N-CSR 1 v096318_ncsr.txt 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 --------------------------------------------- Touchstone Funds Group Trust -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 303 Broadway, Suite 1100, Cincinnati, Ohio 45202 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Jill T. McGruder, 303 Broadway, Suite 1100, Cincinnati, Ohio 45202 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (513) 878-4066 ----------------------------- Date of fiscal year end: 09/30 -------------------- Date of reporting period: 9/30/07 ------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be t 6 0 transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. -------------------------------------------------------------------------------- SEPTEMBER 30, 2007 Annual Report -------------------------------------------------------------------------------- TOUCHSTONE FUNDS GROUP TRUST Touchstone Clover Core Fixed Income Fund Touchstone Diversified Growth Fund Touchstone Diversified Small Cap Value Fund Touchstone Diversified Value Fund Touchstone Family Heritage(R) Fund Touchstone Healthcare and Biotechnology Fund Touchstone International Equity Fund Touchstone Mid Cap Fund Touchstone Pitcairn Taxable Bond Fund Touchstone Sands Capital Select Growth Fund Touchstone Short Duration Fixed Income Fund Touchstone Small Cap Fund Touchstone Small Cap Value Opportunities Fund Touchstone Strategic Value and High Income Fund Touchstone Tax-Exempt Bond Fund Touchstone Ultra Short Duration Fixed Income Fund Touchstone Value Opportunities Fund -------------------------------------------------------------------------------- [LOGO] TOUCHSTONE (R) INVESTMENTS -------------------------------------------------------------------------------- Table of Contents -------------------------------------------------------------------------------- Page -------------------------------------------------------------------------------- Letter from the President 3 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) 4-41 -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Unaudited) 42-44 -------------------------------------------------------------------------------- Statements of Assets and Liabilities 45-54 -------------------------------------------------------------------------------- Statements of Operations 55-59 -------------------------------------------------------------------------------- Statements of Changes in Net Assets 60-70 -------------------------------------------------------------------------------- Financial Highlights 71-94 -------------------------------------------------------------------------------- Notes to Financial Statements 95-119 -------------------------------------------------------------------------------- Portfolios of Investments: -------------------------------------------------------------------------------- Clover Core Fixed Income Fund 120-121 -------------------------------------------------------------------------------- Diversified Growth Fund 122-123 -------------------------------------------------------------------------------- Diversified Small Cap Value Fund 124-125 -------------------------------------------------------------------------------- Diversified Value Fund 126 -------------------------------------------------------------------------------- Family Heritage(R) Fund 127 -------------------------------------------------------------------------------- Healthcare and Biotechnology Fund 128 -------------------------------------------------------------------------------- International Equity Fund 129-135 -------------------------------------------------------------------------------- Mid Cap Fund 136-137 -------------------------------------------------------------------------------- Pitcairn Taxable Bond Fund 138-139 -------------------------------------------------------------------------------- Sands Capital Select Growth Fund 140 -------------------------------------------------------------------------------- Short Duration Fixed Income Fund 141-142 -------------------------------------------------------------------------------- Small Cap Fund 143-144 -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund 145-147 -------------------------------------------------------------------------------- Strategic Value and High Income Fund 148 -------------------------------------------------------------------------------- Tax-Exempt Bond Fund 149-152 -------------------------------------------------------------------------------- Ultra Short Duration Fixed Income Fund 153-154 -------------------------------------------------------------------------------- Value Opportunities Fund 155 -------------------------------------------------------------------------------- Report of Independent Registered Public Accounting Firm 156 -------------------------------------------------------------------------------- Other Items (Unaudited) 157-160 -------------------------------------------------------------------------------- Management of the Trust (Unaudited) 161-164 -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- Letter from the President -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to provide you with the Touchstone Funds Group Trust Annual Report. Inside you will find key financial information, as well as manager commentaries for the twelve months ended September 30, 2007. During the previous twelve months investors contended with concerns related to the weakening housing market, subprime-mortgage problems that roiled financial-services companies worldwide, higher oil prices, the weakening dollar, and the potential for slower economic growth. However, late in the summer investors seemed to be hopeful that the worst of the credit-related problems from the housing and subprime-mortgage markets was over and the Federal Reserve would be aggressive in its effort to keep the economy from sagging into a recession. This view was confirmed as the Fed cut its short-term interest rate by one-half percentage point in September, to 4.75%. This was the first rate reduction in four years and the steepest in nearly five years. This injected the liquidity needed and confidence in the financial markets returned. During the year, the U.S. equity markets were extremely volatile, however, most posted double digit returns for the year. Large cap stocks continued to outperform small cap stocks; growth outperformed value for the first time in seven years. When we examine where the financial markets may be headed in the year to come, we continue to believe that diversification is key to balancing risk and return. We recommend that you work with your financial professional to employ a sound asset allocation strategy that invests in a combination of stock, bond and money market mutual funds to help keep your financial strategy on course. We also suggest maintaining a long-term approach to gain the full potential benefits of investing. Touchstone is committed to providing investors access to proven institutional money managers who act in a sub-advisory capacity. Our sub-advisors are successful investment management firms with demonstrated proficiency in their declared area of expertise. We hope that you will find the enclosed commentaries helpful. We greatly appreciate your continued support. Thank you for including Touchstone as part of your investment plan. Sincerely, /s/ Jill T. McGruder Jill T. McGruder President Touchstone Funds Group Trust 3 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE CLOVER CORE FIXED INCOME FUND SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Clover Core Fixed Income Fund seeks to produce attractive long-term total returns and a high level of current income by investing in a diversified portfolio of bonds. The Fund maintains a laddered maturity structure and a weighted average duration that is consistent with an intermediate bond portfolio. However, individual bonds may have a final maturity from one month to thirty years or more. The Fund managers combine a top down macro economic outlook with individual security selection evaluation and techniques. Factors such as the business cycle, Federal Reserve policy, and credit spreads are taken into account to establish an overall framework for sector allocation and yield curve positioning, as well as the overall posture of the portfolio. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Clover Core Fixed Income Fund was 4.07% for the fiscal year ended September 30, 2007. The total return of the Lehman Aggregate Bond Index was 5.14% for the same period. During the first half of this period, the market experienced a further pay off to riskier assets which was to the detriment of the Fund's relative performance. The Fund began to pick up ground on its benchmark during the summer as a flight to quality took place in the market, which was a short lived trade as September saw risk product recover. Strategies employed for the period succeeded in their primary goal of preserving capital and providing the safe harbor which is expected from a bond portfolio. The assessment that investors were not being adequately compensated for the risk in some of today's securities proved accurate as a significant repricing took place, especially in the area of sub-prime mortgages. While these securities are not a big component of the Fund's benchmark, and therefore did not benefit relative performance, the Fund manager's commitment not to chase yield in this area protected client assets from the negative price movements seen in other investment vehicles. The Fund's defensive posture detracted from returns. We expect this posture to shift somewhat as there is now better value in risk products than there has been in several years. The Fund's underweight to corporate bond duration had the most significant impact to performance from a sector standpoint. Wider corporate bond spreads led to weak performance from the sector which benefited the Fund's relative performance. Special situation holding, SLM Corp 5.375%, due 5/15/14, detracted from performance as it was purchased shortly before market conditions and company specific issues caused risk premiums to rise on the company's debt. We believe this to be a short term factor and that this bond will be one of the key value added holdings of the Fund over time. The Fund's overweight in long duration Treasury bonds also hurt performance as yields on 30-year Treasuries were slightly higher while the rest of the curve saw yields drop. The Fund had a significant underweight to the mortgage pass through and corporate bond sector as measured by contribution to duration. While this provides a lower risk profile, we look to add value in key investments which continue to be the Fund's holding in SLM Corp. bonds as well as structured credit floating rate notes. The Fund's recent defensive bias of taking less risk produced lower returns than the benchmark. However, the lower risk seemed like a prudent decision as risk premiums reached record lows as did the transparency in some of today's investment offerings. We anticipate significant challenges for active fixed income managers as we continue to expect low absolute returns from the bond market, especially in comparison to expense ratios. However, the recent market disruption is providing some sources of value for the first time in a long time. 4 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CLOVER CORE FIXED INCOME FUND - CLASS I* AND THE LEHMAN BROTHERS AGGREGATE INDEX [LINE CHART] ---------------------------------------- CLOVER CORE FIXED INCOME FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years 10 Years Class I 4.07% 3.11% 5.23% ---------------------------------------- Clover Core Fixed Income Fund Lehman Brothers Aggregate Index ----------------------------- ------------------------------- Date Balance Date Balance 9/30/97 10,000 9/30/97 10,000 9/30/98 11,132 9/30/98 11,149 9/30/99 10,934 9/30/99 11,108 9/30/00 11,724 9/30/00 11,883 9/30/01 13,128 9/30/01 13,422 9/30/02 14,290 9/30/02 14,576 9/30/03 14,771 9/30/03 15,363 9/30/04 15,210 9/30/04 15,929 9/30/05 15,558 9/30/05 16,375 9/30/06 16,003 9/30/06 16,976 9/30/07 16,654 9/30/07 17,848 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class I shares commenced on December 6, 1991. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 5 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE DIVERSIFIED GROWTH FUND SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Diversified Growth Fund seeks long-term capital appreciation by primarily investing in common stocks of companies believed to have above average earnings or revenue growth potential. A disciplined investment process is employed which is focused on risk management and security selection. The risk management process is designed to emphasize security selection as the primary driver of relative returns and minimize sector and thematic bets. The security selection methodology focuses on a company's growth prospects and relative evaluation. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Diversified Growth Fund was 16.83% for the fiscal year ended September 30, 2007. The total return of the Russell(R) 1000 Growth Index was 19.35%. The Fund's stock selection in the Financial Services sector detracted from performance, while its selection in Energy contributed to performance. The Fund was impacted by the market's shift from value to growth, with a sizable growth premium emerging. This environment has negatively impacted our portfolios, which have a bias towards value as we seek to own attractively valued securities. Top contributors included National Oilwell Varco, Cisco Systems, and Goodrich. Detractors from performance included E*TRADE Financial, Children's Place Retail Stores, and Amgen. The Fund seeks to invest in stocks of companies that provide solid fundamentals and trade at attractive prices. We believe that over time, these stocks will outperform their peers. Pitcairn does not time the market, nor take sector or thematic bets. Therefore, we concentrate on those aspects of portfolio management in which we have a high degree of confidence, such as individual security selection. We remain true to this process through all market cycles. There were no significant changes made to the Fund's strategy during the year. The only changes made in regard to positioning were in response to Russell's mid-year index reconstitution. These changes included some modest increases and decreases to sector and industry exposures. We believe that, in general, the Fund's characteristics compare favorably versus the benchmark. We continue to believe that owning securities that are undervalued will eventually lead to long-term outperformance. The Fund is structured to keep risk exposures relative to the benchmark controlled. Excess returns are expected to be generated by individual security selection. 6 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DIVERSIFIED GROWTH FUND - CLASS A* AND THE RUSSELL 1000 GROWTH INDEX [LINE CHART] ------------------------------------------------ DIVERSIFIED GROWTH FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 10.15% 10.92% -5.33% ------------------------------------------------ Diversified Growth Fund Russell 1000 Growth Index ----------------------- ------------------------- Date Balance Date Balance 8/4/00 9,425 8/4/00 10,000 9/30/00 9,067 9/30/00 9,818 9/30/01 5,080 9/30/01 5,337 9/30/02 3,789 9/30/02 4,136 9/30/03 4,694 9/30/03 5,207 9/30/04 5,054 9/30/04 5,598 9/30/05 5,493 9/30/05 6,248 9/30/06 5,783 9/30/06 6,625 9/30/07 6,756 9/30/07 7,907 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class A shares commenced on August 4, 2000. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 7 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE DIVERSIFIED SMALL CAP VALUE FUND SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Diversified Small Cap Value Fund seeks long-term capital appreciation by investing in a diversified portfolio of common stocks of U.S. companies with smaller market capitalizations. The Fund focuses on companies that trade at attractive values relative to cash flow, book value, financial strength, and historical valuations. Using a combination of valuation screens, technical analysis, and fundamental research, the Fund seeks companies that possess attractive long-term return potential due to their lower-than-average valuations and improving business fundamentals. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Diversified Small Cap Value Fund was 9.12% for the fiscal year ended September 30, 2007. The total return of the Russell 2000(R) Value Index was 6.09% for the same period. Materials & Processing and Producer Durables were the top performing sectors. This strength was offset by a negative return in the Consumer Discretionary sector, which was impacted by increasing investor concern regarding domestic consumer spending in the wake of a challenging real estate market. Stock selection in Financial Services and Materials & Processing was solid. Performance in Financial Services was achieved by minimizing exposure to credit risk. Materials & Processing was aided by a focus on the engineering and construction industries. Good performance in these sectors was partially offset by weak selection in Health Care, caused by unrelated negative security-specific events. Among the top performing stocks were Bucyrus International, which was buoyed by strength in the mining equipment industry, and Calgon Carbon Corporation, which benefited from increasing demand for water filtration and coal emission control, along with beneficial tariffs on competing Chinese goods. Detractors from performance included mall-based retailer Wet Seal, which was hurt by consumer-led weakness, and convenience store operator Pantry, whose profits were squeezed by declining gasoline margins. Market conditions were variable during the past year, beginning with strong optimism and ending with a more cautious tone. In this environment, Fund performance was affected positively as our techniques were able to isolate stocks with market-beating characteristics. Looking forward, we expect continued positive influence from Fund holdings in the sectors that best exploit the "late cycle" dynamics of the economy. However, we believe these dynamics will eventually give way to new leadership from out-of-favor groups such as Banks and Consumer Finance. We are keeping an eye open for indications of stabilization and improvement of the business conditions in these areas. The Fund remains committed to seeking an optimal portfolio of inexpensive stocks with improving fundamentals to take advantage of the proven, superior long term returns of small cap value stocks. 8 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z* AND THE RUSSELL 2000 VALUE INDEX [LINE CHART] ---------------------------------------- DIVERSFIED SMALL CAP VALUE FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years 10 Years Class A 2.90% 15.25% 9.98% Class C 8.62% 15.81% 9.83% Class Z 9.12% 16.61% 10.63% ---------------------------------------- Diversified Small Cap Value Fund Russell 2000 Value Index -------------------------------- ------------------------ Date Balance Date Balance 9/30/97 10,000 9/30/97 10,000 9/30/98 7,875 9/30/98 8,721 9/30/99 9,593 9/30/99 9,229 9/30/00 12,432 9/30/00 10,648 9/30/01 13,942 9/30/01 11,244 9/30/02 12,731 9/30/02 11,080 9/30/03 16,125 9/30/03 14,588 9/30/04 19,950 9/30/04 18,331 9/30/05 23,200 9/30/05 21,585 9/30/06 25,165 9/30/06 24,609 9/30/07 27,460 9/30/07 26,108 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class Z shares only, which will vary from the performance of Class A and Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A and Class C shares commenced on November 20, 2006 and the initial public offering of Class Z shares commenced on February 28, 1996. The Class A and Class C performance information is calculated using the historical performance of Class Z. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 9 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE DIVERSIFIED VALUE FUND SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Diversified Value Fund seeks long-term capital appreciation by primarily investing in common stocks of companies believed to be priced below their true worth. A disciplined investment process is employed that focuses on risk management and security selection. The risk management process is designed to emphasize security selection as the primary driver of relative returns and minimize sector and thematic bets. The security selection methodology focuses on stocks with strong fundamental characteristics that are attractively priced relative to their peers. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Diversified Value Fund was 11.73% for the fiscal year ended September 30, 2007. The total return of the Russell 1000(R) Value Index was 14.45% for the same period. Over the last several months, there has been a shift from value to growth, with a sizable growth premium emerging. This environment has negatively impacted the Fund, which has a bias towards value. Stock selection detracted from performance, specifically in the Financial Services sector. Stocks that detracted from performance include Pfizer, Capital One Financial, and CompuCredit. Contributors to performance were ConocoPhillips, Marathon Oil and Chevron. The Fund seeks to invest in stocks of companies that provide solid fundamentals and trade at attractive prices. We believe that over time, these stocks will outperform their peers. We do not time the market, nor take sector or thematic bets. Therefore, we concentrate on those aspects of portfolio management in which we have a high degree of confidence, such as individual security selection. We remain true to this process through all market cycles. There were no significant changes made to the Fund's strategy during the year. The only changes made in regard to positioning were in response to Russell's mid-year index reconstitution. These changes included some modest increases and decreases to sector and industry exposures. The Fund is structured to keep risk exposures relative to the benchmark controlled. Excess returns are expected to be generated by individual security selection. 10 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DIVERSIFIED VALUE FUND - CLASS A* AND THE RUSSELL 1000 VALUE INDEX [LINE CHART] ------------------------------------------------ DIVERSIFIED VALUE FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 5.32% 14.22% 6.34% Class C 10.97% 14.74% 6.44% ------------------------------------------------ Diversified Value Fund Russell 1000 Value Index ---------------------- ------------------------ Date Balance Date Balance 8/4/00 9,425 8/4/00 10,000 9/30/00 9,693 9/30/00 10,383 9/30/01 8,694 9/30/01 9,458 9/30/02 7,525 9/30/02 7,855 9/30/03 9,360 9/30/03 9,768 9/30/04 11,066 9/30/04 11,774 9/30/05 12,555 9/30/05 13,739 9/30/06 13,896 9/30/06 15,747 9/30/07 15,526 9/30/07 18,023 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on August 4, 2000 and the initial public offering of Class C shares commenced on November 20, 2006. The Class C performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 11 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE FAMILY HERITAGE(R) FUND SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Family Heritage(R) Fund seeks long-term capital appreciation by primarily investing in common stocks of U.S. companies in which the founding family still maintains significant influence over the direction of the firm. The Fund's security selection methodology emphasizes a company's growth prospects and relative valuations, which seeks to identify stocks that offer significant growth potential, but are attractively priced relative to their peers. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Family Heritage(R) Fund was 12.91% for the fiscal year ended September 30, 2007. The total return of the Dow Jones Wilshire 5000SM Index was 16.99% and for the Russell 3000(R) Index was 16.52% for the same period. Over the last several months, there has been a shift from value to growth, with a sizable growth premium emerging. This environment negatively impacted the Fund, which has a bias towards value. The Fund's security selection, especially in the Financial Services sector, detracted from performance. Consumer Staples was the largest contributing sector to performance. Individual companies that detracted from performance include CompuCredit, Capital One Financial, and Flagstar Bancorp. The stronger performers among the Fund's holdings were Stryker, Central European Distribution, and Telephone & Data Systems. The Fund seeks to invest in stocks of companies that provide solid fundamentals and trade at attractive prices. We believe that over time, these stocks will outperform their peers. We do not time the market, nor take sector or thematic bets. Therefore, we concentrate on those aspects of portfolio management in which we have a high degree of confidence, such as individual security selection. We remain true to this process through all market cycles. With the exception of modest increases and decreases to sector and industry exposure, there were no significant changes made to the Fund's strategy during the year. The Fund is structured to keep risk exposure controlled. Excess returns are expected to be generated by individual security selection. We believe the Fund's characteristics, in general, compare favorably versus the benchmark. In addition, we continue to believe that owning securities that are undervalued versus their potential will eventually lead to long-term outperformance. We remain confident that our core approach to portfolio management, along with our unique focus on companies with significant ownership by the founding family or related foundation will deliver favorable long-term investment results. 12 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FAMILY HERITAGE(R) FUND - CLASS A*, THE WILSHIRE 5000 INDEX AND THE RUSSELL 3000 INDEX [LINE CHART] ------------------------------------------------ FAMILY HERITAGE(R) FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 6.37% 10.42% 1.34% Class C 12.08% 10.91% 1.42% ------------------------------------------------ Family Heritage(R) Fund Wilshire 5000 Index Russell 3000 Index ----------------------- ------------------- ------------------ Date Balance Date Balance Date Balance 8/4/00 9,425 8/4/00 10,000 8/4/00 10,000 9/30/00 9,340 9/30/00 10,006 9/30/00 10,112 9/30/01 7,229 9/30/01 7,111 9/30/01 7,290 9/30/02 6,315 9/30/02 5,865 9/30/02 5,918 9/30/03 7,616 9/30/03 7,405 9/30/03 7,452 9/30/04 8,846 9/30/04 8,498 9/30/04 8,514 9/30/05 9,440 9/30/05 9,743 9/30/05 9,755 9/30/06 9,741 9/30/06 10,754 9/30/06 10,752 9/30/07 10,999 9/30/07 12,581 9/30/07 12,528 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on August 4, 2000 and the initial public offering of Class C shares commenced on November 20, 2006. The Class C performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 13 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE HEALTHCARE AND BIOTECHNOLOGY FUND SUB-ADVISED BY TURNER INVESTMENT PARTNER, INC. PHILOSOPHY AND PROCESS The Touchstone Healthcare and Biotechnology Fund invests primarily in common stocks of healthcare and biotechnology companies. Turner employs rigorous fundamental research with supporting qualitative and technical analysis. Its bottom-up strategy emphasizes fundamental analysis. The Fund seeks companies with improving fundamentals, superior earnings prospects, reasonable valuations, and favorable trading-volume and prices patterns. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Healthcare and Biotechnology Fund was 19.25% for the fiscal year ended September 30, 2007. The total return of the S&P 500 Healthcare Index was 8.70% for the same period. The main factors contributing to the Fund's performance were stock selection and positioning. Shire Pharmaceutical's acquisition of New River Pharmaceuticals had a positive effect on performance. Shire has reported strong earnings results, and the company also received final FDA and DEA approval for Vyvanse, their next generation attention deficit disorder drug. Intuitive Surgical Inc. continues to deliver strong returns. The company is experiencing strong sales of its robotic surgical tool, the Da Vinci System. The purchases are being fueled by rapid adoption of the device in gynecology and urology surgeries. Our decision to eliminate Pfizer was a significant contributor to relative returns. The sale, based on concerns of the commercial profile of Torcetrapib, was a favorable one as the benchmark, a 12% weight, suffered when the stock was under pressure. On a relative basis when compared to the benchmark, the Fund suffered from its position in Merck, which was much smaller than the benchmark's 7% weight. Merck reported solid earnings that beat estimates and also boosted its earnings outlook for the full year. Sepracor, a maker of pharmaceutical products, declined as Medicare reimbursement for their asthma drug, Xopenox, was cut dramatically. Medco, a provider of pharmacy benefit management, also contributed to the benchmarks return and hurt relative performance. We remain underweight vs. the benchmark in large pharmaceuticals but are narrowing the gap, as we are finding individual opportunities within this group. Generally, we expect many large pharmaceutical companies to experience upside earnings surprises due to favorable foreign currency trends and solid prescription trends. Market observers attribute large-cap stocks' strength in recent months to strong international contributions to the companies' profits (large firms do more business overseas than their smaller counterparts) and relatively attractive valuations. As a result of our bottom up research, about 50% of the Fund is invested in companies over $15 billion in market capitalization. In addition, as a growing proportion of revenues are being derived outside the U.S. borders, currently 12% of the Fund is invested in companies outside the United States. We employ a disciplined investment strategy when selecting stocks by identifying strong healthcare companies with favorable earnings prospects and reasonable valuations. We also look for unique characteristics within each industry to ensure the Fund is invested in only the best companies. For example, when researching the pharmaceuticals industry, we look at pricing trends, intellectual property profiles and conduct pipeline analysis. When looking at biotechnology companies, we focus on clinical trial design, corporate regulatory expertise, clinician feedback, and reimbursement analysis. We utilize these tools so the Fund is positioned to achieve consistent investment returns while maintaining disciplined risk controls. 14 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- We do not make top-down decisions but rather we find opportunities through our investment discipline of fundamental bottom-up research on a company-by-company basis. However, as a result of our individual company research, purchases have increased the Fund's biotech exposure to now compose over 14% of the Fund, compared to 10% weight for the benchmark. We continue to anticipate that 2007 will prove to be a year in which price/earnings ratios expand, a circumstance that typically bodes well for healthcare stocks. We think the stock market should be higher at the end of the year than it is now, and we continue to find companies with compelling fundamentals. In addition, balance sheets in the Health Care sector remain flush with cash, boosting the possibility of stock buybacks and mergers and acquisitions in the sector. COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A* AND THE S&P 500 HEALTH CARE INDEX [LINE CHART] ------------------------------------------------ HEALTHCARE AND BIOTECHNOLOGY FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 12.40% 14.14% 10.31% Class C 18.55% 14.68% 10.50% ------------------------------------------------ Healthcare and Biotechnology Fund S&P 500 Health Care Index --------------------------------- ------------------------- Date Balance Date Balance 2/28/01 9,425 2/28/01 10,000 9/30/01 10,510 9/30/01 9,467 9/30/02 9,284 9/30/02 7,393 9/30/03 11,627 9/30/03 8,239 9/30/04 13,036 9/30/04 8,633 9/30/05 15,787 9/30/05 9,533 9/30/06 16,003 9/30/06 10,252 9/30/07 19,083 9/30/07 11,144 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on February 28, 2001 and the initial public offering of Class C shares commenced on November 20, 2006. The Class C performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 15 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE INTERNATIONAL EQUITY FUND SUB-ADVISED BY AXA ROSENBERG INVESTMENT MANAGEMENT LLC INVESTMENT PHILOSOPHY AND PROCESS The Touchstone International Equity Fund (the "Fund") seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. companies located in a broad array of countries. The Fund's investment approach is designed to identify attractively priced companies that are believed to have superior future earnings potential. Focus is placed on evaluating the financial characteristics of individual stocks and a company's fundamental data rather than forecasting the trends in markets, investment styles or selectors. Its stock selection process is driven by proprietary technology designed to analyze the fundamentals of more than 19,000 securities and to evaluate the relative attractiveness of stocks in its universe. AXA Rosenberg's stock selection process includes two fundamental insights on each company in our universe. The Valuation Model identifies bargains, and expensive stocks within each industry; and the Earnings Forecast Model identifies companies with superior/inferior year-ahead earnings. The fundamental valuation of stocks by the Valuation Model is the heart of our investment process. The model first classifies companies into one or more of 170 business segments, valuing each company's individual operating businesses, based on assets, earnings and sales by business segment, in comparison with similar business operations of other companies. The model then refines the business segment valuations to account for the financial data only reported at the company-wide level, including footnote information (over 200 line items in all). The result is a single valuation for each of the more than 5,500 US broad market companies we follow. The difference between AXA Rosenberg's valuation and the market price reflects an opportunity for profit. A second opportunity for profit is captured by our Earnings Forecast Model, which combines numerous fundamental variables related to earnings change with variables that capture investor enthusiasm for companies. These variables include measures of profitability, measures of operational efficiency, individual analysts' earnings forecasts, broker recommendations, earnings surprise and prior market performance. Together, these data are used to predict earnings changes over the following 12 months. Each company's earnings forecast alpha is added to its valuation alpha to arrive at a total company alpha. FUND PERFORMANCE AND POSITIONING The total return of the Fund was 26.01% for the fiscal year ended September 30, 2007. The total return of the S&P Citigroup World Ex-US Index was 26.54% and the total return of the MSCI All Country World ex-US Index was 31.06% for the same period. From a regional perspective, Asia ex Japan was the strongest performer in both absolute terms and relative to its regional benchmark. Europe also contributed to the portfolio's out-performance while contribution from Japan was negative. Across all regions, industry and sector selection were positive while the Fund's style relative to the benchmark and stock picking within industries were weak. The Materials sector produced the best performance for the portfolio. Across all regions, but particularly in Asia, overweight to the Basic Minerals & Metals industry was highly rewarded. With holdings that included Anglo American and Thyssen Krupp in Europe and Rio Tinto and Posco in Asia, the portfolio strongly outperformed the benchmark in this sector. The portfolio also benefited from its positioning in the Consumer Discretionary sector. With an overweight in the Cars and Trucks industry and in individual securities including auto maker DaimlerChrysler and tire maker Michelin, the portfolio added value both from the sector overweight and from stock selection. In fact, the overweight in DaimlerChrysler, which gained more than 100% over the past year, resulted in the portfolio's top stock contribution. Our Valuation Model has had a favorable view of this stock for sometime now while our Earnings Model has shown an increasingly attractive rating since early 2007. 16 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- The most challenging sector over the past year was Financials. With Financials underperforming the broader market, the sector underweight was a modestly good call. However, weak stock selection in Misc. Finance (Brokers & Asset Management), and an underweight in the outperforming REITs industry negated the small gains from the sector positioning. Among the weaker selections included an underweight in ABN-Amro, which rose most of the year on merger rumors, and an overweight in UBS AG, which fell mostly during the third quarter on sub-prime lending losses. Also contributing weakly to performance was the Industrials sector where both the industry underweighting and stock selection in Construction/Homebuilding and Transportation detracted from performance. Net of industries, the Fund's modest value bias characterized by its lower Price/Book ratio was the major detractor from performance, as investors have increasingly shown a preference for growth stocks year to date. Its modestly higher exposure to Earnings Variation or to companies that produced earnings surprises (like DaimlerChrysler), offset some of the weakness from the Fund's relative value positioning. COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL EQUITY FUND - CLASS A* AND THE S&P/CITIGROUP BROAD MARKET INDEX WORLD EX-U.S. COMPOSITE INDEX [LINE CHART] ------------------------------------------------ INTERNATIONAL EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 18.75% 20.63% 3.53% Class C 25.20% 21.18% 3.62% ------------------------------------------------ S&P/Citigroup Broad Market Index International Equity Fund World ex-U.S. Composite Index ------------------------- -------------------------------- Date Balance Date Balance 8/4/00 9,425 8/4/00 10,000 9/30/00 9,057 9/30/00 9,794 9/30/01 5,735 9/30/01 6,997 9/30/02 4,728 9/30/02 6,107 9/30/03 5,871 9/30/03 7,902 9/30/04 6,972 9/30/04 9,753 9/30/05 8,659 9/30/05 12,614 9/30/06 10,167 9/30/06 15,102 9/30/07 12,812 9/30/07 19,110 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on August 4, 2000 and the initial public offering of Class C shares commenced on November 20, 2006. The Class C performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 17 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE MID CAP FUND SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Mid Cap Fund seeks long-term capital appreciation by primarily investing in stocks of medium capitalization companies. It emphasizes companies operating in a broad range of industries based on a fundamental analysis of each company with consideration to such characteristics as price-to-cash flow, price-to-earnings and price-to-book value ratios. The Fund looks for companies with quality management teams, strong fundamentals, well-positioned balanced sheets and distinctive product opportunities that may be positioned to generate and sustain long-term growth. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Mid Cap Fund was 18.13% for the fiscal year ended September 30, 2007. The total return of the Russell Midcap(R) Index was 17.87% for the same period. Strong stock selection in the Financial Services, Energy and Producer Durables sectors were the largest contributors to relative performance, while Consumer Discretionary and Health Care stocks detracted from relative results. At the sector level, Financial Services has struggled throughout much of 2007, but strong stock selection has made it the strongest performing sector on a relative basis. Leading the way was IntercontinentalExchange Inc. Shares of the commodities and futures exchange increased as it continues to be a leader in terms of product and technological innovation. While unsuccessful, their bidding war earlier in the year to acquire the Chicago Board of Trade clearly displays their commitment to grow both organically and through strategic acquisitions. A.G. Edwards was another top contributor among Financial Services as the stock surged on news it was being acquired by Wachovia Bank in a deal that would create the nation's second-largest retail brokerage. FMC Technologies, the second-largest contributor to the Fund on a relative basis, has consistently grown revenue about twice as fast as the overall subsea market by expanding the scope of its subsea offerings and will benefit from the new five-year agreement they signed with Statoil to provide equipment for international developments. Other stocks contributing to performance included Precision Castparts Inc. and ON Semiconductor Inc. Precision Castparts is a metal components manufacturer that continued to benefit from improved operating margins. The company reported robust demand, a sustained aerospace cycle, and better than expected profitability contribution from recent acquisitions. ON Semiconductor Inc. was helped by increasing sales to the computer industry and an increase in consumer electronics demand. The largest detractor from performance over the last twelve months was Amdocs Ltd. Shares of the software maker traded lower after management cut its 2007 revenue forecast. Demand for their products and services remains strong, but not at the same pace that was originally expected. Also detracting from performance was DaVita Inc. The stock was volatile throughout the year and finished slightly lower due to integration concerns after acquiring NxStage. Other stocks that detracted from relative performance were AerCap Holdings and Security Capital Assurance Ltd. AerCap, an integrated aviation company that engages in the trading and leasing of aircraft, failed to meet earnings expectations due to charges related to refinancing some of their bonds. Security Capital was also down as the insurance provider was negatively impacted by slower refunding activity. 18 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- We employ a two-pronged approach to select stocks and construct portfolios. For growth stocks, we perform fundamental analysis to determine if the positive business momentum identified by our earnings model will persist. In addition, the company's balance sheet and cash flows are analyzed to verify that the company has the financial strength required to grow at the rate implied by the model. For value stocks, we employ a series of screens designed to identify hidden assets that will signify attractive return potential and downside protection to share prices. For instance, we seek to identify characteristics like a large net cash position, undervalued assets such as land, overfunded pension assets, non-strategic businesses that can be sold, and undervalued brands or market shares. Then we look for a catalyst for positive change in the companies' fundamentals or strategies -- a prerequisite if an out-of-favor stock is to rise in price; otherwise, without that catalyst, an out-of-favor stock can simply fall even more out of favor. During the last year, we have identified more opportunities using our earnings model which has resulted in the Fund having a slight growth tilt. The Fund was positioned this way to take advantage of owning companies that were experiencing strong earnings momentum while selling at reasonable valuations. In managing the Fund, our focus, as always, remains on owning stocks that we think have either undervalued assets or strong prospective earnings power. We currently favor shares of companies in the wireless, homeland security, civil infrastructure, raw materials, semiconductor, industrial parts, premium retailing, software, managed care, financial data, securities exchange, and investment management groups. The Fund holds overweight positions in the Producer Durables, Technology, Health Care, and Materials & Processing sectors. We think the stock market can draw strength from the continued health of the global economy, which should help to bolster corporate earnings in the U.S. and around the world. Corporate America's second-quarter profits rose about 8%, a rate that was below the double-digit norm of the past three years but nevertheless was still above the long-term average of 7.6%. We also think profit growth may again hit the low double digits in the fourth quarter. As long as earnings stay reasonably healthy, we think the stock market is in little danger of morphing from a bull to a bear in the near term. In our analysis, the much-chronicled housing slump and subprime-loan malaise won't in all likelihood be severe enough to tip the economy into a recession and the stock market into bearish territory. 19 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID CAP FUND - CLASS Y* AND THE RUSSELL MIDCAP INDEX [LINE CHART] -------------------------------------- MID CAP FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year Since Inception* Class A 11.18% 20.14% Class C 17.27% 20.80% Class Y 18.13% 21.93% Class Z 17.84% 21.62% -------------------------------------- Mid Cap Fund Russell Midcap Index ------------ -------------------- Date Balance Date Balance 1/2/03 10,000 1/2/03 10,000 9/30/03 12,520 9/30/03 12,289 9/30/04 14,968 9/30/04 14,814 9/30/05 20,242 9/30/05 18,533 9/30/06 21,679 9/30/06 20,306 9/30/07 25,610 9/30/07 23,935 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class Y shares only, which will vary from the performance of Class A shares, Class C shares and Class Z shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class Y shares commenced on January 2, 2003. The initial public offering of Class A shares and Class C commenced on May 14, 2007 and the initial public offering of Class Z shares commenced on April 24, 2006. The Class A, Class C and Class Z performance information is calculated using the historical performance of Class Y. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 20 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE PITCAIRN TAXABLE BOND FUND SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Pitcairn Taxable Bond Fund seeks to deliver maximum total return consistent with moderate risk of capital and maintenance of liquidity. The Fund invests in a broad range of investment grade fixed income securities across the full maturity spectrum. Additional value may be gained by anticipating changing credit conditions and identifying unique anomalies offered by the market. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Pitcairn Taxable Bond Fund was 4.81% for the fiscal year ended September 30, 2007. The total return of the Lehman U.S. Government Credit Index was 5.08% for the same period. Most of the market activity occurred during the third quarter of 2007. Sub-prime mortgage fears captured the attention of fixed income investors. Liquidity in all sectors, with the exception of U.S. Treasuries, dried up for a period of days, as investors were caught in a quagmire of headlines. This flight-to-quality was best exhibited in the 3-month U.S. Treasury Bill whose yield dropped significantly in August. Investors believed that quality could only be found in very short U.S. Treasuries. The Federal Reserve took action by lowering the discount rate, and subsequently the Federal Funds Rate, as Chairman Bernanke faced his first real challenge. When the dust finally settled and the major mortgage originators were still in business, investors slowly re-entered markets of riskier assets. The yield curve steepened during the fiscal year. The major action occurred on the short end (5-years and shorter) as the Federal rate reductions had its desired effect of improving liquidity in financial markets. The short duration of corporate exposure benefitted the Fund, as corporate bonds underperformed both U.S. Treasuries and agencies. The Fund continues to be characterized as high quality with a weighted average rating of AA, and is conservatively structured with corporate-spread risk concentrated at the short end of the duration spectrum. 