level has always resulted in above average long-term returns.
The markets are disconnected from most economists who are assuming positive GDP
growth in the second half. We believe the markets have overshot.
We have not wavered from our deep value approach which outperforms over time. We
took calculated risks for which we expect to be compensated. In 2008, the
defensive sectors (Telecommunication Services, Utilities and Health Care)
massively outperformed cyclical stocks. Now, in general, defensive stocks are
quite expensive and cyclical stocks quite undervalued. As a result, the Fund has
a clear pro-cyclical tilt. Typically, cyclicals recover strongly at this point
in the cycle and such a move would provide an additional tailwind. We have been
focusing on companies that we believe have huge upsides, companies with
catalysts so that appreciation is not a matter of if, but when, and companies
with balance sheets that can weather the downturn.
The fate of the banks has moved from the realm of financial analysis into the
political arena. We learned the hard way with Fannie Mae that despite a company
clearly meeting all of its capital requirements and the regulator clearly
stating that the company was not going to be taken over, the outcome can be
dire. Upon hearing of the Obama Administration's new "stress test" capital
requirement on the banking industry, we swiftly focused on what this could mean.
We are projecting that the new test will be a 2-year forward look, based on
worsening employment and GDP while focusing on tangible common equity (not Tier
1 capital). Our analysis showed one bank in particular would look very bad under
this new test and was sold. Conversely, a second bank by our analysis of the
likely new stress tests will pass a 3% tangible common equity to risk weighted
asset ratio threshold. We saw a nearly tenfold upside, so even a small dilution
leaves plenty of upside.
Life insurance stocks are down nearly as much as banks and have similar
valuations, yet the higher quality companies are not nearly as risky. Banks hold
loans which are hard to value. They are valued at management's discretion and we
think generally do not reflect the full risk. Life insurers' portfolios are
mostly mark to market bonds and securities which are now likely overly
discounted. The traditional life insurance business is quite stable. The Fund's
insurers have strong balance sheets with excess capital, strong risk based
capital ratios, and good ratings. Finally, life insurers have less onerous state
regulation and are not facing federal bank regulation which is in flux and
likely getting more stringent.
After being underweight in the Financials sector through most of 2008, the Fund
is now overweight. It is not overweight in banks but rather brokers and
increasingly life insurers. The Fund also has an overweight position in each of
the Information Technology and Consumer Discretionary sectors. As Health Care,
Energy, Consumer Staples, Telecommunication Services, Industrials and Materials
sectors are not greatly undervalued, the Fund continues to have an underweight
position in each.
While other value managers have changed their style, JS Asset Management is
sticking to its strategy of buying deep value stocks with catalysts. We believe
the unprecedented Global Fiscal and Monetary policy will eventually work. Two or
three years from now we expect to look back and see this was an extraordinary
time to invest.
15
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
LARGE CAP VALUE FUND - CLASS A* AND THE RUSSELL 1000(R) VALUE INDEX
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year Since Inception*
Class A (72.28%) (40.96%)
Class C (71.00%) (40.41%)
- --------------------------------------------------------------------------------
Large Cap Value Fund - Class A Russell 1000(R) Value Index
DATE DATE
---- ----
03/06/06 9,425 03/06/06 10,000
3/31/2006 9,604 3/31/2006 10,088
6/30/2006 9,444 6/30/2006 10,148
9/30/2006 9,811 9/30/2006 10,779
12/31/2006 10,835 12/31/2006 11,641
3/31/2007 10,768 3/31/2007 11,785
6/30/2007 11,560 6/30/2007 12,366
9/30/2007 9,927 9/30/2007 12,337
12/31/2007 7,908 12/31/2007 11,621
3/31/2008 6,750 3/31/2008 10,608
6/30/2008 5,697 6/30/2008 10,045
9/30/2008 3,570 9/30/2008 9,431
12/31/2008 2,072 12/31/2008 7,339
3/31/2009 1,985 3/31/2009 6,108
Past performance is not predictive of future performance.
* The chart above represents performance of 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 and Class C shares was March 6, 2006.
** 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.
16
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE MID CAP GROWTH FUND
SUB-ADVISED BY TCW INVESTMENT MANAGEMENT COMPANY, LLC
WESTFIELD CAPITAL MANAGEMENT, LLC
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Mid Cap Growth Fund was -37.67% for the
twelve month period ended March 31, 2009. The total return of the Russell
Midcap(R) Growth Index was -39.58% for the same period.
The period offered stark contrast between the beginning and the ending months.
The stock market shrugged off mounting credit problems in early 2008 only to be
overwhelmed during the summer and fall as the global economy vaulted into a deep
recession. Credit contracted, housing prices plummeted, and unemployment jumped.
Large banks failed and/or needed governmental assistance to stay afloat. Oil
prices peaked in early July 2008 at nearly $140 per barrel only to plummet to a
low near $30 per barrel by December 2008 as worldwide demand contracted. The
first quarter of 2009 was equally volatile as the stock market pierced the
November 2008 lows in early March, only to rebound in the final three weeks of
March on hopes that the economy is bottoming.
TCW INVESTMENT MANAGEMENT COMPANY, LLC
PORTFOLIO REVIEW
Although we are not pleased with negative absolute returns for the twelve month
period ending March 31, 2009, our contrarian process of investing helped our
portion of the Fund. Sound security selection in Financials was the principle
driver of relative performance, led by People's United, whose strong capital
base proved to be a competitive advantage during the market turmoil, and Knight
Capital, whose trade execution business benefited from high market volatility.
Consumer Discretionary also helped relative returns as we shifted the Fund to
more value-oriented retailers, such as Burger King, American Eagle and TJX, all
of which solidly contributed positively to performance. Health Care stocks, such
as Edwards Lifesciences and Cerner also boosted the Fund's relative returns.
Underweight positions in Consumer Staples and Utilities were the principle
detractors from relative performance, though we used weakness in both areas to
add to the Fund's weights throughout the year.
CURRENT STRATEGY AND OUTLOOK
Economic data remains decidedly to the downside, including weak employment, GDP,
housing, and consumer confidence readings. If the market shrugs off negative
earnings reports and large banks show signs of stabilization, then early March
may have marked the bottom of the bear market. We continue to buy stocks trading
at discounts to their intrinsic value hoping to find exceptional bargains that
over the long run will translate into superior returns. As always, we remain
ever vigilant and thank you for your continued support.
WESTFIELD CAPITAL MANAGEMENT, LLC
PORTFOLIO REVIEW
The merits of our bottom-up investment process was evident as positive security
selection within our portion of the Fund, particularly in Information Technology
and Health Care, were enough to offset underperformance within the Energy and
Consumer Discretionary sectors.
Security selection with the Information Technology sector contributed positively
to relative performance with broad participation from stocks within the
Communications Equipment, Internet and Software Services, and the Software
industries. Systems software vendor BMC Software reported its fourth quarter
2008 earnings that were ahead of Wall Street expectations driven by a dramatic
increase in operating margins. A near doubling of large deals (greater than $1
million in contract value) gives us confidence in the sustainability of the
margin improvement. The company also benefitted from Cisco's entry into the data
center server market where BMC will be their systems management partner. Red
Hat, an open source software development and licensing company, added to
relative performance over the 12-month time period. This position was increased
on two separate occasions as internal research revealed a better tone of
business than anticipated by the Street, as well as sell-side financial models
that did not reflect meaningful capital structure changes. Late in the first
quarter of 2009, the company reported earnings that were ahead of consensus
expectations and provided encouraging full-year revenue and earnings
projections. NICE Systems, a provider of solutions for the management and
analysis of unstructured content and data, reported better-than-expected
earnings for the fourth quarter of 2008 on revenue growth of 12 percent. Given
the uncertainty around corporate spending on technology, its focus on improving
operational efficiencies and mitigating risk helped to differentiate fundamental
performance. Large deal activity in the security space should provide good
revenue visibility throughout 2009.
17
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
Security selection and a relative overweight position in the Health Care sector
contributed positively to relative earnings during the period. Vertex, a
biotechnology company, reported in-line earnings in late October and has a
potentially promising late stage therapy for the treatment of Hepatitis C, as
data shows it cures patients after 4 weeks of therapy. The company may have the
ability to file with the FDA in early 2010 with what could be the first in class
product to reach the market. They also have a late stage program in Cystic
Fibrosis that targets the underlying defect. With sufficient cash to fund
development, we believe the stock does not fully reflect the opportunity in
Hepatitis C.
The Energy sector detracted from relative returns during the period. Crude oil
prices declined by over 50 percent and shares of most Energy stocks were not far
behind. It is our continued belief that non-OPEC supply growth remains a major
problem. In fact, the International Energy Agency noted in mid-November that as
current fields fade with age, decline rates will accelerate and more investment
will be needed to make up the shortfall. Nonetheless, investments with exposure
to the pursuit of oil and natural gas were punished in the latter half of 2008.
National Oilwell Varco, for example, traded lower as Wall Street estimates of
forward earnings were revised lower due to slowing consumables orders as a
result of lower commodity prices impacting production activity. Meanwhile, the
company has nearly nine quarters of visibility in backlog. Ninety percent of
that backlog is international and 85 percent is offshore. This backlog is
associated with large, long lead time projects that we think are less likely to
be affected by the current commodity price weakness.
The Consumer Discretionary sector also detracted from relative performance
during the period. Newell Rubbermaid, a manufacturer of branded consumer and
commercial products, traded lower during the period. Falling resin prices were
thought to have been enough to improve margins and protect earnings in a
difficult market for discretionary goods. However, the company suffered from
consumer trends toward generic substitution which pressured prices.
International sales, which had been a stabilizing force, turned decidedly lower.
As a result, the stock was sold. DeVry, a for-profit education company,
contributed positively to relative return. The counter-cyclical nature of
education stocks has made them great performers during the market decline. It is
our contention that DeVry is among the higher quality publicly-traded education
companies and we think Wall Street estimates for their earnings are too low for
both this year and next. We believe this is a company that will likely thrive
even when employment trends begin to stabilize.
18
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
CURRENT STRATEGY AND OUTLOOK
We continue our focus on sound fundamental trends and compelling valuations
differentiated performance. The deeply oversold condition in the U.S. equity
market reversed course after a series of macro events and the release of some
economic data that appeared "less negative." Although we remain loath to chase
this market, there are signs of life that are likely to lead to incremental
changes to our portion of the Fund as some defensive growth stocks will be used
as a source of funds for more pro-cyclical investments. Modest credit market
improvement, easy financial comparisons, a positively sloped yield curve and
huge cash balances that are at risk of missing a market move all heighten our
interest in a more offensive portfolio posture. This, as always, will happen one
stock at a time.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
MID CAP GROWTH FUND - CLASS A* AND THE RUSSELL MIDCAP(R) GROWTH INDEX
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS**
Cumulative
1 Year 5 years 10 Years Since Inception* Since Inception*
Class A (41.25%) (4.34%) 6.45% 8.86% --
Class B (40.55%) (4.05%) -- 0.19% --
Class C (38.14%) (3.92%) 6.30% 8.46% --
Class Y -- -- -- -- (1.82%)
- --------------------------------------------------------------------------------
Mid Cap Growth Fund - Class A Russell Mid Cap(R) Growth Index
Date Date
---- ----
03/31/99 9,425 03/31/99 10,000
06/30/99 11,170 06/30/99 11,042
09/30/99 11,162 09/30/99 10,489
12/31/99 14,159 12/31/99 14,629
03/31/00 16,696 03/31/00 17,718
06/30/00 17,080 06/30/00 16,405
09/30/00 18,266 09/30/00 16,819
12/31/00 17,828 12/31/00 12,908
03/31/01 15,869 03/31/01 9,671
06/30/01 18,256 06/30/01 11,236
09/30/01 15,521 09/30/01 8,112
12/31/01 19,086 12/31/01 10,307
03/31/02 19,475 03/31/02 10,125
06/30/02 17,081 06/30/02 8,276
09/30/02 13,489 09/30/02 6,854
12/31/02 14,598 12/31/02 7,482
03/31/03 14,042 03/31/03 7,481
06/30/03 16,893 06/30/03 8,884
09/30/03 18,500 09/30/03 9,520
12/31/03 20,926 12/31/03 10,678
03/31/04 21,968 03/31/04 11,193
06/30/04 22,260 06/30/04 11,311
09/30/04 20,541 09/30/04 10,821
12/31/04 23,140 12/31/04 12,330
03/31/05 22,874 03/31/05 12,124
06/30/05 23,302 06/30/05 12,540
09/30/05 24,818 09/30/05 13,361
12/31/05 25,628 12/31/05 13,821
03/31/06 27,955 03/31/06 14,872
06/30/06 27,152 06/30/06 14,175
09/30/06 27,595 09/30/06 14,301
12/31/06 29,281 12/31/06 15,295
03/31/07 30,426 03/31/07 15,901
06/30/07 33,018 06/30/07 16,972
09/30/07 33,107 09/30/07 17,337
12/31/07 32,819 12/31/07 17,043
03/31/08 29,961 03/31/08 15,176
06/30/08 32,241 06/30/08 15,882
09/30/08 27,060 09/30/08 13,063
12/31/08 19,886 12/31/08 9,489
03/31/09 18,675 03/31/09 9,170
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will
vary from the performance of Class B 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 commenced on October 3,
1994 and the initial public offering of Class B and Class C shares
commenced on May 1, 2001 and January 1, 1999, respectively. The Class C
performance information is calculated using the historical performance of
the Fund's predecessor, which was another mutual fund that began
operations on October 3, 1994.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
*** The initial public offering of Class Y shares commenced on February 2,
2009.
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
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Unaudited)
March 31, 2009
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Health Care 29.5
Information Technology 22.5
Consumer Discretionary 14.9
Industrials 12.8
Consumer Staples 5.2
Energy 3.8
Financials 3.8
Telecommunication Services 2.1
Materials 1.9
Utilities 1.3
Investment Funds 20.3
Other Assets/Liabilities (Net) (18.1)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LARGE CAP CORE EQUITY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 20.5
Health Care 14.5
Energy 13.7
Consumer Staples 12.3
Industrials 10.6
Consumer Discretionary 10.0
Financials 8.9
Utilities 2.8
Telecommunication Services 2.7
Materials 2.6
Investment Funds 27.3
Other Assets/Liabilities (Net) (25.9)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financials 25.9
Information Technology 21.7
Consumer Discretionary 18.4
Energy 10.1
Utilities 7.1
Industrials 4.9
Miscellaneous 3.5
Telecommunication Services 3.4
Consumer Staples 2.8
Health Care 0.2
Investment Funds 25.0
Other Assets/Liabilities (Net) (23.0)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 32.5
Health Care 27.5
Consumer Staples 8.7
Industrials 8.6
Energy 7.8
Materials 5.9
Consumer Discretionary 4.8
Financials 1.9
Investment Funds 30.2
Other Assets/Liabilities (Net) (27.9)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 22.9
Consumer Discretionary 15.9
Materials 13.7
Health Care 13.5
Energy 10.8
Industrials 9.1
Financials 5.4
Consumer Staples 5.0
Telecommunication Services 1.8
Investment Funds 24.8
Other Assets/Liabilities (Net) (22.9)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 21.1
Health Care 16.3
Financials 13.5
Industrials 13.3
Consumer Discretionary 12.2
Energy 9.3
Materials 4.9
Utilities 3.3
Consumer Staples 1.6
Investment Funds 33.6
Other Assets/Liabilities (Net) (29.1)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
March 31, 2009
- --------------------------------------------------------------------------------
DIVERSIFIED LARGE
SMALL CAP GROWTH CAP CORE LARGE CAP
GROWTH OPPORTUNITIES EQUITY GROWTH
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 29,428,089 $ 35,878,736 $ 76,625,073 $ 1,016,781,737
====================================================================================================================================
Affiliated securities, at market value $ 641,572 $ 433,965 $ 597,038 $ 14,569,372
Non-affiliated securities, at market value 23,123,956 30,588,628 58,487,876 940,700,021
- ------------------------------------------------------------------------------------------------------------------------------------
At market value - including $3,412,494, $7,004,811, $12,224,107,
and $176,975,351 of securities loaned for the Diversified Small
Cap Growth Fund, Growth Opportunities Fund, Large Cap Core $ 23,765,528 $ 31,022,593 $ 59,084,914 $ 955,269,393
Equity Fund, and Large Cap Growth Fund, respectively.
