United States
Securities and Exchange Commission
Washington, D. C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8104
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Touchstone Funds Group Trust
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(Exact name of registrant as specified in charter)
303 Broadway, Suite 1100, Cincinnati, Ohio 45202
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(Address of principal executive offices) (Zip code)
Jill T. McGruder, 303 Broadway, Suite 1100, Cincinnati, Ohio 45202
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 878-4066
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Date of fiscal year end: 09/30
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Date of reporting period: 9/30/09
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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.
Touchstone Funds Group Trust Annual Report
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September 30, 2009
Annual Report
TOUCHSTONE FUNDS GROUP TRUST
Touchstone Healthcare and Biotechnology Fund
Touchstone Intermediate Fixed Income Fund
Touchstone International Growth Fund
Touchstone Mid Cap Fund
Touchstone Premium Yield Equity Fund
Touchstone Sands Capital Select Growth Fund
Touchstone Short Duration Fixed Income Fund
Touchstone Small Cap Value Opportunities Fund
Touchstone Ultra Short Duration Fixed Income Fund
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[LOGO] TOUCHSTONE INVESTMENTS(R)
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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) 4-24
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Tabular Presentation of Portfolios of Investments (Unaudited) 25-26
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Statements of Assets and Liabilities 27-31
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Statements of Operations 32-34
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Statements of Changes in Net Assets 35-40
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Financial Highlights 41-56
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Notes to Financial Statements 57-72
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Portfolios of Investments:
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Healthcare and Biotechnology Fund 73
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Intermediate Fixed Income Fund 74-77
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International Growth Fund 78-79
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Mid Cap Fund 80-81
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Premium Yield Equity Fund 82
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Sands Capital Select Growth Fund 83
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Short Duration Fixed Income Fund 84-87
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Small Cap Value Opportunities Fund 88-89
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Ultra Short Duration Fixed Income Fund 90-92
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Report of Independent Registered Public Accounting Firm 93
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Other Items (Unaudited) 94-96
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Management of the Trust (Unaudited) 97-99
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Privacy Protection Policy 103
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2
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Letter from the President
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Dear Shareholder:
We are pleased to provide you with the Touchstone Funds Group Trust Annual
Report. Inside you will find key financial information, as well as manager
commentaries for the Funds, for the twelve months ended September 30, 2009.
After the series of events in 2008 that took such a heavy toll on financial
markets, Government programs implemented thereafter have had a positive effect
on financial markets, helping 2009 become a truly extraordinary year. Improving
confidence in the economy and very strong technicals have combined to fuel a
rally. Spreads in most sectors have narrowed considerably, particularly in the
corporate and mortgage sectors, and the Federal Reserve is expected to remain
accommodative into 2010 as the economy remains weak. Though troubled by the
historically significant loss of global capital, concern for inflationary
pressure from growth, and Treasury debt issuance, the impact on the bond market
was one of improving liquidity. Market conditions during the quarter were
dominated by global optimism for a recovery, led by expectations of inventory
rebuilding and signs of improved interest in home buying. Economic data was less
mixed, with strength evidenced by a rebound in consumer optimism and the stock
market, although the domestic U.S. economy is still laboring under high
unemployment.
Despite the fact that some forecasters believe the economy could remain sluggish
for some time, continued government stimulus, higher exports due to the dollar
weakness, and higher revenues combined with improving cost containment should
lead to a restocking cycle, as well as improving employment prospects and wage
gains throughout the remainder of the year and into 2010.
We continue to believe that diversification is essential to balancing risk and
return. We recommend that you continue to work with your financial professional
to employ a sound asset allocation strategy that invests in a combination of
stock, bond, and money market mutual funds to help keep your financial strategy
on course. In today's market climate, it is critical to maintain a long-term
approach to gain the full potential benefits of investing.
Touchstone is committed to helping investors achieve their financial goals by
providing access to a distinctive selection of institutional asset managers who
are known and respected for proficiency in their specific area of expertise. We
hope that you will find the enclosed commentaries helpful.
We greatly appreciate your continued support. Thank you for including Touchstone
as part of your investment plan.
Sincerely,
/s/ Jill T. McGruder
Jill T. McGruder
President
Touchstone Funds Group Trust
3
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE HEALTHCARE & BIOTECHNOLOGY FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Healthcare and Biotechnology Fund invests primarily in common
stocks of Health Care and biotechnology companies. The Fund employs rigorous
fundamental research with supporting qualitative and technical analysis. Its
bottom-up strategy emphasizes fundamental analysis. The Fund seeks companies
with improving fundamentals, superior earnings prospects, reasonable valuations,
and favorable trading-volume and price patterns.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Healthcare and Biotechnology Fund was -15.76%
for the year ended September 30, 2009. The total return of the S&P 500
Healthcare Index was -3.55% for the same period.
The Life Sciences Tools & Services industry was the largest detractor for the
one year period in part due to the Fund's overweight position along with
exposure to the Clinical Research Organization (CRO) industry, which included
Fund holdings Kendle International Inc. and Covance Inc. CRO companies provide
outsourced clinical research services to the Pharmaceuticals and Biotechnology
industries. The performance of the CRO industry was negatively impacted in the
fourth quarter of 2008 as Pharmaceuticals companies unexpectedly froze spending
and delayed clinical trials given the uncertainty in the macro economic
environment. Also, the frozen credit markets negatively impacted small
Biotechnology companies who were unable to complete clinical trials due to
liquidity issues. The Fund has since reduced its exposure to the CRO industry
significantly given this overall lack of visibility. Turner Investment Partners
(TIP) believes the long-term prospects of this industry are still positive, as
Pharmaceuticals companies are trying to shift their Research and Development
expenses towards a variable cost structure, but the near-term outlook is quite
uncertain.
Also detracting from the Fund's relative results was its underweight in major
Pharmaceuticals companies. Large capitalization Pharmaceuticals companies
represent over 52% of the index weighting and the Fund only had a 29% average
weight for the one year period. The Fund continues to underweight this industry
as TIP does not find the overall fundamentals attractive. The industry is
struggling to meet its earnings targets through cost cutting, which TIP believes
is not sustainable in the long run. However, during the economic downturn, the
industry was viewed to be defensive. From a security view, Xenoport Inc. was one
of the largest detractors for the period within this group. The company is
struggling from poor results from its Phase II clinical trial for XP986, a
treatment of gastroesophageal reflux disease (GERD), which did not meet
statistical significance last quarter. TIP continues to believe this drug is
promising for the company and continues to be positive on its drug for Restless
Leg Syndrome, called Solzira, which is the lead drug in development for Xenoport
Inc. Xenoport Inc. and its partner Glaxo Smith Kline submitted a New Drug
Application to the FDA for Solzira, and TIP expects final FDA approval in late
2009.
The Health Care Providers & Services industry also detracted from relative
results for the one year period. Although the Fund's overweight position helped
within the industry, the Fund holdings underperformed. Express Scripts Inc.
posted a positive return but detracted from relative results because of its
overweight. During the second quarter, the company announced an acquisition of
Wellpoint's pharmacy benefits management services division. Investors are
pleased with the synergies resulting from this strategic move by Express
Scripts, and TIP expects this to contribute significantly to EBITDA. The company
is a leader among peers with strong earnings momentum and favorable return on
invested capital. Omnicare Inc., which sells pharmaceuticals to nursing homes,
also detracted from results as the company reported a decline in their quarterly
profit and lowered its outlook for the reminder of 2009 due to higher than
expected restructuring costs. Laboratory Corp. of America Holdings, a medical
laboratory operator, traded lower as there are concerns regarding healthcare
reform; a proposed tax levied on the industry to help pay for healthcare reform
could significantly negatively impact the company. Both of those positions were
sold, as TIP is finding more attractive opportunities in other securities.
4
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Management's Discussion of Fund Performance (Continued)
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Good stock selection in the Biotechnology industry contributed to performance,
but was not enough to impact results. From a security view, United Therapeutics
Corp. continues in its drive to become the leading company in the treatment of
Pulmonary Arterial Hypertension [PAH]. It received approval for two additional
drugs for the treatment of PAH, Tyvaso and Adcirca. The launch is going well for
both drugs, and it is likely that the company will exceed earnings expectations
in the near term. Human Genome Sciences Inc. also contributed to the Fund's
performance. The company shocked the investment community after releasing
positive results in its Phase III trial for the treatment of lupus. There hasn't
been a new drug for the treatment of lupus in the past fifty years, and the
current treatment options are all largely ineffective. TIP purchased the stock
after the initial clinical results were released. It too contributed to Fund
performance as the lupus market is easily a multi-billion dollar market. Also,
the company may now be seen as an acquisition target for large cap pharma
companies that are desperate in their attempts to rebuild their pipelines.
STRATEGY AND OUTLOOK
Unfortunately, the Health Care sector was the worst performing sector within the
stock market. The debate around healthcare reform gathered momentum throughout
the summer, as this has become the focus for both political parties as well as
investors. Investors are very concerned about the ongoing healthcare reform
initiatives, and how it could impact the profitability levels for nearly every
Health Care industry. TIP believes this overhang will persist until there is
more clarity on the specific healthcare reform programs, which is likely to
occur in the October/November timeframe. Currently, TIP believes valuations
within the Health Care sector are very attractive, but realistically it will be
difficult to gain investors' interest until the formal healthcare reform
packages are unveiled.
The focus of the new Administration is to extend medical insurance to the 47
million uninsured in the United States. The hospital group has the most to gain
from these initiatives, as their levels of bad debt from treating the uninsured
would immediately improve with government sponsored medical coverage. TIP is
closely monitoring the competing proposals from the Senate Finance Committee,
the Senate Health Committee and the House of Representatives; the various
proposals will be brought together in conference, with a final bill likely to be
released in the late fall. TIP will adjust the Fund's holdings accordingly to
take advantage of opportunities as the reform plans unfold.
In addition to employing a disciplined investment strategy by identifying strong
Health Care companies with favorable earnings prospects and reasonable
valuations, TIP looks for unique characteristics within each industry to ensure
the Fund is invested in what are believed to be the best companies. For example,
when researching the Pharmaceuticals industry, TIP analyzes pricing trends,
intellectual property profiles, and product pipelines. When looking at
Biotechnology companies, TIP focuses on clinical trial design, corporate
regulatory expertise, clinician feedback, and reimbursement analysis. TIP
utilizes these tools in an effort to achieve consistent investment returns while
maintaining disciplined risk controls.
TIP does not make top-down decisions but instead finds opportunities through its
investment discipline of fundamental bottom-up research on a company-by-company
basis. TIP remains underweight to the benchmark's concentration in large
Pharmaceuticals companies and overweight in Biotechnology. The Fund's weight in
service companies has been lowered and TIP increased the number of companies in
the Fund to diversify risk.
5
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Management's Discussion of Fund Performance (Continued)
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Despite all the pressures on the sector, TIP believes Health Care is still one
of the most attractive sectors within the overall equity markets. TIP also
believes that Health Care will be one of the few sectors showing earnings growth
this year, and continues to find companies with strong fundamentals that are now
trading at compelling valuations. TIP believes the Biotechnology industry
continues to enjoy significant pricing power, keeping earnings visibility very
high. Lastly, there is a renewed focus on cost-cutting in several industries,
which could potentially lead to a higher level of strategically sound merger
activity. TIP expects that M&A activity will continue to be a strong theme
within the sector.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HEALTHCARE
AND BIOTECHNOLOGY FUND - CLASS A* AND THE S&P 500 HEALTH CARE INDEX
[LINE CHART]
Healthcare and Biotechnology Fund - Class A S&P 500 Health Care Index
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Date Date
2/28/01 9,425 2/28/01 10,000
9/30/01 10,510 9/30/01 9,467
9/30/02 9,284 9/30/02 7,393
9/30/03 11,627 9/30/03 8,239
9/30/04 13,036 9/30/04 8,633
9/30/05 15,787 9/30/05 9,533
9/30/06 16,003 9/30/06 10,252
9/30/07 19,083 9/30/07 11,144
9/30/08 17,591 9/30/08 9,784
9/30/09 14,817 9/30/09 9,436
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HEALTHCARE AND BIOTECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -20.60% 1.39% 4.69%
Class C -16.51% 1.83% 4.62%
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Past performance is not predictive of future performance.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares based on the differences in
loads and fees paid by shareholders in the different classes. The initial
public offering of Class A shares commenced on February 28, 2001 and the
initial public offering of Class C shares commenced on November 20, 2006.
The Class C performance information is calculated using the historical
performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
6
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE INTERMEDIATE FIXED INCOME FUND
SUB-ADVISED BY JKMILNE ASSET MANAGEMENT
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Intermediate Fixed Income Fund seeks to provide high current
income with reasonable risk to capital. Fund management targets these goals by
investing in U.S. Government obligations and other investment grade fixed income
securities, including corporate debt obligations, mortgage-backed securities,
commercial mortgage-backed securities and asset-backed securities. The Fund
seeks fixed income securities of issuers that are believed to offer attractive
income and/or capital appreciation potential with a reasonable level of risk. It
invests in fixed income obligations of different issuers, maturities and
structures depending on their assessment of the relative valuation of the
securities' sector, as well as the security itself.
FUND PERFORMANCE AND POSITIONING
The total return of the Fund was 1.44% for the fiscal year ended September 30,
2009. The total return of the Barclays Capital Intermediate Government/Credit
Index was 10.01% for the same period. As of April 22, 2009, JKMilne Asset
Management became sub-advisor to the Fund and the Fund was renamed the
Touchstone Intermediate Fixed Income Fund. Prior to April 22, 2009, The Fund's
Institutional Shares were renamed "Class I Shares." The performance prior to
April 2009 represents the performance of the previous sub-advisor.
Global bond markets have been extremely volatile during the past fiscal year due
to the unwinding of leverage and aversion to risk. A consequence has been a
sharp contraction in economic activity as credit became scarce, which then
rolled into significant job losses.
The Fund participated in the U.S. Treasury, investment grade corporate bond,
government mortgage agencies such as GNMA, Treasury Inflation Protected
Securities (TIPS), and government agency notes and bond markets. These and other
sectors were rebalanced to capitalize on the most advantageous holdings with
positive outlooks in a volatile market and a struggling economy with heavy
consumer debt, weak housing and companies managing expenses.
STRATEGY AND OUTLOOK
The outlook for the intermediate fixed income markets remain constructive as the
world's economies recover slowly. The key data improvement for global economies
remains the extent to which modest growth will create jobs. The current outlook
for U.S. Gross Domestic Product (GDP) growth, a measure of economic strength, is
an annualized rate improvement year-over-year 2010 of 2.5 to 4.0 percent. To the
extent the higher range can be achieved, this will improve employment prospects
and credit quality.
The Fund's strategy is to continue to be conservative by investing in diverse
bond issuers, industries and sectors likely to do well under the forecast above.
Interest rates are not expected to change substantially.
7
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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 INTERMEDIATE
FIXED INCOME FUND - INSTITUTIONAL CLASS*, THE BARCLAYS CAPITAL INTERMEDIATE U.S.
GOVERNMENT/CREDIT INDEX AND THE BARCLAYS CAPITAL AGGREGATE BOND INDEX
[LINE CHART]
Barclays Capital
Intermediate
Intermediate Fixed Income U.S. Government/Credit Barclays Capital
Fund - Institutional Class Index Aggregate Bond Index
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Date Date Date
9/30/99 10,000 9/30/99 10,000 9/30/99 10,000
9/30/00 10,723 9/30/00 10,625 9/30/00 10,698
9/30/01 12,007 9/30/01 11,996 9/30/01 12,083
9/30/02 13,069 9/30/02 12,967 9/30/02 13,123
9/30/03 13,510 9/30/03 13,747 9/30/03 13,831
9/30/04 13,911 9/30/04 14,111 9/30/04 14,340
9/30/05 14,229 9/30/05 14,323 9/30/05 14,742
9/30/06 14,636 9/30/06 14,831 9/30/06 15,283
9/30/07 15,232 9/30/07 15,636 9/30/07 16,068
9/30/08 14,935 9/30/08 16,126 9/30/08 16,655
9/30/09 15,149 9/30/09 17,740 9/30/09 18,413
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INTERMEDIATE FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Institutional Class 1.44% 1.72% 4.24%
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Past performance is not predictive of future performance.
* The initial public offering of the Institutional Class shares commenced on
December 6, 1991.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
8
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE INTERNATIONAL GROWTH FUND
SUB-ADVISED BY NAVELLIER & ASSOCIATES, INC.
INVESTMENT PHILOSOPHY & PROCESS
The Touchstone International Growth Fund seeks long-term capital growth by
primarily investing in foreign stocks and American Depository Receipts (ADRs) of
foreign companies believed to have superior reward/risk characteristics. A
disciplined quantitative, objective, bottom-up stock selection process is
utilized to identify stocks believed to have superior fundamentals relative to
the underlying market with above-average potential returns adjusted for risk.
This process selects and weights countries based upon the analysis of a
country's reward/risk potential and weights stocks using a disciplined
methodology.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone International Growth Fund was -8.64% for the
year ended September 30, 2009. The total return of the MSCI EAFE(R) Growth Index
was -0.36% and the MSCI EAFE(R) Index was 3.80% for the same period.
In what was an extraordinarily difficult year for the equity markets, with the
exception of positive performance in the Consumer Discretionary sector, all
other sectors detracted from the Touchstone International Growth Fund's
performance; specifically, the Industrials, Health Care, and Financials sectors.
The combination of systemic financial instability, macro-economic slowdown, and
the political calculus of proposed changes to national Health Care policies
contributed to the underperformance of these sectors. The Fund's
country-weighting approach requires it to have representation in all major
Europe, Australasia and Far East (EAFE) Growth countries for diversification
purposes. During the year ending September 30, 2009, its underweight position in
Japan, its overweight position in the Netherlands, and avoiding Italy
contributed to performance. Positions in Brazil, China, and India aided
performance as well. The Fund's overweight position in Germany and underweight
position in Australia detracted from performance.
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, seven fundamental factors were especially effective in screening for
quality stocks. The factors, in order of importance, are: Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA)/Enterprise Value, Cash
Flow Per Share, Operating Return On Equity (ROE), P/E Growth Ratio (PEG),
Earnings Momentum, Revenue Growth, and Net Earnings Revisions. For the year
ending September 30, 2009, Petrobras Petroleo Brasileiro S.A., (Energy); Baidu
Inc., Infosys Technologies, ARM Holdings PLC and Nidec Corp., (Information
Technology); Kubota Corp., (Industrials); Telefonica (Telecommunication
Services); and Makita Corp., (Consumer Discretionary), all contributed
positively to performance.
Stocks that detracted most from the Fund's performance were: Telenor ASA,
(Telecommunication Services); Icon PLC, (Health Care); Hitachi Ltd.,
(Industrials); Honda Motor Co. Ltd., and Nintendo Co. Ltd., (Consumer
Discretionary); and Mitsubishi UFJ Financial Group Inc., (Financial Services).
STRATEGY AND OUTLOOK
The Fund is currently overweight in the Information Technology and Health Care
sectors, with exposure to high quality Financial Services companies,
market-weight exposure to the Energy and Non-Energy Minerals sectors, and
remains diversified across other sectors as well. On a broader,
country-allocation basis, the Fund is underweight Japan and the United Kingdom
and overweight Germany, Brazil, and Canada.
9
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Management's Discussion of Fund Performance (Continued)
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Navellier remains cautiously optimistic about the market outlook over the coming
year. Navellier believes the worst post-war recession is behind us and believes
increases in market liquidity, low interest rates, the implementation of fiscal
stimulus plans, and renewed consumer optimism will prevail. Navellier expects
that as the global economy improves, the bear market in stocks ends, and the
dollar stabilizes, the Fund's investors will be rewarded.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL
GROWTH FUND - CLASS A* AND THE MSCI EAFE GROWTH INDEX
[LINE CHART]
International Growth Fund - Class A MSCI EAFE Growth Index
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Date Date
9/5/00 9,425 9/5/00 10,000
9/30/00 8,631 9/30/00 9,353
9/30/01 5,148 9/30/01 5,953
9/30/02 4,974 9/30/02 5,189
9/30/03 5,786 9/30/03 6,315
9/30/04 6,658 9/30/04 7,388
9/30/05 8,364 9/30/05 9,266
9/30/06 9,685 9/30/06 10,844
9/30/07 12,997 9/30/07 13,900
9/30/08 9,596 9/30/08 9,982
9/30/09 8,767 9/30/09 9,946
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INTERNATIONAL GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -13.87% 4.42% -1.44%
Class C -9.33% 4.98% -1.41%
Class Y -8.31% 5.74% -0.75%
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Past performance is not predictive of future performance.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares and Class Y shares based on
the differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class A shares commenced on
September 5, 2000. The initial public offering of Class C shares and Class
Y commenced on September 29, 2008. The Class C and Class Y performance
information is calculated using the historical performance of Class A.
** The average annual total returns shown above are adjusted for maximum
applicable sales charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
10
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE MID CAP FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Mid Cap Fund seeks long-term capital appreciation by primarily
investing in stocks of medium capitalization companies. It emphasizes companies
operating in a broad range of industries based on a fundamental analysis of each
company with consideration to such characteristics as price-to-cash flow,
price-to-earnings, and price-to-book value ratios. The Fund looks for companies
with quality management teams, strong fundamentals, well-positioned balance
sheets and distinctive product opportunities that may be positioned to generate
and sustain long-term growth.
FUND PERFORMANCE AND POSITIONING
The total return for the Touchstone Mid Cap Fund was -13.81% for the fiscal year
ended September 30, 2009. The total return of the Russell MidCap(R) Index was
- -3.55% for the same period.
The Fund's absolute performance was hurt mostly by losses in the Materials and
Energy sectors. Commodity sensitive holdings experienced a pullback from their
highs in 2008 and Materials and Energy holdings took the brunt of the decline in
commodity prices, although prices have begun to climb recently. In relative
terms, the Telecommunication Services sector contributed to results due to good
security selection in wireless telecom holdings. Conversely, the Health Care,
Information Technology and Industrials sectors detracted the most from relative
performance.
The Health Care industry continues to struggle amid the uncertainty over
healthcare reform and what it may mean for the industry moving forward. The
Fund's underweight position in semiconductors within the Information Technology
sector hurt results as this group was up 18 percent in the benchmark for the
period. Industrial holdings also detracted from results as industrial companies
are generally regarded as late cycle stocks and these holdings did not perform
as well as early cycle stocks as the economy began to show signs of life.
Within the Telecommunication Services sector, Millicom International Cellular, a
provider of mobile phone services to Central and South America along with a
footprint in Africa, contributed the most to relative performance. The company
has benefited from the 3G network rollout that is taking hold in emerging
markets. Wireless communication tower provider SBA Communications Corp. also
helped contribute to gains. The tower sector was battered in 2008 due to
concerns that cellular carriers would have financial difficulties, but these
issues seem to be abating, which spurred investor interest in this company.
Within the Health Care sector, managed healthcare insurer Humana traded lower
after Obama introduced his reform goals for the Health Care industry, which
would specifically reduce funding to the Medicare program. The company is a
large provider of the Medicare Advantage program and would be impacted by any
reduction in the program. The company has been sold.
In the Information Technology sector, Electronics Arts Inc., the world's largest
video game publisher, traded lower as the company reported soft retail sales for
their new EA sports video games. Within the Industrials sector, Kansas City
Southern suffered in the latter part of 2008 from concerns about their freight
volumes, which could decrease as the economy slows. As a result of these
concerns, the decline in stock price detracted from relative returns.
Since the sharp reversal that occurred in early March 2009, the Fund has been
unable to keep pace with the benchmark as its underweight position in low
priced, low-quality securities impacted relative results. Companies that
displayed high beta, high debt levels, low prices and low return on equity
substantially outperformed during the period. This type of market is a challenge
for Turner Investment Partners (TIP) in the short term as focus is generally
placed on companies with the opposite profile (low debt levels, high return on
equity, high cash positions, low valuations and low betas). In TIP's experience
these types of sharp rallies are often short-lived and ultimately investors tend
to refocus on company fundamentals within a few months.
11
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
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As a result of the low quality rally that began in early March 2009, the Fund
struggled to keep pace with the market as investors traded less on fundamentals
and valuations of a company and more on macro factors as discussed above. From a
style perspective, the risk controls in place allow the Fund to hold up to 60
percent in either growth or value stocks. Growth companies in the benchmark did
the best, a group the Fund is slightly overweight due to its bottom up approach.
STRATEGY AND OUTLOOK
TIP believes its two-pronged investment approach emphasizing companies with
business momentum and/or undervalued assets is well-suited for a time when
earnings visibility is poor. Consequently, TIP favors stocks with relatively low
price/book ratios that are supported by above-average levels of cash on their
issuers' balance sheets. The Fund is currently overweight the Energy,
Information Technology and Telecommunication Services sectors. In the Energy
sector, TIP favors oilfield equipment companies. In the Information Technology
sector, TIP favors semiconductors. The Fund is currently underweight in the
Consumer Discretionary sector with limited exposure to specialty stores. It is
also underweight in Materials sector companies with no exposure to chemical
holdings. TIP believes that investors will focus more on corporate valuations
and financial strength and less on lower quality stocks and highly leveraged
balance sheets as movement out of the volatile market environment of the first
half of 2009.
While the economy appears to be near or in the early stages of a recovery, many
areas of concern remain. The high unemployment rate and a still-crippled housing
market have created significant headwinds for the recovery. With only a small
percentage of government stimulus spent, most of the funds have yet to be
allocated which will, in TIP's opinion, generate the necessary kindling to
reignite the long-term growth of the U.S. economy. TIP is also encouraged by the
healing process occurring in the manufacturing segment of the economy. But
perhaps the biggest signal of growth to come resides in the improving earnings
of corporations. TIP believes higher revenue, combined with improving cost
containment, should propel the equity markets higher throughout the remainder of
the year and into 2010.
12
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
MID CAP FUND - INSTITUTIONAL CLASS* AND THE RUSSELL MIDCAP INDEX
[LINE CHART]
Mid Cap Fund - Institutional Class Russell Midcap Index
- ---------------------------------- --------------------
Date Date
1/2/03 10,000 1/2/03 10,000
9/30/03 12,520 9/30/03 12,289
9/30/04 14,968 9/30/04 14,814
9/30/05 20,242 9/30/05 18,533
9/30/06 21,679 9/30/06 20,306
9/30/07 25,610 9/30/07 23,935
9/30/08 18,972 9/30/08 18,583
9/30/09 16,377 9/30/09 17,924
- --------------------------------------------------------------------------------
MID CAP FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year 5 Years Since Inception*
Class A -18.78% 0.41% 6.41%
Class C -14.47% 1.13% 6.78%
Class Z -13.83% 1.55% 7.32%
Institutional Class -13.68% 1.82% 7.59%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
* The chart above represents performance for the Institutional Class shares
only, which will vary from the performance of Class A shares, Class C
shares and Class Z shares based on the differences in loads and fees paid
by shareholders in the different classes. The initial public offering of
the Institutional Class shares commenced on January 2, 2003. The initial
public offering of Class A shares and Class C commenced on May 14, 2007
and the initial public offering of Class Z shares commenced on April 24,
2006. The Class A, Class C and Class Z performance information is
calculated using the historical performance of the Institutional Class.
** 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 PREMIUM YIELD EQUITY FUND
SUB-ADVISED BY MILLER/HOWARD INVESTMENTS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Premium Yield Equity Fund seeks long-term growth of capital and
high current income by focusing on dividend-paying equity securities of U.S.
companies believed to possess attractive long-term return potential primarily
due to lower than average valuations and improving business outlooks.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Premium Yield Equity Fund was -18.40% for the
year ended September 30, 2009. The total return of the Russell 3000(R) Value
Index was -10.79% for the same period. The total return of the Dow Jones Select
Dividend Index was -18.37% for the same period.
There were several dramatic shifts in the capital markets as the financial storm
and economic slowdown continued to evolve. The pace and magnitude of changes in
stock prices from quarter to quarter the past twelve months demonstrated the
"off the charts" environment. What has also been encouraging during this
volatile market is the 19 dividend increases the Fund has had during the period.
Dividend increases have always been a good indicator of a company's financial
strength and management's outlook for the business model, but in a world where
dividend cuts have become more common, these 19 increases demonstrate the focus
of the Fund's High Quality + High Dividend + High Growth of Dividend formula for
potential long-term success.
For the twelve-month period ending September 30, 2009, Information Technology
and Utilities were the only sectors that contributed to relative performance.
Fund holding Taiwan Semiconductor Manufacturing Co. participated in the
Information Technology move this last year. The Consumer Discretionary sector
was the best performing sector for the last 12 months on an absolute basis, but
detracted from relative performance. McDonald's Corp. and Thomson Reuters
Corporation's (Consumer Discretionary) relative performance were down slightly
for the year, but both increased their dividend.
The Fund's Health Care sector holdings also detracted from performance on an
absolute and relative basis. Bristol-Myers Squibb Co., Abbott Laboratories and
Johnson & Johnson all detracted from performance. Also detracting from
performance were Kraft Foods Inc. and Procter & Gamble Co., both from the
Consumer Staples sector, while slight contributions within that sector came from
Unilever N.V. and Colgate-Palmolive Co. In the Telecommunication Services
sector, Telefonica, the large Spanish-based integrated telecom with significant
Latin American growth, led with strong relative and absolute performance.
Stock selection in the Utilities sector contributed to performance this last
year. Energy infrastructure focused selections such as Oneok and more
traditional Utilities names like CMS Energy Corp., the Michigan-based utility
and Northeast Utilities (added in the spring) were all positive contributors to
the Fund while National Grid and Pepco Holdings Inc. detracted from performance
on an absolute and relative basis.