21 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PITCAIRN TAXABLE BOND FUND - CLASS II* AND THE LEHMAN BROTHERS U.S. GOVERNMENT CREDIT INDEX [LINE CHART] ------------------------------------------------ PITCAIRN TAXABLE BOND FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years Since Inception* Class II 4.81% 3.97% 5.56% ------------------------------------------------ Lehman Brothers U.S. Pitcairn Taxable Bond Fund Government Credit Index -------------------------- ----------------------- Date Balance Date Balance 8/4/00 10,000 8/4/00 10,000 9/30/00 10,166 9/30/00 10,108 9/30/01 11,539 9/30/01 11,439 9/30/02 12,123 9/30/02 12,492 9/30/03 12,990 9/30/03 13,305 9/30/04 13,440 9/30/04 13,751 9/30/05 13,641 9/30/05 14,103 9/30/06 14,045 9/30/06 14,572 9/30/07 14,721 9/30/07 15,313 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class II shares commenced on August 4, 2000. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 22 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE SANDS CAPITAL SELECT GROWTH FUND SUB-ADVISED BY SANDS CAPITAL MANAGEMENT, LLC INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Sands Capital Select Growth Fund primarily invests in common stocks of large capitalization U.S. companies that are believed to have above-average potential for revenue or earnings growth. The Fund invests in 25 to 30 companies that are generally high-quality seasoned and growing businesses, spread across an array of attractive and growing industries. Sands Capital generally seeks stocks with sustainable above average earnings growth, and with capital appreciation potential. In addition, Sands Capital looks for companies that have a significant competitive advantage, a leadership position or proprietary niche, a clear mission in an understandable business, financial strength and that are valued rationally in relation to comparable companies, the market, and the business prospects for that particular company. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Sands Capital Select Growth Fund was 19.95% for the fiscal year ended September 30, 2007. The total return of the Russell 1000(R) Growth Index was 19.35% for the same period. The Fund's security selection contributed to performance for the year. The securities which had the greatest positive impact on absolute performance as well as on relative performance were Google, Apple, IntercontinentalExchange, Schlumberger and Intuitive Surgical. Detractors from absolute performance include Starbucks, Apollo, Moody's, Varian Medical and Red Hat. The detractors from relative performance include Starbucks, Genentech, Moody's Corp, Apollo and Genzyme. Sands Capital generally considers selling a security when it no longer meets the investment criteria or when the issues causing such problems are not solvable within an acceptable time frame. During the year, the Fund sold four stocks - Red Hat, Apollo Group, eBay and Patterson. Seven stocks were purchased during the fiscal year - Broadcom, Salesforce, Expeditor's International, FMC Technologies, Cerner, National Oilwell Varco, and EMC - all of which met Sands Capital's investment criteria. Broadcom is a leading designer of semiconductor chips for a number of end markets in networking, wireless, video processing, and consumer electronics. It is an intellectual property company that designs and sells semiconductor chips in the networking, wireless, and consumer electronics end-markets. Salesforce is the leading provider of Software-as-a-Service (SaaS), focusing primarily on the Customer Relationship Management (CRM) segment of the seventy-nine billion dollar enterprise software market. Compared to traditional licensed software, SaaS offers several compelling benefits to customers including lower total cost of ownership over time, much lower upfront costs, and lower implementation risk. The company has a tremendous business model based on recurring subscription revenues with a scalable, fixed-cost base. Further, Salesforce is rapidly building a platform and an ecosystem of third-party developers that will allow it to address other segments of enterprise software besides CRM. Expeditor's International is a third party logistics provider (3PL) focused on international freight forwarding and customs brokerage. Expeditors is essentially a "travel agent" for freight, making the necessary arrangements to facilitate the movement of customers' international air or ocean cargo from origin to destination. Within the rapidly growing 3PL space, Expeditors has established itself as a standout leader, driving share gains with superior service, technology, and global reach. 23 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- FMC Technologies is the leading global provider of highly-engineered subsea equipment used in the production and processing of oil and natural gas from offshore wells. This market is rapidly expanding as exploration and production efforts are becoming increasingly focused on offshore fields because of: 1) their compelling size and economics, 2) the maturation of the world's onshore basins, and 3) limited onshore access for international oil companies. Cerner is the leading global provider of healthcare information technology solutions. The company's flagship product, the Cerner Millennium software suite, has a broad and deep set of clinical applications designed to improve safety, quality, and efficiency in the hospital setting. Cerner's organically-built Millennium architecture, broad product portfolio, and global franchise makes it uniquely positioned to benefit from the robust secular tailwinds driving adoption of clinical information systems. Pay-for-performance initiatives from both private and public payers are pushing hospital adoption of clinical information systems and electronic medical records past an inflection point. National Oilwell Varco is an energy equipment and services company. It is the leading provider of critical drilling rig equipment such as top drives, pipe handling systems, and control instruments, as well as related consumables and services. There are few competitors for many of its products, which are often the de-facto industry-standard brand names. EMC is the leading provider of enterprise storage solutions, a segment which Sands Capital expects to grow faster than overall IT spending due to the continued implementation of compliance and business continuity requirements and the rapid adoption of Internet video. Sands Capital Management has always strictly adhered to a bottom-up, company-focused investment process rather than a top-down, thematic approach. Yet Sands process also requires a keen awareness of important secular trends and an ability to anticipate changes to these trends. These trends often lay the groundwork for attractive industry dynamics. They also act as a growth tailwind for individual companies within those industries. Consequently, Sands ongoing quest to invest in the world's greatest growth companies also enables Fund shareholders to benefit from some of the world's most compelling long-term trends. Examples include: 1) the trend toward minimally invasive surgery, which is represented by our ownership in Intuitive Surgical, the leader in robotic surgery for radical prostatectomies and a growing number of other procedures; 2) the shift in futures and options trading mechanisms from open outcry pits to electronic exchanges, which is represented by our ownership in both CME Group and IntercontinentalExchange; and 3) the proliferation of handheld devices worldwide, which is represented by the Fund's ownership in QUALCOMM, Broadcom, America Movil, and Apple. QUALCOMM and Broadcom are the technology leaders in cell phone chipsets, America Movil is Latin America's leading wireless network operator, and Apple recently entered the one billion unit-per-year cell phone market with its revolutionary new iPhone. These are just a few of the many favorable trends that influence Fund companies and increase the likelihood that they will continue to achieve above-average earnings growth over the long-term--the key to common stock price appreciation and wealth creation. 24 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SANDS CAPITAL SELECT GROWTH FUND - CLASS Y*, SANDS CAPITAL SELECT GROWTH FUND - CLASS Z* AND THE RUSSELL 1000 GROWTH INDEX [LINE CHART] ------------------------------------------------ SANDS CAPITAL SELECT GROWTH FUND - CLASS Y AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years Since Inception* Class Y 20.39% 16.14% -1.23% Class Z 19.95% 15.96% -1.34% ------------------------------------------------ Sands Capital Select Sands Capital Select Growth Fund - Class Y Growth Fund - Class Z Russell 1000 Growth Index --------------------- --------------------- ------------------------- Date Balance Date Balance Date Balance 8/11/00 10,000 8/11/00 10,000 8/11/00 10,000 9/30/00 9,150 9/30/00 9,150 9/30/00 9,802 9/30/01 5,033 9/30/01 5,033 9/30/01 5,328 9/30/02 4,332 9/30/02 4,332 9/30/02 4,129 9/30/03 5,893 9/30/03 5,893 9/30/03 5,199 9/30/04 6,803 9/30/04 6,803 9/30/04 5,590 9/30/05 7,814 9/30/05 7,804 9/30/05 6,238 9/30/06 7,603 9/30/06 7,574 9/30/06 6,615 9/30/07 9,154 9/30/07 9,085 9/30/07 7,895 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class Y shares and Class Z shares commenced on August 27, 2004 and August 11, 2000, respectively. The Class Y performance information is calculated using the historical performance of Class Z. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 25 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE SHORT DURATION FIXED INCOME FUND SUB-ADVISED BY CHARTWELL INVESTMENT PARTNERS INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Short Duration Fixed Income Fund seeks to provide above market income, liquidity and risk-adjusted total return. Fund management targets these goals using a low risk approach, selecting a core group of securities from better yielding sectors within the government and corporate markets, and enhancing liquidity and yield by combining very short maturities with fixed rate issues in a barbell structure. The Fund avoids higher risk strategies, including exposure to non-dollar currencies and below "A" rated credits. The Fund generally has an average duration between 1.5 and 2.0 years and holds no more than 20% of the portfolio in non-government issues. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Short Duration Fund was 5.19% for the fiscal year ended September 30, 2007. The total return of the Lehman 1-3 Year U.S. Government Bond Index was 5.72% for the same period. The Fund benefited from a dramatic rally in short-term rates as investors sought the safety of U.S. Treasury securities during the credit crisis of 2007. The Fund's performance lagged the benchmark as U.S. Treasuries dramatically outperformed all other sectors of the market. The yield curve steepened dramatically during this yield rally as short rates declined over the year and ten-year bond yields did not rally significantly. The Fund's strategy to diversify away from floating rate notes and into more fixed rate debt early in the year helped performance. Floating rate notes have lagged fixed rate notes in the recent rally and will continue to outperform in a stable or falling interest rate environment. Our continuing focus on the high quality source of excess yield provided by government mortgage-backed securities helped Fund performance as 98% of the Fund is invested in agency backed bonds. Looking forward, the Fund's emphasis on high quality, short duration securities should provide for both attractive relative income and better than average price performance. The monthly principal cash flows provided by core agency mortgage-backed securities holdings enhance Fund liquidity and allow us to continually seek out securities that maximize investor returns consistent with the Fund's investment philosophy. 26 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SHORT DURATION FIXED INCOME FUND - CLASS Z* AND THE LEHMAN BROTHERS 1-3 YEAR U.S. GOVERNMENT BOND INDEX [LINE CHART] ---------------------------------------- SHORT DURATION FIXED INCOME FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years 10 Years Class Z 5.19% 2.90% 4.52% ---------------------------------------- Lehman Brothers 1-3 Year U.S. Short Duration Fixed Income Fund Government Bond Index -------------------------------- ----------------------------- Date Balance Date Balance 9/30/97 10,000 9/30/97 10,000 9/30/98 10,807 9/30/98 10,793 9/30/99 11,119 9/30/99 11,137 9/30/00 11,789 9/30/00 11,787 9/30/01 12,889 9/30/01 13,044 9/30/02 13,493 9/30/02 13,807 9/30/03 13,783 9/30/03 14,194 9/30/04 14,037 9/30/04 14,359 9/30/05 14,337 9/30/05 14,515 9/30/06 14,799 9/30/06 15,070 9/30/07 15,567 9/30/07 15,932 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class Z shares commenced on March 1, 1994. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 27 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE SMALL CAP FUND SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Small Cap Fund seeks long-term capital appreciation by primarily investing in common stocks of U.S. small capitalization companies. The Fund is diversified by issuer and industry and typically owns both value and growth stocks. A disciplined investment process is employed which is focused on risk management and security selection. The risk management process is designed to emphasize security selection as the primary driver of relative returns and minimize sector and thematic bets. The security selection methodology emphasizes a company's growth prospects and relative valuations which seek to identify stocks that offer significant growth potential, but are attractively valued relative to their peers. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Small Cap Fund was 8.44% for the fiscal year ended September 30, 2007. The total return of the Russell 2000(R) Index was 12.34% for the same period. Over the last several months there has been a shift from value to growth, with a sizable growth premium emerging. This environment has negatively impacted the Fund, which has a bias towards value. The Fund's stock selection in the Financial Services and Producer Durables sectors detracted from performance, while its selection in the Consumer Discretionary sector contributed to performance. Top contributors included Golden Telecom, WMS Industries, and Tenneco. Detractors from performance included Asyst Technologies, Southwest Bancorp and Central Pacific Financial. The Fund seeks to invest in stocks of companies that provide solid fundamentals and trade at attractive prices. We do not time the market, nor take sector or thematic bets. Therefore, we concentrate on those aspects of portfolio management in which we have a high degree of confidence, such as individual security selection. We remain true to this process through all market cycles. There were no significant changes made to the Fund's strategy during the year. The only changes made in regard to positioning were in response to Russell's mid-year index reconstitution. These changes included some modest increases and decreases to sector and industry exposures. Going forward, we remain focused on searching for niche companies with compelling valuation levels and solid long-term growth prospects as compared to their peers. 28 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP FUND - CLASS A* AND THE RUSSELL 2000 INDEX [LINE CHART] ------------------------------------------------ SMALL CAP FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 2.23% 12.23% 8.84% Class C 7.73% 12.73% 8.95% ------------------------------------------------ Small Cap Fund Russell 2000 Index -------------- ------------------ Date Balance Date Balance 8/25/00 9,425 8/4/00 10,000 9/30/00 9,614 9/30/00 10,467 9/30/01 9,951 9/30/01 8,247 9/30/02 9,663 9/30/02 7,480 9/30/03 12,254 9/30/03 10,210 9/30/04 14,671 9/30/04 12,127 9/30/05 15,945 9/30/05 14,303 9/30/06 16,824 9/30/06 15,722 9/30/07 18,244 9/30/07 17,662 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on August 25, 2000 and the initial public offering of Class C shares commenced on November 20, 2006. The Class C performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 29 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE SMALL CAP VALUE OPPORTUNITIES FUND SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC. DIAMOND HILL CAPITAL MANAGEMENT, INC. JAMES INVESTMENT RESEARCH, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Small Cap Value Opportunities Fund seeks long-term capital appreciation by primarily investing in common stocks of companies with small market capitalizations that are believed to have the potential for growth and that appear to be trading below their perceived value. It invests in securities of companies operating in a broad range of industries. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Small Cap Value Opportunities Fund was 10.77% for the fiscal year ended September 30, 2007. The total return of the Russell 2000(R) Value Index was 6.09% for the same period. TURNER INVESTMENT PARTNERS, INC. Strong stock selection in the Financial Services and Producer Durables sectors were the largest contributors to relative performance, while Energy and Consumer Staples detracted from relative results of our portion of the Fund. Although Financial Services struggled throughout much of 2007, strong stock selection made it the strongest performing sector on a relative basis. Our portion of the Fund remains underweight in the Financial Services sector overall, and more specifically, REITS and banks, which helped excess return. Two online software companies that provide web-based technology services companies contributed to excess return, Online Resources and S1 Corp. Online Resources completed its acquisition of a leading bill pay service provider which was viewed as favorable by investors. S1 Corp. reported solid earnings which also gave investors confidence in new management for the company. In addition, its acquisition of HUB International helped performance. Energy struggled due to the performance of Allis-Chalmers Energy, which provides high-end drilling services. It reported a pullback in activity and pricing. Subpar returns in Consumer Staples and Consumer Discretionary were driven by losses in Cott Corp. and Pantry. The beverage distributor, Cott Corp., reported lower demand for carbonated soft drinks and rising commodity prices. Pantry, the convenience store chain, also was a detractor after reporting relatively low gasoline margins. All three detractors mentioned were sold from the portfolio. Turner's investment strategy focuses on identifying undervalued securities by virtue of their being overlooked by industry analysts. Most industry analysts concentrate on income statements. While we use this metric in our analysis, we also pay close attention to the balance sheet and cash flows. Through this process, we seek to find companies with unrecognized intrinsic values that are not evident in earnings reports. We remain disciplined in this process and will typically be positioned with companies that display these characteristics. In managing the portfolio, our focus, as always, remains on owning stocks that we think have either undervalued assets or strong prospective earnings power. We currently favor shares of companies in the wireless, homeland security, civil infrastructure, raw materials, semiconductor, industrial parts, premium retailing, software, managed care, financial data, securities exchange, and investment management groups. The portfolio holds overweight positions in the Technology, Producer Durables, Health Care, and Autos & Transportation sectors. 30 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- We think the stock market can draw strength from the continued health of the global economy, which should help to bolster corporate earnings in the U.S. and around the world. Corporate America's second-quarter profits rose about 8%, a rate that was below the double-digit norm of the past three years but nevertheless was still above the long-term average of 7.6%. And we think profit growth may again hit the low double digits in the fourth quarter. As long as earnings stay reasonably healthy, we think the stock market is in little danger of morphing from a bull to a bear in the near term. In our analysis, the much-chronicled housing slump and subprime-loan malaise won't in all likelihood be severe enough to tip the economy into a recession and the stock market into bearish territory. DIAMOND HILL CAPITAL MANAGEMENT, INC. An overweight allocation as well as stock selection in the Energy sector contributed to relative performance in our portion of the Fund. The portfolio is overweight the Energy, Autos & Transportation and Consumer Discretionary sectors relative to the benchmark as we believe the valuation of the individual holdings in these sectors are attractive. Top performers during the year were Energy holdings Helmerich & Payne, Encore Acquisition and Berry Petroleum primarily due to higher oil prices. Additional positive contributors were Apria Healthcare Group and Century Aluminum. The largest detractors were Finish Line based on skepticism related to its potential acquisition of footwear company Genesco, MoneyGram due to concerns regarding its exposure to mortgage-backed securities in its portfolio, and Gevity HR Inc. Higher defaults in the mortgage market led to tightened credit conditions, and declines in real estate values held back Financial Services and spilled over into the consumer discretionary sector. During the year, the Consumer Discretionary sector was one of the sectors that detracted from the absolute performance of the portfolio. Producer Durables and Health Care contributed to returns. Diamond Hill uses an intrinsic value approach, which is price sensitive. Outside of Energy, we have had more difficulty finding small cap equities at dramatic discounts to our estimates of intrinsic value. During the year, we were able to take the opportunity to initiate positions at what we believe are favorable prices in Toro, Flowers Foods and Hanesbrands. We also eliminated positions from the Fund including Apria Healthcare, MAF Bancorp and Tidewater after these companies reached our estimated intrinsic value. Regarding Energy, our investment thesis remains the same given our long-term expectations that a long-term tightness in the supply-demand balance that is not fully reflected in the stock prices. We believe the portfolio is positioned relatively defensively given the high cash balance and what we believe are holdings at discounts to their intrinsic value. Certain segments of the portfolio, Energy for example, will likely depend on adequate global economic growth (though not necessarily stellar domestic growth) in order for the stocks within that sector to be solid performers. The portfolio is underweight in the areas of Technology and Health Care, which could lead to relative underperformance if those sectors are leaders. Our 5-year outlook for the equity market is for expected returns in the mid single digits, which would be below long-term and recent averages. This forecast has only a minor effect on what we do as bottom-up investors. Our goal for the Fund is to provide added value by outperforming the relevant benchmark over the long term, measured as 5 years or more. JAMES INVESTMENT RESEARCH James Investment Research became a sub-advisor to the Touchstone Value Small Cap Opportunities Fund on June 20, 2007. 31 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- The third quarter was a difficult environment for small cap value securities. The James approach, which seeks companies with good profitability and relative strength in addition to good relative value, shows the dynamic benefit of not relying on just one factor in making investment decisions. Consumer Discretionary, Materials & Processing and Producer Durables contributed to the relative performance of our portion of the Fund. Consumer Staples, Financial Services and Technology detracted slightly from performance. Individual stocks that had the biggest impact include Schnitzer Steel, Matrix Service Co., Hurco Cos., and Spartan Stores. Our philosophy relies on a disciplined insistence on buying true small cap value stocks that are profitable and are exhibiting strong relative price strength, but still trading at value price levels relative to earnings, cash flow and book value. We know from our experience that high relative strength stocks are harder hit at the beginnings of corrections, but that our approach works very well in down and sideways markets. We remain fully invested, with our sector weightings set defensively as the U.S. economy continues to fight the housing market malaise. As we look to the future, our macro-indicators suggest increased opportunities are ahead for select Utilities and Producer Durables securities. We will, of course, remain diversified among all the major sectors and continue to seek the best bargain stocks for the portfolio. 2007 has presented a challenging landscape for small cap stocks, and our economic outlook suggests this may continue for a time. However, 2008 is a Presidential election year and investors may see better things for smaller securities. Going back to 1926, Ibbotson data indicates that smaller stocks have typically advanced over 22 percent in election years. Our initial research shows that most investors will find the upcoming investment environment to be challenging but there should be opportunities ahead as well. 32 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z* AND THE RUSSELL 2000 VALUE INDEX [LINE CHART] ----------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A 4.34% 19.23% 15.51% Class C 10.01% 19.80% 15.90% Class Z 10.77% 20.72% 16.80% ----------------------------------------------- Small Cap Value Opportunities Fund Russell 2000 Value Index ---------------------------------- ------------------------ Date Balance Date Balance 3/4/02 10,000 3/4/02 10,000 9/30/02 9,270 9/30/02 8,147 9/30/03 12,727 9/30/03 10,726 9/30/04 16,463 9/30/04 13,479 9/30/05 20,467 9/30/05 15,871 9/30/06 21,458 9/30/06 18,095 9/30/07 23,769 9/30/07 19,197 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class Z shares only, which will vary from the performance of Class A shares and Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class Z shares commenced on March 4, 2002 and the initial public offering of Class A shares and Class C shares commenced on July 23, 2007. The Class A and Class C performance information is calculated using the historical performance of Class Z. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 33 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE STRATEGIC VALUE AND HIGH INCOME FUND ADVISED BY TOUCHSTONE ADVISORS, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Strategic Value and High Income Fund (the "Fund") seeks total return through a combination of long-term capital growth and high current income. The Fund is a "fund of funds" which means that it invests substantially all of its assets in shares of other mutual funds, rather than in individual securities. Generally, the Fund invests its assets in shares of other Touchstone Funds - the Touchstone Diversified Small Cap Value Fund and the Touchstone High Yield Fund. The Fund periodically adjusts its asset allocation among these Funds in response to changing market and economic conditions, the performance of the underlying funds, or for other reasons. In addition, the Fund may, under certain circumstances, invest in other underlying funds within the Touchstone Funds family. FUND PERFORMANCE AND POSITIONING The total return of the Fund was 6.46% for the fiscal year ended September 30, 2007. The total return of the 60/40 blend of the Russell 2000(R) Value Index and Merrill Lynch High Yield Index was 6.72% and the total return of the S&P 500 Index was 16.44% for the same period. As of September 30, 2007, the Fund had an allocation of 60% to the Touchstone Diversified Small Cap Value Fund and 40% to the Touchstone High Yield Fund. Market conditions in the equity market were variable during the past year, beginning with strong optimism and ending with a more cautious tone. In this environment, Touchstone Diversified Small Cap Value Fund performance was affected positively as investment techniques were able to isolate stocks with market-beating characteristics. Stock selection in Financial Services and Materials & Processing was solid. Performance in Financial Services was achieved by minimizing exposure to credit risk. Materials and Processing was aided by a focus on the engineering and construction industries. Good performance in these sectors was partially offset by weak selection in Health Care, caused by unrelated negative security-specific events. The Fund remains committed to seeking an optimal portfolio of inexpensive stocks with improving fundamentals to take advantage of the proven, superior long term returns of small cap value stocks. For the twelve month period, the high yield market saw a little bit of everything. The net result was a high yield market total return that approximated the yield with little contribution from capital appreciation or depreciation. The Touchstone High Yield Fund underperformed its benchmark due to its higher-quality bias as well as its allocation to certain industries. During the last twelve months, performance of the Touchstone High Yield Fund was aided by overweight allocations to the Metals, Capital Goods and Healthcare sectors as well as underweight allocations to the Automotive/Auto Parts and Paper industries. Conversely, overweight allocation to Homebuilders and Building Materials detracted from performance. We believe the Fund's strategy of fundamental credit analysis with particular emphasis on avoiding problem credits will continue to add value as negative credit events may have a material impact on returns in this lower return environment. The Fund is designed to exhibit less volatility than the broad market and deliver attractive risk adjusted returns for performance over a full cycle, with focus on protecting principal in down markets. 34 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE STRATEGIC VALUE AND HIGH INCOME - CLASS Y*, THE S&P 500 INDEX, THE RUSSELL 2000 VALUE INDEX, THE MERRILL LYNCH HIGH YIELD INDEX AND A BLENDED 60/40 INDEX*** [LINE CHART] ------------------------------------- STRATEGIC VALUE AND HIGH INCOME FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year Since Inception* Class A 0.13% 12.16% Class C 5.44% 12.68% Class Y 6.46% 13.79% -------------------------------------
Strategic Value and S&P 500 Russell 2000 Merrill Lynch Blended High Income Fund Index Value Index High Yield Index Index ------------------- ------- ------------ ---------------- ------- Date Balance Date Balance Date Balance Date Balance Date Balance 10/31/02 10,000 10/31/02 10,000 10/31/02 10,000 10/31/02 10,000 10/31/02 10,000 9/30/03 12,857 9/30/03 11,433 9/30/03 12,966 9/30/03 12,931 9/30/03 12,952 9/30/04 14,919 9/30/04 13,019 9/30/04 16,293 9/30/04 14,512 9/30/04 15,580 9/30/05 17,041 9/30/05 14,614 9/30/05 19,185 9/30/05 15,484 9/30/05 17,656 9/30/06 17,728 9/30/06 16,191 9/30/06 21,873 9/30/06 16,707 9/30/06 19,698 9/30/07 18,873 9/30/07 18,852 9/30/07 23,205 9/30/07 17,987 9/30/07 21,022
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class Y shares only, which will vary from the performance of Class A shares and Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class Y shares commenced on October 31, 2002 and the initial public offering of Class A shares and Class C shares commenced on November 20, 2006. The Class A and Class C performance information is calculated using the historical performance of Class Y. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. *** The Blended Index is comprised of a 60% weighting in the Russell 2000 Value Index and a 40% weighting in the Merrill Lynch High Yield Index. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 35 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE TAX-EXEMPT BOND FUND SUB-ADVISED BY PITCAIRN INVESTMENT MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Tax-Exempt Bond Fund is managed with a focus on providing income exempt from federal income taxes; ensuring total returns consistent with moderate risk of capital; and maintaining adequate liquidity. The Fund invests in a broad range of investment grade municipal fixed-income securities across the full maturity spectrum. Additional value may be gained by anticipating changing credit conditions and identifying unique anomalies offered by the market. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Tax-Exempt Bond Fund was 2.71% for the fiscal year ended September 30, 2007. The total return of the Lehman Municipal Bond Index was 3.10% for the same period. During the fiscal year, yields rose and the yield curve steepened. Rates rose on the AAA scale by approximately 25 basis points in the 30-year area of the curve and only 2 basis points in the 2-year area of the curve. This steepening and excess return in higher quality sectors illustrates investors' low threshold for risk during the sub-prime meltdown. Pre-refunded bonds were the best performing sector followed by general obligations and revenue bonds. Zero coupon bonds underperformed all other coupon structures during the fiscal year. The long duration of zero coupon bonds contributed to this underperformance. New issues remained strong, as low rates continued to entice issuers to bring deals to market. The Fund's underexposure to longer duration securities contributed to performance. The Fund's portfolio is characterized by a solid average credit rating of AAA/AA and bears a premium yield in comparison to the benchmark. 36 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE TAX-EXEMPT BOND FUND - CLASS A* AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX [LINE CHART] ------------------------------------------------ TAX-EXEMPT BOND FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A -2.16% 2.27% 4.27% ------------------------------------------------ Tax-Exempt Bond Fund Lehman Brothers Municipal Bond Index -------------------- ------------------------------------ Date Balance Date Balance 8/4/00 9,525 8/4/00 10,000 9/30/00 9,585 9/30/00 10,052 9/30/01 10,540 9/30/01 11,098 9/30/02 11,467 9/30/02 12,089 9/30/03 11,882 9/30/03 12,560 9/30/04 12,316 9/30/04 13,138 9/30/05 12,666 9/30/05 13,670 9/30/06 13,118 9/30/06 14,278 9/30/07 13,473 9/30/07 14,720 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class A shares commenced on August 11, 2000. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 37 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE ULTRA SHORT DURATION FIXED INCOME FUND SUB-ADVISED BY CHARTWELL INVESTMENT PARTNERS INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Ultra Short Duration Fixed Income Fund seeks to provide above market income, liquidity, and risk-adjusted total return. Fund management targets these goals using a low risk approach, selecting a core group of securities from better yielding sectors within the government and corporate markets, and enhancing liquidity and yield by combining very short maturities with fixed rate issues in a barbell structure. The Fund avoids higher risk strategies, including exposure to non-dollar currencies and lower quality credits. The Fund generally has a targeted duration of 0.5 years and has 100% of its portfolio in government issues. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Ultra Short Duration Fixed Income Fund was 5.48% for the fiscal year ended September 30, 2007. The total return of the Merrill Lynch 3-Month U.S. Treasury Bill Index was 5.22% for the same period. The Fund's performance was driven by the fact that short-term interest rates rallied over the year as the sub-prime credit swoon that began in June continued into the third quarter and did not subside until the Federal Reserve stepped in and lowered the Federal Funds rate in mid-September. U.S. Treasury securities trounced all other sectors of the market as investors fled to the safety of Treasury-backed securities. The short agency- backed securities rallied right along with the short end of the market allowing the Fund to outperform its benchmark for the year. The Fund's strategy to diversify away from floating rate notes and into more fixed rate debt early in the year helped performance. Floating rate notes have lagged fixed rate notes in the recent rally and will continue to outperform in a stable or falling interest rate environment. Our continuing focus on the high quality source of excess yield provided by government mortgage-backed securities helped Fund performance as 97% of the Fund is invested in agency-backed bonds. Looking forward, the Fund's emphasis on high quality, short duration securities should provide for both attractive relative income and better than average price performance. The monthly principal cash flows provided by core agency mortgage-backed securities holdings enhance Fund liquidity and allow us to continually seek out securities that maximize investor returns consistent with the Fund's investment philosophy. 38 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z* AND THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX [LINE CHART] ---------------------------------------- ULTRA SHORT DURATION FIXED INCOME FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years 10 Years Class Z 5.48% 3.09% 4.32% ---------------------------------------- Ultra Short Duration Merrill Lynch 3-Month Fixed Income Fund U.S. Treasury Bill Index -------------------- -------------------------- Date Balance Date Balance 9/30/97 10,000 9/30/97 10,000 9/30/98 10,622 9/30/98 10,536 9/30/99 11,189 9/30/99 11,034 9/30/00 11,901 9/30/00 11,672 9/30/01 12,742 9/30/01 12,308 9/30/02 13,118 9/30/02 12,553 9/30/03 13,302 9/30/03 12,719 9/30/04 13,519 9/30/04 12,859 9/30/05 13,882 9/30/05 13,196 9/30/06 14,475 9/30/06 13,790 9/30/07 15,268 9/30/07 14,509 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The initial public offering of Class I shares commenced on March 1, 1994. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 39 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) -------------------------------------------------------------------------------- TOUCHSTONE VALUE OPPORTUNITIES FUND SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Value Opportunities Fund seeks long-term capital appreciation by investing in common stocks of U.S. companies with large, medium and small market capitalizations. The Fund focuses on companies that trade at attractive values relative to cash flow, book value, financial strength, and historical valuations. Using a combination of valuation screens, technical analysis, and fundamental research, the Fund seeks companies that possess attractive long-term return potential due to their lower-than-average valuations and improving business fundamentals. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Value Opportunities Fund was 15.83% for the fiscal year ended September 30, 2007. The total return of the Russell 3000(R) Value Index was 13.73% for the same period. From a sector perspective, the Fund finished the year underweight in Financial Services. Notably, it had no direct exposure to the sub-prime market debacle and maintained minimal exposure to REITs. As these two "hot" industries within the sector began their steep correction, the reverberating effects and change in investor sentiment were felt throughout the sector. The Materials & Processing sector benefited from strong stock selection. Shaw Group posted strong returns as the company put its accounting problems to rest and investors have increasingly come to see Shaw Group as a unique player on the need to build out power generation infrastructure around the globe. Partially offsetting performance was the Technology sector where RF Micro Devices and Fairchild Semiconductor, in particular, turned in disappointing showings. The Health Care sector also struggled, primarily due to the performance of Pfizer. The concerns surrounding sub-prime and the uncertain consequences it might pose for the economy shook the markets at different times during the past six months. With the dollar weakening and mixed signals coming from economic data, anxiety became heightened. Leading investors began to allocate capital to companies with international exposure and more predictable business profiles. This dynamic played well to an overweight in Consumer Staples and also benefited key holdings such as General Electric, McDonalds, and Exxon Mobil. The Fund continues to focus on identifying inexpensive stocks with improving fundamentals and improving investor sentiment. We continue to express a preference for such stocks that also possess international exposure and stable earnings profiles. The Fund continues to maintain a somewhat defensive stance given its overweight in Consumer Staples, Healthcare, and Utilities and underweight in Financial Services. We are pursuing research work in certain industries within the Consumer Discretionary and Financial Services sectors where valuation levels have begun to reflect despair on the part of investors and, perhaps, have also begun to obscure more positive business attributes that could be worthwhile for future investment. 40 -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE VALUE OPPORTUNITIES FUND - CLASS Z* AND THE RUSSELL 3000 VALUE INDEX [LINE CHART] ---------------------------------------- VALUE OPPORTUNITIES FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years 10 Years Class A 8.94% 16.70% 9.15% Class C 15.07% 17.27% 9.02% Class Z 15.83% 18.13% 9.82% ---------------------------------------- Value Opportunities Fund Russell 3000 Value Index ------------------------ ------------------------ Date Balance Date Balance 9/30/97 10,000 9/30/97 10,000 9/30/98 9,400 9/30/98 10,197 9/30/99 9,976 9/30/99 11,996 9/30/00 11,340 9/30/00 13,117 9/30/01 11,850 9/30/01 12,071 9/30/02 11,095 9/30/02 10,153 9/30/03 13,493 9/30/03 12,680 9/30/04 16,293 9/30/04 15,328 9/30/05 20,338 9/30/05 17,900 9/30/06 22,037 9/30/06 20,505 9/30/07 25,525 9/30/07 23,320 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. * The chart above represents performance for Class Z shares only, which will vary from the performance of Class A shares and Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class Z shares commenced on December 6, 1991 and the initial public offering of Class A shares and Class C shares commenced on November 20, 2006. The Class A and Class C performance information is calculated using the historical performance of Class Z. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 41 -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Unaudited) September 30, 2007 -------------------------------------------------------------------------------- The illustrations below provide each Fund's sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund's investments. ================================================================================ CLOVER CORE FIXED INCOME FUND -------------------------------------------------------------------------------- CREDIT ANALYSIS (% OF INVESTMENT SECURITIES) U.S. Treasury 21.2 U.S. Agency 47.6 AAA/Aaa 10.4 AA/Aa 7.6 A/A 3.3 BBB/Baa 8.0 Other 1.9 ----- Total 100.0 ----- ================================================================================ ================================================================================ DIVERSIFIED GROWTH FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Technology 20.9 Consumer Discretionary 20.7 Health Care 17.2 Producer Durables 12.1 Energy 6.9 Consumer Staples 6.7 Financial Services 5.8 Materials and Processing 3.5 Autos and Transportation 3.3 Utilities 1.9 Other 1.0 Investment Fund 7.0 Other Assets/Liabilities (Net) (7.0) ----- Total 100.0 ----- ================================================================================ ================================================================================ DIVERSIFIED SMALL CAP VALUE FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financial Services 29.8 Consumer Discretionary 14.4 Materials and Processing 13.0 Technology 11.8 Producer Durables 6.4 Utilities 6.0 Energy 5.6 Health Care 4.7 Autos and Transportation 4.2 Consumer Staples 3.2 Investment Fund 12.3 Cash Equivalent 0.1 Other Assets/Liabilities (Net) (11.5) ----- Total 100.0 ----- ================================================================================ ================================================================================ DIVERSIFIED VALUE FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financial Services 31.1 Energy 15.2 Utilities 12.7 Consumer Discretionary 8.5 Health Care 8.5 Producer Durables 6.7 Consumer Staples 6.3 Materials and Processing 6.0 Technology 3.8 Autos and Transportation 0.9 Other 0.4 Investment Fund 5.3 Other Assets/Liabilities (Net) (5.4) ----- Total 100.0 ----- 42 -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Continued) -------------------------------------------------------------------------------- ================================================================================ FAMILY HERITAGE(R) FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financial Services 22.1 Consumer Discretionary 15.8 Technology 14.4 Health Care 12.4 Energy 10.6 Utilties 8.4 Producer Durables 6.0 Materials and Processing 4.8 Consumer Staples 4.0 Autos and Transportation 0.8 Other 0.5 Investment Fund 4.8 Cash Equivalent 0.3 Other Assets/Liabilities (Net) (4.9) ----- Total 100.0 ----- ================================================================================ ================================================================================ HEALTHCARE AND BIOTECHNOLOGY FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Health Care 94.0 Materials and Processing 2.5 Investment Fund 7.2 Cash Equivalent 4.6 Other Assets/Liabilities (Net) (8.3) ----- Total 100.0 ----- ================================================================================ ================================================================================ INTERNATIONAL EQUITY FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF INVESTMENT SECURITIES) Financials 24.0 Materials 17.2 Consumer Discretionary 15.8 Industrials 8.5 Energy 8.5 Telecommunication Service 8.1 Utilities 6.2 Health Care 5.6 Information Technology 3.7 Consumer Staples 2.4 ----- Total 100.0 ----- ================================================================================ ================================================================================ MID CAP FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financial Services 17.7 Consumer Discretionary 16.9 Producer Durables 11.6 Technology 11.5 Materials and Processing 10.9 Health Care 9.7 Energy 6.9 Utilities 6.4 Consumer Staples 4.7 Autos and Transportation 1.0 Investment Fund 10.6 Cash Equivalent 3.0 Other Assets/Liabilities (Net) (10.9) ----- Total 100.0 ----- ================================================================================ ================================================================================ PITCAIRN TAXABLE BOND FUND -------------------------------------------------------------------------------- CREDIT ANALYSIS (% OF INVESTMENT SECURITIES) U.S. Treasury 19.2 U.S. Agency 30.8 AAA/Aaa 12.2 AA/Aa 6.7 A/A 14.7 BBB/Baa 14.0 B/B 2.4 ----- Total 100.0 ----- ================================================================================ ================================================================================ SANDS CAPITAL SELECT GROWTH FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Health Care 25.3 Consumer Discretionary 20.3 Technology 18.8 Energy 12.2 Financial Services 10.9 Utilities 4.8 Consumer Staples 2.7 Autos and Transportation 2.0 Investment Fund 12.5 Cash Equivalent 0.8 Other Assets/Liabilities (Net) (10.3) ----- Total 100.0 ----- ================================================================================ 43 -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Continued) -------------------------------------------------------------------------------- ================================================================================ SHORT DURATION FIXED INCOME FUND -------------------------------------------------------------------------------- CREDIT ANALYSIS (% OF INVESTMENT SECURITIES) U.S. Agency 97.4 A/A 2.6 ----- Total 100.0 ----- ================================================================================ ================================================================================ SMALL CAP FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Consumer Discretionary 21.6 Financial Services 20.1 Health Care 11.1 Producer Durables 11.0 Technology 10.1 Materials and Processing 6.7 Energy 6.3 Autos and Transportation 5.2 Utilities 3.8 Consumer Staples 3.7 Investment Fund 10.4 Cash Equivalent 0.2 Other Assets/Liabilities (Net) (10.2) ----- Total 100.0 ----- ================================================================================ ================================================================================ SMALL CAP VALUE OPPORTUNITIES FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financial Services 19.4 Consumer Discretionary 16.8 Energy 13.0 Materials and Processing 9.6 Producer Durables 9.6 Utilities 6.0 Autos and Transportation 4.4 Consumer Staples 4.2 Technology 4.0 Health Care 3.6 Investment Fund 7.2 Cash Equivalent 9.7 Other Assets/Liabilities (Net) (7.5) ----- Total 100.0 ----- ================================================================================ ================================================================================ STRATEGIC VALUE AND HIGH INCOME FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Affiliated Equity Fund 59.5 Affiliated Fixed Income Fund 40.8 Other Assets/Liabilities (Net) (0.3) ----- Total 100.0 ----- ================================================================================ ================================================================================ TAX-EXEMPT BOND FUND -------------------------------------------------------------------------------- CREDIT ANALYSIS (% OF INVESTMENT SECURITIES) AAA/Aaa 71.5 AA/Aa 15.0 A/A 10.4 BBB/Baa 3.1 ----- Total 100.0 ----- ================================================================================ ================================================================================ VALUE OPPORTUNITIES FUND -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financial Services 22.8 Energy 15.5 Utilities 15.1 Health Care 10.9 Producer Durables 7.8 Consumer Staples 7.5 Materials and Processing 7.2 Consumer Discretionary 6.0 Technology 3.6 Investment Fund 10.6 Cash Equivalent 4.4 Other Assets/Liabilities (Net) (11.4) ----- Total 100.0 ----- ================================================================================ ================================================================================ ULTRA SHORT DURATION FIXED INCOME FUND -------------------------------------------------------------------------------- CREDIT ANALYSIS (% OF INVESTMENT SECURITIES) U.S. Agency 97.4 A/A 2.6 ----- Total 100.0 ----- ================================================================================ 44 -------------------------------------------------------------------------------- Statements of Assets and Liabilities September 30, 2007 --------------------------------------------------------------------------------