Dividends and interest receivable 7,508 12,001 139,369 1,706,363
Receivable for capital shares sold 998 17,195 3,528 993,656
Receivable for securities sold 19,922 237,729 -- --
Receivable for securities lending income 8,613 1,561 2,574 79,292
Other assets 18,320 46,676 5,062 34,129
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 23,820,889 31,337,755 59,235,447 958,082,833
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned 3,452,262 6,894,924 12,216,169 178,301,175
Payable for capital shares redeemed 2,489 103,303 12,460 1,868,986
Payable for securities purchased 184,730 -- -- --
Payable to Advisor 2,412 12,553 24,530 363,422
Payable to other affiliates 15,992 17,424 8,957 249,136
Payable to Trustees 2,280 2,280 2,280 2,280
Other accrued expenses and liabilities 31,798 66,457 39,809 293,492
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,691,963 7,096,941 12,304,205 181,078,491
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 20,128,926 $ 24,240,814 $ 46,931,242 $ 777,004,342
====================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 47,818,574 $ 77,023,209 $ 73,652,003 $ 1,205,181,256
Accumulated net investment income -- -- 263,429 2,186,078
Accumulated net realized losses from security transactions (22,027,087) (47,926,252) (9,444,031) (368,850,648)
Net unrealized depreciation on investments (5,662,561) (4,856,143) (17,540,159) (61,512,344)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 20,128,926 $ 24,240,814 $ 46,931,242 $ 777,004,342
====================================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 9,053,548 $ 17,973,331 $ 45,073,315 $ 418,808,065
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 1,444,250 1,247,499 7,517,776 28,433,582
====================================================================================================================================
Net asset value and redemption price per share $ 6.27 $ 14.41 $ 6.00 $ 14.73
====================================================================================================================================
Maximum offering price per share $ 6.65 $ 15.29 $ 6.37 $ 15.63
====================================================================================================================================
PRICING OF CLASS B SHARES
Net assets attributable to Class B shares $ -- $ -- $ -- $ 14,186,065
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) -- -- -- 997,449
====================================================================================================================================
Net asset value, offering price and redemption price per share* $ -- $ -- $ -- $ 14.22
====================================================================================================================================
21
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED LARGE
SMALL CAP GROWTH CAP CORE LARGE CAP
GROWTH OPPORTUNITIES EQUITY GROWTH
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 2,267,540 $ 6,262,467 $ 1,857,927 $ 137,641,122
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 365,887 462,079 312,351 9,657,926
====================================================================================================================================
Net asset value, offering price and redemption price per share* $ 6.20 $ 13.55 $ 5.95 $ 14.25
====================================================================================================================================
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ 8,807,838 $ 2,508 $ -- $ 206,369,090
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 1,397,393 174 -- 13,907,460
====================================================================================================================================
Net asset value, offering price and redemption price per share $ 6.30 $ 14.41 $ -- $ 14.84
====================================================================================================================================
PRICING OF INSTITUTIONAL CLASS SHARES
Net assets attributable to Institutional Class shares $ -- $ 2,508 $ -- $ --
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) -- 174 -- --
====================================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ 14.42 $ -- $ --
====================================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
22
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
LARGE CAP MID CAP
VALUE GROWTH
FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 15,551,347 $ 914,946,181
=====================================================================================================================
Affiliated securities, at market value $ 295,932 $ 32,053,889
Non-affiliated securities, at market value 8,422,389 724,535,871
- ---------------------------------------------------------------------------------------------------------------------
At market value - including $1,461,108 and $164,717,349
of securities loaned for the Large Cap Value Fund and
Mid Cap Growth Fund, respectively. $ 8,718,321 $ 756,589,760
Dividends and interest receivable 2,615 829,513
Receivable for capital shares sold 20,720 1,261,460
Receivable for securities sold 20,228 261,742
Receivable for securities lending income 362 52,118
Other assets 15,627 56,010
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 8,777,873 759,050,603
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned 1,474,505 164,974,116
Payable for capital shares redeemed 27,318 1,441,916
Payable for securities purchased 145,487 5,225,025
Payable to Advisor 1,308 379,623
Payable to other affiliates 6,964 398,201
Payable to Trustees 2,280 2,103
Other accrued expenses and liabilities 34,612 567,582
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,692,474 172,988,566
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 7,085,399 $ 586,062,037
=====================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 49,756,210 $ 910,918,893
Accumulated net realized losses from security transactions (35,837,785) (166,500,435)
Net unrealized depreciation on investments (6,833,026) (158,356,421)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 7,085,399 $ 586,062,037
=====================================================================================================================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 5,321,136 $ 397,756,438
=====================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 2,942,709 30,707,280
=====================================================================================================================
Net asset value and redemption price per share $ 1.81 $ 12.95
=====================================================================================================================
Maximum offering price per share $ 1.92 $ 13.74
=====================================================================================================================
PRICING OF CLASS B SHARES
Net assets attributable to Class B shares $ -- $ 29,520,904
=====================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) -- 2,687,973
=====================================================================================================================
Net asset value, offering price and redemption price per share* $ -- $ 10.98
=====================================================================================================================
23
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
LARGE CAP MID CAP
VALUE GROWTH
FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 1,764,263 $ 158,782,240
=====================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 983,532 14,444,123
=====================================================================================================================
Net asset value, offering price and redemption price per share* $ 1.79 $ 10.99
=====================================================================================================================
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ 2,455
=====================================================================================================================
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) -- 189
=====================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ 12.96
=====================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
24
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended March 31, 2009
- --------------------------------------------------------------------------------
DIVERSIFIED LARGE
SMALL CAP GROWTH CAP CORE LARGE CAP
GROWTH OPPORTUNITIES EQUITY GROWTH
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 21,513 $ 23,773 $ 32,556 $ 823,111
Dividends from non-affiliated securities (A) 102,756 205,819 1,605,737 14,753,647
Interest 93 191 105 758
Income from securities loaned 236,204 52,832 45,300 1,773,079
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 360,566 282,615 1,683,698 17,350,595
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 321,173 341,272 432,371 7,181,753
Distribution expenses, Class A 41,105 60,617 160,384 1,583,213
Distribution expenses, Class B -- 14,832 -- 238,441
Distribution expenses, Class C 30,628 90,603 23,649 2,069,328
Administration fees 61,176 69,589 133,037 2,035,336
Transfer Agent fees, Class A 61,984 66,431 42,818 698,711
Transfer Agent fees, Class B -- 6,979 -- 44,863
Transfer Agent fees, Class C 16,369 24,750 7,888 277,088
Transfer Agent fees, Class Y 5,106 -- -- 115,239
Postage and supplies 36,730 44,522 20,311 268,235
Reports to shareholders 3,206 14,594 7,445 179,497
Registration fees, Class A 26,574 13,827 10,989 37,274
Registration fees, Class B -- 12,896 -- 10,712
Registration fees, Class C 16,170 8,486 6,617 21,033
Registration fees, Class Y 14,592 -- -- 12,790
Professional fees 20,026 20,815 22,279 81,110
Custodian fees 1,688 9,057 6,262 68,375
Trustees' fees and expenses 3,337 6,744 5,349 7,268
Compliance fees and expenses 1,115 1,319 1,296 6,177
Other expenses 2,257 423 2,224 33,584
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 663,236 807,756 882,919 14,970,027
Fees waived by the Administrator (61,176) (69,589) (98,799) (924,129)
Fees waived and/or expenses reimbursed by the Advisor (177,843) (131,696) -- --
Fees reduced by Custodian -- -- -- (9,955)
- -----------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 424,217 606,471 784,120 14,035,943
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (63,651) (323,856) 899,578 3,314,652
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses from security transactions (9,624,130) (6,773,831) (9,214,214) (341,832,277)
Net change in unrealized appreciation/
depreciation on investments (1,538,607) (7,150,096) (18,011,816) (210,014,994)
- -----------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (11,162,737) (13,923,927) (27,226,030) (551,847,271)
- -----------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (11,226,388) $ (14,247,783) $ (26,326,452) $ (548,532,619)
=============================================================================================================================
(A) Net of foreign tax withholding of: $ -- $ 660 $ 1,380 $ 166,380
See accompanying notes to financial statements.
25
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
LARGE CAP MID CAP
VALUE GROWTH
FUND FUND
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 12,548 $ 854,015
Dividends from non-affiliated securities (A) 354,613 10,027,691
Interest 168 569
Income from securities loaned 104,446 1,264,697
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 471,775 12,146,972
- ---------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 133,724 6,821,984
Distribution expenses, Class A 31,846 1,395,691
Distribution expenses, Class B -- 485,509
Distribution expenses, Class C 50,914 2,459,209
Administration fees 35,660 1,705,505
Transfer Agent fees, Class A 20,783 862,043
Transfer Agent fees, Class B -- 100,895
Transfer Agent fees, Class C 19,369 454,253
Postage and supplies 20,414 625,224
Reports to shareholders 10,122 199,227
Professional fees 20,131 76,646
Registration fees, Class A 14,515 29,780
Registration fees, Class B -- 10,549
Registration fees, Class C 8,526 16,458
Custodian fees 4,069 66,223
Trustees' fees and expenses 7,183 5,828
Compliance fees and expenses 1,606 5,387
Other expenses 598 34,270
- ---------------------------------------------------------------------------------------
TOTAL EXPENSES 379,460 15,354,681
Fees waived by the Administrator (35,660) (348,150)
Other operating expenses reimbursed by the Advisor (65,324) --
- ---------------------------------------------------------------------------------------
NET EXPENSES 278,476 15,006,531
- ---------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 193,299 (2,859,559)
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (29,398,630) (154,319,675)
Net change in unrealized appreciation/
depreciation on investments 8,616,169 (231,737,939)
- ---------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (20,782,461) (386,057,614)
- ---------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (20,589,162) $(388,917,173)
=======================================================================================
(A) Net of foreign tax withholding of: $ 100 $ 7,697
See accompanying notes to financial statements.
26
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
DIVERSIFIED GROWTH
SMALL CAP OPPORTUNITIES
GROWTH FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008(A) 2009(B)(C) 2008
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss $ (63,651) $ (105,712) $ (323,856) $ (537,079)
Net realized gains (losses) from security transactions (9,624,130) 601,739 (6,773,831) 6,787,746
Net change in unrealized appreciation/depreciation on investments (1,538,607) (3,667,836) (7,150,096) (2,959,595)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (11,226,388) (3,171,809) (14,247,783) 3,291,072
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains, Class A -- (752,111) -- --
From net realized gains, Class C -- (2,212) -- --
From net realized gains, Class Y -- (631,432) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS -- (1,385,755) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 2,325,565 3,167,457 10,983,044 8,890,874
Reinvested distributions -- 744,007 -- --
Proceeds from shares issued in connection with merger(D) -- 16,787,855 -- --
Payments for shares redeemed (10,439,076) (1,092,663) (9,002,735) (20,930,319)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (8,113,511) 19,606,656 1,980,309 (12,039,445)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B
Proceeds from shares sold -- -- 179,046 144,930
Payments for shares redeemed -- -- (1,769,228) (568,213)
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS B SHARE TRANSACTIONS -- -- (1,590,182) (423,283)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 454,913 30,668 1,562,451 1,718,568
Reinvested distributions -- 2,028 -- --
Proceeds from shares issued in connection with merger(D) -- 4,738,407 -- --
Payments for shares redeemed (1,205,593) (162,935) (2,906,983) (3,077,255)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS (750,680) 4,608,168 (1,344,532) (1,358,687)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold 2,368,883 153,398 2,500 --
Reinvested distributions -- 625,498 -- --
Proceeds from shares issued in connection with merger(D) -- 10,000,673 -- --
Payments for shares redeemed (3,840,927) (719,725) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS (1,472,044) 10,059,844 2,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Proceeds from shares sold -- -- 2,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM INSTITUTIONAL CLASS SHARE TRANSACTIONS -- -- 2,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (21,562,623) 29,717,104 (15,197,188) (10,530,343)
NET ASSETS
Beginning of year 41,691,549 11,974,445 39,438,002 49,968,345
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 20,128,926 $ 41,691,549 $ 24,240,814 $ 39,438,002
====================================================================================================================================
ACCUMULATED NET INVESTMENT $ -- $ -- $ -- $ --
====================================================================================================================================
(A) Class C represents the period from commencement of operations (August 1,
2007) through March 31, 2008.
(B) Class B represents the period from April 1, 2008 through February 1, 2009.
(C) Class Y and Institutional Class represent the period from commencement of
operations (February 2, 2009) through March 31, 2009.
(D) See Footnote 9 in notes to financial statements.
See accompanying notes to financial statements.
27
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
LARGE CAP CORE LARGE CAP
EQUITY FUND GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008 2009 2008
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 899,578 $ 866,217 $ 3,314,652 $ (1,155,972)
Net realized gains (losses) from security transactions (9,214,214) 6,463,979 (341,832,277) 78,418,915
Net change in unrealized appreciation/depreciation on investments (18,011,816) (11,752,556) (210,014,994) 11,288,276
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (26,326,452) (4,422,360) (548,532,619) 88,551,219
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (826,694) (869,683) (384,725) --
From net investment income, Class C (23,762) (6,974) -- --
From net investment income, Class Y -- -- (743,849) --
From net realized gains, Class A (4,234,966) (3,072,157) -- --
From net realized gains, Class C (191,660) (115,209) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (5,277,082) (4,064,023) (1,128,574) --
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 11,416,914 3,683,254 275,238,115 248,046,527
Reinvested distributions 4,958,772 3,889,452 249,999 --
Payments for shares redeemed (25,433,557) (9,913,649) (255,367,571) (251,396,114)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS (9,057,871) (2,340,943) 20,120,543 (3,349,587)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B
Proceeds from shares sold -- -- 2,200,560 4,553,787
Payments for shares redeemed -- -- (6,221,431) (3,971,491)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS B SHARE
TRANSACTIONS -- -- (4,020,871) 582,296
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 2,075,124 360,222 58,876,139 77,098,573
Reinvested distributions 148,421 100,046 -- --
Payments for shares redeemed (2,154,892) (1,514,470) (53,064,767) (46,988,762)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS 68,653 (1,054,202) 5,811,372 30,109,811
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold -- -- 339,657,227 18,878,626
Reinvested distributions -- -- 715,680 --
Payments for shares redeemed -- -- (53,196,540) (30,750,486)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y SHARE
TRANSACTIONS -- -- 287,176,367 (11,871,860)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (40,592,752) (11,881,528) (240,573,782) 104,021,879
NET ASSETS
Beginning of year 87,523,994 99,405,522 1,017,578,124 913,556,245
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 46,931,242 $ 87,523,994 $ 777,004,342 $ 1,017,578,124
====================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 263,429 $ 214,307 $ 2,186,078 $ --
====================================================================================================================================
See accompanying notes to financial statements.
28
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
LARGE CAP MID CAP
VALUE FUND GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008 2009(A) 2008
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 193,299 $ 369,221 $ (2,859,559) $ (9,330,452)
Net realized gains (losses) from security transactions (29,398,630) (4,840,876) (154,319,675) 126,657,990
Net change in unrealized appreciation/depreciation on investments 8,616,169 (17,198,483) (231,737,939) (132,524,125)
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (20,589,162) (21,670,138) (388,917,173) (15,196,587)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (215,080) (276,762) -- --
From net investment income, Class C (65,250) (8,042) -- --
From net realized gains, Class A -- (1,859,568) (7,418,546) (83,106,401)
From net realized gains, Class B -- -- (709,563) (9,367,106)
From net realized gains, Class C -- (873,430) (3,686,097) (44,739,520)
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (280,330) (3,017,802) (11,814,206) (137,213,027)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 4,874,733 19,751,253 198,229,454 190,248,618
Reinvested distributions 207,375 1,817,713 6,477,072 70,079,740
Payments for shares redeemed (8,689,205) (11,126,403) (194,004,433) (232,671,372)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS (3,607,097) 10,442,563 10,702,093 27,656,986
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B
Proceeds from shares sold -- -- 2,085,030 4,289,248
Reinvested distributions -- -- 554,988 7,301,219
Payments for shares redeemed -- -- (12,750,178) (14,187,674)
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS B SHARE
TRANSACTIONS -- -- (10,110,160) (2,597,207)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 760,133 9,574,773 29,438,796 47,085,566
Reinvested distributions 58,850 719,340 2,383,946 28,910,918
Payments for shares redeemed (2,505,493) (7,628,859) (59,914,155) (68,954,343)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS (1,686,510) 2,665,254 (28,091,413) 7,042,141
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold -- -- 2,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS -- -- 2,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (26,163,099) (11,580,123) (428,228,359) (120,307,694)
NET ASSETS
Beginning of year 33,248,498 44,828,621 1,014,290,396 1,134,598,090
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 7,085,399 $ 33,248,498 $ 586,062,037 $ 1,014,290,396
====================================================================================================================================
ACCUMULATED NET INVESTMENT $ -- $ -- $ -- $ --
====================================================================================================================================
(A) Class Y represents the period from commencement of operations (February 2,
2009) through March 31, 2009.
See accompanying notes to financial statements.
29
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP GROWTH FUND--CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD
MARCH 31, ENDED
------------------------ MARCH 31,
2009 2008 2007(A)
- -----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 9.80 $ 11.64 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.02) 0.50 (0.07)
Net realized and unrealized gains (losses) on investments (3.51) (1.15) 1.71
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (3.53) (0.65) 1.64
- -----------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.19) --
- -----------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 6.27 $ 9.80 $ 11.64
- -----------------------------------------------------------------------------------------------------------
Total return(B) (36.02%) (7.28%) 16.40%(C)
===========================================================================================================
Net assets at end of period (000's) $ 9,054 $ 22,955 $ 5,846
===========================================================================================================
Ratio of net expenses to average net assets 1.40% 1.40% 1.40%(D)
Ratio of net investment income (loss) to average net assets (0.22%) 0.33% (1.15%)(D)
Portfolio turnover rate 113% 99% 86%(D)
(A) Represents the period from commencement of operations (September 6, 2006)
through March 31, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
DIVERSIFIED SMALL CAP GROWTH FUND--CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -----------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
MARCH 31, MARCH 31,
2009 2008(A)
- -----------------------------------------------------------------------------------
Net asset value at beginning of period $ 9.75 $ 12.44
- -----------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.08) (0.22)
Net realized and unrealized losses on investments (3.47) (1.28)
- -----------------------------------------------------------------------------------
Total from investment operations (3.55) (1.50)
- -----------------------------------------------------------------------------------
Distributions from net realized gains -- (1.19)
- -----------------------------------------------------------------------------------
Net asset value at end of period $ 6.20 $ 9.75
===================================================================================
Total return(B) (36.41%) (13.66%)(C)
===================================================================================
Net assets at end of period (000's) $ 2,267 $ 4,228
===================================================================================
Ratio of net expenses to average net assets 2.15% 0.84%(D)
Ratio of net investment loss to average net assets (0.98%) (17.70%)(D)
Portfolio turnover rate 113% 99%
(A) Represents the period from commencement of operations (August 1, 2007)
through March 31, 2008.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
30
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP GROWTH FUND--CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD
MARCH 31, ENDED
-------------------------- MARCH 31,
2009 2008 2007(A)
- -------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 9.84 $ 11.66 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.00(B) 0.04 (0.05)
Net realized and unrealized gains (losses) on investments (3.54) (0.67) 1.71
- -------------------------------------------------------------------------------------------------------------
Total from investment operations (3.54) (0.63) 1.66
- -------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.19) --
- -------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 6.30 $ 9.84 $ 11.66
=============================================================================================================
Total return (35.98%) (7.09%) 16.60%(C)
=============================================================================================================
Net assets at end of period (000's) $ 8,808 $ 14,509 $ 6,128
=============================================================================================================
Ratio of net expenses to average net assets 1.15% 1.15% 1.15%(D)
Ratio of net investment income (loss) to average net assets 0.02% (0.52%) (0.90%)(D)
Portfolio turnover rate 113% 99% 86%(D)
(A) Represents the period from commencement of operations (September 6, 2006)
through March 31, 2007.
(B) Amount rounds to less than $0.01 per share.
(C) Not annualized.
(D) Annualized.