Over the course of this last year, the Financials sector was one of the sectors
to experience some of the most dramatic swings from quarter to quarter. The
Fund's underweight in the sector due to the challenges for the group to maintain
dividends and the prospects for growing the dividend, (key ingredients
Miller/Howard Inc. (MHI) looks for), has made the comparison to the benchmark
quite different over the past twelve months. The Fund added to the Financials
sector weight as the environment started to stabilize which contributed to
performance in recent months. Bank of Montreal, HSBC Holdings, Alexandria Real
Estate Equities Inc. and Allstate Corp. all contributed to performance since
they were added mid 2009. Companies that the Fund no longer owns from the
Financials sector that were detractors to performance include Wilmington Trust,
Apartment Investment & Management Co., Northstar Realty Financial Corp., Arthur
J. Gallagher Co., First Industrial Realty Trust Inc., ING Group, Potlatch Corp.
and Lloyds Banking Group.
14
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
The economy has bounced back from many hits over the past decades, but it is
fragile now. MHI's biggest concern is regarding its ability to weather another
shock in the near term.
Some of the economic indicators MHI respects, such as the Institute for Supply
Management (ISM), point to better times ahead, so MHI remains open to companies
with solid businesses that will be enhanced by economic revival. MHI will
continue to search for stocks which exhibit balance sheet strength, ongoing cash
flow and revenue stability or growth, modest dividend payout ratios, and
dividend increases.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
PREMIUM YIELD EQUITY FUND - CLASS A* , THE RUSSELL 3000 VALUE INDEX AND
THE DOW JONES US SELECT DIVIDEND INDEX
[LINE CHART]
Premium Yield Russell 3000 Dow Jones US Select
Equity Fund - Class A Value Index Dividend Index
- --------------------- ----------- --------------
Date Date Date
12/3/07 9,425 12/3/07 10,000 12/3/07 10,000
12/31/07 9,343 12/31/07 9,904 12/31/07 9,709
3/31/08 8,509 3/31/08 9,057 3/31/08 8,873
6/30/08 8,183 6/30/08 8,589 6/30/08 7,631
9/30/08 7,400 9/30/08 8,137 9/30/08 8,491
12/31/08 5,477 12/31/08 6,314 12/31/08 6,702
3/31/09 4,724 3/31/09 5,240 3/31/09 5,155
6/30/09 5,307 6/30/09 6,121 6/30/09 5,862
9/30/09 6,039 9/30/09 7,259 9/30/09 6,931
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS**
1 Year Since Inception*
Class A -23.08% -24.12%
Class C -18.96% -22.71%
Class Y -18.22% -21.57%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
* The chart above represents performance for Class A shares only, which will
vary from the performance of Class C shares and Class Y shares based on
the differences in loads and fees paid by shareholders in the different
classes. The initial public offering of Class A shares and Class C shares
commenced on December 3, 2007. The initial public offering of Class Y
shares commenced on August 12, 2008. The Class C and Class Y performance
information is calculated using the historical performance of Class A.
** The total returns shown above are adjusted for maximum applicable sales
charges.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
15
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE SANDS CAPITAL SELECT GROWTH FUND
SUB-ADVISED BY SANDS CAPITAL MANAGEMENT LLC
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Sands Capital Select Growth Fund primarily invests in common
stocks of large capitalization U.S. companies that are believed to have
above-average potential for revenue or earnings growth. The Fund invests in 25
to 30 companies that are generally high-quality, seasoned and growing
businesses, spread across an array of attractive and growing industries. Sands
Capital generally seeks stocks with sustainable above average earnings growth
and capital appreciation potential. In addition, Sands Capital looks for
companies that have a significant competitive advantage, a leadership position
or proprietary niche, a clear mission in an understandable business, financial
strength, and are valued rationally in relation to comparable companies, the
market, and the business prospects for that particular company.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Sands Capital Select Growth Fund was 6.63%
for the fiscal year ended September 30, 2009. The total return of the Russell
1000(R) Growth Index was -1.85% for the same period.
The Fund's relative performance was primarily attributable to security
selection. The largest individual contributors, in descending order, were Apple
Inc., Amazon.com Inc., Broadcom Corp., Intercontinental xchange Inc. and
Salesforce.com Inc. The largest detractors from relative performance were
Genzyme Corp., Schlumberger Ltd., Varian Medical Systems Inc., Stryker Corp. and
Moody's Corp.
In aggregate, the Fund's sector allocations detracted from relative performance
due to overweight positions in the Energy, Financials and Telecommunication
Services sectors. Also contributing to relative performance was not having any
exposure to the Consumer Staples sector. An underweight position in the
Industrials sector and an overweight position in the Information Technology
sector positively impacted relative performance.
As 2009 progresses, Sands Capital Management (SCM) continues to be pleased by
the strong performance of the companies held in the Fund, both as businesses and
as stocks. The reconnection of stock prices with strong business fundamentals
remains on course. Patience, supported by a willingness to look past the noise
of the markets and a commitment to focusing on the long-term fundamental
strength of the Fund's leading business enterprises, has been a rewarding
strategy.
Two important characteristics of SCM's strong investment results so far this
year are worth mentioning. First, Fund returns, lofty as they are on an absolute
and relative basis, have not been driven by just a few stocks. Rather, they have
been the result of widely distributed stock price increases across most of the
businesses held in the Fund. Fiscal year-to-date the stocks of 29 of the 32
companies, or a full 81 percent, contributed to the absolute performance of the
Fund.
Though the rebound in stock prices has been widely distributed across the Fund's
concentrated group of companies, the same has not been true for all growth
equities thus far in 2009. In absolute terms, long-term equity investors have
not had much to cheer about compared to average historical long-term equity
returns, although mean reversion suggests the coming decade may offer
considerably greater rewards to investors as a result. However, SCM believes its
significant relative return advantage versus the benchmark reflects the very
real benefits of a concentrated "best ideas" approach to investing in high
quality, leading growth businesses regardless of the overall equity market
environment.
16
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
More recently, the market has clearly recognized both corporate and economic
improvements, and stock prices have recovered from the trough valuations in
March 2009. However, SCM continues to find and research leading businesses at
rational valuations - businesses that are taking market share at the expense of
weaker competitors. SCM believes these businesses are likely to emerge stronger
and leaner from the global downturn. In addition, earnings per share
acceleration may be ahead of expectations as many of SCM's leading companies
have focused on sustainable cost cuts and controls--becoming significantly more
efficient operators as a result of the economic downturn--and may therefore
realize a double benefit as sales reaccelerate on top of a much leaner cost
base. As indicated previously, SCM has identified 29 of these special businesses
and expects that attractive future long-term absolute returns are likely to be
driven by the compelling growth SCM believes exists in the Fund today.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SANDS CAPITAL
SELECT GROWTH FUND - CLASS Y*, SANDS CAPITAL SELECT GROWTH FUND - CLASS Z* AND
THE RUSSELL 1000 GROWTH INDEX
[LINE CHART]
Sands Capital Select Sands Capital Select Russell 1000
Growth Fund - Class Y Growth Fund - Class Z Growth Index
- --------------------- --------------------- ------------
Date Date Date
8/11/00 10,000 8/11/00 10,000 8/11/00 10,000
9/30/00 9,150 9/30/00 9,150 9/30/00 9,802
9/30/01 5,033 9/30/01 5,033 9/30/01 5,328
9/30/02 4,332 9/30/02 4,332 9/30/02 4,129
9/30/03 5,893 9/30/03 5,893 9/30/03 5,199
9/30/04 6,803 9/30/04 6,803 9/30/04 5,590
9/30/05 7,814 9/30/05 7,804 9/30/05 6,238
9/30/06 7,603 9/30/06 7,574 9/30/06 6,615
9/30/07 9,154 9/30/07 9,085 9/30/07 7,895
9/30/08 6,862 9/30/08 6,794 9/30/08 6,246
9/30/09 7,343 9/30/09 7,243 9/30/09 6,131
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years Since Inception*
Class Y 7.00% 1.54% -3.32%
Class Z 6.63% 1.26% -3.47%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
* The initial public offering of Class Y shares and Class Z shares commenced
on August 27, 2004 and August 11, 2000, respectively. The Class Y
performance information is calculated using the historical performance of
Class Z.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
17
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE SHORT DURATION FIXED INCOME FUND
SUB-ADVISED BY LONGFELLOW INVESTMENT MANAGEMENT COMPANY
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Short Duration Fixed Income Fund seeks to provide above market
income, liquidity and risk-adjusted total return. Fund management targets these
goals using a low risk approach, selecting a core group of securities from
better yielding sectors within the government and corporate markets, and
enhancing liquidity and yield by combining very short maturities with fixed rate
issues in a barbell structure. The Fund avoids higher risk strategies, including
exposure to non-dollar currencies and lower quality credits. While the Fund may
invest in securities with any maturity or duration, interest rate risk is
managed by maintaining an effective duration that is comparable to or less than
that of three year U.S. Treasury Notes.
FUND PERFORMANCE AND POSITIONING
On February 23, 2009, Longfellow Investment Management Co. (Longfellow) began
sub-advising the Fund and on April 21, officially changed its mandate from
government-only to investment grade securities.
When Longfellow assumed management of the Fund, it was highly concentrated in
agency pass-throughs and collateralized mortgage obligations (CMOs) -
approximately 66 percent. Longfellow's efforts since then have been directed at
reallocating the Fund so that it more closely resembles its other short duration
portfolios. At September 30, 2009, the percentage of agency pass-throughs and
CMOs represent 21 percent of assets, a substantial reduction in these sectors.
Alternatively, the Fund now holds asset backed securities (ABS) and corporate
bonds with similar allocation to Longfellow's other portfolios.
For the fiscal year ended September 30, 2009, the total return of the Fund was
7.13%. The total return of the Barclays Capital 1 - 3 year U.S. Treasury Index
was 3.55% for the same period. Much of the outperformance was achieved in the
second and third quarters of 2009 when the mandate was widened to include
investment grade securities. Increased income from higher yielding securities
contributed approximately 80 basis points of return, while the sectors
contributing the largest to return were the ABS and corporate bond sectors with
a smaller contribution from commercial mortgage backed securities (CMBS).
STRATEGY AND OUTLOOK
Government programs implemented in late 2008 and early 2009 have had a positive
effect on financial markets. Spreads in most sectors have narrowed considerably,
particularly in the ABS, corporate and mortgage sectors. Longfellow expects the
Fed to remain accommodative in 2010 as the economy remains weak. Short rates
could remain low and the steep yield curve may favor the performance of the
short duration portfolio over other low risk alternatives. Sector spreads have
compressed significantly and Longfellow expects any future compression to be
much more measured. Future performance against the index will be more
challenging.
18
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SHORT DURATION
FIXED INCOME FUND - CLASS Z*, THE BARCLAYS CAPITAL 1-3 YEAR U.S. TREASURY INDEX
AND THE BARCLAYS CAPITAL 1-3 YEAR U.S. GOVERNMENT BOND INDEX
[LINE CHART]
Barclays Capital 1-3
Short Duration Fixed Barclays Capital 1-3 Year U.S. Government
Income Fund - Class Z Year U.S. Treasury Index Bond Index
- --------------------- ------------------------ --------------------
Date Date Date
9/30/99 10,000 9/30/99 10,000 9/30/99 10,000
9/30/00 10,602 9/30/00 10,572 9/30/00 10,583
9/30/01 11,591 9/30/01 11,683 9/30/01 11,712
9/30/02 12,135 9/30/02 12,355 9/30/02 12,397
9/30/03 12,396 9/30/03 12,684 9/30/03 12,744
9/30/04 12,624 9/30/04 12,815 9/30/04 12,892
9/30/05 12,894 9/30/05 12,936 9/30/05 13,033
9/30/06 13,309 9/30/06 13,416 9/30/06 13,531
9/30/07 14,000 9/30/07 14,189 9/30/07 14,305
9/30/08 14,330 9/30/08 15,081 9/30/08 15,149
9/30/09 15,351 9/30/09 15,616 9/30/09 15,815
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
Total Return
1 Year 5 Years 10 Years Since Inception*
Class Y NA NA NA 3.02%
Class Z 7.13% 3.99% 4.38% NA
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
* The initial public offering of Class Z shares commenced on March 1, 1994
and the initial public offering of Class Y shares commenced on May 4,
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
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE SMALL CAP VALUE OPPORTUNITIES FUND
SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Small Cap Value Opportunities Fund seeks long-term capital
appreciation by primarily investing in common stocks of companies with small
market capitalizations that are believed to have the potential for growth and
that appear to be trading below their perceived value. It invests in securities
of companies operating in a broad range of industries.
FUND PERFORMANCE AND POSITIONING
The total return of the Touchstone Small Cap Value Opportunities Fund was
- -13.90% for the fiscal year ended September 30, 2009. The total return of the
Russell 2000(R) Value Index was -12.61% for the same period.
The Fund's absolute performance was affected by losses in the Consumer Staples
and Energy sectors. Commodity sensitive holdings experienced a pullback from
their highs in 2008 and Energy holdings took the brunt of the decline in
commodity prices; although prices have begun to climb more recently. In relative
terms, the Financials and Energy sectors contributed positively to results. In
the Financials sector, good security selection in commercial banks aided results
as Fund holdings outperformed the benchmark. In the Energy sector, the Fund's
oil and gas holdings held up better than those held in the benchmark.
Conversely, the Industrials and Health Care sectors detracted from results.
Industrials detracted from performance as they are generally regarded as late
cycle stocks and they did not perform as well as early cycle stocks when the
economy began to show signs of life. The Health Care sector continues to
struggle amid the uncertainty over reform and what it may mean for the sector
moving forward.
Within the Financials sector, MF Global Ltd. contributed to relative
performance. The company provides execution and clearing services for
exchange-traded and OTC derivative products and reported earnings results under
new management that were viewed as favorable. Webster Financial Corp., a New
England bank with 180 branches, received favorable results after getting an
equity infusion from a private equity firm. The stock price jumped as investors
view this as good news for the company.
In the Energy sector, Oceaneering International Inc. contributed to gains as
Turner Investment Partners (TIP) believes the healthy balance sheet of this
company helped to save them from the rapid decline of their peers in the latter
parts of 2008. Global Industries Ltd., a leader in construction services for
offshore oil/gas rigs and pipelines, also helped relative performance.
Management has been focused on cost reductions and has reaped the benefits of a
rebound in global oil exploration/production activity with commodity price at a
profitable level.
The Industrials sector detracted from relative performance as JetBlue Airways
Corp. and Atlas Air Worldwide Holdings traded lower. Atlas, the provider of
global air cargo assets and services, was impacted by the slowing economy as
their Scheduled Service and Commercial Charter business segments were down due
to lower demand for such services; the position was sold. The low-fare airline
JetBlue continued to show its top line to be weak and labor costs were much
higher than expected, which outweighed the benefit of lower fuel costs. The Fund
no longer holds the security.
In the Health Care sector, Health Net Inc. detracted from relative performance.
The regional health insurer reported a lower-than-expected second-quarter profit
as its enrollment fell and medical costs cut into its premium revenue. The
company is focused on health plans in the western part of the U.S., which are
believed to have more upside than any other part of the country. The Fund no
longer holds the security.
20
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
Since the sharp reversal that occurred in early March 2009, the Fund has been
unable to keep pace with the benchmark as its underweight position versus the
benchmark in low priced, low-quality securities impacted relative results.
Companies that displayed high beta, high debt levels, low prices and low return
on equity substantially outperformed during the period. This type of market is
challenging for TIP in the short term as it generally focuses on companies with
the opposite profile (low debt levels, high return on equity, high cash
positions, low valuations and low betas). In TIP's experience, these types of
sharp rallies are often short-lived and ultimately investors tend to refocus on
company fundamentals within a few months.
STRATEGY AND OUTLOOK
TIP believes its two-pronged investment approach emphasizing companies with
undervalued assets is well-suited for a time when earnings visibility is poor.
Consequently, TIP favors stocks with relatively low price/book ratios that are
supported by above-average levels of cash on their issuers' balance sheets. The
Fund generally held overweight positions in the Information Technology and
Materials sectors, while underweighting the Consumer Discretionary and Consumer
Staples sectors. TIP currently favors shares of Investment Bank/Brokers,
Internet Software/Services, and Oil & Gas Production companies. TIP thinks the
market, in response, should reflect an increasingly high correlation between
companies with above-average fundamentals and good stock returns. In short, TIP
expects a classic stock picker's market, an environment which they believe
should bode well for this strategy.
While the economy appears to be near or in the early stages of a recovery, many
areas of concern remain. The high unemployment rate and a still-crippled housing
market have created significant headwinds for the recovery. With only a small
percentage of government stimulus funds spent, additional allocations will, TIP
believes, generate the necessary kindling to reignite the long-term growth of
the U.S. economy. TIP is also encouraged by the healing process occurring in the
manufacturing segment of the economy. But perhaps the biggest signal of growth
to come resides in improving corporate earnings. Higher revenue, combined with
improving cost containment, should propel the equity markets higher throughout
the remainder of the year and into 2010.
21
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP
VALUE OPPORTUNITIES FUND - CLASS Z* AND THE RUSSELL 2000 VALUE INDEX
[LINE CHART]
Small Cap Value Opportunities Fund - Class Z Russell 2000 Value Index
- -------------------------------------------- ------------------------
Date Date
3/4/02 10,000 3/4/02 10,000
9/30/02 9,270 9/30/02 8,147
9/30/03 12,727 9/30/03 10,726
9/30/04 16,463 9/30/04 13,479
9/30/05 20,467 9/30/05 15,871
9/30/06 21,458 9/30/06 18,095
9/30/07 23,769 9/30/07 19,197
9/30/08 19,773 9/30/08 16,845
9/30/09 17,026 9/30/09 14,721
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years Since Inception*
Class Z -13.90% 0.67% 7.28%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
* The initial public offering of Class Z shares commenced on March 4, 2002.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
22
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
TOUCHSTONE ULTRA SHORT DURATION FIXED INCOME FUND
SUB-ADVISED BY FORT WASHINGTON INVESTMENT ADVISORS INC.
INVESTMENT PHILOSOPHY AND PROCESS
The Touchstone Ultra Short Duration Fixed Income Fund seeks to provide above
market income, liquidity and risk-adjusted total return. Fund management targets
these goals using a low risk approach, selecting a core position in short
duration securities from historically attractive sectors within the government
and agency mortgage-backed securities (MBS) markets, and enhancing liquidity,
income and total return by combining very short cash substitutes and short
duration non-agency securities, including private label MBS, asset backed
securities, taxable municipal and corporate securities. The Fund avoids higher
risk strategies, including exposure to non-dollar currencies and lower quality
credits. While the Fund may invest in securities with any maturity or duration,
interest rate risk is managed by limiting the duration of any single security
and maintaining an effective duration that is comparable to, or less than that
of one year U.S. Treasury bills; potentially volatile securities with high
levels of spread duration (sensitivity to changes in spread) are avoided.
FUND PERFORMANCE AND POSITIONING
The total return of the Fund was 2.60% for the fiscal year ended September 30,
2009. The total return of the Merrill Lynch 3-Month U.S. Treasury Bill Index was
0.39% for the same period. The Fund's outperformance was driven by a combination
of duration and declining risk premiums during the fiscal year. One-year and
two-year Treasury note yields declined 138 and 101 basis points, respectively,
during the year. The TED spread, a proxy for credit risk on 3-month corporate
obligations, declined from 314 basis points to 22 basis points. The TED is the
difference between U.S. Treasuries and the London Interbank Offered Rate, or
LIBOR.
Fort Washington Investment Advisors (FWIA) assumed management of the Fund on
October 1, 2008, just after the initial vote on the Troubled Asset Relief Plan
failed in Congress (September 29, 2008). The dislocations in the fixed income
markets were swift and dramatic. Liquidity in actively traded agency
mortgage-backed securities, a significant exposure of the Fund, was severely
curtailed. Liquidity did not return to the markets until early in 2009, and even
then it was limited to the more generic fixed income sectors.
As the markets began to thaw, FWIA began to opportunistically reposition the
Fund, reducing nominal duration, spread duration and credit risk while
increasing liquidity. Higher risk assets were sold and replaced with low
duration, stable income producing securities and cash substitutes. Sectors where
exposures were reduced included support floaters, inverse floaters, interest
only securities and financials (corporate). Exposure to agency adjustable rate
mortgages (ARMs) was increased from 2 percent to approximately 25 percent of
assets and is now a core position of the Fund.
In the second half of the fiscal year (second and third quarter, 2009) the
non-government sectors were increased close to the 20 percent maximum allowed by
the Fund's prospectus. Several corporate positions, which had rallied strongly,
were sold and replaced with high quality commercial and non-agency
mortgage-backed securities. FWIA expects to maintain a full allocation to the
non-government sectors and views this component as a significant source of
excess returns.
STRATEGY AND OUTLOOK
The outlook for the fixed income markets, both agency and non-agency, is
constructive. Short duration securities continue to be "well-bid." While many
retail investors have been moving out of short duration and into higher risk
investments--stocks and longer duration bonds--banks are replacing that demand,
investing their cash in the short duration sectors. Also, credit performance
stabilization in the non-government sectors has fostered demand from investors
largely absent over the past year. In particular, non-agency MBS are
experiencing a renaissance fueled by PPIP (the Public-Private Investment
Program) and regulatory capital relief appears imminent for both banks and
insurance companies.
23
- --------------------------------------------------------------------------------
Management's Discussion of Fund Performance (Continued)
- --------------------------------------------------------------------------------
FWIA's view is a bit less sanguine. Short term interest rates are likely to
remain low for several quarters as the market ebbs and flows, digesting the
seasonal housing and economic data. The seasonality of home sale and price data
is likely to cause confusion about the recovery in the coming months, keeping
the Fed in an accommodating posture. However, as the recovery gains momentum,
possibly later in 2010, short-term rates are likely to move higher--a move that
could be swift and substantive.
For these reasons, the Fund maintains a moderately defensive posture with
duration in the 0.5 year range and mortgage positioning biased toward moderately
higher interest rates. FWIA will continue to focus on high quality
non-government securities in an effort to maximize excess returns and add to the
core income-producing government and agency segments of the Fund--a combination
of agency debentures and short, agency, collateralized mortgage obligations.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ULTRA SHORT
DURATION FIXED INCOME FUND - CLASS Z* AND THE MERRILL LYNCH 3-MONTH U.S.
TREASURY BILL INDEX
[LINE CHART]
Merrill Lynch 3-Month
Ultra Short Duration Fixed Income Fund U.S. Treasury Bill Index
- -------------------------------------- ------------------------
Date Date
9/30/99 10,000 9/30/99 10,000
9/30/00 10,636 9/30/00 10,578
9/30/01 11,388 9/30/01 11,154
9/30/02 11,724 9/30/02 11,376
9/30/03 11,888 9/30/03 11,526
9/30/04 12,082 9/30/04 11,654
9/30/05 12,407 9/30/05 11,959
9/30/06 12,937 9/30/06 12,497
9/30/07 13,646 9/30/07 13,149
9/30/08 13,817 9/30/08 13,530
9/30/09 14,177 9/30/09 13,582
- --------------------------------------------------------------------------------
ULTRA SHORT DURATION FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 years
Class Z 2.60% 3.25% 3.55%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
* The initial public offering of Class Z shares commenced on March 1, 1994.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
24
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Unaudited)
September 30, 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.
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Health Care 99.9
Investment Fund 24.1
Other Assets/Liabilities (Net) (24.0)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 21.2
Financials 14.8
Health Care 13.7
Consumer Staples 9.7
Energy 9.3
Industrials 8.6
Materials 6.3
Investment Fund 5.9
Telecommunication Services 5.4
Consumer Discretionary 4.0
Utilities 3.7
Other Assets/Liabilities (Net) (2.6)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Energy 20.3
Utilities 16.9
Health Care 11.6
Telecommunication Services 11.2
Consumer Staples 10.6
Financials 10.1
Information Technology 8.4
Consumer Discretionary 6.9
Industrials 2.1
Investment Fund 1.7
Other Assets/Liabilities (Net) 0.2
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT QUALITY (% OF INVESTMENT SECURITIES)
U.S. Treasury 26.8
U.S. Agency 14.2
AAA 0.6
AA 8.8
A 25.5
BBB 18.0
Cash 6.1
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MID CAP FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Investment Funds 28.4
Financials 18.3
Information Technology 17.6
Consumer Discretionary 14.3
Health Care 9.6
Energy 9.5
Industrials 8.3
Utilities 6.8
Consumer Staples 6.0
Materials 5.0
Telecommunication Services 4.7
Other Assets/Liabilities (Net) (28.5)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 30.9
Health Care 21.9
Consumer Discretionary 15.0
Energy 14.1
Financials 7.5
Investment Funds 6.0
Materials 4.0
Telecommunication Services 2.8
Industrials 1.2
Other Assets/Liabilities (Net) (3.4)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
Tabular Presentation of Portfolios of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT QUALITY (% OF INVESTMENT SECURITIES)
U.S. Treasury 14.8
U.S. Agency 27.0
AAA 31.2
AA 6.4
A 13.7
BBB 6.9
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ULTRA SHORT DURATION FIXED INCOME FUND
- --------------------------------------------------------------------------------
CREDIT QUALITY (% OF INVESTMENT SECURITIES)
U.S. Treasury 2.8
U.S. Agency 69.3
AAA 9.5
AA 5.0
A 1.9
BBB 2.9
Cash 8.6
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Financials 32.0
Investment Funds 23.4
Information Technology 16.9
Consumer Discretionary 13.0
Industrials 10.6
Energy 7.7
Materials 7.5
Utilities 5.3
Health Care 4.1
Consumer Staples 1.8
Telecommunication Services 1.2
Other Assets/Liabilities (Net) (23.5)
-----
TOTAL 100.0
-----
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
September 30, 2009
- --------------------------------------------------------------------------------
HEALTHCARE AND INTERMEDIATE INTERNATIONAL
BIOTECHNOLOGY FIXED INCOME GROWTH
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 40,512,199 $ 101,195,796 $ 35,382,854
==================================================================================================================================
Affiliated securities, at market value $ -- $ 6,229,472 $ 2,195,557
Non-affiliated securities, at market value 46,500,643 96,664,165 36,017,739
- ----------------------------------------------------------------------------------------------------------------------------------
At market value - including $8,786,075
of securities loaned for the Healthcare and Biotechnology Fund $ 46,500,643 $ 102,893,637 $ 38,213,296
Dividends and interest receivable 167 1,032,509 57,272
Receivable for capital shares sold 5,449 71,044 861
Receivable for securities sold 1,304,937 -- --
Receivable for securities lending income 829 -- --
Tax reclaim receivable 2,000 -- --
Other assets 10,206 1,948 29,684
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 47,824,231 103,999,138 38,301,113
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Bank overdraft 389,995 -- 4,109
Dividends payable -- 227,431 --
Payable upon return of securities loaned 9,038,201 -- --
Payable for capital shares redeemed 188,566 2,007 4,905
Payable for securities purchased 597,411 -- 954,008
Payable to Advisor 25,631 9,485 25,049
Payable to other affiliates 19,090 17,580 7,529
Payable to Trustees 1,951 2,094 4,145
Other accrued expenses and liabilities 48,132 15,559 69,501
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 10,308,977 274,156 1,069,246
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 37,515,254 $ 103,724,982 $ 37,231,867
==================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 46,380,828 $ 104,005,610 $ 37,741,503
Accumulated net investment income (loss) (13,459) 1,292 385,646
Accumulated net realized losses on investments
and foreign currency transactions (14,840,559) (1,979,761) (3,725,724)
Net unrealized appreciation on investments 5,988,444 1,697,841 2,830,442
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 37,515,254 $ 103,724,982 $ 37,231,867
- ----------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 34,028,785 $ -- $ 37,072,979
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 2,675,621 -- 4,739,554
==================================================================================================================================
Net asset value and redemption price per share $ 12.72 $ -- $ 7.82
==================================================================================================================================
Maximum offering price per share $ 13.50 $ -- $ 8.30
==================================================================================================================================
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 3,486,469 $ -- $ 141,763
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 280,351 -- 18,240
==================================================================================================================================
Net asset value, offering price and redemption price per share* $ 12.44 $ -- $ 7.77
==================================================================================================================================
27
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND INTERMEDIATE INTERNATIONAL
BIOTECHNOLOGY FIXED INCOME GROWTH
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ -- $ 17,125
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- -- 2,194
==================================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ -- $ 7.81
==================================================================================================================================
PRICING OF INSTITUTIONAL CLASS SHARES
Net assets attributable to Institutional Class shares $ -- $ 103,724,982 $ --
==================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) -- 11,880,237 --
==================================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ 8.73 $ --
==================================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
28
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 194,087,361 $ 24,283,541 $ 346,260,354 $ 43,100,243
===================================================================================================================================
Affiliated securities, at market value $ 1,005,405 $ 399,062 $ 19,564,025 $ 403,523
Non-affiliated securities, at market value 218,392,071 23,311,069 410,539,661 43,710,698
- -----------------------------------------------------------------------------------------------------------------------------------
At market value - including $45,892,849 and
$5,036,767 of securities loaned
for the Mid Cap Fund and Sands Capital
Select Growth Fund, respectively $ 219,397,476 $ 23,710,131 $ 430,103,686 $ 44,114,221
Dividends and interest receivable 210,598 68,411 107,373 296,862
Receivable for capital shares sold 8,506 34,681 1,423,176 22,339
Receivable for securities sold 1,931,862 -- 438,046 --
Receivable for securities lending income 7,080 -- 798 --
Tax reclaim receivable 475 -- -- --
Other assets 9,377 15,691 20,101 14,639
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 221,565,374 23,828,914 432,093,180 44,448,061
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends payable -- 4,667 -- 3,466
Payable upon return of securities loaned 47,451,091 -- 5,242,697 --
Payable for capital shares redeemed 790,695 28,404 757,148 44,802
Payable for securities purchased 2,413,461 -- 9,344,148 --
Payable to Advisor 90,771 5,621 283,792 15,573
Payable to other affiliates 31,438 5,497 103,021 13,763
Payable to Trustees 1,951 1,951 1,951 1,951
Other accrued expenses and liabilities 37,193 34,001 242,536 27,910
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 50,816,600 80,141 15,975,293 107,465
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 170,748,774 $ 23,748,773 $ 416,117,887 $ 44,340,596
===================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 361,749,692 $ 33,257,822 $ 485,804,437 $ 48,760,555
Accumulated net investment income (loss) 224,960 (4,195) -- 27,777
Accumulated net realized losses on investments (216,535,993) (8,931,444) (153,529,882) (5,461,714)
Net unrealized appreciation (depreciation) on
investments 25,310,115 (573,410) 83,843,332 1,013,978
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 170,748,774 $ 23,748,773 $ 416,117,887 $ 44,340,596
- -----------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares $ 452,314 $ 19,878,564 $ -- $ --
===================================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 40,383 3,351,980 -- --
===================================================================================================================================
Net asset value and redemption price per share $ 11.20 $ 5.93 $ -- $ --
===================================================================================================================================
Maximum offering price per share $ 11.88 $ 6.29 $ -- $ --
===================================================================================================================================
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares $ 169,133 $ 3,318,809 $ -- $ --
===================================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 15,119 559,610 -- --
===================================================================================================================================
Net asset value, offering price and redemption price
per share* $ 11.19 $ 5.93 $ -- $ --
===================================================================================================================================
29
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS Y SHARES
Net assets attributable to Class Y shares $ -- $ 551,400 $ 82,918,149 $ 591,770
===================================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) -- 93,096 11,300,167 59,503
===================================================================================================================================
Net asset value, offering price and redemption price
per share $ -- $ 5.92 $ 7.34 $ 9.95
===================================================================================================================================
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ 1,814,065 $ -- $ 333,199,738 $ 43,748,826
===================================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 162,319 -- 45,996,065 4,400,531
===================================================================================================================================
Net asset value, offering price and redemption price
per share $ 11.18 $ -- $ 7.24 $ 9.94
===================================================================================================================================
PRICING OF INSTITUTIONAL CLASS SHARES
Net assets attributable to Institutional Class shares $ 168,313,262 $ -- $ -- $ --
===================================================================================================================================
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 14,961,272 -- -- --
===================================================================================================================================
Net asset value, offering price and redemption price
per share $ 11.25 $ -- $ -- $ --
===================================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
30
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA
VALUE SHORT DURATION
OPPORTUNITIES FIXED INCOME
FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At cost $ 88,257,034 $ 107,812,669
=========================================================================================================================
Affiliated securities, at market value $ 913,866 $ 9,126,534
Non-affiliated securities, at market value 102,916,258 98,983,867
- -------------------------------------------------------------------------------------------------------------------------
At market value - including $17,966,273 of securities
loaned for the Small Cap Value Opportunities Fund $ 103,830,124 $ 108,110,401
Cash -- 54,155
Dividends and interest receivable 32,129 425,626
Receivable for capital shares sold 58,925 136,445
Receivable for securities sold 805,801 1,214,617
Receivable for securities lending income 7,760 --
Other assets 7,960 12,545
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 104,742,699 109,953,789
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends payable -- 10,862
Payable upon return of securities loaned 18,773,938 --
Payable for capital shares redeemed 100,421 181,342
Payable for securities purchased 1,576,833 1,053,221
Payable to Advisor 65,206 14,808
Payable to other affiliates 38,219 38,724
Payable to Trustees 1,951 1,951
Other accrued expenses and liabilities 139,990 100,624
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 20,696,558 1,401,532
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 84,046,141 $ 108,552,257
=========================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 129,107,747 $ 122,098,364
Accumulated net investment income 16,060 123,995
Accumulated net realized losses on investments (60,650,756) (13,967,834)
Net unrealized appreciation on investments 15,573,090 297,732
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 84,046,141 $ 108,552,257
- -------------------------------------------------------------------------------------------------------------------------
PRICING OF CLASS Z SHARES
Net assets attributable to Class Z shares $ 84,046,141 $ 108,552,257
=========================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 6,338,261 11,236,157
=========================================================================================================================
Net asset value, offering price and redemption price per share $ 13.26 $ 9.66
=========================================================================================================================
See accompanying notes to financial statements.