DIVERSIFIED CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED FIXED INCOME GROWTH VALUE VALUE FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ ASSETS Investment securities: At cost $ 20,133,180 $ 119,031,391 $ 187,302,679 $ 176,153,636 ======================================================================================================================== At market value - including $431,982, $8,571,315, $20,579,210 and $10,257,451 of securities loaned for the Clover Core Fixed Income Fund, Diversified Growth Fund, Diversified Small Cap Value Fund and Diversified Value Fund, respectively $ 19,852,500 $ 133,600,695 $ 198,714,544 $ 207,980,539 Dividends and interest receivable 222,851 81,623 127,838 190,218 Receivable for capital shares sold 156,365 -- 44,078 76 Receivable for securities sold 513,600 123,138 5,358,006 8,864,285 Receivable for securities lending income 369 3,980 16,353 1,574 Other assets 6,873 1,652 14,626 19,818 ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 20,752,558 133,811,088 204,275,445 217,056,510 ------------------------------------------------------------------------------------------------------------------------ LIABILITIES Bank overdrafts -- 41,813 -- -- Payable upon return of securities loaned 443,438 8,685,782 21,898,722 10,473,364 Dividends payable 2,586 -- -- 506,000 Payable for capital shares redeemed 49,224 52,197 375,753 23,173 Payable for securities purchased 653,510 -- 3,175,773 8,390,783 Payable to Advisor 7,116 70,147 108,312 124,271 Payable to other affiliates 3,503 18,500 156,185 50,919 Payable to Trustees 1,691 -- 6,944 2,958 Other accrued expenses and liabilities 106,167 64,968 273,692 104,306 ------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 1,267,235 8,933,407 25,995,381 19,675,774 ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 19,485,323 $ 124,877,681 $ 178,280,064 $ 197,380,736 ======================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 20,138,297 $ 172,600,815 $ 127,366,427 $ 162,941,879 Accumulated net investment income (loss) (267) -- 278,687 (487,310) Accumulated net realized gains (losses) on investments (372,027) (62,292,438) 39,223,085 3,099,264 Net unrealized appreciation (depreciation) on investments (280,680) 14,569,304 11,411,865 31,826,903 ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 19,485,323 $ 124,877,681 $ 178,280,064 $ 197,380,736 ======================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ -- $ 124,877,681 $ 205,091 $ 197,374,254 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 17,543,005 10,487 16,748,449 ======================================================================================================================== Net asset value and redemption price per share $ -- $ 7.12 $ 19.56 $ 11.78 ======================================================================================================================== Maximum offering price per share $ -- $ 7.55 $ 20.75 $ 12.50 ======================================================================================================================== PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ -- $ -- $ 79,087 $ 6,482 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- 4,060 549 ======================================================================================================================== Net asset value, offering price and redemption price per share* $ -- $ -- $ 19.48 $ 11.80 ========================================================================================================================
45 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
DIVERSIFIED CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED FIXED INCOME GROWTH VALUE VALUE FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ -- $ -- $ 177,995,886 $ -- ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- 9,102,690 -- ======================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ -- $ 19.55 $ -- ======================================================================================================================== PRICING OF CLASS I SHARES Net assets attributable to Class I shares $ 19,485,323 $ -- $ -- $ -- ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 2,049,969 -- -- -- ======================================================================================================================== Net asset value, offering price and redemption price per share $ 9.51 $ -- $ -- $ -- ========================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 46 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ ASSETS Investment securities: At cost $ 70,257,073 $ 49,337,966 $ 124,183,307 $ 518,761,530 ======================================================================================================================== At market value - including $3,833,606, $3,847,724 and $49,789,776 of securities loaned for the Family Heritage (R) Fund, Healthcare and Biotechnology Fund and Mid Cap Fund, respectively $ 87,437,596 $ 59,235,034 $ 154,312,525 $ 551,509,961 Cash -- -- 258,871 -- Foreign currency (cost $826,957) -- -- 891,650 -- Dividends and interest receivable 38,356 49,866 364,921 277,259 Receivable for capital shares sold -- 507,497 5,079 2,020,040 Receivable for securities sold -- 243,676 399,857 11,608,457 Receivable for securities lending income 2,785 1,368 -- 13,644 Currency contracts receivable -- 22,506 -- -- Tax reclaim receivable -- 2,000 230,827 -- Other assets 22,322 -- 11,803 53,471 ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 87,501,059 60,061,947 156,475,533 565,482,832 ------------------------------------------------------------------------------------------------------------------------ LIABILITIES Bank overdrafts -- 22,506 -- -- Payable upon return of securities loaned 3,970,776 3,930,823 -- 52,880,591 Dividends payable -- -- -- -- Currency contracts payable -- -- 162,396 -- Payable for capital shares redeemed 75,591 3,578 261 414,749 Payable for securities purchased -- 1,289,264 667,409 14,311,936 Payable to Advisor 58,388 43,509 100,146 340,089 Payable to other affiliates 24,495 23,095 11,860 20,261 Payable to Trustees 4,236 1,682 3,066 2,651 Unrealized depreciation on foreign currency exchange contracts -- -- 2,399 -- Other accrued expenses and liabilities 51,821 56,406 164,957 16,181 ------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 4,185,307 5,370,863 1,112,494 67,986,458 ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 83,315,752 $ 54,691,084 $ 155,363,039 $ 497,496,374 ======================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 72,396,017 $ 40,042,584 $ 107,990,713 $ 461,820,342 Accumulated net investment income (loss) 50,443 (3,803) 2,000,880 -- Accumulated net realized gains (losses) on investments and foreign currency transactions (6,311,231) 4,755,235 15,177,535 2,927,601 Net unrealized appreciation on investments 17,180,523 9,896,861 30,129,218 32,748,431 Net unrealized appreciation on foreign currency and translation of other assets and liabilities denominated in foreign currency -- 207 64,693 -- ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 83,315,752 $ 54,691,084 $ 155,363,039 $ 497,496,374 ======================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ 83,309,762 $ 53,295,534 $ 154,622,670 $ 210,563 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 7,302,350 2,914,817 12,751,863 11,787 ======================================================================================================================== Net asset value and redemption price per share $ 11.41 $ 18.28 $ 12.13 $ 17.86 ======================================================================================================================== Maximum offering price per share $ 12.11 $ 19.40 $ 12.85 $ 18.95 ========================================================================================================================
47 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ 5,990 $ 1,395,550 $ 740,369 $ 35,712 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 521 76,707 61,349 2,002 ======================================================================================================================== Net asset value, offering price and redemption price per share* $ 11.50 $ 18.19 $ 12.07 $ 17.84 ======================================================================================================================== PRICING OF CLASS Y SHARES Net assets attributable to Class Y shares $ -- $ -- $ -- $ 482,047,241 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- -- 26,912,116 ======================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ -- $ -- $ 17.91 ======================================================================================================================== PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ -- $ -- $ -- $ 15,202,858 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- -- 851,788 ======================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ -- $ -- $ 17.85 ========================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 48 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION TAXABLE SELECT FIXED SMALL BOND GROWTH INCOME CAP FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ ASSETS: Investment securities: At cost $ 35,523,102 $ 523,816,595 $ 59,762,628 $ 70,796,877 ======================================================================================================================== At market value - including $71,549,018 and $6,813,000 of securities loaned for the Sands Capital Select Growth Fund and Small Cap Fund, respectiviely $ 36,093,476 $ 654,763,824 $ 59,112,275 $ 76,395,395 Dividends and interest receivable 621,954 75,332 311,705 113,013 Receivable for capital shares sold -- 13,481,278 -- 4 Receivable for securities sold 1,000,000 5,581,261 -- 1,139,209 Receivable for securities lending income 226 13,313 -- 5,399 Receivable from Advisor -- -- 18,681 -- Other assets 8,981 17,922 7,319 11,160 ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 37,724,637 673,932,930 59,449,980 77,664,180 ------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable upon return of securities loaned -- 74,360,152 -- 7,190,007 Dividends payable 99,916 -- 4,430 -- Payable for capital shares redeemed -- 799,630 122,846 -- Payable for securities purchased -- 4,142,242 -- 1,027,045 Payable to Advisor 12,316 351,243 -- 37,881 Payable to other affiliates 7,510 182,257 35,205 15,455 Payable to Trustees 4,241 6,935 3,727 1,070 Other accrued expenses and liabilities 31,373 393,956 91,464 54,694 ------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 155,356 80,236,415 257,672 8,326,152 ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 37,569,281 $ 593,696,515 $ 59,192,308 $ 69,338,028 ======================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 37,705,220 $ 507,167,811 $ 64,106,883 $ 56,210,768 Accumulated net investment income (loss) (166) -- -- 116,008 Accumulated net realized gains (losses) on investments (706,147) (44,418,525) (4,264,222) 7,412,734 Net unrealized appreciation (depreciation) on investments 570,374 130,947,229 (650,353) 5,598,518 ------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 37,569,281 $ 593,696,515 $ 59,192,308 $ 69,338,028 ======================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ -- $ -- $ -- $ 69,337,034 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- -- 4,775,865 ======================================================================================================================== Net asset value and redemption price per share $ -- $ -- $ -- $ 14.52 ======================================================================================================================== Maximum offering price per share $ -- $ -- $ -- $ 15.41 ======================================================================================================================== PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ -- $ -- $ -- $ 994 ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- -- 69 ======================================================================================================================== Net asset value, offering price and redemption price per share* $ -- $ -- $ -- $ 14.44 ========================================================================================================================
49 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION TAXABLE SELECT FIXED SMALL BOND GROWTH INCOME CAP FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ PRICING OF CLASS Y SHARES Net assets attributable to Class Y shares $ -- $ 213,671,548 $ -- $ -- ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 23,355,229 -- -- ======================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ 9.15 $ -- $ -- ======================================================================================================================== PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ -- $ 380,024,967 $ 59,192,308 $ -- ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 41,849,517 6,031,938 -- ======================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ 9.08 $ 9.81 $ -- ======================================================================================================================== PRICING OF CLASS II SHARES Net assets attributable to Class II shares $ 37,569,281 $ -- $ -- $ -- ======================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 3,633,212 -- -- -- ======================================================================================================================== Net asset value, offering price and redemption price per share $ 10.34 $ -- $ -- $ -- ========================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 50 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE VALUE AND HIGH TAX-EXEMPT OPPORTUNITIES INCOME BOND FUND FUND FUND -------------------------------------------------------------------------------------------------------------------- ASSETS Investment securities: At cost $ 209,554,080 $ 1,169,986 $ 99,690,851 ==================================================================================================================== Non-affiliated securities, at market value $ 219,513,543 $ -- $ 102,701,363 Affiliated securities, at market value -- 1,155,251 -- -------------------------------------------------------------------------------------------------------------------- Total investment securities, at market value - including $14,039,502 of securities loaned for the Small Cap Value Opportunities Fund 219,513,543 1,155,251 102,701,363 Dividends and interest receivable 185,538 3,026 1,518,870 Receivable for capital shares sold 86,844 -- 81 Receivable for securities sold 1,319,871 27,323 -- Receivable for securities lending income 4,612 -- -- Receivable from Advisor -- 24,795 -- Other assets 58,384 11,923 -- -------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 221,168,792 1,222,318 104,220,314 -------------------------------------------------------------------------------------------------------------------- LIABILITIES Bank overdrafts -- 16,360 -- Payable upon return of securities loaned 14,703,983 -- -- Dividends payable -- 323 287,000 Payable for capital shares redeemed 756,168 3,095 -- Payable for securities purchased 1,349,415 13,952 -- Payable to Advisor 148,047 -- 18,077 Payable to other affiliates 88,450 1,721 19,806 Payable to Trustees 2,545 1,691 1,673 Other accrued expenses and liabilities 4,631 19,709 85,632 -------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 17,053,239 56,851 412,188 -------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 204,115,553 $ 1,165,467 $ 103,808,126 ==================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 178,939,356 $ 922,227 $ 100,151,749 Accumulated net investment income 11,319 3,072 222,291 Accumulated net realized gains on investments 15,205,415 254,903 423,574 Net unrealized appreciation (depreciation) on investments 9,959,463 (14,735) 3,010,512 ==================================================================================================================== NET ASSETS $ 204,115,553 $ 1,165,467 $ 103,808,126 ==================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ 7,672 $ 150,524 $ 103,808,126 ==================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 375 9,949 10,082,312 ==================================================================================================================== Net asset value and redemption price per share $ 20.48 $ 15.13 $ 10.30 ==================================================================================================================== Maximum offering price per share $ 21.73 $ 16.05 $ 10.81 ==================================================================================================================== PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ 80,681 $ 5,242 $ -- ==================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 3,942 346 -- ==================================================================================================================== Net asset value, offering price and redemption price per share* $ 20.47 $ 15.16 $ -- ====================================================================================================================
51 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE VALUE AND HIGH TAX-EXEMPT OPPORTUNITIES INCOME BOND FUND FUND FUND -------------------------------------------------------------------------------------------------------------------- PRICING OF CLASS Y SHARES Net assets attributable to Class Y shares $ -- $ 1,009,701 $ -- ==================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 67,272 -- ==================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ 15.01 $ -- ==================================================================================================================== PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ 204,027,200 $ -- $ -- ==================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 9,960,681 -- -- ==================================================================================================================== Net asset value, offering price and redemption price per share $ 20.48 $ -- $ -- ====================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 52 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE FIXED INCOME OPPORTUNITIES FUND FUND ------------------------------------------------------------------------------------------------------- ASSETS Investment securities: At cost $ 145,398,635 $ 105,007,647 ======================================================================================================= At market value - including $11,068,728 of securities loaned for the Value Opportunities Fund $ 146,016,204 $ 120,128,184 Dividends and interest receivable 576,887 176,090 Receivable for capital shares sold 133,405 740 Receivable for securities sold 78 2,973,110 Receivable for securities lending income -- 2,397 Other assets 7,671 16,094 ------------------------------------------------------------------------------------------------------- TOTAL ASSETS 146,734,245 123,296,615 ------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned -- 11,407,980 Dividends payable 25,835 19,650 Payable for capital shares redeemed 341,359 218,709 Payable for securities purchased -- 3,691,330 Payable to Advisor 29,094 58,980 Payable to other affiliates 55,111 53,544 Payable to Trustees 4,258 3,462 Other accrued expenses and liabilities 233,154 35,873 ------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 688,811 15,489,528 ------------------------------------------------------------------------------------------------------- NET ASSETS $ 146,045,434 $ 107,807,087 ======================================================================================================= NET ASSETS CONSIST OF: Paid-in capital $ 152,669,737 $ 84,479,571 Accumulated net investment income (loss) 4 (7,541) Accumulated net realized gains (losses) on investments (7,241,876) 8,214,520 Net unrealized appreciation on investments 617,569 15,120,537 ------------------------------------------------------------------------------------------------------- NET ASSETS $ 146,045,434 $ 107,807,087 ======================================================================================================= PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ -- $ 471,714 ======================================================================================================= Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 26,428 ======================================================================================================= Net asset value and redemption price per share $ -- $ 17.85 ======================================================================================================= Maximum offering price per share $ -- $ 18.94 =======================================================================================================
53 -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE FIXED INCOME OPPORTUNITIES FUND FUND ------------------------------------------------------------------------------------------------------- PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ -- $ 423,215 ======================================================================================================= Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 23,764 ======================================================================================================= Net asset value, offering price and redemption price per share* $ -- $ 17.81 ======================================================================================================= PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ 146,045,434 $ 106,912,158 ======================================================================================================= Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 14,493,406 5,996,419 ======================================================================================================= Net asset value, offering price and redemption price per share $ 10.08 $ 17.83 =======================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 54 -------------------------------------------------------------------------------- Statements of Operations For the Year Ended September 30, 2007 --------------------------------------------------------------------------------
DIVERSIFIED CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED FIXED INCOME GROWTH VALUE VALUE FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends $ 9,663 $ 1,364,740 $ 2,947,626 $ 4,235,039 Income from securities loaned 2,066 47,894 121,422 44,737 Interest 1,123,179 -- -- -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 1,134,908 1,412,634 3,069,048 4,279,776 ------------------------------------------------------------------------------------------------------------------------ EXPENSES Investment advisory fees 91,543 850,464 1,927,264 1,243,106 Administration fees 36,531 226,235 405,827 324,095 Distribution expenses, Class A -- 261,539 219 383,797 Distribution expenses, Class C -- -- 332 32 Shareholder servicing fees -- 42,162 350,941 59,979 Transfer agent fees, Class A -- 9,341 600 15,789 Transfer agent fees, Class C -- -- 100 98 Transfer agent fees, Class Z -- -- 199,790 -- Transfer agent fees, Class I 8,259 -- -- -- Transfer agent fees and expenses, Class A -- 12,987 -- 19,156 Transfer agent fees and expenses, Class Z -- -- 89,950 -- Transfer agent fees and expenses, Class I 9,993 -- -- -- Custodian fees 8,281 16,208 95,699 22,478 Postage and supplies -- -- 53,434 -- Professional fees 24,083 21,972 25,432 29,426 Registration fees 6,491 25,039 39,991 25,394 Trustees' fees and expenses 7,166 5,376 12,483 7,178 Reports to shareholders 3,603 -- 14,250 5,214 Compliance fees and expenses 864 1,074 1,280 1,514 Other expenses 4,478 8,555 37,629 1,158 ------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES 201,292 1,480,952 3,255,221 2,138,414 Fees waived by the Administrator (24,325) (146,538) (8,514) (198,094) Fees waived/and or expenses reimbursed by the Advisor -- -- -- -- Fees paid indirectly (372) (33) (4,331) (84) ------------------------------------------------------------------------------------------------------------------------ NET EXPENSES 176,595 1,334,381 3,242,376 1,940,236 ------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) 958,313 78,253 (173,328) 2,339,540 ------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains (losses) from security transactions (133,799) 3,994,236 42,191,085 25,898,731 Net change in unrealized appreciation/ depreciation on investments (29,799) 14,689,118 (17,509,698) (10,441,375) ------------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (163,598) 18,683,354 24,681,387 15,457,356 ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 794,715 $ 18,761,607 $ 24,508,059 $ 17,796,896 ========================================================================================================================
See accompanying notes to financial statements. 55 -------------------------------------------------------------------------------- Statements of Operations (Continued) --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends (A) $ 2,239,154 $ 489,890 $ 3,993,344 $ 3,888,559 Income from securities loaned 45,025 28,840 -- 44,964 ------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 2,284,179 518,730 3,993,344 3,933,523 ------------------------------------------------------------------------------------------------------------------------ EXPENSES Investment advisory fees 753,558 500,196 1,486,895 2,470,376 Administration fees 152,840 89,901 282,392 584,259 Distribution expenses, Class A 180,904 105,365 336,609 24 Distribution expenses, Class C 15 1,636 2,187 39 Shareholder servicing fees 28,689 17,803 54,197 15,149 Transfer agent fees, Class A 8,792 31,812 25,641 9,801 Transfer agent fees, Class C 84 144 -- 968 Transfer agent fees, Class Y -- -- -- 17,454 Transfer agent fees, Class Z -- -- -- 139 Transfer agent fees and expenses, Class A 13,500 28,800 15,548 -- Transfer agent fees and expenses, Class Y -- -- -- 20,136 Transfer agent fees and expenses, Class Z -- -- -- 2,299 Registration fees 12,418 40,020 30,114 18,923 Custodian fees 18,217 15,392 494,163 68,984 Postage and supplies 6,919 8,675 -- 280 Professional fees 20,405 22,600 32,219 38,363 Reports to shareholders 2,192 21,993 958 3,254 Trustees' fees and expenses 9,727 7,166 8,576 8,185 Compliance fees and expenses 913 921 1,147 1,554 Other expenses 8,518 6,914 96,709 3,778 ------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES 1,217,691 899,338 2,867,355 3,263,965 Fees waived by the Administrator (130,698) (65,060) (282,392) (484,841) Fees waived/and or expenses reimbursed by the Advisor -- -- (318,444) -- Fees paid indirectly (47) (1,432) (73) (185) ------------------------------------------------------------------------------------------------------------------------ NET EXPENSES 1,086,946 832,846 2,266,446 2,778,939 ------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) 1,197,233 (314,116) 1,726,898 1,154,584 ------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains from security transactions 4,928,815 5,819,353 16,686,708 3,549,738 Net realized gains (losses) from foreign currency transactions -- (3,803) 364,297 -- Net change in unrealized appreciation/ depreciation on investments 3,922,586 3,150,465 17,335,430 31,725,301 Net change in unrealized appreciation/ depreciation on foreign currency transactions -- 207 10,101 -- ------------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 8,851,401 8,966,222 34,396,536 35,275,039 ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 10,048,634 $ 8,652,106 $ 36,123,434 $ 36,429,623 ======================================================================================================================== (A) Net of foreign tax withholding of: $ -- $ 2,796 $ 551,003 $ 917
See accompanying notes to financial statements. 56 -------------------------------------------------------------------------------- Statements of Operations (Continued) --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION TAXABLE SELECT FIXED SMALL BOND GROWTH INCOME CAP FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends (A) $ 50,231 $ 1,864,141 $ 2,743 $ 858,474 Income from securities loaned 2,366 150,959 643 40,791 Interest 2,135,877 -- 3,550,357 -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 2,188,474 2,015,100 3,553,743 899,265 ------------------------------------------------------------------------------------------------------------------------ EXPENSES Investment advisory fees 158,551 4,376,477 165,561 558,485 Administration fees 71,881 1,010,955 117,850 145,326 Shareholder servicing fees 99,056 934,767 105,077 29,872 Transfer agent fees, Class A -- -- -- 15,804 Transfer agent fees, Class C -- -- -- 19 Transfer agent fees, Class Y -- 16,267 -- -- Transfer agent fees, Class Z -- 241,592 46,607 -- Transfer agent fees, Class II 5,103 -- -- -- Transfer agent fees and expenses, Class A -- -- -- 12,979 Transfer agent fees and expenses, Class Y -- 43,048 -- -- Transfer agent fees and expenses, Class Z -- 85,438 28,793 -- Transfer agent fees and expenses, Class II 9,306 -- -- -- Registration fees 8,113 71,287 15,159 23,344 Professional fees 21,709 36,459 23,672 25,052 Custodian fees 5,602 52,319 14,344 14,632 Reports to shareholders 3,182 37,973 12,516 1,281 Trustees' fees and expenses 9,720 12,555 9,214 6,561 Distribution expenses, Class A -- -- -- 167,316 Distribution expenses, Class C -- -- -- 7 Compliance fees and expenses 904 1,946 958 988 Other expenses 1,926 2,891 9,993 2,844 ------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES 395,053 6,923,974 549,744 1,004,510 Fees waived by the Administrator (41,943) (243,779) (56,171) (124,672) Fees paid indirectly (23) (2,380) (344) (93) ------------------------------------------------------------------------------------------------------------------------ NET EXPENSES 353,087 6,677,815 493,229 879,745 ------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) 1,835,387 (4,662,715) 3,060,514 19,520 ------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains (losses) from security transactions 281,261 (7,733,494) (339,021) 10,664,099 Net change in unrealized appreciation/ depreciation on investments (238,115) 114,689,804 645,398 (3,560,710) ------------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 43,146 106,956,310 306,377 7,103,389 ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,878,533 $ 102,293,595 $ 3,366,891 $ 7,122,909 ======================================================================================================================== (A) Net of foreign tax withholding of: $ -- $ 18,752 $ -- $ --
See accompanying notes to financial statements. 57 -------------------------------------------------------------------------------- Statements of Operations (Continued) --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE VALUE AND HIGH TAX-EXEMPT OPPORTUNITIES INCOME BOND FUND FUND FUND -------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends from affiliated securities $ -- $ 44,357 $ -- Dividends from non-affiliated securities (A) 3,357,856 -- 41,329 Income from securities loaned 65,470 -- -- Interest -- -- 5,048,747 -------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 3,423,326 44,357 5,090,076 -------------------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 2,175,657 2,009 340,227 Administration fees 411,942 3,248 206,284 Distribution expenses, Class A 3 162 243,350 Distribution expenses, Class C 75 11 -- Shareholder servicing fees 572,540 -- 40,888 Custodian fees 62,108 4,023 12,631 Postage and supplies 25,123 -- -- Professional fees 34,947 21,913 28,398 Transfer agent fees, Class A 840 488 10,094 Transfer agent fees, Class C 47 99 -- Transfer agent fees, Class Y -- 2,463 -- Transfer agent fees, Class Z 324,901 -- -- Transfer agent fees and expenses, Class A -- -- 13,773 Transfer agent fees and expenses, Class Y -- 7,299 -- Transfer agent fees and expenses, Class Z 33,808 -- -- Reports to shareholders 28,703 3,103 1,251 Trustees' fees and expenses 8,088 7,160 7,173 Registration fees 35,966 24,394 38,357 Compliance fees and expenses 1,286 -- 1,059 Other expenses 18,846 419 16,869 -------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 3,734,880 76,791 960,354 Fees waived by the Administrator (278,835) (3,248) (164,892) Fees waived/and or expenses reimbursed by the Advisor -- (68,465) -- Fees paid indirectly (7,416) (179) (50) -------------------------------------------------------------------------------------------------------------------- NET EXPENSES 3,448,629 4,899 795,412 -------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (25,303) 39,458 4,294,664 -------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains from affiliated security transactions -- 259,854 -- Net realized gains from non-affiliated security transactions 15,610,150 -- 465,983 Net change in unrealized appreciation/ depreciation on affiliated investments -- (137,843) -- Net change in unrealized appreciation/ depreciation on non-affiliated investments 10,302,517 -- (1,810,157) -------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS 25,912,667 122,011 (1,344,174) -------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 25,887,364 $ 161,469 $ 2,950,490 ==================================================================================================================== (A) Net of foreign tax withholding of: $ 608 $ -- $ --
See accompanying notes to financial statements. 58 -------------------------------------------------------------------------------- Statements of Operations (Continued) --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE FIXED INCOME OPPORTUNITIES FUND FUND ------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (A) $ 7,790 $ 2,171,978 Income from securities loaned 244 21,853 Interest 9,255,257 -- ------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 9,263,291 2,193,831 ------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 390,257 755,058 Administration fees 280,675 172,854 Distribution expenses, Class A -- 456 Distribution expenses, Class C -- 1,210 Shareholder servicing fees 249,308 55,721 Transfer agent fees, Class Z 69,019 77,495 Transfer agent fees and expenses, Class Z 53,344 25,038 Custodian fees 27,689 15,018 Professional fees 26,695 24,979 Postage and supplies -- 1,447 Reports to shareholders 12,618 9,785 Trustees' fees and expenses 9,771 8,960 Registration fees 37,326 37,890 Compliance fees and expenses 1,140 1,029 Other expenses 11,915 11,291 ------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 1,169,757 1,198,231 Fees waived by the Administrator (97,596) (50,202) Fees paid indirectly (1,211) (2,029) ------------------------------------------------------------------------------------------------------- NET EXPENSES 1,070,950 1,146,000 ------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 8,192,341 1,047,831 ------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS ON INVESTMENTS Net realized gains from security transactions 70,532 9,316,813 Net change in unrealized appreciation/ depreciation on investments 152,845 4,431,805 ------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 223,377 13,748,618 ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,415,718 $ 14,796,449 ======================================================================================================= (A) Net of foreign tax withholding of: $ -- $ 139
See accompanying notes to financial statements. 59 -------------------------------------------------------------------------------- Statements of Changes in Net Assets --------------------------------------------------------------------------------
CLOVER CORE FIXED INCOME DIVERSIFIED FUND GROWTH FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income $ 958,313 $ 1,033,314 $ 78,253 $ 114,799 Net realized gains (losses) from security transactions (133,799) (217,802) 3,994,236 6,209,237 Net change in unrealized appreciation/depreciation on investments (29,799) (174,709) 14,689,118 (323,638) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 794,715 640,803 18,761,607 6,000,398 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A -- -- (110,282) (121,417) From net investment income, Class I (961,663) (1,047,680) -- -- From net realized gains, Class I -- (608,327) -- -- ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (961,663) (1,656,007) (110,282) (121,417) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold -- -- 782,858 7,078,282 Reinvested distributions -- -- 7,296 7,657 Payments for shares redeemed -- -- (12,062,138) (12,026,814) ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS -- -- (11,271,984) (4,940,875) ------------------------------------------------------------------------------------------------------------------------ CLASS I Proceeds from shares sold 2,861,301 4,777,848 -- -- Reinvested distributions 921,355 1,601,713 -- -- Payments for shares redeemed (5,819,674) (9,841,174) -- -- ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS I SHARE TRANSACTIONS (2,037,018) (3,461,613) -- -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (2,203,966) (4,476,817) 7,379,341 938,106 NET ASSETS Beginning of year 21,689,289 26,166,106 117,498,340 116,560,234 ------------------------------------------------------------------------------------------------------------------------ End of year $ 19,485,323 $ 21,689,289 $ 124,877,681 $ 117,498,340 ======================================================================================================================== ACCUMULATED NET INVESTMENT LOSS $ (267) $ -- $ -- $ (3,964) ========================================================================================================================
See accompanying notes to financial statements. 60 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
DIVERSIFED SMALL CAP DIVERSIFIED VALUE FUND VALUE FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 2007(B) 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ (173,328) $ (1,220,521) $ 2,339,540 $ 2,212,710 Net realized gains from security transactions 42,191,085 74,451,036 25,898,731 5,167,491 Net change in unrealized appreciation/depreciation on investments (17,509,698) (44,693,056) (10,441,375) 9,322,847 ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 24,508,059 28,537,459 17,796,896 16,703,048 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A -- -- (2,337,948) (2,246,752) From net investment income, Class C -- -- (34) -- From net realized gains, Class A (3,401) -- (28,344,396) (13,479,191) From net realized gains, Class C (4,650) -- (873) -- From net realized gains, Class Z (74,856,107) (60,867,084) -- -- ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (74,864,158) (60,867,084) (30,683,251) (15,725,943) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 266,468 -- 2,002,099 7,837,850 Reinvested distributions 3,401 -- 3,198,512 4,209,554 Proceeds from shares issued in connection with acquisition (C) -- -- 53,968,745 -- Payments for shares redeemed (61,472) -- (16,506,005) (13,970,168) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 208,397 -- 42,663,351 (1,922,764) ------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold 80,986 -- 6,260 -- Reinvested distributions 4,650 -- 907 -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 85,636 -- 7,167 -- ------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold 17,327,622 37,823,898 -- -- Reinvested distributions 71,871,313 59,757,740 -- -- Payments for shares redeemed (120,135,425) (255,984,525) -- -- ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (30,936,490) (158,402,887) -- -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (80,998,556) (190,732,512) 29,784,163 (945,659) NET ASSETS Beginning of year 259,278,620 450,011,132 167,596,573 168,542,232 ------------------------------------------------------------------------------------------------------------------------ End of year $ 178,280,064 $ 259,278,620 $ 197,380,736 $ 167,596,573 ======================================================================================================================== ACCUMULATED NET INVESTMENT LOSS $ 278,687 $ -- $ (487,310) $ (4,944) ========================================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (C) See Footnote 9 in notes to financial statements. See accompanying notes to financial statements. 61 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
FAMILY HEALTHCARE AND HERITAGE(R) FUND BIOTECHNOLOGY FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 2007(A) 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ 1,197,233 $ 198,532 $ (314,116) $ (626,652) Net realized gains from security transactions 4,928,815 3,637,615 5,819,353 1,219,117 Net realized losses from foreign currency transactions -- -- (3,803) -- Net change in unrealized appreciation/depreciation on investments 3,922,586 (1,310,466) 3,150,465 (456,843) Net change in unrealized appreciation/depreciation from foreign currency transactions -- -- 207 -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 10,048,634 2,525,681 8,652,106 135,622 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A (1,156,587) (202,429) -- -- In excess of net investment income, Class A -- (24,705) -- -- From net realized gains, Class A -- -- (1,868,667) (1,786,077) From net realized gains, Class C -- -- (37) ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,156,587) (227,134) (1,868,704) (1,786,077) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 5,842,108 2,147,532 9,785,368 25,828,040 Reinvested distributions 147,757 28,791 1,828,887 1,767,486 Payments for shares redeemed (11,953,129) (8,542,152) (20,162,439) (30,566,992) ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (5,963,264) (6,365,829) (8,548,184) (2,971,466) ------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold 5,995 -- 1,353,028 -- Reinvested distributions -- -- 37 -- Payments for shares redeemed -- -- (17,481) -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 5,995 -- 1,335,584 -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 2,934,778 (4,067,282) (429,198) (4,621,921) NET ASSETS Beginning of year 80,380,974 84,448,256 55,120,282 59,742,203 ------------------------------------------------------------------------------------------------------------------------ End of year $ 83,315,752 $ 80,380,974 $ 54,691,084 $ 55,120,282 ======================================================================================================================== ACCUMULATED NET INVESTMENT INCOME (LOSS) $ 50,443 $ -- $ (3,803) $ -- ========================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. See accompanying notes to financial statements. 62 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
INTERNATIONAL EQUITY MID CAP FUND FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 2007(B) 2006(C) ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income $ 1,726,898 $ 1,529,624 $ 1,154,584 $ 72,092 Net realized gains (losses) from security transactions 16,686,708 31,702,789 3,549,738 (334,728) Net realized gains from foreign currency transactions 364,297 30,160 -- -- Net change in unrealized appreciation/depreciation on investments 17,335,430 (11,427,749) 31,725,301 906,899 Net change in unrealized appreciation/depreciation from foreign currency transactions 10,101 57,041 -- -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 36,123,434 21,891,865 36,429,623 644,263 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A (1,945,480) (1,747,820) -- -- From net investment income, Class C (204) -- -- -- From net investment income, Class Y -- -- (1,499,729) (1,586) From net investment income, Class Z -- -- (12,723) -- From net realized gains, Class A (6,592,570) -- -- -- From net realized gains, Class C (703) -- -- -- From net realized gains, Class Z -- -- -- (61,105) ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (8,538,957) (1,747,820) (1,512,452) (62,691) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 6,650,827 14,416,258 219,426 -- Reinvested distributions 2,039,158 168,196 -- -- Payments for shares redeemed (32,944,162) (11,321,379) (8,322) -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (24,254,177) 3,263,075 211,104 -- ------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold 700,214 -- 35,447 -- Reinvested distributions 907 -- -- -- Payments for shares redeemed (4,445) -- -- -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 696,676 -- 35,447 -- ------------------------------------------------------------------------------------------------------------------------ CLASS Y Proceeds from shares sold -- -- 397,263,466 86,237,355 Reinvested distributions -- -- 84,244 62,687 Payments for shares redeemed -- -- (37,176,701) (689,660) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS -- -- 360,171,009 85,610,382 ------------------------------------------------------------------------------------------------------------------------