GROWTH OPPORTUNITIES FUND--CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 21.68 $ 20.75 $ 21.57 $ 17.92 $ 18.06
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.15) (0.24) (0.35) (0.21) (0.24)
Net realized and unrealized gains (losses) on investments (7.12) 1.17 (0.47) 3.86 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (7.27) 0.93 (0.82) 3.65 (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 14.41 $ 21.68 $ 20.75 $ 21.57 $ 17.92
====================================================================================================================================
Total return(A) (33.53%) 4.48% (3.80%) 20.37% (0.78%)
====================================================================================================================================
Net assets at end of year (000's) $ 17,973 $ 26,349 $ 35,723 $ 98,004 $ 81,313
====================================================================================================================================
Ratio of net expenses to average net assets 1.51% 1.55% 1.79% 1.64% 1.68%
Ratio of net investment loss to average net assets (0.70%) (0.89%) (1.12%) (1.09%) (1.14%)
Portfolio turnover rate 60% 82% 161% 80% 35%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
31
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
GROWTH OPPORTUNITIES FUND--CLASS B
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED MARCH 31,
FEBRUARY 1, ---------------------------------------------------------------
2009(A) 2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 20.18 $ 19.38 $ 20.39 $ 16.97 $ 17.31 $ 12.13
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.24) (0.36) (0.51) (0.46) (0.43) (0.38)
Net realized and unrealized gains
(losses) on investments (6.64) 1.16 (0.50) 3.88 0.09 5.56
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (6.88) 0.80 (1.01) 3.42 (0.34) 5.18
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 13.30 $ 20.18 $ 19.38 $ 20.39 $ 16.97 $ 17.31
====================================================================================================================================
Total return(B) (34.09%)(C) 4.13% (4.95%) 20.15% (1.96%) 42.70%
====================================================================================================================================
Net assets at end of period (000's) $ 1,224 $ 1,974 $ 2,288 $ 3,230 $ 3,064 $ 3,608
====================================================================================================================================
Ratio of net expenses to average net assets 2.28%(D) 2.30% 2.97% 2.97% 2.95% 2.84%
Ratio of net investment loss to average net assets (1.51%)(D) (1.59%) (2.24%) (2.39%) (2.38%) (2.45%)
Portfolio turnover rate 60% 82% 161% 80% 35% 47%
(A) On February 2, 2009, Class B shares were exchanged for Class A shares.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
GROWTH OPPORTUNITIES FUND--CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------------------------------------
2009 2008 2007 2006 2005
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 20.42 $ 19.63 $ 20.60 $ 17.11 $ 17.39
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.29) (0.35) (0.54) (0.40) (0.40)
Net realized and unrealized gains (losses) on investments (6.58) 1.14 (0.43) 3.89 0.12
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (6.87) 0.79 (0.97) 3.49 (0.28)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 13.55 $ 20.42 $ 19.63 $ 20.60 $ 17.11
===================================================================================================================================
Total return(A) (33.64%) 4.02% (4.71%) 20.40% (1.61%)
===================================================================================================================================
Net assets at end of year (000's) $ 6,262 $ 11,115 $ 11,957 $ 22,412 $ 21,789
===================================================================================================================================
Ratio of net expenses to average net assets 2.27% 2.30% 2.71% 2.57% 2.61%
Ratio of net investment loss to average net assets (1.46%) (1.60%) (2.00%) (2.01%) (2.04%)
Portfolio turnover rate 60% 82% 161% 80% 35%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
32
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
GROWTH OPPORTUNITIES FUND--CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
MARCH 31,
2009(A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 14.37
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.00)(B)
Net realized and unrealized gains on investments 0.04
- --------------------------------------------------------------------------------
Total from investment operations 0.04
- --------------------------------------------------------------------------------
Net asset value at end of period $ 14.41
================================================================================
Total return 0.28%(C)
================================================================================
Net assets at end of period (000's) $ 3
================================================================================
Ratio of net expenses to average net assets 0.97%(D)
Ratio of net investment income to average net assets 0.21%(D)
Portfolio turnover rate 60%
(A) Represents the period from commencement of operations (February 2, 2009)
through March 31, 2009.
(B) Amount rounds to less than $0.01.
(C) Not annualized.
(D) Annualized.
GROWTH OPPORTUNITIES FUND--INSTITUTIONAL CLASS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
MARCH 31,
2009(A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 14.37
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.00)(B)
Net realized and unrealized gains on investments 0.05
- --------------------------------------------------------------------------------
Total from investment operations 0.05
- --------------------------------------------------------------------------------
Net asset value at end of period $ 14.42
================================================================================
Total return 0.35%(C)
================================================================================
Net assets at end of period (000's) $ 3
================================================================================
Ratio of net expenses to average net assets 0.82%(D)
Ratio of net investment income to average net assets 0.36%(D)
Portfolio turnover rate 60%
(A) Represents the period from commencement of operations (February 2, 2009)
through March 31, 2009.
(B) Amount rounds to less than $0.01.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
33
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
LARGE CAP CORE EQUITY FUND--CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------------------------
2009 2008 2007 2006 2005
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 10.36 $ 11.36 $ 10.49 $ 9.48 $ 9.10
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.12 0.10 0.11 0.06 0.11
Net realized and unrealized gains (losses) on investments (3.77) (0.62) 0.91 0.96 0.38
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.65) (0.52) 1.02 1.02 0.49
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.11) (0.10) (0.15) (0.01) (0.11)
Distributions from net realized gains (0.60) (0.38) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.71) (0.48) (0.15) (0.01) (0.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 6.00 $ 10.36 $ 11.36 $ 10.49 $ 9.48
==================================================================================================================================
Total return(A) (35.73%) (5.03%) 9.83% 10.74% 5.32%
==================================================================================================================================
Net assets at end of year (000's) $ 45,073 $ 84,611 $ 95,175 $ 25,693 $ 9,328
==================================================================================================================================
Ratio of net expenses to average net assets 1.15% 1.15% 1.15% 1.00% 1.00%
Ratio of net investment income to average net assets 1.38% 0.89% 0.97% 1.03% 1.18%
Portfolio turnover rate 51% 52% 54% 6% 7%
(A) Total returns shown exclude the effect of applicable sales loads.
LARGE CAP CORE EQUITY FUND--CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------------------------
2009 2008 2007 2006 2005
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 10.29 $ 11.29 $ 10.39 $ 9.46 $ 9.08
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.04 0.01 (0.02) 0.03 0.04
Net realized and unrealized gains (losses) on investments (3.72) (0.61) 0.96 0.91 0.37
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.68) (0.60) 0.94 0.94 0.41
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.06) (0.02) (0.04) (0.01) (0.03)
Distributions from net realized gains (0.60) (0.38) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.66) (0.40) (0.04) (0.01) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 5.95 $ 10.29 $ 11.29 $ 10.39 $ 9.46
==================================================================================================================================
Total return(A) (36.23%) (5.72%) 9.09% 9.91% 4.52%
==================================================================================================================================
Net assets at end of year (000's) $ 1,858 $ 2,913 $ 4,231 $ 1,399 $ 1,675
==================================================================================================================================
Ratio of net expenses to average net assets 1.90% 1.90% 1.90% 1.75% 1.75%
Ratio of net investment income (loss) to average net assets 0.70% 0.13% (0.26%) 0.26% 0.41%
Portfolio turnover rate 51% 52% 54% 6% 7%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
34
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND--CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 24.45 $ 22.06 $ 23.26 $ 19.84 $ 17.31
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.09 0.02 (0.04) (0.02) (0.02)
Net realized and unrealized gains (losses) on investments (9.80) 2.37 (1.16) 3.44 2.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (9.71) 2.39 (1.20) 3.42 2.53
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.01) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 14.73 $ 24.45 $ 22.06 $ 23.26 $ 19.84
====================================================================================================================================
Total return(A) (39.71%) 10.83% (5.16%) 17.24% 14.62%
====================================================================================================================================
Net assets at end of year (000's) $ 418,808 $ 719,488 $ 656,582 $ 838,120 $ 274,121
====================================================================================================================================
Ratio of net expenses to average net assets 1.25% 1.25% 1.16% 1.17% 1.26%
Ratio of net investment income (loss) to average net assets 0.41% 0.06% (0.16%) (0.13%) (0.23%)
Portfolio turnover 126% 72% 115% 104% 127%
(A) Total returns shown exclude the effect of applicable sales loads.
LARGE CAP GROWTH FUND--CLASS B
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 23.68 $ 21.46 $ 22.83 $ 19.60 $ 17.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.08) (0.15) (0.21) (0.15) (0.12)
Net realized and unrealized gains (losses) on investments (9.38) 2.37 (1.16) 3.38 2.48
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (9.46) 2.22 (1.37) 3.23 2.36
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 14.22 $ 23.68 $ 21.46 $ 22.83 $ 19.60
====================================================================================================================================
Total return(A) (39.95%) 10.34% (6.00%) 16.48% 13.69%
====================================================================================================================================
Net assets at end of year (000's) $ 14,186 $ 29,829 $ 26,669 $ 27,781 $ 10,579
====================================================================================================================================
Ratio of net expenses to average net assets 2.00% 2.00% 2.02% 2.08% 2.25%
Ratio of net investment loss to average net assets (0.35%) (0.65%) (0.98%) (1.02%) (1.23%)
Portfolio turnover rate 126% 72% 115% 104% 127%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
35
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND--CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 23.74 $ 21.52 $ 22.88 $ 19.62 $ 17.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.07) (0.14) (0.20) (0.11) (0.08)
Net realized and unrealized gains (losses) on investments (9.42) 2.36 (1.16) 3.37 2.46
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (9.49) 2.22 (1.36) 3.26 2.38
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 14.25 $ 23.74 $ 21.52 $ 22.88 $ 19.62
====================================================================================================================================
Total return(A) (39.97%) 10.32% (5.94%) 16.62% 13.81%
====================================================================================================================================
Net assets at end of year (000's) $ 137,641 $ 236,582 $ 190,261 $ 188,810 $ 48,446
====================================================================================================================================
Ratio of net expenses to average net assets 2.00% 2.00% 1.95% 1.98% 2.03%
Ratio of net investment loss to average net assets (0.33%) (0.66%) (0.92%) (0.93%) (0.97%)
Portfolio turnover rate 126% 72% 115% 104% 127%
(A) Total returns shown exclude the effect of applicable sales loads.
LARGE CAP GROWTH FUND--CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED MARCH 31, ENDED
---------------------------------------------------- MARCH 31,
2009 2008 2007 2006 2005(A)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 24.64 $ 22.19 $ 23.33 $ 19.86 $ 18.34
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.10 0.05 0.06 0.03 0.01
Net realized and unrealized gains (losses) on investments (9.85) 2.40 (1.20) 3.44 1.51
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (9.75) 2.45 (1.14) 3.47 1.52
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.05) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 14.84 $ 24.64 $ 22.19 $ 23.33 $ 19.86
====================================================================================================================================
Total return (39.58%) 11.04% (4.89%) 17.47% 8.29%(B)
====================================================================================================================================
Net assets at end of period (000's) $ 206,369 $ 31,679 $ 40,044 $ 66,655 $ 43,279
====================================================================================================================================
Ratio of net expenses to average net assets 0.97% 1.00% 0.90% 0.93% 1.01%(C)
Ratio of net investment income to average net assets 0.95% 0.21% 0.13% 0.12% 0.21%(C)
Portfolio turnover 126% 72% 115% 104% 127%
(A) Represents the period from commencement of operations (November 10, 2004)
through March 31, 2005.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
36
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND--CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED MARCH 31, ENDED
--------------------------------------- MARCH 31,
2009 2008 2007 2006(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 6.41 $ 11.15 $ 10.19 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.06 0.10 0.04 0.01
Net realized and unrealized gains (losses) on investments (4.58) (4.15) 1.19 0.18
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (4.52) (4.05) 1.23 0.19
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.08) (0.09) (0.04) --
Distributions from net realized gains -- (0.60) (0.23) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.08) (0.69) (0.27) --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 1.81 $ 6.41 $ 11.15 $ 10.19
=========================================================================================================================
Total return(B) (70.60%) (37.31%) 12.12% 1.90%(C)
=========================================================================================================================
Net assets at end of period (000's) $ 5,321 $ 23,609 $ 29,609 $ 11,684
=========================================================================================================================
Ratio of net expenses to average net assets 1.35% 1.35% 1.35% 1.30%(D)
Ratio of net investment income to average net assets 1.30% 1.06% 0.55% 1.34%(D)
Portfolio turnover rate 100% 75% 57% 68%(D)
(A) Represents the period from commencement of operations (March 6, 2006)
through March 31, 2006.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
37
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND--CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED MARCH 31, ENDED
--------------------------------------- MARCH 31,
2009 2008 2007 2006(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 6.38 $ 11.09 $ 10.18 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.03 0.03 (0.01) 0.00(B)
Net realized and unrealized gains (losses) on investments (4.56) (4.14) 1.17 0.18
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (4.53) (4.11) 1.16 0.18
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.06) (0.00)(B) (0.01) --
Distributions from net realized gains -- (0.60) (0.24) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.06) (0.60) (0.25) --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 1.79 $ 6.38 $ 11.09 $ 10.18
=========================================================================================================================
Total return(C) (71.00%) (37.89%) 11.37% 1.80%(D)
=========================================================================================================================
Net assets at end of period (000's) $ 1,764 $ 9,639 $ 15,220 $ 561
=========================================================================================================================
Ratio of net expenses to average net assets 2.10% 2.10% 2.10% 1.89%(E)
Ratio of net investment income (loss) to average net assets 0.55% 0.30% (0.27%) 0.25%(E)
Portfolio turnover rate 100% 75% 57% 68%(E)
(A) Represents the period from commencement of operations (March 6, 2006)
through March 31, 2006.
(B) Amount rounds to less than $0.01 per share.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
38
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND--CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 21.16 $ 24.17 $ 24.02 $ 21.42 $ 21.73
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.01) (0.12) (0.14) (0.12) (0.16)
Net realized and unrealized gains (losses) on investments (7.96) 0.01 2.20 4.70 1.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (7.97) (0.11) 2.06 4.58 0.87
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.24) (2.90) (1.91) (1.98) (1.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 12.95 $ 21.16 $ 24.17 $ 24.02 $ 21.42
====================================================================================================================================
Total return(A) (37.67%) (1.53%) 8.84% 22.21% 4.13%
====================================================================================================================================
Net assets at end of year (000's) $ 397,756 $ 649,891 $ 713,666 $ 639,501 $ 574,855
====================================================================================================================================
Ratio of net expenses to average net assets 1.50% 1.47% 1.50% 1.50% 1.50%
Ratio of net investment loss to average net assets (0.07%) (0.53%) (0.66%) (0.57%) (0.84%)
Portfolio turnover 71% 64% 58% 69% 85%
(A) Total returns shown exclude the effect of applicable sales loads.
MID CAP GROWTH FUND--CLASS B
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 18.13 $ 21.25 $ 21.49 $ 19.50 $ 20.03
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.15) (0.28) (0.30) (0.26) (0.29)
Net realized and unrealized gains (losses) on investments (6.76) 0.06 1.97 4.23 0.94
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (6.91) (0.22) 1.67 3.97 0.65
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.24) (2.90) (1.91) (1.98) (1.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 10.98 $ 18.13 $ 21.25 $ 21.49 $ 19.50
====================================================================================================================================
Total return(A) (38.12%) (2.29%) 8.04% 21.24% 3.37%
====================================================================================================================================
Net assets at end of year (000's) $ 29,521 $ 61,977 $ 74,935 $ 79,552 $ 71,879
====================================================================================================================================
Ratio of net expenses to average net assets 2.25% 2.25% 2.25% 2.25% 2.25%
Ratio of net investment loss to average net assets (0.85%) (1.31%) (1.42%) (1.32%) (1.60%)
Portfolio turnover rate 71% 64% 58% 69% 85%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
39
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND--CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 18.15 $ 21.27 $ 21.51 $ 19.51 $ 20.04
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.14) (0.27) (0.28) (0.25) (0.30)
Net realized and unrealized gains (losses) on investments (6.78) 0.05 1.95 4.23 0.95
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (6.92) (0.22) 1.67 3.98 0.65
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.24) (2.90) (1.91) (1.98) (1.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 10.99 $ 18.15 $ 21.27 $ 21.51 $ 19.51
====================================================================================================================================
Total return(A) (38.14%) (2.28%) 8.04% 21.28% 3.36%
====================================================================================================================================
Net assets at end of year (000's) $ 158,782 $ 302,422 $ 345,997 $ 327,867 $ 284,966
====================================================================================================================================
Ratio of net expenses to average net assets 2.25% 2.24% 2.25% 2.25% 2.25%
Ratio of net investment loss to average net assets (0.84%) (1.30%) (1.41%) (1.32%) (1.60%)
Portfolio turnover 71% 64% 58% 69% 85%
(A) Total returns shown exclude the effect of applicable sales loads.
MID CAP GROWTH FUND--CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
PERIOD
ENDED
MARCH 31,
2009(A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 13.20
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.02
Net realized and unrealized losses on investments (0.26)
- --------------------------------------------------------------------------------
Total from investment operations (0.24)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 12.96
================================================================================
Total return (1.82%)(B)
================================================================================
Net assets at end of period (000's) $ 3
================================================================================
Ratio of net expenses to average net assets 1.25%(C)
Ratio of net investment income to average net assets 1.11%(C)
Portfolio turnover 71%
(A) Represents the period from commencement of operations (February 2, 2009)
through March 31, 2009.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
40
- --------------------------------------------------------------------------------
Notes to Financial Statements
March 31, 2009
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Diversified Small Cap Growth Fund, Growth Opportunities Fund, Large Cap Core
Equity Fund, Large Cap Growth Fund, Large Cap Value Fund, and Mid Cap Growth
Fund (individually, a Fund, and collectively, the Funds) are each a series of
Touchstone Strategic Trust (the 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 was established as a Massachusetts business trust
under a Declaration of Trust dated November 18, 1982. The Declaration of Trust,
as amended, permits the Trustees to issue an unlimited number of shares of each
Fund.
The Funds are registered to offer certain of the following classes of shares:
Class A shares, Class B shares, Class C shares, Class Y shares, and
Institutional Class shares. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held.