31
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended September 30, 2009
- --------------------------------------------------------------------------------
HEALTHCARE AND INTERMEDIATE INTERNATIONAL
BIOTECHNOLOGY FIXED INCOME GROWTH
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 40,540 $ 20,893 $ 18,650
Dividends from non-affiliated securities(A) 423,715 40,255 711,151
Interest 10 926,208 187
Income from securities loaned 45,630 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 509,895 987,356 729,988
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 456,120 111,119 228,655
Distribution expenses, Class A 104,009 -- 63,215
Distribution expenses, Class C 40,081 -- 1,145
Administration fees 91,225 53,645 50,813
Professional fees 22,299 29,970 35,351
Transfer Agent fees, Class A 80,436 -- 6,511
Transfer Agent fees, Class C 9,562 -- 332
Transfer Agent fees, Class Y -- -- 94
Transfer Agent fees, Institutional Class -- 2,930 --
Reports to shareholders 23,091 3,870 14,757
Registration fees, Class A 22,675 -- 8,914
Registration fees, Class C 10,810 -- 8,610
Registration fees, Class Y -- -- 8,148
Registration fees, Institutional Class -- 4,142 --
Trustees' fees and expenses 6,857 5,578 8,500
Postage and supplies 34,746 4,774 11,879
Custodian fees 7,291 1,419 16,292
Compliance fees and expenses 2,005 1,679 2,000
Other expenses 1,556 5,186 2,935
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 912,763 224,312 468,151
Fees waived by the Administrator (91,225) (53,645) (50,813)
Fees waived and/or expenses reimbursed by the Advisor (85,066) (29,262) (73,968)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Expenses 736,472 141,405 343,370
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (226,577) 845,951 386,618
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions (10,671,346) (1,842,058) (3,390,371)
Net realized losses from foreign currency transactions (137,152) -- --
Net change in unrealized appreciation/depreciation on investments (562,790) 3,248,154 3,491,540
Net change in unrealized appreciation/depreciation on foreign currency transactions 734 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (11,370,554) 1,406,096 101,169
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (11,597,131) $ 2,252,047 $ 487,787
==================================================================================================================================
(A) Net of foreign tax withholding of: $ -- $ -- $ 17,451
(B) Effective after the close of business on December 31, 2007, the Fund changed its fiscal year end to September 30.
See accompanying notes to financial statements.
32
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION
PREMIUM SELECT FIXED
MID CAP YIELD EQUITY GROWTH INCOME
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 142,911 $ 11,214 $ 120,754 $ 54,594
Dividends from non-affiliated securities(A) 2,504,485 863,374 1,326,454 --
Interest 723 40 236 1,725,370
Income from securities loaned 297,353 -- 240,323 --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,945,472 874,628 1,687,767 1,779,964
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 1,558,659 119,246 2,490,441 111,671
Administration fees 389,668 34,071 680,956 89,338
Shareholder servicing fees 4,435 -- 577,377 107,303
Transfer Agent fees, Class A 1,151 2,536 -- --
Transfer Agent fees, Class C 291 298 -- --
Transfer Agent fees, Class Y -- 91 33,216 42
Transfer Agent fees, Class Z 7,843 -- 229,283 26,401
Transfer Agent fees, Institutional Class 2,046 -- -- --
Registration fees, Class A 5,773 13,164 -- --
Registration fees, Class C 5,784 11,217 -- --
Registration fees, Class Y -- 14,004 6,775 580
Registration fees, Class Z 10,231 -- 42,076 11,045
Registration fees, Institutional Class 9,745 -- -- --
Professional fees 31,156 23,932 43,240 30,815
Postage and supplies 18,652 9,777 83,831 9,893
Reports to shareholders 9,786 5,811 73,221 20,138
Distribution expenses, Class A 680 39,031 -- --
Distribution expenses, Class C 1,226 13,118 -- --
Trustees' fees and expenses 6,352 5,933 6,160 7,758
Custodian fees 9,598 3,715 7,115 1,265
Compliance fees and expenses 2,964 1,898 3,674 2,053
Other expenses 6,758 -- 11,541 9,619
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,082,798 297,842 4,288,906 427,921
Fees waived by the Administrator (324,722) (34,071) (298,538) (89,338)
Fees waived and/or expenses reimbursed by the Advisor -- (49,980) -- (8,119)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1,758,076 213,791 3,990,368 330,464
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,187,396 660,837 (2,302,601) 1,449,500
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security
transactions (134,664,066) (6,642,383) (121,258,262) 149,559
Net change in unrealized appreciation/
depreciation on investments 51,982,386 3,246,251 118,207,340 1,486,380
- -----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS (82,681,680) (3,396,132) (3,050,922) 1,635,939
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (81,494,284) $ (2,735,295) $ (5,353,523) $ 3,085,439
===================================================================================================================================
(A) Net of foreign tax withholding of: $ 2,030 $ 18,217 $ -- $ --
See accompanying notes to financial statements.
33
- --------------------------------------------------------------------------------
Statements of Operations (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA
VALUE SHORT DURATION
OPPORTUNITIES FIXED INCOME
FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 29,295 $ 194,691
Dividends from non-affiliated securities 1,170,214 --
Interest 803 4,656,478
Income from securities loaned 218,048 --
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,418,360 4,851,169
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 791,470 295,784
Shareholder servicing fees 185,725 263,241
Administration fees 166,810 236,629
Transfer Agent fees 144,128 85,835
Reports to shareholders 66,570 22,191
Professional fees 28,525 37,878
Registration fees 20,512 22,804
Postage and supplies 20,372 17,588
Trustees' fees and expenses 6,941 7,361
Compliance fees and expenses 2,224 2,499
Custodian fees -- 2,585
Other expenses 1,908 12,639
- -------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,435,185 1,007,034
Fees waived by the Administrator (166,810) (190,717)
Other operating expenses reimbursed by the Advisor (19,538) --
- -------------------------------------------------------------------------------------------------------------------------
Net Expenses 1,248,837 816,317
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 169,523 4,034,852
- -------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (38,806,211) (3,327,009)
Net change in unrealized appreciation/depreciation on investments 15,045,658 2,081,033
- -------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (23,760,553) (1,245,976)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (23,591,030) $ 2,788,876
=========================================================================================================================
See accompanying notes to financial statements.
34
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
INTERMEDIATE
HEALTHCARE AND FIXED INCOME
BIOTECHNOLOGY FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008
- -----------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (226,577) $ (522,337) $ 845,951 $ 856,780
Net realized gains (losses) from security
transactions (10,671,346) (3,152,100) (1,842,058) 292,998
Net realized gains (losses) from foreign currency
transactions (137,152) 3,538 -- --
Net change in unrealized appreciation/depreciation on
investments (562,790) (3,345,627) 3,248,154 (1,269,633)
Net change in unrealized appreciation/depreciation
from foreign currency transactions 734 (941) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (11,597,131) (7,017,467) 2,252,047 (119,855)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- (5,166,603) -- --
From net investment income, Class C -- (220,880) -- --
From net investment income, Institutional Class -- -- (855,228) (864,148)
From net realized gains, Class A -- (1,016,771) -- --
From net realized gains, Class C -- (43,469) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS -- (6,447,723) (855,228) (864,148)
- -----------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 13,960,719 48,340,108 -- --
Reinvested distributions -- 5,512,885 -- --
Payments for shares redeemed (30,335,581) (33,569,549) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A
SHARE TRANSACTIONS (16,374,862) 20,283,444 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 592,896 6,624,608 -- --
Reinvested distributions -- 117,545 -- --
Payments for shares redeemed (1,993,164) (1,363,976) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS C
SHARE TRANSACTIONS (1,400,268) 5,378,177 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Proceeds from shares sold -- -- 99,192,335 3,365,524
Reinvested distributions -- -- 370,061 827,891
Payments for shares redeemed -- -- (12,610,797) (7,318,171)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
INSTITUTIONAL CLASS SHARE TRANSACTIONS -- -- 86,951,599 (3,124,756)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (29,372,261) 12,196,431 88,348,418 (4,108,759)
NET ASSETS
Beginning of year 66,887,515 54,691,084 15,376,564 19,485,323
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $ 37,515,254 $ 66,887,515 $ 103,724,982 $ 15,376,564
===================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME (LOSS) $ (13,459) $ -- $ 1,292 $ (267)
===================================================================================================================================
See accompanying notes to financial statements.
35
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
2009 2008(A)(B) 2007
- ----------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 386,618 $ 44,633 $ 30,595
Net realized gains (losses) from security transactions (3,390,371) (320,230) 217,507
Net change in unrealized appreciation/depreciation on investments 3,491,540 (1,265,129) 197,015
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 487,787 (1,540,726) 445,117
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (968) (44,621) (30,744)
From net investment income, Class Y (5) (11) --
From net realized gains, Class A -- (96,726) --
From net realized gains, Class C -- (10) (143,085)
From net realized gains, Class Y -- (10) --
- ----------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (973) (141,378) (173,829)
- ----------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 12,785,708 25,035,840 2,060,415
Reinvested distributions 1,008 140,376 171,620
Payments for shares redeemed* (1,798,150) (1,691,354) (545,390)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 10,988,566 23,484,862 1,686,645
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 163,436 2,500 --
Reinvested distributions -- 10 --
Payments for shares redeemed (56,857) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 106,579 2,510 --
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold 13,098 2,500 --
Reinvested distributions 5 20 --
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS 13,103 2,520 --
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 11,595,062 21,807,788 1,957,933
NET ASSETS
Beginning of period 25,636,805 3,829,017 1,871,084
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 37,231,867 $ 25,636,805 $ 3,829,017
==================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 385,646 $ 1 $ --
==================================================================================================================================
(A) Effective after the close of business on December 31, 2007, the Fund
changed its fiscal year end to September 30.
(B) Classes C and Y represent the period from commencement of operations
(September 29, 2008) through September 30, 2008.
* The cost of shares redeemed for the International Growth Fund is net of
the 2% redemption fee on Fund shares which have been held 60 days or less.
For the nine months ended September 30, 2008, these fees were $6,466. For
the year ended December 31, 2007, these fees were $938. Effective
September 26, 2008, the Fund no longer charges a redemption fee.
See accompanying notes to financial statements.
36
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
PREMIUM
MID CAP YIELD EQUITY
FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008(A)(B)
- -----------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 1,187,396 $ 404,833 $ 660,837 $ 845,316
Net realized losses from security transactions (134,664,066) (79,816,887) (6,642,383) (2,420,818)
Net change in unrealized appreciation/depreciation on
investments 51,982,386 (59,420,702) 3,246,251 (3,819,661)
- -----------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (81,494,284) (138,832,756) (2,735,295) (5,395,163)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (760) -- (617,662) (797,478)
From net investment income, Class C -- -- (38,913) (13,875)
From net investment income, Class Y -- -- (4,260) (18)
From net investment income, Class Z (6,806) -- -- --
From net investment income, Institutional Class (1,025,805) -- -- --
From net realized gains, Class A (679) (1,305) -- --
From net realized gains, Class C (196) (475) -- --
From net realized gains, Class Y -- (4,618,823) -- --
From net realized gains, Class Z (6,060) (144,841) -- --
From net realized gains, Institutional Class (544,160) -- -- --
From return of capital, Class A -- -- -- (33,941)
From return of capital, Class C -- -- -- (592)
- -----------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (1,584,466) (4,765,444) (660,835) (845,904)
- -----------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 356,417 115,793 3,921,903 24,689,913
Reinvested distributions 1,271 1,304 586,503 831,173
Payments for shares redeemed (86,398) (122,798) (406,034) (11,228)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A
SHARE TRANSACTIONS 271,290 (5,701) 4,102,372 25,509,858
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold 177,196 31,391 2,576,967 696,948
Reinvested distributions 196 475 24,214 14,290
Payments for shares redeemed (51,251) (26,190) (45,939) (2,334)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS 126,141 5,676 2,555,242 708,904
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Proceeds from shares sold -- -- 507,005 2,500
Reinvested distributions -- -- 4,260 18
Payments for shares redeemed -- -- (4,189) --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS Y SHARE
TRANSACTIONS -- -- 507,076 2,518
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 905,071 2,136,325 -- --
Reinvested distributions 11,591 142,147 -- --
Payments for shares redeemed (1,753,109) (12,401,165) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS Z SHARE
TRANSACTIONS (836,447) (10,122,693) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
37
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
PREMIUM
MID CAP YIELD EQUITY
FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008(A)(B)
- -----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS(C)
Proceeds from shares sold 62,211,281 211,911,977 -- --
Reinvested distributions 135,921 1,066,871 -- --
Payments for shares redeemed (233,893,142) (130,941,824) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
INSTITUTIONAL CLASS SHARE TRANSACTIONS (171,545,940) 82,037,024 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (255,063,706) (71,683,894) 3,768,560 19,980,213
NET ASSETS
Beginning of period 425,812,480 497,496,374 19,980,213 --
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $ 170,748,774 $ 425,812,480 $ 23,748,773 $ 19,980,213
===================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME (LOSS) $ 224,960 $ 109,780 $ (4,195) $ 6,082
===================================================================================================================================
(A) Class A and C represent the period from commencement of operations
(December 3, 2007) through September 30, 2008.
(B) Class Y represents the period from commencement of operations (August 12,
2008) through September 30, 2008.
(C) Effective February 1, 2009, Class Y shares of the Mid Cap Fund were
changed to Institutional Class Shares.
See accompanying notes to financial statements.
38
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL
SELECT GROWTH SHORT DURATION
FUND FIXED INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009(A) 2008
- -----------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (2,302,601) $ (4,437,427) $ 1,449,500 $ 2,432,421
Net realized gains (losses) from security transactions (121,258,262) 9,044,188 149,559 (1,271,833)
Net change in unrealized appreciation/depreciation on
investments 118,207,340 (165,311,237) 1,486,380 177,951
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (5,353,523) (160,704,476) 3,085,439 1,338,539
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class Y -- -- (3,115) --
From net investment income, Class Z -- -- (1,476,456) (2,449,791)
- -----------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS -- -- (1,479,571) (2,449,791)
- -----------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS Y
Proceeds from shares sold 24,126,933 60,693,615 583,877 --
Reinvested distributions -- -- 3,203 --
Payments for shares redeemed (67,763,802) (95,239,473) (60) --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y
SHARE TRANSACTIONS (43,636,869) (34,545,858) 587,020 --
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 162,783,632 235,792,575 4,828,650 904,404
Reinvested distributions -- -- 1,447,580 2,409,375
Payments for shares redeemed (192,550,314) (139,363,795) (11,117,272) (14,406,085)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z
SHARE TRANSACTIONS (29,766,682) 96,428,780 (4,841,042) (11,092,306)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (78,757,074) (98,821,554) (2,648,154) (12,203,558)
NET ASSETS
Beginning of year 494,874,961 593,696,515 46,988,750 59,192,308
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $ 416,117,887 $ 494,874,961 $ 44,340,596 $ 46,988,750
===================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME (LOSS) $ -- $ -- $ 27,777 $ --
===================================================================================================================================
(A) Class Y represents the period from commencement of operations (May 4,
2009) through September 30, 2009.
See accompanying notes to financial statements.
39
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SMALL CAP ULTRA SHORT
VALUE OPPORTUNITIES DURATION FIXED
FUND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008(A) 2009 2008
- -----------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 169,523 $ (43,603) $ 4,034,852 $ 7,645,319
Net realized losses from security transactions (38,806,211) (20,405,279) (3,327,009) (3,298,587)
Net change in unrealized appreciation/depreciation on
investments 15,045,658 (9,432,031) 2,081,033 (2,400,870)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (23,591,030) (29,880,913) 2,788,876 1,945,862
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A -- (372) -- --
From net investment income, Class Z (155,058) (174,221) (4,095,134) (7,561,408)
From net realized gains, Class A -- (30,785) -- --
From net realized gains, Class C -- (7,330) -- --
From net realized gains, Class Z (135,276) (16,312,232) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (290,334) (16,524,940) (4,095,134) (7,561,408)
- -----------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold -- 1,275,883 -- --
Reinvested distributions -- 31,157 -- --
Payments for shares redeemed -- (1,293,212) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CLASS A SHARE
TRANSACTIONS -- 13,828 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold -- 135,921 -- --
Reinvested distributions -- 7,044 -- --
Payments for shares redeemed -- (214,704) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS C SHARE
TRANSACTIONS -- (71,739) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS Z
Proceeds from shares sold 13,589,393 27,377,000 39,273,005 75,996,643
Reinvested distributions 279,749 15,630,203 3,943,039 7,319,453
Payments for shares redeemed (38,054,151) (68,546,478) (77,194,787) (79,908,726)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z
SHARE TRANSACTIONS (24,185,009) (25,539,275) (33,978,743) 3,407,370
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (48,066,373) (72,003,039) (35,285,001) (2,208,176)
NET ASSETS
Beginning of year 132,112,514 204,115,553 143,837,258 146,045,434
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $ 84,046,141 $ 132,112,514 $ 108,552,257 $ 143,837,258
===================================================================================================================================
ACCUMULATED NET INVESTMENT INCOME $ 16,060 $ 19,450 $ 123,995 $ --
===================================================================================================================================
(A) Classes A and C represent the period from October 1, 2007 through June 13,
2008. Effective June 13, 2008, Class A and Class C shares were exchanged
for Class Z shares.
See accompanying notes to financial statements.
40
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------
2009 2008 2007 2006 2005
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 15.10 $ 18.28 $ 15.91 $ 16.13 $ 13.79
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.07) (0.11) (0.14) (0.18) (0.16)
Net realized and unrealized gains (losses) on investments (2.31) (1.09) 3.10 0.40 3.02
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.38) (1.20) 2.96 0.22 2.86
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net realized gains -- (1.65) (0.59) (0.44) (0.52)
Distributions from return of capital -- (0.33) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.98) (0.59) (0.44) (0.52)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 12.72 $ 15.10 $ 18.28 $ 15.91 $ 16.13
==================================================================================================================================
Total return(A) (15.76%) (7.82%) 19.25% 1.37% 21.10%
==================================================================================================================================
Net assets at end of year (000's) $ 34,029 $ 60,959 $ 53,295 $ 55,120 $ 59,742
==================================================================================================================================
Ratio of net expenses to average net assets 1.55% 1.55% 1.67% 1.85%(B) 1.88%
Ratio of gross expenses to average net assets 1.91% 1.73% 1.80% 1.85% 1.88%
Ratio of net investment loss to average net assets (0.43%) (0.72%) (0.63%) (0.99%) (1.35%)
Portfolio turnover rate 162% 127% 156% 158% 169%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.84%.
See accompanying notes to financial statements.
41
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND -- CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2007(A)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 14.90 $ 18.19 $ 15.98
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.17) (0.16) (0.03)
Net realized and unrealized gains (losses) on investments (2.29) (1.15) 2.83
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.46) (1.31) 2.80
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net realized gains -- (1.65) (0.59)
Distributions from return of capital -- (0.33) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.98) (0.59)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 12.44 $ 14.90 $ 18.19
===============================================================================================================================
Total return(B) (16.51%) (8.53%) 18.15%(C)
===============================================================================================================================
Net assets at end of period (000s) $ 3,486 $ 5,929 $ 1,396
===============================================================================================================================
Ratio of net expenses to average net assets 2.30% 2.30% 2.23%(D)
Ratio of gross expenses to average net assets 2.93% 2.64% 2.57%(D)
Ratio of net investment loss to average net assets (1.17%) (1.46%) (1.27%)(D)
Portfolio turnover rate 162% 127% 156%
(A) Represents the period from commencement of operations (November 20, 2006)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
42
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERMEDIATE FIXED INCOME FUND -- INSTITUTIONAL CLASS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
2009 2008 2007 2006 2005
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 8.90 $ 9.51 $ 9.58 $ 9.94 $ 10.27
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.30 0.44 0.45 0.39 0.42
Net realized and unrealized losses on investments (0.17) (0.60) (0.07) (0.12) (0.19)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.13 (0.16) 0.38 0.27 0.23
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.30) (0.45) (0.45) (0.40) (0.42)
Distributions from net realized gains -- -- -- (0.23) (0.14)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.30) (0.45) (0.45) (0.63) (0.56)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 8.73 $ 8.90 $ 9.51 $ 9.58 $ 9.94
================================================================================================================================
Total return 1.44% (1.95%) 4.07% 2.87% 2.27%
================================================================================================================================
Net assets at end of year (000's) $ 103,725 $ 15,377 $ 19,485 $ 21,689 $ 26,166
================================================================================================================================
Ratio of net expenses to average net assets 0.52% 0.85% 0.87% 0.91%(A) 0.80%
Ratio of gross expenses to average net assets 0.83% 1.15% 0.99% 0.95% 0.86%
Ratio of net investment income to average net assets 3.12% 4.61% 4.72% 4.13% 3.91%
Portfolio turnover rate 125% 62% 71% 62% 70%
(A) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 0.89%.
See accompanying notes to financial statements.
43
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND -- CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------
2009 2008(A) 2007 2006 2005 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 8.56 $ 11.88 $ 10.25 $ 8.62 $ 7.76 $ 6.79
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.08 0.02 0.10 0.01 0.04 0.01
Net realized and unrealized gains
(losses) on investments (0.82) (3.30) 2.23 1.97 1.09 0.96
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.74) (3.28) 2.33 1.98 1.13 0.97
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.00)(B) (0.02) (0.10) (0.01) (0.04) --
Distributions from net realized gains -- (0.03) (0.60) (0.34) (0.23) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.00)(B) (0.05) (0.70) (0.35) (0.27) --
- ----------------------------------------------------------------------------------------------------------------------------------
Paid--in capital from redemption fees -- 0.01 0.00(B) 0.00(B) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 7.82 $ 8.56 $ 11.88 $ 10.25 $ 8.62 $ 7.76
==================================================================================================================================
Total return(C) (8.64%) (27.55%)(D) 22.77% 23.01% 14.57% 14.29%
==================================================================================================================================
Net assets at end of period (000s) $ 37,073 $ 25,631 $ 3,829 $ 1,871 $ 800 $ 609
==================================================================================================================================
Ratio of net expenses to average net assets 1.35% 1.48%(E) 1.50% 1.50% 1.50% 1.50%
Ratio of gross expenses to average net assets 1.77% 6.42%(E) 8.88% 15.14% 25.80% 23.37%
Ratio of net investment income to average net assets 1.52% 1.16%(E) 1.32% 0.06% 0.64% 0.10%
Portfolio turnover rate 37% 35%(E) 91% 67% 75% 86%
(A) Effective after the close of business on December 31, 2007, the Fund
changed its fiscal year end to September 30.
(B) Amount rounds to less than $0.01.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
44
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND -- CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 8.57 $ 8.52
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.06 0.00(B)
Net realized and unrealized gains (losses) on investments (0.86) 0.08
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.80) 0.08
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 7.77 $ 8.57
=========================================================================================================================
Total return(C) (9.33%) 0.97%(D)
=========================================================================================================================
Net assets at end of period (000s) $ 142 $ 3
=========================================================================================================================
Ratio of net expenses to average net assets 2.10% 0.73%(E)
Ratio of gross expenses to average net assets 10.21% 832.55%(E)
Ratio of net investment income to average net assets 0.95% 0.80%(E)
Portfolio turnover rate 37% 35%(E)
(A) Represents the period from commencement of operations (September 29, 2008)
through September 30, 2008.
(B) Amount rounds to less than $0.01 per share.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
45
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND -- CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 8.54 $ 8.52
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.07 0.00(B)
Net realized and unrealized gains (losses) on investments (0.78) 0.09
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.71) 0.09
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.04)
Distributions from net realized gains -- (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.02) (0.07)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 7.81 $ 8.54
=========================================================================================================================
Total return (8.31%) 1.04%(C)
=========================================================================================================================
Net assets at end of period (000s) $ 17 $ 3
=========================================================================================================================
Ratio of net expenses to average net assets 1.10% 0.22%(D)
Ratio of gross expenses to average net assets 146.67% 834.03%(D)
Ratio of net investment income to average net assets 0.97% 1.32%(D)
Portfolio turnover rate 37% 35%(D)
(A) Represents the period from commencement of operations (September 29, 2008)
through September 30, 2008.
(B) Amount rounds to less than $0.01 per share.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
46
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND -- CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD
SEPTEMBER 30, ENDED
------------------------------ SEPTEMBER 30,
2009 2008 2007(A)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 13.07 $ 17.86 $ 18.14
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.04 (0.02) (0.00)(B)
Net realized and unrealized losses on investments (1.85) (4.60) (0.28)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.81) (4.62) (0.28)
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) -- --
Distributions from net realized gains (0.03) (0.17) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.06) (0.17) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.20 $ 13.07 $ 17.86
===============================================================================================================================
Total return(C) (13.81%) (26.11%) (1.54%)(D)
===============================================================================================================================
Net assets at end of period (000s) $ 453 $ 159 $ 210
===============================================================================================================================
Ratio of net expenses to average net assets 1.15% 1.15% 0.94%(E)
Ratio of gross expenses to average net assets 3.84% 4.09% 14.21%(E)
Ratio of net investment income (loss) to average net assets 0.39% (0.16%) (0.09%)(E)
Portfolio turnover rate 187% 157% 193%
(A) Represents the period from commencement of operations (May 14, 2007)
through September 30, 2007.
(B) Amount rounds to less than $0.01 per share.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Not annualized.
(E) Annualized.
See accompanying notes to financial statements.