63 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
INTERNATIONAL EQUITY MID CAP FUND FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 2007(B) 2006(C) ------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold $ -- $ -- $ 16,658,928 $ 348,562 Reinvested distributions -- -- 1,880 -- Payments for shares redeemed -- -- (1,881,297) -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS -- -- 14,779,511 348,562 ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE IN NET ASSETS 4,026,976 23,407,120 410,114,242 86,540,516 NET ASSETS Beginning of year 151,336,063 127,928,943 87,382,132 841,616 ------------------------------------------------------------------------------------------------------------------------ End of year $ 155,363,039 $ 151,336,063 $ 497,496,374 $ 87,382,132 ======================================================================================================================== ACCUMULATED NET INVESTMENT INCOME $ 2,000,880 $ 1,654,774 $ -- $ 70,818 ========================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Classes A and C represent the period from commencement of operations (May 14, 2007) through September 30, 2007. (C) Class Z represents the period from commencement of operations (April 24, 2006) through September 30, 2006. See accompanying notes to financial statements. 64 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL TAXABLE BOND SELECT GROWTH FUND FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ 1,835,387 $ 2,108,755 $ (4,662,715) $ (3,883,664) Net realized gains (losses) from security transactions 281,261 (356,274) (7,733,494) (6,346,760) Net change in unrealized appreciation/depreciation on investments (238,115) (516,570) 114,689,804 (17,798,702) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,878,533 1,235,911 102,293,595 (28,029,126) ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class II (1,835,524) (2,110,784) -- -- ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,835,524) (2,110,784) -- -- ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS Y Proceeds from shares sold -- -- 71,602,921 148,235,482 Payments for shares redeemed -- -- (74,861,403) (36,499,523) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS -- -- (3,258,482) 111,735,959 ------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold -- -- 90,095,417 284,523,520 Payments for shares redeemed -- -- (142,825,600) (65,813,872) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS -- -- (52,730,183) 218,709,648 ------------------------------------------------------------------------------------------------------------------------ CLASS II Proceeds from shares sold 2,820,055 4,636,284 -- -- Reinvested distributions 400,806 497,557 -- -- Payments for shares redeemed (9,875,964) (8,046,185) -- -- ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS II SHARE TRANSACTIONS (6,655,103) (2,912,344) -- -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (6,612,094) (3,787,217) 46,304,930 302,416,481 NET ASSETS Beginning of year 44,181,375 47,968,592 547,391,585 244,975,104 ------------------------------------------------------------------------------------------------------------------------ End of year $ 37,569,281 $ 44,181,375 $ 593,696,515 $ 547,391,585 ======================================================================================================================== ACCUMULATED NET INVESTMENT LOSS $ (166) $ -- $ -- $ -- ========================================================================================================================
See accompanying notes to financial statements. 65 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
SHORT DURATION FIXED INCOME FUND SMALL CAP FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ 3,060,514 $ 3,665,400 $ 19,520 $ (138,000) Net realized gains (losses) from security transactions (339,021) (583,772) 10,664,099 7,012,032 Net change in unrealized appreciation/depreciation on investments 645,398 (409,885) (3,560,710) (1,834,993) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 3,366,891 2,671,743 7,122,909 5,039,039 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class Z (3,020,621) (3,966,690) -- -- From net realized gains, Class A -- -- (10,130,964) (12,655,814) From net realized gains, Class C -- -- (116) -- ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (3,020,621) (3,966,690) (10,131,080) (12,655,814) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold -- -- 1,423,144 3,652,966 Reinvested distributions -- -- 3,273,099 4,109,146 Payments for shares redeemed -- -- (15,248,355) (13,187,462) ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS -- -- (10,552,112) (5,425,350) ------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold -- -- 1,000 -- Reinvested distributions -- -- 116 -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS -- -- 1,116 -- ------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold 2,206,972 2,811,911 -- -- Reinvested distributions 2,965,843 3,910,664 -- -- Payments for shares redeemed (22,416,499) (42,170,628) -- -- ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (17,243,684) (35,448,053) -- -- ------------------------------------------------------------------------------------------------------------------------ TOTAL DECREASE IN NET ASSETS (16,897,414) (36,743,000) (13,559,167) (13,042,125) NET ASSETS Beginning of year 76,089,722 112,832,722 82,897,195 95,939,320 ------------------------------------------------------------------------------------------------------------------------ End of year $ 59,192,308 $ 76,089,722 $ 69,338,028 $ 82,897,195 ======================================================================================================================== ACCUMULATED NET INVESTMENT INCOME $ -- $ -- $ 116,008 $ -- ========================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. See accompanying notes to financial statements. 66 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE VALUE OPPORTUNITIES AND HIGH INCOME FUND FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ (25,303) $ (784,311) $ 39,458 $ 27,877 Net realized gains from affiliated security transactions -- -- 259,854 174 Net realized gains from non-affiliated security transactions 15,610,150 6,793,128 -- -- Net change in unrealized appreciation/depreciation on affiliated investments -- -- (137,843) (13,494) Net change in unrealized appreciation/ depreciation on non-affiliated investments 10,302,517 (5,773,884) -- -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 25,887,364 234,933 161,469 14,557 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A -- -- (1,133) -- From net investment income, Class C -- -- (4) -- From net investment income, Class Y -- -- (35,355) (27,885) From net investment income, Class Z -- (123,995) -- -- From net realized gains, Class A -- -- (3) -- From net realized gains, Class C -- -- (1) -- From net realized gains, Class Y -- -- (3,430) (5,832) From net realized gains, Class Z (6,056,120) (1,644,383) -- -- ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (6,056,120) (1,768,378) (39,926) (33,717) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 7,500 -- 157,168 -- Reinvested distributions -- -- 1,135 -- Payments for shares redeemed -- -- (4,085) -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 7,500 -- 154,218 -- ------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold 77,703 -- 5,052 -- Reinvested distributions -- -- 6 -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 77,703 -- 5,058 -- ------------------------------------------------------------------------------------------------------------------------ CLASS Y Proceeds from shares sold -- -- 60,968 2,524,125 Reinvested distributions -- -- 35,712 33,401 Payments for shares redeemed -- -- (1,753,724) (802,978) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS -- -- (1,657,044) 1,754,548 ------------------------------------------------------------------------------------------------------------------------
67 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE VALUE OPPORTUNITIES AND HIGH INCOME FUND FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold $ 69,825,768 $ 234,392,976 $ -- $ -- Reinvested distributions 5,737,368 1,751,676 -- -- Payments for shares redeemed (140,795,265) (59,414,549) -- -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (65,232,129) 176,730,103 -- -- ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (45,315,682) 175,196,658 (1,376,225) 1,735,388 NET ASSETS Beginning of year 249,431,235 74,234,577 2,541,692 806,304 ------------------------------------------------------------------------------------------------------------------------ End of year $ 204,115,553 $ 249,431,235 $ 1,165,467 $ 2,541,692 ======================================================================================================================== ACCUMULATED NET INVESTMENT INCOME (LOSS) $ 11,319 $ -- $ 3,072 $ -- ========================================================================================================================
(A) Classes A and C represent the period from commencement of operations (July 23, 2007) through September 30, 2007. (B) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. See accompanying notes to financial statements. 68 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
ULTRA SHORT TAX-EXEMPT DURATION FIXED BOND FUND INCOME FUND ------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income $ 4,294,664 $ 4,544,266 $ 8,192,341 $ 9,687,262 Net realized gains (losses) from security transactions 465,983 353,485 70,532 (336,961) Net change in unrealized appreciation/depreciation on investments (1,810,157) (890,993) 152,845 (571,064) ------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM OPERATIONS 2,950,490 4,006,758 8,415,718 8,779,237 ------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A (4,294,666) (4,431,540) -- -- From net investment income, Class Z -- -- (8,051,978) (9,755,714) From net realized gains, Class A (185,535) (1,409,044) -- -- ------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (4,480,201) (5,840,584) (8,051,978) (9,755,714) ------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 7,241,080 18,284,442 -- -- Reinvested distributions 143,759 492,024 -- -- Payments for shares redeemed (19,713,572) (10,850,595) -- -- ------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (12,328,733) 7,925,871 -- -- ------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold -- -- 28,974,657 36,786,959 Reinvested distributions -- -- 7,727,531 9,413,370 Payments for shares redeemed -- -- (64,736,725) (176,729,225) ------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS -- -- (28,034,537) (130,528,896) ------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (13,858,444) 6,092,045 (27,670,797) (131,505,373) NET ASSETS Beginning of year 117,666,570 111,574,525 173,716,231 305,221,604 ------------------------------------------------------------------------------------------------------------------------ End of year $ 103,808,126 $ 117,666,570 $ 146,045,434 $ 173,716,231 ======================================================================================================================== ACCUMULATED NET INVESTMENT INCOME $ 222,291 $ 221,760 $ 4 $ -- ========================================================================================================================
See accompanying notes to financial statements. 69 -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND ------------------------------------------------------------------------------------------------------- YEAR YEAR ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2007(A) 2006 ------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income $ 1,047,831 $ 546,164 Net realized gains from security transactions 9,316,813 17,333,397 Net change in unrealized appreciation/depreciation on investments 4,431,805 (9,531,377) ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS 14,796,449 8,348,184 ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A (2,180) -- From net investment income, Class C (1,687) -- From net investment income, Class Z (1,049,665) (549,006) From net realized gains, Class A (183) -- From net realized gains, Class C (1,928) -- From net realized gains, Class Z (18,377,100) (9,232,072) ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (19,432,743) (9,781,078) ------------------------------------------------------------------------------------------------------- FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 520,044 -- Reinvested distributions 2,363 -- Payments for shares redeemed (61,639) -- ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 460,768 -- ------------------------------------------------------------------------------------------------------- CLASS C Proceeds from shares sold 434,119 -- Reinvested distributions 3,422 -- Payments for shares redeemed (31,321) -- ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 406,220 -- ------------------------------------------------------------------------------------------------------- CLASS Z Proceeds from shares sold 17,359,285 21,531,751 Reinvested distributions 18,415,427 9,501,446 Payments for shares redeemed (24,236,609) (100,813,313) ------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS 11,538,103 (69,780,116) ------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 7,768,797 (71,213,010) NET ASSETS Beginning of year 100,038,290 171,251,300 ------------------------------------------------------------------------------------------------------- End of year $ 107,807,087 $ 100,038,290 ======================================================================================================= ACCUMULATED NET INVESTMENT LOSS $ (7,541) $ (3,117) =======================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. See accompanying notes to financial statements. 70 -------------------------------------------------------------------------------- Financial Highlights -------------------------------------------------------------------------------- CLOVER CORE FIXED INCOME FUND - CLASS I
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 9.58 $ 9.94 $ 10.27 $ 10.40 $ 10.55 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.45 0.39 0.42 0.43 0.45 Net realized and unrealized losses on investments (0.07) (0.12) (0.19) (0.13) (0.10) ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.38 0.27 0.23 0.30 0.35 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.45) (0.40) (0.42) (0.43) (0.47) Distributions from net realized gains -- (0.23) (0.14) -- (0.03) ------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.45) (0.63) (0.56) (0.43) (0.50) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 9.51 $ 9.58 $ 9.94 $ 10.27 $ 10.40 =============================================================================================================================== Total return 4.07% 2.87% 2.27% 2.97% 3.37% =============================================================================================================================== Net assets at end of year (000's) $ 19,485 $ 21,689 $ 26,166 $ 32,334 $ 43,391 =============================================================================================================================== Ratio of net expenses to average net assets 0.87% 0.91%(A) 0.80% 0.80% 0.78% Ratio of gross expenses to average net assets 0.99% 0.95% 0.86% 0.85% 0.87% Ratio of net investment income to average net assets 4.72% 4.13% 3.91% 3.94% 4.25% Portfolio turnover rate 71% 62% 70% 45% 46%
(A) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 0.89%. DIVERSIFED GROWTH FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 6.10 $ 5.80 $ 5.36 $ 5.25 $ 4.40 $ 5.66 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.01 0.01 0.03 -- -- (0.01) Net realized and unrealized gains (losses) on investments 1.02 0.30 0.44 0.11 0.85 (1.25) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.03 0.31 0.47 0.11 0.85 (1.26) --------------------------------------------------------------------------------------------------------------------------------- Dividends from net investment income (0.01) (0.01) (0.03) (0.00)(B) -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 7.12 $ 6.10 $ 5.80 $ 5.36 $ 5.25 $ 4.40 ================================================================================================================================= Total return (C) 16.83% 5.28% 8.71% 2.14%(D) 19.32% (22.26%) ================================================================================================================================= Net assets at end of period (000s) $124,878 $117,498 $116,560 $104,528 $ 95,724 $ 82,368 ================================================================================================================================= Ratio of net expenses to average net assets 1.10% 1.05% 1.10% 1.02%(E) 1.01% 1.01% Ratio of gross expenses to average net assets 1.22% 1.19% 1.23% 1.15%(E) 1.16% 1.14% Ratio of net investment income (loss) to average net assets 0.06% 0.10% 0.48% 0.00%(E) 0.05% (0.15%) Portfolio turnover rate 62% 73% 56% 53%(E) 70% 35%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Amount rounds to less than $0.01 per share. (C) Total returns shown exclude the effect of applicable sales loads. (D) Not annualized. (E) Annualized. See accompanying notes to financial statements. 71 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 26.95 -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.02 Net realized and unrealized gains on investments 0.38 -------------------------------------------------------------------------------- Total from investment operations 0.40 -------------------------------------------------------------------------------- Distributions from net realized gains (7.79) -------------------------------------------------------------------------------- Net asset value at end of period $ 19.56 ================================================================================ Total return (B) 1.68%(C) ================================================================================ Net assets at end of period (000s) $ 205 ================================================================================ Ratio of net expenses to average net assets 1.28%(D) Ratio of gross expenses to average net assets 1.81%(D) Ratio of net investment income to average net assets 0.23%(D) Portfolio turnover rate 79% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. DIVERSIFIED SMALL CAP VALUE FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 26.95 -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.04) Net realized and unrealized gains on investments 0.36 -------------------------------------------------------------------------------- Total from investment operations 0.32 -------------------------------------------------------------------------------- Distributions from net realized gains (7.79) -------------------------------------------------------------------------------- Net asset value at end of period $ 19.48 ================================================================================ Total return (B) 1.26%(C) ================================================================================ Net assets at end of period (000s) $ 79 ================================================================================ Ratio of net expenses to average net assets 1.86%(D) Ratio of gross expenses to average net assets 1.86%(D) Ratio of net investment loss to average net assets (0.38%)(D) Portfolio turnover rate 79% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 72 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 25.10 $ 27.63 $ 23.76 $ 19.23 $ 15.20 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (0.03) (0.12) (0.14) (0.01) 0.01 Net realized and unrealized gains on investments 2.27 2.12 4.01 4.57 4.04 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.24 2.00 3.87 4.56 4.05 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income -- -- -- (0.03) (0.02)(A) Distributions from net realized gains (7.79) (4.53) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total distributions (7.79) (4.53) -- (0.03) (0.02) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 19.55 $ 25.10 $ 27.63 $ 23.76 $ 19.23 =============================================================================================================================== Total return 9.12% 8.47% 16.29% 23.72% 26.66% =============================================================================================================================== Net assets at end of year (000's) $ 177,996 $ 259,279 $ 450,011 $ 540,278 $ 394,946 =============================================================================================================================== Ratio of net expenses to average net assets 1.43% 1.32%(B) 1.23% 1.22% 1.27% Ratio of gross expenses to average net assets 1.43% 1.32% 1.23% 1.22% 1.27% Ratio of net investment income (loss) to average net assets (0.08%) (0.37%) (0.48%) (0.09%) 0.08% Portfolio turnover rate 79% 98% 78% 61% 52%
(A) Includes return of capital of $0.004. (B) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.31%. See accompanying notes to financial statements. 73 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- DIVERSIFIED VALUE FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 12.66 $ 12.60 $ 11.22 $ 10.26 $ 8.50 $ 9.19 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.17 0.17 0.13 0.10 0.12 0.10 Net realized and unrealized gains (losses) on investments 1.36 1.08 1.38 0.97 1.77 (0.69) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.53 1.25 1.51 1.07 1.89 (0.59) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.17) (0.17) (0.13) (0.11) (0.13) (0.10) Distributions from net realized gains (2.24) (1.02) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions (2.41) (1.19) (0.13) (0.11) (0.13) (0.10) --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 11.78 $ 12.66 $ 12.60 $ 11.22 $ 10.26 $ 8.50 ================================================================================================================================= Total return (B) 11.73% 10.68% 13.47% 10.50%(C) 22.43% (6.43%) ================================================================================================================================= Net assets at end of period (000's) $197,374 $167,597 $168,542 $152,202 $143,641 $122,391 ================================================================================================================================= Ratio of net expenses to average net assets 1.10% 1.06% 1.09% 1.02%(D) 1.01% 1.02% Ratio of gross expenses average net assets 1.21% 1.20% 1.21% 1.14%(D) 1.14% 1.13% Ratio of net investment income to average net assets 1.32% 1.34% 1.04% 1.06%(D) 1.32% 1.17% Portfolio turnover rate 107% 48% 64% 75%(D) 59% 26%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 74 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- DIVERSIFIED VALUE FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 13.22 -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.06 Net realized and unrealized gains on investments 0.83 -------------------------------------------------------------------------------- Total from investment operations 0.89 -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.08) Distributions from net realized gains (2.23) -------------------------------------------------------------------------------- Total distributions (2.31) -------------------------------------------------------------------------------- Net asset value at end of period $ 11.80 ================================================================================ Total return (B) 6.38%(C) ================================================================================ Net assets at end of period (000s) $ 7 ================================================================================ Ratio of net expenses to average net assets 1.78%(D) Ratio of gross expenses to average net assets 3.91%(D) Ratio of net investment income to average net assets 0.57%(D) Portfolio turnover rate 107% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 75 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- FAMILY HERITAGE(R) FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.25 $ 9.96 $ 9.38 $ 8.55 $ 6.97 $ 7.82 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.16 0.03 0.05 -- -- (0.01) Net realized and unrealized gains (losses) on investments 1.15 0.29 0.58 0.83 1.58 (0.84) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.31 0.32 0.63 0.83 1.58 (0.85) --------------------------------------------------------------------------------------------------------------------------------- Dividends from net investment income (0.15) (0.03) (0.05) 0.00(B) -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 11.41 $ 10.25 $ 9.96 $ 9.38 $ 8.55 $ 6.97 ================================================================================================================================= Total return (C) 12.91% 3.19% 6.72% 9.77%(D) 22.67% (10.87%) ================================================================================================================================= Net assets at end of period (000's) $ 83,310 $ 80,381 $ 84,448 $ 78,103 $ 73,490 $ 66,126 ================================================================================================================================= Ratio of net expenses to average net assets 1.30% 1.25% 1.29% 1.23%(E) 1.23% 1.27% Ratio of gross expenses to average net assets 1.46% 1.42% 1.44% 1.37%(E) 1.38% 1.36% Ratio of net investment income (loss) to average net assets 1.43% 0.24% 0.50% 0.01%(E) 0.06% (0.18%) Portfolio turnover rate 25% 27% 25% 19%(E) 12% 24%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Amount rounds to less than $0.01 per share. (C) Total returns shown exclude the effect of applicable sales loads. (D) Not annualized. (E) Annualized. FAMILY HERITAGE(R) FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.84 -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.02) Net realized and unrealized gains on investments 0.68 -------------------------------------------------------------------------------- Total from investment operations 0.66 -------------------------------------------------------------------------------- Net asset value at end of period $ 11.50 ================================================================================ Total return (B) 6.09%(C) ================================================================================ Net assets at end of period (000s) $ 6 ================================================================================ Ratio of net expenses to average net assets 1.99%(D) Ratio of gross expenses to average net assets 6.20%(D) Ratio of net investment loss to average net assets (0.55%)(D) Portfolio turnover rate 25% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 76 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 15.91 $ 16.13 $ 13.79 $ 12.31 $ 9.83 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.14) (0.18) (0.16) (0.06) (0.11) Net realized and unrealized gains on investments 3.10 0.40 3.02 1.55 2.59 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.96 0.22 2.86 1.49 2.48 ------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains (0.59) (0.44) (0.52) (0.01) -- ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 18.28 $ 15.91 $ 16.13 $ 13.79 $ 12.31 =============================================================================================================================== Total return (A) 19.25% 1.37% 21.10% 12.12% 25.23% =============================================================================================================================== Net assets at end of year (000's) $ 53,295 $ 55,120 $ 59,742 $ 35,371 $ 14,853 =============================================================================================================================== Ratio of net expenses to average net assets 1.67% 1.85%(B) 1.88% 1.61% 1.47% Ratio of gross expenses to average net assets 1.80% 1.85% 1.88% 1.84% 1.63% Ratio of net investment loss to average net assets (0.63%) (0.99%) (1.35%) (1.10%) (1.16%) Portfolio turnover rate 156% 158% 169% 163% 274%
(A) Total returns shown exclude the effect of applicable sales loads. (B) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.84%. HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 15.98 -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.03) Net realized and unrealized gains on investments 2.83 -------------------------------------------------------------------------------- Total from investment operations 2.80 -------------------------------------------------------------------------------- Distributions from net realized gains (0.59) -------------------------------------------------------------------------------- Net asset value at end of period $ 18.19 ================================================================================ Total return (B) 18.15%(C) ================================================================================ Net assets at end of period (000s) $ 1,396 ================================================================================ Ratio of net expenses to average net assets 2.23%(D) Ratio of gross expenses to average net assets 2.57%(D) Ratio of net investment loss to average net assets (1.27%)(D) Portfolio turnover rate 156% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 77 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.14 $ 8.75 $ 7.06 $ 6.47 $ 5.23 $ 6.19 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.12 0.10(B) 0.07 0.05 0.06 0.04 Net realized and unrealized gains (losses) on investments 2.45 1.41(B) 1.64 0.71 1.21 (0.94) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.57 1.51 1.71 0.76 1.27 (0.90) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.13) (0.12) (0.02) (0.17) (0.03) (0.06) Distributions from net realized gains (0.45) -- -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.58) (0.12) (0.02) (0.17) (0.03) (0.06) --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 12.13 $ 10.14 $ 8.75 $ 7.06 $ 6.47 $ 5.23 ================================================================================================================================= Total return (C) 26.22% 17.42% 24.19% 11.97%(D) 24.40% (14.68%) ================================================================================================================================= Net assets at end of period (000's) $154,623 $151,336 $127,929 $107,001 $ 97,817 $ 83,513 ================================================================================================================================= Ratio of net expenses to average net assets 1.45% 1.41% 1.44% 1.35%(E) 1.30% 1.32% Ratio of gross expenses to average net assets 1.83% 1.64% 1.64% 1.60%(E) 1.60% 1.48% Ratio of net investment income to average net assets 1.11% 1.09% 0.80% 0.90%(E) 1.15% 0.63% Portfolio turnover rate 61% 140% 53% 62%(E) 128% 69%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Per share data calculated using average shares method. (C) Total returns shown exclude the effect of applicable sales loads. (D) Not annualized. (E) Annualized. See accompanying notes to financial statements. 78 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.56 -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.17 Net realized and unrealized gains on investments 1.92 -------------------------------------------------------------------------------- Total from investment operations 2.09 -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.13) Distributions from net realized gains (0.45) -------------------------------------------------------------------------------- Total distributions (0.58) -------------------------------------------------------------------------------- Net asset value at end of period $ 12.07 ================================================================================ Total return (B) 20.54%(C) ================================================================================ Net assets at end of period (000s) $ 740 ================================================================================ Ratio of net expenses to average net assets 2.19%(D) Ratio of gross expenses to average net assets 2.49%(D) Ratio of net investment income to average net assets 0.89%(D) Portfolio turnover rate 61% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 79 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- MID CAP FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 18.14 -------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.00)(B) Net realized and unrealized losses on investments (0.28) -------------------------------------------------------------------------------- Total from investment operations (0.28) -------------------------------------------------------------------------------- Net asset value at end of period $ 17.86 ================================================================================ Total return (C) (1.54%)(D) ================================================================================ Net assets at end of period (000s) $ 210 ================================================================================ Ratio of net expenses to average net assets 0.94%(E) Ratio of gross expenses to average net assets 14.21%(E) Ratio of net investment loss to average net assets (0.09%)(E) Portfolio turnover rate 193% (A) Represents the period from commencement of operations (May 14, 2007) through September 30, 2007. (B) Amount rounds to less than $0.01 per share. (C) Total return shown excludes the effect of applicable sales loads. (D) Not annualized. (E) Annualized. MID CAP FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 18.14 -------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.02) Net realized and unrealized losses on investments (0.28) -------------------------------------------------------------------------------- Total from investment operations (0.30) -------------------------------------------------------------------------------- Net asset value at end of period $ 17.84 ================================================================================ Total return (B) (1.65%)(C) ================================================================================ Net assets at end of period (000s) $ 36 ================================================================================ Ratio of net expenses to average net assets 1.35%(D) Ratio of gross expenses to average net assets 28.68%(D) Ratio of net investment loss to average net assets (0.51%)(D) Portfolio turnover rate 193% (A) Represents the period from commencement of operations (May 14, 2007) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 80 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- MID CAP FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ------------------------------------------------------------------------------------------------------------------------------- YEAR PERIOD YEAR ENDED SEPT. 30, ENDED ENDED ------------------------------------------ DEC. 31, DEC. 31, 2007 2006 2005(A) 2004 2003(B) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 15.28 $ 15.36 $ 13.29 $ 12.79 $ 10.00 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.11 0.04 (0.01) 0.08 0.01 Net realized and unrealized gains on investments 2.65 1.00 2.47 2.70 3.99 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.76 1.04 2.46 2.78 4.00 ------------------------------------------------------------------------------------------------------------------------------- Less Distributions Dividends from net investment income (0.13) (0.03) -- (0.09) -- Distributions from net realized gains -- (1.09) (0.39) (2.19) (1.21) ------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.13) (1.12) (0.39) (2.28) (1.21) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79 =============================================================================================================================== Total return 18.13% 7.10% 18.53%(C) 21.78% 40.24%(C) =============================================================================================================================== Net assets at end of period (000's) $ 482,047 $ 87,032 $ 842 $ 410 $ 337 =============================================================================================================================== Ratio of net expenses to average net assets 0.90% 0.91%(D) 1.00%(E) 0.90% 0.90%(E) Ratio of gross expenses to average net assets 1.06% 1.81% 8.23%(E) 0.90% 0.90%(E) Ratio of net investment income (loss) to average net assets 0.39% 0.82% (0.02%)(E) 0.59% 0.12%(E) Portfolio turnover rate 193% 323% 120%(E) 193% 141%(E)
(A) For the nine-month period ended September 30, 2005. Effective January 1, 2005, the Fund changed its fiscal year end from December 31 to September 30. (B) Represents the period from commencement of operations (January 2, 2003) through December 31, 2003. (C) Not annualized. (D) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 0.90%. (E) Annualized. See accompanying notes to financial statements. 81 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- MID CAP FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ------------------------------------------------------------------------------------------------------- YEAR PERIOD ENDED ENDED SEPT. 30, SEPT. 30, 2007 2006(A) ------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 15.26 $ 16.73 ------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.09 0.01 Net realized and unrealized gains (losses) on investments 2.62 (1.48) ------------------------------------------------------------------------------------------------------- Total from investment operations 2.71 (1.47) ------------------------------------------------------------------------------------------------------- Dividends from net investment income (0.12) -- ------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 17.85 $ 15.26 ======================================================================================================= Total return 17.84% (8.79%)(B) ======================================================================================================= Net assets at end of period (000's) $ 15,203 $ 350 ======================================================================================================= Ratio of net expenses to average net assets 1.14% 1.16%(C)(D) Ratio of gross expenses to average net assets 1.25% 1.82%(C) Ratio of net investment income (loss) to average net assets (0.12%) 0.63%(C) Portfolio turnover rate 193% 323%
(A) Represents the period from commencement of operations (April 24, 2006) through September 30, 2006. (B) Not annualized (C) Annualized. (D) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.15%. See accompanying notes to financial statements. 82 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- PITCAIRN TAXABLE BOND FUND - CLASS II
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.33 $ 10.50 $ 10.77 $ 10.73 $ 10.47 $ 10.98 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.48 0.47 0.43 0.43 0.51 0.56 Net realized and unrealized gains (losses) on investments 0.01 (0.17) (0.27) 0.04 0.26 (0.42) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.49 0.30 0.16 0.47 0.77 0.14 --------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.48) (0.47) (0.43) (0.43) (0.51) (0.56) Distributions from net realized gains -- -- -- -- -- (0.09) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.48) (0.47) (0.43) (0.43) (0.51) (0.65) --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 10.34 $ 10.33 $ 10.50 $ 10.77 $ 10.73 $ 10.47 ================================================================================================================================= Total return 4.81% 2.98% 1.50% 4.42%(B) 7.44% 1.46 ================================================================================================================================= Net assets at end of period (000's) $ 37,569 $ 44,181 $ 47,969 $ 43,239 $ 43,432 $ 40,058 ================================================================================================================================= Ratio of net expenses to average net assets 0.89% 0.87% 0.89% 0.75%(C) 0.73% 0.78% Ratio of gross expenses to average net assets 1.00% 0.95% 0.96% 0.94%(C) 0.97% 0.98% Ratio of net investment income to average net assets 4.63% 4.56% 4.05% 4.36%(C) 4.74% 5.35% Portfolio turnover rate 28% 32% 37% 26%(C) 24% 58%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Not annualized. (C) Annualized. See accompanying notes to financial statements. 83 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- SANDS CAPITAL SELECT GROWTH FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED SEPTEMBER 30, ---------------------------------------------------------------- 2007 2006 2005 2004(A) ------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period $ 7.60 $ 7.81 $ 6.80 $ 6.74 ------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment loss (0.05) (0.06) (0.06) -- Net realized and unrealized gains (losses) on investments 1.60 (0.15) 1.07 0.06 ------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.55 (0.21) 1.01 0.06 ------------------------------------------------------------------------------------------------------------------------ Net asset value at end of period $ 9.15 $ 7.60 $ 7.81 $ 6.80 ======================================================================================================================== Total return 20.39% (2.69%) 14.85% 0.89%(B) ======================================================================================================================== Net assets at end of period (000s) $ 213,672 $ 182,001 $ 81,976 $ 32,591 ======================================================================================================================== Ratio of net expenses to average net assets 1.03% 1.10% 1.11% 1.10%(C) Ratio of gross expenses to average net assets 1.03% 1.23% 1.19% 1.10%(C) Ratio of net investment loss to average net assets (0.67%) (0.74%) (0.62%) (0.79%)(C) Portfolio turnover rate 24% 24% 24% 11%(C)
(A) Represents the period from commencement of operations (August 27, 2004) through September 30, 2004. (B) Not annualized. (C) Annualized. SANDS CAPITAL SELECT GROWTH FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 7.57 $ 7.80 $ 6.80 $ 6.13 $ 4.81 $ 5.55 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.09) (0.05) (0.03) (0.06) (0.04)(B) (0.04) Net realized and unrealized gains (losses) on investments 1.60 (0.18) 1.03 0.73 1.36 (0.70) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.51 (0.23) 1.00 0.67 1.32 (0.74) --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 9.08 $ 7.57 $ 7.80 $ 6.80 $ 6.13 $ 4.81 ================================================================================================================================= Total return 19.95% (2.95%) 14.71% 10.93%(C) 27.44% (13.33%) ================================================================================================================================= Net assets at end of period (000s) $380,025 $365,390 $162,999 $ 70,027 $ 43,878 $ 32,818 ================================================================================================================================= Ratio of net expenses to average net assets 1.29% 1.35% 1.36% 1.20%(D) 1.17% 1.16% Ratio of gross expenses to average net assets 1.35% 1.48% 1.44% 1.35%(D) 1.45% 1.43% Ratio of net investment loss to average net assets (0.92%) (0.99%) (0.84%) (0.95%)(D) (0.81%) (0.69%) Portfolio turnover rate 24% 24% 24% 11%(D) 28% 24%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Based on average shares outstanding. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 84 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- SHORT DURATION FIXED INCOME FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 9.76 $ 9.87 $ 10.04 $ 10.14 $ 10.24 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.45 0.38 0.31 0.28 0.17(A) Net realized and unrealized gains (losses) on investments 0.05 (0.07) (0.10) (0.10) 0.05 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.50 0.31 0.21 0.18 0.22 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.45) (0.42) (0.38) (0.28) (0.25) Distributions from net realized gains -- -- -- -- (0.07) ------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.45) (0.42) (0.38) (0.28) (0.32) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 9.81 $ 9.76 $ 9.87 $ 10.04 $ 10.14 =============================================================================================================================== Total return 5.19% 3.23% 2.12% 1.84% 2.15% =============================================================================================================================== Net assets at end of year (000's) $ 59,192 $ 76,090 $ 112,833 $ 172,213 $ 252,772 =============================================================================================================================== Ratio of net expenses to average net assets 0.74% 0.72% 0.61% 0.46% 0.41% Ratio of gross expenses to average net assets 0.82% 0.74% 0.66% 0.60% 0.62% Ratio of net investment income to average net assets 4.62% 3.97% 3.18% 2.49% 1.65% Portfolio turnover rate 21% 10% 46% 84% 200%