Effective February 1, 2009, Class B shares of the Growth Opportunities Fund,
Large Cap Growth Fund, and Mid Cap Growth Fund were closed to new investors.
Based on approval by the Board of Trustees, the following changes took place
effective February 2, 2009:
(i) Class B shares of the Growth Opportunities Fund were exchanged for Class A
shares of the Growth Opportunities Fund.
(ii) Growth Opportunities Fund began offering Class Y shares and Institutional
Class shares.
(iii) Mid Cap Growth Fund began offering Class Y shares.
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 as outlined below:
CLASS A (1) CLASS B (2) CLASS C (3) CLASS Y (4) INSTITUTIONAL CLASS (5)
- ------------------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund X X X
Growth Opportunities Fund X X X X
Large Cap Core Equity Fund X X
Large Cap Growth Fund X X X X
Large Cap Value Fund X X
Mid Cap Growth Fund X X X X
(1) Currently sold subject to a maximum front-end sales load of 5.75% and a
maximum distribution fee of up to 0.25% of average daily net assets
(2) Sold subject to a maximum contingent deferred sales load of 5.00% for a
one-year period and incrementally reduced over time and a maximum
distribution fee of up to 1.00% of average daily net assets
(3) Sold subject to a 1.00% contingent deferred sales load for a one-year
period and a maximum distribution fee of up to 1.00% of average daily net
assets
(4) Sold without a distribution fee or sales charge, but offered only through
selected dealers
(5) Sold without a distribution fee or sales charge, and subject to a higher
minimum initial investment
Each Class A, Class B, Class C, Class Y, and Institutional Class share of a Fund
represents identical interests in the investment portfolio of such Fund and has
the same rights, except that (i) Class B and Class C shares bear the expenses of
higher distribution fees, which is expected to cause Class B and Class C shares
to have a higher expense ratio and to pay lower dividends than Class A, Class Y,
and Institutional Class shares; (ii) certain other class specific expenses will
be borne solely by the class to which such expenses are attributable; and (iii)
each class has exclusive voting rights with respect to matters relating to its
own distribution arrangements.
41
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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. 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. Money market instruments and other debt securities with a remaining
maturity of less than 60 days are valued at amortized cost, which approximates
market. 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.
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.
Various inputs are used in determining the value of the Funds investments. These
inputs are summarized in the three broad levels listed below:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For
example, money market securities are valued using amortized cost, in accordance
with rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
42
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The following is a summary of the inputs used to value the Funds net assets as
of March 31, 2009:
LEVEL 2 - LEVEL 3 -
OTHER SIGNIFICANT SIGNIFICANT
LEVEL 1 - OBSERVABLE UNOBSERVABLE
INVESTMENTS IN SECURITIES: QUOTED PRICES INPUTS INPUTS
- --------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund $ 23,765,528 $ -- $ --
Growth Opportunities Fund 31,010,920 -- --
Large Cap Core Equity Fund 59,084,914 -- --
Large Cap Growth Fund 955,269,393 -- --
Large Cap Value Fund 8,718,321 -- --
Mid Cap Growth Fund 756,589,760 -- --
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 March 31, 2009, the following Funds loaned common stocks and received
collateral as follows:
MARKET VALUE VALUE OF
OF COMMON COLLATERAL
STOCKS LOANED RECEIVED
- --------------------------------------------------------------------------------
Diversified Small Cap Growth Fund $ 3,412,494 $ 3,452,262
Growth Opportunities Fund $ 7,004,811 $ 6,894,924
Large Cap Core Equity Fund $ 12,224,107 $ 12,216,169
Large Cap Growth Fund $176,975,351 $178,301,175
Large Cap Value Fund $ 1,461,108 $ 1,474,505
Mid Cap Growth Fund $164,717,349 $164,974,116
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 Funds' securities lending agreement, and
according to normal operating procedures, the custodian segregated an additional
$109,887 and $7,938 in collateral the following business day for securities on
loan in the Growth Opportunities Fund and the Large Cap Core Equity Fund,
respectively, as of March 31, 2009.
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 are recognized by the Funds. The
Funds have the right under the lending agreement to recover the securities from
the borrower on demand.
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.
43
- --------------------------------------------------------------------------------
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 B, Class C, Class Y, and Institutional Class 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 B and Class C shares of the Funds
are subject to a contingent deferred sales load of 5.00% and 1.00%,
respectively, of the original purchase price if redeemed within a one-year
period from the date of purchase. The contingent deferred sales load for Class B
shares will be incrementally reduced over time. After the 6th year, there is no
contingent deferred sales load for Class B shares.
INVESTMENT INCOME -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities purchased
are accreted or amortized into income using the effective yield method.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends arising from net investment income,
if any, are declared and paid to shareholders annually for each Fund. With
respect to each Fund, net realized short-term capital gains, if any, may be
distributed throughout the year and net realized long-term capital gains, if
any, are distributed at least once each year. Income dividends and capital gain
distributions are determined in accordance with income tax regulations.
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. FEDERAL TAX INFORMATION
It is each Fund's policy to continue to comply with the special provisions of
the Internal Revenue Code applicable to regulated investment companies. As
provided therein, in any fiscal year in which a Fund so qualifies and
distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare and pay as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ending October 31) plus undistributed amounts
from prior years.
44
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid for the years ended March 31, 2009 and
2008 was as follows:
DIVERSIFIED
SMALL CAP GROWTH LARGE CAP
GROWTH OPPORTUNITIES CORE EQUITY
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008 2009 2008 2009 2008
- ----------------------------------------------------------------------------------------------------------------------
From ordinary income $ -- $ 1,091,263 $ -- $ -- $ 850,456 $ 953,047
From long-term capital gains -- 250,461 -- -- 4,426,626 3,110,976
From tax return of capital -- 44,031 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
$ -- $ 1,385,755 $ -- $ -- $ 5,277,082 $ 4,064,023
- ----------------------------------------------------------------------------------------------------------------------
LARGE CAP
GROWTH LARGE CAP VALUE MID CAP GROWTH
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008 2009 2008 2009 2008
- ----------------------------------------------------------------------------------------------------------------------
From ordinary income $ 1,128,574 $ -- $ 280,330 $ 2,249,958 $ -- $ 10,614,691
From long-term capital gains -- -- -- 661,846 11,814,206 126,598,336
From tax return of capital -- -- -- 105,998 -- --
- ----------------------------------------------------------------------------------------------------------------------
$ 1,128,574 $ -- $ 280,330 $ 3,017,802 $ 11,814,206 $137,213,027
- ----------------------------------------------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of March
31, 2009:
DIVERSIFIED LARGE
SMALL CAP GROWTH CAP CORE
GROWTH OPPORTUNITIES EQUITY
FUND FUND FUND
- -----------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 31,826,824 $ 36,212,179 $ 79,984,711
- -----------------------------------------------------------------------------------------
Gross unrealized appreciation 287,883 1,026,989 --
Gross unrealized depreciation (8,349,179) (6,216,575) (20,899,797)
- -----------------------------------------------------------------------------------------
Net unrealized depreciation (8,061,296) (5,189,586) (20,899,797)
Undistributed ordinary income -- -- 263,429
Capital loss carryforward (15,063,549) (44,094,123) (1,053,666)
Post October losses (4,564,803) (3,498,686) (5,030,727)
- -----------------------------------------------------------------------------------------
Accumulated deficit $ (27,689,648) $ (52,782,395) $ (26,720,761)
=========================================================================================
LARGE CAP LARGE CAP MID CAP
GROWTH VALUE GROWTH
FUND FUND FUND
- -----------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 1,025,938,378 $ 16,851,160 $ 926,918,458
- -----------------------------------------------------------------------------------------
Gross unrealized appreciation 42,083,743 -- 16,272,015
Gross unrealized depreciation (112,752,728) (8,132,839) (186,600,713)
- -----------------------------------------------------------------------------------------
Net unrealized depreciation (70,668,985) (8,132,839) (170,328,698)
Undistributed ordinary income 2,186,078 -- --
Capital loss carryforward (67,703,714) (22,453,637) (55,424,720)
Post October losses (291,990,293) (12,084,335) (99,103,438)
- -----------------------------------------------------------------------------------------
Accumulated deficit $ (428,176,914) $ (42,670,811) $ (324,856,856)
=========================================================================================
45
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The difference between the tax cost of portfolio investments and the financial
statement cost is primarily due to wash sales.
As of March 31, 2009, the Funds had the following capital loss carryforwards for
federal income tax purposes.
EXPIRES
FUND AMOUNT MARCH 31,
- --------------------------------------------------------------------------------
Diversified Small Cap Growth Fund $11,436,443 2015
3,627,106 2017
-----------
15,063,549
===========
Growth Opportunities Fund $21,887,780 2011
17,098,132 2012
1,976,702 2013
3,131,509 2017
-----------
44,094,123
===========
Large Cap Core Equity Fund $ 1,053,666 2017
===========
Large Cap Growth Fund $26,177,120 2015
41,526,594 2017
-----------
67,703,714
===========
Large Cap Value Fund $22,453,637 2017
===========
Mid Cap Growth Fund $55,424,720 2017
===========
The capital loss carryforwards and Post-October losses may be utilized in future
years to offset net realized capital gains, if any, prior to distributing such
gains to shareholders.
Certain reclassifications, the result of permanent differences between financial
statement and income tax reporting requirements have been made to the components
of capital. These reclassifications have no impact on the net assets or net
asset value per share of the Funds and are designed to present the Fund's
capital accounts on a tax basis. The following reclassification of net
investment loss have been made to the following Funds for the year ended March
31, 2009:
ACCUMULATED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME GAINS
- --------------------------------------------------------------------------------
Diversified Small Cap Growth Fund $ (66,895) $ 63,533 $ 3,362
Growth Opportunities Fund (328,722) 323,694 5,028
Large Cap Value Fund (87,031) 87,031 --
Mid Cap Growth Fund (2,859,559) 2,859,559 --
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 benefit in the current year. Adoption of FIN 48 was required for fiscal
years beginning after December 15, 2006 and was applied to all open tax years as
of the effective date. The Funds have analyzed their tax positions taken on
Federal income tax returns for all open tax years (tax years ended March 31,
2006 through 2009) for purposes of applying FIN 48 and have concluded that no
provision for income tax is required in their financial statements.
46
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and U.S. Government
securities) were as follows for the year ended March 31, 2009:
DIVERSIFIED
SMALL CAP GROWTH LARGE CAP LARGE CAP
GROWTH OPPORTUNITIES CORE EQUITY GROWTH
FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------
Purchases of investment securities $ 34,352,086 $ 20,772,268 $ 33,977,348 $1,585,937,478
- -------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $ 44,724,058 $ 20,601,449 $ 47,116,488 $1,248,291,063
- -------------------------------------------------------------------------------------------------------
LARGE CAP MID CAP
VALUE GROWTH
FUND FUND
- --------------------------------------------------------------------------------
Purchases of investment securities $ 17,672,240 $592,520,412
- --------------------------------------------------------------------------------
Proceeds from sales and maturities $ 22,128,837 $634,191,523
- --------------------------------------------------------------------------------
5. 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) 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).
MANAGEMENT AGREEMENTS
The Advisor provides general investment supervisory services for the Funds,
under the 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 follows:
Diversified Small Cap Growth Fund 1.05%
- -----------------------------------------------------------------------------------------
Growth Opportunities Fund* 0.83% on the first $500 million
0.80% on the next $500 million
0.75% of such assets in excess of $1 billion
- -----------------------------------------------------------------------------------------
Large Cap Core Equity Fund 0.65% on the first $100 million
0.60% on the next $100 million
0.55% on the next $100 million
0.50% of such assets in excess of $300 million
- -----------------------------------------------------------------------------------------
Large Cap Growth Fund 0.75% on the first $200 million
0.70% on the next $800 million
0.65% of such assets in excess of $1 billion
- -----------------------------------------------------------------------------------------
Large Cap Value Fund 0.75%
- -----------------------------------------------------------------------------------------
Mid Cap Growth Fund 0.80%
- -----------------------------------------------------------------------------------------
* Prior to February 2, 2009, the Fund paid 1.00% of the first $50 million of
average net assets, 0.90% of the next $50 million of average net assets,
0.80% of the next $900 million of average net assets, and 0.75% on assets
over $1 billion.
47
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The Advisor has retained various Sub-Advisors to manage the investments of the
Funds under the terms of a Sub-Advisory Agreement. The Advisor (not the Funds)
pays the Sub-Advisors a fee for these services.
Fort Washington Investment Advisors, Inc., an affiliate of the Advisor, has been
retained by the Advisor to manage the investments of the Diversified Small Cap
Growth Fund.
Westfield Capital Management Company, LP has been retained by the Advisor to
manage the investments of the Growth Opportunities Fund and a portion of the
investments of the Mid Cap Growth Fund.
Todd Investment Advisors, Inc., an affiliate of the Advisor, has been retained
by the Advisor to manage the investments of the Large Cap Core Equity Fund.
Effective April 30, 2009, Todd Investment Advisors, Inc. changed its name to
Todd/Veredus Asset Management, LLC and is no longer an affiliate of the Advsor.
Navellier & Associates, Inc. has been retained by the Advisor to manage the
investments of the Large Cap Growth Fund.
JS Asset Management, LLC has been retained by the Advisor to manage the
investments of the Large Cap Value Fund.
TCW Investment Management Company has been retained by the Advisor to manage a
portion of the investments of the Mid Cap Growth Fund.
ADMINISTRATION AND ACCOUNTING SERVICES 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, supervising the preparation of tax returns,
coordinating the preparation of reports to shareholders and reports to, and
filings with, the Securities and Exchange Commission and state securities
authorities, preparing 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
Funds Group Trust, Touchstone Investment Trust (excluding Institutional Money
Market Fund), 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.
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.
EXPENSE LIMITATION AGREEMENT
The Trust and the Advisor have entered into an Expense Limitation Agreement to
contractually limit operating expenses of the Diversified Small Cap Growth Fund,
Growth Opportunities Fund, Large Cap Core Equity Fund, Large Cap Growth Fund,
Large Cap Value Fund, and Mid Cap Growth Fund. 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, as stated
below, for the Diversified Small Cap Growth Fund, Large Cap Core Equity Fund,
Large Cap Growth Fund, Large Cap Value Fund, and Class A, B, and C shares of the
Mid Cap Growth Fund through July 31, 2009. The Advisor has agreed to waive
advisory fees and reimburse expenses in order to maintain expense limitations,
as stated below, for the Growth Opportunities Fund and Class Y shares of the Mid
Cap Growth Fund through February 1, 2010.
48
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS Y CLASS
- ------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund 1.40% -- 2.15% 1.15% --
Growth Opportunities Fund* 1.24% -- 1.99% 0.99% 0.84%
Large Cap Core Equity Fund 1.15% -- 1.90% -- --
Large Cap Growth Fund 1.25% 2.00% 2.00% 0.99% --
Large Cap Value Fund 1.35% -- 2.10% -- --
Mid Cap Growth Fund 1.50% 2.25% 2.25% 1.25% --
* Effective February 2, 2009, the Fund changed its expense limits from 1.55%
and 2.30% for Class A and Class C, respectively.
For the year ended March 31, 2009, the Advisor waived investment advisory fees,
administration fees, and/or reimbursed expenses as follows:
INVESTMENT OTHER OPERATING
ADVISORY ADMINISTRATION EXPENSES
FEES WAIVED FEES WAIVED REIMBURSED
- --------------------------------------------------------------------------------
Diversified Small Cap Growth Fund $106,110 $ 61,176 $ 71,733
Growth Opportunities Fund $ -- $ 69,589 $131,696
Large Cap Core Equity Fund $ -- $ 98,799 $ --
Large Cap Growth Fund $ -- $924,129 $ --
Large Cap Value Fund $ -- $ 35,660 $ 65,324
Mid Cap Growth Fund $ -- $348,150 $ --
- --------------------------------------------------------------------------------
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 March 31, 2009, the following Funds reimbursed the Advisor
for amounts paid to third parties that provide sub-transfer agency and other
administrative services to the Funds. These amounts are included in transfer
agent fees on the Statements of Operations:
AMOUNT
- --------------------------------------------------------------------------------
Diversified Small Cap Growth Fund $ 5,328
Growth Opportunities Fund $ 5,299
Large Cap Core Equity Fund $ 2,999
Large Cap Growth Fund $ 567,572
Large Cap Value Fund $ 2,785
Mid Cap Growth Fund $ 439,294
49
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
UNDERWRITING AGREEMENT
The Underwriter is the Funds' principal underwriter and, as such, acts as the
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and Underwriter, the Underwriter earned
the following from underwriting and broker commissions on the sale of shares of
the following Funds for the year ended March 31, 2009:
Diversified Small Cap Growth Fund $ 2,090
Growth Opportunities Fund $ 6,759
Large Cap Core Equity Fund $ 2,319
Large Cap Growth Fund $ 120,981
Large Cap Value Fund $ 3,186
Mid Cap Growth Fund $ 66,695
In addition, the Underwriter collected the following contingent deferred sales
charges on the redemption of Class B and Class C shares of the following Funds
during the year ended March 31, 2009:
Diversified Small Cap Growth Fund $ 71
Growth Opportunities Fund $ 2,559
Large Cap Core Equity Fund $ 212
Large Cap Growth Fund $ 96,767
Large Cap Value Fund $ 2,013
Mid Cap Growth Fund $ 99,146
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which Class A shares
of each Fund may directly incur or reimburse the Advisor or the Underwriter for
expenses related to the distribution and promotion of shares. The annual
limitation for payment of such expenses under the Class A Plan is 0.25% of
average daily net assets attributable to such shares.
The Trust also has a Plan of Distribution (Class B and Class C Plan) under which
Class B and Class C shares of each Fund may directly incur or reimburse the
Advisor or the Underwriter for expenses related to the distribution and
promotion of shares. The annual limitation for payment of such expenses under
the Class B and Class C Plan is 1.00% of average daily net assets attributable
to Class B and Class C shares.
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.