47
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND -- CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD
SEPTEMBER 30, ENDED
------------------------------ SEPTEMBER 30,
2009 2008 2007(A)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 13.12 $ 17.84 $ 18.14
- -------------------------------------------------------------------------------------------------------------------------------
Loss from investment operations:
Net investment loss (0.03) (0.15) (0.02)
Net realized and unrealized losses on investments (1.87) (4.40) (0.28)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.90) (4.55) (0.30)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.03) (0.17) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.19 $ 13.12 $ 17.84
===============================================================================================================================
Total return(B) (14.47%) (25.74%) (1.65%)(C)
===============================================================================================================================
Net assets at end of period (000s) $ 169 $ 30 $ 36
===============================================================================================================================
Ratio of net expenses to average net assets 1.90% 1.90% 1.35%(D)
Ratio of gross expenses to average net assets 6.99% 31.40% 28.68%(D)
Ratio of net investment loss to average net assets (0.38%) (0.91%) (0.51%)(D)
Portfolio turnover rate 187% 157% 193%
(A) Represents the period from commencement of operations (May 14, 2007)
through September 30, 2007.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
48
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND -- CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED SEPTEMBER 30, ENDED
----------------------------------------------------- SEPTEMBER 30,
2009 2008 2007 2006(A)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 13.05 $ 17.85 $ 15.26 $ 16.73
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.03 (0.08) 0.09 0.01
Net realized and unrealized gains (losses) on
investments (1.84) (4.55) 2.62 (1.48)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.81) (4.63) 2.71 (1.47)
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.03) -- (0.12) --
Distributions from net realized gains (0.03) (0.17) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (0.06) (0.17) (0.12) --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.18 $ 13.05 $ 17.85 $ 15.26
=============================================================================================================================
Total return (13.83%) (26.18%) 17.84% (8.79%)(B)
=============================================================================================================================
Net assets at end of period (000's) $ 1,814 $ 3,267 $ 15,203 $ 350
=============================================================================================================================
Ratio of net expenses to average net assets 1.15% 1.15% 1.14% 1.16%(C)(D)
Ratio of gross expenses to average net assets 2.22% 1.48% 1.25% 1.82%(C)
Ratio of net investment income (loss) to average
net assets 0.39% (0.27%) (0.12%) 0.63%(C)
Portfolio turnover rate 187% 157% 193% 323%
(A) Represents the period from commencement of operations (April 24, 2006)
through September 30, 2006.
(B) Not annualized
(C) Annualized.
(D) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.15%.
See accompanying notes to financial statements.
49
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MID CAP FUND -- INSTITUTIONAL CLASS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
PERIOD YEAR
YEAR ENDED SEPTEMBER 30, ENDED ENDED
------------------------------------------------ SEPTEMBER 30, DEC. 31,
2009 2008 2007 2006 2005(A) 2004
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 13.14 $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.07 0.01 0.11 0.04 (0.01) 0.08
Net realized and unrealized gains
(losses) on investments (1.88) (4.61) 2.65 1.00 2.47 2.70
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.81) (4.60) 2.76 1.04 2.46 2.78
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.05) -- (0.13) (0.03) -- (0.09)
Distributions from net realized gains (0.03) (0.17) -- (1.09) (0.39) (2.19)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.08) (0.17) (0.13) (1.12) (0.39) (2.28)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.25 $ 13.14 $ 17.91 $ 15.28 $ 15.36 $ 13.29
===============================================================================================================================
Total return (13.68%) (25.92%) 18.13% 7.10% 18.53%(B) 21.78%
===============================================================================================================================
Net assets at end of period (000's) $ 168,313 $ 422,356 $ 482,047 $ 87,032 $ 842 $ 410
===============================================================================================================================
Ratio of net expenses to average net assets 0.90% 0.90% 0.90% 0.91%(C) 1.00%(D) 0.90%
Ratio of gross expenses to average net assets 1.05% 1.03% 1.06% 1.81% 8.23%(D) 0.90%
Ratio of net investment income (loss)
to average net assets 0.61% 0.09% 0.39% 0.82% (0.02%)(D) 0.59%
Portfolio turnover rate 187% 157% 193% 323% 120%(D) 193%
(A) Effective after the close of business on December 31, 2004, the Fund
changed its fiscal year end to September 30.
(B) Not annualized.
(C) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 0.90%.
(D) Annualized.
See accompanying notes to financial statements.
50
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND -- CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 7.56 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.22 0.33
Net realized and unrealized losses on investments (1.64) (2.44)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.42) (2.11)
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.21) (0.32)
Distributions from return of capital -- (0.01)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.21) (0.33)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 5.93 $ 7.56
=========================================================================================================================
Total return(B) (18.40%) (21.48%)(C)
=========================================================================================================================
Net assets at end of period (000s) $ 19,879 $ 19,411
=========================================================================================================================
Ratio of net expenses to average net assets 1.20% 1.20%(D)
Ratio of gross expenses to average net assets 1.55% 1.53%(D)
Ratio of net investment income to average net assets 3.97% 4.68%(D)
Portfolio turnover rate 30% 181%(D)
(A) Represents the period from commencement of operations (December 3, 2007)
through September 30, 2008.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
51
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND -- CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 7.56 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.10 0.29
Net realized and unrealized losses on investments (1.55) (2.45)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.45) (2.16)
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.18) (0.27)
Distributions from return of capital -- (0.01)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.18) (0.28)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 5.93 $ 7.56
=========================================================================================================================
Total return(B) (18.96%) (21.95%)(C)
=========================================================================================================================
Net assets at end of period (000s) $ 3,319 $ 567
=========================================================================================================================
Ratio of net expenses to average net assets 1.95% 1.94%(D)
Ratio of gross expenses to average net assets 3.08% 5.31%(D)
Ratio of net investment income to average net assets 2.80% 3.93%(D)
Portfolio turnover rate 30% 181%(D)
(A) Represents the period from commencement of operations (December 3, 2007)
through September 30, 2008.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
52
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
PREMIUM YIELD EQUITY FUND -- CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008(A)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 7.55 $ 8.30
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.22 0.04
Net realized and unrealized losses on investments (1.62) (0.73)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.40) (0.69)
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.23) (0.05)
Distributions from return of capital -- (0.01)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.23) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 5.92 $ 7.55
=========================================================================================================================
Total return (18.22%) (8.37%)(B)
=========================================================================================================================
Net assets at end of period (000s) $ 551 $ 2
=========================================================================================================================
Ratio of net expenses to average net assets 0.95% 0.90%(C)
Ratio of gross expenses to average net assets 13.70% 453.70%(C)
Ratio of net investment income to average net assets 2.97% 3.16%(C)
Portfolio turnover rate 30% 181%(C)
(A) Represents the period from commencement of operations (August 12, 2008)
through September 30, 2008.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
53
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH FUND -- CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
2009 2008 2007 2006 2005
- --------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 6.86 $ 9.15 $ 7.60 $ 7.81 $ 6.80
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.03) (0.06) (0.05) (0.06) (0.06)
Net realized and unrealized gains (losses) on investments 0.51 (2.23) 1.60 (0.15) 1.07
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.48 (2.29) 1.55 (0.21) 1.01
- --------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 7.34 $ 6.86 $ 9.15 $ 7.60 $ 7.81
==========================================================================================================================
Total return 7.00% (25.03%) 20.39% (2.69%) 14.85%
==========================================================================================================================
Net assets at end of year (000s) $ 82,918 $ 130,920 $ 213,672 $ 182,001 $ 81,976
==========================================================================================================================
Ratio of net expenses to average net assets 0.98% 1.16% 1.03% 1.10% 1.11%
Ratio of gross expenses to average net assets 1.05% 1.19% 1.03% 1.23% 1.19%
Ratio of net investment loss to average net assets (0.48%) (0.59%) (0.67%) (0.74%) (0.62%)
Portfolio turnover rate 50% 39% 24% 24% 24%
SANDS CAPITAL SELECT GROWTH FUND -- CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2009 2008 2007 2006 2005
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 6.79 $ 9.08 $ 7.57 $ 7.80 $ 6.80
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.04) (0.06) (0.09) (0.05) (0.03)
Net realized and unrealized gains (losses) on investments 0.49 (2.23) 1.60 (0.18) 1.03
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.45 (2.29) 1.51 (0.23) 1.00
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 7.24 $ 6.79 $ 9.08 $ 7.57 $ 7.80
===============================================================================================================================
Total return 6.63% (25.22%) 19.95% (2.95%) 14.71%
===============================================================================================================================
Net assets at end of year (000s) $ 333,200 $ 363,955 $ 380,025 $ 365,390 $ 162,999
===============================================================================================================================
Ratio of net expenses to average net assets 1.23% 1.41% 1.29% 1.35% 1.36%
Ratio of gross expenses to average net assets 1.32% 1.43% 1.35% 1.48% 1.44%
Ratio of net investment loss to average net assets (0.74%) (0.85%) (0.92%) (0.99%) (0.84%)
Portfolio turnover rate 50% 39% 24% 24% 24%
See accompanying notes to financial statements.
54
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND -- CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- ----------------------------------------------------------------------------
PERIOD
ENDED
SEPTEMBER 30,
2009(A)
- ----------------------------------------------------------------------------
Net asset value at beginning of period $ 9.79
- ----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13
Net realized and unrealized gains on investments 0.16
- ----------------------------------------------------------------------------
Total from investment operations 0.29
- ----------------------------------------------------------------------------
Dividends from net investment income (0.13)
- ----------------------------------------------------------------------------
Net asset value at end of period $ 9.95
============================================================================
Total return 3.02%(B)
============================================================================
Net assets at end of period (000's) $ 592
============================================================================
Ratio of net expenses to average net assets 0.48%(C)
Ratio of gross expenses to average net assets 1.49%(C)
Ratio of net investment income to average net assets 3.03%(C)
Portfolio turnover rate 79%
(A) Represents the period from commencement of operations (May 4, 2009)
through September 30, 2009.
(B) Not annualized.
(C) Annualized.
SHORT DURATION FIXED INCOME FUND -- CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2009 2008 2007 2006 2005
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 9.59 $ 9.81 $ 9.76 $ 9.87 $ 10.04
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.32 0.45 0.45 0.38 0.31
Net realized and unrealized gains (losses) on investments 0.35 (0.22) 0.05 (0.07) (0.10)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.67 0.23 0.50 0.31 0.21
- -------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.32) (0.45) (0.45) (0.42) (0.38)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 9.94 $ 9.59 $ 9.81 $ 9.76 $ 9.87
===============================================================================================================================
Total return 7.13% 2.36% 5.19% 3.23% 2.12%
===============================================================================================================================
Net assets at end of year (000's) $ 43,749 $ 46,989 $ 59,192 $ 76,090 $ 112,833
===============================================================================================================================
Ratio of net expenses to average net assets 0.74% 0.74% 0.74% 0.72% 0.61%
Ratio of gross expenses to average net assets 0.96% 0.94% 0.82% 0.74% 0.66%
Ratio of net investment income to average net assets 3.24% 4.60% 4.62% 3.97% 3.18%
Portfolio turnover rate 79% 25% 21% 10% 46%
See accompanying notes to financial statements.
55
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITIES FUND -- CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2009 2008 2007 2006 2005
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 15.45 $ 20.48 $ 18.94 $ 18.35 $ 16.21
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.02 (0.00)(A) (0.02) (0.08) 0.02
Net realized and unrealized gains (losses) on investments (2.17) (3.22) 2.05 0.96 3.76
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.15) (3.22) 2.03 0.88 3.78
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.02) -- (0.02) --
Distributions from net realized gains (0.02) (1.79) (0.49) (0.27) (1.64)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.04) (1.81) (0.49) (0.29) (1.64)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 13.26 $ 15.45 $ 20.48 $ 18.94 $ 18.35
===============================================================================================================================
Total return (13.90%) (16.81%) 10.77% 4.84% 24.32%
===============================================================================================================================
Net assets at end of year (000s) $ 84,046 $ 132,113 $ 204,027 $ 249,431 $ 74,235
===============================================================================================================================
Ratio of net expenses to average net assets 1.50% 1.50% 1.58% 1.63%(B) 1.46%
Ratio of gross expenses to average net assets 1.72% 1.74% 1.71% 1.65% 2.04%
Ratio of net investment income (loss) to average net assets 0.20% (0.03%) (0.01%) (0.43%) 0.29%
Portfolio turnover rate 215% 222% 127% 99% 193%
(A) Amount rounds to less than $.0.01 per share.
(B) The ratio of net expenses to average net assets excludes the effect of
fees paid indirectly. If these expense offsets were included, the ratio
would have been 1.62%.
ULTRA SHORT DURATION FIXED INCOME FUND -- CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
2009 2008 2007 2006 2005
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 9.74 $ 10.08 $ 10.06 $ 10.08 $ 10.12
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.32 0.47 0.53 0.44 0.30
Net realized and unrealized gains (losses) on investments (0.07) (0.34) 0.01 (0.02) (0.03)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.25 0.13 0.54 0.42 0.27
- --------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.33) (0.47) (0.52) (0.44) (0.31)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 9.66 $ 9.74 $ 10.08 $ 10.06 $ 10.08
================================================================================================================================
Total return 2.60% 1.26% 5.48% 4.28% 2.67%
================================================================================================================================
Net assets at end of year (000s) $ 108,552 $ 143,837 $ 146,045 $ 173,716 $ 305,222
================================================================================================================================
Ratio of net expenses to average net assets 0.69% 0.69% 0.69% 0.69% 0.59%
Ratio of gross expenses to average net assets 0.85% 0.82% 0.75% 0.69% 0.62%
Ratio of net investment income to average net assets 3.41% 4.72% 5.25% 4.30% 2.93%
Portfolio turnover rate 15% 56% 26% 38% 68%
See accompanying notes to financial statements.
56
- --------------------------------------------------------------------------------
Notes to Financial Statements
September 30, 2009
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Touchstone Funds Group Trust (the Trust), is registered under the Investment
Company Act of 1940, as amended, (the Act), as an open-end management investment
company. The Trust consists of the following nine mutual funds, individually, a
Fund, and collectively, the Funds:
Touchstone Healthcare and Biotechnology Fund
Touchstone Intermediate Fixed Income Fund (formerly the Clover Core Fixed
Income Fund)
Touchstone International Growth Fund
Touchstone Mid Cap Fund
Touchstone Premium Yield Equity Fund
Touchstone Sands Capital Select Growth Fund
Touchstone Short Duration Fixed Income Fund
Touchstone Small Cap Value Opportunities Fund
Touchstone Ultra Short Duration Fixed Income Fund
Prior to September 26, 2008, the International Growth Fund (formerly the
Navellier International Growth Portfolio) was part of the Navellier Millennium
Funds, registered under the Act as an open-end management investment company.
Effective September 26, 2008, the Fund was merged into the Trust and its fiscal
year end was subsequently changed from December 31 to September 30. Prior to
September 26, 2008, the Fund charged a redemption fee of 2.00% of the amount
redeemed if the shares sold were held for fewer than 60 days. Redemption fees
were paid directly to the Fund. Effective September 26, 2008, the Fund no longer
charges a redemption fee.
Each Fund is registered as a diversified portfolio of the Trust with the
exception of the Healthcare and Biotechnology Fund, International Growth Fund,
and Sands Capital Select Growth Fund, each of which is non-diversified.
The Funds are registered to offer different classes of shares: Class A shares,
Class C shares, Class Y shares, Class Z shares, and 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. The Funds' prospectus provides a
description of each Fund's investment objectives, policies, and strategies along
with information on the classes of shares currently being offered. Effective
June 13, 2008, Class A and Class C shares of the Small Cap Value Opportunities
Fund were exchanged for Class Z shares of the Small Cap Value Opportunities
Fund. Effective February 1, 2009, Class Y shares of the Mid Cap Fund were
changed to Institutional Class Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
SECURITY VALUATION -- The Funds' portfolio securities are valued as of the close
of the regular session of trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time). Portfolio securities traded on stock exchanges are valued
at the last sale price and portfolio securities quoted by NASDAQ are valued at
the NASDAQ Official Closing Price (NOCP). Securities not traded on a particular
day, or for which the last sale price is not readily available, are valued at
their last broker-quoted bid prices as obtained from one or more of the major
market makers for such securities by an independent pricing service. Debt
securities for which market quotations are readily available are valued at their
most recent bid prices as obtained from one or more of the major market makers
for such securities by an independent pricing service. Money market instruments
and other debt securities with a remaining maturity of less than 60 days are
valued at amortized cost, which approximates market value. Securities for which
market quotations or the NOCP are not readily available are valued based on fair
value as determined by or under the direction of the Board of Trustees. Shares
of open-end mutual funds in which the Funds invest are valued at their
respective net asset values as reported by the underlying funds. The prices for
foreign securities are reported in local currency and converted to U.S. dollars
using currency exchange rates.
57
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
For securities that principally trade on a foreign market or exchange, a
significant gap in time can exist between the time of a particular security's
last trade and the time at which a Fund calculates its net asset value. The
closing prices of such securities may no longer reflect their market value at
the time the Fund calculates its net asset value if an event that could
materially affect the value of those securities (a "Significant Event") has
occurred between the time of the security's last close and the time that the
Fund calculates its net asset value. A Significant Event may relate to a single
issuer or to an entire market sector. If the advisor or sub-advisor of a Fund
becomes aware of a Significant Event that has occurred with respect to a
security or group of securities after the closing of the exchange or market on
which the security or securities principally trade, but before the time at which
the Fund calculates its net asset value, it may request that a Fair Value
Committee Meeting be called. In addition, the Funds' administrator or
sub-administrator monitors price movements among certain selected indices,
securities and/or baskets of securities that may be an indicator that the
closing prices received earlier from foreign exchanges or markets may not
reflect market value at the time the Fund calculates its net asset value. If
price movements in a monitored index or security exceed levels established by
the Advisor, the Sub-Administrator notifies the Advisor or Sub-Advisor for any
Fund holding the relevant securities that such limits have been exceeded. In
such event, the Advisor makes the determination whether a Fair Value Committee
meeting should be called based on the information provided.
The Funds have adopted FASB ASC 820 "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. Fair Value Measurements applies to fair value
measurements already required or permitted by existing standards. 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.
The aggregate value by input level, as of September 30, 2009, for each Fund's
investments, as well as a reconciliation of assets for which significant
unobservable inputs (Level 3) were used in determining value, is included in
each Fund's Portfolio of Investments, which also includes a breakdown of the
Fund's investments by geographic/industry concentration.
58
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are
maintained in U.S. dollars and translated into U.S. dollars on the following
basis:
(1) market value of investment securities, assets and liabilities at the
current rate of exchange on the valuation date; and
(2) purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The Funds do not isolate that portion of gains and losses on investments in
equity securities that is due to changes in the foreign exchange rates from that
which is due to changes in market prices of equity securities.
PORTFOLIO SECURITIES LOANED -- Each Fund may lend its portfolio securities.
Lending portfolio securities exposes a Fund to the risk that the borrower may
fail to return the loaned securities or may not be able to provide additional
collateral or that the Fund may experience delays in recovery of the loaned
securities or loss of rights in the collateral if the borrower fails
financially. To minimize these risks, the borrower must agree to maintain
collateral marked to market daily, in the form of cash and/or liquid securities,
with the Fund's custodian in an amount at least equal to the market value of the
loaned securities. As of September 30, 2009, the following Funds loaned
securities and received collateral as follows:
FAIR VALUE OF VALUE OF
SECURITIES COLLATERAL
LOANED RECEIVED
- --------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ 8,786,075 $ 9,038,201
Mid Cap Fund $45,892,849 $47,451,091
Sands Capital Select Growth Fund $ 5,036,767 $ 5,242,697
Small Cap Value Opportunities Fund $17,966,273 $18,773,938
All collateral received as cash and securities is received, held and
administered by the Funds' custodian for the benefit of the Funds in the
applicable custody account or other account established for the purpose of
holding collateral.
Funds participating in securities lending receive compensation in the form of
fees, or retain a portion of interest or dividends on the investment of any cash
received as collateral. The Funds also continue to receive interest or dividends
on the securities loaned. The loans are secured by collateral valued at least
equal, at all times, to the fair value of the securities loaned plus accrued
interest. Unrealized gain or loss on the fair value of the securities loaned
that may occur during the term of the loan is recognized by the Funds. The Funds
have the right under the lending agreement to recover the securities from the
borrower on demand.
DELAYED DELIVERY TRANSACTIONS -- The Funds may purchase or sell securities on a
when-issued or delayed delivery basis. These transactions involve a commitment
by the Funds to purchase or sell securities for a predetermined price or yield,
with payment and delivery taking place beyond the customary settlement period.
When delayed delivery purchases are outstanding, the Funds will set aside liquid
assets in an amount sufficient to meet the purchase price. When purchasing a
security on a delayed delivery basis, the Funds assume the rights and risks of
ownership of the security, including the risk of price and yield fluctuations,
and take such fluctuations into account when determining net asset value. The
Funds may dispose of or renegotiate a delayed delivery transaction after it is
entered into, and may sell when-issued securities before they are delivered,
which may result in a capital gain or loss. When the Funds have sold a security
on a delayed delivery basis, the Funds do not participate in future gains and
losses with respect to the security.
59
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- Repurchase agreements, which are collateralized by U.S.
Government obligations, are valued at cost, which together with accrued interest
approximates market value. At the time each Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying collateral
securities, including accrued interest, will at all times be equal to or exceed
the face amount of the repurchase agreement.
SHARE VALUATION -- The net asset value per share of each class of shares of each
Fund is calculated daily by dividing the total value of a Fund's assets
attributable to that class, less liabilities attributable to that class, by the
number of outstanding shares of that class.
The maximum offering price per share of Class A shares of the Funds is equal to
the net asset value per share plus a sales load equal to 6.10% of the net asset
value (or 5.75% of the offering price). The maximum offering price per share of
Class C, Class Y, Class Z, 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 C shares of the Funds are subject
to a contingent deferred sales load of 1.00% of the original purchase price if
redeemed within a one-year period from the date of purchase.
INVESTMENT INCOME -- Interest income is accrued as earned and includes, where
applicable, the pro-rata amortization of premium or accretion of discount.
Dividend income is recorded on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS -- The Healthcare and Biotechnology Fund,
International Growth Fund, Mid Cap Fund, and Small Cap Value Opportunities Fund
declare and distribute net investment income, if any, annually, as a dividend to
shareholders. The Sands Capital Select Growth Fund declares and distributes net
investment income, if any, quarterly, as a dividend to shareholders. The Premium
Yield Equity Fund declares and distributes net investment income, if any,
monthly as a dividend to shareholders. The Intermediate Fixed Income Fund, Short
Duration Fixed Income Fund, and Ultra Short Duration Fixed Income Fund declare
net investment income daily and distribute it monthly, as a dividend to
shareholders. Any net realized capital gains on sales of securities for all
Funds are distributed to shareholders at least annually.
ALLOCATIONS -- Investment income earned, realized capital gains and losses, and
unrealized appreciation and depreciation for the Funds are allocated daily to
each class of shares based upon its proportionate share of total net assets of
the Fund. Class specific expenses are charged directly to the class incurring
the expense. Common expenses, which are not attributable to a specific class,
are allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund. Expenses not directly billed to a Fund are
allocated proportionally among all Funds daily in relation to net assets of each
Fund or another reasonable measure.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
ESTIMATES -- The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could differ
from those estimates.
60
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and U.S. Government
securities) were as follows for the year ended September 30, 2009:
HEALTHCARE AND INTERMEDIATE INTERNATIONAL
BIOTECHNOLOGY FIXED INCOME GROWTH
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------
Purchases of investment securities $ 72,231,446 $ 62,277,277 $21,097,548
- ---------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $ 88,735,112 $ 9,268,793 $ 9,333,407
- ---------------------------------------------------------------------------------------------------------
SANDS CAPITAL
PREMIUM SELECT
MID CAP YIELD EQUITY GROWTH
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------
Purchases of investment securities $368,240,647 $13,626,259 $172,606,805
- ---------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $520,312,367 $ 5,150,361 $243,475,536
- ---------------------------------------------------------------------------------------------------------
SHORT DURATION SMALL CAP ULTRA
FIXED VALUE SHORT DURATION
INCOME OPPORTUNITIES FIXED INCOME
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------
Purchases of investment securities $ 20,350,138 $184,199,671 $ 9,353,402
- ---------------------------------------------------------------------------------------------------------
Proceeds from sales and maturities $ 3,218,760 $206,874,016 $ 4,922,905
- ---------------------------------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of the Advisor (Touchstone
Advisors, Inc.), the Underwriter (Touchstone Securities, Inc.) and/or JPMorgan
Chase Bank, N.A. ("JPMorgan" and the Sub-Administrator and Transfer Agent to the
Funds). The Advisor and Underwriter are each wholly owned, indirect subsidiaries
of The Western and Southern Life Insurance Company (Western-Southern).
As of September 30, 2009, 50% and 69% of the International Growth Fund and
Premium Yield Equity Fund, respectively, were owned by Western-Southern and
subsidiaries.
MANAGEMENT & EXPENSE LIMITATIONS AGREEMENTS
The Advisor provides general investment supervisory services for the Funds,
under terms of an Advisory Agreement. Under the Advisory Agreement, the Funds
pay the Advisor a fee, which is computed and accrued daily and paid monthly, at
an annual rate based on average daily net assets as shown in the table below.
Healthcare and Biotechnology Fund 1.00%
- --------------------------------------------------------------------------------------------------
Intermediate Fixed Income Fund* 0.40%
- --------------------------------------------------------------------------------------------------
International Growth Fund 0.90%
- --------------------------------------------------------------------------------------------------
Mid Cap Fund 0.80%
- --------------------------------------------------------------------------------------------------
Premium Yield Equity Fund 0.70% on the first $100 million
0.65% of such assets in excess of $100 million
- --------------------------------------------------------------------------------------------------
Sands Capital Select Growth Fund 0.85%
- --------------------------------------------------------------------------------------------------
Short Duration Fixed Income Fund 0.25%
- --------------------------------------------------------------------------------------------------
Small Cap Value Opportunities Fund 0.95%
- --------------------------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund 0.25%
- --------------------------------------------------------------------------------------------------
* Effective April 22, 2009, the fee was decreased from 0.45% to 0.40%.
61
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The Advisor entered into an Expense Limitation Agreement to contractually limit
operating expenses of the Funds. The maximum operating expense limit in any year
with respect to the Funds is based on a percentage of the average daily net
assets of the Funds. The Advisor has agreed to waive advisory fees and reimburse
expenses in order to maintain expense limitations for the Funds as follows
through January 31, 2010:
CLASS A CLASS C CLASS Y CLASS Z INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------------------------------
Healthcare and Biotechnology Fund 1.55% 2.30% -- -- --
Intermediate Fixed Income Fund* -- -- -- -- 0.40%
International Growth Fund 1.35% 2.10% 1.10% -- --
Mid Cap Fund 1.15% 1.90% -- 1.15% 0.90%
Premium Yield Equity Fund 1.20% 1.95% 0.95% -- --
Short Duration Fixed Income Fund** -- -- 0.49% 0.74% --
Small Cap Value Opportunities Fund -- -- -- 1.50% --
Ultra Short Duration Fixed Income Fund -- -- -- 0.69% --
* Effective April 22, 2009, the Fund decreased its expense limit from 0.85%
to 0.40%.
** Class Y commenced operations on May 4, 2009; the expense limitation will
remain in effect until May 4, 2010.
The Advisor has agreed to limit certain Funds other operating expenses ("Other
Expenses") to the following levels. These expense limitations will remain in
effect until at least January 31, 2010.
CLASS Y CLASS Z
- --------------------------------------------------------------------------------
Sands Capital Select Growth Fund 0.25% 0.25%
- --------------------------------------------------------------------------------
In addition to the base advisory fee shown above, for the Sands Capital Select
Growth Fund, a performance fee adjustment will be added to or subtracted from
the base advisory fee depending on the performance of the Fund in relation to
the investment performance of the Fund's benchmark index, for the preceding
twelve month period, as follows:
BASE ANNUAL
ADVISORY ADJUSTMENT BENCHMARK BENCHMARK
FEES RATE INDEX THRESHOLD
- ----------------------------------------------------------------------------------------------------------
Russell 1000
Sands Capital Select Growth Fund 0.85% +/-0.15% Growth Index +/-2.50%
For the year ended September 30, 2009, the Advisor's base fee was decreased by
$403,604 as a result of the performance fee adjustment.
62
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
During the year ended September 30, 2009, the Advisor waived investment advisory
fees, administration fees and/or reimbursed expenses of the Funds as follows:
INVESTMENT OTHER OPERATING
ADVISORY ADMINISTRATION EXPENSES
FEES WAIVED FEES WAIVED REIMBURSED
- ------------------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ -- $ 91,225 $ 85,066
Intermediate Fixed Income Fund $ 29,262 $ 53,645 $ --
International Growth Fund $ 9,608 $ 50,813 $ 64,360
Mid Cap Fund $ -- $ 324,722 $ --
Premium Yield Equity Fund $ -- $ 34,071 $ 49,980
Sands Capital Select Growth Fund $ -- $ 298,538 $ --
Short Duration Fixed Income Fund $ -- $ 89,338 $ 8,119
Small Cap Value Opportunities Fund $ -- $ 166,810 $ 19,538
Ultra Short Duration Fixed Income Fund $ -- $ 190,717 $ --
The Advisor has entered into investment sub-advisory agreements with the
following parties:
JKMILNE ASSET MANAGEMENT NAVELLIER & ASSOCIATES, INC.
Intermediate Fixed Income Fund International Growth Fund
FORT WASHINGTON INVESTMENT ADVISORS, INC. SANDS CAPITAL MANAGEMENT, LLC
Ultra Short Duration Fixed Income Fund Sands Capital Select Growth Fund
LONGFELLOW INVESTMENT MANAGEMENT COMPANY TURNER INVESTMENT PARTNERS, INC.
Short Duration Fixed Income Fund Healthcare and Biotechnology Fund
Mid Cap Fund
MILLER/HOWARD INVESTMENTS, INC. Small Cap Value Opportunities Fund
Premium Yield Equity Fund
The Advisor, not the Funds, pays sub-advisory fees to each Sub-Advisor.