(A) Based on average shares outstanding. See accompanying notes to financial statements. 85 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- SMALL CAP FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD -------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 -------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 15.14 $ 16.51 $ 15.30 $ 13.78 $ 9.87 $ 10.67 -------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.00(B) (0.03) (0.04) (0.04) --(C) 0.07 Net realized and unrealized gains (losses) on investments 1.29 0.87 1.37 1.56 3.91 (0.78) -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.29 0.84 1.33 1.52 3.91 (0.71) -------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income -- -- -- 0.00(B) 0.00(B) (0.09) Distributions from net realized gains (1.91) (2.21) (0.12) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.91) (2.21) (0.12) -- -- (0.09) -------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 14.52 $ 15.14 $ 16.51 $ 15.30 $ 13.78 $ 9.87 ================================================================================================================================ Total return (D) 8.44% 5.51% 8.69% 11.03%(E) 39.65% (6.78%) ================================================================================================================================ Net assets at end of period (000s) $ 69,337 $ 82,897 $ 95,939 $ 92,848 $ 87,520 $ 50,096 ================================================================================================================================ Ratio of net expenses to average net assets 1.10% 1.06% 1.10% 1.08%(F) 1.20%(G) 1.28%(G) Ratio of gross expenses to average net assets 1.26% 1.23% 1.24% 1.15%(F) 1.17% 1.38% Ratio of net investment income (loss) to average net assets 0.02% (0.16%) (0.27%) (0.26%)(F) (0.04%) 0.58% Portfolio turnover rate 146% 145% 100% 72%(F) 149%(H) 93%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Amount rounds to less than $0.01 per share. (C) Based on average shares outstanding. (D) Total returns shown exclude the effect of applicable sales loads. (E) Not annualized. (F) Annualized. (G) The ratio of expenses to average net assets excluding interest expense for the periods ended October 31, 2003 and October 31, 2002 were 1.10% and 1.19%, respectively. (H) Excludes effect of in-kind transfers and mergers. See accompanying notes to financial statements. 86 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- SMALL CAP FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 16.43 -------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.06) Net realized and unrealized losses on investments (0.02) -------------------------------------------------------------------------------- Total from investment operations (0.08) -------------------------------------------------------------------------------- Distributions from net realized gains (1.91) -------------------------------------------------------------------------------- Net asset value at end of period $ 14.44 ================================================================================ Total return (B) (0.63%)(C) ================================================================================ Net assets at end of period (000s) $ 1 ================================================================================ Ratio of net expenses to average net assets 1.68%(D) Ratio of gross expenses to average net assets 3.77%(D) Ratio of net investment loss to average net assets (0.48%)(D) Portfolio turnover rate 146% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. SMALL CAP VALUE OPPORTUNITIES FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 21.55 -------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.00)(B) Net realized and unrealized losses on investments (1.07) -------------------------------------------------------------------------------- Total from investment operations (1.07) -------------------------------------------------------------------------------- Net asset value at end of period $ 20.48 ================================================================================ Total return (C) (4.97%)(D) ================================================================================ Net assets at end of period (000s) $ 8 ================================================================================ Ratio of net expenses to average net assets 1.49%(E) Ratio of gross expenses to average net assets 72.28%(E) Ratio of net investment loss to average net assets (0.11%)(E) Portfolio turnover rate 127% (A) Represents the period from commencement of operations (July 23, 2007) through September 30, 2007. (B) Amount rounds to less than $0.01 per share. (C) Total return shown excludes the effect of applicable sales loads. (D) Not annualized. (E) Annualized. See accompanying notes to financial statements. 87 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 21.55 -------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.02) Net realized and unrealized losses on investments (1.06) -------------------------------------------------------------------------------- Total from investment operations (1.08) -------------------------------------------------------------------------------- Net asset value at end of period $ 20.47 ================================================================================ Total return (B) (5.01%)(C) ================================================================================ Net assets at end of period (000s) $ 81 ================================================================================ Ratio of net expenses to average net assets 2.09%(D) Ratio of gross expenses to average net assets 2.37%(D) Ratio of net investment loss to average net assets (0.69%)(D) Portfolio turnover rate 127% (A) Represents the period from commencement of operations (July 23, 2007) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 18.94 $ 18.35 $ 16.21 $ 12.72 $ 9.27 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (0.02) (0.08) 0.02 (0.04) (0.01) Net realized and unrealized gains on investments 2.05 0.96 3.76 3.75 3.47 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.03 0.88 3.78 3.71 3.46 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income -- (0.02) -- -- (0.01) Distributions from net realized gains (0.49) (0.27) (1.64) (0.22) -- ------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.49) (0.29) (1.64) (0.22) (0.01) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 20.48 $ 18.94 $ 18.35 $ 16.21 $ 12.72 =============================================================================================================================== Total return 10.77% 4.84% 24.32% 29.36% 37.29% =============================================================================================================================== Net assets at end of year (000s) $ 204,027 $ 249,431 $ 74,235 $ 14,533 $ 5,740 =============================================================================================================================== Ratio of net expenses to average net assets 1.58% 1.63%(A) 1.46% 1.45% 1.40% Ratio of gross expenses to average net assets 1.71% 1.65% 2.04% 1.82% 3.64% Ratio of net investment income (loss) to average net assets (0.01%) (0.43%) 0.29% (0.23%) (0.26%) Portfolio turnover rate 127% 99% 193% 272% 245%
(A) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.62%. See accompanying notes to financial statements. 88 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- STRATEGIC VALUE AND HIGH INCOME FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 15.15 -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.25 Net realized and unrealized losses on investments (0.05) -------------------------------------------------------------------------------- Total from investment operations 0.20 -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.20) Distributions from net realized gains (0.02) -------------------------------------------------------------------------------- Total distributions (0.22) -------------------------------------------------------------------------------- Net asset value at end of period $ 15.13 ================================================================================ Total return (B) 1.22%(C) ================================================================================ Net assets at end of period (000s) $ 150 ================================================================================ Ratio of net expenses to average net assets 0.50%(D) Ratio of gross expenses to average net assets 8.51%(D) Ratio of net investment income to average net assets 2.63%(D) Portfolio turnover rate 124% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 89 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- STRATEGIC VALUE AND HIGH INCOME FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 15.15 -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.13 Net realized and unrealized losses on investments (0.03) -------------------------------------------------------------------------------- Total from investment operations 0.10 -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.07) Distributions from net realized gains (0.02) -------------------------------------------------------------------------------- Total distributions (0.09) -------------------------------------------------------------------------------- Net asset value at end of period $ 15.16 ================================================================================ Total return (B) 0.57%(C) ================================================================================ Net assets at end of period (000s) $ 5 ================================================================================ Ratio of net expenses to average net assets 1.25%(D) Ratio of gross expenses to average net assets 20.52%(D) Ratio of net investment income to average net assets 1.69%(D) Portfolio turnover rate 124% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 90 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- STRATEGIC VALUE AND HIGH INCOME FUND - CLASS Y
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003(A) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 14.44 $ 14.21 $ 14.01 $ 12.58 $ 10.00 ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.38 0.25 0.72 0.47 0.25 Net realized and unrealized gains on investments 0.55 0.32(B) 1.18 1.53 2.58 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.93 0.57 1.90 2.00 2.83 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.34) (0.25) (0.72) (0.47) (0.25) Distributions from net realized gains (0.02) (0.09) (0.98) (0.10) -- ------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.36) (0.34) (1.70) (0.57) (0.25) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 15.01 $ 14.44 $ 14.21 $ 14.01 $ 12.58 =============================================================================================================================== Total return 6.46% 4.03% 14.22% 16.04% 28.57%(C) =============================================================================================================================== Net assets at end of period (000s) $ 1,010 $ 2,542 $ 806 $ 706 $ 443 =============================================================================================================================== Ratio of net expenses to average net assets 0.25% 0.30%(D) 0.25% 0.25% 0.25%(E) Ratio of gross expenses to average net assets 3.88% 2.62% 4.71% 1.36% 21.93%(E) Ratio of net investment income to average net assets 2.07% 1.76% 5.51% 3.23% 3.27%(E) Portfolio turnover rate 124% 84% 130% 411% 397%(E)
(A) Represents the period from commencement of operations (October 31, 2002) through September 30, 2003. (B) The amount shown for a share outstanding throughout the period does not accord with the aggregate net losses on investments for the period because of sale and repurchases of fund shares in relation to fluctuating market value of the investment of the Fund. (C) Not annualized. (D) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 0.25%. (E) Annualized. See accompanying notes to financial statements. 91 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- TAX-EXEMPT BOND FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, OCTOBER 31, -------------------------------------------------- ---------------------- 2007 2006 2005 2004(A) 2003 2002 --------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.43 $ 10.60 $ 10.78 $ 10.77 $ 10.71 $ 10.60 --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.39 0.41 0.41 0.39 0.44 0.44 Net realized and unrealized gains (losses) on investments (0.11) (0.05) (0.11) 0.05 0.09 0.12 --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.28 0.36 0.30 0.44 0.53 0.56 --------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.39) (0.40) (0.41) (0.39) (0.44) (0.44) Distributions from net realized gains (0.02) (0.13) (0.07) (0.04) (0.03) (0.01) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.41) (0.53) (0.48) (0.43) (0.47) (0.45) --------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 10.30 $ 10.43 $ 10.60 $ 10.78 $ 10.77 $ 10.71 ================================================================================================================================= Total return (B) 2.71% 3.59% 2.78% 4.20%(C) 4.96% 5.41% ================================================================================================================================= Net assets at end of period (000s) $103,808 $117,667 $111,575 $113,880 $111,470 $115,905 ================================================================================================================================= Ratio of net expenses to average net assets 0.70% 0.68% 0.69% 0.62%(D) 0.60% 0.60% Ratio of gross expenses to average net assets 0.85% 0.82% 0.82% 0.75%(D) 0.74% 0.74% Ratio of net investment income to average net assets 3.79% 3.97% 3.80% 3.97%(D) 4.06% 4.19% Portfolio turnover rate 12% 55% 38% 25%(D) 14% 14%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 92 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 10.06 $ 10.08 $ 10.12 $ 10.17 $ 10.23 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.53 0.44 0.30 0.21 0.08(A) Net realized and unrealized gains (losses) on investments 0.01 (0.02) (0.03) (0.05) 0.06 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.54 0.42 0.27 0.16 0.14 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.52) (0.44) (0.31) (0.21) (0.19) Distributions from net realized gains -- -- -- -- (0.01) ------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.52) (0.44) (0.31) (0.21) (0.20) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 10.08 $ 10.06 $ 10.08 $ 10.12 $ 10.17 =============================================================================================================================== Total return 5.48% 4.28% 2.67% 1.63% 1.40% =============================================================================================================================== Net assets at end of year (000s) $ 146,045 $ 173,716 $ 305,222 $ 391,934 $ 462,567 =============================================================================================================================== Ratio of net expenses to average net assets 0.69% 0.69% 0.59% 0.46% 0.41% Ratio of gross expenses to average net assets 0.75% 0.69% 0.62% 0.58% 0.62% Ratio of net investment income to average net assets 5.25% 4.30% 2.93% 2.08% 0.78% Portfolio turnover rate 26% 38% 68% 44% 222%
(A) Based on average shares outstanding. VALUE OPPORTUNITIES FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 19.51 -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09 Net realized and unrealized gains on investments 1.95 -------------------------------------------------------------------------------- Total from investment operations 2.04 -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.12) Distributions from net realized gains (3.58) -------------------------------------------------------------------------------- Total distributions (3.70) -------------------------------------------------------------------------------- Net asset value at end of period $ 17.85 ================================================================================ Total return (B) 11.90%(C) ================================================================================ Net assets at end of period (000s) $ 472 ================================================================================ Ratio of net expenses to average net assets 1.31%(D) Ratio of gross expenses to average net assets 1.31%(D) Ratio of net investment income to average net assets 0.77%(D) Portfolio turnover rate 62% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized See accompanying notes to financial statements. 93 -------------------------------------------------------------------------------- Financial Highlights (Continued) -------------------------------------------------------------------------------- VALUE OPPORTUNITIES FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2007 (A) -------------------------------------------------------------------------------- Net asset value at beginning of period $ 19.51 -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.05 Net realized and unrealized gains on investments 1.93 -------------------------------------------------------------------------------- Total from investment operations 1.98 -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.10) Distributions from net realized gains (3.58) -------------------------------------------------------------------------------- Total distributions (3.68) -------------------------------------------------------------------------------- Net asset value at end of period $ 17.81 ================================================================================ Total return (B) 11.52%(C) ================================================================================ Net assets at end of period (000s) $ 423 ================================================================================ Ratio of net expenses to average net assets 1.86%(D) Ratio of gross expenses to average net assets 1.86%(D) Ratio of net investment income to average net assets 0.20%(D) Portfolio turnover rate 62% (A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized VALUE OPPORTUNITIES FUND - CLASS Z
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR ------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------------ 2007 2006 2005 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 18.89 $ 19.00 $ 16.51 $ 14.18 $ 11.71 ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.18 0.10 0.04 0.06 0.05 Net realized and unrealized gains on investments 2.52 1.38 3.90 2.84 2.47 ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.70 1.48 3.94 2.90 2.52 ------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.18) (0.10) (0.04) (0.06) (0.05) Distributions from net realized gains (3.58) (1.49) (1.41) (0.51) -- ------------------------------------------------------------------------------------------------------------------------------- Total distributions (3.76) (1.59) (1.45) (0.57) (0.05) ------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 17.83 $ 18.89 $ 19.00 $ 16.51 $ 14.18 =============================================================================================================================== Total return 15.83% 8.35% 24.83% 20.75% 21.61% =============================================================================================================================== Net assets at end of year (000s) $ 106,912 $ 100,038 $ 171,251 $ 59,714 $ 46,673 =============================================================================================================================== Ratio of net expenses to average net assets 1.12% 1.19%(A) 1.13% 1.08% 1.13% Ratio of gross expenses to average net assets 1.17% 1.19% 1.13% 1.08% 1.13% Ratio of net investment income to average net assets 1.03% 0.49% 0.24% 0.39% 0.43% Portfolio turnover rate 62% 80% 75% 55% 67%
(A) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.18%. See accompanying notes to financial statements. 94 -------------------------------------------------------------------------------- Notes to Financial Statements September 30, 2007 -------------------------------------------------------------------------------- 1. ORGANIZATION The Touchstone Funds Group Trust (the Trust), formerly Constellation Funds, is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Trust consists of the following seventeen mutual funds, individually, a Fund, and collectively, the Funds:
CURRENT FUND FORMERLY KNOWN AS ----------------------------------------------------------------------------------------------------------------------------------- Touchstone Clover Core Fixed Income Fund Constellation Clover Core Fixed Income Fund Touchstone Diversified Growth Fund Constellation Pitcairn Diversified Growth Fund Touchstone Diversified Small Cap Value Fund Constellation Clover Small Cap Value Fund Touchstone Diversified Value Fund Constellation Pitcairn Diversified Value Fund Touchstone Family Heritage(R) Fund Constellation Pitcairn Family Heritage(R) Fund Touchstone Healthcare and Biotechnology Fund Constellation TIP Healthcare and Biotechnology Fund Touchstone International Equity Fund Constellation International Equity Fund Touchstone Mid Cap Fund Constellation TIP Mid Cap Fund Touchstone Pitcairn Taxable Bond Fund Constellation Pitcairn Taxable Bond Fund Touchstone Sands Capital Select Growth Fund Constellation Sands Capital Select Growth Fund Touchstone Short Duration Fixed Income Fund Constellation Chartwell Short Duration Fixed Income Fund Touchstone Small Cap Fund Constellation Pitcairn Small Cap Fund Touchstone Small Cap Value Opportunities Fund Constellation Small Cap Value Opportunities Fund Touchstone Strategic Value and High Income Fund Constellation Strategic Value and High Income Fund Touchstone Tax-Exempt Bond Fund Constellation Pitcairn Tax-Exempt Bond Fund Touchstone Ultra Short Duration Fixed Income Fund Constellation Chartwell Ultra Short Duration Fixed Income Fund Touchstone Value Opportunities Fund Constellation Clover Core Value Fund
The Strategic Value and High Income Fund is a "Fund of Funds" and offers shareholders the opportunity to invest in certain underlying affiliated investment companies. Each Fund is registered as a diversified portfolio of the Trust with the exception of the Family Heritage(R) Fund, Healthcare and Biotechnology Fund, Pitcairn Taxable Bond Fund, and Sands Capital Select Growth Fund, each of which is non-diversified. The Funds are registered to offer different classes of shares: Class A shares, Class C shares, Class Y shares, Class Z shares, Class I shares, and Class II shares. The assets of each Fund are segregated, and a shareholder's interest is limited to the Fund in which shares are held. The Funds' prospectus provides a description of each Fund's investment objectives, policies, and strategies along with information on the classes of shares currently being offered. Based on approval by the Board of Trustees, the following changes took place effective November 20, 2006: (i) Class II shares of the Diversified Growth Fund, Diversified Value Fund, Family Heritage(R) Fund, Healthcare and Biotechnology Fund, International Equity Fund, Small Cap Fund, and Tax-Exempt Bond Fund were each redesignated as Class A shares. (ii) Diversified Small Cap Value Fund, Strategic Value and High Income and Value Opportunities Fund began offering Class A shares. (iii) Diversified Small Cap Value Fund, Diversified Value Fund, Family Heritage(R) Fund, Healthcare and Biotechnology Fund, International Equity Fund, Small Cap Fund, Strategic Value and High Income Fund, and Value Opportunities Fund, began offering Class C shares. 95 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- (iv) Class I shares of the Mid Cap Fund, Sands Capital Select Growth Fund, and Strategic Value and High Income Fund were each redesignated as Class Y Shares. (v) Class I shares of the Diversified Small Cap Value Fund, Short Duration Fixed Income Fund, Ultra Short Duration Fixed Income Fund, and Value Opportunities Fund, were each redesignated as Class Z shares. (vi) Class II shares of the Mid Cap Fund, Sands Capital Select Growth Fund, and Small Cap Value Opportunities Fund, were each redesignated as Class Z shares. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the Funds' significant accounting policies: SECURITY VALUATION -- The Funds' portfolio securities are valued as of the close of the regular session of trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time). Portfolio securities traded on stock exchanges are valued at the last sale price and portfolio securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price (NOCP). Securities not traded on a particular day, or for which the last sale price is not readily available, are valued at their last broker-quoted bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service. Debt securities for which market quotations are readily available are valued at their most recent bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service. Money market instruments and other debt securities with a remaining maturity of less than 60 days are valued at amortized cost, which approximates market. Securities for which market quotations or the NOCP are not readily available are valued based on fair value as determined by or under the direction of the Board of Trustees. Shares of open-end mutual funds in which the Funds invest are valued at their respective net asset values as reported by the underlying funds. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. For securities that principally trade on a foreign market or exchange, a significant gap in time can exist between the time of a particular security's last trade and the time at which a Fund calculates its net asset value. The closing prices of such securities may no longer reflect their market value at the time the Fund calculates its net asset value if an event that could materially affect the value of those securities (a "Significant Event") has occurred between the time of the security's last close and the time that the Fund calculates its net asset value. A Significant Event may relate to a single issuer or to an entire market sector. If the advisor or sub-advisor of a Fund becomes aware of a Significant Event that has occurred with respect to a security or group of securities after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Fund calculates its net asset value, it may request that a Fair Value Committee Meeting be called. In addition, the Funds' administrator or sub-administrator monitors price movements among certain selected indices, securities and/or baskets of securities that may be an indicator that the closing prices received earlier from foreign exchanges or markets may not reflect market value at the time the Fund calculates its net asset value. If price movements in a monitored index or security exceed levels established by the Advisor, the Sub-Administrator notifies the Advisor or Sub-Advisor for any Fund holding the relevant securities that such limits have been exceeded. In such event, the Advisor makes the determination whether a Fair Value Committee meeting should be called based on the information provided. The International Equity Fund also uses a third-party fair valuation vendor. The vendor provides a fair value for foreign securities held by the Fund based on certain factors and methodologies (involving, generally, tracking valuation correlations between the U.S. market and each non-U.S. security). Values from the fair value vendor are applied in the event that there is a movement in the U.S. market that exceeds a specific threshold that has been established by the Fair Value Committee. The Fair Value Committee has also established a "confidence interval" which is used to determine the level of historical correlation between the value of a specific foreign security and movements in the U.S. market before a particular security will be fair valued when the threshold is exceeded. In the event that the threshold established by the Fair Value Committee is exceeded on a specific day, the Fund will value the non- U.S. securities in its portfolio that exceed the applicable "confidence interval" based upon the adjusted prices provided by the fair valuation vendor. 96 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- The assets of the Strategic Value and High Income Fund consist of investments in underlying affiliated investment companies, which are valued at their respective net asset value per share. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles (GAAP) from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of September 30, 2007, the Trust does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statement of changes in net assets for a fiscal period. FOREIGN CURRENCY TRANSLATION -- The books and records of the International Equity Fund are maintained in U.S. dollars and translated into U.S. dollars on the following basis: (1) market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date; and (2) purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. The International Equity Fund does not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. FORWARD FOREIGN CURRENCY CONTRACTS - The International Equity Fund may enter into forward foreign currency contracts as hedges against specific transactions. All commitments are "marked-to-market" daily at the applicable foreign exchange rate, and any resulting unrealized gains or losses are recorded currently. The International Equity Fund realizes gains or losses at the time forward contracts are extinguished. Unrealized gains or losses on outstanding positions in forward foreign currency contracts held at the close of the year are recognized as ordinary income or loss for income tax purposes. As of September 30, 2007, the International Equity Fund had the following forward foreign currency exchange contracts outstanding as follows:
SETTLEMENT TO RECEIVE/ INITIAL MARKET NET UNREALIZED NET UNREALIZED DATE TO DELIVER VALUE VALUE APPRECIATION DEPRECIATION ------------------------------------------------------------------------------------------------------- Contract to Buy 10/2/2007 2,000,000 HKD $257,756 $257,273 $ -- $ (483) Contract to Sell 10/2/2007 292,624 AUD $257,756 $259,672 $ -- $ (1,916) -------------- -------------- $ -- $ (2,399) ============== ============== -------------------------------------------------------------------------------------------------------
AUD - Australian Dollar HKD - Hong Kong Dollar 97 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- PORTFOLIO SECURITIES LOANED -- Each Fund may lend its portfolio securities. Lending portfolio securities exposes a Fund to the risk that the borrower may fail to return the loaned securities or may not be able to provide additional collateral or that the Fund may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the borrower must agree to maintain collateral marked to market daily, in the form of cash and/or liquid securities, with the Fund's Custodian in an amount at least equal to the market value of the loaned securities. As of September 30, 2007, the following Funds loaned securities and received collateral as follows: FAIR VALUE OF VALUE OF SECURITIES COLLATERAL LOANED RECEIVED -------------------------------------------------------------------------------- Clover Core Fixed Income Fund $ 431,982 $ 443,438 -------------------------------------------------------------------------------- Diversified Growth Fund $ 8,571,315 $ 8,685,782 -------------------------------------------------------------------------------- Diversified Small Cap Value Fund $ 20,579,210 $ 21,898,722 -------------------------------------------------------------------------------- Diversified Value Fund $ 10,257,451 $ 10,473,364 -------------------------------------------------------------------------------- Family Heritage(R) Fund $ 3,833,606 $ 3,970,776 -------------------------------------------------------------------------------- Healthcare and Biotechnology Fund $ 3,847,724 $ 3,930,823 -------------------------------------------------------------------------------- Mid Cap Fund $ 49,789,776 $ 52,880,591 -------------------------------------------------------------------------------- Sands Capital Select Growth Fund $ 71,549,018 $ 74,360,152 -------------------------------------------------------------------------------- Small Cap Fund $ 6,813,000 $ 7,190,007 -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund $ 14,039,502 $ 14,703,983 -------------------------------------------------------------------------------- Value Opportunities Fund $ 11,068,728 $ 11,407,980 -------------------------------------------------------------------------------- All collateral received as cash and securities is received, held and administered by the Funds' custodian for the benefit of the Funds in the applicable custody account or other account established for the purpose of holding collateral. Funds participating in securities lending receive compensation in the form of fees, or retain a portion of interest or dividends on the investment of any cash received as collateral. The Funds also continue to receive interest or dividends on the securities loaned. The loans are secured by collateral valued at least equal, at all times, to the fair value of the securities loaned plus accrued interest. Unrealized gain or loss on the fair value of the securities loaned that may occur during the term of the loan is recognized by the Funds. The Funds have the right under the lending agreement to recover the securities from the borrower on demand. DELAYED DELIVERY TRANSACTIONS -- The Funds may purchase or sell securities on a when-issued or delayed delivery basis. These transactions involve a commitment by the Funds to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed delivery purchases are outstanding, the Funds will set aside liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and take such fluctuations into account when determining net asset value. The Funds may dispose of or renegotiate a delayed delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a capital gain or loss. When the Funds have sold a security on a delayed delivery basis, the Funds do not participate in future gains and losses with respect to the security. 98 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- Repurchase agreements, which are collateralized by U.S. Government obligations, are valued at cost, which together with accrued interest approximates market. At the time each Fund enters into a repurchase agreement, the seller agrees that the value of the underlying collateral securities, including accrued interest, will at all times be equal to or exceed the face amount of the repurchase agreement. SHARE VALUATION -- The net asset value per share of each class of shares of each Fund is calculated daily by dividing the total value of a Fund's assets attributable to that class, less liabilities attributable to that class, by the number of outstanding shares of that class. The maximum offering price per share of Class A shares of the Funds is equal to the net asset value per share plus a sales load equal to 6.10% of the net asset value (or 5.75% of the offering price). The maximum offering price per share of Class C, Class Y, Class Z, Class I, and Class II shares of the Funds is equal to the net asset value per share. The redemption price per share of each class of shares of the Funds is equal to the net asset value per share. However, Class C shares of the Funds are subject to a contingent deferred sales load of 1.00% of the original purchase price if redeemed within a one-year period from the date of purchase. INVESTMENT INCOME -- Interest income is accrued as earned and includes, where applicable, the pro-rata amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date. DISTRIBUTIONS TO SHAREHOLDERS -- The Healthcare and Biotechnology Fund, International Equity Fund, Mid Cap Fund, and Small Cap Value Opportunities Fund declare and distribute net investment income, if any, annually, as a dividend to shareholders. The Diversified Growth Fund, Diversified Small Cap Value Fund, Diversified Value Fund, Family Heritage(R) Fund, Sands Capital Select Growth Fund, Small Cap Fund, Strategic Value and High Income Fund, and Value Opportunities Fund declare and distribute net investment income, if any, quarterly, as a dividend to shareholders. The Clover Core Fixed Income Fund, Pitcairn Taxable Bond Fund, Short Duration Fixed Income Fund, Tax-Exempt Bond Fund, and Ultra Short Duration Fixed Income Fund declare net investment income daily and distribute it monthly, as a dividend to shareholders. Any net realized capital gains on sales of securities for all Funds are distributed to shareholders at least annually. ALLOCATIONS -- Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for the Funds are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class specific expenses are charged directly to the class incurring the expense. Common expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all Funds daily in relation to net assets of each Fund or another reasonable measure. In addition to the Fund's direct expense, shareholders of the Strategic Value and High Income Fund also bear a proportionate share of the underlying funds' expenses. SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade date. Securities sold are determined on a specific identification basis. ESTIMATES -- The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 99 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Investment transactions (excluding short-term investments and U.S. Government securities) were as follows for the year ended September 30, 2007:
DIVERSIFIED CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED FIXED INCOME GROWTH VALUE VALUE FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------- Purchases of investment securities $ 818,982 $ 74,645,350 $ 176,834,695 $193,190,145 ----------------------------------------------------------------------------------------------------------- Proceeds from sales and maturities $3,064,939 $ 85,812,191 $ 280,984,424 $189,522,272 -----------------------------------------------------------------------------------------------------------
FAMILY HEALTHCARE AND INTERNATIONAL HERITAGE(R) BIOTECHNOLOGY EQUITY MID CAP FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------- Purchases of investment securities $21,021,966 $ 74,292,115 $ 94,402,760 $ 942,032,241 ----------------------------------------------------------------------------------------------------------- Proceeds from sales and maturities $27,026,315 $ 83,132,583 $ 121,577,629 $ 569,290,204 -----------------------------------------------------------------------------------------------------------
PITCAIRN SANDS CAPITAL SHORT DURATION TAXABLE SELECT FIXED SMALL BOND GROWTH INCOME CAP FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------- Purchases of investment securities $7,160,682 $ 133,417,234 $ -- $ 115,939,430 ----------------------------------------------------------------------------------------------------------- Proceeds from sales and maturities $15,105,311 $ 208,607,791 $ -- $ 136,514,832 -----------------------------------------------------------------------------------------------------------
SMALL CAP STRATEGIC ULTRA VALUE VALUE AND HIGH TAX-EXEMPT SHORT DURATION OPPORTUNITIES INCOME BOND FIXED-INCOME FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------- Purchases of investment securities $264,311,264 $ 2,324,388 $ 12,739,252 $ -- ----------------------------------------------------------------------------------------------------------- Proceeds from sales and maturities $338,046,568 $ 3,793,362 $ 21,981,102 $ -- -----------------------------------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND ----------------------------------------------------- Purchases of investment securities $62,365,117 ----------------------------------------------------- Proceeds from sales and maturities $69,129,965 100 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 4. TRANSACTIONS WITH AFFILIATES Certain officers of the Trust are also officers of the Advisor (Touchstone Advisors, Inc.), the Underwriter (Touchstone Securities, Inc.) and/or JPMorgan Chase Bank, N.A. ("JPMorgan" and the Sub-Administrator and Transfer Agent to the Funds). The Advisor, Underwriter and Integrated Investment Services, Inc. ("Integrated" and the former administrator, transfer agent and fund accountant to the Funds) were each wholly-owned indirect subsidiaries of The Western and Southern Life Insurance Company (Western-Southern). On April 1, 2007, Western-Southern sold Integrated to JPMorgan. MANAGEMENT & EXPENSE LIMITATIONS AGREEMENTS The Advisor provides general investment supervisory services for the Funds, under terms of an Advisory Agreement. Under the Advisory Agreement, the Funds pay the Advisor a fee, which is computed and accrued daily and paid monthly, at an annual rate based on average daily net assets as shown in the table below. Effective January 1, 2007, the Advisor entered into an Expense Limitation Agreement to contractually limit operating expenses of the Funds. The maximum operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. The Advisor has agreed to waive advisory fees and reimburse expenses in order to maintain expense limitations for the Funds as follows through January 1, 2008: "OTHER TOTAL ADVISORY EXPENSE" EXPENSE FEES CAP CAP -------------------------------------------------------------------------------- Clover Core Fixed Income Fund - Class I 0.45% 0.40% 0.85% Diversified Growth Fund - Class A 0.70 0.15 1.10 Diversified Small Cap Value Fund - Class A 0.85 0.35 1.45 Diversified Small Cap Value Fund - Class C 0.85 0.35 2.20 Diversified Small Cap Value Fund - Class Z 0.85 0.35 1.45 Diversified Value Fund - Class A 0.70 0.15 1.10 Diversified Value Fund - Class C 0.70 0.15 1.85 Family Heritage(R) Fund - Class A 0.90 0.15 1.30 Family Heritage(R) Fund - Class C 0.90 0.15 2.05 Healthcare and Biotechnology Fund - Class A 1.00 0.30 1.55 Healthcare and Biotechnology Fund - Class C 1.00 0.30 2.30 International Equity Fund - Class A 0.95 0.25(1) 1.45(1) International Equity Fund - Class C 0.95 0.25(1) 2.20(1) Mid Cap Fund - Class A 0.80 0.10 1.15 Mid Cap Fund - Class C 0.80 0.10 1.90 Mid Cap Fund - Class Y 0.80 0.10 0.90 Mid Cap Fund - Class Z 0.80 0.10 1.15 Pitcairn Taxable Bond Fund - Class II 0.40 0.24 0.89 Sands Capital Select Growth Fund - Class Y 0.85 0.25 1.10 Sands Capital Select Growth Fund - Class Z 0.85 0.25 1.35 Short Duration Fixed Income Fund - Class Z 0.25 0.24 0.74 Small Cap Fund - Class A 0.70 0.15(1) 1.10(1) Small Cap Fund - Class C 0.70 0.15(1) 1.85(1) Small Cap Value Opportunities Fund - Class A 0.95 0.30 1.50 101 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- "OTHER TOTAL ADVISORY EXPENSE" EXPENSE FEES CAP CAP -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund - Class C 0.95% 0.30% 2.25% Small Cap Value Opportunities Fund - Class Z 0.95 0.30 1.50 Strategic Value and High Income Fund - Class A 0.10 0.15 0.50 Strategic Value and High Income Fund - Class C 0.10 0.15 1.25 Strategic Value and High Income Fund - Class Y 0.10 0.15 0.25 Tax-Exempt Bond Fund - Class A 0.30 0.15 0.70 Ultra Short Duration Fixed Income Fund - Class Z 0.25 0.19 0.69 Value Opportunities Fund - Class A 0.74 0.35 1.34 Value Opportunities Fund - Class C 0.74 0.35 2.09 Value Opportunities Fund - Class Z 0.74 0.35 1.34 (1) This fee waiver obligation may be reduced by up to 0.01% to the extent that the Fund earns revenues from securities lending activities. See the Funds' Prospectus for additional information. In addition to the base advisory fee shown above, for the Sands Capital Select Growth Fund, a performance fee adjustment will be added to or subtracted from the base advisory fee depending on the performance of the Fund in relation to the investment performance of the Fund's benchmark index, for the preceding twelve month period, as follows:
BASE ANNUAL ADVISORY ADJUSTMENT BENCHMARK BENCHMARK FEES RATE INDEX THRESHOLD(1) ---------------------------------------------------------------------------------------------------------- Russell 1000 Sands Capital Select Growth Fund 0.85% +/-0.15% Growth Index +/-2.50%
(1) See the Funds' Prospectus and Statement of Additional Information for more information regarding the Fund's benchmark performance. The performance fee adjustment was not applied until the Advisory Agreement had been in effect for twelve months which was on February 28, 2007. For the fiscal year ended September 30, 2007, the Advisor's base fee was reduced by $339,953 as a result of the performance fee adjustment. 102 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- During the year ended September 30, 2007, the Advisor waived investment advisory fees, administration fees and/or reimbursed expenses of the Funds as follows:
INVESTMENT OTHER OPERATING ADVISORY ADMINISTRATION EXPENSES FEES WAIVED FEES WAIVED REIMBURSED ---------------------------------------------------------------------------------------- Clover Core Fixed Income Fund $ -- $ 24,325 $ -- ---------------------------------------------------------------------------------------- Diversified Growth Fund $ -- $ 146,538 $ -- ---------------------------------------------------------------------------------------- Diversified Small Cap Value Fund $ -- $ 8,514 $ -- ---------------------------------------------------------------------------------------- Diversified Value Fund $ -- $ 198,094 $ -- ---------------------------------------------------------------------------------------- Family Heritage(R) Fund $ -- $ 130,698 $ -- ---------------------------------------------------------------------------------------- Healthcare and Biotechnology Fund $ -- $ 65,060 $ -- ---------------------------------------------------------------------------------------- International Equity Fund $ -- $ 282,392 $ 318,444 ---------------------------------------------------------------------------------------- Mid Cap Fund $ -- $ 484,841 $ -- ---------------------------------------------------------------------------------------- Pitcairn Taxable Bond Fund $ -- $ 41,943 $ -- ---------------------------------------------------------------------------------------- Sands Capital Select Growth Fund $ -- $ 243,779 $ -- ---------------------------------------------------------------------------------------- Short Duration Fixed Income Fund $ -- $ 56,171 $ -- ---------------------------------------------------------------------------------------- Small Cap Fund $ -- $ 124,672 $ -- ---------------------------------------------------------------------------------------- Small Cap Value Opportunities Fund $ -- $ 278,835 $ -- ---------------------------------------------------------------------------------------- Strategic Value and High Income Fund $ 68,292 $ 3,248 $ 173 ---------------------------------------------------------------------------------------- Tax-Exempt Bond Fund $ -- $ 164,892 $ -- ---------------------------------------------------------------------------------------- Ultra Short Duration Fixed Income Fund $ -- $ 97,596 $ -- ---------------------------------------------------------------------------------------- Value Opportunities Fund $ -- $ 50,202 $ -- ----------------------------------------------------------------------------------------