50
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
AFFILIATED INVESTMENTS
Each Fund may invest in the Touchstone Institutional Money Market Fund, subject
to compliance with the 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 in the Touchstone Institutional Money Market
Fund, for the year ended March 31, 2009, is noted below:
SHARE ACTIVITY
------------------------------------------
BALANCE BALANCE VALUE
03/31/08 PURCHASES SALES 03/31/09 DIVIDENDS 03/31/09
- ---------------------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund 426,337 21,843,195 21,627,960 641,572 $ 21,513 $ 641,572
- ---------------------------------------------------------------------------------------------------------------------------
Growth Opportunities Fund 2,103,630 15,559,975 17,229,640 433,965 $ 23,773 $ 433,965
- ---------------------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund 909,424 16,413,235 16,725,621 597,038 $ 32,556 $ 597,038
- ---------------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund 40,267,884 720,333,683 746,032,195 14,569,372 $ 823,111 $ 14,569,372
- ---------------------------------------------------------------------------------------------------------------------------
Large Cap Value Fund 1,031,802 9,873,742 10,609,612 295,932 $ 12,548 $ 295,932
- ---------------------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund 31,135,521 394,010,433 393,092,065 32,053,889 $ 854,015 $ 32,053,889
- ---------------------------------------------------------------------------------------------------------------------------
As of March 31, 2009, 60% of the Large Cap Core Equity Fund was owned by
Western-Southern and subsidiaries.
51
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
6. 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:
DIVERSIFIED SMALL CAP GROWTH
GROWTH FUND OPPORTUNITIES FUND
- --------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008(A) 2009 (B)(C) 2008
- --------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 284,069 263,944 597,146 386,840
Shares reinvested -- 63,482 -- --
Shares issued in connection with merger(D) -- 1,618,654 -- --
Shares redeemed (1,183,072) (105,123) (564,842) (893,540)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (899,003) 1,840,957 32,304 (506,700)
Shares outstanding, beginning of year 2,343,253 502,296 1,215,195 1,721,895
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 1,444,250 2,343,253 1,247,499 1,215,195
========================================================================================================
CLASS B
Shares sold -- -- 12,106 6,701
Shares redeemed -- -- (109,949) (26,917)
- --------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- (97,843) (20,216)
Shares outstanding, beginning of period -- -- 97,843 118,059
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- 97,843
========================================================================================================
CLASS C
Shares sold 75,215 2,428 95,132 77,480
Shares reinvested -- 174 -- --
Shares issued in connection with merger(D) -- 447,314 -- --
Shares redeemed (142,717) (16,527) (177,424) (142,358)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (67,502) 433,389 (82,292) (64,878)
Shares outstanding, beginning of year 433,389 -- 544,371 609,249
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 365,887 433,389 462,079 544,371
========================================================================================================
CLASS Y
Shares sold 381,513 13,179 174 --
Shares reinvested -- 53,188 -- --
Shares issued in connection with merger(D) -- 955,214 -- --
Shares redeemed (459,173) (72,284) -- --
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (77,660) 949,297 174 --
Shares outstanding, beginning of period 1,475,053 525,756 -- --
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 1,397,393 1,475,053 174 --
========================================================================================================
INSTITUTIONAL CLASS
Shares sold -- -- 174 --
- --------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 174 --
Shares outstanding, beginning of period -- -- -- --
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 174 --
========================================================================================================
(A) Class C represents the period from commencement of operations (August 1,
2007) through March 31, 2008.
(B) Class B represents the period from April 1, 2008 through February 1, 2009.
(C) Class Y and Institutional Class represent the period from commencement of
operations (February 2, 2009) through March 31, 2009.
(D) See Footnote 9 in notes to financial statements.
52
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
LARGE CAP LARGE CAP
CORE EQUITY FUND GROWTH FUND
- ---------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008 2009 2008
- ---------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,320,503 315,075 12,745,671 9,792,309
Shares reinvested 752,009 330,369 15,664 --
Shares redeemed (2,719,015) (857,207) (13,751,512) (10,133,781)
- --------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding (646,503) (211,763) (990,177) (341,472)
Shares outstanding, beginning of year 8,164,279 8,376,042 29,423,759 29,765,231
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 7,517,776 8,164,279 28,433,582 29,423,759
========================================================================================================
CLASS B
Shares sold -- -- 100,102 182,120
Shares redeemed -- -- (362,105) (165,299)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- (262,003) 16,821
Shares outstanding, beginning of year -- -- 1,259,452 1,242,631
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 997,449 1,259,452
========================================================================================================
CLASS C
Shares sold 294,725 30,672 2,714,036 3,108,568
Shares reinvested 22,799 8,571 -- --
Shares redeemed (288,175) (130,836) (3,021,193) (1,984,001)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 29,349 (91,593) (307,157) 1,124,567
Shares outstanding, beginning of year 283,002 374,595 9,965,083 8,840,516
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 312,351 283,002 9,657,926 9,965,083
========================================================================================================
CLASS Y
Shares sold -- -- 15,826,281 740,061
Shares reinvested -- -- 44,535 --
Shares redeemed -- -- (3,249,013) (1,259,270)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- 12,621,803 (519,209)
Shares outstanding, beginning of year -- -- 1,285,657 1,804,866
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 13,907,460 1,285,657
========================================================================================================
53
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
LARGE CAP MID CAP
VALUE FUND GROWTH FUND
- ---------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2009 2008 2009(A) 2008
- ---------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,490,908 2,079,360 11,219,498 7,756,111
Shares reinvested 109,722 237,399 494,434 3,012,887
Shares redeemed (2,340,944) (1,289,234) (11,715,127) (9,592,017)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (740,314) 1,027,525 (1,195) 1,176,981
Shares outstanding, beginning of year 3,683,023 2,655,498 30,708,475 29,531,494
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 2,942,709 3,683,023 30,707,280 30,708,475
========================================================================================================
CLASS B
Shares sold -- -- 130,202 203,646
Shares reinvested -- -- 49,864 365,609
Shares redeemed -- -- (910,093) (677,956)
- --------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- (730,027) (108,701)
Shares outstanding, beginning of year -- -- 3,418,000 3,526,701
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 2,687,973 3,418,000
========================================================================================================
CLASS C
Shares sold 247,818 929,283 1,903,113 2,235,765
Shares reinvested 31,303 94,785 213,999 1,446,269
Shares redeemed (806,356) (885,835) (4,331,573) (3,290,914)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (527,235) 138,233 (2,214,461) 391,120
Shares outstanding, beginning of year 1,510,767 1,372,534 16,658,584 16,267,464
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 983,532 1,510,767 14,444,123 16,658,584
========================================================================================================
CLASS Y
Shares sold -- -- 189 --
- --------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- 189 --
Shares outstanding, beginning of period -- -- -- --
- --------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 189 --
========================================================================================================
(A) Class Y represents the period from commencement of operations (February 2,
2009) through March 31, 2009.
7. CUSTODY OFFSET ARRANGEMENT
Some Funds may participate in the Custody Fee Offset Program offered by the
Custodian when they execute security trades where the Custodian is the broker.
If a Fund chooses to participate in the Custody Fee Offset Program, a rebate
amount will be applied to and credited against the fees payable by the Fund to
the Custodian. For financial reporting purposes for the year ended March 31,
2009, custodian fees reduced by the Custodian were $9,955 for the Large Cap
Growth Fund. There was no effect on net investment income.
8. 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.
54
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
9. FUND MERGERS
On February 15, 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 assets and liabilities of the Small Cap Growth Fund to the Diversified
Small Cap Growth Fund in exchange for shares of the Diversified Small Cap Growth
Fund and the subsequent liquidation of the Small Cap Growth Fund.
The merger was approved as follows:
NUMBER OF VOTES
----------------------------------------------------
FOR AGAINST ABSTAIN
----------------------------------------------------
1,225,698 12,830 42,194
The following is a summary of shares outstanding, net assets, net asset value
per share, unrealized depreciation and realized gain (loss) immediately before
and after the reorganization:
BEFORE AFTER
REORGANIZATION REORGANIZATION
- -----------------------------------------------------------------------------------------
DIVERSIFIED DIVERSIFIED
SMALL CAP SMALL CAP SMALL CAP
GROWTH GROWTH GROWTH
FUND FUND FUND
- -----------------------------------------------------------------------------------------
Shares:
Class A 927,021 1,461,709 2,388,730
Class B 204,375 -- --
Class C 321,452 128,199 449,651
Class Y 654,070 886,760 1,540,830
Net Assets:
Class A $ 13,935,302 $ 10,979,134 $ 24,914,436
Class B $ 2,952,341 $ -- $ --
Class C $ 4,647,481 $ 19,172 $ 4,666,653
Class Y $ 10,000,219 $ 6,131,096 $ 16,131,315
Net Asset Value:
Class A $ 15.03 $ 10.43 $ 10.43
Class B $ 14.45 $ -- $ --
Class C $ 14.46 $ 10.38 $ 10.38
Class Y $ 15.29 $ 10.47 $ 10.47
Unrealized Depreciation $ (1,767,740) $ (214,531) $ (1,982,271)
Accumulated Net Realized Gain (Loss) $ (12,053,670) $ 154,203 $ (11,899,467)
10. SPECIAL MEETING OF SHAREHOLDERS
During a meeting held February 19, 2009 of the Board of Trustees, the Trustees
unanimously approved the liquidation of the Micro Cap Growth Fund. On March 30,
2009 all outstanding shares of the Micro Cap Growth Fund were redeemed as part
of the liquidation of the Fund and all operations ceased on this date.
55
- --------------------------------------------------------------------------------
Portfolio of Investments
Diversified Small Cap Growth Fund - March 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 97.8% SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE -- 29.5%
Acorda Therapeutics, Inc.* 20,350 $ 403,134
Alexion Pharmaceuticals, Inc.* 13,483 507,769
American Medical Systems
Holdings, Inc.* 12,190 135,919
Biomarin Pharmaceutical, Inc.* 22,761 281,098
CardioNet, Inc.* 12,695 356,222
eResearch Technology, Inc.* 44,025 231,572
Genomic Health, Inc.* 21,383 521,317
Gen-Probe, Inc.* 9,344 425,900
Myriad Genetics, Inc.* 5,700 259,179
NuVasive, Inc.* + 13,180 413,588
Onyx Pharmaceuticals, Inc.* 9,315 265,943
OSI Pharmaceuticals, Inc.* + 12,617 482,726
RTI Biologics, Inc.* 94,950 270,608
SonoSite, Inc.* 19,130 342,044
Spectranetics Corp. (The)* + 74,040 187,321
TranS1, Inc.* + 30,096 183,285
United Therapeutics Corp.* 5,760 380,678
Wright Medical Group, Inc.* 23,040 300,211
- --------------------------------------------------------------------------------
5,948,514
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 22.5%
Anixter International, Inc.* 4,894 155,042
Avnet, Inc.* 5,096 89,231
CACI International, Inc. - Class A* 3,620 132,094
ComScore, Inc.* 18,589 224,741
Digital River, Inc.* 8,818 262,953
DivX, Inc.* 10,877 54,711
Euronet Worldwide, Inc.* 20,584 268,827
F5 Networks, Inc.* 7,288 152,684
j2 Global Communications, Inc.* 11,611 254,165
Micros Systems, Inc.* 6,058 113,588
Microsemi Corp.* 21,117 244,957
Multi-Fineline Electronix, Inc.* 4,851 81,691
Nuance Communications, Inc.* 14,327 155,591
Parametric Technology Corp.* 13,645 136,177
Polycom, Inc.* 14,510 223,309
Progress Software Corp.* 10,860 188,530
Skyworks Solutions, Inc.* + 45,562 367,229
Sybase, Inc.* + 9,225 279,425
Tessera Technologies, Inc.* 14,039 187,701
United Online, Inc. 17,910 79,879
ValueClick, Inc.* 14,286 121,574
VistaPrint Ltd.* + 12,045 331,117
Web.Com Group, Inc.* 41,426 137,534
Wind River Systems, Inc.* 22,840 146,176
Wright Express Corp.* 7,769 141,551
- --------------------------------------------------------------------------------
4,530,477
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 14.9%
99 Cents Only Stores* 4,310 39,824
Big Lots, Inc.* + 14,210 295,284
BJ'S Restaurants, Inc.* 17,245 239,878
Chipotle Mexican Grill, Inc. - Class A* + 3,921 260,276
Coinstar, Inc.* 9,740 319,082
Deckers Outdoor Corp.* 3,666 194,445
Fuel Systems Solutions, Inc.* + 11,045 148,887
Iconix Brand Group, Inc.* 24,808 219,551
LKQ Corp.* 18,145 258,929
Morningstar, Inc.* + 6,269 214,086
Netflix, Inc.* + 8,885 381,344
Panera Bread Co. - Class A* + 4,305 240,650
PetMed Express, Inc.* + 11,803 194,513
- --------------------------------------------------------------------------------
3,006,749
- --------------------------------------------------------------------------------
INDUSTRIALS -- 12.8%
Ameron International Corp. 3,655 192,472
Astec Industries, Inc.* 5,070 132,986
Ducommun, Inc. 11,724 170,467
Duff & Phelps Corp. - Class A* 11,505 181,204
EnPro Industries, Inc.* 10,032 171,547
ESCO Technologies, Inc.* 5,785 223,880
GrafTech International Ltd.* 26,715 164,564
Granite Construction, Inc. 4,440 166,411
LaBarge, Inc.* 13,734 114,954
Old Dominion Freight Line, Inc.* 9,385 220,454
Sykes Enterprises, Inc.* 11,270 187,420
Valmont Industries, Inc. 2,780 139,584
Wabtec Corp. 8,918 235,257
Watson Wyatt Worldwide, Inc. - Class A 5,703 281,556
- --------------------------------------------------------------------------------
2,582,756
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 5.2%
BJ's Wholesale Club, Inc.* 3,933 125,817
Chattem, Inc.* 3,680 206,264
Flowers Foods, Inc. 9,850 231,277
J.M. Smucker Co. (The) 2,720 101,374
Lancaster Colony Corp. 2,260 93,745
Ralcorp Holdings, Inc.* 2,995 161,371
Whole Foods Market, Inc.* + 7,147 120,070
- --------------------------------------------------------------------------------
1,039,918
- --------------------------------------------------------------------------------
ENERGY -- 3.8%
Atwood Oceanics, Inc.* 7,570 125,586
Comstock Resources, Inc.* 6,375 189,975
Lufkin Industries, Inc. 6,185 234,288
McMoRan Exploration Co.* 17,635 82,885
Natural Gas Services Group, Inc.* 13,786 124,074
- --------------------------------------------------------------------------------
756,808
- --------------------------------------------------------------------------------
FINANCIALS -- 3.8%
Cash America International, Inc. 7,150 111,969
EZCORP, Inc. - Class A* 22,540 260,788
Portfolio Recovery Associates, Inc.* + 14,274 383,114
- --------------------------------------------------------------------------------
755,871
- --------------------------------------------------------------------------------
56
- --------------------------------------------------------------------------------
Diversified Small Cap Growth Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 97.8% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 2.1%
NTELOS Holdings Corp. 9,945 $ 180,402
Syniverse Holdings, Inc.* 14,965 235,849
- --------------------------------------------------------------------------------
416,251
- --------------------------------------------------------------------------------
MATERIALS -- 1.9%
Greif, Inc. - Class A 6,135 204,235
Olin Corp. 12,305 175,592
- --------------------------------------------------------------------------------
379,827
- --------------------------------------------------------------------------------
UTILITIES -- 1.3%
ITC Holdings Corp. 5,835 254,523
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 19,671,694
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 20.3%
Invesco AIM Liquid
Assets Portfolio ** 3,452,262 3,452,262
Touchstone Institutional
Money Market Fund^ 641,572 641,572
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 4,093,834
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 118.1%
(Cost $29,428,089) $ 23,765,528
LIABILITIES IN EXCESS OF OTHER ASSETS -- (18.1%) (3,636,602)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 20,128,926
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 5.
+ All or a portion of the security is on loan. The total value of securities
on loan as of March 31, 2009, was $3,412,494.
** Represents collateral for securities loaned.
See accompanying notes to financial statements.
57
- --------------------------------------------------------------------------------
Portfolio of Investments
Growth Opportunities Fund - March 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 97.7% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 32.5%
Alliance Data Systems Corp.* + 11,900 $ 439,705
BMC Software, Inc.* + 22,250 734,249
Check Point Software
Technologies Ltd.* 30,800 684,068
Cognizant Technology
Solutions Corp.* 26,830 557,796
EMC Corp.* 50,400 574,560
Hewlett-Packard Co. 16,600 532,196
International Business Machines Corp. 5,900 571,651
Microsoft Corp. + 24,300 446,391
NetApp, Inc.* + 16,600 246,344
NICE Systems Ltd. - SPONS ADR* 16,900 420,134
Nuance Communications, Inc.* 46,300 502,818
Oracle Corp.* 39,100 706,536
Polycom, Inc.* 18,400 283,176
QUALCOMM, Inc. 15,350 597,269
SkillSoft PLC - ADR* 52,800 353,232
VeriFone Holdings, Inc.* 32,000 217,600
- --------------------------------------------------------------------------------
7,867,725
- --------------------------------------------------------------------------------
HEALTH CARE -- 27.5%
Adolor Corp.* 99,000 201,960
Biogen Idec, Inc.* + 20,200 1,058,884
Celgene Corp.* 19,225 853,590
Elan Corp. PLC - SPONS ADR* + 72,400 480,736
Immucor, Inc.* + 19,600 492,940
Masimo Corp.* + 19,000 550,620
OSI Pharmaceuticals, Inc.* + 19,600 749,896
Santarus, Inc.* 54,600 87,906
Shire PLC - ADR 14,200 510,348
Thermo Fisher Scientific, Inc.* + 14,000 499,380
Vertex Pharmaceuticals, Inc.* + 16,000 459,680
Wyeth 16,600 714,464
- --------------------------------------------------------------------------------
6,660,404
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 8.7%
Church & Dwight Co., Inc. + 9,450 493,574
CVS Caremark Corp. 29,100 799,959
Wal-Mart Stores, Inc. 15,700 817,970
- --------------------------------------------------------------------------------
2,111,503
- --------------------------------------------------------------------------------
INDUSTRIALS -- 8.6%
AMETEK, Inc. 16,050 501,884
Corrections Corp. of America* + 18,400 235,704
Geo Group, Inc. (The)* 22,400 296,800
IDEX Corp. 15,100 330,237
ITT Corp. 11,300 434,711
MSC Industrial Direct Co., Inc. -
Class A + 9,500 295,165
- --------------------------------------------------------------------------------
2,094,501
- --------------------------------------------------------------------------------
ENERGY -- 7.8%
Exterran Holdings, Inc.* + 12,500 200,250
Hess Corp. 8,000 433,600
National-Oilwell Varco, Inc.* 20,200 579,942
Peabody Energy Corp. 11,900 297,976
Weatherford International Ltd.* 34,400 380,808
- --------------------------------------------------------------------------------
1,892,576
- --------------------------------------------------------------------------------
MATERIALS -- 5.9%
Monsanto Co. 10,100 839,310
Praxair, Inc. + 8,900 598,881
- --------------------------------------------------------------------------------
1,438,191
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 4.8%
DeVry, Inc. 14,800 713,064
Home Depot, Inc. + 19,000 447,640
- --------------------------------------------------------------------------------
1,160,704
- --------------------------------------------------------------------------------
FINANCIALS -- 1.9%
Charles Schwab Corp. (The) + 30,200 468,100
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 23,693,704
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 30.2%
Invesco AIM Liquid
Assets Portfolio ** 6,894,924 6,894,924
Touchstone Institutional
Money Market Fund^ 433,965 433,965
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 7,328,889
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 127.9%
(Cost $35,878,736) $ 31,022,593
LIABILITIES IN EXCESS OF OTHER ASSETS -- (27.9%) (6,781,779)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 24,240,814
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 5.