ADMINISTRATION AGREEMENT
The Advisor entered into an Administration and Accounting Services Agreement
with the Trust, whereby the Advisor is responsible for supplying executive and
regulatory compliance services, supervises the preparation of tax returns, and
coordinates the preparation of reports to shareholders and reports to, and
filings with, the Securities and Exchange Commission and state securities
authorities, materials for meetings of the Board of Trustees, calculating the
daily net asset value per share and maintaining the financial books and records
of each Fund. For its services, the Advisor receives an annual fee of 0.20% of
the aggregate average daily net assets of the Trust, Touchstone Investment Trust
(excluding Institutional Money Market Fund), Touchstone Strategic Trust, and
Touchstone Tax-Free Trust up to and including $6 billion; 0.16% of the next $4
billion of aggregate average daily net assets; and 0.12% of the aggregate
average daily net assets of all such assets in excess of $10 billion. The fee is
allocated among the Funds on the basis of relative daily net assets.
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.
63
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
TRANSFER AGENT AGREEMENT
Under the terms of the Transfer Agent Agreement between the Trust and JPMorgan,
JPMorgan maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of each Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. For these services,
JPMorgan receives a monthly fee per shareholder account from each Fund. In
addition, each Fund pays JPMorgan out-of-pocket expenses including, but not
limited to, postage and supplies.
For the year ended September 30, 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
- --------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ 40,370
Intermediate Fixed Income Fund $ 702
International Growth Fund $ 2,483
Premium Yield Equity Fund $ 1,312
Sands Capital Select Growth Fund $ 139,331
Short Duration Fixed Income Fund $ 21,639
Small Cap Value Opportunities Fund $ 74,833
Ultra Short Duration Fixed Income Fund $ 70,606
PLANS OF DISTRIBUTION
The Trust has adopted a Distribution and Shareholder Services Plan for Class A
shares of the Healthcare and Biotechnology Fund, International Growth Fund, Mid
Cap Fund, and Premium Yield Equity Fund (Class A Plan) under which each Fund may
directly or indirectly bear expenses relating to the distribution of Class A
shares of the Trust and for providing shareholder services to Class A shares.
The Fund will incur and/or reimburse expenses for distribution and shareholder
service of Class A shares at an annual rate not to exceed 0.25% of the average
daily net assets of Class A shares.
The Trust has adopted a Distribution and Shareholder Services Plan for Class C
shares of the Healthcare and Biotechnology Fund, International Growth Fund, Mid
Cap Fund, and Premium Yield Equity Fund (Class C Plan) under which each Fund may
directly or indirectly bear expenses relating to the distribution of Class C
shares of the Trust and for providing shareholder services to Class C shares.
The Fund will incur and/or reimburse expenses for distribution and shareholder
services of Class C shares at an annual rate not to exceed 1.00% and 0.25%,
respectively, of the average daily net assets of Class C shares. The combination
of these fees is not to exceed 1.00% of the average daily net assets of Class C
shares.
The Trust has adopted a Shareholder Services Plan for Class Z shares of the Mid
Cap Fund, Sands Capital Select Growth Fund, Short Duration Fixed Income Fund,
Small Cap Value Opportunities Fund, and Ultra Short Duration Fixed Income Fund
(Class Z Plan) under which each Fund may directly or indirectly bear expenses
for providing shareholder services. The Fund will incur and/or reimburse expense
for shareholder service of Class Z shares at an annual rate not to exceed 0.25%
of the average daily net assets of Class Z shares.
64
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
UNDERWRITING AGREEMENT
The Underwriter is the Funds' principal underwriter and, as such, acts as
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and Underwriter, the Underwriter earned
the following from underwriting and broker commissions on the sale of shares of
the following Funds for the year ended September 30, 2009:
AMOUNT
- --------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ 7,152
International Growth Fund $ 769
Mid Cap Fund $ 1,035
Premium Yield Equity Fund $ 3,699
In addition, the Underwriter collected $3,171 and $138 of contingent deferred
sales charges on the redemption of Class C shares of the Healthcare and
Biotechnology Fund and Premium Yield Equity Fund, respectively, for the year
ended September 30, 2009.
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.
AFFILIATED INVESTMENTS
Each Fund may invest in the Touchstone Institutional Money Market Fund, subject
to compliance with several conditions set forth in an order received by the
Trust from the Securities and Exchange Commission. To the extent that the other
Touchstone Funds are invested in the Touchstone Institutional Money Market Fund,
the Advisor and Administrator will be paid additional fees from the Touchstone
Institutional Money Market Fund that will not be waived or reimbursed.
A summary of each Fund's investment, as applicable, in the Touchstone
Institutional Money Market Fund for the year ended September 30, 2009, is as
follows:
SHARE ACTIVITY
-------------------------------------------------------
BALANCE BALANCE VALUE
09/30/08 PURCHASES SALES 09/30/09 DIVIDENDS 09/30/09
- ---------------------------------------------------------------------------------------------------------------------------
Healthcare and Biotechnology Fund 1,237,068 57,302,031 (58,539,099) -- $ 40,540 $ --
- ---------------------------------------------------------------------------------------------------------------------------
Intermediate Fixed Income Fund 292,543 57,558,039 (51,621,110) 6,229,472 $ 20,893 $ 6,229,472
- ---------------------------------------------------------------------------------------------------------------------------
International Growth Fund 20,207,886 13,558,146 (31,570,475) 2,195,557 $ 18,650 $ 2,195,557
- ---------------------------------------------------------------------------------------------------------------------------
Mid Cap Fund 17,311,821 167,433,612 (183,740,028) 1,005,405 $ 142,911 $ 1,005,405
- ---------------------------------------------------------------------------------------------------------------------------
Premium Yield Equity Fund 925,785 10,821,118 (11,347,841) 399,062 $ 11,214 $ 399,062
- ---------------------------------------------------------------------------------------------------------------------------
Sands Capital Select Growth Fund 20,526,773 146,852,328 (147,815,076) 19,564,025 $ 120,754 $ 19,564,025
- ---------------------------------------------------------------------------------------------------------------------------
Short Duration Fixed Income Fund 511,399 36,504,234 (36,612,110) 403,523 $ 54,594 $ 403,523
- ---------------------------------------------------------------------------------------------------------------------------
Small Cap Value Opportunities Fund -- 46,194,406 (45,280,540) 913,866 $ 29,295 $ 913,866
- ---------------------------------------------------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund 7,436,454 88,302,804 (86,612,724) 9,126,534 $ 194,691 $ 9,126,534
- ---------------------------------------------------------------------------------------------------------------------------
65
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes in
Net Assets are the result of the following capital share transactions for the
periods shown:
HEALTHCARE AND INTERMEDIATE
BIOTECHNOLOGY FIXED INCOME INTERNATIONAL GROWTH
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, DEC. 31,
2009 2008 2009 2008 2009 2008(A) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued 1,168,902 2,903,539 -- -- 2,018,789 2,815,460 174,634
Shares reinvested -- 322,958 -- -- 152 16,399 14,495
Shares redeemed (2,530,036) (2,104,559) -- -- (274,463) (158,988) (49,485)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
shares outstanding (1,361,134) 1,121,938 -- -- 1,744,478 2,672,871 139,644
Shares outstanding,
beginning of period 4,036,755 2,914,817 -- -- 2,995,076 322,205 182,561
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 2,675,621 4,036,755 -- -- 4,739,554 2,995,076 322,205
====================================================================================================================================
CLASS C
Shares issued 49,549 399,569 -- -- 26,149 293 --
Shares reinvested -- 6,931 -- -- -- 1 --
Shares redeemed (167,013) (85,392) -- -- (8,203) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
shares outstanding (117,464) 321,108 -- -- 17,946 294 --
Shares outstanding,
beginning of period 397,815 76,707 -- -- 294 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 280,351 397,815 -- -- 18,240 294 --
====================================================================================================================================
CLASS Y
Shares issued -- -- -- -- 1,898
Shares reinvested -- -- -- -- -- 294 --
Shares redeemed -- -- -- -- -- 2 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding -- -- -- -- 1,898 296 --
Shares outstanding, beginning of period -- -- -- -- 296 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- 2,194 296 --
====================================================================================================================================
INSTITUTIONAL CLASS
Shares issued -- -- 11,553,991 348,886 -- -- --
Shares reinvested -- -- 41,342 86,355 -- -- --
Shares redeemed -- -- (1,442,295) (758,011) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
shares outstanding -- -- 10,153,038 (322,770) -- -- --
Shares outstanding, beginning of year -- -- 1,727,199 2,049,969 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year -- -- 11,880,237 1,727,199 -- -- --
====================================================================================================================================
(A) Effective after the close of business on December 31, 2007, the Fund
changed its fiscal year end to September 30.
66
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
MID CAP PREMIUM YIELD SANDS CAPITAL SELECT
FUND EQUITY FUND GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPTEMBER 30, SEPT. 30, SEPT. 30,
2009 2008 2009 2008(A)(B) 2009 2008
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued 36,964 7,252 756,905 2,474,926 -- --
Shares reinvested 132 77 108,456 95,010 -- --
Shares redeemed (8,835) (6,994) (81,899) (1,418) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 28,261 335 783,462 2,568,518 -- --
Shares outstanding, beginning of period 12,122 11,787 2,568,518 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 40,383 12,122 3,351,980 2,568,518 -- --
================================================================================================================================
CLASS C
Shares issued 18,403 1,930 489,270 73,588 -- --
Shares reinvested 21 28 4,467 1,637 -- --
Shares redeemed (5,595) (1,670) (9,098) (254) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 12,829 288 484,639 74,971 -- --
Shares outstanding, beginning of period 2,290 2,002 74,971 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 15,119 2,290 559,610 74,971 -- --
================================================================================================================================
CLASS Y
Shares issued -- -- 92,780 301 4,413,386 7,214,667
Shares reinvested -- -- 757 2 -- --
Shares redeemed -- -- (744) -- (12,186,105) (11,497,010)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding -- -- 92,793 303 (7,772,719) (4,282,343)
Shares outstanding, beginning of period -- -- 303 -- 19,072,886 23,355,229
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- 93,096 303 11,300,167 19,072,886
================================================================================================================================
CLASS Z
Shares issued 96,295 130,930 -- -- 30,043,839 28,675,860
Shares reinvested 1,206 8,376 -- -- -- --
Shares redeemed (185,516) (740,760) -- -- (37,614,532) (16,958,619)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (88,015) (601,454) -- -- (7,570,693) 11,717,241
Shares outstanding, beginning of year 250,334 851,788 -- -- 53,566,758 41,849,517
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 162,319 250,334 -- -- 45,996,065 53,566,758
================================================================================================================================
INSTITUTIONAL CLASS(C)
Shares issued 6,376,276 13,570,336 -- -- -- --
Shares reinvested 14,265 62,610 -- -- -- --
Shares redeemed (23,577,005) (8,397,326) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding (17,186,464) 5,235,620 -- -- -- --
Shares outstanding, beginning of year 32,147,736 26,912,116 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 14,961,272 32,147,736 -- -- -- --
================================================================================================================================
(A) Classes A and C represent the period from commencement of operations
(December 3, 2007) through September 30, 2008.
(B) Class Y represents the period from commencement of operations (August 12,
2008) through September 30, 2008.
(C) Effective February 1, 2009, Class Y shares of the Mid Cap Fund were
changed to Institutional Class Shares.
67
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
SHORT DURATION FIXED SMALL CAP VALUE ULTRA SHORT DURATION
INCOME FUND OPPORTUNITIES FUND FIXED INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2009(A) 2008 2009 2008(B) 2009 2008
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares issued -- -- -- 71,759 -- --
Shares reinvested -- -- -- 1,773 -- --
Shares redeemed -- -- -- (73,907) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- -- (375) -- --
Shares outstanding, beginning of period -- -- -- 375 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- -- --
================================================================================================================================
CLASS C
Shares issued -- -- -- 8,000 -- --
Shares reinvested -- -- -- 402 -- --
Shares redeemed -- -- -- (12,344) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net decrease in shares outstanding -- -- -- (3,942) -- --
Shares outstanding, beginning of period -- -- -- 3,942 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period -- -- -- -- -- --
================================================================================================================================
CLASS Y
Shares issued 59,186 -- -- -- -- --
Shares reinvested 323 -- -- -- -- --
Shares redeemed (6) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 59,503 -- -- -- -- --
Shares outstanding, beginning of period -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 59,503 -- -- -- -- --
================================================================================================================================
CLASS Z
Shares issued 493,806 92,468 1,203,675 1,576,959 4,070,270 7,586,012
Shares reinvested 148,522 246,218 24,829 889,469 409,229 735,459
Shares redeemed (1,141,404) (1,471,017) (3,440,717) (3,876,635) (8,006,654) (8,051,565)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (499,076) (1,132,331) (2,212,213) (1,410,207) (3,527,155) 269,906
Shares outstanding, beginning of year 4,899,607 6,031,938 8,550,474 9,960,681 14,763,312 14,493,406
- --------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 4,400,531 4,899,607 6,338,261 8,550,474 11,236,157 14,763,312
================================================================================================================================
(A) Class Y represents the period from commencement of operations (May 4,
2009) through September 30, 2009.
(B) Classes A and C represent the period from October 1, 2007 through June 13,
2008. Effective June 13, 2008, Class A and Class C shares were exchanged
for Class Z shares.
6. FEDERAL TAX INFORMATION
FEDERAL INCOME TAX - It is each Fund's policy to continue to comply with the
special provisions of the Internal Revenue Code applicable to regulated
investment companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its investment company taxable 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 investment company taxable
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.
68
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid for the periods ended September 30, 2009
and 2008 was as follows:
HEALTHCARE AND INTERMEDIATE
BIOTECHNOLOGY FIXED INCOME INTERNATIONAL GROWTH
FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
2009 2008 2009 2008 2009 2008*
- -----------------------------------------------------------------------------------------------------------------------------
From ordinary income $ -- $ 1,403,820 $ 855,228 $ 864,148 $ 973 $ 52,616
From long-term capital gains -- 3,983,663 -- -- -- 88,762
From tax return of capital -- 1,060,240 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
$ -- $ 6,447,723 $ 855,228 $ 864,148 $ 973 $ 141,378
- -----------------------------------------------------------------------------------------------------------------------------
MID CAP PREMIUM YIELD SANDS CAPITAL SELECT
FUND EQUITY FUND GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008 2009 2008
- -----------------------------------------------------------------------------------------------------------------------------
From ordinary income $ 1,033,371 $ 4,685,264 $ 583,029 $ 811,372 $ -- $ --
From long-term capital gains 551,095 80,180 -- -- -- --
From tax return of capital -- -- 77,806 34,532 -- --
- -----------------------------------------------------------------------------------------------------------------------------
$ 1,584,466 $ 4,765,444 $ 660,835 $ 845,904 $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------
SHORT DURATION FIXED SMALL CAP VALUE ULTRA SHORT DURATION
INCOME FUND OPPORTUNITIES FUND FIXED INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008 2009 2008
- -----------------------------------------------------------------------------------------------------------------------------
From ordinary income $ 1,479,571 $ 2,449,791 $ 105,644 $ 4,124,200 $ 4,095,134 $ 7,561,408
From long-term capital gains -- -- 135,276 12,400,740 -- --
From tax return of capital -- -- 49,414 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
$ 1,479,571 $ 2,449,791 $ 290,334 $ 16,524,940 $ 4,095,134 $ 7,561,408
- -----------------------------------------------------------------------------------------------------------------------------
* Represents the period from January 1, 2008 through September 30, 2008.
69
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of
September 30, 2009:
HEALTHCARE AND INTERMEDIATE INTERNATIONAL PREMIUM
BIOTECHNOLOGY FIXED INCOME GROWTH MID CAP YIELD
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 41,550,086 $ 102,080,496 $ 35,810,259 $ 196,423,348 $ 24,325,881
- -------------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 5,722,596 858,542 4,434,243 26,704,858 2,137,270
Gross unrealized depreciation (772,039) (45,401) (2,031,206) (3,730,730) (2,753,020)
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) 4,950,557 813,141 2,403,037 22,974,128 (615,750)
Post-October losses (8,034,786) (1,892,689) (2,970,277) (93,618,654) (5,804,331)
Capital loss carryforward (6,462,446) (87,072) (328,042) (120,759,656) (3,084,301)
Undistributed ordinary income -- 228,723 385,646 224,960 --
Other temporary differences 681,101 657,269 -- 178,304 (4,667)
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated (deficit) $ (8,865,574) $ (280,628) $ (509,636) $(191,000,918) $ (9,509,049)
===============================================================================================================================
SMALL CAP ULTRA
SANDS CAPITAL SHORT DURATION VALUE SHORT DURATION
SELECT GROWTH FIXED INCOME OPPORTUNITIES FIXED INCOME
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 387,152,411 $ 43,103,081 $ 88,911,595 $ 107,812,671
- ----------------------------------------------------------------------------------------------------
Gross unrealized appreciation 75,994,248 1,028,938 16,170,862 1,061,529
Gross unrealized depreciation (33,042,973) (17,798) (1,252,333) (763,799)
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation 42,951,275 1,011,140 14,918,529 297,730
Post-October losses (83,825,204) -- (28,997,866) (3,505,301)
Capital loss carryforward (30,790,451) (5,458,876) (31,350,357) (10,462,531)
Undistributed ordinary income -- 31,243 -- 134,857
Other temporary difference 1,977,830 (3,466) 368,088 (10,862)
- ----------------------------------------------------------------------------------------------------
Accumulated (deficit) $ (69,686,550) $ (4,419,959) $ (45,061,606) $ (13,546,107)
====================================================================================================
The difference between the tax cost of portfolio investments and the financial
statement cost is primarily due to wash sale loss deferrals, the tax treatment
of real estate investment trusts, and book/tax differences on securities
contributed in-kind.
70
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of September 30, 2009, the Funds had the following capital loss carryforwards
for federal income tax purposes.
EXPIRES
FUND AMOUNT SEPTEMBER 30,
- --------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ 6,462,446 2017
------------
Intermediate Fixed Income Fund $ 86,389 2015
683 2017
------------
87,072
------------
International Growth Fund $ 190,851 2016
137,191 2017
------------
328,042
------------
Mid Cap Fund $120,759,656 2017
------------
Premium Yield Equity Fund $ 3,084,301 2017
------------
Sands Capital Select Growth Fund $ 12,366,467 2010
5,719,519 2011
2,692,298 2014
6,051,198 2015
3,960,969 2016
------------
$ 30,790,451
------------
Short Duration Fixed Income Fund $ 1,994,293 2012
96,050 2013
1,027,850 2014
852,134 2015
295,319 2016
1,193,230 2017
------------
$ 5,458,876
------------
Small Cap Value Opportunities Fund $ 31,350,357 2017
------------
Ultra Short Duration Fixed Income Fund $ 6,699,046 2012
371,187 2014
164,819 2015
3,227,479 2017
------------
$ 10,462,531
------------
The capital loss carryforwards may be utilized in future years to offset net
realized capital gains, if any, prior to distributing such gains to
shareholders.
The Sands Capital Select Growth Fund had $3,102,717 of capital losses expire
unutilized during the year ended September 30, 2009.
71
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Certain reclassifications, the result of permanent differences between financial
statement and income tax reporting requirements have been made to the components
of capital. These reclassifications have no impact on the net assets or net
asset value per share of the Funds and are designed to present the Funds'
capital accounts on a tax basis. The following reclassifications which are
primarily attributed to the tax treatment of net investment loss, foreign
currency gain/loss, paydown gain/loss, expiration of capital loss carryforwards,
real estate investment trusts, and securities contributed in-kind have been made
to the following Funds for the year ended September 30, 2009:
ACCUMULATED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME (LOSS) GAINS (LOSSES)
- ------------------------------------------------------------------------------------------
Healthcare and Biotechnology Fund $ (350,270) $ 213,118 $ 137,152
Intermediate Fixed Income Fund $ 40,470 $ 10,836 $ (51,306)
Mid Cap Fund $ -- $ (38,845) $ 38,845
Premium Yield Equity Fund $ (93,616) $ (10,279) $ 103,895
Sands Capital Select Growth Fund $(5,405,318) $ 2,302,601 $ 3,102,717
Short Duration Fixed Income Fund $ -- $ 57,848 $ (57,848)
Small Cap Value Opportunities Fund $ (47,896) $ (17,855) $ 65,751
Ultra Short Duration Fixed Income Fund $ -- $ 184,277 $ (184,277)
The Funds have analyzed their tax positions taken on Federal income tax returns
for all open tax years (tax years ended September 30, 2006 through 2009) and
have concluded that no provision for income tax is required in their financial
statements.
7. COMMITMENTS AND CONTINGENCIES
The Funds indemnify the Trust's officers and Trustees for certain liabilities
that might arise from their performance of their duties to the Funds.
Additionally, in the normal course of business, the Funds enter into contracts
that contain a variety of representations and warranties and which provide
general indemnifications. The Funds' maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made against the
Funds that have not yet occurred. However, based on experience, the Funds expect
the risk of loss to be remote.
8. CONCENTRATIONS/RISKS
Certain Funds invest a high percentage of their assets in specific sectors of
the market in order to achieve a potentially greater investment return. As a
result, the Funds may be more susceptible to economic, political, and regulatory
developments in a particular sector of the market, positive or negative, and may
experience increased volatility on the Fund's net asset value and magnified
effect on the total return.
9. SUBSEQUENT EVENTS
The Funds evaluated subsequent events from September 30, 2009, the date of these
financial statements, through November 30, 2009, the date these financial
statements were issued and available. There were no subsequent events to report
that would have a material impact on the Funds' financial statements.
72
- --------------------------------------------------------------------------------
Portfolio of Investments
Healthcare and Biotechnology Fund - September 30, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.9% SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE -- 99.9%
Abbott Laboratories 27,040 $ 1,337,669
Aetna, Inc. 15,080 419,676
Alcon, Inc. + 5,630 780,712
Alexion Pharmaceuticals, Inc.* 21,450 955,383
Align Technology, Inc.* + 12,130 172,489
Allergan, Inc. 13,490 765,692
AMERIGROUP Corp.* 3,160 70,057
AmerisourceBergen Corp. + 37,770 845,293
Amgen, Inc.* 38,480 2,317,650
Auxilium Pharmaceuticals, Inc.* + 10,860 371,521
Beckman Coulter, Inc. 21,770 1,500,824
BioMarin Pharmaceutical* 17,360 313,869
CIGNA Corp. 25,710 722,194
Community Health Systems, Inc.* 16,520 527,484
DaVita, Inc.* 17,680 1,001,395
Dendreon Corp.* 16,070 449,799
Emergency Medical Services Corp. - Class A* 5,770 268,305
Express Scripts, Inc.* 4,250 329,715
Gilead Sciences, Inc.* 62,780 2,924,291
HealthSouth Corp.* + 36,340 568,358
Human Genome Sciences, Inc.* + 29,340 552,179
Icon PLC ADR* 15,280 374,207
Illumina, Inc.* + 14,740 626,450
Intuitive Surgical, Inc.* 1,550 406,488
Johnson & Johnson 19,290 1,174,568
LHC Group, Inc.* 9,060 271,166
Life Technologies Corp.* 21,130 983,602
Mednax, Inc.* 5,470 300,412
Momenta Pharmaceuticals, Inc.* 6,990 74,164
NuVasive, Inc.* + 10,660 445,162
Pfizer, Inc. + 167,750 2,776,263
PharMerica Corp.* 29,962 556,394
Psychiatric Solutions, Inc.* 21,430 573,467
Savient Pharmaceuticals, Inc.* 27,200 413,440
Shire PLC ADR 11,190 585,125
St. Jude Medical, Inc.* 10,030 391,270
Talecris Biotherapeutics Holdings Corp.* 28,420 539,980
Tenet Healthcare Corp.* 43,260 254,369
Teva Pharmaceutical Industries Ltd. ADR 13,590 687,110
Thermo Fisher Scientific, Inc.* 20,670 902,659
United Therapeutics Corp.* 21,300 1,043,487
UnitedHealth Group, Inc. 54,960 1,376,198
Universal Health Services - Class B 7,040 435,987
Vitacost.com, Inc.* + 79,290 865,847
VIVUS, Inc.* + 44,940 469,623
Watson Pharmaceuticals, Inc.* 10,890 399,010
Wyeth 58,990 2,865,734
Zimmer Holdings* + 8,900 475,705
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 37,462,442
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 24.1%
Invesco AIM Liquid Assets Portfolio ** 9,038,201 $ 9,038,201
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 124.0%
(Cost $40,512,199) $ 46,500,643
LIABILITIES IN EXCESS OF OTHER ASSETS -- (24.0%) (8,985,389)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 37,515,254
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan, as of September 30, 2009, was $8,786,075.
** Represents collateral for securities loaned.
ADR - American Depository Receipt
PLC - Public Limited Company
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Common Stocks $37,462,442 $ -- $ -- $37,462,442
Mutual Fund 9,038,201 -- -- 9,038,201
===========
$46,500,643
See accompanying notes to financial statements.