The Advisor has entered into investment sub-advisory agreements with the following parties: PITCAIRN INVESTMENT MANAGEMENT AXA ROSENBERG INVESTMENT MANAGEMENT LLC Diversified Growth Fund International Equity Fund Diversified Value Fund Family Heritage(R) Fund DIAMOND HILL CAPITAL MANAGEMENT, INC. Pitcairn Taxable Bond Fund Small Cap Value Opportunities Fund Small Cap Fund Tax-Exempt Bond Fund SANDS CAPITAL MANAGEMENT, LLC Sands Capital Select Growth Fund CLOVER CAPITAL MANAGEMENT, INC. Clover Core Fixed Income Fund TURNER INVESTMENT PARTNERS, INC. Diversified Small Cap Value Fund Healthcare and Biotechnology Fund Value Opportunities Fund Mid Cap Fund Small Cap Value Opportunities Fund CHARTWELL INVESTMENT PARTNERS Short Duration Fixed Income Fund JAMES INVESTMENT RESEARCH, INC. Ultra Short Duration Fixed Income Fund Small Cap Value Opportunities Fund The Advisor, not the Funds, pays sub-advisory fees to each Sub-Advisor. 103 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- ADMINISTRATION AGREEMENT The Advisor provides administrative services for the Funds. Effective January 1, 2007, for its services, the Advisor receives an annual fee of 0.20% of the aggregate average daily net assets of the Trust, Touchstone Strategic Trust, Touchstone Tax-Free Trust, and Touchstone Investment Trust (excluding Institutional Money Market Fund) up to and including $6 billion; 0.16% of the next $4 billion of aggregate average daily net assets; and 0.12% of the aggregate average daily net assets of all such assets in excess of $10 billion. However, through February 28, 2008, the administration fees are limited to an annual fee of 0.146% of the aggregate average daily net assets of the Trust. The fee is allocated among the Funds on the basis of relative daily net assets. Prior to January 1, 2007, the Advisor received an annual fee of 0.15% of the aggregate average daily net assets of the Trust up to $2 billion and 0.12% of the aggregate average daily net assets of the Trust over $2 billion. The fee was allocated among the Funds on the basis of relative daily net assets. TRANSFER AGENT AGREEMENT Under the terms of the Transfer Agent Agreement, effective November 20, 2006, between the Trust and JPMorgan Chase Bank, N.A. (JPMorgan and formerly Integrated Investment Services, Inc.), JPMorgan maintains the records of each shareholder's account, answers shareholders' inquiries concerning their accounts, processes purchases and redemptions of each Fund's shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. For these services, JP Morgan receives a monthly fee per shareholder account from each Fund. In addition, each Fund pays JPMorgan out-of-pocket expenses including, but not limited to, postage and supplies. Prior to November 20, 2006, DST Systems, Inc. served as the transfer agent and dividend disbursing agent for the Funds under a transfer agency agreement with the Trust. 104 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- For the year ended September 30, 2007, the following Funds reimbursed the Advisor for amounts paid to third parties that provide sub-transfer agency and other administrative services to the Funds. These amounts are included in transfer agent fees on the Statements of Operations: AMOUNT ------------------------------------------------- Diversified Growth Fund $ 1,484 Diversified Small Cap Value Fund $ 84,447 Diversified Value Fund $ 3,885 Family Heritage(R) Fund $ 24 Healthcare and Biotechnology Fund $ 34,579 International Equity Fund $ 20,876 Mid Cap Fund $ 781 Pitcairn Taxable Bond Fund $ 1,092 Sands Capital Select Growth Fund $194,642 Short Duration Fixed Income Fund $ 36,518 Small Cap Fund $ 2,198 Small Cap Value Opportunities Fund $ 86,826 Tax-Exempt Bond Fund $ 2,626 Ultra Short Duration Fixed Income Fund $ 36,618 Value Opportunities Fund $ 14,476 Prior to November 20, 2006, the Funds could earn cash management credits, from DST Systems Inc., which could be used to offset transfer agent expenses. These amounts are listed as fees paid indirectly on the Statements of Operations. PLANS OF DISTRIBUTION The Trust has adopted a Distribution and Shareholder Services Plan for Class A shares of the Diversified Growth Fund, Diversified Small Cap Value Fund, Diversified Value Fund, Family Heritage(R) Fund, Healthcare and Biotechnology Fund, International Equity Fund, Mid Cap Fund, Small Cap Fund, Small Cap Value Opportunities Fund, Strategic Value and High Income Fund, Tax-Exempt Bond Fund, and Value Opportunities Fund (Class A Plan) under which each Fund may directly or indirectly bear expenses relating to the distribution of Class A shares of the Trust and for providing shareholder services to Class A shares. The Fund will incur and/or reimburse expenses for distribution and shareholder service of Class A shares at an annual rate not to exceed 0.25% of the average daily net assets of Class A shares. The Trust has adopted a Distribution and Shareholder Services Plan for Class C shares of the Diversified Small Cap Value Fund, Diversified Value Fund, Family Heritage(R) Fund, Healthcare and Biotechnology Fund, International Equity Fund, Mid Cap Fund, Small Cap Fund, Small Cap Value Opportunities Fund, Strategic Value and High Income Fund, and Value Opportunities Fund (Class C Plan) under which each Fund may directly or indirectly bear expenses relating to the distribution of Class C shares of the Trust and for providing shareholder services to Class C shares. The Fund will incur and/or reimburse expenses for distribution and shareholder services of Class C shares at an annual rate not to exceed 0.75% and 0.25%, respectively, of the average daily net assets of Class C shares. The Trust has adopted a Shareholder Services Plan for Class Z shares of the Small Cap Value Opportunities Fund, Mid Cap Fund, and Sands Capital Select Growth Fund, and effective February 1, 2007, the Diversified Small Cap Value Fund, Short Duration Fixed Income Fund, Ultra Short Duration Fixed Income Fund, and Value Opportunities Fund (Class Z Plan) under which each Fund may directly or indirectly bear expenses for providing shareholder services. The Fund will incur and/or reimburse expense for shareholder service of Class Z shares at an annual rate not to exceed 0.25% of the average daily net assets of Class Z shares. 105 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- The Trust has adopted a Distribution and Shareholder Services Plan for Class II shares of the Pitcairn Taxable Bond Fund (Class II Plan). Under the Class II Plan, the Advisor currently receives fees equal to 0.25% of each Fund's Class II shares' average daily net assets to provide or procure shareholder services. The Class II Plan may directly or indirectly bear expenses related to the distribution of Class II shares at an annual rate not to exceed 0.75% of the average daily net assets of Class II shares; however, no fees are currently being paid for distribution expenses. UNDERWRITING AGREEMENT Touchstone Securities, Inc. (the Underwriter) is the Funds' principal underwriter and, as such, acts as the exclusive agent for distribution of the Funds' shares. Under the terms of the Underwriting Agreement between the Trust and Underwriter, the Underwriter earned the following from underwriting and broker commissions on the sale of shares of the following Funds for the year ended September 30, 2007: AMOUNT ----------------------------------------------- Diversified Growth Fund $ 44 Diversified Small Cap Value Fund $ 1,239 Diversified Value Fund $ 441 Family Heritage(R) Fund $ 52 Healthcare and Biotechnology Fund $13,820 International Equity Fund $ 5,504 Mid Cap Fund $ 445 Small Cap Fund $ 533 Strategic Value and High Income Fund $ 976 Tax-Exempt Bond Fund $ 1,581 Value Opportunities Fund $ 4,660 In addition, the Underwriter collected $44 and $99 of contingent deferred sales charges on the redemption of Class C shares of the International Equity Fund and Value Opportunities Fund, respectively, during the year ended September 30, 2007. COMPLIANCE SERVICES AGREEMENT Under the terms of the Compliance Services Agreement between the Trust and JPMorgan, JPMorgan provides certain compliance services to the Trust for a fee, including developing and assisting in implementing a compliance program for JPMorgan on behalf of the Funds and providing administrative support services to the Funds' Compliance Program and Chief Compliance Officer. 106 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- AFFILIATED INVESTMENTS Investments made by the Strategic Value and High Income Fund in other Funds are considered to be investments in Affiliated Companies as defined under section 2(a)(3) of the 1940 Act. A summary of the investment and income activity of the Strategic Value and High Income Fund in each Affiliated Company's shares is as follows:
SHARE ACTIVITY ---------------------------------------- BALANCE BALANCE REALIZED VALUE AFFILIATED INVESTMENT 09/30/06 PURCHASES SALES 09/30/07 DIVIDENDS GAIN(LOSS) 09/30/07 -------------------------------------------------------------------------------------------------------------------------- Touchstone Funds Group Trust Clover Core Fixed Income Fund 54,204 1,212 (55,416) -- $ 7,162 $ 742 $ -- -------------------------------------------------------------------------------------------------------------------------- Touchstone Funds Group Trust Diversified Small Cap Value Fund -- 67,747 (32,815) 34,932 $ -- $ 5,505 $ 682,923 -------------------------------------------------------------------------------------------------------------------------- Touchstone Investment Trust High Yield Fund -- 98,061 46,609 51,452 $ 29,344 $ (2,114) $ 472,328 -------------------------------------------------------------------------------------------------------------------------- Touchstone Funds Group Trust Small Cap Value Opportunities Fund 79,627 2,389 (82,016) -- $ -- $ 217,765 $ -- -------------------------------------------------------------------------------------------------------------------------- Touchstone Funds Group Trust Ultra Short Duration Fixed Income Fund 51,908 1,233 (53,141) -- $ 7,850 $ 3,556 $ -- --------------------------------------------------------------------------------------------------------------------------
107 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 5. CAPITAL SHARE TRANSACTIONS Proceeds and payments on capital shares as shown in the Statements of Changes in Net Assets are the result of the following capital share transactions for the periods shown:
CLOVER CORE DIVERSIFIED DIVERSIFIED FIXED INCOME GROWTH SMALL CAP FUND FUND VALUE FUND ----------------------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT.30, SEPT. 30, 2007 2006 2007 2006 2007(A) 2006 ----------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares issued -- -- 118,600 1,181,515 13,314 -- Shares reinvested -- -- 1,129 1,269 175 -- Shares redeemed -- -- (1,825,424) (2,030,910) (3,002) -- ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding -- -- (1,705,695) (848,126) 10,487 -- Shares outstanding, beginning of period -- -- 19,248,700 20,096,826 -- -- ----------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- 17,543,005 19,248,700 10,487 -- =================================================================================================================================== CLASS C Shares issued -- -- -- -- 3,821 -- Shares reinvested -- -- -- -- 239 -- ----------------------------------------------------------------------------------------------------------------------------------- Net increase in shares outstanding -- -- -- -- 4,060 -- Shares outstanding, beginning of period -- -- -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- -- -- 4,060 -- =================================================================================================================================== CLASS Z Shares issued -- -- -- -- 835,178 1,478,125 Shares reinvested -- -- -- -- 3,697,084 2,558,122 Shares redeemed -- -- -- -- (5,758,231) (9,992,145) ----------------------------------------------------------------------------------------------------------------------------------- Net decrease in shares outstanding -- -- -- -- (1,225,969) (5,955,898) Shares outstanding, beginning of year -- -- -- -- 10,328,659 16,284,557 ----------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of year -- -- -- -- 9,102,690 10,328,659 =================================================================================================================================== CLASS I Shares issued 299,959 497,849 -- -- -- -- Shares reinvested 96,670 166,712 -- -- -- -- Shares redeemed (609,712) (1,034,234) -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- Net decrease in shares outstanding (213,083) (369,673) -- -- -- -- Shares outstanding, beginning of year 2,263,052 2,632,725 -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of year 2,049,969 2,263,052 -- -- -- -- ===================================================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. 108 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
HEALTHCARE AND DIVERSIFIED VALUE FAMILY HERITAGE(R) BIOTECHNOLOGY FUND FUND FUND ----------------------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2007(A) 2006 2007(A) 2006 2007(A) 2006 ----------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares issued 156,793 639,769 532,813 211,849 577,797 1,623,755 Shares reinvested 250,243 357,813 13,759 2,838 118,145 110,261 Shares issued in connection with acquisition(B) 4,385,381 -- -- -- -- -- Shares redeemed (1,283,826) (1,137,859) (1,088,810) (846,932) (1,244,584) (1,975,402) ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding 3,508,591 (140,277) (542,238) (632,245) (548,642) (241,386) Shares outstanding, beginning of year 13,239,858 13,380,135 7,844,588 8,476,833 3,463,459 3,704,845 ----------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of year 16,748,449 13,239,858 7,302,350 7,844,588 2,914,817 3,463,459 =================================================================================================================================== CLASS C Shares issued 476 -- 521 -- 77,729 -- Shares reinvested 73 -- -- -- 2 -- Shares redeemed -- -- -- -- (1,024) -- ----------------------------------------------------------------------------------------------------------------------------------- Net increase in shares outstanding 549 -- 521 -- 76,707 -- Shares outstanding, beginning of period -- -- -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period 549 -- 521 -- 76,707 -- ===================================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) See Footnote 9 in notes to financial statements. 109 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
INTERNATIONAL EQUITY MID CAP PITCAIRN TAXABLE BOND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2007(A) 2006 2007(B) 2006(C) 2007 2006 ------------------------------------------------------------------------------------------------------------------------------------ CLASS A Shares issued 597,932 1,472,241 12,263 -- -- -- Shares reinvested 190,932 18,380 -- -- -- -- Shares redeemed (2,964,722) (1,188,479) (476) -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding (2,175,858) 302,142 11,787 -- -- -- Shares outstanding, beginning of period 14,927,721 14,625,579 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period 12,751,863 14,927,721 11,787 -- -- -- ==================================================================================================================================== CLASS C Shares issued 61,670 -- 2,002 -- -- -- Shares reinvested 85 -- -- -- -- -- Shares redeemed (406) -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase in shares outstanding 61,349 -- 2,002 -- -- -- Shares outstanding, beginning of period -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period 61,349 -- 2,002 -- -- -- ==================================================================================================================================== CLASS Y Shares issued -- -- 23,351,224 5,683,473 -- -- Shares reinvested -- -- 5,229 4,315 -- -- Shares redeemed -- -- (2,141,213) (45,711) -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase in shares outstanding -- -- 21,215,240 5,642,077 -- -- Shares outstanding, beginning of year -- -- 5,696,876 54,799 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year -- -- 26,912,116 5,696,876 -- -- ==================================================================================================================================== CLASS Z Shares issued -- -- 938,463 22,956 -- -- Shares reinvested -- -- 117 -- -- -- Shares redeemed -- -- (109,748) -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase in shares outstanding -- -- 828,832 22,956 -- -- Shares outstanding, beginning of period -- -- 22,956 -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period -- -- 851,788 22,956 -- -- ==================================================================================================================================== CLASS II Shares issued -- -- -- -- 272,618 451,916 Shares reinvested -- -- -- -- 38,773 48,542 Shares redeemed -- -- -- -- (955,861) (789,947) ------------------------------------------------------------------------------------------------------------------------------------ Net decrease in shares outstanding -- -- -- -- (644,470) (289,489) Shares outstanding, beginning of year -- -- -- -- 4,277,682 4,567,171 ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year -- -- -- -- 3,633,212 4,277,682 ====================================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Classes A and C represent the period from commencement of operations (May 14, 2007) through September 30, 2007. (C) Class Z represents the period from commencement of operations (April 24, 2006) through September 30, 2006. 110 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
SANDS CAPITAL SELECT SHORT DURATION FIXED SMALL CAP GROWTH FUND INCOME FUND FUND ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT.30, SEPT. 30, 2007 2006 2007 2006 2007(A) 2006 ------------------------------------------------------------------------------------------------------------------------------------ CLASS A Shares issued -- -- -- -- 95,077 236,192 Shares reinvested -- -- -- -- 224,032 280,488 Shares redeemed -- -- -- -- (1,018,102) (852,883) ------------------------------------------------------------------------------------------------------------------------------------ Net decrease in shares outstanding -- -- -- -- (698,993) (336,203) Shares outstanding, beginning of year -- -- -- -- 5,474,858 5,811,061 ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year -- -- -- -- 4,775,865 5,474,858 ==================================================================================================================================== CLASS C Shares issued -- -- -- -- 61 -- Shares reinvested -- -- -- -- 8 -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase in shares outstanding -- -- -- -- 69 -- Shares outstanding, beginning of period -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period -- -- -- -- 69 -- ==================================================================================================================================== CLASS Y Shares issued 8,624,881 18,234,418 -- -- -- -- Shares redeemed (9,208,013) (4,787,555) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding (583,132) 13,446,863 -- -- -- -- Shares outstanding, beginning of year 23,938,361 10,491,498 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year 23,355,229 23,938,361 -- -- -- -- ==================================================================================================================================== CLASS Z Shares issued 11,118,165 35,871,834 225,346 288,649 -- -- Shares reinvested -- -- 302,626 401,811 -- -- Shares redeemed (17,560,077) (8,490,899) (2,289,520) (4,330,971) -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding (6,441,912) 27,380,935 (1,761,548) (3,640,511) -- -- Shares outstanding, beginning of year 48,291,429 20,910,494 7,793,486 11,433,997 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year 41,849,517 48,291,429 6,031,938 7,793,486 -- -- ====================================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. 111 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
SMALL CAP VALUE STRATEGIC VALUE AND TAX-EXEMPT BOND OPPORTUNITIES FUND HIGH INCOME FUND FUND ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT.30, SEPT. 30, 2007(A) 2006 2007(B) 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------------------------ CLASS A Shares issued 375 -- 10,145 -- 695,892 1,754,327 Shares reinvested -- -- 74 -- 13,839 47,266 Shares redeemed -- -- (270) -- (1,911,353) (1,043,394) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding 375 -- 9,949 -- (1,201,622) 758,199 Shares outstanding, beginning of period -- -- -- -- 11,283,934 10,525,735 ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period 375 -- 9,949 -- 10,082,312 11,283,934 ==================================================================================================================================== CLASS C Shares issued 3,942 -- 346 -- -- -- Shares outstanding, beginning of period -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period 3,942 -- 346 -- -- -- ==================================================================================================================================== CLASS Y Shares issued -- -- 3,986 171,775 -- -- Shares reinvested -- -- 2,341 2,318 -- -- Shares redeemed -- -- (115,037) (54,863) -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding -- -- (108,710) 119,230 -- -- Shares outstanding, beginning of year -- -- 175,982 56,752 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year -- -- 67,272 175,982 -- -- ==================================================================================================================================== CLASS Z Shares issued 3,458,155 12,145,070 -- -- -- -- Shares reinvested 284,028 96,491 -- -- -- -- Shares redeemed (6,948,731) (3,119,676) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding (3,206,548) 9,121,885 -- -- -- -- Shares outstanding, beginning of year 13,167,229 4,045,344 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year 9,960,681 13,167,229 -- -- -- -- ====================================================================================================================================
(A) Classes A and C represent the period from commencement of operations (July 23, 2007) through September 30, 2007. (B) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. 112 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE OPPORTUNITIES FIXED INCOME FUND FUND --------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2007 2006 2007(A) 2006 --------------------------------------------------------------------------------------------------------- CLASS A Shares issued -- -- 29,890 -- Shares reinvested -- -- 134 -- Shares redeemed -- -- (3,596) -- --------------------------------------------------------------------------------------------------------- Net increase in shares outstanding -- -- 26,428 -- Shares outstanding, beginning of period -- -- -- -- --------------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- 26,428 -- ========================================================================================================= CLASS C Shares issued -- -- 25,258 -- Shares reinvested -- -- 201 -- Shares redeemed -- -- (1,695) -- --------------------------------------------------------------------------------------------------------- Net increase in shares outstanding -- -- 23,764 -- Shares outstanding, beginning of year -- -- -- -- --------------------------------------------------------------------------------------------------------- Shares outstanding, end of year -- -- 23,764 -- ========================================================================================================= CLASS Z Shares issued 2,872,100 3,667,531 985,780 1,178,316 Shares reinvested 765,481 938,389 1,102,429 534,579 Shares redeemed (6,416,115) (17,613,166) (1,388,951) (5,427,049) --------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding (2,778,534) (13,007,246) 699,258 (3,714,154) Shares outstanding, beginning of period 17,271,940 30,279,186 5,297,161 9,011,315 --------------------------------------------------------------------------------------------------------- Shares outstanding, end of period 14,493,406 17,271,940 5,996,419 5,297,161 =========================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. 6. FEDERAL TAX INFORMATION It is each Fund's policy to continue to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which a Fund so qualifies and distributes at least 90% of its taxable net income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed. Accordingly, no provision for income taxes has been made. In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also each Fund's intention to declare and pay as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98% of its net realized capital gains (earned during the twelve months ending October 31) plus undistributed amounts from prior years. 113 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- THE TAX CHARACTER OF DISTRIBUTIONS PAID FOR THE PERIODS ENDED SEPTEMBER 30, 2007 AND 2006 WAS AS FOLLOWS:
CLOVER CORE DIVERSIFIED DIVERSIFIED FIXED INCOME GROWTH SMALL CAP VALUE FUND FUND FUND ------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------- From ordinary income $ 961,663 $ 1,134,635 $ 110,282 $ 121,417 $15,097,780 $ -- From long-term capital gains -- 521,373 -- -- 59,766,378 60,867,084 ------------------------------------------------------------------------------------------------------------------- $ 961,663 $ 1,656,008 $ 110,282 $ 121,417 $74,864,158 $60,867,084 -------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FAMILY HEALTHCARE AND VALUE HERITAGE BIOTECHNOLOGY FUND FUND FUND ------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------- From ordinary income $ 3,249,112 $ 5,641,097 $ 1,156,587 $ 227,134 $ -- $ 955,188 From long-term capital gains 27,434,139 10,084,845 -- -- 1,868,704 830,889 ------------------------------------------------------------------------------------------------------------------- $30,683,251 $15,725,942 $ 1,156,587 $ 227,134 $ 1,868,704 $ 1,786,077 -------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PITCAIRN EQUITY MID CAP TAXABLE BOND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------- From ordinary income $ 1,945,684 $ 1,747,820 $ 1,512,452 $ 38,696 $ 1,835,524 $ 2,110,784 From long-term capital gains 6,593,273 -- -- 23,995 -- -- ------------------------------------------------------------------------------------------------------------------- $ 8,538,957 $ 1,747,820 $ 1,512,452 $ 62,691 $ 1,835,524 $ 2,110,784 -------------------------------------------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION SELECT GROWTH FIXED INCOME SMALL CAP FUND FUND FUND ------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------- From ordinary income $ -- $ -- $ 3,020,621 $ 3,966,690 $ -- $ -- From long-term capital gains -- -- -- -- 10,131,080 12,655,814 ------------------------------------------------------------------------------------------------------------------- $ -- $ -- $ 3,020,621 $ 3,966,690 $10,131,080 $12,655,814 -------------------------------------------------------------------------------------------------------------------
114 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
SMALL CAP STRATEGIC VALUE AND VALUE OPPORTUNITIES HIGH INCOME TAX-EXEMPT BOND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------------------------------------------------- From tax-exempt income $ -- $ -- $ -- $ -- $ 4,294,666 $ 4,395,127 From ordinary income 2,373,051 627,630 36,492 32,346 -- 36,413 From long-term capital gains 3,683,069 1,140,748 3,434 1,372 185,535 1,409,043 ------------------------------------------------------------------------------------------------------------------- $ 6,056,120 $ 1,768,378 $ 39,926 $ 33,718 $ 4,480,201 $ 5,840,583 -------------------------------------------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE FIXED INCOME OPPORTUNITIES FUND FUND ---------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 ---------------------------------------------------------------------------------------- From ordinary income $ 8,051,978 $ 9,755,714 $ 6,672,464 $ 2,017,717 From long-term capital gains -- -- 12,760,280 7,763,361 ---------------------------------------------------------------------------------------- $ 8,051,978 $ 9,755,714 $19,432,744 $ 9,781,078
The following information is computed on a tax basis for each item as of September 30, 2007:
DIVERSIFIED CLOVER CORE DIVERSIFIED SMALL CAP DIVERSIFIED FAMILY HEALTHCARE AND FIXED INCOME GROWTH VALUE VALUE HERITAGE BIOTECHNOLOGY FUND FUND FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------------------------------- Tax cost of portfolio investments $ 20,133,188 $ 119,031,391 $ 187,438,518 $ 176,159,023 $ 70,323,090 $ 49,362,508 ----------------------------------------------------------------------------------------------------------------------------------- Gross unrealized appreciation 83,484 21,024,209 22,625,692 33,529,460 21,651,905 10,195,738 Gross unrealized depreciation (364,172) (6,454,905) (11,349,666) (1,707,944) (4,537,399) (323,212) ----------------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) (280,688) 14,569,304 11,276,026 31,821,516 17,114,506 9,872,526 Post-October losses (79,667) -- -- -- -- (3,803) Capital loss carryforward (292,352) (62,292,438) -- -- (6,194,771) -- Undistributed ordinary income 2,319 -- 14,495,138 -- -- 1,403,820 Undistributed long-term capital gains -- -- 25,142,473 3,123,341 -- 3,375,957 Other temporary differences (2,586) -- -- (506,000) -- -- ----------------------------------------------------------------------------------------------------------------------------------- Accumulated earnings (deficit) $ (652,974) $ (47,723,134) $ 50,913,637 $ 34,438,857 $ 10,919,735 $ 14,648,500 ===================================================================================================================================
115 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) --------------------------------------------------------------------------------
PITCAIRN SANDS SHORT INTERNATIONAL TAXABLE CAPITAL SELECT DURATION EQUITY MID CAP BOND GROWTH FIXED INCOME SMALL CAP FUND FUND FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------------------------------- Tax cost of portfolio investments $ 124,290,418 $ 520,516,124 $ 35,523,102 $ 525,618,974 $ 59,762,633 $ 70,697,039 ----------------------------------------------------------------------------------------------------------------------------------- Gross unrealized appreciation 33,558,583 43,090,789 923,928 150,193,629 212,137 8,249,076 Gross unrealized depreciation (3,536,476) (12,096,952) (353,554) (21,048,779) (862,495) (2,550,720) ----------------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) 30,022,107 30,993,837 570,374 129,144,850 (650,358) 5,698,356 Post-October losses -- (22,027) -- -- (293,890) -- Capital loss carryforward -- -- (706,147) (42,616,146) (3,970,327) -- Undistributed ordinary income 9,413,237 4,685,264 99,750 -- 4,430 3,929,410 Undistributed long-term capital gains 7,936,982 18,958 -- -- -- 3,499,494 Other temporary difference -- -- (99,916) -- (4,430) -- ----------------------------------------------------------------------------------------------------------------------------------- Accumulated earnings (deficit) $ 47,372,326 $ 35,676,032 $ (135,939) $ 86,528,704 $ (4,914,575) $ 13,127,260 ===================================================================================================================================
SMALL CAP STRATEGIC ULTRA SHORT VALUE VALUE AND TAX-EXEMPT DURATION VALUE OPPORTUNITIES HIGH INCOME BOND FIXED INCOME OPPORTUNITIES FUND FUND FUND FUND FUND -------------------------------------------------------------------------------------------------------------------------- Tax cost of portfolio investments $ 210,496,264 $ 1,173,059 $ 99,510,969 $ 145,398,638 $ 105,038,095 -------------------------------------------------------------------------------------------------------------------------- Gross unrealized appreciation 19,494,475 3,753 3,760,492 1,442,607 16,187,653 Gross unrealized depreciation (10,477,196) (21,561) (570,098) (825,041) (1,097,564) -------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) 9,017,279 (17,808) 3,190,394 617,566 15,090,089 Capital loss carryforward -- -- -- (7,241,873) -- Undistributed ordinary income 4,172,469 69,656 111,052 25,839 12,109 Undistributed long-term capital gains 11,986,449 191,715 354,931 -- 8,244,968 Undistributed tax-exempt income -- -- 286,463 -- -- Other temporary difference -- (323) (286,463) (25,835) (19,650) -------------------------------------------------------------------------------------------------------------------------- Accumulated earnings (deficit) $ 25,176,197 $ 243,240 $ 3,656,377 $ (6,624,303) $ 23,327,516 ==========================================================================================================================
The difference between the tax cost of portfolio investments and the financial statement cost is primarily due to wash sales. As of September 30, 2007, the Funds had the following capital loss carryforwards for federal income tax purposes. AMOUNT EXPIRATION DATE ---------------------------------------------------------------------------- Clover Core Fixed Income Fund $ 4,682 2014 287,670 2015 ------------- $ 292,352 ------------- Diversified Growth Fund $ 13,685,911 2009 35,398,494 2010 11,331,155 2011 1,876,878 2013 ------------- $ 62,292,438 ------------- Family Heritage Fund $ 4,367,662 2011 1,827,109 2013 ------------- $ 6,194,771 ------------- 116 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- Pitcairn Taxable Bond Fund $ 473,083 2010 129,200 2014 103,864 2015 ------------- $ 706,147 ------------- Sands Capital Select Growth Fund $ 8,044,957 2009 12,366,467 2010 5,719,519 2011 2,692,298 2014 13,792,905 2015 ------------- $ 42,616,146 ------------- Short Duration Fixed Income Fund $ 1,994,293 2012 96,050 2013 1,027,850 2014 852,134 2015 ------------- $ 3,970,327 ------------- Ultra Short Duration Fixed Income Fund $ 6,705,867 2012 371,187 2014 164,819 2015 ------------- $ 7,241,873 ------------- The capital loss carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders. During the year ended September 30, 2007, the funds utilized capital loss carryforwards as follows: AMOUNT -------------------------------------------------------------------------------- Diversified Growth Fund $3,656,477 Family Heritage Fund $4,984,006 Mid Cap Fund $ 8,814 117 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- Certain reclassifications, the result of permanent differences between financial statement and income tax reporting requirements have been made to the components of capital. These reclassifications have no impact on the net assets or net asset value per share of the Funds and are designed to present the Funds' capital accounts on a tax basis. The following reclassifications of net investment loss have been made to the following Funds for the year ended September 30, 2007:
ACCUMULATED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME (LOSS) GAINS (LOSSES) ------------------------------------------------------------------------------------- Clover Core Fixed Income Fund $ 3 $ 3,351 $ (3,354) Diversified Growth Fund $ (35,993) $ 35,993 $ -- Diversified Small Cap Value Fund $ 5 $ 452,011 $ (452,016) Diversified Value Fund $ -- $ (483,924) $ 483,924 Family Heritage Fund $ (9,797) $ 9,797 $ -- Healthcare and Biotechnology Fund $ -- $ 310,313 $ (310,313) International Equity Fund $ 3 $ 564,892 $ (564,895) Mid Cap Fund $ 33 $ 287,050 $ (287,083) Pitcairn Taxable Bond Fund $ 133 $ (133) $ -- Sands Capital Select Growth Fund $(4,662,714) $ 4,662,715 $ (1) Short Duration Fixed Income Fund $ 2 $ (39,817) $ 39,815 Small Cap Fund $ -- $ 96,488 $ (96,488) Small Cap Value Opportunities Fund $ -- $ 36,621 $ (36,621) Tax-Exempt Bond Fund $ 42,413 $ (4) $ (42,409) Ultra Short Duration Fixed Income Fund $ -- $ (140,497) $ 140,497 Value Opportunities Fund $ (2) $ -- $ 2
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretatin No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Recent SEC guidance allows implementing FIN 48 in fund NAV calculations as late as the Fund's last NAV calculation in the first required financial statement reporting period. As a result, the Funds will incorporate FIN 48 in their semi annual report on March 31, 2008. Management is in the process of determing the impact of adoption. DIVIDENDS RECEIVED DEDUCTION For corporate shareholders, the following ordinary dividends paid during the year ended September 30, 2007 qualify for the corporate dividends received deduction: Diversified Growth Fund 74% Diversified Value Fund 86% Family Heritage Fund 95% Mid Cap Fund 34% Strategic Value and High Income Fund 21% Value Opportunities Fund 18% 118 -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) -------------------------------------------------------------------------------- 7. COMMITMENTS AND CONTINGENCIES The Funds indemnify the Trust's Officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 8. CONCENTRATIONS/RISKS Certain Funds invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, the Funds may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility on the Fund's net asset value and magnified effect on the total return. The International Equity Fund invests in securities of foreign issuers in various countries. These investments may involve certain considerations and risks not typically associated with investments in the United States of America, as a result of, among other factors, the possibility of future political and economic developments and the level of governmental supervision and regulation of securities markets in the respective countries. 9. SPECIAL MEETING OF SHAREHOLDERS/ACQUISITION On July 13, 2007, a Special Meeting of Shareholders was held to approve or disapprove an Agreement and Plan of Reorganization providing for the transfer of all of assets and liabilities of the Pitcairn Select Value Fund to the Diversified Value Fund in exchange for shares of the Diversified Value Fund and the subsequent liquidation of the Pitcairn Select Value Fund. The acquisition was approved as follows: NUMBER OF VOTES -------------------------------------------------------------------------------- FOR AGAINST ABSTAIN -------------------------------------------------------------------------------- 4,895,423 -- -- The following is a summary of shares outstanding, net assets, net asset value per share, unrealized appreciation and realized gain immediately before and after the reorganization: BEFORE AFTER REORGANIZATION REORGANIZATION -------------------------------------------------------------------------------- PITCAIRN DIVERSIFIED DIVERSIFIED SELECT VALUE VALUE VALUE FUND FUND FUND -------------------------------------------------------------------------------- SHARES: Class A 4,828,626 12,243,103 17,071,729 Class C -- 549 549 NET ASSETS: Class A $ 53,968,888 $156,169,584 $210,138,472 Class C $ -- $ 6,763 $ 6,763 NET ASSET VALUE: Class A $ 11.18 $ 12.31 $ 12.31 Class C $ -- $ 12.32 $ 12.32 UNREALIZED APPRECIATION $ 10,452,450 $ 30,014,913 $ 40,467,363 ACCUMULATED NET REALIZED GAIN $ -- $ 3,027,167 $ 3,027,167 119 -------------------------------------------------------------------------------- Portfolio of Investments Clover Core Fixed Income Fund - September 30, 2007 -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE ------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 43.1% $ 295,496 FHLMC ARM Pool #Q10089 (A), 4.51%, 1/1/36 $ 292,264 951,808 FHLMC CMO Ser 3225 Class EO PO (B), .00%, 10/15/36 725,759 763,651 FHLMC CMO/REMIC Ser 3100 PO (B), .00%, 1/15/36 603,769 301,010 FHLMC CMO/REMIC Ser 3139, Class YB, 4.38%, 4/15/15 289,732 707,209 FHLMC Gold #08168, 6.00%, 12/1/36 708,176 539,431 FHLMC Pool #C01844, 4.50%, 4/1/34 501,238 621,350 FHLMC Pool #G08062, 5.00%, 6/1/35 593,679 54,955 FNMA CMO/REMIC Ser 1994-17, Class H, 6.00%, 2/25/09 55,177 503,449 FNMA Pool #254759, 4.50%, 6/1/18 486,040 621,077 FNMA Pool #255111, 5.50%, 3/1/34 609,583 12,991 FNMA Pool #369214, 5.00%, 4/1/09 12,916 47,729 FNMA Pool #535301, 6.50%, 4/1/15 49,046 740,487 FNMA Pool #689022, 5.00%, 5/1/33 708,843 421,791 FNMA Pool #694431, 5.00%, 3/1/18 414,612 329,599 FNMA Pool #738783, 7.00%, 2/1/25 342,802 297,608 FNMA Pool #G11570, 5.00%, 4/1/19 292,549 697,245 GNMA CMO PAC-1(11) Ser 2006-26 PO (B), .00%, 6/20/36 543,489 115,031 GNMA CMO/REMIC Ser 2004-59, Class DA, 5.00%, 6/16/34 113,174 4,201 GNMA Pool #196477, 10.00%, 4/15/10 4,549 14,358 GNMA Pool #202886, 8.00%, 3/15/17 15,171 4,962 GNMA Pool #221235, 8.50%, 7/15/17 5,328 13,730 GNMA Pool #331786, 8.00%, 8/15/22 14,570 76,350 GNMA Pool #376400, 6.50%, 2/15/24 78,323 63,003 GNMA Pool #439478, 7.00%, 1/15/27 66,076 152,036 GNMA Pool #457921, 5.50%, 12/15/28 150,318 94,378 GNMA Pool #462622, 6.50%, 3/15/28 96,846 43,795 GNMA Pool #533974, 6.50%, 5/15/32 44,865 113,555 GNMA Pool #570400, 6.50%, 9/15/31 116,386 32,259 GNMA Pool #781029, 6.50%, 5/15/29 33,096 151,038 GNMA Pool #781096, 6.50%, 12/15/28 155,010 73,165 GNMA Pool #781231, 7.00%, 12/15/30 75,860 117,991 GNMA Pool #781276, 6.50%, 4/15/31 121,002 70,244 GNMA Pool #781328, 7.00%, 9/15/31 73,589 ------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS $ 8,393,837 ------------------------------------------------------------------------------- CORPORATE BONDS -- 18.8% FINANCIALS -- 7.9% 650,000 Lehman Brothers Holdings, MTN (A), 8.00%, 9/5/16 636,999 500,000 Morgan Stanley, MTN (A), 7.50%, 10/23/18 495,000 450,000 SLM, MTN Ser A, 5.38%, 5/15/14 392,711 ------------------------------------------------------------------------------- 1,524,710 ------------------------------------------------------------------------------- INDUSTRIALS -- 3.3% 650,000 Toyota Motor Credit, MTN (A), 8.00%, 9/1/16 643,500 ------------------------------------------------------------------------------- UTILITIES -- 3.0% 350,000 AES, 9.38%, 9/15/10 369,250 215,000 Consolidated Natural Gas, Ser C, 6.25%, 11/1/11 221,068 ------------------------------------------------------------------------------- 590,318 ------------------------------------------------------------------------------- ENERGY -- 2.6% 475,000 XTO Energy, 7.50%, 4/15/12 513,240 ------------------------------------------------------------------------------- CONSUMER STAPLES -- 2.0% 367,000 Conagra Foods, 7.88%, 9/15/10 395,140 ------------------------------------------------------------------------------- TOTAL CORPORATE BONDS $ 3,666,908 ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 20.9% 1,150,000 U.S. Treasury Bond, 6.25%, 8/15/23 1,321,152 175,000 U.S. Treasury Bond, 4.50%, 2/15/36 165,908 500,000 U.S. Treasury Note, 4.88%, 4/30/11 512,930 1,000,000 U.S. Treasury Note, 4.25%, 8/15/13 998,984 100,000 U.S. Treasury Note, 4.00%, 2/15/15 97,289 980,000 U.S. Treasury Note, 4.63%, 2/15/17+ 984,517 ------------------------------------------------------------------------------- TOTAL U.S. TREASURY OBLIGATIONS $ 4,080,780 ------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 9.6% 300,000 Countrywide Alternative Loan Trust, Ser 2005-J13, Class 2A8, 5.50%, 11/25/35 280,010 500,000 CS First Boston Mortgage Securities, Ser 2005-C5, Class A3 (A), 5.10%, 8/15/38 493,622 500,000 Merrill Lynch Mortgage Investors, Ser 1998-C1, Class A3 (A), 6.72%, 11/15/26 530,694 600,000 Wachovia Bank Commercial Mortgage Trust, Ser 2003-C5, Class B, 4.11%, 6/15/35 563,023 ------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES $ 1,867,349 ------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATION -- 4.2% 750,000 TVA, 5.88%, 4/1/36 $ 811,492 ------------------------------------------------------------------------------- MUNICIPAL BOND -- 2.0% VIRGINIA -- 2.0% 400,000 State Housing Authority RB, Taxable Rental, Ser C, 5.00%, 5/1/13 $ 392,740 ------------------------------------------------------------------------------- 120 -------------------------------------------------------------------------------- Clover Core Fixed Income Fund (Continued) -------------------------------------------------------------------------------- MARKET SHARES VALUE ------------------------------------------------------------------------------- INVESTMENT FUND -- 2.3% 443,438 BlackRock Institutional Money Market Trust, 5.37% * ^ $ 443,438 ------------------------------------------------------------------------------- CASH EQUIVALENT -- 1.0% 195,956 BlackRock TempFund, Institutional Shares, 5.34% ^ $ 195,956 ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 101.9% (Cost $20,133,180) $ 19,852,500 LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.9%) (367,177) ------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 19,485,323 =============================================================================== + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $431,982. * Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. (A) Variable rate security - the rate reflected is the rate in effect on September 30, 2007. (B) Zero Coupon security - The rate reported was the effective yield at the time of purchase. ARM - Adjustable Rate Mortgage CMO - Collateralized Mortgage Obligation FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association PO - Principal Only Security MTN - Medium Term Note RB - Revenue Bond REMIC - Real Estate Mortgage Investment Conduit TVA - Tennessee Valley Authority See accompanying notes to financial statements. 121 -------------------------------------------------------------------------------- Portfolio of Investments Diversified Growth Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 100.0% SHARES VALUE ------------------------------------------------------------------------- TECHNOLOGY -- 20.9% ADC Telecommunications* 74,823 $ 1,467,279 Apple* 13,528 2,077,089 Cisco Systems* 149,531 4,950,972 Hewlett-Packard 73,927 3,680,825 Intel 93,906 2,428,409 International Business Machines 20,923 2,464,729 Microsoft 140,436 4,137,246 Oracle* 173,813 3,763,051 QUALCOMM 28,212 1,192,239 ------------------------------------------------------------------------- 26,161,839 ------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 20.7% Accenture+ 57,568 2,317,112 Best Buy 56,141 2,583,609 Brinker International 34,515 947,092 Dollar Tree Stores* 44,401 1,800,017 eBay* 46,561 1,816,810 Google, Class A* 4,632 2,627,595 Jarden* 31,778 983,211 Marriott International - Class A 42,233 1,835,869 NIKE, Class B 34,264 2,009,926 Omnicom Group 43,368 2,085,567 Staples 67,508 1,450,747 Wal-Mart Stores 63,819 2,785,698 Walt Disney 76,627 2,635,203 ------------------------------------------------------------------------- 25,878,456 ------------------------------------------------------------------------- HEALTH CARE -- 17.2% Aetna 46,441 2,520,353 Amgen* 40,622 2,297,987 Barr Pharmaceuticals* 20,703 1,178,208 Biogen Idec* 28,226 1,872,231 Eli Lilly 63,791 3,631,621 Johnson & Johnson 39,685 2,607,305 Patterson* 68,378 2,640,074 Stryker 42,010 2,888,607 WellPoint* 23,074 1,821,000 ------------------------------------------------------------------------- 21,457,386 ------------------------------------------------------------------------- PRODUCER DURABLES -- 12.1% Applied Materials 101,145 2,093,702 Caterpillar 23,993 1,881,771 Danaher 15,520 1,283,659 Goodrich 43,490 2,967,322 Novellus Systems* 66,863 1,822,685 Parker Hannifin+ 23,301 2,605,751 United Technologies 30,018 2,415,849 ------------------------------------------------------------------------- 15,070,739 ------------------------------------------------------------------------- ENERGY -- 6.9% Chesapeake Energy 44,421 1,566,284 Global Industries* 57,441 1,479,680 National-Oilwell Varco* 21,995 3,178,277 Unit* 22,209 1,074,916 Valero Energy 20,198 1,356,902 ------------------------------------------------------------------------- 8,656,059 ------------------------------------------------------------------------- CONSUMER STAPLES -- 6.7% Altria Group 32,475 2,257,987 PepsiCo 57,953 4,245,636 Procter & Gamble 27,258 1,917,328 ------------------------------------------------------------------------- 8,420,951 ------------------------------------------------------------------------- FINANCIAL SERVICES -- 5.8% American International Group 17,778 1,202,682 First Marblehead+ 30,359 1,151,517 Goldman Sachs Group 10,244 2,220,284 Host Hotels & Resorts+ 53,818 1,207,676 Morgan Stanley Dean Witter & Co. 22,539 1,419,957 ------------------------------------------------------------------------- 7,202,116 ------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 3.5% Alcoa 34,953 1,367,361 Celanese 37,962 1,479,759 E.I. du Pont de Nemours 30,815 1,527,192 ------------------------------------------------------------------------- 4,374,312 ------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 3.3% FedEx 17,790 1,863,502 Harley-Davidson+ 27,900 1,289,259 Norfolk Southern 17,868 927,528 ------------------------------------------------------------------------- 4,080,289 ------------------------------------------------------------------------- UTILITIES -- 1.9% AES* 61,574 1,233,943 Telephone & Data Systems 17,523 1,086,426 ------------------------------------------------------------------------- 2,320,369 ------------------------------------------------------------------------- OTHER -- 1.0% iShares Russell 1000 Growth Index Fund 9,841 606,402 iShares S&P MidCap 400 Growth Index Fund 7,570 685,995 ------------------------------------------------------------------------- 1,292,397 ------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 124,914,913 ------------------------------------------------------------------------- 122 -------------------------------------------------------------------------------- Diversified Growth Fund (Continued) -------------------------------------------------------------------------------- MARKET SHARES VALUE ------------------------------------------------------------------------- INVESTMENT FUND -- 7.0% BlackRock Institutional Money Market Trust, 5.37% ** ^ 8,685,782 $ 8,685,782 ------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 107.0% (Cost $119,031,391) $ 133,600,695 LIABILITIES IN EXCESS OF OTHER ASSETS -- (7.0%) (8,723,014) ------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 124,877,681 ========================================================================= * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $8,571,315. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. See accompanying notes to financial statements. 