+ All or a portion of the security is on loan. The total value of securities
on loan as of March 31, 2009, was $7,004,811.
** Represents collateral for securities loaned.
ADR American Depository Receipt.
See accompanying notes to financial statements.
58
- --------------------------------------------------------------------------------
Portfolio of Investments
Large Cap Core Equity Fund - March 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.6% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 20.5%
Amphenol Corp. - Class A 27,056 $ 770,825
Applied Materials, Inc. + 103,797 1,115,818
Cisco Systems, Inc.* 78,208 1,311,548
Hewlett-Packard Co. 28,753 921,821
Intel Corp. + 71,829 1,081,026
Microsoft Corp. + 78,011 1,433,062
Oracle Corp.* 56,195 1,015,444
QUALCOMM, Inc. 35,899 1,396,830
Western Union Co. 40,533 509,500
- --------------------------------------------------------------------------------
9,555,874
- --------------------------------------------------------------------------------
HEALTH CARE -- 14.5%
Cardinal Health, Inc. 26,580 836,738
Johnson & Johnson 17,607 926,128
Laboratory Corp. of
America Holdings* + 20,883 1,221,447
McKesson Corp. 22,091 774,069
Novartis AG - ADR 29,662 1,122,113
Teva Pharmaceutical Industries Ltd. + 17,800 801,890
WellPoint, Inc.* 28,997 1,101,016
- --------------------------------------------------------------------------------
6,783,401
- --------------------------------------------------------------------------------
ENERGY -- 13.7%
Chevron Corp. 20,981 1,410,762
ConocoPhillips 32,428 1,269,880
Ensco International, Inc. + 27,762 732,917
Marathon Oil Corp. 56,637 1,488,988
Transocean Ltd.* + 12,568 739,501
XTO Energy, Inc. 26,342 806,592
- --------------------------------------------------------------------------------
6,448,640
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 12.3%
Altria Group, Inc. 45,185 723,864
CVS Caremark Corp. 27,501 756,002
Kimberly-Clark Corp. 20,051 924,552
Kraft Foods, Inc. - Class A 39,900 889,371
Pepsico, Inc. 19,890 1,023,937
Philip Morris International, Inc. 41,398 1,472,941
- --------------------------------------------------------------------------------
5,790,667
- --------------------------------------------------------------------------------
INDUSTRIALS -- 10.6%
Danaher Corp. + 13,275 719,771
Emerson Electric Co. 22,892 654,253
Honeywell International, Inc. 15,586 434,226
Illinois Tool Works, Inc. + 28,609 882,588
Union Pacific Corp. 22,048 906,393
United Technologies Corp. 31,657 1,360,618
- --------------------------------------------------------------------------------
4,957,849
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 10.0%
Best Buy Co., Inc. + 43,149 1,637,936
Honda Motor Co., Ltd. - SPONS ADR 31,260 740,862
McDonald's Corp. 17,570 958,795
Target Corp. 39,856 1,370,648
- --------------------------------------------------------------------------------
4,708,241
- --------------------------------------------------------------------------------
FINANCIALS -- 8.9%
AFLAC, Inc. + 32,568 630,517
Allstate Corp. (The) 27,216 521,186
American Express Co. + 33,888 461,893
BB&T Corp. + 24,950 422,154
Goldman Sachs Group 4,620 489,812
JPMorgan Chase & Co. 28,826 766,196
Morgan Stanley 18,490 421,017
PNC Financial Services Group 16,200 474,498
- --------------------------------------------------------------------------------
4,187,273
- --------------------------------------------------------------------------------
UTILITIES -- 2.8%
Dominion Resources, Inc. + 42,454 1,315,649
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 2.7%
AT&T, Inc. 51,159 1,289,207
- --------------------------------------------------------------------------------
MATERIALS -- 2.6%
Praxair, Inc. + 18,352 1,234,906
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 46,271,707
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 27.3%
Invesco AIM Liquid
Assets Portfolio ** 12,216,169 12,216,169
Touchstone Institutional
Money Market Fund^ 597,038 597,038
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 12,813,207
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 125.9%
(Cost $76,625,073) $ 59,084,914
LIABILITIES IN EXCESS OF OTHER ASSETS -- (25.9%) (12,153,672)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 46,931,242
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 5.
+ All or a portion of the security is on loan. The total value of securities
on loan as of March 31, 2009, was $12,224,107.
** Represents collateral for securities loaned.
ADR American Depository Receipt.
See accompanying notes to financial statements.
59
- --------------------------------------------------------------------------------
Portfolio of Investments
Large Cap Growth Fund - March 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.1% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 22.9%
Baidu, Inc. - SPONS ADR* + 103,825 $ 18,335,495
Infosys Technologies Ltd. - ADR + 570,100 15,181,763
International Business
Machines Corp. 247,740 24,003,529
Mastercard, Inc. - Class A + 196,465 32,903,958
Oracle Corp.* 1,387,880 25,078,992
QUALCOMM, Inc. 744,520 28,969,273
Symantec Corp.* 1,227,400 18,337,356
Taiwan Semiconductor
Manufacturing Co., Ltd. + 1,650,000 14,767,500
- --------------------------------------------------------------------------------
177,577,866
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 15.9%
Amazon.com, Inc.* + 422,250 31,010,039
Apollo Group, Inc. - Class A* + 299,050 23,424,587
DIRECTV Group, Inc.* + 743,395 16,941,972
Kohl's Corp.* 655,533 27,742,157
McDonald's Corp. 450,245 24,569,870
- --------------------------------------------------------------------------------
123,688,625
- --------------------------------------------------------------------------------
MATERIALS -- 13.7%
BHP Billiton Ltd. + 346,510 15,454,346
Companhia Siderurgica Nacional + 925,000 13,727,000
Monsanto Co. 194,000 16,121,400
Potash Corp. of Saskatchewan, Inc. 188,185 15,207,230
Praxair, Inc. + 381,725 25,686,275
Southern Copper Corp. + 1,150,000 20,033,000
- --------------------------------------------------------------------------------
106,229,251
- --------------------------------------------------------------------------------
HEALTH CARE -- 13.5%
Baxter International, Inc. 547,165 28,025,791
Express Scripts, Inc.* 593,895 27,420,132
Gilead Sciences, Inc.* + 725,705 33,614,656
St. Jude Medical, Inc.* + 440,000 15,985,200
- --------------------------------------------------------------------------------
105,045,779
- --------------------------------------------------------------------------------
ENERGY -- 10.8%
Anadarko Petroleum Corp. 452,780 17,608,614
Chevron Corp. 235,000 15,801,400
Hess Corp. 246,000 13,333,200
Occidental Petroleum Corp. 296,000 16,472,400
Southwestern Energy Co.* + 699,725 20,774,835
- --------------------------------------------------------------------------------
83,990,449
- --------------------------------------------------------------------------------
INDUSTRIALS -- 9.1%
First Solar, Inc.* + 175,190 23,247,713
Norfolk Southern Corp. 412,510 13,922,213
Union Pacific Corp. + 469,483 19,300,446
Waste Management, Inc. 547,000 14,003,200
- --------------------------------------------------------------------------------
70,473,572
- --------------------------------------------------------------------------------
FINANCIALS -- 5.4%
ACE Ltd. - ADR 350,100 14,144,040
Northern Trust Corp. 470,000 28,115,400
- --------------------------------------------------------------------------------
42,259,440
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 5.0%
Colgate-Palmolive Co. 251,535 14,835,534
Wal-Mart Stores, Inc. 461,270 24,032,167
- --------------------------------------------------------------------------------
38,867,701
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.8%
Nippon Telegraph &
Telephone Corp. - ADR 749,667 14,266,163
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 762,398,846
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 24.8%
Invesco AIM Liquid
Assets Portfolio ** 178,301,175 178,301,175
Touchstone Institutional
Money Market Fund^ 14,569,372 14,569,372
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 192,870,547
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 122.9%
(Cost $1,016,781,737) $ 955,269,393
LIABILITIES IN EXCESS OF OTHER ASSETS -- (22.9%) (178,265,051)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 777,004,342
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 5.
+ All or a portion of the security is on loan. The total value of securities
on loan as of March 31, 2009, was $176,975,351.
** Represents collateral for securities loaned.
ADR American Depository Receipt.
See accompanying notes to financial statements.
60
- --------------------------------------------------------------------------------
Portfolio of Investments
Large Cap Value Fund - March 31, 2009
- --------------------------------------------------------------------------------
MARKET
PREFERRED STOCK -- 0.7% SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 0.7%
General Motors Corp. 18,600 $ 47,244
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.3%
FINANCIALS -- 25.9%
Bank of America Corp. 58,292 397,552
Capital One Financial Corp. + 16,500 201,960
Genworth Financial, Inc. - Class A* + 95,247 180,969
JPMorgan Chase & Co. 10,600 281,748
MetLife, Inc. 12,600 286,902
Morgan Stanley 13,400 305,118
Torchmark Corp. 7,200 188,856
- --------------------------------------------------------------------------------
1,843,105
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 21.7%
Alcatel - Lucent - SPONS ADR* 113,900 211,854
Arrow Electronics, Inc.* 7,400 141,044
Avnet, Inc.* 8,500 148,835
Dell, Inc.* 31,600 299,568
Lam Research Corp.* + 15,600 355,212
Motorola, Inc. 69,400 293,562
Novellus Systems, Inc.* + 5,500 91,465
- --------------------------------------------------------------------------------
1,541,540
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 17.7%
Centex Corp.* 49,600 372,000
D.R. Horton, Inc. 24,400 236,680
J.C. Penney Co., Inc. + 11,800 236,826
Magna International, Inc. 2,200 58,850
Pulte Homes, Inc.* 31,900 348,667
- --------------------------------------------------------------------------------
1,253,023
- --------------------------------------------------------------------------------
ENERGY -- 10.1%
Chesapeake Energy Corp. + 19,400 330,964
Nabors Industries Ltd.* 12,400 123,876
Peabody Energy Corp. 1,600 40,064
XTO Energy, Inc. 7,100 217,402
- --------------------------------------------------------------------------------
712,306
- --------------------------------------------------------------------------------
UTILITIES -- 7.1%
Mirant Corp.* 12,102 137,963
Reliant Energy, Inc.* 114,600 365,574
- --------------------------------------------------------------------------------
503,537
- --------------------------------------------------------------------------------
INDUSTRIALS -- 4.9%
Navistar International Corp.* 10,300 344,638
- --------------------------------------------------------------------------------
MISCELLANEOUS -- 3.5%
iShares Dow Jones US Home
Construction Fund 16,200 141,588
iShares Russell 1000 Value Index Fund2,700 109,593
- --------------------------------------------------------------------------------
251,181
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.4%
Sprint Nextel Corp.* 66,700 238,119
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.8%
Tyson Foods, Inc. - Class A + 21,400 200,946
- --------------------------------------------------------------------------------
HEALTH CARE -- 0.2%
Omnicare, Inc. + 500 12,245
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 6,900,640
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 25.0%
Invesco AIM Liquid
Assets Portfolio ** 1,474,505 1,474,505
Touchstone Institutional
Money Market Fund^ 295,932 295,932
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 1,770,437
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 123.0%
(Cost $15,551,347) $ 8,718,321
LIABILITIES IN EXCESS OF OTHER ASSETS -- (23.0%) (1,632,922)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 7,085,399
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 5.
+ All or a portion of the security is on loan. The total value of securities
on loan as of March 31, 2009, was $1,461,108.
** Represents collateral for securities loaned.
ADR American Depository Receipt.
See accompanying notes to financial statements.
61
- --------------------------------------------------------------------------------
Portfolio of Investments
Mid Cap Growth Fund - March 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 95.5% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 21.1%
Agilent Technologies, Inc.* + 144,000 $ 2,213,280
Alliance Data Systems Corp.* + 171,500 6,336,925
Altera Corp. + 338,400 5,938,920
Analog Devices, Inc. 221,500 4,268,305
Avnet, Inc.* 152,400 2,668,524
BMC Software, Inc.* + 304,600 10,051,799
Broadcom Corp. - Class A* + 425,150 8,494,497
Brocade Communications
Systems, Inc.* + 1,412,300 4,872,435
Cognizant Technology
Solutions Corp.* + 476,700 9,910,592
Global Payments, Inc. 151,150 5,049,922
Maxim Integrated Products, Inc. 387,000 5,112,270
Mettler-Toledo International, Inc.* + 185,000 9,496,050
National Semiconductor Corp. + 405,100 4,160,377
NetApp, Inc.* + 226,850 3,366,454
NICE Systems Ltd. - SPONS ADR* 397,100 9,871,906
Quest Software, Inc.* 699,400 8,868,392
Red Hat, Inc.* 444,450 7,928,988
SAIC, Inc.* 451,200 8,423,904
Verigy Ltd.* 276,851 2,284,021
VistaPrint Ltd.* + 155,700 4,280,193
- --------------------------------------------------------------------------------
123,597,754
- --------------------------------------------------------------------------------
HEALTH CARE -- 16.3%
Beckman Coulter, Inc. + 73,000 3,723,730
Celgene Corp.* 194,032 8,615,021
Cerner Corp.* + 139,600 6,138,212
Covance, Inc.* + 130,900 4,663,967
DaVita, Inc.* 234,650 10,312,868
Edwards Lifesciences Corp.* + 59,450 3,604,454
Elan Corp. PLC - SPONS ADR* + 947,600 6,292,064
Life Technologies Corp.* + 277,500 9,013,200
QIAGEN N.V.* 487,300 7,777,308
Shire PLC - ADR + 320,400 11,515,175
Teleflex, Inc. 98,287 3,842,039
Thermo Fisher Scientific, Inc.* + 144,650 5,159,666
Varian, Inc.* 139,395 3,309,237
Vertex Pharmaceuticals, Inc.* + 401,600 11,537,967
- --------------------------------------------------------------------------------
95,504,908
- --------------------------------------------------------------------------------
FINANCIALS -- 13.5%
Annaly Capital Management, Inc. + 694,900 9,638,262
Arch Capital Group, Ltd.* 127,200 6,850,992
Assurant, Inc. 156,780 3,414,668
Federated Investors, Inc. - Class B + 219,300 4,881,618
Fidelity National Financial, Inc. 137,800 2,688,478
Fifth Third Bancorp. + 634,645 1,853,163
First Horizon National Corp. 371,121 3,985,838
Hudson City Bancorp, Inc. 297,975 3,483,328
Invesco Ltd. 339,120 4,700,203
KeyCorp + 283,500 2,231,145
Knight Capital Group, Inc. - Class A* + 320,225 4,720,117
Moody's Corp. + 155,500 3,564,060
New York Community Bancorp, Inc. + 455,342 5,086,170
PartnerRe Ltd. 62,900 3,904,203
People's United Financial, Inc. + 286,569 5,149,645
SVB Financial Group* + 218,800 4,378,188
Synovus Financial Corp. + 645,506 2,097,895
Willis Group Holdings Ltd. + 299,589 6,590,958
- --------------------------------------------------------------------------------
79,218,931
- --------------------------------------------------------------------------------
INDUSTRIALS -- 13.3%
Alliant Techsystems, Inc.* + 56,435 3,780,016
AMETEK, Inc. + 234,650 7,337,506
Corrections Corp. of America* 469,300 6,011,733
CSX Corp. 160,050 4,137,293
Dover Corp. + 170,790 4,505,440
Hexcel Corp.* 638,995 4,198,197
IDEX Corp. 322,600 7,055,262
ITT Corp. 194,000 7,463,180
Jacobs Engineering Group, Inc.* + 83,302 3,220,455
Joy Global, Inc. 162,390 3,458,907
Kirby Corp.* + 259,400 6,910,416
MSC Industrial Direct Co., Inc.