73
- --------------------------------------------------------------------------------
Portfolio of Investments
Intermediate Fixed Income Fund - September 30, 2009
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 54.5%
FINANCIALS -- 21.5%
$ 75,000 Ace Ina Holdings, 5.70%, 2/15/17 $ 80,899
370,000 Allstate Life Global Funding Trust,
5.38%, 4/30/13 393,828
25,000 American Express Bank, 5.50%, 4/16/13 26,385
150,000 American Express Co., 4.88%, 7/15/13 154,564
200,000 American Express Co., 7.00%, 3/19/18 220,016
125,000 Ameriprise Financial, 5.65%, 11/15/15 126,488
275,000 Bank of America Corp., 7.40%, 1/15/11 288,764
30,000 Bank of America Corp., 5.75%, 8/15/16 29,533
200,000 Bank of America Corp., 5.75%, 12/1/17 199,635
200,000 Bank of America Corp., 5.65%, 5/1/18 197,478
45,000 Bank One Corp., 5.90%, 11/15/11 48,114
200,000 Barclays Bank PLC, 5.45%, 9/12/12 214,923
120,000 Barclays Bank PLC, 5.90%, 9/1/16 134,840
500,000 Barclays Bank PLC, 5.00%, 9/22/16 506,384
40,000 Barclays Bank PLC, 6.75%, 5/22/19 44,737
325,000 BB&T Corp., 4.75%, 10/1/12 338,962
915,000 BB&T Corp., 6.85%, 4/30/19 1,023,517
150,000 Bear Stearns Cos. LLC, 5.70%, 11/15/14 160,664
30,000 Bear Stearns Cos. LLC, 6.40%, 10/2/17 32,636
500,000 Berkshire Hathaway Financial,
5.00%, 8/15/13 543,055
350,000 Capital One Financial, 5.70%, 9/15/11 365,648
15,000 Capital One Financial, 4.80%, 2/21/12 15,006
500,000 Citigroup, Inc., 2.88%, 12/9/11 516,144
545,000 Citigroup, Inc., 5.00%, 9/15/14 518,614
175,000 Citigroup, Inc., 5.85%, 8/2/16 171,102
250,000 Citigroup, Inc., 6.13%, 11/21/17 248,213
40,000 CME Group, Inc., 5.75%, 2/15/14 43,778
200,000 Deutsch Bank AG, 6.00%, 9/1/17 215,834
475,000 Fifth Third Bank, 6.25%, 5/1/13 489,918
400,000 General Electric Capital Corp.,
6.00%, 6/15/12 428,410
1,500,000 General Electric Capital Corp.,
3.50%, 8/13/12 1,518,688
400,000 General Electric Capital Corp.,
5.45%, 1/15/13 421,548
65,000 General Electric Capital Corp.,
4.80%, 5/1/13 67,476
275,000 General Electric Capital Corp.,
5.40%, 2/15/17 274,159
175,000 General Electric Capital Corp.,
5.63%, 5/1/18 174,160
945,000 Goldman Sachs, 5.25%, 10/15/13 1,003,226
315,000 Goldman Sachs, 5.15%, 1/15/14 330,730
500,000 Goldman Sachs, 5.63%, 1/15/17 503,717
35,000 Goldman Sachs, 6.15%, 4/1/18 36,817
185,000 HSBC Corp., 5.00%, 6/30/15 185,709
300,000 HSBC Corp., 5.50%, 1/19/16 306,688
500,000 Jefferies Group, Inc., 8.50%, 7/15/19 529,184
275,000 JPMorgan Chase & Co., 5.38%, 10/1/12 295,896
385,000 JPMorgan Chase & Co., 5.13%, 9/15/14 401,098
230,000 Key Bank NA, 3.20%, 6/15/12 239,733
100,000 Key Bank NA, 5.80%, 7/1/14 96,945
530,000 KeyCorp., 6.50%, 5/14/13 542,547
85,000 Marshall & Ilsley Bank, 4.85%, 6/16/15 66,708
75,000 Merrill Lynch & Co., 6.15%, 4/25/13 79,357
400,000 Merrill Lynch & Co., 5.45%, 7/15/14 416,368
215,000 Merrill Lynch & Co., 6.40%, 8/28/17 217,744
170,000 MetLife, Inc., 6.13%, 12/1/11 182,709
20,000 MetLife, Inc., 5.00%, 6/15/15 20,886
200,000 Morgan Stanley, 5.30%, 3/1/13 209,566
170,000 Morgan Stanley, 4.75%, 4/1/14 168,745
200,000 Morgan Stanley, 5.38%, 10/15/15 206,446
100,000 National Australia Bank, 8.60%, 5/19/10 104,909
290,000 PNC Funding Corp., 2.30%, 6/22/12 295,207
280,000 PNC Funding Corp., 5.63%, 2/1/17 275,516
915,000 PNC Funding Corp., 6.70%, 6/10/19 1,012,627
125,000 Principal Life, Inc., 5.10%, 4/15/14 128,789
125,000 Prudential Financial, Inc., 4.75%, 4/1/14 125,450
30,000 Prudential Financial, Inc., 4.75%, 9/17/15 29,790
125,000 Royal Bank of Canada, 4.13%, 1/26/10 126,512
325,000 Simon Property Group, 6.35%, 8/28/12 345,522
25,000 Simon Property Group, 5.75%, 12/1/15 25,573
300,000 Suntrust Bank, Inc., 6.38%, 4/1/11 310,815
200,000 Suntrust Bank, Inc., 5.25%, 11/5/12 206,386
100,000 Travelers Cos., Inc., 5.50%, 12/1/15 108,093
1,000,000 Travelers Cos., Inc., 5.90%, 6/2/19 1,120,547
250,000 Union Planters Corp., 4.38%, 12/1/10 248,731
185,000 Wachovia Bank, 5.00%, 8/15/15 178,355
375,000 Wachovia Bank, 5.75%, 2/1/18 396,884
170,000 Wells Fargo & Co., 6.38%, 8/1/11 182,179
800,000 Wells Fargo & Co., 3.00%, 12/9/11 828,493
- --------------------------------------------------------------------------------
22,325,317
- --------------------------------------------------------------------------------
UTILITIES -- 9.2%
20,000 Arizona Public Service, 8.75%, 3/1/19 24,215
1,300,000 Boardwalk Pipelines LLC,
5.75%, 9/15/19 1,297,876
150,000 Consolidated Edison Co. of NY,
5.85%, 4/1/18 163,505
100,000 Detroit Edison Co., 5.60%, 6/15/18 107,026
930,000 Dominion Resources, Inc.,
5.00%, 12/1/14 985,334
740,000 DTE Energy Co., 6.35%, 6/1/16 761,768
425,000 Duke Energy Carolinas, 6.25%, 1/15/12 463,168
100,000 Duke Energy Carolinas, 5.30%, 10/1/15 108,972
860,000 Energy Transfer Partners, 5.95%, 2/1/15 902,818
650,000 Enterprise Products Operating LP,
9.75%, 1/31/14 784,802
25,000 Exelon Corp., 4.90%, 6/15/15 25,915
520,000 Exelon Generation Co. LLC,
5.20%, 10/1/19 525,690
100,000 Florida Power Corp., 5.10%, 12/1/15 108,383
250,000 FPL Group Capital, Inc., 5.63%, 9/1/11 267,781
115,000 Georgia Power, 5.25%, 12/15/15 124,318
74
- --------------------------------------------------------------------------------
Intermediate Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 54.5% (CONTINUED)
UTILITIES -- 9.2% (CONTINUED)
$ 180,000 Hydro-Quebec, 7.50%, 4/1/16 $ 211,901
125,000 Keyspan Corp., 7.63%, 11/15/10 131,533
110,000 Korea Electric Power, 7.75%, 4/1/13 123,422
660,000 Metropolitan Edison, 7.70%, 1/15/19 779,670
310,000 Midamerican Energy Holdings,
5.00%, 2/15/14 327,743
20,000 Midamerican Energy Holdings,
5.75%, 4/1/18 21,588
110,000 National Rural Utilities, 7.25%, 3/1/12 121,483
125,000 NSTAR Electric Co., 4.88%, 4/15/14 133,922
175,000 Pacificorp., 6.90%, 11/15/11 193,942
180,000 Public Service Colorado, 7.88%, 10/1/12 209,194
140,000 Public Service Electric & Gas,
5.38%, 9/1/13 152,056
130,000 Southern Cal Edison, 5.00%, 1/15/16 138,940
100,000 Trans-Canada Pipelines, 4.88%, 1/15/15 104,265
260,000 Trans-Canada Pipelines,
6.50%, 8/15/18 293,200
- --------------------------------------------------------------------------------
9,594,430
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 6.2%
275,000 Archer Daniels, 5.45%, 3/15/18 297,999
200,000 Avon Products, 4.20%, 7/15/18 194,123
150,000 Bottling Group LLC, 4.63%, 11/15/12 161,754
100,000 Coca-Cola Co., 5.75%, 3/15/11 106,479
200,000 Coca-Cola Co., 7.13%, 8/1/17 237,947
275,000 Coca-Cola Co., 5.35%, 11/15/17 300,289
25,000 Conagra Foods, Inc., 7.00%, 4/15/19 29,459
150,000 Costco Wholesale Corp., 5.50%, 3/15/17 163,999
25,000 CVS Caremark Corp., 6.60%, 3/15/19 28,182
690,000 Dr. Pepper Snapple Group,
6.82%, 5/1/18 784,380
500,000 General Mills, 5.20%, 3/17/15 540,581
35,000 General Mills, 5.65%, 2/15/19 37,906
150,000 Kimberly-Clark, 6.13%, 8/1/17 170,815
900,000 Kraft Foods, Inc., 6.25%, 6/1/12 978,696
25,000 Kraft Foods, Inc., 6.50%, 8/11/17 27,044
30,000 Kroger Co., 6.40%, 8/15/17 33,194
200,000 Pepsico, Inc., 5.15%, 5/15/12 217,013
150,000 Pitney Bowes, Inc., 3.88%, 6/15/13 153,875
40,000 Procter & Gamble Co., 4.70%, 2/15/19 41,805
20,000 Safeway, Inc., 5.80%, 8/15/12 21,678
921,000 Safeway, Inc., 6.25%, 3/15/14 1,017,460
500,000 Sara Lee Corp., 3.88%, 6/15/13 508,908
20,000 Staples, Inc., 7.75%, 4/1/11 21,599
120,000 Sysco Corp., 4.20%, 2/12/13 124,856
150,000 Unilever Capital Corp., 7.13%, 11/1/10 160,140
25,000 Wal-Mart Stores, 5.80%, 2/15/18 28,082
- --------------------------------------------------------------------------------
6,388,263
- --------------------------------------------------------------------------------
ENERGY -- 3.8%
730,000 Anadarko Petroleum Corp.,
5.95%, 9/15/16 773,478
225,000 Apache Corp., 6.25%, 4/15/12 248,096
400,000 BP Capital Markets PLC, 1.55%, 8/11/11 401,354
225,000 Conoco Funding Co., 6.35%, 10/15/11 246,554
500,000 ConocoPhillips, 4.40%, 5/15/13 527,706
650,000 Marathon Oil Corp., 7.50%, 2/15/19 749,728
425,000 Occidental Petroleum Corp.,
4.13%, 6/1/16 437,124
150,000 Seariver Maritime, Inc., .00%, 9/1/12 139,273
320,000 Shell International, 5.63%, 6/27/11 345,283
25,000 Valero Energy, 9.38%, 3/15/19 29,132
- --------------------------------------------------------------------------------
3,897,728
- --------------------------------------------------------------------------------
INDUSTRIALS -- 3.4%
385,000 3M Co., 4.38%, 8/15/13 412,229
25,000 Boeing Capital Corp., 6.10%, 3/1/11 26,553
385,000 Boeing Capital Corp., 5.80%, 1/15/13 420,663
250,000 Canadian National Railways,
4.40%, 3/15/13 262,456
150,000 Caterpillar Financial Services
Corp., 4.60%, 1/15/14 155,933
195,000 Caterpillar Financial Services
Corp., 7.15%, 2/15/19 226,114
150,000 Emerson Electric Co., 5.00%, 12/15/14 163,059
150,000 General Dynamics Corp., 4.25%, 5/15/13 158,869
275,000 General Electric Co., 5.25%, 12/6/17 282,219
150,000 Honeywell International, 6.13%, 11/1/11 163,684
150,000 John Deere Capital Corp.,
7.00%, 3/15/12 167,378
500,000 Northrop Grumman Corp.,
3.70%, 8/1/14 508,724
140,000 Parker-Hannifin Corp., 5.50%, 5/15/18 148,741
200,000 Praxair, Inc., 5.38%, 11/1/16 218,838
150,000 Toyota Motor Credit Corp.,
4.35%, 12/15/10 153,191
100,000 United Technologies Corp.,
4.88%, 5/1/15 109,371
- --------------------------------------------------------------------------------
3,578,022
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 2.4%
150,000 Cisco Systems, Inc., 5.50%, 2/22/16 165,173
40,000 Dell, Inc., 5.88%, 6/15/19 42,882
500,000 Hewlett-Packard Co., 4.50%, 3/1/13 533,875
200,000 IBM Corp., 5.70%, 9/14/17 220,417
160,000 Oracle Corp., 5.00%, 1/15/11 167,341
235,000 Oracle Corp., 4.95%, 4/15/13 254,343
40,000 Oracle Corp., 5.75%, 4/15/18 44,074
1,000,000 Xerox Corp., 6.40%, 3/15/16 1,047,744
- --------------------------------------------------------------------------------
2,475,849
- --------------------------------------------------------------------------------
75
- --------------------------------------------------------------------------------
Intermediate Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 54.5% (CONTINUED)
CONSUMER DISCRETIONARY -- 2.2%
$ 20,000 Comcast Corp., 5.88%, 2/15/18 $ 21,311
20,000 Johnson Controls, Inc., 5.25%, 1/15/11 20,765
100,000 Lowe's Companies, Inc.,
5.40%, 10/15/16 108,224
175,000 McDonald's Corp., 6.00%, 4/15/11 187,104
35,000 McDonald's Corp., 5.35%, 3/1/18 38,187
500,000 Southwest Airlines Co., 6.50%, 3/1/12 525,653
250,000 Stanford University, 4.75%, 5/1/19 263,359
5,000 Target Corp., 6.35%, 1/15/11 5,317
185,000 Target Corp., 5.88%, 7/15/16 204,609
30,000 Time Warner Cable, Inc., 6.20%, 7/1/13 32,682
20,000 Time Warner Cable, Inc., 8.25%, 4/1/19 24,174
350,000 Wal-Mart Stores, 4.25%, 4/15/13 372,986
150,000 Wal-Mart Stores, 4.50%, 7/1/15 161,532
150,000 Walt Disney Co., 6.38%, 3/1/12 164,707
180,000 Walt Disney Co., 5.50%, 3/15/19 195,452
- --------------------------------------------------------------------------------
2,326,062
- --------------------------------------------------------------------------------
HEALTH CARE -- 1.9%
205,000 Abbott Laboratories, 5.88%, 5/15/16 228,489
150,000 Abbott Laboratories, 5.60%, 11/30/17 165,341
100,000 Aetna, Inc., 6.00%, 6/15/16 105,473
175,000 Astrazeneca PLC, 5.90%, 9/15/17 195,805
150,000 Genentech, Inc., 4.75%, 7/15/15 161,836
230,000 Johnson & Johnson, 5.15%, 8/15/12 253,251
100,000 Medtronic, Inc., 4.75%, 9/15/15 108,339
300,000 Pfizer, Inc., 6.20%, 3/15/19 338,141
115,000 UnitedHealth Group, Inc.,
5.00%, 8/15/14 119,155
25,000 WellPoint, Inc., 5.00%, 1/15/11 25,766
120,000 Wyeth, 5.50%, 2/1/14 131,053
125,000 Wyeth, 5.45%, 4/1/17 135,447
- --------------------------------------------------------------------------------
1,968,096
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.6%
75,000 AT&T, Inc., 5.88%, 8/15/12 82,086
110,000 AT&T, Inc., 5.63%, 6/15/16 118,333
145,000 AT&T, Inc., 5.50%, 2/1/18 151,289
140,000 BellSouth Corp., 5.20%, 9/15/14 151,576
200,000 France Telecom, 7.75%, 3/1/11 216,555
225,000 New Cingular Wireless Service,
8.13%, 5/1/12 256,727
175,000 Verizon Communications, Inc.,
4.38%, 6/1/13 184,073
305,000 Verizon Communications, Inc.,
5.50%, 2/15/18 319,778
100,000 Vodafone Group PLC, 5.50%, 6/15/11 106,214
100,000 Vodafone Group PLC, 5.63%, 2/27/17 105,979
- --------------------------------------------------------------------------------
1,692,610
- --------------------------------------------------------------------------------
MATERIALS -- 1.4%
130,000 Dover Corp., 4.88%, 10/15/15 139,538
740,000 Dow Chemical Co., 5.90%, 2/15/15 759,524
500,000 E.I. DuPont de Nemours, 5.00%, 1/15/13 541,493
- --------------------------------------------------------------------------------
1,440,555
- --------------------------------------------------------------------------------
WASTE MANAGEMENT -- 0.5%
500,000 Allied Waste North America,
7.88%, 4/15/13 512,500
- --------------------------------------------------------------------------------
SERVICES -- 0.4%
125,000 Omnicom Group, Inc., 5.90%, 4/15/16 131,882
250,000 United Parcel Service, 5.50%, 1/15/18 275,079
- --------------------------------------------------------------------------------
406,961
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 56,606,393
- --------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT OBLIGATIONS -- 3.3%
460,000 African Development Bank,
2.75%, 2/25/11 471,620
100,000 Asian Development Bank,
4.50%, 9/4/12 107,085
200,000 European Investment Bank,
3.38%, 6/12/13 206,335
200,000 European Investment Bank,
4.63%, 5/15/14 217,941
250,000 Export-Import Bank of Korea,
5.50%, 10/17/12 263,715
150,000 Inter-American Development
Bank, 4.38%, 9/20/12 160,311
125,000 Korea Development Bank,
5.50%, 11/13/12 132,632
200,000 Malaysia, 7.50%, 7/15/11 218,887
350,000 Oekb Oest. Kontrollbank,
3.13%, 10/14/11 360,493
250,000 Ontario (Province of), 4.75%, 1/19/16 268,411
200,000 Quebec Province, 4.60%, 5/26/15 214,128
500,000 Republic of Chile, 5.50%, 1/15/13 558,050
225,000 Republic of Korea, 4.88%, 9/22/14 234,604
- --------------------------------------------------------------------------------
TOTAL SOVEREIGN
GOVERNMENT OBLIGATIONS $ 3,414,212
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.7%
340,000 FFCB, 5.13%, 8/25/16 372,817
1,775,000 FHLB, 3.63%, 10/18/13 1,869,617
465,000 FHLB, 5.00%, 12/21/15 509,989
275,000 FHLB, 5.38%, 5/18/16 310,453
875,000 FHLMC, 5.63%, 3/15/11 936,985
300,000 FHLMC, 5.50%, 9/15/11 326,304
245,000 FHLMC, 5.75%, 1/15/12 270,540
900,000 FHLMC, 4.13%, 12/21/12 965,741
400,000 FHLMC, 4.50%, 1/15/14 434,878
76
- --------------------------------------------------------------------------------
Intermediate Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.7%
(CONTINUED)
$ 400,000 FHLMC, 5.13%, 10/18/16 $ 443,187
1,175,000 FNMA, 5.50%, 3/15/11 1,256,598
500,000 FNMA, 4.38%, 9/15/12 537,539
125,000 FNMA, 4.63%, 10/15/13 136,508
150,000 FNMA, 4.13%, 4/15/14 160,711
250,000 FNMA, 2.50%, 5/15/14 249,458
50,000 GMAC LLC, 2.20%, 12/19/12 50,534
150,000 Tennessee Valley Authority,
4.75%, 8/1/13 162,254
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 8,994,113
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 26.7%
250,000 U.S. Treasury Bond, 1.38%, 4/15/12 251,094
170,000 U.S. Treasury Bond, 1.75%, 3/31/14 167,277
250,000 U.S. Treasury Bond, 2.38%, 3/31/16 243,340
800,000 U.S. Treasury Bond, 8.75%, 5/15/17 1,108,313
1,200,000 U.S. Treasury Bond, 4.50%, 8/15/39 1,293,750
2,883,384 U.S. Treasury Inflation Indexed
Note, 2.38%, 1/15/17 3,068,099
4,000,000 U.S. Treasury Note, 5.75%, 8/15/10 4,186,092
5,100,000 U.S. Treasury Note, 5.13%, 6/30/11 5,483,096
5,000,000 U.S. Treasury Note, 1.00%, 7/31/11 5,014,259
2,000,000 U.S. Treasury Note, 1.50%, 7/15/12 2,010,000
250,000 U.S. Treasury Note, 4.13%, 8/31/12 269,629
500,000 U.S. Treasury Note, 2.75%, 10/31/13 516,016
1,500,000 U.S. Treasury Note, 1.88%, 2/28/14 1,486,992
1,500,000 U.S. Treasury Note, 2.63%, 6/30/14 1,526,718
500,000 U.S. Treasury Note, 11.25%, 2/15/15 720,117
150,000 U.S. Treasury Note, 4.63%, 11/15/16 166,266
125,000 U.S. Treasury Note, 4.63%, 2/15/17 138,389
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 27,649,447
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 6.0%
6,229,472 Touchstone Institutional
Money Market Fund^ $ 6,229,472
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.2%
(Cost $101,195,796) $102,893,637
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 0.8% 831,345
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $103,724,982
================================================================================
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See
Note 4.
FFCB - Federal Farm Credit Bank
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GMAC - General Motors Acceptance Corporation
PLC - Public Limited Company
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Corporate Bonds $ -- $56,606,393 $ -- $ 56,606,393
Sovereign
Government
Obligations -- 3,414,212 -- 3,414,212
U.S. Government
Agency
Obligations -- 8,994,113 -- 8,994,113
U.S. Treasury
Obligations -- 27,649,447 -- 27,649,447
Mutual Fund 6,229,472 -- -- 6,229,472
============
$102,893,637
See accompanying notes to financial statements.
77
- --------------------------------------------------------------------------------
Portfolio of Investments
International Growth Fund - September 30, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 96.7% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 21.2%
Accenture PLC - Class A (Ireland) 7,675 $ 286,047
Alcatel ADR (France)* 101,000 453,490
Amdocs Ltd. (Guernsey)* 17,045 458,170
ARM Holdings PLC ADR (Britain) 91,470 640,290
Baidu, Inc. ADR (Cayman Islands)* 1,183 462,612
Canon, Inc. ADR (Japan) 17,832 713,102
Infosys Technologies Ltd. ADR (India) 10,185 493,871
Logitech International S.A. ADR (Switzerland)* 26,826 493,062
NetEase.com, Inc. ADR (Cayman Islands)* 7,850 358,588
Nidec Corp. ADR (Japan) 35,559 722,914
Nokia Oyj ADR (Finland) 27,813 406,626
Research In Motion Ltd. (Canada)* 7,748 523,377
SAP AG ADR (Germany) 17,074 834,406
Taiwan Semiconductor Manufacturing
Co. Ltd. ADR (Taiwan) 47,611 521,817
Trend Micro, Inc. ADR (Japan) 13,716 511,607
- --------------------------------------------------------------------------------
7,879,979
- --------------------------------------------------------------------------------
FINANCIALS -- 14.8%
Allianz SE ADR (Germany) 44,180 551,366
AXA ADR (France) 34,537 934,226
Banco Santander S.A. ADR (Spain) 43,038 695,064
Credit Suisse Group ADR (Switzerland) 11,371 632,796
HSBC Holdings PLC ADR (Britain) 14,662 840,866
ING Groep N.V. ADR (Netherlands) 44,846 799,604
Mitsubishi UFJ Financial Group, Inc.
ADR (MUFG) (Japan) 72,813 388,821
National Australia Bank Ltd. ADR (Australia) 25,369 685,217
- --------------------------------------------------------------------------------
5,527,960
- --------------------------------------------------------------------------------
HEALTH CARE -- 13.7%
Alcon, Inc. ADR (Switzerland) 6,639 920,630
AstraZeneca PLC ADR (Britain) 12,700 570,865
Bayer AG ADR (Germany) 10,930 760,728
Covidien PLC (Ireland) 10,602 458,643
Fresenius Medical Care AG & Co.
KGaA ADR (Germany) 8,175 406,625
GlaxoSmithKline PLC ADR (Britain) 9,699 383,207
Novartis AG ADR (Switzerland) 11,311 569,848
Novo-Nordisk A/S ADR (Denmark) 10,258 645,741
Teva Pharmaceutical Industries
Ltd. ADR (Israel) 7,429 375,610
- --------------------------------------------------------------------------------
5,091,897
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 9.7%
Anheuser-Busch InBev N.V. ADR (Belgium)* 16,723 767,586
British American Tobacco PLC ADR (Britain) 14,543 919,845
Diageo PLC ADR (Britain) 8,369 514,610
Nestle S.A. ADR (Switzerland) 11,397 485,056
Phillip Morris International, Inc. (United States) 8,830 430,374
Tesco PLC ADR (Britain) 25,045 481,114
- --------------------------------------------------------------------------------
3,598,585
- --------------------------------------------------------------------------------
ENERGY -- 9.3%
BP PLC ADR (Britain) 8,875 472,416
EnCana Corp. (Canada) 10,962 631,521
Petroleo Brasileiro ADR (Brazil) 15,822 726,230
Schlumberger Ltd. (United States) 5,569 331,912
StatoilHydro ASA ADR (Norway) 30,614 690,040
Total S.A. ADR (France) 10,434 618,319
- --------------------------------------------------------------------------------
3,470,438
- --------------------------------------------------------------------------------
INDUSTRIALS -- 8.6%
ABB Ltd. ADR (Switzerland) 23,158 464,086
BAE Systems PLC ADR (Britain) 21,441 480,278
Chicago Bridge & Iron Co. N.V.
ADR (Netherlands)* 16,803 313,880
Ingersoll-Rand PLC (Ireland) 13,760 422,019
Kubota Corp. ADR (Japan) 12,967 536,704
Siemens AG ADR (Germany) 5,797 538,890
Tyco International Ltd. (Switzerland) 13,450 463,756
- --------------------------------------------------------------------------------
3,219,613
- --------------------------------------------------------------------------------
MATERIALS -- 6.3%
BASF AG ADR (Germany) 10,197 540,441
Randgold Resources Ltd. (France) 3,885 271,484
Rio Tinto PLC ADR (Britain) 1,868 318,102
Syngenta AG ADR (Switzerland) 11,092 509,677
Vale S.A. ADR (Brazil) 30,713 710,392
- --------------------------------------------------------------------------------
2,350,096
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 5.4%
BT Group PLC ADR (Britain) 15,329 318,996
Telefonica S.A. ADR (Spain) 12,690 1,052,128
Vodafone Group PLC ADR (Britain) 28,481 640,823
- --------------------------------------------------------------------------------
2,011,947
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 4.0%
Honda Motor Co., Ltd. ADR (Japan) 15,600 472,836
Makita Corp. ADR (Japan) 22,308 696,456
Panasonic Corp. ADR (Japan) 21,060 307,476
- --------------------------------------------------------------------------------
1,476,768
- --------------------------------------------------------------------------------
UTILITIES -- 3.7%
E.ON AG ADR (Germany) 20,052 853,213
Veolia Environnement ADR (France) 13,958 537,243
- --------------------------------------------------------------------------------
1,390,456
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 36,017,739
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 5.9%
Touchstone Institutional
Money Market Fund^ 2,195,557 $ 2,195,557
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 102.6%
(Cost $35,382,854) $ 38,213,296
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.6%) (981,429)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 37,231,867
================================================================================
78
- --------------------------------------------------------------------------------
International Growth Fund (Continued
- --------------------------------------------------------------------------------
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
PLC - Public Limited Company
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Common Stocks $36,017,739 $ -- $ -- $36,017,739
Mutual Fund 2,195,557 -- -- 2,195,557
===========
$38,213,296
See accompanying notes to financial statements.
79
- --------------------------------------------------------------------------------
Portfolio of Investments
Mid Cap Fund - September 30, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 100.1% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 18.3%
AllianceBerstein Holding LP + 125,660 $ 3,428,004
Allied World Assurance Co. Holdings Ltd. 47,850 2,293,451
Arch Capital Group Ltd.* 37,870 2,557,740
Assured Guaranty Ltd. + 120,670 2,343,411
Brandywine Realty Trust 302,890 3,343,905
Chimera Investment Corp. 203,710 778,172
Digital Realty Trust, Inc. + 63,840 2,918,126
Douglas Emmett, Inc. + 175,220 2,151,702
First Horizon National Corp.* + 192,115 2,541,679
IntercontinentalExchange, Inc.* 11,050 1,073,950
Marshall & Ilsley Corp. 330,793 2,669,500
SunTrust Banks, Inc. 142,120 3,204,806
Zions BanCorp. + 118,490 2,129,265
- --------------------------------------------------------------------------------
31,433,711
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 17.6%
Global Payments, Inc. 60,040 2,803,868
IAC/InterActiveCorp.* + 163,480 3,300,660
Intersil Corp. - Class A 141,650 2,168,662
Jabil Circuit, Inc. 168,290 2,256,769
Maxim Integrated Products, Inc. 135,120 2,451,077
McAfee, Inc.* 70,490 3,086,756
NCR Corp.* 193,580 2,675,276
Novellus Systems, Inc.* 105,823 2,220,167
ON Semiconductor Corp.* + 316,870 2,614,178
Sybase, Inc.* + 69,037 2,685,539
Synopsys, Inc.* 96,460 2,162,633
Western Digital Corp.* 46,760 1,708,143
- --------------------------------------------------------------------------------
30,133,728
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 14.3%
Abercrombie & Fitch Co. + 75,400 2,479,152
Aeropostale, Inc.* + 66,740 2,901,187
Dollar Tree, Inc.* 53,126 2,586,174
GUESS?, Inc. 54,670 2,024,977
Lamar Advertising Co.* + 84,380 2,315,387
Las Vegas Sands Corp.* + 138,350 2,329,814
Newell Rubbermaid, Inc. + 138,000 2,165,220
NVR, Inc.* 2,660 1,695,404
O'Reilly Automotive, Inc.* + 35,620 1,287,307
Priceline.com, Inc.* + 10,480 1,737,794
WMS Industries, Inc.* 63,300 2,820,648
- --------------------------------------------------------------------------------
24,343,064
- --------------------------------------------------------------------------------
HEALTH CARE -- 9.6%
Biovail Corp. + 220,690 3,405,246
Intuitive Surgical, Inc.* + 7,350 1,927,538
King Pharmaceuticals, Inc.* + 262,230 2,824,217
Life Technologies Corp.* 65,660 3,056,473
Mylan, Inc.* + 183,960 2,945,200
Universal Health Services, Inc. - Class B 35,390 2,191,703
- --------------------------------------------------------------------------------
16,350,377
- --------------------------------------------------------------------------------
ENERGY -- 9.5%
Alpha Natural Resources, Inc.* 64,410 2,260,791
Concho Resources, Inc.* 75,120 2,728,358
ENSCO International, Inc. 53,680 2,283,547
FMC Technologies, Inc.* + 53,660 2,803,199
Oil States International, Inc. 65,640 2,305,933
Petrohawk Energy Corp.* 56,410 1,365,686
Plains All American Pipeline LP* 51,820 2,398,748
- --------------------------------------------------------------------------------
16,146,262
- --------------------------------------------------------------------------------
INDUSTRIALS -- 8.3%
Flowserve Corp. 15,580 1,535,253
Joy Global, Inc. 45,760 2,239,494
McDermott International, Inc.* 145,740 3,682,851
Oshkosh Corp.* 43,310 1,339,578
Roper Industries, Inc. + 50,660 2,582,647
TransDigm Group, Inc.* 54,510 2,715,143
- --------------------------------------------------------------------------------
14,094,966
- --------------------------------------------------------------------------------
UTILITIES -- 6.8%
AES Corp.* + 126,650 1,876,953
Constellation Energy Group, Inc. 83,140 2,691,243
Northeast Utilities 111,360 2,643,686
NV Energy, Inc. 201,270 2,332,719
RRI Energy, Inc.* 295,160 2,107,442
- --------------------------------------------------------------------------------
11,652,043
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 6.0%
Church & Dwight Co., Inc. + 22,840 1,295,942
J.M. Smucker Co. (The) 57,960 3,072,459
Sara Lee Corp. 169,340 1,886,448
W.W. Grainger, Inc. 19,400 1,733,584
Whole Foods Market, Inc.* + 71,210 2,171,193
- --------------------------------------------------------------------------------
10,159,626
- --------------------------------------------------------------------------------
MATERIALS -- 5.0%
Carpenter Technology 53,320 1,247,155
Cliff's Natural Resources, Inc. 38,260 1,238,094
Commercial Metals Co. 108,800 1,947,520
Pactiv Corp.* 98,650 2,569,832
Pan American Silver Corp.* 70,360 1,604,208
- --------------------------------------------------------------------------------
8,606,809
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 4.7%
Millicom International Cellular S.A.* 25,520 1,856,325
SBA Communications Corp. - Class A* + 121,450 3,282,793
Windstream Corp. 284,430 2,881,276
- --------------------------------------------------------------------------------
8,020,394
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $170,940,980
- --------------------------------------------------------------------------------
80
- --------------------------------------------------------------------------------
Mid Cap Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 28.4%
Invesco AIM Liquid Assets Portfolio ** 47,451,091 $ 47,451,091
Touchstone Institutional
Money Market Fund^ 1,005,405 1,005,405
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 48,456,496
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 128.5%
(Cost $194,087,361) $ 219,397,476
LIABILITIES IN EXCESS OF OTHER ASSETS -- (28.5%) (48,648,702)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 170,748,774
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan, as of September 30, 2009, was $45,892,849.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Common Stocks $ 170,940,980 $ -- $ -- $ 170,940,980
Mutual Funds 48,456,496 -- -- 48,456,496
=============
$ 219,397,476
See accompanying notes to financial statements.