123 -------------------------------------------------------------------------------- Portfolio of Investments Diversified Small Cap Value Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 99.1% SHARES VALUE -------------------------------------------------------------------------- FINANCIAL SERVICES -- 29.8% American Campus Communities 45,620 $ 1,336,210 Anworth Mortgage Asset+ 189,700 1,022,483 Argo Group International Holdings* 22,490 978,540 Central Pacific Financial 27,100 791,320 City Holding 43,190 1,572,548 Columbia Banking System 89,845 2,858,867 Delphi Financial Group, Class A 24,585 993,726 FelCor Lodging Trust 87,845 1,750,751 FirstMerit 117,335 2,318,539 Flushing Financial 83,380 1,400,784 Glacier Bancorp+ 40,350 908,682 Hanover Insurance Group 40,625 1,795,219 HCC Insurance Holdings+ 44,105 1,263,167 Highwoods Properties 26,300 964,421 Home Properties 22,160 1,156,309 Horace Mann Educators 71,775 1,414,685 IBERIABANK 34,065 1,793,522 Independent Bank 42,820 1,271,754 IPC Holdings+ 41,075 1,185,014 Lexington Realty Trust+ 76,600 1,532,766 LTC Properties 57,765 1,367,298 National Penn Bancshares+ 107,105 1,752,242 National Retail Properties+ 51,825 1,263,494 Navigators Group* 28,005 1,519,271 Northwest Bancorp+ 46,905 1,334,916 Old National Bancorp 54,100 896,437 Pacific Capital Bancorp 64,350 1,692,405 Phoenix Companies 116,725 1,646,990 Potlatch 26,196 1,179,606 Prosperity Bancshares 32,200 1,067,752 Sotheby's 38,790 1,853,773 Sovran Self Storage 19,450 891,588 Sterling Bancshares 126,887 1,447,781 Sun Communities 37,800 1,137,024 United America Indemnity, Class A* 38,535 828,888 Waddell & Reed Financial, Class A 68,525 1,852,231 West Coast Bancorp 31,910 906,563 Westamerica Bancorp+ 17,225 857,977 Zenith National Insurance 23,825 1,069,504 -------------------------------------------------------------------------- 52,875,047 -------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 14.4% 99 Cents Only Stores* 85,400 877,058 AFC Enterprises* 55,000 827,750 Brown Shoe 43,392 841,805 CEC Entertainment* 25,850 694,590 Consolidated Graphics* 14,010 879,688 Dollar Thrifty Automotive Group* 29,400 1,019,886 Dollar Tree Stores* 31,305 1,269,105 Elizabeth Arden* 64,920 1,750,242 Ethan Allen Interiors+ 30,100 983,969 Harris Interactive* 172,285 742,548 HOT Topic* 103,700 773,602 Kellwood+ 30,315 516,871 Kforce* 71,425 918,526 K-Swiss, Class A 53,750 1,231,413 Lee Enterprises 46,450 723,227 Maidenform Brands* 55,905 887,771 Multimedia Games* 47,010 400,525 OfficeMax 21,130 724,125 Pantry*+ 14,350 367,791 Scholastic* 37,100 1,293,305 School Specialty* 33,650 1,165,300 Service Corporation International 84,000 1,083,600 Steiner Leisure* 14,375 623,875 Tractor Supply* 24,450 1,126,901 United Online 94,525 1,418,819 Wet Seal, Class A*+ 204,800 792,576 Wolverine World Wide 34,350 941,190 Zale* 36,275 839,404 -------------------------------------------------------------------------- 25,715,462 -------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 13.0% Ampco-Pittsburgh 29,220 1,150,684 Barnes Group 41,050 1,310,316 Buckeye Technologies* 72,205 1,093,184 Calgon Carbon*+ 150,575 2,102,026 Chemtura 114,775 1,020,350 Cleveland-Cliffs+ 16,900 1,486,693 Compass Minerals International 37,275 1,268,841 EMCOR Group* 58,175 1,824,368 Ferro 46,025 919,580 Graphic Packaging* 209,670 947,708 Innospec 39,295 895,140 OM Group* 18,405 971,968 Quanta Services* 76,640 2,027,127 Royal Gold 39,925 1,307,544 RTI International Metals* 12,275 972,917 Stillwater Mining* 101,500 1,044,435 URS* 29,815 1,683,057 Washington Group International* 13,595 1,193,777 -------------------------------------------------------------------------- 23,219,715 -------------------------------------------------------------------------- TECHNOLOGY -- 11.8% Atmel* 214,865 1,108,703 Black Box 35,025 1,497,669 Brocade Communications Systems* 127,385 1,090,416 CommScope* 34,270 1,721,724 CSG Systems International* 36,995 786,144 Digital River* 17,920 801,920 Fairchild Semiconductor International* 71,105 1,328,241 Finisar*+ 290,675 813,890 j2 Global Communications* 32,040 1,048,669 Macrovision* 46,500 1,145,295 Mentor Graphics* 40,790 615,929 MicroStrategy, Class A* 8,930 708,506 Omnivision Technologies*+ 24,775 563,136 124 -------------------------------------------------------------------------------- Diversified Small Cap Value Fund (Continued) -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 99.1% (CONTINUED) SHARES VALUE --------------------------------------------------------------------------- TECHNOLOGY -- 11.8% (CONTINUED) Oplink Communications* 70,825 $ 967,470 Perot Systems, Class A* 57,700 975,707 SeaChange International* 173,955 1,203,769 SPSS* 27,305 1,123,328 Sykes Enterprises* 59,960 995,936 Vignette* 63,000 1,264,410 Zoran* 67,315 1,359,763 --------------------------------------------------------------------------- 21,120,625 --------------------------------------------------------------------------- PRODUCER DURABLES -- 6.4% Bucyrus International, Class A 40,680 2,966,793 CTS 56,335 726,722 EnPro Industries* 26,425 1,072,855 Flowserve 12,595 959,487 Itron*+ 17,415 1,620,814 Mine Safety Appliances 15,825 745,516 NICE Systems ADR* 37,885 1,357,798 Orbital Sciences* 67,360 1,498,086 SymmetriCom, Inc.* 98,150 461,305 --------------------------------------------------------------------------- 11,409,376 --------------------------------------------------------------------------- UTILITIES -- 6.0% AGL Resources 32,030 1,269,029 Atmos Energy 43,775 1,239,708 Avista 70,825 1,441,288 Black Hills+ 33,675 1,381,349 Cleco 51,995 1,313,914 MGE Energy 26,150 874,456 Nicor 24,340 1,044,186 ONEOK 18,365 870,501 Westar Energy 51,875 1,274,050 --------------------------------------------------------------------------- 10,708,481 --------------------------------------------------------------------------- ENERGY -- 5.6% Alpha Natural Resources* 43,225 1,004,117 Cabot Oil & Gas 68,705 2,415,667 Forest Oil*+ 54,019 2,324,977 Foundation Coal Holdings 39,420 1,545,264 Petrohawk* 90,825 1,491,347 Whiting Petroleum* 26,110 1,160,590 --------------------------------------------------------------------------- 9,941,962 --------------------------------------------------------------------------- HEALTH CARE -- 4.7% Albany Molecular Research* 69,950 1,056,245 CONMED* 33,070 925,629 Greatbatch* 42,075 1,118,774 Invacare 58,800 1,374,744 MedCath* 60,925 1,673,001 PSS World Medical* 65,795 1,258,658 Salix Pharmaceuticals*+ 85,050 1,056,321 --------------------------------------------------------------------------- 8,463,372 --------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 4.2% ArvinMeritor+ 55,525 933,931 HUB Group, Class A* 37,280 1,119,518 Pacer International 37,740 718,947 Republic Airways Holdings* 59,110 1,251,359 Skywest 44,425 1,118,177 Tenneco* 77,330 2,398,003 --------------------------------------------------------------------------- 7,539,935 --------------------------------------------------------------------------- CONSUMER STAPLES -- 3.2% Church & Dwight+ 25,695 1,208,693 Spartan Stores 45,235 1,019,145 TreeHouse Foods* 73,235 1,981,006 Universal 30,150 1,475,843 --------------------------------------------------------------------------- 5,684,687 --------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 176,678,662 --------------------------------------------------------------------------- INVESTMENT FUND -- 12.3% BlackRock Institutional Money Market Trust, 5.37% ** ^ 21,898,722 $ 21,898,722 --------------------------------------------------------------------------- CASH EQUIVALENT -- 0.1% BlackRock TempFund, Institutional Shares, 5.34% ^ 137,160 $ 137,160 --------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 111.5% (Cost $187,302,679) $ 198,714,544 LIABILITIES IN EXCESS OF OTHER ASSETS -- (11.5%) (20,434,480) --------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 178,280,064 =========================================================================== * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $20,579,210. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. ADR - American Depository Receipt See accompanying notes to financial statements. 125 -------------------------------------------------------------------------------- Portfolio of Investments Diversified Value Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 100.1% SHARES VALUE ---------------------------------------------------------------------------- FINANCIAL SERVICES -- 31.1% American International Group 94,357 $ 6,383,251 Bear Stearns+ 31,325 3,847,023 Capital One Financial 71,854 4,773,261 CapitalSource 111,250 2,251,700 Citigroup 187,572 8,753,986 Everest Re Group 33,814 3,727,655 Goldman Sachs Group 11,060 2,397,144 Host Hotels & Resorts+ 111,198 2,495,283 JPMorgan Chase 201,253 9,221,413 RenaissanceRe Holdings 28,151 1,841,357 TCF Financial 168,663 4,415,597 Torchmark 52,845 3,293,300 Washington Mutual 36,360 1,283,872 Wells Fargo 189,329 6,743,899 ---------------------------------------------------------------------------- 61,428,741 ---------------------------------------------------------------------------- ENERGY -- 15.2% Anadarko Petroleum 82,702 4,445,233 Chevron Texaco 62,545 5,852,961 ConocoPhillips 78,826 6,918,558 Exxon Mobil 97,020 8,980,171 Marathon Oil 66,161 3,772,500 ---------------------------------------------------------------------------- 29,969,423 ---------------------------------------------------------------------------- UTILITIES -- 12.7% American Electric Power 83,338 3,840,215 NSTAR 137,632 4,790,970 SCANA 87,746 3,399,280 Telephone & Data Systems 46,228 2,866,136 Verizon Communications 231,669 10,258,303 ---------------------------------------------------------------------------- 25,154,904 ---------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 8.5% Citadel Broadcasting 1 3 Dollar Tree Stores* 64,625 2,619,898 J.C. Penney Company 61,066 3,869,752 News, Class A 93,574 2,057,692 Walt Disney 238,916 8,216,322 ---------------------------------------------------------------------------- 16,763,667 ---------------------------------------------------------------------------- HEALTH CARE -- 8.5% Aetna 60,151 3,264,395 Eli Lilly 37,890 2,157,078 Johnson & Johnson 74,809 4,914,951 Pfizer 259,686 6,344,129 ---------------------------------------------------------------------------- 16,680,553 ---------------------------------------------------------------------------- PRODUCER DURABLES -- 6.7% Alliant Techsystems*+ 16,650 1,819,845 Caterpillar 36,457 2,859,322 Dover 42,366 2,158,548 Goodrich 40,135 2,738,411 Novellus Systems* 37,184 1,013,636 Parker Hannifin+ 23,624 2,641,872 ---------------------------------------------------------------------------- 13,231,634 ---------------------------------------------------------------------------- CONSUMER STAPLES -- 6.3% Altria Group 80,805 5,618,371 J.M. Smucker 63,122 3,371,977 Procter & Gamble 48,081 3,382,018 ---------------------------------------------------------------------------- 12,372,366 ---------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 6.0% Alcoa 88,287 3,453,788 Dow Chemical 44,156 1,901,357 International Paper 35,913 1,288,199 Lyondell Chemical 58,634 2,717,686 Pactiv* 84,219 2,413,717 ---------------------------------------------------------------------------- 11,774,747 ---------------------------------------------------------------------------- TECHNOLOGY -- 3.8% Computer Sciences* 25,280 1,413,152 Hewlett-Packard 91,562 4,558,872 PerkinElmer 53,617 1,566,153 ---------------------------------------------------------------------------- 7,538,177 ---------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 0.9% Norfolk Southern 33,163 1,721,491 ---------------------------------------------------------------------------- OTHER -- 0.4% iShares S&P 500 Value Index Fund+ 9,824 799,772 ---------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 197,435,475 ---------------------------------------------------------------------------- INVESTMENT FUND -- 5.3% BlackRock Institutional Money Market Trust, 5.37% ** ^ 10,473,364 $ 10,473,364 ---------------------------------------------------------------------------- CASH EQUIVALENT -- 0.0% PNC Bank Money Market Fund, 4.43% ^ 71,700 $ 71,700 ---------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 105.4% (Cost $176,153,636) $ 207,980,539 LIABILITIES IN EXCESS OF OTHER ASSETS -- (5.4%) (10,599,803) ---------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 197,380,736 ============================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $10,257,451. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. See accompanying notes to financial statements. 126 -------------------------------------------------------------------------------- Portfolio of Investments Family Heritage(R) Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 99.8% SHARES VALUE --------------------------------------------------------------------------- FINANCIAL SERVICES -- 22.1% Berkshire Hathaway, Class B* 335 $ 1,323,920 Capital One Financial 30,245 2,009,175 CapitalSource+ 76,739 1,553,197 Commerce Bancshares 42,749 1,961,752 CompuCredit* 52,888 1,148,198 Federated Investors, Class B 56,956 2,261,153 Fiserv* 25,024 1,272,721 Flagstar Bancorp 86,724 843,825 Paychex 35,143 1,440,863 Philadelphia Consolidated Holding* 16,387 677,439 TCF Financial 100,559 2,632,634 W. R. Berkley 44,309 1,312,876 --------------------------------------------------------------------------- 18,437,753 --------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 15.8% Aaron Rents 29,755 663,537 Best Buy 35,215 1,620,594 Carnival 21,855 1,058,438 Central European Distribution* 37,715 1,806,925 eBay*+ 33,097 1,291,445 Lifetime Brands+ 41,544 842,928 Marriott International, Class A 25,514 1,109,094 NIKE, Class B 19,059 1,118,001 Viacom, Class B* 28,230 1,100,123 Wal-Mart Stores 58,226 2,541,564 --------------------------------------------------------------------------- 13,152,649 --------------------------------------------------------------------------- TECHNOLOGY -- 14.4% Dell* 61,024 1,684,262 General Dynamics 22,118 1,868,307 Microsoft 99,501 2,931,300 Oracle* 100,238 2,170,153 Qualcomm 26,695 1,128,131 Sirenza Microdevices* 49,227 851,135 Vishay Intertechnology* 104,411 1,360,475 --------------------------------------------------------------------------- 11,993,763 --------------------------------------------------------------------------- HEALTH CARE -- 12.4% Cephalon* 21,753 1,589,274 Eli Lilly 68,853 3,919,801 ICU Medical* 19,745 765,119 Stryker 45,401 3,121,773 Universal Health Services, Class B 17,901 974,172 --------------------------------------------------------------------------- 10,370,139 --------------------------------------------------------------------------- ENERGY -- 10.6% Apache 16,438 1,480,406 CARBO Ceramics+ 14,104 715,496 Chesapeake Energy 34,269 1,208,325 Devon Energy 16,585 1,379,872 Global Industries* 33,237 856,185 Hess Corporation 29,548 1,965,829 Murphy Oil 16,944 1,184,216 --------------------------------------------------------------------------- 8,790,329 --------------------------------------------------------------------------- UTILITIES -- 8.4% AES* 134,235 2,690,070 Comcast, Class A*+ 67,896 1,641,725 Telephone & Data Systems 43,292 2,684,104 --------------------------------------------------------------------------- 7,015,899 --------------------------------------------------------------------------- PRODUCER DURABLES -- 6.0% Danaher 36,361 3,007,418 Illinois Tool Works 33,834 2,017,860 --------------------------------------------------------------------------- 5,025,278 --------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 4.8% E.I. du Pont de Nemours 47,627 2,360,394 Worthington Industries 69,378 1,634,546 --------------------------------------------------------------------------- 3,994,940 --------------------------------------------------------------------------- CONSUMER STAPLES -- 4.0% Hansen Natural* 13,523 766,484 Wm. Wrigley Jr. 39,394 2,530,276 --------------------------------------------------------------------------- 3,296,760 --------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 0.8% Werner Enterprises 40,661 697,336 --------------------------------------------------------------------------- OTHER -- 0.5% SPDR Trust Series 1 2,679 408,923 --------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 83,183,769 --------------------------------------------------------------------------- INVESTMENT FUND -- 4.8% BlackRock Institutional Money Market Trust, 5.37% ** ^ 3,970,776 $ 3,970,776 --------------------------------------------------------------------------- CASH EQUIVALENT -- 0.3% PNC Bank Money Market Fund, 4.43% ^ 283,051 $ 283,051 --------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 104.9% (Cost $70,257,073) $ 87,437,596 LIABILITIES IN EXCESS OF OTHER ASSETS -- (4.9%) (4,121,844) --------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 83,315,752 =========================================================================== * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $3,833,606. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. See accompanying notes to financial statements. 127 ------------------------------------------------------------------------------- Portfolio of Investments Healthcare and Biotechnology Fund - September 30, 2007 ------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 96.5% SHARES VALUE ------------------------------------------------------------------------------- HEALTH CARE -- 94.0% Abbott Laboratories 20,440 $ 1,095,993 Aetna 24,950 1,354,037 Alexion Pharmaceuticals* 30,210 1,968,182 Allergan 30,650 1,976,006 AMERIGROUP* 31,710 1,093,361 Baxter International 43,710 2,459,998 Beckman Coulter 3,460 255,210 BioMarin Pharmaceutical* 13,650 339,885 Bristol-Myers Squibb 45,140 1,300,935 Celgene*+ 17,240 1,229,384 Charles River Laboratories International* 12,350 693,453 CSL 6,840 651,284 Cypress Bioscience* 18,090 247,652 DENTSPLY International 40,680 1,693,915 Express Scripts* 25,110 1,401,640 Gilead Sciences* 75,380 3,080,780 Henry Schein* 13,762 837,280 Hologic*+ 14,060 857,660 Humana* 12,220 853,934 ICON Plc ADR* 15,630 797,599 Intermune*+ 22,310 426,790 Intuitive Surgical* 2,760 634,800 Inverness Medical Innovations* 11,460 633,967 Johnson & Johnson 29,150 1,915,155 Kendle International* 10,670 443,125 KV Pharmaceutical, Class A* 20,680 591,448 Kyphon* 11,490 804,300 Laboratory Corp. of America Holdings* 14,660 1,146,852 Medco Health Solutions* 17,790 1,608,038 Merck & Co., Inc. 44,240 2,286,765 MGI Pharma* 20,250 562,545 Novo Nordisk A/S ADR 3,900 472,056 Onyx Pharmaceuticals* 13,400 583,168 Progenics Pharmaceuticals*+ 16,580 366,584 Quality Systems+ 13,360 489,377 Respironics* 10,800 518,724 Schering-Plough 74,920 2,369,719 Seattle Genetics* 28,020 314,945 Shire ADR 32,338 2,392,364 Smith & Nephew ADR+ 16,240 994,538 St. Jude Medical* 33,810 1,490,007 Sunrise Senior Living* 22,680 802,192 Thermo Fisher Scientific* 49,770 2,872,723 United Therapeutics*+ 7,840 521,674 Universal Health Services, Class B 8,400 457,128 VCA Antech*+ 6,490 270,958 Xenoport* 10,800 508,140 Zimmer Holdings* 9,200 745,108 ------------------------------------------------------------------------------- 51,411,378 ------------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 2.5% Bayer AG ADR 17,540 1,391,799 ------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 52,803,177 ------------------------------------------------------------------------------- INVESTMENT FUND -- 7.2% BlackRock Institutional Money Market Trust, 5.37% ** ^ 3,930,823 $ 3,930,823 ------------------------------------------------------------------------------- CASH EQUIVALENT -- 4.6% BlackRock TempFund, Institutional Shares, 5.34% ^ 2,501,034 $ 2,501,034 ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 108.3% (Cost $49,337,966) $ 59,235,034 LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.3%) (4,543,950) ------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 54,691,084 =============================================================================== * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $3,847,724. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. ADR - American Depository Receipt See accompanying notes to financial statements. 128 -------------------------------------------------------------------------------- Portfolio of Investments International Equity Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET FOREIGN COMMON STOCKS -- 99.1% SHARES VALUE -------------------------------------------------------------------------------- AUSTRALIA -- 4.8% Adelaide Brighton Ltd. 44,000 $ 154,228 Aditya Birla Minerals Ltd.* 2,000 7,401 Amcor Ltd. 18,500 121,155 Asx Ltd. 1,900 90,625 Bhp Billiton Ltd. 36,400 1,439,010 Bluescope Steel Ltd. 24,700 235,624 Boral Ltd. 14,400 91,877 Coca-Cola Amatil Ltd.* 8,600 68,684 Felix Resources Ltd. 1,400 7,131 Fortescue Metals Group Ltd.* 1,200 50,784 Goodman Fiedler Ltd. 75,200 172,168 Incitec Pivot Ltd. 200 15,181 Independence Group Nl 9,400 54,637 Insurance Aust Group 24,900 116,004 Jabiru Metals Ltd.* 27,000 36,179 Jubilee Mines Nl 10,300 158,672 Lend Lease Ltd. 5,400 90,567 Macmahon Holdings Ltd. 84,200 124,779 Minara Resouces Ltd. 25,000 144,423 Mincor Resources 12,500 47,143 National Australia Bank Ltd. 25,800 909,147 Oakton Ltd. 2,800 16,871 Onesteel Ltd. 18,041 110,462 Orica Ltd. 10,200 272,447 Origin Energy Ltd. 27,900 255,009 Pacific Brands Ltd. 18,400 50,617 Perilya Ltd. 20,700 73,292 Portman Ltd. 2,300 23,471 Qantas Airways Ltd. 35,800 177,269 Rio Tinto Ltd. 5,600 537,787 Sally Malay Mining* 32,100 138,723 Santos Limited 18,500 247,072 Sims Group Ltd. 7,100 203,379 Tabcorp Holdings Ltd. 13,300 178,805 Telstra Corp Ltd. 51,900 200,802 Woolworths Ltd. 20,400 537,833 WorleyParsons Ltd. 700 26,344 Zinifex Ltd. 17,600 276,752 -------------------------------------------------------------------------------- 7,462,354 -------------------------------------------------------------------------------- AUSTRIA -- 0.8% Immofinanz AG* 28,607 356,950 Omv AG 3,427 228,858 Voestalpine AG 8,000 691,337 -------------------------------------------------------------------------------- 1,277,145 -------------------------------------------------------------------------------- BELGIUM -- 1.8% Agfa-gevaert Nv 620 11,936 Delhaize Group 6,387 612,059 D'ieteren SA 225 100,425 Fortis 42,000 1,236,791 Immobiliere De Belgique 172 9,284 Recticel 1,651 24,956 Solvay SA 2,321 336,839 Umicore 1,800 430,203 -------------------------------------------------------------------------------- 2,762,493 -------------------------------------------------------------------------------- CANADA -- 7.6% Addax Petroleum 7,910 311,963 Agrium, Inc. 148 8,061 Angiotech Pharmaceuticals* 5,600 34,905 Aspreva Pharmaceuticals* 2,500 51,573 Atco Ltd, Class I 4,200 245,278 Axcan Pharma* 3,340 69,741 Bank of Montreal 7,420 484,870 Bank of Nova Scotia 15,300 803,685 Barrick Gold 15,800 634,573 Biovail 10,000 174,123 Bpo Properties Ltd. 1,670 113,309 Canadian Natural Resources 9,248 702,502 Canadian Utilities Ltd., Class A 8,100 396,165 Cascades 8,100 81,024 Celestica* 2,210 13,464 Cogeco 1,240 47,122 Dorel Industries, Inc., Class B 600 18,096 Dundee Corp, Class A* 5,400 119,324 Empire Co., Ltd, Class A 2,550 126,257 EnCana 12,000 741,932 Finning International 100 3,223 FirstService* 2,040 63,741 George Weston Ltd. 5,840 416,849 Gerdau Ameristeel 8,600 101,588 Goldcorp 30 917 Groupe CGI* 22,900 262,221 Husky Energy 710 29,586 Husky Injection Molding Systems Ltd. 420 3,382 Industrial Alliance Insurance and Financial Services 4,600 180,356 Inmet Mining 4,000 401,126 Kinross Gold* 4,690 70,065 Laurentian Bank of Canada 1,792 76,836 Linamar 5,320 136,650 Lundin Mining Corp.* 200 2,572 Manulife Financial 3,100 127,808 Martinrea International* 4,800 82,517 Methanex 7,200 181,176 MI Developments, Inc., Class A 3,600 119,216 Nexen 11,820 361,124 Nortel Networks Ltd.* 3,470 59,235 Northbridge Financial Corp. 3,200 112,275 Open Text Corp.* 4,200 109,613 Petro-Canada 5,140 294,903 Potash Corp. of Saskatchewan 1,300 137,293 Power Corp. of Canada 12,670 507,717 QLT, Inc.* 5,420 30,459 Rothmans, Inc. 4,900 113,547 Royal Bank of Canada 3,110 172,118 Savanna Energy Services Corp. 4,300 73,489 129 -------------------------------------------------------------------------------- International Equity Fund (Continued) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS -- 99.1% MARKET (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- CANADA -- 7.6% (CONTINUED) Sherritt International Corp. 11,150 $ 178,454 Sierra Wireless, Inc.* 2,000 41,721 Teck Cominco Ltd., Class B 11,906 565,197 Telus Corp. 9,207 518,339 Tesco Corp.* 2,700 73,696 Toronto-Dominion Bank 9,345 716,823 Transcontinental, Inc., Class B 6,200 135,631 Yamana Gold 10,870 128,840 -------------------------------------------------------------------------------- 11,768,270 -------------------------------------------------------------------------------- CHINA -- 1.2% BOC Hong Kong Holdings Ltd. 84,500 214,135 China Mobile Ltd. 2,000 32,751 China Petroleum & Chemical Corp. (Sinopec) 16,000 19,985 China Unicom Ltd. 16,000 33,096 CITIC International Financial Holdings Ltd. 188,000 150,422 Digital China Holdings Ltd. 25,000 14,504 Guangdong Investment Ltd. 94,000 64,449 Guangzhou Investment Co., Ltd. 350,000 109,405 Hopson Development 28,000 93,287 Industrial & Commercial Bank of China (Asia) Ltd. 54,000 150,736 PetroChina Co., Ltd., Class H 242,000 458,856 Shanghai Industrial Holdings 36,000 179,679 Shenzhen Expressway Co., Ltd. 8,000 8,305 Sinotrans Ltd. 234,000 143,280 TPV Technology Ltd. 66,000 47,544 Weiqiao Textile Co., Ltd., Class H 39,000 73,246 -------------------------------------------------------------------------------- 1,793,680 -------------------------------------------------------------------------------- DENMARK -- 0.4% A P Moeller - Maersk A/S 46 624,726 Danske Bank A/S 1,387 56,311 -------------------------------------------------------------------------------- 681,037 -------------------------------------------------------------------------------- FINLAND -- 1.0% Elisa Oyj 4,550 141,447 Nokia Oyj 10,400 395,385 Outokumpu Oyj 10,500 377,176 Sampo Oyj 22,500 686,953 -------------------------------------------------------------------------------- 1,600,961 -------------------------------------------------------------------------------- FRANCE -- 9.2% Air France-KLM 10,971 403,170 Atos Origin SA* 1,385 80,582 BNP Paribas SA 16,200 1,772,817 Cap Gemini SA 8,100 499,226 Christian Dior SA 6,000 767,829 Ciments Francais SA 1,200 210,960 Club Mediterranee* 217 14,080 CNP Assurances SA 3,692 472,313 Compagnie Generale des Etablissements Michelin, Class B 7,301 981,588 Credit Agricole SA 21,923 845,657 France Telecom 43,558 1,459,077 Natixis 22,462 498,088 Nexans 2,586 425,376 Nexity 885 54,558 Peugeot SA 10,500 866,652 Renault 455 65,935 Saint-Gobain (cie De) 11,600 1,210,701 Sanofi-Aventis 20,200 1,710,483 Sequana Capital 437 14,426 Sodexho Alliance SA 7,600 525,633 Sucriere de Pithiviers-Le-Vieil 3 2,545 Thales SA 2,727 159,867 Thomson 6,000 91,380 Total SA 9,000 731,807 Valeo 7,200 400,633 -------------------------------------------------------------------------------- 14,265,383 -------------------------------------------------------------------------------- GERMANY -- 8.4% Allianz SE 1,100 257,020 Bayer AG 22,550 1,791,137 Bechtle AG 391 16,984 BMW-Bayerische Motoren Werke AG 1,600 103,472 DaimlerChrysler AG 24,300 2,451,311 Deutsche Bank AG 11,800 1,520,160 Draegerwerk AG 102 9,382 E.ON AG 14,200 2,620,899 Fresenius AG 7,500 565,989 Infineon Technologies AG* 41,429 714,263 MTU Aero Engines Holding AG 679 41,345 MVV Energie AG 678 28,512 RWE AG 5,993 752,405 Siemens AG 2,533 347,667 ThyssenKrupp AG 15,600 993,506 Volkswagen AG 3,595 812,560 -------------------------------------------------------------------------------- 13,026,612 -------------------------------------------------------------------------------- GREECE -- 0.4% Bank of Greece* 1,568 205,154 Public Power Corp., S.A. (PPC) 10,000 396,435 -------------------------------------------------------------------------------- 601,589 -------------------------------------------------------------------------------- HONG KONG -- 1.7% Asia Financial Holdings Ltd. 12,000 7,132 Chevalier International Holdings Ltd. 32,000 35,812 China Oriental Group Co., Ltd. 199,000 113,914 Chow Sang Sang Holdings International Ltd. 36,000 50,384 CLP Holdings Ltd. 50,500 349,493 Esprit Holdings Ltd. 2,500 39,716 Great Eagle Holdings Ltd. 4,000 15,179 Guoco Group Ltd. 10,000 136,355 Hang Lung Properties Ltd. 21,000 94,007 Hang Seng Bank Ltd. 4,700 83,494 Henderson Land Development Co., Ltd. 16,000 126,887 Hong Kong and China Gas Co., Ltd. 26,000 60,536 130 -------------------------------------------------------------------------------- International Equity Fund (Continued) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS -- 99.1% MARKET (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- HONG KONG -- 1.7% (CONTINUED) Hongkong Electric Holdings Ltd. 29,000 $ 150,710 Hopewell Holdings 30,000 143,172 Hutchison Whampoa Ltd. 11,000 117,657 Jardine Matheson Holdings Ltd. 5,200 148,720 Jardine Strategic 3,000 47,400 New World Development Ltd. 11,000 30,423 Pacific Century Premium Developments Ltd. 151,000 47,201 Sinolink Worldwide Holdings Ltd. 286,000 91,607 Sun Hung Kai & Co., Ltd. 35,000 49,975 Tai Cheung Holdings 63,000 50,489 Transport International Holdings Ltd. 20,400 115,726 Truly International Holdings 18,000 48,509 Vislink plc 6,265 8,666 Wheelock & Co., Ltd. 57,000 156,911 Wheelock Properties Ltd. 105,000 116,429 Wing On Co. International Ltd. 23,100 43,324 Winsor Properties Holdings Ltd. 21,000 39,170 Yue Yuen Industrial Holdings 20,500 61,311 -------------------------------------------------------------------------------- 2,580,309 -------------------------------------------------------------------------------- INDIA -- 0.0% Reliance Energy Ltd. GDR, 144a 380 28,500 -------------------------------------------------------------------------------- IRELAND -- 0.1% DCC plc 2,934 86,608 -------------------------------------------------------------------------------- ITALY -- 4.3% ACEA S.p.A 3,000 59,123 Acegas-APS S.p.A 22,475 240,535 C.I.R. - Compagnie Industriali Riunite 77,500 302,540 Danieli S.p.A 5,852 199,448 Enel S.p.A 36,000 407,615 Engineering Ingegneria Informatica S.p.A 3,869 190,347 Eni S.p.A 28,200 1,045,159 Fiat S.p.A 32,900 995,093 IFIL - Investments S.p.A 4,022 43,360 Immobiliare Lombarda S.p.A.* 553,194 135,449 Intek S.p.A 116,440 132,837 Intesa Sanpaolo 24,000 185,326 Iride S.p.A 36,272 133,450 Italcementi S.p.A 18,000 398,888 Italmobiliare S.p.A 78 9,729 KME Group* 149,529 394,905 Mittel S.p.A 5,691 43,337 Pirelli & C. S.p.A.* 147,475 177,706 Reply S.p.A 2,720 88,087 Telecom Italia S.p.A 403,210 1,226,160 UniCredito Italiano S.p.A 26,800 229,305 -------------------------------------------------------------------------------- 6,638,399 -------------------------------------------------------------------------------- JAPAN -- 18.4% Adeka 4,300 45,109 Aichi Bank 700 60,332 Aichi Machine Industry Co., Ltd. 7,000 17,551 Aida Engineering Ltd. 5,000 32,125 Aioi Insurance Co., Ltd. 24,000 139,573 Aiphone Co., Ltd. 1,200 20,069 Aizawa Securities Co., Ltd. 500 3,613 Akita Bank Ltd. 2,000 8,741 Alpen Co., Ltd. 1,900 25,490 Amada 2,000 22,357 Aoyama Trading 2,900 73,721 Arakawa Chemical Industrial Ltd. 1,200 13,675 Asahi Breweries Ltd. 19,400 295,564 Asahi Diamond Industrial Co., Ltd. 4,000 28,451 Asahi Glass Co., Ltd. 23,000 309,363 Asahi Kasei 26,000 210,055 Autobacs Seven Co., Ltd. 1,400 36,382 Bosch 13,000 63,152 Bridgestone Corp. 14,600 322,849 Canon 16,550 903,395 Canon Finetech 400 6,881 Casio Computer Co., Ltd. 9,600 137,567 Cawachi Ltd. 1,700 45,732 Central Glass Co., Ltd. 14,000 70,570 Central Japan Railway 5 53,106 Chiyoda Co., Ltd. 2,200 31,621 Chubu Steel Plate Co., Ltd. 1,700 11,840 Chubu-Nippon Broadcasting Co., Ltd. 200 2,298 Chudenko 1,400 25,352 Chukyo Bank Ltd. 14,000 41,440 Cleanup 2,600 18,040 Coca-Cola Central Japan Co., Ltd. 6 46,124 Corona 1,900 29,046 Cosmo Oil 3,000 14,312 Cosmos Initia Co., Ltd. 1,000 4,179 Dai Nippon Printing Co., Ltd. 11,000 157,245 Daiichikosho 3,100 34,599 Daikoku Denki Co., Ltd. 900 12,145 Dainippon Ink & Chemicals 33,000 146,233 Dainippon Screen Mfg. Co., Ltd. 10,000 60,245 Dainippon Sumitomo Pharma Co., Ltd. 8,000 74,383 Daisyo 1,500 20,137 DyDo Drinco 200 7,975 Eighteenth Bank Ltd. 11,000 44,147 Eizo Nanao 100 3,291 Espec 1,200 8,117 Fields 19 25,804 Fuji Electric Holdings Co., Ltd. 27,000 120,350 Fuji Fire and Marine Insurance Co., Ltd. 18,000 61,429 Fuji Heavy Industries Ltd. 33,000 145,083 Fuji Machine Mfg Co. Ltd. 2,800 54,481 Fuji Television Network 1 2,011 Fujifilm Holdings 12,300 568,607 131 -------------------------------------------------------------------------------- International Equity Fund (Continued) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS -- 99.1% MARKET (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- JAPAN -- 18.4% (CONTINUED) Fujikura Ltd. 12,000 $ 75,950 Fujishoji Co. Ltd. 1 888 Fujitsu Business Systems Ltd. 1,800 30,087 Fujitsu Ltd. 49,000 346,389 Fukuda Denshi Co., Ltd. 100 3,230 Futaba 3,100 68,280 Futaba Industrial Co., Ltd. 3,200 82,462 H.I.S. Co., Ltd. 1,900 35,729 Hakuhodo DY Holdings, Inc. 240 16,841 Hakuto Co., Ltd. 1,100 16,088 Hankyu Hanshin Holdings, Inc. 41,000 209,524 Heiwa 5,000 58,852 Heiwado Co., Ltd. 3,300 52,603 Hi-Lex 1,500 23,088 Hitachi Cable Ltd. 14,000 86,780 Hitachi Koki Co., Ltd. 3,100 53,437 Hitachi Ltd. 83,000 552,779 Hitachi Maxell Ltd. 4,600 49,658 Hitachi Systems & Services 400 7,835 Hokkaido Electric Power 7,500 162,256 Honda Motor Co., Ltd. 27,300 917,407 Hyakugo Bank Ltd. 13,000 75,149 Idemitsu Kosan Co., Ltd. 1,900 213,877 Inabata & Co., Ltd. 4,300 28,076 Ines 300 1,745 Ishikawajima-Harima Heavy Industries 45,000 141,427 Itochu 28,000 340,051 Itoham Foods 1,000 4,074 Jalux 100 1,798 Japan Airlines 18,000 39,020 Japan Digital Laboratory Co., Ltd. 1,200 17,185 Japan Wool Textile Co., Ltd. 7,000 56,553 JFE Holdings 11,700 829,130 Kaken Pharmaceutical Co., Ltd. 8,000 58,016 Kamei 3,000 17,264 Kaneka 11,000 92,509 Kansai Electric Power Co. 200 4,571 Kasumi Co. 5,000 25,639 Kato Sangyo Co., Ltd. 1,900 24,961 Kawasaki Heavy Industries Ltd. 58,000 227,223 KDDI Corp. 20 148,348 Keihanshin Real Estate Co., Ltd. 4,000 21,556 Kirin Brewery Co., Ltd. 22,000 291,124 Kissei Pharmaceutical Ltd. 3,000 54,325 Kitagawa Industries Co. 700 11,091 Kobe Steel Ltd. 76,000 283,846 Komori 4,000 98,028 Konaka Co. Ltd. 970 7,372 Kurabo Industries Ltd. 18,000 44,818 Kyokuto Kaihatsu Kogyo Co., Ltd. 2,300 17,481 Kyorin Co., Ltd. 1,000 14,321 Maeda Road Construction Co., Ltd. 7,000 61,307 Maezawa Kasei Industries Co., Ltd. 1,100 15,964 Marubeni 2,000 18,352 Marudai Food Company Ltd. 2,000 7,139 Matsushita Electric Industrial Co., Ltd. 47,000 881,774 Matsuya Foods Co., Ltd. 1,300 15,573 Max Co., Ltd. 1,000 14,809 Mazda Motor 37,000 187,150 Meiko Trans Co., Ltd. 1,000 12,275 Mercian 3,000 6,582 Mikuni Coca-Cola Bottling Co., Ltd. 3,600 40,242 Millea Holdings, Inc. 8,000 321,769 Mitsubishi 30,600 969,694 Mitsubishi Heavy Industries Ltd. 85,000 555,739 Mitsubishi UFJ Financial Group 70 615,505 Mitsui High-tec 500 5,820 Mitsui Mining & Smelting Co., Ltd. 29,000 124,973 Mitsui Sumitomo Insurance Co., Ltd. 40,000 469,769 Mitsuuroko Co., Ltd. 100 710 Mizuho Financial Group 75 427,676 Mochida Pharmaceutical Co., Ltd. 4,000 37,923 NAFCO Co., Ltd. 100 2,472 Nagase & Co., Ltd. 6,000 71,040 Nakayama Steel Works Ltd. 9,000 21,312 NAMCO BANDAI Holdings 9,200 133,757 NEC Corp. 54,000 262,325 NEC Electronics* 1,800 51,713 NEC Leasing Ltd. 100 1,705 NEC Networks & System Integration 2,900 31,988 NGK SPARK PLUG Co., Ltd. 8,000 124,320 NICHICON Corp. 3,300 41,887 NIDEC COPAL 500 5,689 Nihon Yamamura Glass Co., Ltd. 1,000 2,420 Nippo 2,000 16,001 Nippon Electric Glass Co., Ltd. 15,000 241,588 Nippon Koei Co., Ltd. 1,000 2,821 Nippon Light Metal Co., Ltd. 5,000 11,013 Nippon Mining Holdings 33,500 336,560 Nippon Steel Corp. 131,000 943,167 Nippon Telegraph & Telephone Corp. (NTT) 146 682,558 Nippon Television Network 140 18,026 Nippon Yusen Kabushiki Kaisha 21,000 205,128 Nishimatsu Construction Co., Ltd. 8,000 24,168 Nissan Motor Co., Ltd. 64,900 650,328 Nissan Shatai Co., Ltd. 10,000 61,551 Nissay Dowa General Insurance Co., Ltd. 16,000 97,924 Nisshin Steel Co., Ltd. 43,000 193,915 Nitto Kogyo 2,200 33,901 Noritake Co., Ltd. 5,000 23,854 NTT DoCoMo, Inc. 179 255,570 OHARA, Inc.* 1,200 22,461 Ohmoto Gumi Co., Ltd. 3,000 18,779 Oiles 800 17,307 OJI Paper Co., Ltd. 9,000 43,564 OMRON Corp. 7,500 198,494 Onward Kashiyama Co., Ltd. 10,000 101,162 132 -------------------------------------------------------------------------------- International Equity Fund (Continued) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS -- 99.1% MARKET (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- JAPAN -- 18.4% (CONTINUED) Osaka Steel Co., Ltd. 1,800 $ 33,300 Piolax, Inc. 1,000 20,676 Pioneer 7,400 90,773 Rakuten, Inc. 423 165,900 Ricoh Co., Ltd. 5,000 105,776 Right On Co., Ltd. 500 5,372 Riso Kagaku Corp. 1,100 22,313 Rohm Co., Ltd. 100 8,836 Roland 1,200 33,431 Royal Holdings Co., Ltd. 2,400 28,374 Ryosan Co., Ltd. 2,500 62,573 Sanden Corp. 8,000 44,644 San-In Godo Bank Ltd. 11,000 87,146 Sankyo Co., Ltd. 3,300 133,592 Sanwa Shutter 2,000 11,213 Sazaby League Ltd. 1,400 37,905 Sega Sammy Holdings, Inc. 9,300 123,876 Seikagaku Corp. 400 4,618 Seiko Epson Corp. 6,800 168,424 Sekisui Jushi Corp. 4,000 35,276 SENSHUKAI CO., LTD 100 1,258 SHiDAX Corp. 23 15,678 Shinkawa Ltd. 1,300 23,824 Shin-Kobe Electric Machinery Co., Ltd. 3,000 12,223 ShinMaywa Industries Ltd. 8,000 38,236 Shinsei Bank Ltd. 44,000 138,667 Showa Corp. 3,400 40,522 Showa Denko K.K 46,000 174,205 Showa Shell Sekiyu 8,100 104,154 Sintokogio Ltd. 3,500 52,623 SOFTBANK Corp. 1,900 35,067 Sojitz Corp.* 35,500 154,529 SSP CO., LTD 6,000 27,894 Sumisho Computer Systems Corp. 100 1,959 Sumitom Pipe & Tube Co., Ltd. 2,000 15,392 Sumitomo Chemical Co., Ltd. 34,000 291,560 Sumitomo Corp. 23,200 448,387 Sumitomo Electric Industries Ltd. 19,170 305,412 Sumitomo Forestry Co., Ltd. 8,000 66,025 Sumitomo Metal Mining Co., Ltd. 15,000 364,341 Sumitomo Mitsui Financial Group, Inc. 51 397,380 Sumitomo Precision Products Co., Ltd. 3,000 14,104 T&D Holdings, Inc. 4,900 301,598 Taiheiyo Cement 12,000 45,654 Taisho Pharmaceutical Co., Ltd. 4,000 78,701 Takagi Securities Co., Ltd. 4,000 13,059 Takeda Pharmaceutical* 5,200 365,786 Techno Associe Co., Ltd. 1,000 12,101 Teijin Ltd. 38,000 185,592 Teikoku Tsushin Kogyo Co., Ltd. 2,000 8,567 TKC Corp. 2,000 36,129 Toagosei Co., Ltd. 15,000 55,892 Toho Bank Ltd. 12,000 44,713 Tokyo Steel Mfg. Co., Ltd. 6,800 105,613 Tokyo Style Co., Ltd. 7,000 72,764 Toppan Printing Co., Ltd. 19,000 195,682 Topre Corp. 3,000 26,692 Topy Industries Ltd. 12,000 32,072 Torii Pharmaceutical Co., Ltd. 2,000 35,172 Toshiba Corp.* 36,000 336,290 Toshiba TEC Corp. 15,000 92,718 Tosoh Corp. 20,000 129,717 TOTO Ltd. 12,000 87,024 Toyo Ink Mfg. Co., Ltd. 16,000 54,185 Toyo Kohan Co., Ltd. 6,000 38,393 Toyo Securities Co., Ltd. 5,000 17,629 Toyota Auto Body Co., Ltd. 4,700 77,866 Toyota Motor Corp. 18,000 1,062,464 Trusco Nakayama Corp. 2,200 38,114 TSUGAMI Corporation 4,000 15,218 Tsurumi Mfg. Co., Ltd. 3,000 27,554 TV Asahi Corp. 41 66,034 Uchida Yoko Co., Ltd. 4,000 18,178 Unimat Life Corp. 1,200 14,156 Unipres Corp. 2,900 22,596 UNY Co., Ltd. 9,000 78,431 VITAL-NET, Inc. 400 2,497 Wacoal Holdings Corp. 1,000 12,284 Yachiyo Industry Co., Ltd. 200 2,716 Yamaha Motor Co., Ltd. 8,100 206,616 Yamato Kogyo Co., Ltd. 3,600 173,003 Yokogawa Electric Corp. 9,800 119,274 Yonekyu Corp. 2,000 20,598 Yuraku Real Estate Co., Ltd. 4,000 17,412 -------------------------------------------------------------------------------- 28,792,123 -------------------------------------------------------------------------------- NETHERLANDS -- 2.3% ABN Amro Holding N.V 4,500 237,112 Aegon N.V 17,927 343,329 Akzo Nobel N.V 1,800 148,364 Corporate Express 14,900 162,333 Hunter Douglas N.V 1,200 107,807 ING Groep N.V 39,600 1,757,930 Koninklijke DSM N.V 11,700 631,508 Van der Moolen Holding N.V.* 2,081 9,407 Vedior N.V 7,800 171,628 -------------------------------------------------------------------------------- 3,569,418 -------------------------------------------------------------------------------- NEW ZEALAND -- 0.0% Air New Zealand Ltd. 8,200 15,347 -------------------------------------------------------------------------------- NORWAY -- 0.3% Aker ASA 3,502 247,470 Aker Yards A/S 4,587 54,024 Ementor ASA* 13,228 119,728 -------------------------------------------------------------------------------- 421,222 -------------------------------------------------------------------------------- 133 -------------------------------------------------------------------------------- International Equity Fund (Continued) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS -- 99.1% MARKET (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- PORTUGAL -- 0.7% Cimpor - Cimentos de Portugal SGPS S.A 30,000 $ 248,556 EDP - Energias de Portugal S.A 124,108 725,622 Sonae Industria-SGPS S.A.* 12,324 138,486 Teixeira Duarte - Engenharia E Construcoes, S.A 8,551 24,876 -------------------------------------------------------------------------------- 1,137,540 -------------------------------------------------------------------------------- SINGAPORE -- 1.2% Chartered Semiconductor Manufacturing* 66,000 48,428 DBS Group Holdings Ltd. 26,000 378,055 Haw Par Corp. Ltd. 1,000 5,453 Ho Bee Investment Ltd. 21,000 30,818 Hotel Plaza Ltd. 42,000 61,353 Jardine Cycle & Carriage Limited 15,000 186,806 K1 Ventures Ltd.* 165,000 35,544 Keppel Corp Ltd.* 12,000 116,324 Kingboard Copper Foil Holdings Ltd. 129,000 37,775 MCL Land Ltd. 7,000 12,440 Metro Holdings Ltd. 16,000 11,202 Neptune Orient Lines Ltd. 26,000 92,763 Singapore Airlines Ltd. 20,533 257,099 Singapore Technologies Engineering Ltd. 66,000 173,275 SP Chemicals Ltd. 65,000 51,632 United Overseas Bank 5,000 74,386 UOB-Kay Hian Holdings Ltd. 70,000 101,313 Wing Tai Holdings 52,000 135,119 -------------------------------------------------------------------------------- 1,809,785 -------------------------------------------------------------------------------- SOUTH KOREA -- 3.9% Doosan Co., Ltd.* 1,060 220,073 GS Home Shopping 610 53,924 Hanil Cement Co., Ltd. 720 81,823 Hanwha Chemical 5,190 136,960 Hyundai Heavy Industries Co., Ltd. 1,300 600,885 Hyundai Mipo Dockyard Co., Ltd. 500 172,103 Hyundai Mobis 2,250 238,731 KCC Engineering & Construction Co., Ltd. 260 20,399 Korea Development Financing Corp.* 1,060 61,389 Korea Electric Power Corp. 6,630 310,798 Korea Kumho Petrochemical Co., Ltd. 800 61,629 Korea Petrochemical Industrial Co., Ltd. 360 35,404 Korea Zinc Co., Ltd. 750 141,780 KT Corp. 1,200 60,252 KT Freetel Co., Ltd. 5,110 185,382 Kyeryong Construction Industrial Co., Ltd. 1,010 61,252 LG Electronics, Inc.* 2,140 199,934 LS Cable Ltd. 1,210 150,729 Nong Shim Holdings Co., Ltd. 120 11,670 Pacific 590 122,816 POSCO 830 610,382 Samho International Co., Ltd.* 580 17,112 Samsung Electronics Co., Ltd. 990 622,030 Samsung Heavy Industries Co., Ltd. 8,090 430,070 Samwhan Corp. 1,680 58,102 Samyang Genex Co., Ltd. 400 45,238 SFA Engineering Corp. 920 54,688 Shinhan Financial Group Co., Ltd. 5,490 358,741 SK Energy Co., Ltd.* 2,229 389,777 SK Gas Co., Ltd. 680 64,497 SK Holdings Co., Ltd. 911 194,030 SK Telecom Co., Ltd. 1,010 231,765 -------------------------------------------------------------------------------- 6,004,365 -------------------------------------------------------------------------------- SPAIN -- 4.7% Banco Bilbao Vizcaya Argentaria S.A 8,400 196,928 Banco Santander Central Hispano S.A 132,000 2,565,647 Cementos Portland Valderrivas S.A 1,745 189,866 Iberdrola S.A 2,700 158,631 Iberia Lineas Aereas de Espana S.A 45,398 221,406 Repsol YPF S.A 25,402 907,408 Sol Melia S.A 17,600 331,545 Telefonica S.A 98,590 2,759,818 -------------------------------------------------------------------------------- 7,331,249 -------------------------------------------------------------------------------- SWEDEN -- 2.0% SAAB AB, Class B 8,195 193,947 SAS AB* 20,000 358,490 Svenska Cellulosa AB (SCA) 580 10,824 Tele2 AB 27,800 600,765 Telefonaktiebolaget LM Ericsson, Class B 45,255 181,197 TeliaSonera AB 102,000 922,063 Volvo AB 48,000 836,166 -------------------------------------------------------------------------------- 3,103,452 -------------------------------------------------------------------------------- SWITZERLAND -- 5.4% Bobst Group AG 166 12,119 Bucher Industries AG 2,096 389,225 Ciba Specialty Chemicals AG 6,590 335,939 Clariant AG* 2,679 32,928 Credit Suisse Group 2,700 179,266 Energiediedienst Holding AG 92 49,467 Georg Fischer AG* 540 371,750 Holcim AG 8,400 927,842 Jungfraubahn Holding AG 661 34,633 Nestle S.A 1,250 561,520 Novartis AG 11,268 621,833 Roche Holding AG 2,893 524,554 Schweizerische National- Versicherungs-Gesellschaft 195 150,741 SEZ Holding AG 10,800 251,389 Siegfried Holding AG 1,687 278,933 Swiss Life Holding* 1,890 490,256 Swiss Reinsurance 12,400 1,104,471 UBS AG 5,200 279,596 Walter Meier Holding AG* 93 17,733 Zueblin Immobilien Holding AG* 34,000 293,494 Zurich Financial Services AG 4,960 1,487,893 -------------------------------------------------------------------------------- 8,395,582 -------------------------------------------------------------------------------- 134 -------------------------------------------------------------------------------- International Equity Fund (Continued) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS -- 99.1% MARKET (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- UNITED KINGDOM -- 18.5% 3i Group plc 21,763 $ 444,166 Anglo American plc 30,667 2,063,708 AstraZeneca PLC 6,810 341,371 Aviva PLC 82,343 1,240,831 BAE Systems PLC 113,955 1,151,208 Barclays PLC 16,800 204,694 Barratt Developments plc 1,776 27,181 BHP Billiton 5,100 182,609 BP plc 71,000 824,399 Brit Insurance Holdings PLC 16,944 118,391 British Airways* 46,000 360,706 British Energy Group PLC 49,000 535,867 Carphone Warehouse Group PLC 43,282 308,619 Centrica PLC 109,715 854,150 COLT Telecom Group SA* 72,000 250,435 Compass Group PLC 116,000 716,767 Cookson Group PLC 19,800 309,103 Delta PLC 9,608 25,851 Elementis PLC 10,330 20,766 G4S PLC 26,024 107,557 GKN PLC 64,000 463,550 GlaxoSmithKline PLC 24,209 642,932 HBOS PLC 8,500 159,043 Home Retail Group plc 2,548 19,433 HSBC Holdings PLC 18,800 343,891 HSBC Holdings PLC 24,400 451,806 Imperial Chemical Industries PLC 222 2,959 Kazakhmys PLC 27,500 790,537 Kelda Group PLC 3,600 63,493 LogicaCMG PLC 90,246 279,278 Millennium & Copthorne Hotels PLC 28,800 282,844 NETeller PLC* 42,809 67,443 Old Mutual PLC 243,000 796,990 Prudential PLC 80,500 1,237,765 Rio Tinto PLC 1,824 157,788 RM PLC 26,178 102,570 Royal Bank of Scotland Group PLC 190,083 2,043,756 Royal Dutch Shell PLC, Class A 42,000 1,734,503 Royal Dutch Shell PLC, Class B 73,700 3,033,951 Smiths Group PLC 19,508 426,681 Standard Life PLC 32,047 189,167 Tesco PLC 17,000 152,783 Trinity Mirror PLC 14,633 123,351 United Utilities PLC 47,200 676,010 Vodafone Group PLC 591,300 2,135,333 Wolseley 21,687 366,738 WPP Group PLC 53,200 720,581 Xstrata PLC 19,200 1,274,369 -------------------------------------------------------------------------------- 28,827,924 -------------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS $153,981,347 -------------------------------------------------------------------------------- CASH EQUIVALENT -- 0.1% PNC Bank Money Market Fund, 4.43^ 108,376 $ 108,376 -------------------------------------------------------------------------------- MARKET RIGHT -- 0.1% PAR VALUE VALUE -------------------------------------------------------------------------------- BELGIUM -- 0.1% Fortis Rights, .00%, 10/9/07 $ 42,000 $ 222,802 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.3% (Cost $124,183,307) $154,312,525 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7% 1,050,514 -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $155,363,039 ================================================================================ * Non-income producing security. ^ The rate shown is the 7-day effective yield as of September 30, 2007. GDR - Global Depository Receipt 144a- This is a restricted security that was sold in a transaction exempt from Rule 144a of the Securities Act of 1933. This security may be sold in transactions exempt from registration, normally to qualified institutional buyers. See accompanying notes to financial statements. 