Class A + 320,400 9,954,828
Rockwell Collins, Inc. 136,845 4,466,621
SPX Corp. 109,675 5,155,822
- --------------------------------------------------------------------------------
77,655,676
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 12.2%
Abercrombie & Fitch Co. 195,900 4,662,420
Advance Auto Parts, Inc. 216,632 8,899,243
American Eagle Outfitters, Inc. + 414,600 5,074,704
Apollo Group, Inc. - Class A* + 60,900 4,770,297
Bed Bath & Beyond, Inc.* + 127,200 3,148,200
Best Buy Co., Inc. + 182,700 6,935,292
Burger King Holdings, Inc. 247,000 5,668,650
DeVry, Inc. 200,750 9,672,134
Lennar Corp. - Class A 250,200 1,879,002
Macy's, Inc. 424,324 3,776,484
Snap-On, Inc. 120,680 3,029,068
TJX Cos., Inc. (The) 309,540 7,936,606
Toll Brothers, Inc.* + 151,600 2,753,056
WABCO Holdings, Inc. 275,830 3,395,467
- --------------------------------------------------------------------------------
71,600,623
- --------------------------------------------------------------------------------
ENERGY -- 9.3%
Cameron International Corp.* + 163,100 3,576,783
CONSOL Energy, Inc. 326,500 8,240,860
Denbury Resources, Inc.* 629,900 9,360,314
Massey Energy Co. 185,000 1,872,200
Murphy Oil Corp. + 108,920 4,876,348
National-Oilwell Varco, Inc.* 265,130 7,611,882
Peabody Energy Corp. 135,400 3,390,416
Smith International, Inc. + 189,500 4,070,460
Weatherford International Ltd.* + 1,043,400 11,550,439
- --------------------------------------------------------------------------------
54,549,702
- --------------------------------------------------------------------------------
62
- --------------------------------------------------------------------------------
Mid Cap Growth Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 95.5% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS -- 4.9%
Commercial Metals Co. + 541,145 $ 6,250,225
Crown Holdings, Inc.* 419,650 9,538,644
Cytec Industries, Inc. 197,125 2,960,818
International Flavors &
Fragrances, Inc. + 184,700 5,625,962
Pactiv Corp.* 295,300 4,308,427
- --------------------------------------------------------------------------------
28,684,076
- --------------------------------------------------------------------------------
UTILITIES -- 3.3%
Consolidated Edison, Inc. + 121,270 4,803,505
EQT Corp. 203,100 6,363,123
Hawaiian Electric Industries, Inc. 212,239 2,916,164
Wisconsin Energy Corp. + 130,395 5,368,362
- --------------------------------------------------------------------------------
19,451,154
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 1.6%
HJ Heinz Co. 112,200 3,709,332
JM Smucker Co. (The) 75,750 2,823,203
Molson Coors Brewing Co. 80,700 2,766,396
- --------------------------------------------------------------------------------
9,298,931
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 559,561,755
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 33.6%
Invesco AIM Liquid
Assets Portfolio ** 164,974,116 164,974,116
Touchstone Institutional
Money Market Fund^ 32,053,889 32,053,889
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 197,028,005
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 129.1%
(Cost $914,946,181) $ 756,589,760
LIABILITIES IN EXCESS OF OTHER ASSETS -- (29.1%) (170,527,723)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 586,062,037
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 5.
+ All or a portion of the security is on loan. The total value of securities
on loan as of March 31, 2009, was $164,717,349.
** Represents collateral for securities loaned.
ADR American Depository Receipt.
See accompanying notes to financial statements.
63
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Touchstone Strategic Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Touchstone Strategic Trust, comprised of the
Touchstone Diversified Small Cap Growth Fund, Touchstone Growth Opportunities
Fund, Touchstone Large Cap Core Equity Fund, Touchstone Large Cap Growth Fund,
Touchstone Large Cap Value Fund, and Touchstone Mid Cap Growth Fund (the
"Funds"), as of March 31, 2009, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years then ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the 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 March 31, 2009, by correspondence with
the custodian and brokers, or by other appropriate auditing procedures where
replies from brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds comprising the Touchstone Strategic Trust at March 31,
2009, the results of their operations for the year then ended, the changes in
their net assets for each of the two years then ended and their financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
May 21, 2009
64
- --------------------------------------------------------------------------------
Other Items (Unaudited)
- --------------------------------------------------------------------------------
DIVIDENDS RECEIVED DEDUCTION
For corporate shareholders, the following ordinary dividends paid during the
year ended March 31, 2009 qualify for the corporate dividends received
deduction:
Large Cap Core Equity Fund 98%
Large Cap Growth Fund 100%
Large Cap Value Fund 100%
PROXY VOTING
The Sub-Advisors are 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-Advisors use 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 March 31, 2009" 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.
65
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
MARCH 31, OCTOBER 1, MARCH 31, MARCH 31,
2009 2008 2009 2009*
- -------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP GROWTH FUND
Class A Actual 1.40% $ 1,000.00 $ 673.50 $ 5.86
Class A Hypothetical 1.40% $ 1,000.00 $1,017.93 $ 7.07
Class C Actual 2.16% $ 1,000.00 $ 671.00 $ 8.98
Class C Hypothetical 2.16% $ 1,000.00 $1,014.18 $ 10.83
Class Y Actual 1.15% $ 1,000.00 $ 673.80 $ 4.81
Class Y Hypothetical 1.15% $ 1,000.00 $1,019.18 $ 5.81
GROWTH OPPORTUNITIES FUND
Class A Actual 1.46% $ 1,000.00 $ 748.20 $ 6.36
Class A Hypothetical 1.46% $ 1,000.00 $1,017.65 $ 7.34
Class C Actual 2.21% $ 1,000.00 $ 744.90 $ 9.63
Class C Hypothetical 2.21% $ 1,000.00 $1,013.90 $ 11.11
Class Y Actual ** 0.97% $ 1,000.00 $1,002.80 $ 1.55
Class Y Hypothetical ** 0.97% $ 1,000.00 $1,006.40 $ 1.55
Institutional Actual ** 0.83% $ 1,000.00 $1,003.50 $ 1.31
Institutional Hypothetical ** 0.83% $ 1,000.00 $1,006.63 $ 1.32
LARGE CAP CORE EQUITY FUND
Class A Actual 1.15% $ 1,000.00 $ 687.20 $ 4.85
Class A Hypothetical 1.15% $ 1,000.00 $1,019.18 $ 5.81
Class C Actual 1.91% $ 1,000.00 $ 684.20 $ 8.00
Class C Hypothetical 1.91% $ 1,000.00 $1,015.43 $ 9.58
LARGE CAP GROWTH FUND
Class A Actual 1.26% $ 1,000.00 $ 702.30 $ 5.33
Class A Hypothetical 1.26% $ 1,000.00 $1,018.67 $ 6.32
Class B Actual 2.01% $ 1,000.00 $ 699.50 $ 8.52
Class B Hypothetical 2.01% $ 1,000.00 $1,014.91 $ 10.10
Class C Actual 2.01% $ 1,000.00 $ 699.60 $ 8.52
Class C Hypothetical 2.01% $ 1,000.00 $1,014.91 $ 10.10
Class Y Actual 0.98% $ 1,000.00 $ 703.50 $ 4.17
Class Y Hypothetical 0.98% $ 1,000.00 $1,020.03 $ 4.95
66
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
MARCH 31, OCTOBER 1, MARCH 31, MARCH 31,
2009 2008 2009 2009*
- -------------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Class A Actual 1.35% $ 1,000.00 $ 556.00 $ 5.22
Class A Hypothetical 1.35% $ 1,000.00 $1,018.23 $ 6.77
Class C Actual 2.10% $ 1,000.00 $ 552.40 $ 8.12
Class C Hypothetical 2.10% $ 1,000.00 $1,014.48 $ 10.53
MID CAP GROWTH FUND
Class A Actual 1.56% $ 1,000.00 $ 690.10 $ 6.56
Class A Hypothetical 1.56% $ 1,000.00 $1,017.17 $ 7.83
Class B Actual 2.26% $ 1,000.00 $ 687.80 $ 9.50
Class B Hypothetical 2.26% $ 1,000.00 $1,013.68 $ 11.33
Class C Actual 2.27% $ 1,000.00 $ 687.60 $ 9.57
Class C Hypothetical 2.27% $ 1,000.00 $1,013.59 $ 11.42
Class Y Actual ** 1.25% $ 1,000.00 $ 982.60 $ 1.97
Class Y Hypothetical ** 1.25% $ 1,000.00 $1,005.96 $ 1.99
* 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 (February 2, 2009) and held for the entire period through
March 31, 2009.
67
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Other Items (Continued)
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ANNUAL RENEWAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS
At a meeting held on November 13, 2008, the Board of Trustees (the "Board" or
"Trustees") of the Touchstone Strategic Trust (the "Trust"), and by a separate
vote, the Independent Trustees of the Trust, approved the continuance of the
Investment Advisory Agreement between the Trust and the Advisor with respect to
each Fund of the Trust and the applicable Sub-Advisory Agreement(s) with respect
to each Fund between the Advisor and the applicable Sub-Advisor(s).
In determining whether to approve the continuation of the Investment Advisory
Agreement and the Sub-Advisory Agreements, the Advisor furnished information
necessary for a majority of the Independent Trustees to make the determination
that the continuance of the Investment Advisory Agreement and the applicable
Sub-Advisory Agreement(s) was in the best interests of each Fund and its
respective shareholders. The information provided to the Board included: (1)
industry data comparing advisory fees and expense ratios of comparable
investment companies; (2) comparative performance information; (3) the Advisor's
and its affiliates' revenues and costs of providing services to the Funds; and
(4) information about the Advisor's and Sub-Advisors' personnel. Prior to
voting, the Independent Trustees reviewed the proposed continuance of the
Investment Advisory Agreement and the Sub-Advisory Agreements with management
and with experienced independent legal counsel and received materials from such
counsel discussing the legal standards for their consideration of the proposed
continuation of the Investment Advisory Agreement and the applicable
Sub-Advisory Agreement(s) with respect to each Fund. The Independent Trustees
also reviewed the proposed continuation of the Investment Advisory Agreement and
the applicable Sub-Advisory Agreement(s) with respect to each of the Funds in
private sessions with independent legal counsel at which no representatives of
management were present.
In approving the Funds' Investment Advisory Agreement, the Board considered
various factors, among them: (1) the nature, extent and quality of services
provided to the Funds, including the personnel providing such services; (2) the
Advisor's compensation and profitability; (3) a comparison of fees and
performance with other advisers; (4) economies of scale; and (5) the terms of
the Investment Advisory Agreement. The Board's analysis of these factors is set
forth below. The Independent Trustees were advised by independent legal counsel
throughout the process.
Nature, Extent and Quality of Advisor Services. The Board considered the level
and depth of knowledge of the Advisor, including the professional experience and
qualifications of senior personnel. The Board discussed the Advisor's
effectiveness in monitoring the performance of each Sub-Advisor, including those
that were affiliates of the Advisor, and the Advisor's timeliness in responding
to performance issues. In evaluating the quality of services provided by the
Advisor, the Board took into account its familiarity with the Advisor's senior
management through Board meetings, discussions and reports during the preceding
year. The Board also took into account the Advisor's compliance policies and
procedures. The quality of administrative and other services, including the
Advisor's role in coordinating the activities of the Funds' other service
providers, was also considered. The Board also considered the Advisor's
relationship with its affiliates and the resources available to them, as well as
any potential conflicts of interest. The Trustees concluded that they were
satisfied with the nature, extent and quality of services provided to each Fund
by the Advisor under the Investment Advisory Agreement.
Advisor's Compensation and Profitability. The Board took into consideration the
financial condition and profitability of the Advisor and its affiliates
(including the Sub-Advisor to one of the Funds) and the direct and indirect
benefits derived by the Advisor and its affiliates from the Advisor's
relationship with the Funds. The information considered by the Board included
operating profit margin information for the Advisor's business as a whole. The
Board noted that the Advisor waives advisory fees, administrative fees, and/or
reimburses expenses for each Fund and also pays the Sub-Advisors' sub-advisory
fees out of the advisory fees the Advisor receives from the Funds. The Board
reviewed the profitability of the Advisor's relationship with the Funds both
before and after tax expenses and whether the Advisor has the financial
wherewithal to continue to provide a high level of services to the Funds, noting
the ongoing commitment of the Advisor's parent company with respect to providing
support and resources as needed. The Board also considered that the Funds'
distributor, an affiliate of the Advisor, receives Rule 12b-1 distribution fees
from the Funds and receives a portion of the sales charges on sales or
redemptions of certain classes of shares. The Board also noted that the Advisor
derives benefits to its reputation and other benefits from its association with
the Funds.
68
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Other Items (Continued)
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The Board recognized that the Advisor should be entitled to earn a reasonable
level of profits in exchange for the level of services it provides to each Fund
and the entrepreneurial risk that it assumes as Advisor. Based upon their
review, the Trustees concluded that the Advisor's and its affiliates' level of
profitability, if any, from their relationship with each Fund was reasonable and
not excessive.
Expenses and Performance. The Board compared the respective advisory fees and
total expense ratios for each of the Funds with various comparative data,
including the median and average advisory fees and total expense ratios of each
Fund's respective peer group. The Board also considered, among other data, the
Funds' respective performance results during the six-month period, twelve-month
period and thirty-six month period ended September 30, 2008, as applicable, and
noted that the Board reviews on a quarterly basis detailed information about
each Fund's performance results, portfolio composition and investment
strategies.
The Board also considered the effect of each Fund's growth and size on its
performance and expenses. The Board noted that the Advisor had waived advisory
fees, administrative fees, and/or reimbursed expenses for each Fund in order to
reduce the Fund's respective operating expenses to targeted levels. The Board
further noted that the sub-advisory fees under the Sub-Advisory Agreement with
respect to each Fund were paid by the Advisor out of the advisory fees it
receives from the Fund and the impact of such sub-advisory fees on the
profitability of the Advisor. In reviewing the respective expense ratios and
performance of each of the Funds, the Board also took into account the nature,
extent and quality of the services provided to the Funds by the Advisor and its
affiliates.
The Board also discussed with management certain factors as set forth in the
conditions to the Funds' exemptive order issued by the Securities and Exchange
Commission relating to investments by the non-money market Funds in the
Touchstone Institutional Money Market Fund. Based upon the nature and extent of
the services provided by the Advisor and the Sub-Advisors to each Fund and a
discussion by management with respect to the costs to the Advisor and
Sub-Advisors of the portion of the advisory fee and sub-advisory fee
attributable to the portion of the non-money market Funds' assets to be invested
in the Touchstone Institutional Money Market Fund, the Board concluded that the
advisory fee and the sub-advisory fee(s) of each non-money market Fund were
based on services that were in addition to, rather than duplicative of, services
provided under the Investment Advisory and Sub-Advisory Agreements with respect
to the portion of such Funds' assets to be invested in the Touchstone
Institutional Money Market Fund.
The Board considered, among other data, the specific factors and related
conclusions set forth below with respect to each Fund:
Touchstone Diversified Small Cap Growth Fund. The Fund's advisory fee and total
expense ratio (net of applicable fee waivers and/or expense reimbursements) were
below the median of its peer group. The Board noted that the Advisor was
currently waiving and/or reimbursing a portion of the Fund's expenses. The Board
took into account the impact that the relatively small size of the Fund has upon
expenses. The Fund's performance for the six-month period and twelve-month
period ended September 30, 2008 was in the 2nd quartile of the Fund's peer
group. Based upon their review, the Trustees concluded that the Fund's
performance was satisfactory and also found that the advisory fee was reasonable
in light of the high quality of services received by the Fund and the other
factors considered.
69
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
Touchstone Growth Opportunities Fund. The Fund's advisory fee and total expense
ratio (net of applicable fee waivers and/or expense reimbursements) were below
the median and above the median, respectively, of its peer group. The Board
noted that the Advisor was currently waiving and/or reimbursing a portion of the
Fund's expenses. The Board took into account the impact that the relatively
small size of the Fund has upon expenses. The Fund's performance for the
six-month period ended September 30, 2008 was in the 2nd quartile of the Fund's
peer group, in the 1st quartile of the Fund's peer group for the twelve-month
period ended September 30, 2008 and in the 3rd quartile of the Fund's peer group
for the thirty-six month period ended September 30, 2008. Based upon their
review, the Trustees concluded that the Fund's performance over time was
satisfactory and also found that the advisory fee was reasonable in light of the
high quality of services received by the Fund and the other factors considered.
Touchstone Large Cap Core Equity Fund. The Fund's advisory fee and total expense
ratio (net of applicable fee waivers and/or expense reimbursements) were below
the median of its peer group. The Board noted that the Advisor was currently
waiving and/or reimbursing a portion of the Fund's expenses. The Fund's
performance for the six-month period, twelve-month period and thirty-six month
period ended September 30, 2008 was in the 1st quartile of the Fund's peer
group. The Board noted that the Fund had implemented changes to its investment
strategy and investment process on March 28, 2008. Based upon their review, the
Trustees concluded that the Fund's performance was satisfactory and that the
Fund's advisory fee was reasonable in light of the high quality of services
received by the Fund and the other factors considered.
Touchstone Large Cap Growth Fund. The Fund's advisory fee and total expense
ratio (net of applicable fee waivers and/or expense reimbursements) were above
the median of its peer group. The Board noted that the Advisor was currently
waiving and/or reimbursing a portion of the Fund's expenses. The Fund's
performance for the six-month period ended September 30, 2008 was in the 3rd
quartile of the Fund's peer group and in the 2nd quartile of the Fund's peer
group for the twelve-month period and thirty-six month period ended September
30, 2008. Based upon their review, the Trustees concluded that the Fund's
performance over time was satisfactory and that the Fund's advisory fee was
reasonable in light of the high quality of services received by the Fund and the
other factors considered.
Touchstone Large Cap Value Fund. The Fund's advisory fee and total expense ratio
(net of applicable fee waivers and/or expense reimbursements) was below the
median and above the median, respectively, of its peer group. The Board noted
that the Advisor was currently waiving and/or reimbursing a portion of the
Fund's expenses. The Board took into account the impact that the relatively
small size of the Fund has upon expenses. The Fund's performance for the
six-month period and twelve-month period ended September 30, 2008 was in the 4th
quartile of the Fund's peer group. The Board took into account management's
discussion of the Fund's performance. Based upon their review, the Trustees
concluded that the Fund's performance was being addressed and that the Fund's
advisory fee was reasonable in light of the high quality of services received by
the Fund and the other factors considered.
Touchstone Mid Cap Growth Fund. The Fund's advisory fee and total expense ratio
(net of applicable fee waivers and/or expense reimbursements) were above the
median of its peer group. The Board noted that the Advisor was currently waiving
and/or reimbursing a portion of the Fund's expenses. The Fund's performance for
the six-month period ended September 30, 2008 was in the 3rd quartile of the
Fund's peer group, in the 2nd quartile of the Fund's peer group for the
twelve-month period ended September 30, 2008 and in the 1st quartile of the
Fund's peer group for the thirty-six month period ended September 30, 2008.
Based upon their review, the Trustees concluded that the Fund's performance over
time was satisfactory and that the advisory fee was reasonable in light of the
high quality of services received by the Fund and the other factors considered.