81
- --------------------------------------------------------------------------------
Portfolio of Investments
Premium Yield Equity Fund - September 30, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 98.1% SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY -- 20.3%
BP PLC ADR 10,295 $ 548,003
Diamond Offshore Drilling, Inc. 6,055 578,374
Enerplus Resources Fund 35,580 814,426
Kinder Morgan Management LLC* 27,408 1,297,776
Southern Union Co. 38,905 808,835
Spectra Energy Corp. 41,910 793,775
- --------------------------------------------------------------------------------
4,841,189
- --------------------------------------------------------------------------------
UTILITIES -- 16.9%
American Water Works Co., Inc. 34,865 695,208
CMS Energy Corp. 31,390 420,626
National Grid PLC ADR 15,550 758,062
NiSource, Inc. 51,830 719,919
Northeast Utilities 16,245 385,656
ONEOK, Inc. 19,185 702,555
Pepco Holdings, Inc. 21,845 325,054
- --------------------------------------------------------------------------------
4,007,080
- --------------------------------------------------------------------------------
HEALTH CARE -- 11.6%
Abbott Laboratories 13,515 668,587
Bristol-Myers Squibb Co. 16,110 362,797
Johnson & Johnson 15,785 961,149
Merck & Co., Inc. 23,755 751,371
- --------------------------------------------------------------------------------
2,743,904
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 11.2%
AT&T, Inc. 23,440 633,114
BCE, Inc. 21,265 524,608
China Mobile Ltd. 7,935 389,688
Telefonica S.A. ADR 7,660 635,091
Windstream Corp. 48,165 487,911
- --------------------------------------------------------------------------------
2,670,412
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 10.6%
Colgate-Palmolive Co. 9,330 711,693
Kraft Foods, Inc. - Class A 23,700 622,599
Procter & Gamble Co. 11,910 689,827
Unilever N.V. 17,270 498,412
- --------------------------------------------------------------------------------
2,522,531
- --------------------------------------------------------------------------------
FINANCIALS -- 10.1%
Alexandria Real Estate Equities, Inc. 8,605 467,682
Allstate Corp. 17,375 532,023
Bank of Montreal 6,530 330,679
HCP, Inc. 16,030 460,702
HSBC Holdings PLC ADR 10,730 615,365
- --------------------------------------------------------------------------------
2,406,451
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 8.4%
Microchip Technology, Inc. 25,005 662,633
Paychex, Inc. 16,020 465,381
Taiwan Semiconductor Manufacturing
Co. Ltd. ADR 57,193 626,835
Tele Norte Leste Participacoes ADR 12,495 234,781
- --------------------------------------------------------------------------------
1,989,630
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.9%
Genuine Parts Co. 14,600 555,676
McDonald's Corp. 9,850 562,140
Thomson Reuters Corp. 15,360 515,635
- --------------------------------------------------------------------------------
1,633,451
- --------------------------------------------------------------------------------
INDUSTRIALS -- 2.1%
R. R. Donnelley & Sons Co. 23,350 496,421
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $23,311,069
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 1.7%
Touchstone Institutional
Money Market Fund^ 399,062 $ 399,062
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.8%
(Cost $24,283,541) $23,710,131
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% 38,642
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $23,748,773
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
PLC - Public Limited Company
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Common Stocks $23,311,069 $ -- $ -- $23,311,069
Mutual Fund 399,062 -- -- 399,062
===========
$23,710,131
See accompanying notes to financial statements.
82
- --------------------------------------------------------------------------------
Portfolio of Investments
Sands Capital Select Growth Fund - September 30, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 97.4% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 30.9%
Apple, Inc.* 156,600 $ 29,028,942
Broadcom Corp. - Class A* 273,600 8,396,784
FLIR Systems, Inc.* 250,700 7,012,079
Google, Inc. - Class A* 48,100 23,850,385
QUALCOMM, Inc. 412,500 18,554,250
Salesforce.com, Inc.* 292,500 16,652,025
Visa, Inc. - Class A 281,700 19,468,287
VMware, Inc.* 150,100 6,029,517
- --------------------------------------------------------------------------------
128,992,269
- --------------------------------------------------------------------------------
HEALTH CARE -- 21.9%
Allergan, Inc. 324,400 18,412,944
Genzyme Corp.* 382,500 21,699,225
Illumina, Inc.* 78,516 3,336,930
Intuitive Surgical, Inc.* 91,600 24,022,100
Mindray Medical International Ltd. ADR 175,900 5,741,376
Stryker Corp. 164,700 7,482,321
Varian Medical Systems, Inc.* 243,600 10,262,868
- --------------------------------------------------------------------------------
90,957,764
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 15.0%
Amazon.com, Inc.* 252,100 23,536,056
Las Vegas Sands Corp.* 557,600 9,389,984
NIKE, Inc. - Class B 179,300 11,600,710
Staples, Inc. 325,529 7,558,783
Starbucks Corp.* 493,700 10,194,905
- --------------------------------------------------------------------------------
62,280,438
- --------------------------------------------------------------------------------
ENERGY -- 14.1%
FMC Technologies, Inc.* 326,700 17,066,808
National-Oilwell Varco, Inc.* 547,200 23,600,736
Schlumberger Ltd. 302,100 18,005,160
- --------------------------------------------------------------------------------
58,672,704
- --------------------------------------------------------------------------------
FINANCIALS -- 7.5%
Charles Schwab Corp. (The) 255,850 4,899,528
CME Group, Inc. 35,000 10,786,650
IntercontinentalExchange, Inc.* 159,300 15,482,367
- --------------------------------------------------------------------------------
31,168,545
- --------------------------------------------------------------------------------
MATERIALS -- 4.0%
Monsanto Co. 214,000 16,563,600
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 2.8%
America Movil SAB de C.V. ADR 263,600 11,553,588
- --------------------------------------------------------------------------------
INDUSTRIALS -- 1.2%
Iron Mountain, Inc.* + 191,600 5,108,056
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 405,296,964
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 6.0%
Invesco AIM Liquid Assets Portfolio ** 5,242,697$ 5,242,697
Touchstone Institutional
Money Market Fund^ 19,564,025 19,564,025
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 24,806,722
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 103.4%
(Cost $346,260,354) $ 430,103,686
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.4%) (13,985,799)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 416,117,887
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan, as of September 30, 2009, was $5,036,767.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
ADR - American Depository Receipt
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Common Stocks $405,296,964 $ -- $ -- $405,296,964
Mutual Funds 24,806,722 -- -- 24,806,722
============
$430,103,686
See accompanying notes to financial statements.
83
- --------------------------------------------------------------------------------
Portfolio of Investments
Short Duration Fixed Income Fund - September 30, 2009
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 24.6%
$ 475,929 FHLMC CMO/REMIC Ser 2510,
Class TA, 4.000%, 6/15/32 $ 490,505
341,249 FHLMC CMO/REMIC Ser 2575,
Class QP, 4.500%, 11/15/31 351,834
1,137,139 FHLMC CMO/REMIC Ser 2590,
Class UL, 3.750%, 3/15/32 1,168,475
249,672 FHLMC CMO/REMIC Ser 2892,
Class A, 5.000%, 5/15/21 256,021
635,845 FHLMC CMO/REMIC Ser 3138,
Class PA, 5.500%, 2/15/27 657,136
508,033 FHLMC CMO/REMIC Ser 3178,
Class MA, 6.000%, 10/15/26 518,456
3,115 FNMA CMO/REMIC Ser 1999-15,
Class PC, 6.000%, 9/25/18 3,133
707,298 FNMA CMO/REMIC Ser 2002-71,
Class AP, 5.000%, 11/25/32 745,830
652,666 FNMA CMO/REMIC Ser 2003-119,
Class PU, 4.000%, 11/25/33 673,237
430,284 FNMA CMO/REMIC Ser 2003-19,
Class ME, 4.000%, 1/25/33 440,119
624,777 FNMA CMO/REMIC Ser 2003-42,
Class CA, 4.000%, 5/25/33 642,796
205,478 FNMA CMO/REMIC Ser 2003-66,
Class AP, 3.500%, 11/25/32 206,415
113,504 FHLMC Pool #C66916, 7.000%, 5/1/32 124,434
108,822 FHLMC Pool #D94598, 6.500%, 4/1/21 117,932
60,813 FHLMC Pool #E97227, 7.000%, 9/1/14 62,231
7,206 FHLMC Pool #G10446, 6.500%, 2/1/11 7,398
137,899 FHLMC Pool #G30085, 7.500%, 10/1/17 156,157
4,399 FNMA Pool #250477, 6.000%, 1/1/11 4,560
314 FNMA Pool #303096, 7.500%, 12/1/09 316
52,026 FNMA Pool #313429, 7.000%, 3/1/12 54,056
97,519 FNMA Pool #323441, 7.000%, 12/1/13 100,131
144,221 FNMA Pool #323832, 7.500%, 7/1/29 161,444
8,569 FNMA Pool #334593, 7.000%, 5/1/24 9,440
252,810 FNMA Pool #546474, 7.000%, 1/1/15 266,219
29 FNMA Pool #6222, 9.000%, 4/1/16 29
226,693 FNMA Pool #665773, 7.500%, 6/1/31 253,639
17,171 GNMA ARM Pool #8426 (A),
4.125%, 10/1/09 17,594
4,539 GNMA Pool #2707, 5.500%, 1/20/14 4,788
3,723 GNMA Pool #2802, 5.500%, 7/20/14 3,928
60,056 GNMA Pool #2843, 5.500%, 11/20/14 63,351
64,922 GNMA Pool #344233, 8.000%, 2/15/23 73,412
127,978 GNMA Pool #345123, 8.000%, 12/15/23 144,714
19,217 GNMA Pool #462486, 6.500%, 1/15/13 20,601
41,941 GNMA Pool #569337, 6.500%, 4/15/22 44,416
57,157 GNMA Pool #578189, 6.000%, 2/15/32 60,997
72,376 GNMA Pool #780322, 8.000%, 11/15/22 81,559
33,032 GNMA Pool #780327, 8.000%, 11/15/17 36,181
193,998 GNMA Pool #780604, 7.000%, 7/15/12 203,794
72,872 GNMA Pool #814, 8.000%, 8/20/17 80,241
731,530 GNMA CMO/REMIC Ser 2002-72,
Class AB, 4.500%, 10/20/32 762,373
430,000 GNMA, Ser 2004-12, Class BA,
4.807%, 8/16/32 447,911
375,967 GNMA, Ser 2004-43, Class A,
2.822%, 12/16/19 379,913
170,078 GNMA, Ser 2004-6, Class B,
3.949%, 7/16/33 175,731
128,167 GNMA, Ser 2004-9, Class A,
3.360%, 8/16/22 129,086
370,058 GNMA, Ser 2005-12, Class A,
4.044%, 5/16/21 378,048
296,310 GNMA, Ser 2005-76, Class A,
3.963%, 5/16/30 305,836
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $10,886,417
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 23.4%
CONSUMER DISCRETIONARY -- 2.3%
620,000 CVS Caremark Corp. (A), .661%, 12/1/09 620,449
140,000 Kroger Co., 6.800%, 4/1/11 149,937
225,000 Ryder System, Inc., 5.950%, 5/2/11 234,067
- --------------------------------------------------------------------------------
1,004,453
- --------------------------------------------------------------------------------
FINANCIALS -- 13.4%
350,000 American Express Bank (A),
.394%, 10/12/09 326,977
150,000 Bank of New York Mellon,
5.125%, 11/1/11 159,651
315,000 Bank of New York Mellon,
4.950%, 11/1/12 341,311
210,000 Fifth Third Bank, 4.200%, 2/23/10 211,676
235,000 General Electric Capital Corp. (A),
.510%, 11/17/09 229,153
280,000 Goldman Sachs Group, Inc.,
6.875%, 1/15/11 297,316
275,000 Hudson United Bank, 7.000%, 5/15/12 295,948
300,000 Metlife of Connecticut Euro MTN (A),
.759%, 10/15/09 281,259
295,000 MONY Group, Inc., 8.350%, 3/15/10 302,270
255,000 Morgan Stanley, 5.625%, 1/9/12 270,198
270,000 National City Bank of Kentucky,
6.300%, 2/15/11 281,359
120,000 New York Life Global Funding,
5.250%, 10/16/12 128,549
365,000 Northern Trust Corp., 5.300%, 8/29/11 389,858
450,000 PNC Funding Corp., 2.300%, 6/22/12 458,079
270,000 State Street Corp., 7.650%, 6/15/10 279,246
260,000 Suntrust Bank, 6.375%, 4/1/11 269,373
300,000 Trustreet Properties, Inc., 7.500%, 4/1/15 319,929
300,000 USAA Capital Corp., 4.640%, 12/15/09 300,810
500,000 Wells Fargo & Co., MTN,
3.980%, 10/29/10 509,436
275,000 Xlliac Global Funding, 4.800%, 8/10/10 273,936
- --------------------------------------------------------------------------------
5,926,334
- --------------------------------------------------------------------------------
84
- --------------------------------------------------------------------------------
Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 23.4% (CONTINUED)
HEALTH CARE -- 3.0%
$ 325,000 Baxter Finco BV, 4.750%, 10/15/10 $ 337,819
280,000 Beckton Dickinson, 7.150%, 10/1/09 280,000
330,000 Express Scripts, Inc., 5.250%, 6/15/12 350,308
360,000 Hospira, Inc., 5.550%, 3/30/12 382,020
- --------------------------------------------------------------------------------
1,350,147
- --------------------------------------------------------------------------------
INDUSTRIALS -- 1.0%
225,000 Cooper US, Inc., 5.250%, 11/15/12 243,733
175,000 Tyco International Finance,
6.375%, 10/15/11 188,650
- --------------------------------------------------------------------------------
432,383
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.5%
200,000 Hewlett-Packard Co., 2.250%, 5/27/11 203,735
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.9%
233,415 BellSouth Telecommunications,
6.300%, 12/15/15 251,467
245,000 Comcast Cable Communications,
6.750%, 1/30/11 260,535
150,000 Telus Corp., 8.000%, 6/1/11 163,214
175,000 Verizon New England, Inc.,
6.500%, 9/15/11 188,167
- --------------------------------------------------------------------------------
863,383
- --------------------------------------------------------------------------------
UTILITIES -- 1.3%
300,000 NSTAR Electric Co., 7.800%, 5/15/10 311,334
270,000 Sempra Energy, 7.950%, 3/1/10 277,630
- --------------------------------------------------------------------------------
588,964
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $10,369,399
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.4%
500,000 FHLMC, 2.000%, 2/25/11 502,750
260,000 FNMA, 5.250%, 8/1/12 277,870
189,590 Petrodrill Four Ltd., 4.240%, 1/15/16 198,683
157,505 Petrodrill Four Ltd., 4.390%, 4/15/16 165,192
254,776 SBA, Ser 1998-20L, Class 1,
5.800%, 12/1/18 270,721
258,574 SBA, Ser 2002-20A, Class 1,
6.140%, 1/1/22 279,316
228,661 SBA, Ser 2002-20C, Class 1,
6.070%, 3/1/22 246,889
226,472 SBA, Ser 2002-20J, Class 1,
4.750%, 10/1/22 237,570
237,951 SBA, Ser 2003-20E, Class 1,
4.640%, 5/1/23 248,992
277,285 SBA, Ser 2004-20B, Class 1,
4.720%, 2/1/24 291,023
270,697 SBA, Ser 2005-20G, Class 1,
4.750%, 7/1/25 286,083
199,426 SBA, Ser 2006-P10A, Class 1,
5.408%, 2/10/16 211,270
336,168 SBA, Ser 2007-10E, Class 1,
5.250%, 9/1/17 360,101
324,096 SBA, Ser 2008-10B, Class 1,
4.580%, 3/1/18 342,695
216,995 WHC-IRS Trust, 6.980%, 5/15/15 239,239
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 4,158,394
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 8.1%
949,798 U.S. Treasury Inflation Indexed
Bond, 1.875%, 7/15/13 981,259
500,000 U.S. Treasury Note, 2.375%, 8/31/10 509,024
750,000 U.S. Treasury Note, .875%, 2/28/11 752,871
500,000 U.S. Treasury Note, 4.125%, 8/31/12 539,258
800,000 U.S. Treasury Note, 2.750%, 10/31/13 825,625
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 3,608,037
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 1.7%
PENNSYLVANIA -- 1.7%
750,000 Commonwealth Fing Auth RB,
Ser A, 3.860%, 6/1/11 $ 770,483
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 31.4%
480,000 American Express Credit Account
MTN, Ser 2005-4, Class A (A),
.313%, 10/15/09 470,148
183,746 Bae Systems 2001 Asset Trust,
6.664%, 9/15/13 182,357
250,293 Banc of America Commercial
Mortgage, Inc., Ser 2000-2,
Class A2, 7.197%, 9/15/32 253,027
260,000 Bank of America Auto Trust, Ser
2008-1A, Class A3A, 4.970%, 9/20/12 269,162
175,000 CarMax Auto Owner Trust, Ser
2006-2, Class B, 5.310%, 4/16/12 179,137
217,183 Caterpillar Financial Asset Trust,
Ser 2008-A, Class A2B (A),
1.396%, 10/25/09 217,272
133,568 Centerpoint Energy Transition
Bond, Ser 2005-A, Class A2,
4.970%, 8/1/14 140,514
270,000 Chase Issuance Trust, Ser 2007-A17,
Class A, 5.120%, 10/15/14 292,389
430,000 Chase Issuance Trust, Ser 2008-A11,
Class A11, 5.400%, 7/15/15 472,410
305,000 Chase Issuance Trust, Ser 2009-A3,
Class A3, 2.400%, 6/17/13 310,007
395,526 Chase Manhattan Auto Owner
Trust, Ser 2006-B, Class A4,
5.110%, 4/15/14 406,314
85
- --------------------------------------------------------------------------------
Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 31.4% (CONTINUED)
$ 300,000 Chrysler Financial Auto Securitization,
Ser 2009-A, Class A3,
2.820%, 1/15/16 $ 305,962
1,500,000 CNH Equipment Trust, Ser 2008-B,
Class A3B (A), 1.643%, 10/15/09 1,507,079
360,667 Community Program Loan Trust,
Ser 1987-A, Class A4,
4.500%, 10/1/18 362,302
325,000 Crown Castle Towers LLC, Ser
2005-1A, Class AFX, 4.643%, 6/15/35 325,000
170,000 Crown Castle Towers LLC, Ser
2005-1A, Class B, 4.878%, 6/15/35 170,000
225,000 Crown Castle Towers LLC, Ser
2006-1A, Class AFX,
5.245%, 11/15/36 225,000
125,000 Crown Castle Towers LLC, Ser
2006-1A, Class B, 5.362%, 11/15/36 125,000
425,000 Discover Card Master Trust, Ser
2008-A3, Class A3, 5.100%, 10/15/13 446,496
145,000 First Union National Bank
Commercial Mortgage, Ser
2001-C2, Class A2, 6.223%, 12/12/33 152,051
442,674 First Union National Bank
Commerical Mortgage, Ser
2001-C2, Class A2, 6.663%, 1/12/43 462,880
234,633 Ford Credit Auto Owner Trust,
Ser 2007-B, Class A3A,
5.150%, 11/15/11 240,152
140,000 Ford Credit Auto Owner Trust,
Ser 2009-B, Class A4,
4.942%, 7/15/14 147,112
360,000 GE Capital Commercial Mortgage
Corp., Ser 2001-3, Class A2,
6.070%, 6/10/38 379,618
300,000 GE Capital Credit Card Master
Note Trust, Ser 2005-3, Class A,
3.690%, 7/15/15 303,299
320,000 GE Capital Credit Card Master
Note Trust, Ser 2009-2, Class A,
4.130%, 6/15/13 325,375
150,000 GE Captial Commercial Mortgage
Corp., Ser 2001-1, Class A2,
6.531%, 5/15/33 156,316
116,255 GMAC Commercial Mortgage
Securities, Inc., Ser 2000-C1,
Class A2, 7.724%, 3/15/33 116,724
888,307 Harley-Davidson Motorcycle Trust,
Ser 2006-1, Class A2,
5.040%, 10/15/12 914,937
180,000 John Deere Owner Trust, Ser 2007-A,
Class A4, 5.070%, 4/15/14 184,438
284,905 LB-UBS Commercial Mortgage
Trust, Ser 2000-C3, Class A2,
7.950%, 5/15/25 287,160
315,000 LB-UBS Commerical Mortgage
Trust, Ser 2003-C7, Class A3,
4.559%, 9/15/27 319,065
211,546 Louisiana Public Facilities Authority,
Ser 2008-Ell, Class A1,
4.500%, 2/1/14 214,920
307,513 Merrill Lynch Mortgage Investors
Trust, Ser 1998-C1, Class A3,
6.720%, 11/15/26 322,493
309,020 Morgan Stanley Capital I,
Ser 2007-HQ11, Class A1,
5.246%, 2/12/44 314,263
440,000 Nissan Auto Lease Trust, Ser 2009-A,
Class A4, 3.510%, 11/17/14 451,786
400,000 PG&E Energy Recovery Funding LLC,
Ser 2005-1, Class A4,
4.370%, 6/25/14 420,410
126,193 PG&E Energy Recovery Funding LLC,
Ser 2005-2, Class A2,
5.030%, 3/25/14 132,645
143,349 RSB Bondco LLC, Ser 2007-A,
Class A1, 5.470%, 10/1/14 152,182
69,960 Salomon Brothers Mortgage
Securities VII, Ser 2000-C1,
Class A2, 7.520%, 12/18/09 70,129
90,000 SBA CMBS Trust, Ser 2006-1A,
Class A, 5.314%, 11/15/36 89,550
375,000 Volkswagen Auto Lease Trust,
Ser 2009-A, Class A3,
3.410%, 4/16/12 385,809
239,000 Volkswagen Auto Loan Enhanced
Trust, Ser 2008-1, Class A3,
4.500%, 7/20/12 246,491
294,152 Wells Fargo Mortgage Backed
Securities, Ser 2006-16,
Class A12, 5.000%, 11/25/36 286,337
180,000 World Financial Network Credit
Card Master, Ser 2009-B, Class A,
3.790%, 5/16/16 182,250
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES $13,917,968
- --------------------------------------------------------------------------------
86
- --------------------------------------------------------------------------------
Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 0.9%
403,523 Touchstone Institutional Money
Market Fund^ $ 403,523
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.5%
(Cost $43,100,243) $44,114,221
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 0.5% 226,375
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $44,340,596
================================================================================
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2009.
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
MTN - Medium Term Note
RB - Revenue Bond
REMIC - Real Estate Mortgage Investment Conduit
SBA - Small Business Administration
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
U.S. Government
Mortgage-Backed
Obligations $ -- $10,886,417 $ -- $10,886,417
Corporate Bonds -- 10,369,399 -- 10,369,399
U.S. Government
Agency
Obligations -- 3,911,505 -- 3,911,505
U.S. Treasury
Obligations -- 3,608,037 -- 3,608,037
Municipal Bonds -- 770,483 -- 770,483
Asset-Backed Securities -- 13,917,968 -- 13,917,968
U.S. Government and
Agency Obligations -- 246,889 -- 246,889
Mutual Fund 403,523 -- -- 403,523
===========
$44,114,221
See accompanying notes to financial statements.
87
- --------------------------------------------------------------------------------
Portfolio of Investments
Small Cap Value Opportunities Fund - September 30, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 100.1% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 32.0%
American Capital Ltd.* + 258,030 $ 833,437
AMERISAFE, Inc.* 27,670 477,308
BioMed Realty Trust, Inc. 75,260 1,038,588
Boston Private Financial Holdings 155,130 1,009,896
Brandywine Realty Trust 146,700 1,619,567
Cash America International, Inc. 40,590 1,224,194
Columbia Banking System, Inc. 38,430 636,017
DCT Industrial Trust, Inc. 175,430 896,447
DuPont Fabros Technology, Inc.* 116,390 1,551,479
Evercore Partners, Inc. 33,410 976,240
First Niagara Financial Group, Inc. + 75,980 936,833
GFI Group, Inc. + 140,200 1,013,646
GLG Partners, Inc.* + 173,030 697,311
Hancock Holding Co. + 29,190 1,096,668
Hilltop Holdings, Inc.* 62,250 763,185
Knight Capital Group, Inc.* 40,820 887,835
MF Global Ltd.* + 169,500 1,232,265
Mid-America Apartment Communities, Inc. 22,790 1,028,513
Nelnet Inc. - Class A* 61,530 765,433
PrivateBancorp, Inc. + 43,480 1,063,521
Prosperity Bancshares, Inc. + 41,850 1,455,962
Signature Bank* 47,410 1,374,890
Sterling Bancshares, Inc. 106,260 776,761
Washington Real Estate Investment Trust + 39,520 1,138,176
Webster Financial Corp. + 98,220 1,224,803
Western Alliance Bancorp.* + 86,750 547,393
Wilshire Bancorp, Inc. + 79,200 581,328
- --------------------------------------------------------------------------------
26,847,696
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 16.9%
ADC Telecommunications, Inc.* 106,950 891,963
Anadigics, Inc. 158,510 746,582
China Security & Surveillance, Inc.* + 106,580 760,981
Cymer, Inc.* 23,180 900,775
Global Cash Access Holdings, Inc.* 82,080 600,005
JDA Software Group, Inc.* 36,980 811,341
JDS Uniphase Corp.* 144,030 1,024,053
Net 1 UEPS Technologies, Inc.* 34,150 715,784
OmniVision Technologies, Inc.* 68,420 1,113,877
Openwave Systems, Inc.* + 353,230 918,398
Polycom, Inc.* 38,670 1,034,423
Teradyne, Inc.* + 107,560 994,930
Unisys Corp.* + 374,410 999,675
United Online 97,340 782,614
VeriFone Holdings, Inc.* + 83,250 1,322,842
Zoran Corp.* 53,980 621,850
- --------------------------------------------------------------------------------
14,240,093
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 13.0%
Ascent Media Corp. - Class A* 34,290 877,824
Carter's, Inc.* 32,910 878,697
Collective Brands, Inc.* + 63,470 1,099,935
Dolan Media Co.* 45,060 540,269
Dress Barn, Inc.* + 47,640 854,185
Lincoln Educational Services Corp.* 26,210 599,685
Ryland Group, Inc. + 42,850 902,850
Service Corp. International 193,010 1,353,000
Shutterfly, Inc.* 44,530 740,534
Sonic Corp.* 101,730 1,125,134
Tractor Supply Co.* + 21,690 1,050,230
Vail Resorts, Inc.* + 26,630 893,170
- --------------------------------------------------------------------------------
10,915,513
- --------------------------------------------------------------------------------
INDUSTRIALS -- 10.6%
ACCO Brands Corp.* 73,380 529,804
Albany International Corp. 33,200 644,080
Belden, Inc. 30,470 703,857
Chicago Bridge & Iron Co. NV* + 35,110 655,855
Deluxe Corp. + 56,020 957,942
DynCorp International, Inc. - Class A* 48,670 876,060
Esterline Technologies Corp.* 19,410 761,066
Fushi Copperweld, Inc.* 114,430 968,077
GrafTech International Ltd.* 58,260 856,422
Headwaters, Inc.* 128,650 497,876
The Manitowoc Co., Inc. + 70,720 669,718
Woodward Governor Co. + 30,910 749,877
- --------------------------------------------------------------------------------
8,870,634
- --------------------------------------------------------------------------------
ENERGY -- 7.7%
Bill Barrett Corp.* 29,970 982,716
Bristow Group, Inc.* 29,040 862,198
Golar LNG Ltd.* 122,630 1,356,287
Rosetta Resources, Inc.* 70,470 1,035,204
Stone Energy Corp.* 76,650 1,250,162
Tetra Technologies, Inc.* + 97,910 948,748
- --------------------------------------------------------------------------------
6,435,315
- --------------------------------------------------------------------------------
MATERIALS -- 7.5%
Century Aluminum Co.* + 73,750 689,563
Entegris, Inc.* 105,330 521,384
Horsehead Holding Corp.* 73,120 856,966
Kaiser Aluminum Corp. 30,670 1,115,161
Rock-Tenn Co. 17,490 823,954
Rockwood Holdings, Inc.* 37,370 768,701
RTI International Metals, Inc.* + 61,160 1,523,495
- --------------------------------------------------------------------------------
6,299,224
- --------------------------------------------------------------------------------
UTILITIES -- 5.3%
Avista Corp. 45,400 917,988
California Water Service Group + 24,780 964,933
Cleco Corp. + 36,860 924,449
Northwestern Corp. + 28,410 694,056
PNM Resources, Inc. + 84,670 988,946
- --------------------------------------------------------------------------------
4,490,372
- --------------------------------------------------------------------------------
HEALTH CARE -- 4.1%
Gentiva Health Services, Inc.* 38,160 954,382
Impax Laboratories, Inc.* 130,750 1,142,755
Medicis Pharmaceuticals Corp. - Class A 64,390 1,374,726
- --------------------------------------------------------------------------------
3,471,863
- --------------------------------------------------------------------------------
88
- --------------------------------------------------------------------------------
Small Cap Value Opportunities Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 100.1% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 1.8%
B&G Foods, Inc. - Class A 33,530 $ 274,611
TreeHouse Foods, Inc.* + 35,580 1,269,138
- --------------------------------------------------------------------------------
1,543,749
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.2%
AboveNet, Inc.* 21,080 1,027,861
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 84,142,320
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 23.4%
Invesco AIM Liquid Assets Portfolio ** 18,773,938 18,773,938
Touchstone Institutional
Money Market Fund^ 913,866 913,866
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 19,687,804
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 123.5%
(Cost $88,257,034) $ 103,830,124
LIABILITIES IN EXCESS OF OTHER ASSETS -- (23.5%) (19,783,983)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 84,046,141
================================================================================
* Non-income producing security.
+ All or a portion of the security is on loan. The total value of securities
on loan, as of September 30, 2009, was $17,966,273.
** Represents collateral for securities loaned.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
Common Stocks $84,142,320 $ -- $ -- $ 84,142,320
Mutual Funds 19,687,804 -- -- 19,687,804
============
$103,830,124
See accompanying notes to financial statements.
89
- --------------------------------------------------------------------------------
Portfolio of Investments
Ultra Short Duration Fixed Income Fund - September 30, 2009
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 69.1%
$3,877,678 FHLMC CMO/REMIC Ser 2571,
Class FN (A), .893%, 10/15/09 $ 3,834,409
704,108 FHLMC CMO/REMIC Ser 2575
Class LM, 4.500%, 5/15/32 726,332
1,111,268 FHLMC CMO/REMIC Ser 2586,
Class WA, 4.000%, 12/15/32 1,133,753
905,065 FHLMC CMO/REMIC Ser 2590,
Class UL, 3.750%, 3/15/32 930,005
1,070,812 FHLMC CMO/REMIC Ser 2594,
Class YA, 4.000%, 4/15/23 1,120,701
7,684,660 FHLMC CMO/REMIC Ser 2625,
Class IO, 5.000%, 12/15/31 749,142
2,256,822 FHLMC CMO/REMIC Ser 2660,
Class PB, 5.000%, 8/15/26 2,314,286
310,290 FHLMC CMO/REMIC Ser 2682,
Class HG, 4.000%, 4/15/17 318,264
2,554,102 FHLMC CMO/REMIC Ser 2770,
Class FH (A), .643%, 10/15/09 2,515,340
2,247,045 FHLMC CMO/REMIC Ser 2892,
Class A, 5.000%, 5/15/21 2,304,193
199,128 FHLMC CMO/REMIC Ser 2925,
Class CF (A), .743%, 10/15/09 195,805
1,958,372 FHLMC CMO/REMIC Ser 3033,
Class AT, 5.000%, 1/15/27 1,996,220
717,162 FHLMC CMO/REMIC Ser 3033,
Class BY (A), 2.511%, 10/1/09 712,395
1,142,720 FHLMC CMO/REMIC Ser 3073,
Class LA, 5.000%, 12/15/17 1,172,231
1,930,857 FHLMC CMO/REMIC Ser 3137,
Class PJ, 5.125%, 12/15/13 1,941,573
1,095,843 FHLMC CMO/REMIC SER 3178,
Class MA, 6.000%, 10/15/26 1,118,326
1,314,721 FHLMC CMO/REMIC Ser 3196,
Class PA, 5.250%, 8/15/11 1,366,637
456,423 FHLMC Pool #1H2524 (A),
4.062%, 10/1/09 470,921
1,188,019 FHLMC Pool #1L1288 (A),
3.397%, 10/1/09 1,205,704
2,614,394 FHLMC Pool #1Q0187 (A),
5.003%, 10/1/09 2,730,823
798,398 FHLMC Pool #847795 (A),
4.034%, 10/1/09 816,773
714,139 FHLMC Pool #848088 (A),
4.486%, 10/1/09 728,382
54,088 FHLMC Pool #B15413, 8.000%, 3/1/11 55,589
28,259 FHLMC Pool #E64944, 7.000%, 7/1/11 29,478
226,011 FHLMC Pool #G11072, 7.500%, 12/1/15 244,689
448,263 FHLMC Pool #M80853, 3.000%, 9/1/10 456,106
3,123,065 FHLMC Pool#781515 (A),
2.752%, 10/1/09 3,192,720
1,259,511 FHLMC, Ser 2705, Class LB,
4.500%, 9/15/26 1,287,446
1,034,537 FNMA CMO/REMIC Ser 2003-106,
Class WC, 4.500%, 8/25/18 1,054,456
1,237,450 FNMA CMO/REMIC Ser 2003-119,
Class PU, 4.000%, 11/25/33 1,276,451
492,696 FNMA CMO/REMIC Ser 2003-19,
Class ME, 4.000%, 1/25/33 503,958
288,963 FNMA CMO/REMIC Ser 2003-27,
Class PC, 4.500%, 5/25/26 289,387
568,382 FNMA CMO/REMIC Ser 2003-33,
Class AM, 4.250%, 5/25/33 597,180
808,934 FNMA CMO/REMIC Ser 2003-33,
Class AU, 4.000%, 3/25/33 829,777
541,679 FNMA CMO/REMIC Ser 2003-34,
Class AD, 4.000%, 1/25/32 551,809
3,844,103 FNMA CMO/REMIC Ser 2003-69,
Class NF (A), 1.761%, 10/1/09 3,793,132
3,820,805 FNMA CMO/REMIC Ser 2003-81,
Class FE (A), .746%, 10/25/09 3,733,073
500,000 FNMA CMO/REMIC Ser 2003-81,
Class NY, 4.500%, 9/25/16 520,599
2,917,487 FNMA CMO/REMIC Ser 2004-96,
Class LF (A), 1.246%, 10/25/09 2,896,867
285,464 FNMA CMO/REMIC Ser 2005-108,
Class GU, 5.750%, 7/25/35 286,392
672,924 FNMA CMO/REMIC Ser 2006-2,
Class GH, 5.500%, 6/25/32 687,575
1,006,302 FNMA CMO/REMIC Ser 2006-73,
Class PJ, 6.000%, 2/25/28 1,041,723
848,603 FNMA CMO/REMIC Ser 2007-9,
Class YA, 5.500%, 3/25/37 886,850
3,085,441 FNMA CMO/REMIC Ser 2008-35,
Class IO, 4.500%, 4/25/23 311,257
513,194 FNMA Pool #1B2629 (A),
4.565%, 10/1/09 526,134
23,525 FNMA Pool #253472, 7.500%, 9/1/10 23,997
90,288 FNMA Pool #519992, 7.000%, 10/1/14 96,823
106,315 FNMA Pool #534851, 7.500%, 4/1/15 115,431
93,937 FNMA Pool #535219, 7.500%, 3/1/15 101,991
10,900 FNMA Pool #535635, 8.500%, 6/1/12 11,182
401,574 FNMA Pool #555646, 7.500%, 9/1/16 426,982
874,509 FNMA Pool #679742 (A),
4.143%, 10/1/09 874,856
474,887 FNMA Pool #681642 (A),
4.442%, 10/1/09 488,126
605,952 FNMA Pool #735539 (A),
3.935%, 10/1/09 614,656
375,263 FNMA Pool #743207 (A),
4.590%, 10/1/09 388,305
385,704 FNMA Pool #784365 (A),
3.298%, 10/1/09 394,314
600,339 FNMA Pool #804001 (A),
4.440%, 10/1/09 612,518
592,571 FNMA Pool #806765 (A),
4.529%, 10/1/09 611,137
90
- --------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 69.1% (CONTINUED)
$ 397,324 FNMA Pool #809897 (A),
4.550%, 10/1/09 $ 409,249
1,176,007 FNMA Pool #810896 (A),
4.758%, 10/1/09 1,203,143
1,026,064 FNMA Pool #813714 (A),
3.725%, 10/1/09 1,029,658
5,640,433 FNMA Pool #813844 (A),
4.835%, 10/1/09 5,780,971
4,008,142 FNMA Pool #825395 (A),
4.826%, 10/1/09 4,113,108
511,932 FNMA Pool #828480 (A), 4
.965%, 10/1/09 533,865
403,509 FNMA Pool #888548 (A),
4.747%, 10/1/09 416,285
973,769 GNMA ARM Pool #80889 (A),
3.000%, 10/1/09 976,355
24,907 GNMA ARM Pool #8103 (A),
4.500%, 10/1/09 25,444
31,596 GNMA ARM Pool #8287 (A),
4.125%, 10/1/09 32,413
42,462 GNMA ARM Pool #8297 (A),
4.125%, 10/1/09 43,566
75,843 GNMA ARM Pool #8333 (A),
4.500%, 10/1/09 77,769
46,850 GNMA ARM Pool #8345 (A),
4.500%, 10/1/09 48,112
62,513 GNMA ARM Pool #8366 (A),
4.375%, 10/1/09 64,208
2,400 GNMA ARM Pool #8404 (A),
4.625%, 10/1/09 2,480
27,102 GNMA ARM Pool #8405 (A),
4.625%, 10/1/09 27,934
5,431 GNMA ARM Pool #8462 (A),
4.375%, 10/1/09 5,584
22,603 GNMA ARM Pool #8489 (A),
4.500%, 10/1/09 23,239
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS $ 75,028,564
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 10.5%
681,158 American Home Mortgage
Investment Trust, Ser 2005-2,
Class 5A3, 5.077%, 9/25/35 664,637
1,009,534 Banc of America Mortgage
Securities, Ser 2004-3, Class 1A23,
4.500%, 4/25/34 1,007,659
1,359,050 Bear Stearns Commercial
Mortgage Securities, Ser 2004-ESA,
Class K, 7.320%, 10/15/32 1,396,759
1,500,000 CNH Equipment Trust Ser 2008-B,
Class A3B (A), 1.643%, 10/15/09 1,507,078
705,561 First Horizon Mortgage Pass-Through
Trust Ser 2005-2, Class 1A1,
5.500%, 5/25/35 705,230
963,606 GE Capital Commercial Mortgage
Corp., Ser 2001-3, Class A1,
5.560%, 6/10/38 990,517
466,361 Harley-Davidson Motorcycle Trust
Ser 2006-1, Class A2,
5.040%, 10/15/12 480,341
1,114,647 Madison Avenue Manufactured
Housing Ser 2002-A, Class A1 (A),
.596%, 10/25/09 1,043,400
503,846 Nissan Auto Lease Trust Ser 2008-A,
Class A2B (A), 1.793%, 10/15/09 503,846
397,290 Salomon Brothers Mortgage
Securities, Ser 2000-C2,
Class A2, 7.455%, 7/18/33 401,555
1,470,385 Wells Fargo Mortgage Backed
Securities, Ser 2003-17,
Class 1A10, 5.250%, 1/25/14 1,484,038
1,176,610 Wells Fargo Mortgage Backed
Securities, Ser 2006-16, Class A12,
5.000%, 11/25/36 1,145,349
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES $ 11,330,409
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.8%
3,000,000 Overseas Private Investment
Corp. (A), .220%, 10/7/09 $ 3,000,000
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 5.3%
FINANCIALS -- 3.3%
1,000,000 American Express Credit Co., MTN (A),
1.646%, 10/27/09 1,002,052
1,000,000 PNC Funding Corp., 4.500%, 3/10/10 1,011,213
1,600,000 Wells Fargo & Co., MTN,
3.980%, 10/29/10 1,630,196
- --------------------------------------------------------------------------------
3,643,461
- --------------------------------------------------------------------------------
INDUSTRIALS -- 1.1%
1,200,000 BAE Systems Holdings, Inc.,
4.750%, 8/15/10 1,220,116
- --------------------------------------------------------------------------------
MATERIALS -- 0.9%
920,000 Enterprise Products, 4.950%, 6/1/10 934,344
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS $ 5,797,921
- --------------------------------------------------------------------------------
91
- --------------------------------------------------------------------------------
Ultra Short Duration Fixed Income Fund (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 3.5%
CONNECTICUT -- 0.9%
$1,000,000 Waterbury Taxable Pension,
2.707%, 12/1/10 $ 1,001,870
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 2.6%
2,750,000 Commonwealth Fing Auth PA
Rev, Ser A, 3.860%, 6/1/11 2,825,103
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $ 3,826,973
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 8.4%
9,126,534 Touchstone Institutional
Money Market Fund^ $ 9,126,534
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.6%
(Cost $107,812,669) $108,110,401
OTHER ASSETS IN
EXCESS OF LIABILITIES -- 0.4% 441,856
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $108,552,257
================================================================================
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
(A) Variable rate security - the rate reflected is the rate in effect on
September 30, 2009.
ARM - Adjustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
OTHER INFORMATION:
The inputs or methodology used for valuing securities may not be an indication
of the risk associated with investing in those securities. For more information
on valuation inputs, and their aggregation into the levels used in the table
below, please refer to the security valuation section in the accompanying notes
to financial statements.
VALUATION INPUTS AT REPORTING DATE:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
U.S. Government
Mortgage-Backed
Obligations $ -- $75,028,564 $ -- $ 75,028,564
Asset-Backed
Securities -- 11,330,409 -- 11,330,409
U.S. Government
Agency
Obligations -- 3,000,000 -- 3,000,000
Corporate Bonds -- 5,797,921 -- 5,797,921
Municipal Bonds -- 3,826,973 -- 3,826,973
Mutual Fund 9,126,534 -- -- 9,126,534
=============
$ 108,110,401
See accompanying notes to financial statements.
92
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of Touchstone Funds Group Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Touchstone Funds Group Trust, comprised of
Touchstone Intermediate Fixed Income Fund (formerly, the Touchstone Clover Core
Fixed Income Fund), Touchstone Short Duration Fixed Income Fund, Touchstone
Ultra Short Duration Fixed Income Fund, Touchstone Small Cap Value Opportunities
Fund, Touchstone Healthcare & Biotechnology Fund (collectively, the "Former
Turner Funds"), Touchstone Mid Cap Fund, Touchstone Sands Capital Select Growth
Fund and Touchstone Premium Yield Equity Fund as of September 30, 2009, and the
related statements of operations for the year then ended and the statements of
changes in net assets for each of the two years in the period then ended and
financial highlights for each of the four years in the period then ended, and
the accompanying statement of assets and liabilities, including the portfolio of
investments of Touchstone International Growth Fund as of September 30, 2009,
and the related statements of operations for the year then ended and the
statement of changes in net assets and financial highlights for each of the two
years or periods in the period then ended (collectively, the "Funds"). These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the year ended September 30, 2005 of the Former Turner Funds and
Touchstone Mid Cap Fund were audited by other auditors whose report dated
November 29, 2005, expressed an unqualified opinion on those financial
highlights. The financial highlights for each of the four years in the period
ended December 31, 2007 of the Touchstone International Growth Fund were audited
by other auditors whose report dated February 27, 2008, expressed an unqualified
opinion on those financial statements and financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Funds' internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Funds' internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of September 30, 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 Touchstone Funds Group Trust at September 30,
2009, the results of their operations for the year then ended and the changes in
their net assets for each of the two years in the period then ended and
financial highlights for the years in the period then ended indicated above, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
November 30, 2009
93
- --------------------------------------------------------------------------------
Other Items (Unaudited)
- --------------------------------------------------------------------------------
SUPPLEMENTAL TAX INFORMATION
The information set forth below is for each Fund's fiscal year as required by
federal income tax laws. Shareholders, however, must report distributions on a
calendar year basis for income tax purposes, which may include distributions for
portions of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For corporate shareholders, the following ordinary dividends paid during the
year ended September 30, 2009 qualify for the corporate dividends received
deduction:
International Growth Fund 97%
Mid Cap Fund 95%
Premium Yield Equity Fund 100%
Small Cap Value Opportunities Fund 86%
For the fiscal year ended September 30, 2009, certain dividends paid by each
Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs
and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate
up to the following maximum amounts to be taxed at a maximum rate of 15%.
Complete information will be computed and reported in conjunction with your 2009
Form 1099-DIV.
FUND MAXIMUM QDI
- --------------------------------------------------------------------------------
International GrowthFund $ 1,945
Mid Cap Fund $ 1,033,371
Premium Yield Equity Fund $ 656,380
Small Cap Value Opportunities Fund $ 155,058
PROXY VOTING DISCLOSURE
The Sub-Advisor is responsible for exercising the voting rights associated with
the securities purchased and held by the Funds. A description of the policies
and procedures that the Sub-Advisor uses in fulfilling this responsibility and
information regarding how those proxies were voted during the twelve month
period ended June 30, are available without charge upon request by calling toll
free 1.800.543.0407. These items are also available on the Securities and
Exchange Commission's (the Commission) website at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The Trust files a complete listing of portfolio holdings for each Fund as of the
end of the first and third quarters of each fiscal year on Form N-Q. The
complete listing (i) is available on the Commission's website; (ii) may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC;
and (iii) will be made available to shareholders upon request by calling
1.800.543.0407. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
94
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including reinvested dividends or other distributions; and (2) ongoing
costs, including investment advisory fees; distribution (12b-1) fees; and other
Fund expenses. This example is intended to help you understand your ongoing
costs (in dollars) of investing in the Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six
Months Ended September 30, 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.
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2009 2009 2009 2009*
- ----------------------------------------------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND
Class A Actual 1.56% $ 1,000.00 $ 1,121.70 $ 8.28
Class A Hypothetical 1.56% $ 1,000.00 $ 1,017.26 $ 7.87
Class C Actual 2.31% $ 1,000.00 $ 1,120.70 $ 12.27
Class C Hypothetical 2.31% $ 1,000.00 $ 1,013.50 $ 11.65
INTERMEDIATE FIXED INCOME FUND
Institutional Class Actual 0.40% $ 1,000.00 $ 1,020.00 $ 2.04
Institutional Class Hypothetical 0.40% $ 1,000.00 $ 1,023.04 $ 2.05
INTERNATIONAL GROWTH FUND
Class A Actual 1.35% $ 1,000.00 $ 1,424.40 $ 8.19
Class A Hypothetical 1.35% $ 1,000.00 $ 1,018.31 $ 6.82
Class C Actual 2.11% $ 1,000.00 $ 1,420.50 $ 12.83
Class C Hypothetical 2.11% $ 1,000.00 $ 1,014.47 $ 10.68
Class Y Actual 1.09% $ 1,000.00 $ 1,427.80 $ 6.65
Class Y Hypothetical 1.09% $ 1,000.00 $ 1,019.59 $ 5.53
95
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
2009 2009 2009 2009*
- ----------------------------------------------------------------------------------------------------------------------
MID CAP FUND
Class A Actual 1.15% $ 1,000.00 $ 1,264.10 $ 6.52
Class A Hypothetical 1.15% $ 1,000.00 $ 1,019.31 $ 5.82
Class C Actual 1.91% $ 1,000.00 $ 1,260.10 $ 10.82
Class C Hypothetical 1.91% $ 1,000.00 $ 1,015.50 $ 9.65
Class Z Actual 1.15% $ 1,000.00 $ 1,264.70 $ 6.52
Class Z Hypothetical 1.15% $ 1,000.00 $ 1,019.31 $ 5.82
Institutional Class Actual 0.90% $ 1,000.00 $ 1,266.90 $ 5.11
Institutional Class Hypothetical 0.90% $ 1,000.00 $ 1,020.56 $ 4.56
PREMIUM YIELD EQUITY FUND
Class A Actual 1.20% $ 1,000.00 $ 1,278.20 $ 6.85
Class A Hypothetical 1.20% $ 1,000.00 $ 1,019.06 $ 6.07
Class C Actual 1.94% $ 1,000.00 $ 1,273.50 11.08
Class C Hypothetical 1.94% $ 1,000.00 $ 1,015.33 $ 9.82
Class Y Actual 0.94% $ 1,000.00 $ 1,277.70 $ 5.37
Class Y Hypothetical 0.94% $ 1,000.00 $ 1,020.35 $ 4.76
SANDS CAPITAL SELECT GROWTH FUND
Class Y Actual 1.09% $ 1,000.00 $ 1,476.90 $ 6.77
Class Y Hypothetical 1.09% $ 1,000.00 $ 1,019.60 $ 5.52
Class Z Actual 1.34% $ 1,000.00 $ 1,474.50 $ 8.29
Class Z Hypothetical 1.34% $ 1,000.00 $ 1,018.37 $ 6.77
SHORT DURATION FIXED INCOME FUND
Class Y Actual** 0.48% $ 1,000.00 $ 1,030.20 $ 2.01
Class Y Hypothetical** 0.48% $ 1,000.00 $ 1,018.57 $ 2.00
Class Z Actual 0.74% $ 1,000.00 $ 1,033.30 $ 3.77
Class Z Hypothetical 0.74% $ 1,000.00 $ 1,021.36 $ 3.75
SMALL CAP VALUE OPPORTUNITIES FUND
Class Z Actual 1.50% $ 1,000.00 $ 1,330.00 $ 8.76
Class Z Hypothetical 1.50% $ 1,000.00 $ 1,017.55 $ 7.58
ULTRA SHORT DURATION FIXED INCOME FUND
Class Z Actual 0.69% $ 1,000.00 $ 1,019.00 $ 3.49
Class Z Hypothetical 0.69% $ 1,000.00 $ 1,021.61 $ 3.50
* 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 (May 4, 2009) and held for the entire period through
September 30, 2009.
96
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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 President and CEO of 38 Director of LaRosa's (a
Touchstone Advisors, Inc and retirement at IFS Financial restaurant chain),
303 Broadway President age 75 or until Services, Inc. (a Capital Analysts
Cincinnati, OH she resigns or holding company). Incorporated (an
Year of Birth: 1955 is removed investment advisor and
Trustee since broker-dealer), IFS
2006 Financial Services, Inc.
(a holding company), IFS
Fund Distributors (a
broker-dealer), Integrity
and National Integrity
Life Insurance Co.,
Touchstone Securities
(the Trust's
distributor), Touchstone
Advisors (the Trust's
investment advisor and
administrator), W&S
Brokerage Services (a
broker-dealer) and W&S
Financial Group
Distributors (a
distribution company).
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- -----------------------------------------------------------------------------------------------------------------------------------
Phillip R. Cox Trustee Until President and Chief 38 Director of Cincinnati
105 East Fourth Street retirement at Executive Officer of Bell (a communications
Cincinnati, OH age 75 or until Cox Financial Corp. (a company), Bethesda Inc.
Year of Birth: 1947 he resigns or financial services (a hospital), Timken Co.
is removed company). (a manufacturing
Trustee since company), Diebold (a
2006 technology solutions
company), and Ohio
Business Alliance for
Higher Education.
- -----------------------------------------------------------------------------------------------------------------------------------
H. Jerome Lerner Trustee Until Principal of HJL 38 None
c/o Touchstone Advisors, Inc. retirement at Enterprises (a
303 Broadway age 75 or until privately held
Cincinnati, OH he resigns or investment company).
Year of Birth: 1938 is removed
Trustee since
2007
- -----------------------------------------------------------------------------------------------------------------------------------
Donald C. Siekmann Trustee Until Executive for Duro Bag 38 None
c/o Touchstone Advisors, Inc. retirement at Manufacturing Co. (a
303 Broadway age 75 or until bag manufacturer) from
Cincinnati, OH he resigns or 2002-2008. President
Year of Birth: 1938 is removed of Shor Foundation for
Trustee since Epilepsy Research (a
2006 charitable foundation).
- -----------------------------------------------------------------------------------------------------------------------------------
Robert E. Stautberg Trustee Until Retired Partner of 38 Trustee of Tri-Health
c/o Touchstone Advisors, Inc. retirement at KPMG LLP (a certified Physician Enterprise
303 Broadway age 75 or until public accounting Corporation.
Cincinnati, OH he resigns or firm). Vice President
Year of Birth: 1934 is removed of St. Xavier High
Trustee since School.
2006
- -----------------------------------------------------------------------------------------------------------------------------------
97
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED):
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- -----------------------------------------------------------------------------------------------------------------------------------
John P. Zanotti Trustee Until CEO, Chairman and Director of 38 None
c/o Touchstone retirement at Avaton, Inc. (a wireless
Advisors, Inc. age 75 or until entertainment company) until
303 Broadway he resigns or 2006. President of Cincinnati
Cincinnati, OH is removed Biomedical (a life science and
Year of Birth: 1948 Trustee since economic development company)
2007 from 2003 - 2007. Chairman of
Integrated Media Technologies (a
media company).
- -----------------------------------------------------------------------------------------------------------------------------------
Susan J. Hickenlooper Trustee Until President and Trustee of 38 Trustee of Gateway
c/o Touchstone Advisors, Inc. retirement at Episcopal Retirement Homes Trust (a charitable
303 Broadway age 75 or until Foundation organization),
Cincinnati, OH he resigns or Trustee of
Year of Birth: 1946 is removed Cincinnati Parks
Trustee since Foundation.
2009
- -----------------------------------------------------------------------------------------------------------------------------------
(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 9 series of the Trust, 4 series of
Touchstone Institutional Funds Trust, 4 series of Touchstone Investment
Trust, 6 series of Touchstone Strategic Trust, 4 series of Touchstone
Tax-Free Trust, and 11 variable annuity series of Touchstone Variable
Series Trust.
(4) Each Trustee is also a Trustee of Touchstone Institutional Funds Trust,
Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone
Tax-Free Trust, and Touchstone Variable Series Trust.
98
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS(1):
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE AND LENGTH TOUCHSTONE OTHER
ADDRESS HELD WITH 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. 38 See
Touchstone and Trustee removal or biography
Advisors, Inc. disqualification above.
303 Broadway President since 2004;
Cincinnati, OH President from 2000-2002
Year of Birth: 1955
- -----------------------------------------------------------------------------------------------------------------------------------
Brian E. Hirsch Vice Until resignation, Senior Vice President and 38 None
Touchstone President removal or Chief Compliance Officer of
Advisors, Inc. and Chief disqualification IFS Financial Services, Inc.
303 Broadway Compliance Vice President
Cincinnati, OH Officer since 2003
Year of Birth: 1956
- -----------------------------------------------------------------------------------------------------------------------------------
Steven M. Graziano Vice Until resignation, President of Touchstone 38 None
Touchstone Advisors, Inc. President removal or Advisors, Inc.; Executive Vice
303 Broadway disqualification President of Pioneer
Cincinnati, OH Vice President Investment Management, Head of
Year of Birth: 1954 since 2009 Retail Distribution and
Strategic Marketing 2007 -
2008; Executive Vice President
of Pioneer Investment
Management, Chief Marketing
Officer 2002 - 2007.
- -----------------------------------------------------------------------------------------------------------------------------------
William A. Dent Vice Until resignation, Senior Vice President of 38 None
Touchstone President removal or Touchstone Advisors, Inc.
Advisors, Inc. disqualification
303 Broadway Vice President
Cincinnati, OH since 2004
Year of Birth: 1963
- -----------------------------------------------------------------------------------------------------------------------------------
Gregory A. Harris Vice Until resignation, Vice President-Fund 38 None
Touchstone President removal or Administration of Touchstone
Advisors, Inc. disqualification Investments. Managing
303 Broadway Vice President Director, Fund Project
Cincinnati, OH since 2007 Services, Inc. 1998 - 2007.
Year of Birth: 1968
- -----------------------------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft Controller Until resignation, Chief Financial Officer of IFS 38 None
Touchstone and Treasurer removal or Financial Services, Inc.
Advisors, Inc. disqualification
303 Broadway Controller since 2000
Cincinnati, OH Treasurer since 2003
Year of Birth: 1962
- -----------------------------------------------------------------------------------------------------------------------------------
Jay S. Fitton Secretary Until resignation, Assistant Vice President and 38 None
JPMorgan removal or Senior Counsel at JPMorgan
303 Broadway disqualification Chase Bank, N.A
Cincinnati, OH Secretary since 2006.
Year of Birth: 1970 Assistant Secretary from
2002 - 2006
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Each officer also holds the same office with Touchstone Institutional
Funds Trust, Touchstone Investment Trust, Touchstone Strategic Trust,
Touchstone Tax-Free Trust, and Touchstone Variable Series Trust.
(2) The Touchstone Fund Complex consists of 9 series of the Trust, 4 series of
Touchstone Institutional Funds Trust, 4 series of Touchstone Investment
Trust, 6 series of Touchstone Strategic Trust, 4 series of Touchstone
Tax-Free Trust, and 11 variable annuity series of Touchstone Variable
Series Trust.
99
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[LOGO] TOUCHSTONE INVESTMENTS(R)
303 Broadway, Suite 1100
Cincinnati, OH 45202-4203
- --------------------------------------------------------------------------------
[LOGO] eDelivery
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-56-TFGT-AR-0910
ITEM 2. CODE OF ETHICS.
At the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to its principal executive officer and principal
financial officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. Mr.
Donald Siekmann is the registrant's audit committee financial expert and is an
independent trustee within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. Audit fees totaled approximately $146,880 for the September 30,
2009 fiscal year and approximately $172,700 for the September 30, 2008. 2009
fees include $124,880 of fees associated with the annual audit and filing for
Form N-1A and Form N-SAR, and $22,000 of fees associated with additional filings
of Form N-1A and Form N-14. 2008 fees include $156,700 of fees associated with
the annual audit and filing of Form N-1A and Form N-SAR, and $16,000 of fees
associated with additional filings of Form N-1A and Form N-14.
(b) Audit-Related Fees. Audit-related fees totaled approximately $15,000 for the
September 30, 2009 fiscal year and $6,000 for the September 30, 2008 fiscal year
and consisted of limited internal control testing in fiscal year 2009 and 2008
of the Trust's fund accountant and transfer agent.
(c) Tax Fees. Tax fees totaled approximately $56,200 for the September 30, 2009
fiscal year and $100,600 for the September 30, 2008 fiscal year and consisted of
fees for tax compliance services during both years.
(d) All Other Fees. There were no fees for all other services to the registrant
during the September 30, 2009 or September 30, 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 its sub-advisor) and any entity controlling, controlled by or
under common control with the advisor that provides ongoing services to the
registrant were approximately $56,200 for the fiscal year ended September 30,
2009 and $129,600 for the fiscal year ended September 30, 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.
The Governance Committee will consider shareholder recommendations for
nomination to the Board only in the event that there is a vacancy on the Board.
Shareholders who wish to submit recommendations for nominations to the Board to
fill the vacancy must submit their recommendations in writing to John P.
Zanotti, Chairman of the Governance Committee, c/o Touchstone, 303 Broadway,
Suite 1100, Cincinnati, OH 45202. Shareholders should include appropriate
information on the background and qualifications of any person recommended to
the Governance Committee (e.g., a resume), as well as the candidate's contact
information and a written consent from the candidate to serve if nominated and
elected. Shareholder recommendations for nominations to the Board will be
accepted on an ongoing basis and such recommendations will be kept on file for
consideration in the event of a future vacancy on the Board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's
principal executive officer and principal financial officer have concluded that
the registrant's disclosure controls and procedures are effective as of a date
within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the registrant's second fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The Code of Ethics for Senior Financial Officers was filed on December 9,
2005 with Registrant's N-CSR for the September 30, 2005 fiscal year and is
hereby incorporated by reference.
(a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed
herewith.
(b) Certification required by Item 11(b) of Form N-CSR is filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Touchstone Funds Group Trust
----------------------------
By (Signature and Title)
/s/ Jill T. McGruder
- -----------------------------------------
Jill T. McGruder
President
Date: December 1, 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: December 1, 2009
/s/ Terrie A. Wiedenheft
- -----------------------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: December 1, 2009