70
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Other Items (Continued)
- --------------------------------------------------------------------------------
Economies of Scale. The Board considered the effect of each Fund's current size
and potential growth on its performance and expenses. The Board considered the
effective advisory fees under the Investment Advisory Agreement as a percentage
of assets at different asset levels and possible economies of scale that might
be realized if the assets of each Fund increase. The Board noted that the
advisory fee schedule for each of Touchstone Growth Opportunities Fund,
Touchstone Large Cap Core Equity Fund and Touchstone Large Cap Growth Fund
contain breakpoints that would reduce the applicable advisory fee rate on assets
above specified levels as the applicable Fund's assets increased and considered
the necessity of adding breakpoints with respect to the Funds that did not
currently have such breakpoints in their advisory fee schedules. The Board noted
that the current advisory fee for the Touchstone Large Cap Growth Fund reflected
such economies of scale. The Board determined that adding breakpoints at
specified levels to the advisory fee schedule of each Fund that currently did
not have such breakpoints was not appropriate at this time. The Board also noted
that if a Fund's assets increase over time, the Fund might realize other
economies of scale if assets increase proportionally more than certain other
expenses. The Board also considered the fact that, under the Investment Advisory
Agreement, the advisory fee payable to the Advisor by a Fund was reduced by the
total sub-advisory fee(s) paid by the Advisor to the Fund's Sub-Advisor(s).
Conclusion. In considering the renewal of the Funds' Investment Advisory
Agreement, the Board, including the Independent Trustees, did not identify any
single factor as controlling, and each Trustee attributed different weight to
the various factors. The Trustees evaluated all information available to them on
a Fund-by-Fund basis, and their determinations were made separately with respect
to each Fund. The Board reached the following conclusions regarding the Funds'
Investment Advisory Agreement with the Advisor, among others: (a) the Advisor
had demonstrated that it possessed the capability and resources to perform the
duties required of it under the Investment Advisory Agreement; (b) the Advisor
maintains an appropriate compliance program; (c) the performance of each Fund is
reasonable relative to the performance of funds with similar investment
objectives and to relevant indices or, as discussed above, is being addressed;
and (d) each Fund's advisory fee is reasonable relative to those of similar
funds and to the services to be provided by the Advisor. Based on their
conclusions, the Trustees determined with respect to each Fund that continuation
of the Investment Advisory Agreement was in the best interests of the Fund and
its shareholders.
In approving the Funds' respective Sub-Advisory Agreements, the Board considered
various factors with respect to each Fund and the applicable Sub-Advisory
Agreement(s), among them: (1) the nature, extent and quality of services
provided to the Fund, including the personnel providing such services; (2) the
Sub-Advisor's compensation; (3) a comparison of the sub-advisory fee and
performance with other advisers; and (4) the terms of the Sub-Advisory
Agreement. The Board's analysis of these factors is set forth below. The
Independent Trustees were advised by independent legal counsel throughout the
process.
Nature, Extent and Quality of Services Provided; Investment Personnel. The Board
considered information provided by the Advisor regarding the services provided
by each Sub-Advisor, including information presented periodically throughout the
previous year. The Board noted the affiliation of the Sub-Advisor to one of the
Funds with the Advisor, noting any potential conflicts of interest. The Board
also noted that, on a periodic basis, the Board meets with portfolio managers of
the Sub-Advisors to discuss their respective performance and investment
processes and strategies. The Board considered each Sub-Advisor's level of
knowledge and investment style. The Board reviewed the experience and
credentials of the applicable investment personnel who are responsible for
managing the investment of portfolio securities with respect to the Funds. The
Board also noted each Sub-Advisor's brokerage practices. The Board also
considered each Sub-Advisor's regulatory and compliance history. The Board noted
that the Advisor's compliance monitoring processes includes quarterly reviews of
compliance reports and annual compliance visits to the Sub-Advisors and that
compliance issues, if any, are reported to the Board.
71
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
Sub-Advisor's Compensation. The Board also took into consideration the financial
condition of each Sub-Advisor and any indirect benefits derived by each
Sub-Advisor and its affiliates from the Sub-Advisor's relationship with the
Funds. In considering the profitability to each Sub-Advisor of its relationship
with the Funds, the Board noted the undertakings of the Advisor to maintain
expense limitations for the Funds and also noted that the sub-advisory fees
under the Sub-Advisory Agreements were paid by the Advisor out of the advisory
fees that it receives under the Investment Advisory Agreement and in addition,
with respect to the unaffiliated Sub-Advisors, are negotiated at arm's-length.
As a consequence, the profitability to each Sub-Advisor of its relationship with
a Fund was not a substantial factor in the Board's deliberations. For similar
reasons, the Board did not consider the potential economies of scale in each
Sub-Advisor's management of the applicable Fund to be a substantial factor in
its consideration, although the Board noted that the sub-advisory fee schedule
for each of Touchstone Growth Opportunities Fund, Touchstone Large Cap Core
Equity Fund, Touchstone Large Cap Growth Fund and Touchstone Large Cap Value
Fund contained breakpoints that would reduce the sub-advisory fee rate on assets
above specified levels if the applicable Fund's assets increased.
Sub-Advisory Fees and Fund Performance. The Board considered that each Fund pays
an advisory fee to the Advisor and that the Advisor pays the sub-advisory fee(s)
to the applicable Sub-Advisor(s). The Board considered the amount retained by
the Advisor and the sub-advisory fee paid to each Sub-Advisor with respect to
the various services provided by the Advisor and the Sub-Advisor. The Board also
noted that the Advisor negotiated the sub-advisory fee with each of the
unaffiliated Sub-Advisors at arm's-length. The Board compared the sub-advisory
fee(s) for each Fund with various comparative data, including the median and
average sub-advisory fees of each Fund's peer group, and found that each Fund's
sub-advisory fee was reasonable and appropriate under the facts and
circumstances.
Touchstone Diversified Small Cap Growth Fund. The Fund's sub-advisory fee was
below the median of its peer group. Based upon its review, the Board concluded
that the Fund's sub-advisory fee was reasonable in view of the high quality of
services received by the Fund and the other factors considered.
Touchstone Growth Opportunities Fund. The Fund's sub-advisory fee was above the
median of its peer group. Based upon its review, the Board concluded that the
sub-advisory fee was reasonable in view of the high quality of services received
by the Fund and the other factors considered.
Touchstone Large Cap Core Equity Fund. The Fund's sub-advisory fee was at the
median of its peer group. Based upon its review, the Board concluded that the
Fund's sub-advisory fee was reasonable in view of the high quality of services
received by the Fund and the other factors considered.
Touchstone Large Cap Growth Fund. The Fund's sub-advisory fee was above the
median of its peer group. Based upon its review, the Board concluded that the
sub-advisory fee was reasonable in view of the high quality of services received
by the Fund and the other factors considered.
Touchstone Large Cap Value Fund. The Fund's sub-advisory fee was below the
median of its peer group. Based upon its review, the Board concluded that the
sub-advisory fee was reasonable in view of the high quality of services received
by the Fund and the other factors considered.
Touchstone Mid Cap Growth Fund. The Fund's sub-advisory fees were above the
median of its peer group. Based upon its review, the Board concluded that the
sub-advisory fees were reasonable in view of the high quality of services
received by the Fund and the other factors considered.
72
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Other Items (Continued)
- --------------------------------------------------------------------------------
As noted above, the Board considered each Fund's performance during the
six-month period, twelve-month period and thirty-six month period ended
September 30, 2008, as applicable, as compared to each Fund's peer group and
noted that the Board reviews on a quarterly basis detailed information about
each Fund's performance results, portfolio composition and investment
strategies. The Board noted the Advisor's expertise and resources in monitoring
the performance, investment style and risk-adjusted performance of each
Sub-Advisor. The Board was mindful of the Advisor's focus on each Sub-Advisor's
performance and the Advisor's ways of addressing underperformance.
Conclusion. In considering the renewal of the applicable Sub-Advisory
Agreement(s) with respect to each Fund, the Board, including the Independent
Trustees, did not identify any single factor as controlling, and each Trustee
attributed different weight to the various factors. The Board reached the
following conclusions regarding each Sub-Advisory Agreement, among others: (a)
the Sub-Advisor was qualified to manage each Fund's assets in accordance with
the Fund's investment objectives and policies; (b) the Sub-Advisor maintains an
appropriate compliance program; (c) the performance of each Fund is satisfactory
relative to the performance of funds with similar investment objectives and to
relevant indices or, as discussed above, is being addressed; (d) each Fund's
advisory fees are reasonable relative to those of similar funds and to the
services to be provided by the Advisor and the Sub-Advisor; and (e) the
Sub-Advisor's investment strategies are appropriate for pursuing the investment
objectives of each Fund. Based on its conclusions, the Board determined that
approval of the Sub-Advisory Agreement(s) with respect to each Fund was in the
best interests of the respective Fund and its shareholders.
73
- --------------------------------------------------------------------------------
Management of the Trust (Unaudited)
- --------------------------------------------------------------------------------
Listed below is basic information regarding the Trustees and principal officers
of the Trust. The Trust's Statement of Additional Information includes
additional information about the Trustees and is available, without charge, upon
request by calling 1.800.543.0407.
INTERESTED TRUSTEES(1):
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder Trustee Until Senior Vice President of The 40 Director of
Touchstone Advisors, Inc and retirement at Western and Southern Life LaRosa's
303 Broadway President age 75 or until Insurance Company. President, (a restaurant
Cincinnati, OH she resigns or CEO and a director of IFS chain).
Year of Birth: 1955 is removed Financial Services, Inc. (a
Trustee since holding company). She is a
1999 director of Capital Analysts
Incorporated (an investment
advisor and broker-dealer),
IFS Fund Distributors, Inc. (a
broker-dealer), Touchstone
Advisors, Inc. (the Trust's
investment advisor and
administrator), W&S Financial
Group Distributors, Inc. (an
annuity distributor) and
Touchstone Securities, Inc.
(the Trust's distributor). She
is also President and a
director of IFS Systems, Inc.
She is Senior Vice President
and a director of W&S Brokerage
Services, Inc. (a
broker-dealer). She is
President and Chief Executive
Officer of Integrity Life
Insurance Company and National
Integrity Life Insurance
Company. She is 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. She
was President of Touchstone
Advisors, Inc., and Touchstone
Securities, Inc. until 2004.
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- -----------------------------------------------------------------------------------------------------------------------------------
Phillip R. Cox Trustee Until President and Chief Executive 40 Director of
105 East Fourth Street retirement at Officer of Cox Financial Corp. Duke
Cincinnati, OH age 75 or until (a financial services company). Energy (a
Year of Birth: 1947 he resigns or is utility
removed company).
Trustee since
1999
- -----------------------------------------------------------------------------------------------------------------------------------
H. Jerome Lerner Trustee Until Principal of HJL Enterprises 40 None
c/o Touchstone Advisors, Inc. retirement at (a privately held investment
303 Broadway age 75 or until company).
Cincinnati, OH he resigns or is
Year of Birth: 1938 removed
Trustee since
1989
- -----------------------------------------------------------------------------------------------------------------------------------
74
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
INTERESTED 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)
- -----------------------------------------------------------------------------------------------------------------------------------
Donald C. Siekmann Trustee Until Executive for Duro Bag 40 None
c/o Touchstone Advisors, Inc. retirement at Manufacturing Co. (a bag
303 Broadway age 75 or until manufacturer); President of Shor
Cincinnati, OH he resigns or is Foundation for Epilepsy Research
Year of Birth: 1938 removed (a charitable foundation);
Trustee since Trustee of Riverfront Funds
2005 (mutual funds) from 1999 - 2004.
- -----------------------------------------------------------------------------------------------------------------------------------
Robert E. Stautberg Trustee Until Retired Partner of KPMG LLP 40 Trustee of
c/o Touchstone Advisors, Inc. retirement at (a certified public Tri-Health
303 Broadway age 75 or until accounting firm). He is Physician
Cincinnati, OH he resigns or is Vice President of St. Xavier Enterprise
Year of Birth: 1934 removed High School. Corporation.
Trustee since
1999
- -----------------------------------------------------------------------------------------------------------------------------------
John P. Zanotti Trustee Until CEO, Chairman and Director of 40 Director of
c/o Touchstone Advisors, Inc. retirement at Avaton, Inc. (a wireless QMed (a health
303 Broadway age 75 or until entertainment company) until care
Cincinnati, OH he resigns or is 2006. President of Cincinnati management
Year of Birth: 1948 removed Biomedical (a life science company).
Trustee since and economic development
2002 company).
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Ms. McGruder, as a director of the Advisor and the Distributor, and an
officer of affiliates of the Advisor and the 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 6 series of the Trust, 11 series
of Touchstone Funds Group Trust, 4 series of Touchstone Institutional
Funds Trust, 4 series of Touchstone Investment 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 Funds Group Trust, Touchstone
Institutional Funds Trust, Touchstone Investment Trust, Touchstone
Tax-Free Trust, and Touchstone Variable Series Trust.
75
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS(1):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(2) HELD
- ------------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder President Until resignation, See biography above. 40 See biography
Touchstone removal or above.
Advisors, Inc. disqualification
303 Broadway President since
Cincinnati, OH 2004; President
Year of Birth: 1955 from 2000-2002
- ------------------------------------------------------------------------------------------------------------------------------------
Gene L. Needles Vice Until resignation, President of Touchstone Advisors, 40 None
Touchstone President removal or Inc., Touchstone Securities, Inc.
Advisors, Inc. disqualification and Touchstone Investments.
303 Broadway Vice President President of AIM Distributors
Cincinnati, OH since 2008 from 2004 - 2008. CEO of AIM
Year of Birth: 1954 Distributors from 2005 -2008
- ------------------------------------------------------------------------------------------------------------------------------------
Brian E. Hirsch Vice Until resignation, Senior Vice President-Compliance 40 None
Touchstone Advisors, Inc. President removal or of IFS Financial Services, Inc.,
303 Broadway and Chief disqualification Director of Compliance of W&S
Cincinnati, OH Compliance Vice President Brokerage Services, Inc.
Year of Birth: 1956 Officer since 2003
- ------------------------------------------------------------------------------------------------------------------------------------
William A. Dent Vice Until resignation, Senior Vice President of 40 None
Touchstone Advisors, Inc. President removal or Touchstone Advisors, Inc.;
303 Broadway disqualification Marketing Director of Promontory
Cincinnati, OH Vice President Interfinancial Network from
Year of Birth: 1963 since 2004 2002-2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Gregory A. Harris Vice Until resignation, Vice President-Fund 40 None
Touchstone President removal or Administration of Touchstone
Advisors, Inc. disqualification Investments; Managing Director,
303 Broadway Vice President Fund Project Services, 1998-2007
Cincinnati, OH since 2007
Year of Birth: 1968
- ------------------------------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft Controller Until resignation, Senior Vice President, Chief 40 None
Touchstone Advisors, Inc. and Treasurer removal or Financial Officer and Treasurer
303 Broadway disqualification of IFS Fund Distributors, Inc.;
Cincinnati, OH Controller since Senior Vice President and Chief
Year of Birth: 1962 2000; Treasurer Financial Officer of W & S
since 2003 Brokerage Services, Inc.; Chief
Financial Officer of IFS
Financial Services, Inc.,
Touchstone Advisors, Inc. and
Touchstone Securities, Inc.;
Senior Vice President and Chief
Financial Officer of Fort
Washington Investment Advisors,
Inc. Vice-President and Treasurer
of IIS Broadway Corp. She served
as Senior Vice President, Chief
Financial Officer and Treasurer
of Integrated Investment
Services, Inc. up to April 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Jay S. Fitton Secretary Until resignation, Assistant Vice President and 40 None
JPMorgan removal or Senior Counsel at JPMorgan Chase
303 Broadway disqualification Bank, N.A.
Cincinnati, OH Secretary since
Year of Birth: 1970 2006; Assistant
Secretary from
2002-2006
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Each officer also holds the same office with Touchstone Funds Group Trust,
Touchstone Institutional Funds Trust, Touchstone Investment Trust,
Touchstone Tax-Free Trust, and Touchstone Variable Series Trust.
(2) The Touchstone Fund Complex consists of 6 series of the Trust, 11 series
of Touchstone Funds Group Trust, 4 series of Touchstone Institutional
Funds Trust, 4 series of Touchstone Investment Trust, 4 series of
Touchstone Tax-Free Trust, and 11 variable annuity series of Touchstone
Variable Series Trust.
76
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[LOGO] TOUCHSTONE(R)
INVESTMENTS
303 Broadway, Suite 1100
Cincinnati, OH 45202-4203
- --------------------------------------------------------------------------------
[LOGO] e Delivery
Go paperless, sign up today at:
www.touchstoneinvestments.com/home
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
TSF-54-TST-AR-0903
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.
Don 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 $82,980 for the March 31, 2009
fiscal year and approximately $93,100 for the March 31, 2008 fiscal year,
including fees associated with the annual audit and filings of the registrant's
Form N-1A and Form N-SAR.
(b) Audit-Related Fees. Audit-Related fees totaled $4,000 for the March 31, 2009
fiscal year and $123,000 for the March 31, 2008 fiscal year. The 2009 fees
include $4,000 related to post-audit review procedures, review of February 2009
N-1A filing and issuance of our consent in connection with the new share class
offering in the Growth Opportunities and Mid Cap Funds. The 2008 fees consisted
of the SAS 70 internal control reviews of the registrant's fund accountant and
transfer agent. Of the amount listed for 2008, $7,000 was related to post-audit
review procedures, review of N-14 filing and pro-forma financial statements and
issuance of our consent in connection with the mergers of the Small Cap Growth
Fund into the Diversified Small Cap Growth Fund.
(c) Tax Fees. Tax fees totaled approximately $31,290 for the March 31, 2009
fiscal year and approximately $34,400 for the March 31, 2008 fiscal year and
consisted of fees for tax compliance services and tax consultation services.
(d) All Other Fees. There were no other fees for the March 31, 2009 or March 31,
2008 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 sub-advisors) and any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant were approximately $31,290 for the fiscal year ended March 31, 2009
and $179,400 for the fiscal year ended March 31, 2008.
(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.
No material changes have been made to the procedures by which shareholders may
recommend nominees to its Board of Trustees.
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 March 9,
2004 with registrant's N-CSR for the Large Cap Growth Fund 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 Strategic Trust
--------------------------
By (Signature and Title)
/s/ Jill T. McGruder
- ---------------------------------------
Jill T. McGruder
President
Date: June 2, 2009
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: June 2, 2009
/s/ Terrie A. Wiedenheft
- ---------------------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: June 2, 2009