135 -------------------------------------------------------------------------------- Portfolio of Investments Mid Cap Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 97.3% SHARES VALUE -------------------------------------------------------------------------------- FINANCIAL SERVICES -- 17.7% AerCap Holdings NV* 279,670 $ 6,960,986 Alexandria Real Estate Equities 28,240 2,718,382 Alliance Data Systems* 50,640 3,921,562 Arch Capital Group* 101,300 7,537,733 Everest Re Group 75,010 8,269,102 Factset Research Systems 106,740 7,317,027 Fidelity National Information Services 128,669 5,709,044 Global Payments+ 145,560 6,436,663 Hanover Insurance Group 125,260 5,535,239 IntercontinentalExchange* 61,780 9,384,382 Markel Corporation* 12,570 6,083,880 Nasdaq Stock Market* 159,110 5,995,265 Rayonier, REIT 104,980 5,043,239 Ryder System 132,690 6,501,810 -------------------------------------------------------------------------------- 87,414,314 -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 16.9% Brink's 112,430 6,282,588 Columbia Sportswear+ 78,340 4,332,985 Corrections Corporation of America* 136,340 3,568,018 Dollar Tree Stores* 89,080 3,611,303 DreamWorks Animation SKG, Class A* 253,730 8,479,657 Hanesbrands* 170,450 4,782,827 Hewitt Associates, Class A* 176,060 6,170,903 Jarden* 123,380 3,817,377 O'Reilly Automotive*+ 175,590 5,866,462 PetSmart 218,760 6,978,444 R.H. Donnelley* 72,770 4,076,575 Rebublic Services 265,540 8,685,813 Saks+ 284,100 4,872,315 Sally Beauty Holdings* 612,270 5,173,682 Tech Data* 181,330 7,274,960 -------------------------------------------------------------------------------- 83,973,909 -------------------------------------------------------------------------------- PRODUCER DURABLES -- 11.6% Carlisle+ 158,560 7,706,016 Covanta Holding* 370,750 9,087,083 Lincoln Electric Holdings 102,640 7,965,890 Manitowoc 180,570 7,995,640 Roper Industries+ 145,420 9,525,010 SBA Communications, Class A* 261,750 9,234,540 Verigy* 241,930 5,978,090 -------------------------------------------------------------------------------- 57,492,269 -------------------------------------------------------------------------------- TECHNOLOGY -- 11.5% Amphenol, Class A 210,490 8,369,083 Check Point Software Technologies*+ 311,800 7,851,124 Harris 132,660 7,666,421 Intersil, Class A 147,080 4,916,884 McAfee* 166,930 5,820,849 Novell* 702,110 5,364,120 ON Semiconductor* 838,300 10,529,049 Trimble Navigation* 176,330 6,913,899 -------------------------------------------------------------------------------- 57,431,429 -------------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 10.9% Carpenter Technology 38,250 4,972,883 Celanese Corporation 192,560 7,505,989 Chicago Bridge & Iron 161,690 6,962,371 Harsco 156,760 9,291,165 Nalco Holding 273,700 8,115,205 Pactiv* 124,800 3,576,768 Sigma-Aldrich 183,900 8,963,286 Titanium Metals*+ 147,530 4,951,107 -------------------------------------------------------------------------------- 54,338,774 -------------------------------------------------------------------------------- HEALTH CARE -- 9.7% Cephalon*+ 73,330 5,357,490 Charles River Laboratories International* 134,980 7,579,127 Cubist Pharmaceuticals* 195,420 4,129,225 Health Net* 96,820 5,233,121 Henry Schein* 123,820 7,533,209 IMS Health 168,690 5,168,662 Pediatrix Medical Group* 127,960 8,371,142 Respironics* 100,370 4,820,771 -------------------------------------------------------------------------------- 48,192,747 -------------------------------------------------------------------------------- ENERGY -- 6.9% Acergy ADR 126,590 3,759,723 Cameron International* 83,460 7,702,523 Exterran Holdings* 92,910 7,464,389 FMC Technologies* 135,160 7,793,326 Range Resources 190,025 7,726,417 -------------------------------------------------------------------------------- 34,446,378 -------------------------------------------------------------------------------- UTILITIES -- 6.4% Allegheny Energy* 140,880 7,362,389 MDU Resources Group 152,150 4,235,856 National Fuel Gas+ 143,490 6,716,767 NII Holdings*+ 117,230 9,630,444 Telephone & Data Systems 56,350 3,761,363 -------------------------------------------------------------------------------- 31,706,819 -------------------------------------------------------------------------------- CONSUMER STAPLES -- 4.7% Herbalife ADR 176,410 8,019,599 Molson Coors Brewing, Class B 74,690 7,444,352 PepsiAmericas 248,120 8,049,013 -------------------------------------------------------------------------------- 23,512,964 -------------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 1.0% Goodyear Tire & Rubber* 168,920 5,136,857 -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 483,646,460 -------------------------------------------------------------------------------- 136 -------------------------------------------------------------------------------- Mid Cap Fund (Continued) -------------------------------------------------------------------------------- MARKET SHARES VALUE -------------------------------------------------------------------------------- INVESTMENT FUND -- 10.6% BlackRock Institutional Money Market Trust, 5.37% ** ^ 52,880,591 $ 52,880,591 -------------------------------------------------------------------------------- CASH EQUIVALENT -- 3.0% BlackRock TempFund, Institutional Shares, 5.34% ^ 14,982,910 $ 14,982,910 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 110.9% (Cost $518,761,530) $ 551,509,961 LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.9%) (54,013,587) -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 497,496,374 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $49,789,776. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. ADR - American Depository Receipt See accompanying notes to financial statements. 137 -------------------------------------------------------------------------------- Portfolio of Investments Pitcairn Taxable Bond Fund - September 30, 2007 -------------------------------------------------------------------------------- PRINCIPAL MARKET VALUE AMOUNT -------------------------------------------------------------------------------- CORPORATE BONDS -- 39.3% FINANCIALS -- 18.3% $1,500,000 21st Century Insurance, 5.90%, 12/15/13 $ 1,521,008 1,000,000 American General Finance, MTN, Ser I, 4.63%, 5/15/09 991,342 439,000 Berkley (WR), 6.15%, 8/15/19 435,668 904,000 Ford Motor Credit, 7.38%, 10/28/09 886,424 750,000 General Electric Capital, 5.50%, 10/6/17 732,269 1,000,000 HSBC Finance, 4.75%, 5/15/09 993,649 450,000 Kimco Realty, MTN, Ser B, 7.90%, 12/7/07 451,682 1,000,000 Radian Group, 5.63%, 2/15/13 850,154 -------------------------------------------------------------------------------- 6,862,196 -------------------------------------------------------------------------------- INDUSTRIALS -- 5.4% 1,000,000 Gannet, 6.38%, 4/1/12 1,027,624 1,000,000 General Electric Capital, MTN, 5.72%, 8/22/11 1,003,337 -------------------------------------------------------------------------------- 2,030,961 -------------------------------------------------------------------------------- ENERGY -- 5.3% 1,000,000 Entergy Louisiana, 5.83%, 11/1/10 998,579 1,000,000 Sunoco, 5.75%, 1/15/17 983,691 -------------------------------------------------------------------------------- 1,982,270 -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 3.3% 1,000,000 Verizon Communications, 8.75%, 11/1/21 1,239,345 -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 2.8% 1,000,000 May Department Stores, 7.63%, 8/15/13 1,053,338 -------------------------------------------------------------------------------- CONSUMER STAPLES -- 2.8% 1,045,000 H.J. Heinz, 6.00%, 3/15/08 1,047,593 -------------------------------------------------------------------------------- SOVEREIGN BOND -- 1.4% 500,000 Aid-Israel, 5.50%, 4/26/24 526,817 -------------------------------------------------------------------------------- TOTAL CORPORATE BONDS $ 14,742,520 -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 33.1% 1,635,000 FHLB, Ser RA18, 5.13%, 6/26/18 1,592,400 1,000,000 FHLMC, 5.25%, 1/11/10 1,001,975 500,000 FHLMC, 5.20%, 3/5/19 491,910 1,500,000 FHLMC, MTN, 4.65%, 10/10/13 1,470,899 750,000 FHLMC, MTN, 6.00%, 6/18/14 756,229 1,544,000 FHLMC, MTN, 5.00%, 12/14/18 1,504,779 1,000,000 FHLMC, MTN (A), .00%, 3/4/19 502,773 5,000,000 FHLMC, MTN (A), .00%, 4/4/36 669,265 1,000,000 FNMA, 8.20%, 3/10/16 1,222,655 2,000,000 FNMA, 5.55%, 2/16/17 2,018,287 1,175,000 TVA, Ser B, 6.24%, 7/15/45 1,216,418 -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 12,447,590 -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 16.3% 830,000 U.S. Treasury Bonds, 7.50%, 11/15/16 1,008,256 1,500,000 U.S. Treasury Bonds, 8.75%, 5/15/17 1,975,546 1,500,000 U.S. Treasury Bonds, 8.13%, 8/15/19 1,953,867 913,000 U.S. Treasury Bonds, 7.63%, 11/15/22 1,180,766 -------------------------------------------------------------------------------- TOTAL U.S. TREASURY OBLIGATIONS $ 6,118,435 -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 4.4% MARYLAND -- 3.1% 1,185,000 Baltimore, Consolidated Public Improvement GO, Ser B, AMBAC, 5.00%, 10/15/10 1,190,273 -------------------------------------------------------------------------------- NEW YORK -- 1.3% 500,000 Sales Tax Asset Receivable RB, Ser B, FGIC, 4.76%, 10/15/15 481,245 -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS $ 1,671,518 -------------------------------------------------------------------------------- 138 -------------------------------------------------------------------------------- Pitcairn Taxable Bond Fund (Continued) -------------------------------------------------------------------------------- MARKET SHARES VALUE -------------------------------------------------------------------------------- CASH EQUIVALENT -- 3.0% 1,113,413 PNC Bank Money Market Fund, 4.43% ^ $ 1,113,413 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 96.1% (Cost $35,523,102) $ 36,093,476 OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.9% 1,475,805 -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 37,569,281 ================================================================================ ^ The rate shown is the 7-day effective yield as of September 30, 2007. (A) Zero Coupon Security - The rate shown was the effective yield at the time of purchase. AMBAC - American Municipal Bond Assurance Corporation FGIC - Financial Guaranty Insurance Corporation FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GO - General Obligation MTN - Medium Term Note RB - Revenue Bond TVA - Tennessee Valley Authority See accompanying notes to financial statements. 139 -------------------------------------------------------------------------------- Portfolio of Investments Sands Capital Select Growth Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 97.0% SHARES VALUE -------------------------------------------------------------------------------- HEALTH CARE -- 25.3% Abraxis BioScience*+ 202,100 $ 4,613,943 Allergan 416,800 26,871,096 Cerner*+ 141,000 8,433,210 Genentech* 289,200 22,563,384 Genzyme* 361,100 22,373,756 Intuitive Surgical*+ 94,300 21,689,000 Stryker 192,200 13,215,672 Teva Pharmaceutical Industries ADR+ 264,100 11,744,527 Varian Medical Systems* 278,500 11,666,365 Zimmer Holdings* 88,500 7,167,615 -------------------------------------------------------------------------------- 150,338,568 -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 20.3% Google, Class A* 98,800 56,046,276 Iron Mountain*+ 223,700 6,818,376 Lowe's 630,100 17,655,402 Starbucks* 1,122,800 29,417,360 Yahoo!*+ 391,658 10,512,101 -------------------------------------------------------------------------------- 120,449,515 -------------------------------------------------------------------------------- TECHNOLOGY -- 18.8% Apple* 170,200 26,132,508 Broadcom, Class A*+ 825,500 30,081,220 EMC* 898,300 18,684,640 QUALCOMM 522,800 22,093,528 Salesforce.com* 285,200 14,636,464 -------------------------------------------------------------------------------- 111,628,360 -------------------------------------------------------------------------------- ENERGY -- 12.2% FMC Technologies* 139,200 8,026,272 National-Oilwell Varco* 207,500 29,983,750 Schlumberger 329,200 34,566,000 -------------------------------------------------------------------------------- 72,576,022 -------------------------------------------------------------------------------- FINANCIAL SERVICES -- 10.9% CME Group 39,500 23,200,325 Intercontinental Exchange* 146,900 22,314,110 Moody's+ 376,343 18,967,687 -------------------------------------------------------------------------------- 64,482,122 -------------------------------------------------------------------------------- UTILITIES -- 4.8% America Movil S.A. ADR+ 442,400 28,313,600 -------------------------------------------------------------------------------- CONSUMER STAPLES -- 2.7% Walgreen 339,100 16,019,084 -------------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 2.0% Expeditors International of Washington 252,400 11,938,520 -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 575,745,791 -------------------------------------------------------------------------------- INVESTMENT FUND -- 12.5% BlackRock Institutional Money Market Trust, 5.37% ** ^ 74,360,152 $ 74,360,152 -------------------------------------------------------------------------------- CASH EQUIVALENTS -- 0.8% PNC Bank Money Market Fund, 4.43% ^ 4,657,881 $ 4,657,881 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 110.3% (Cost $523,816,595) $ 654,763,824 LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.3%) (61,067,309) -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 593,696,515 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $71,549,018. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. ADR - American Depository Receipt See accompanying notes to financial statements. 140 -------------------------------------------------------------------------------- Portfolio of Investments Short Duration Fixed Income Fund - September 30, 2007 -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 67.0% $ 33,663 FHLMC CMO/REMIC Ser 1538, Class J, 6.500%, 6/15/08 $ 33,608 214,274 FHLMC CMO/REMIC Ser 2509, Class EA, 4.000%, 12/15/12 213,855 744,737 FHLMC CMO/REMIC Ser 2510, Class TA, 4.000%, 6/15/32 718,158 1,223,272 FHLMC CMO/REMIC Ser 2515, Class ED, 5.000%, 3/15/17 1,222,515 1,378,464 FHLMC CMO/REMIC Ser 2543, Class YJ, 4.500%, 3/15/32 1,346,824 939,144 FHLMC CMO/REMIC Ser 2566, Class LM, 4.500%, 4/15/32 919,309 943,017 FHLMC CMO/REMIC Ser 2575, Class QP, 4.500%, 11/15/31 931,442 780,251 FHLMC CMO/REMIC Ser 2583, Class ND, 4.250%, 12/15/10 773,568 830,295 FHLMC CMO/REMIC Ser 2590, Class QY, 3.750%, 4/15/28 792,764 1,542,521 FHLMC CMO/REMIC Ser 2590, Class UL, 3.750%, 3/15/32 1,479,295 1,227,546 FHLMC CMO/REMIC Ser 2596, Class QE, 4.000%, 3/15/33 1,175,393 2,646,426 FHLMC CMO/REMIC Ser 2649, Class PJ, 3.500%, 6/15/33 2,565,193 2,582,779 FHLMC CMO/REMIC Ser 2744, Class TA, 5.500%, 3/15/26 2,583,724 2,056,724 FHLMC CMO/REMIC Ser 3092, Class TA, 7.250%, 11/15/35 2,008,261 564,523 FHLMC CMO/REMIC Ser 3251, Class TA, 7.400%, 6/15/36 567,073 135,062 FHLMC Pool #C66916, 7.000%, 5/1/32 140,023 130,349 FHLMC Pool #D94598, 6.500%, 4/1/21 133,913 188,535 FHLMC Pool #E97227, 7.000%, 9/1/14 193,027 14,965 FHLMC Pool #G10288, 6.000%, 9/1/09 15,044 31,207 FHLMC Pool #G10446, 6.500%, 2/1/11 31,800 213,494 FHLMC Pool #G30085, 7.500%, 10/1/17 224,571 326,239 FHLMC Pool #M90771, 5.000%, 12/1/07 325,315 3,811 FNMA CMO/REMIC Ser 1994-27, Class PJ, 6.500%, 6/25/23 3,802 23,334 FNMA CMO/REMIC Ser 1999-15, Class PC, 6.000%, 9/25/18 23,559 943,773 FNMA CMO/REMIC Ser 2002-71, Class AP, 5.000%, 11/25/32 928,929 959,821 FNMA CMO/REMIC Ser 2003-119, Class PU, 4.000%, 11/25/33 938,833 668,668 FNMA CMO/REMIC Ser 2003-19, Class ME, 4.000%, 1/25/33 639,915 834,062 FNMA CMO/REMIC Ser 2003-30, Class MB, 4.000%, 6/25/27 827,670 2,995,514 FNMA CMO/REMIC Ser 2003-34, Class GJ, 4.000%, 2/25/33 2,845,824 920,848 FNMA CMO/REMIC Ser 2003-42, Class CA, 4.000%, 5/25/33 868,080 282,670 FNMA CMO/REMIC Ser 2003-66, Class AP, 3.500%, 11/25/32 263,047 4,196,516 FNMA CMO/REMIC Ser 2005-93, Class XT (A), 7.000%, 10/25/35 4,080,056 2,283,537 FNMA CMO/REMIC Ser 2006-14, Class DT (A), 7.000%, 3/25/36 2,272,434 16,646 FNMA Pool #250477, 6.000%, 1/1/11 16,840 26,737 FNMA Pool #303096, 7.500%, 12/1/09 27,004 150,432 FNMA Pool #313429, 7.000%, 3/1/12 155,005 261,137 FNMA Pool #323441, 7.000%, 12/1/13 270,245 207,441 FNMA Pool #323832, 7.500%, 7/1/29 217,697 13,011 FNMA Pool #334593, 7.000%, 5/1/24 13,664 523,344 FNMA Pool #546474, 7.000%, 1/1/15 541,597 9,543 FNMA Pool #6222, 9.000%, 4/1/16 9,867 568,445 FNMA Pool #647567, 6.000%, 6/1/17 577,242 389,104 FNMA Pool #665773, 7.500%, 6/1/31 408,467 956,716 FNMA Pool #725284, 7.000%, 11/1/18 990,085 8,609 FNMA Pool #8245, 8.000%, 12/1/08 8,682 1,973,815 FNMA Pool #838790, 4.500%, 8/1/35 1,832,152 24,991 GNMA ARM Pool #8426 (A), 5.125%, 11/20/18 25,237 1,059,023 GNMA CMO/REMIC Ser 2002-72, Class AB, 4.500%, 10/20/32 1,015,325 8,893 GNMA Pool #2707, 5.500%, 1/20/14 8,890 11,041 GNMA Pool #2802, 5.500%, 7/20/14 11,038 117,210 GNMA Pool #2843, 5.500%, 11/20/14 117,175 94,816 GNMA Pool #344233, 8.000%, 2/15/23 100,683 223,153 GNMA Pool #345123, 8.000%, 12/15/23 236,959 6,322 GNMA Pool #351122, 6.500%, 7/15/08 6,362 3,957 GNMA Pool #357343, 6.500%, 10/15/08 3,982 47,544 GNMA Pool #462486, 6.500%, 1/15/13 48,860 59,222 GNMA Pool #569337, 6.500%, 4/15/22 60,420 77,195 GNMA Pool #578189, 6.000%, 2/15/32 77,862 105,944 GNMA Pool #780322, 8.000%, 11/15/22 112,348 51,784 GNMA Pool #780327, 8.000%, 11/15/17 54,590 479,597 GNMA Pool #780604, 7.000%, 7/15/12 495,339 119,879 GNMA Pool #814, 8.000%, 8/20/17 126,186 -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS $ 39,656,627 -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 28.5% 7,000,000 FHLB (A), 6.125%, 8/20/08 6,965,700 7,000,000 FHLB (A), 9.000%, 8/16/22 6,975,500 3,000,000 FHLB Discount Note, 6/18/08 2,906,040 -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 16,847,240 -------------------------------------------------------------------------------- CORPORATE BOND -- 1.7% FINANCIAL -- 1.7% 1,000,000 Countrywide Financial Corp, MTN (A), 5.440%, 2/28/08 $ 990,085 -------------------------------------------------------------------------------- 141 -------------------------------------------------------------------------------- Short Duration Fixed Income Fund (Continued) -------------------------------------------------------------------------------- FACE VALUE VALUE -------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 2.7% $1,618,000 PNC Bank, National Association 4.42% dated 09/28/07 due 10/01/07 repurchase proceeds $1,618,596 (Collateralized by $1,915,000 U.S. Government Obligation FGG 02480 6.50% due 12/01/36; fair value $1,960,481) $ 1,618,000 -------------------------------------------------------------------------------- MARKET SHARES VALUE -------------------------------------------------------------------------------- CASH EQUIVALENT -- 0.0% 323 BlackRock TempFund, Institutional Shares, 5.341%^ $ 323 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES AND REPURCHASE AGREEMENT -- 99.9% (Cost $59,762,628) $ 59,112,275 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1% 80,033 -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 59,192,308 -------------------------------------------------------------------------------- ^ The rate shown is the 7-day effective yield as of September 30, 2007. (A) Variable rate security - the rate reflected is the rate in effect on September 30, 2007. ARM - Adjustable Rate Mortgage CMO - Collateralized Mortgage Obligation FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association MTN - Medium Term Note REMIC - Real Estate Mortgage Investment Conduit See accompanying notes to financial statements. 142 -------------------------------------------------------------------------------- Portfolio of Investments Small Cap Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 99.6% SHARES VALUE -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 21.6% Aaron Rents 37,522 $ 836,741 CNET Networks*+ 121,115 902,307 Consolidated Graphics* 16,298 1,023,351 Dover Downs Gaming & Entertainment 63,119 655,806 EarthLink* 105,244 833,532 EZCORP - Class A* 49,880 670,886 Jos. A. Bank Clothiers* 15,518 518,612 Matthews International 32,874 1,439,880 Sonic* 45,259 1,059,061 Steiner Leisure Limited* 22,953 996,160 TeleTech Holdings* 36,590 874,867 Toro 22,219 1,307,144 Tupperware 30,822 970,585 UniFirst 14,509 543,507 WMS Industries* 41,947 1,388,446 Wolverine World Wide 31,905 874,197 -------------------------------------------------------------------------------- 14,895,082 -------------------------------------------------------------------------------- FINANCIAL SERVICES -- 20.1% Central Pacific Financial+ 44,932 1,312,014 CompuCredit* 15,666 340,109 Corporate Office Properties Trust 17,555 730,815 Cowen Group* 35,150 485,773 First Industrial Realty Trust+ 36,140 1,404,762 First Marblehead+ 13,641 517,403 Flagstar Bancorp 42,952 417,923 FPIC Insurance Group* 20,984 903,361 Jefferies Group 27,606 768,275 Montpelier Re Holdings+ 53,641 949,446 Southwest Bancorp 48,944 921,126 Strategic Hotels & Resorts 63,801 1,313,663 Sunstone Hotel Investors 77,131 1,977,638 TNS 31,716 509,359 TriCo Bancshares 63,043 1,403,968 -------------------------------------------------------------------------------- 13,955,635 -------------------------------------------------------------------------------- HEALTH CARE -- 11.1% Centene* 26,814 576,769 Enzon Pharmaceuticals* 36,682 323,168 Exelixis* 31,692 335,618 ICU Medical* 19,339 749,386 Incyte* 39,611 283,219 Integra LifeSciences Holdings*+ 24,960 1,212,557 Isis Pharmaceuticals*+ 33,971 508,546 Kendle International*+ 17,319 719,258 Nabi Biopharmaceuticals*+ 60,896 247,238 Perrigo 75,152 1,604,494 Progenics Pharmaceuticals*+ 14,270 315,510 Sepracor* 11,529 317,048 Trubion Pharmaceuticals*+ 15,730 190,805 ViroPharma* 34,701 308,839 -------------------------------------------------------------------------------- 7,692,455 -------------------------------------------------------------------------------- PRODUCER DURABLES -- 11.0% Astec Industries* 16,422 943,444 Asyst Technologies* 76,394 404,124 Axcelis Technologies* 160,975 822,582 Belden CDT 15,920 746,807 Genlyte Group* 8,700 559,062 ICF International* 37,335 1,029,699 MKS Instruments* 33,038 628,383 Plantronics 44,140 1,260,197 Regal-Beloit 15,046 720,553 Watts Water Technologies, Class A+ 15,568 477,938 -------------------------------------------------------------------------------- 7,592,789 -------------------------------------------------------------------------------- TECHNOLOGY -- 10.1% ADC Telecommunications* 52,802 1,035,447 AMIS Holdings* 49,737 482,946 COMSYS IT Partners* 28,713 482,666 DRS Technologies 15,840 873,101 MicroStrategy - Class A* 5,081 403,127 Palm*+ 27,675 450,272 Radiant Systems* 47,469 751,434 Vignette* 44,513 893,376 Vishay Intertechnology* 57,768 752,717 Xyratex* 47,058 903,043 -------------------------------------------------------------------------------- 7,028,129 -------------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 6.7% Arch Chemicals 27,491 1,288,778 Hercules 34,114 717,076 Koppers Holdings 27,150 1,048,262 Quanex 23,053 1,083,030 US Concrete* 78,030 514,218 -------------------------------------------------------------------------------- 4,651,364 -------------------------------------------------------------------------------- ENERGY -- 6.3% Global Industries* 37,600 968,577 Lufkin Industries 9,217 507,119 Rosetta Resources* 35,269 646,833 Swift Energy* 11,123 455,153 T-3 Energy Services* 21,309 908,616 Unit* 18,928 916,115 -------------------------------------------------------------------------------- 4,402,413 -------------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 5.2% AAR* 29,713 901,492 Con-way 15,448 710,608 SkyWest 30,669 771,939 Tenneco* 39,435 1,222,880 -------------------------------------------------------------------------------- 3,606,919 -------------------------------------------------------------------------------- UTILITIES -- 3.8% Golden Telecom+ 11,808 950,426 Laclede Group 26,108 842,766 NSTAR 24,533 853,994 -------------------------------------------------------------------------------- 2,647,186 -------------------------------------------------------------------------------- 143 -------------------------------------------------------------------------------- Small Cap Fund (Continued) -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 99.6% (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- CONSUMER STAPLES -- 3.7% Hain Celestial Group* 46,678 $ 1,499,764 Longs Drug Stores 21,451 1,065,471 -------------------------------------------------------------------------------- 2,565,235 -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 69,037,207 -------------------------------------------------------------------------------- INVESTMENT FUND -- 10.4% BlackRock Institutional Money Market Trust, 5.37% ** ^ 7,190,007 $ 7,190,007 -------------------------------------------------------------------------------- CASH EQUIVALENT -- 0.2% PNC Bank Money Market Fund, 4.43% ^ 168,181 $ 168,181 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 110.2% (Cost $70,796,877) $ 76,395,395 LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.2%) (7,057,367) -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 69,338,028 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $6,813,000. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. See accompanying notes to financial statements. 144 -------------------------------------------------------------------------------- Portfolio of Investments Small Cap Value Opportunities Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 90.6% SHARES VALUE -------------------------------------------------------------------------------- FINANCIAL SERVICES -- 19.4% 1st Source 52,800 $ 1,209,120 Advanta, Class B 40,650 1,114,623 American Physicans Capital 37,500 1,461,000 Argo Group International Holdings* 8,400 365,484 ASTA Funding 21,032 805,946 BioMed Realty Trust 26,050 627,805 Boston Private Financial Holdings+ 23,500 654,240 Centennial Bank Holdings*+ 126,600 810,240 CNA Surety* 64,900 1,144,187 Corporate Office Properties Trust 13,480 561,172 Delphi Financial Group, Class A 21,680 876,306 DiamondRock Hospitality 52,740 918,203 EastGroup Properties 16,520 747,695 Employers Holdings 37,730 777,615 Encore Capital Group* 28,014 330,565 First State Bancorp 52,900 1,038,956 FPIC Insurance Group* 48,570 2,090,938 Hanmi Financial 61,860 958,211 Hanover Insurance Group 28,400 1,254,996 Heritage Commerce 16,870 357,138 Investment Technology Group* 17,890 768,912 IPC Holdings+ 26,620 767,987 Max Capital Group 52,100 1,460,884 Mercer Insurance Group 16,700 295,423 Mid-America Apartment Communities 19,956 994,807 Midland 11,400 626,544 MoneyGram International 60,300 1,362,177 Navigators Group* 18,490 1,003,083 NGP Capital Resources+ 51,690 838,929 Online Resources* 86,590 1,094,498 Phoenix Companies 48,840 689,132 Pico Holdings 14,140 587,517 Potlatch 19,290 868,629 ProAssurance* 14,390 775,189 Renasant+ 32,220 696,919 RLI 11,300 640,936 S1* 80,380 727,439 Signature Bank* 30,230 1,065,003 SVB Financial Group*+ 15,640 740,710 Taylor Capital Group 31,300 874,209 UCBH Holdings+ 39,000 681,720 UMB Financial 23,410 1,003,353 United America Indemnity, Class A* 92,780 1,995,697 United Fire & Casualty 26,000 1,016,340 -------------------------------------------------------------------------------- 39,680,477 -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 16.8% Aaron Rents 67,000 1,494,100 American Greetings, Class A 60,102 1,586,693 Belo, Class A 42,000 729,120 BJ's Wholesale Club* 29,830 989,163 Bob Evans Farms 44,400 1,339,992 Bright Horizons Family Solutions* 22,280 954,475 Brink's 26,000 1,452,880 Brown Shoe Company 22,540 437,276 Buckle 46,800 1,775,591 Cabela's*+ 28,040 663,146 Callaway Golf 143,090 2,290,870 Charming Shoppes* 101,100 849,240 Crown Crafts* 21,250 88,400 E Com Ventures* 12,250 300,125 Entravision Communications* 59,280 546,562 EZCORP, Class A* 59,100 794,895 Finish Line, Class A 87,850 381,269 First Consulting Group* 54,890 565,367 FTI Consulting* 19,580 985,070 Gevity HR 33,180 340,095 Hanesbrands* 50,100 1,405,806 Hartmarx* 58,450 286,405 Helen of Troy* 19,980 385,814 Jakks Pacific* 53,500 1,428,985 K-Swiss, Class A 56,850 1,302,434 Landry's Restaurants+ 25,260 668,380 Morton's Restaurant Group* 35,530 564,927 Movado Group 21,050 671,916 Penske Automotive Group 50,300 1,018,072 R.G. Barry* 20,300 195,895 Steiner Leisure* 30,600 1,328,040 Steinway Musical Instruments 30,580 905,780 Toro+ 27,200 1,600,176 Tupperware Brands 60,100 1,892,548 United Online 81,600 1,224,816 Universal Security Instruments* 10,700 187,250 WMS Industries* 17,035 563,859 Zones* 11,300 116,842 -------------------------------------------------------------------------------- 34,312,274 -------------------------------------------------------------------------------- ENERGY -- 13.0% Basic Energy Services* 8,100 170,262 Berry Petroleum, Class A 27,700 1,096,643 Bill Barrett* 11,050 435,481 Bolt Technology* 13,700 447,442 Cimarex Energy 60,000 2,235,000 Copano Energy 36,000 1,322,280 Delek US Holdings 22,500 564,300 Encore Acquisition*+ 80,000 2,532,000 Grey Wolf* 23,400 153,270 Helmerich & Payne 81,000 2,659,230 Hornbeck Offshore Services*+ 40,100 1,471,670 ICO* 86,800 1,222,144 Lufkin Industries 31,810 1,750,186 Matrix Service* 107,060 2,242,907 Parker Drilling* 45,200 367,024 Penn Virginia Corporation 18,230 801,755 Petrohawk Energy* 61,180 1,004,576 Petroleum Development* 14,940 662,589 Southwestern Energy* 30,000 1,255,500 145 -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund (Continued) -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 90.6% (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- ENERGY -- 13.0% (CONTINUED) Trico Marine Services*+ 20,670 $ 615,966 W-H Energy Services* 17,800 1,312,750 Whiting Petroleum*+ 50,500 2,244,725 -------------------------------------------------------------------------------- 26,567,700 -------------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 9.6% A.M. Castle & Co. 46,500 1,515,900 AEP Industries* 7,500 317,550 Arch Chemicals 12,700 595,376 Barnes Group+ 36,850 1,176,252 Century Aluminum* 5,600 294,840 Chase 21,500 399,900 Compass Minerals International 30,210 1,028,348 Eastern 11,849 266,010 EnerSys* 35,590 632,434 Haynes International* 6,640 566,857 Innospec 32,600 742,628 Kaiser Aluminum 8,870 625,956 Kaydon 17,400 904,626 KHD Humboldt Wedag International* 22,540 687,470 Koppers Holdings 14,440 557,528 L.B. Foster, Class A*+ 18,020 783,149 LSB Industries* 27,400 648,010 Minerals Technologies 5,500 368,500 Neenah Paper 20,120 665,771 North American Galvanizing & Coatings* 127,200 966,720 Olin 30,000 671,400 Quanex 37,200 1,747,656 Schnitzer Steel Industries, Class A 35,600 2,609,125 Sterling Construction* 23,850 550,458 Universal Stainless & Alloy Products* 7,500 298,425 -------------------------------------------------------------------------------- 19,620,889 -------------------------------------------------------------------------------- PRODUCER DURABLES -- 9.6% ACCO Brands* 68,000 1,525,920 Applied Industrial Technologies 22,500 693,675 Arris Group*+ 46,710 576,869 ASE Test Limited* 69,600 1,000,152 Cascade 32,600 2,124,542 ECI Telecom Limited* 52,100 518,916 Gehl* 28,100 627,473 Hurco* 39,400 2,129,964 Kadant* 30,440 852,320 Ladish* 21,440 1,189,491 Lincoln Electric Holdings 15,200 1,179,672 LMI Aerospace* 32,100 743,115 Measurement Specialties 20,210 563,859 Park-Ohio Holdings* 14,400 373,680 Powell Industries* 15,280 578,959 Preformed Line Products 7,500 390,150 Regal-Beloit 9,570 458,307 Trinity Industries+ 24,600 923,484 Trio-Tech International 19,500 212,355 Triumph Group 11,300 923,323 Verigy Limited* 35,960 888,572 VSE 24,000 1,134,720 -------------------------------------------------------------------------------- 19,609,518 -------------------------------------------------------------------------------- UTILITIES -- 6.0% Alaska Communications Systems Group 85,900 1,241,255 Allete 9,710 434,620 Central Vermont Public Service 39,900 1,457,946 El Paso Electric* 30,490 705,234 Integrys Energy Group+ 23,090 1,182,901 New Jersey Resources 27,890 1,383,065 Northwest Natural Gas 34,100 1,558,369 NTELOS Holdings 40,480 1,192,541 PAETEC Holding* 71,890 896,468 Suburban Propane Partners 11,100 492,840 UGI 45,000 1,169,100 WGL Holdings 16,100 545,629 -------------------------------------------------------------------------------- 12,259,968 -------------------------------------------------------------------------------- AUTOS AND TRANSPORTATION -- 4.4% AAR* 24,650 747,881 AirTran Holdings* 180,000 1,771,199 Cooper Tire & Rubber 26,300 641,720 Greenbrier 15,900 424,689 Hayes Lemmerz International* 149,929 623,705 Miller Industries* 26,300 450,256 Republic Airways Holdings* 17,500 370,475 Spartan Motors+ 38,190 642,738 TBS International, Class A* 15,700 647,625 Titan International+ 32,430 1,035,166 Tsakos Energy Navigation 11,300 795,633 Werner Enterprises 43,700 749,455 -------------------------------------------------------------------------------- 8,900,542 -------------------------------------------------------------------------------- CONSUMER STAPLES -- 4.2% Del Monte Foods 85,300 895,650 Flower Foods 53,640 1,169,352 Fresh Del Monte Produce 26,300 756,125 Ingles Markets, Class A 41,500 1,189,390 Lance 14,789 340,443 Longs Drug Stores 17,440 866,245 Nutraceutical International* 20,000 304,200 Spartan Stores 89,600 2,018,687 Susser Holdings* 48,730 1,035,513 -------------------------------------------------------------------------------- 8,575,605 -------------------------------------------------------------------------------- TECHNOLOGY -- 4.0% Ariba* 43,170 465,373 Avici Systems 38,100 406,146 BroadVision* 133,200 293,040 Cirrus Logic* 77,800 497,920 146 -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund (Continued) -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 90.6% (CONTINUED) SHARES VALUE -------------------------------------------------------------------------------- TECHNOLOGY -- 4.0% (CONTINUED) Corel* 11,300 $ 144,753 EDO+ 12,910 723,089 EMS Technologies* 17,580 431,237 Foundry Networks* 40,770 724,483 Ixia* 85,590 746,345 Macrovision* 28,270 696,290 Progress Software* 28,780 872,034 Semtech*+ 43,450 889,856 UTEK 25,500 376,125 Zoran* 44,040 889,608 -------------------------------------------------------------------------------- 8,156,299 -------------------------------------------------------------------------------- HEALTH CARE -- 3.6% Alliance Imaging* 114,150 1,034,199 Amedisys* 16,790 645,072 AMERIGROUP* 22,500 775,800 Analogic 33,262 2,120,785 Axcan Pharma* 67,550 1,403,014 Owens & Minor 16,190 616,677 STERIS 27,810 760,047 -------------------------------------------------------------------------------- 7,355,594 -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 185,038,866 -------------------------------------------------------------------------------- INVESTMENT FUND -- 7.2% BlackRock Institutional Money Market Trust, 5.37% ** ^ 14,703,983 $ 14,703,983 -------------------------------------------------------------------------------- CASH EQUIVALENT -- 9.7% PNC Bank Money Market Fund, 4.43% ^ 19,770,694 $ 19,770,694 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 107.5% (Cost $209,554,080) $ 219,513,543 LIABILITIES IN EXCESS OF OTHER ASSETS -- (7.5%) (15,397,990) -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 204,115,553 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $14,039,502. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. See accompanying notes to financial statements. 147 -------------------------------------------------------------------------------- Portfolio of Investments Strategic Value and High Income Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET SHARES VALUE -------------------------------------------------------------------------------- AFFILIATED EQUITY FUND -- 58.6% Touchstone Funds Group Trust Diversified Small Cap Value Fund* 34,932 $ 682,923 -------------------------------------------------------------------------------- AFFILIATED FIXED INCOME FUND -- 40.5% Touchstone Investment Trust High Yield Fund** 51,452 $ 472,328 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.1% (Cost $1,169,986) $ 1,155,251 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9% 10,216 -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 1,165,467 ================================================================================ * Affiliated Fund, sub-advised by Clover Capital Management, Inc. ** Affiliated Fund, sub-advised by Fort Washington Investment Advisers, Inc. See accompanying notes to financial statements. 148 -------------------------------------------------------------------------------- Portfolio of Investments Tax-Exempt Bond Fund - September 30, 2007 -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 98.9% ALABAMA -- 1.0% $1,000,000 Bessemer RB, AMBAC, Callable 02/01/10 @ 102, 5.600%, 2/1/30 $ 1,054,750 -------------------------------------------------------------------------------- CALIFORNIA -- 10.7% 2,000,000 California Health Facilities Finance Authority RB, St. Francis Memorial Hospital, Ser C, ETM, 5.875%, 11/1/23 2,354,200 1,840,000 California State GO, Callable 02/01/13 @ 100, 5.250%, 2/1/33 1,904,768 2,000,000 California State GO, Callable 09/01/16 @ 100, 4.750%, 9/1/30 1,994,380 2,000,000 California State, Department of Veteran Affairs Home Purchase RB, Ser A, Callable 11/30/11 @ 101, 4.400%, 12/1/21 1,995,300 2,000,000 California State, Economic Recovery GO, Ser A, Callable 07/01/11 @ 100, 5.000%, 7/1/17 2,093,920 500,000 California State, Statewide Communities Developmental Authority, Pollution Control RB, Southern California Edison, Ser A, XLCA, 4.100%, 4/1/28 509,385 285,000 Stockton Housing Facility RB, O'Connor Woods Project, Ser A, ETM, GNMA, Callable 05/06/05 @ 100, 5.200%, 9/20/09 285,373 -------------------------------------------------------------------------------- 11,137,326 -------------------------------------------------------------------------------- COLORADO -- 1.0% 1,000,000 South Suburban Park & Recreation District GO, AMBAC, Callable 09/15/10 @ 100, 5.375%, 9/15/18 1,051,470 -------------------------------------------------------------------------------- DELAWARE -- 1.0% 1,000,000 Delaware State, Economic Development Authority, Pollution Control RB, Delmarva Power, AMBAC, Callable 05/01/11 @ 100 (A), 4.900%, 5/1/26 1,038,270 -------------------------------------------------------------------------------- DISTRICT OF COLUMBIA -- 1.3% 1,000,000 District of Columbia RB, Howard University Project, MBIA, 5.500%, 10/1/16 1,120,150 200,000 Washington D.C., Convention Center Authority RB, Dedicated Tax Revenue, Senior Lien, AMBAC, Callable 10/01/08 @ 101, 5.250%, 10/1/09 205,428 -------------------------------------------------------------------------------- 1,325,578 -------------------------------------------------------------------------------- FLORIDA -- 1.1% 405,000 Orlando Utilities Commission, Water & Electric RB, Callable 10/01/11 @ 101, 5.250%, 10/1/20 429,968 685,000 Orlando Utilities Commission, Water & Electric RB, Pre-Refunded 10/01/11 @ 101, 5.250%, 10/1/20 733,834 -------------------------------------------------------------------------------- 1,163,802 -------------------------------------------------------------------------------- GEORGIA -- 2.3% 2,000,000 Henry County, Water & Sewer Authority RB, AMBAC, 6.150%, 2/1/20 2,378,880 -------------------------------------------------------------------------------- HAWAII -- 4.3% 1,680,000 Honolulu, City & County GO, Ser B, ETM, 8.000%, 10/1/10 1,890,504 2,385,000 University of Hawaii RB, Ser A, FGIC, Callable 07/15/12 @ 100, 5.500%, 7/15/21 2,585,078 -------------------------------------------------------------------------------- 4,475,582 -------------------------------------------------------------------------------- ILLINOIS -- 8.3% 1,000,000 Chicago, Park District GO, Aquarium & Museum Project, FGIC, Callable 01/01/08 @ 100, 5.500%, 1/1/10 1,004,710 2,350,000 Illinois Development Finance Authority RB, Elgin School District Project, FSA (B), .000%, 1/1/18 1,525,009 1,000,000 Illinois Health Facilities Authority RB, Hospital Sisters Services Project, Ser A, MBIA, Callable 06/01/08 @ 101, 5.250%, 6/1/12 1,019,600 1,000,000 Illinois State, Toll Highway Authority Revenue RB, Senior Priority, Ser A-1, Callable 07/01/2016 @ 100, 5.000%, 1/1/26 1,045,370 1,200,000 Metropolitan Pier & Exposition Authority RB, Illinois Dedicated State Tax Revenue, AMBAC, Callable 06/01/07 @ 101, 5.125%, 6/1/13 1,213,392 500,000 Metropolitan Pier & Exposition Authority RB, Illinois Dedicated State Tax Revenue, Ser A, FGIC, 5.500%, 12/15/23 564,485 500,000 Metropolitan Pier & Exposition Authority RB, Illinois Dedicated State Tax Revenue, Ser A, FGIC, ETM, 5.500%, 12/15/23 567,935 2,000,000 Will County, Community School District GO, USD #365, FSA (B), .000%, 11/1/12 1,648,680 -------------------------------------------------------------------------------- 8,589,181 -------------------------------------------------------------------------------- 149 -------------------------------------------------------------------------------- Tax-Exempt Bond Fund (Continued) -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 98.9% (CONTINUED) INDIANA -- 4.2% $1,000,000 Indiana Transportation Finance Authority RB, Ser A, MBIA, 6.800%, 12/1/16 $ 1,164,870 3,000,000 Indiana University RB, Student Fee, Ser P, AMBAC, Callable 01/01/10 @ 100, 5.000%, 8/1/18 3,165,720 -------------------------------------------------------------------------------- 4,330,590 -------------------------------------------------------------------------------- KENTUCKY -- 1.1% 1,050,000 Kentucky State, Property & Buildings Commission RB, Project Number 67, Pre-Refunded 09/01/10 @ 100, 5.625%, 9/1/13 1,110,291 -------------------------------------------------------------------------------- LOUISIANA -- 2.2% 2,115,000 Louisiana Public Facilites Authority RB, Franciscan Missionaries Project, Ser A, FSA, 5.500%, 7/1/11 2,249,599 -------------------------------------------------------------------------------- MASSACHUSETTS -- 3.1% 1,000,000 Massachusetts State, Housing Finance Agency RB, Ser B, MBIA, Callable 06/01/08 @ 101, 5.300%, 12/1/17 1,006,600 70,000 Massachusetts State, Special Obligation RB, Consolidated Loan, Ser A, Callable 06/01/08 @ 101, 5.000%, 6/1/15 71,299 930,000 Massachusetts State, Special Obligation RB, Consolidated Loan, Ser A, Pre-Refunded 06/01/08 @ 101, 5.000%, 6/1/15 946,945 1,060,000 Massachusetts State, Water Resources Authority RB, Ser D, MBIA, GOA, 6.000%, 8/1/14 1,208,039 -------------------------------------------------------------------------------- 3,232,883 -------------------------------------------------------------------------------- MISSISSIPPI -- 0.7% 745,000 Mississippi Development Bank RB, Capital Project & Equipment Acquisition, Ser A2, AMBAC, 5.000%, 7/1/24 745,782 -------------------------------------------------------------------------------- NEVADA -- 2.0% 2,000,000 Nevada Systems, Higher Education University RB, Ser B, AMBAC, Callable, 01/01/16 @ 100, 5.000%, 7/1/35 2,058,460 -------------------------------------------------------------------------------- NEW JERSEY -- 0.4% 150,000 New Jersey State GO, Ser D, 6.000%, 2/15/11 161,603 250,000 New Jersey State, Transportation System RB, Ser A, 5.625%, 6/15/14 278,992 -------------------------------------------------------------------------------- 440,595 -------------------------------------------------------------------------------- NEW YORK -- 10.0% 3,715,000 New York City, Transitional Finance Authority RB, Ser A, Callable 11/01/11 @ 100 (A), 5.500%, 11/1/26 3,975,979 1,000,000 New York State, Mortgage Agency RB, Homeowner Mortgage, Ser 80, Callable 03/01/09 @ 101, 5.100%, 10/1/17 1,022,060 3,000,000 New York State, Municipal Bond Bank Agency RB, Special School Purpose, Ser C, Callable 06/01/2013 @ 100, 5.500%, 6/1/15 3,250,320 2,000,000 New York State, Thruway Authority RB, Highway and Bridge Project, Callable 04/01/12 @ 100, 5.500%, 4/1/15 2,148,220 -------------------------------------------------------------------------------- 10,396,579 -------------------------------------------------------------------------------- NORTH CAROLINA -- 4.8% 230,000 Charlotte, Mecklenburg Hospital Authority, North Carolina Health Care Systems RB, Ser A, Pre-Refunded 01/15/11 @ 101, 5.000%, 1/15/31 242,034 770,000 Charlotte, Mecklenburg Hospital Authority, North Carolina Health Care Systems RB, Ser A, Unrefunded, 5.000%, 1/15/31 775,567 2,200,000 Greensboro, Enterprise System RB, 5.250%, 6/1/24 2,449,589 1,380,000 University of North Carolina Wilmington, RB, AMBAC, Callable 01/01/13 @ 100, 5.250%, 1/1/21 1,467,037 -------------------------------------------------------------------------------- 4,934,227 -------------------------------------------------------------------------------- PENNSYLVANIA -- 18.5% 1,345,000 Chester County, Health & Education Facilities Authority RB, Devereux Foundation, Callable 11/01/16 @ 100, 5.000%, 11/1/22 1,365,565 2,730,000 Coatesville School District GO, FSA, Callable 08/15/14 @ 100, 5.250%, 8/15/18 2,947,008 150 -------------------------------------------------------------------------------- Tax-Exempt Bond Fund (Continued) -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 98.9% (CONTINUED) PENNSYLVANIA -- 18.5% (CONTINUED) $ 270,000 Coatesville School District GO, FSA, Pre-Refunded 8/15/14 @ 100, 5.250%, 8/15/18 $ 295,893 3,000,000 Delaware County Authority, Hospital RB, Crozer Keystone Obigation Group A, Callable 12/15/16 @ 100, 5.000%, 12/15/26 2,923,860 2,820,000 Lancaster Area Sewer Authority Revenue RB, FGIC, Callable 4/1/15 @ 100, 5.000%, 4/1/17 3,031,245 2,000,000 Norwin Penn School District GO, FGIC, Pre-Refunded 04/01/10 @ 100, 6.000%, 4/1/24 2,116,100 1,000,000 Owen J Roberts School District, FSA, Callable 05/15/2016 @ 100, 4.750%, 5/15/25 1,024,140 1,035,000 Pennsylvania State, Higher Educational Facilities Authority RB, Saint Joseph's University, Callable 05/01/06 @ 100 (LOC: Allied Irish Banks PLC) (A), 5.000%, 5/1/11 1,035,932 1,000,000 Pennsylvania State, Public School Building Authority RB, Harrisburg Area Community College Project, AMBAC, Callable 04/01/14 @ 100, 5.250%, 4/1/24 1,069,810 1,500,000 Philadelphia, Authority for Industrial Development Lease Revenue RB, Ser B, FSA, Callable 10/01/11 @ 101, 5.500%, 10/1/12 1,615,575 1,300,000 Philadelphia, Hospital & Higher Education Authority RB, Presbyterian Medical Center Project, ETM, 6.500%, 12/1/11 1,375,803 525,000 Philadelphia, Water & Waste Water RB, MBIA, 6.250%, 8/1/09 550,410 -------------------------------------------------------------------------------- 19,351,341 -------------------------------------------------------------------------------- PUERTO RICO -- 0.8% 250,000 Puerto Rico, Commonwealth Public Improvements, Ser A, 5.000%, 7/1/09 255,728 500,000 Puerto Rico, Electric Power Authority RB, Ser RR, Callable 07/01/15 @ 100, 5.000%, 7/1/29 544,515 -------------------------------------------------------------------------------- 800,243 -------------------------------------------------------------------------------- RHODE ISLAND -- 1.2% 1,000,000 Rhode Island, Depositors Economic Protection Authority RB, Special Obligation, Ser A, ETM, 6.375%, 8/1/22 1,235,200 -------------------------------------------------------------------------------- SOUTH CAROLINA -- 6.0% 2,530,000 Darlington County, Water & Sewer Authority RB, AMBAC, Callable 12/01/12 @ 101, 5.625%, 12/1/23 2,748,339 3,415,000 South Carolina State, Public Service Authority RB, Ser A, AMBAC Callable 01/01/14 @ 100, 5.000%, 1/1/39 3,484,598 -------------------------------------------------------------------------------- 6,232,937 -------------------------------------------------------------------------------- TEXAS -- 6.6% 10,000 Duncanville, Independent School District, GO, PSF-GTD, Callable 02/15/13 @ 100, 5.650%, 2/15/28 10,716 1,340,000 Duncanville, Independent School District, GO, PSF-GTD, Pre-Refunded 02/15/13 @ 100, 5.650%, 2/15/28 1,471,856 975,000 Fort Worth Water & Sewer RB, Unrefunded, 5.750%, 2/15/14 1,028,001 1,850,000 Harris County, Healthcare Facilities Development Authority RB, Christus Health Project, Ser A, MBIA, Callable 07/01/09 @ 101, 5.375%, 7/1/24 1,924,352 1,140,000 Houston, Water & Sewer Systems Authority RB, Junior Lien, Ser C, FGIC, Pre-Refunded 12/01/07 @ 101, 5.375%, 12/1/27 1,154,649 1,250,000 Texas Water Development Board RB, Revolving Fund, Senior Lein, Ser B, Callable 01/15/10 @ 100, 5.500%, 7/15/15 1,299,600 -------------------------------------------------------------------------------- 6,889,174 -------------------------------------------------------------------------------- UTAH -- 2.1% 2,000,000 Utah Transit Authority Sales Tax RB, Ser A, FSA, Callable 12/15/12 @ 100, 5.000%, 6/15/24 2,133,880 -------------------------------------------------------------------------------- 151 -------------------------------------------------------------------------------- Tax-Exempt Bond Fund (Continued) -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 98.9% (CONTINUED) WASHINGTON -- 4.2% $1,000,000 Central Pugent Sound, Regional Transportation Authority RB, Sales Tax & Motor Project, FGIC, 5.250%, 2/1/21 $ 1,093,500 1,000,000 Clark County, School District No. 177 GO, AMBAC, 5.250%, 12/1/14 1,095,650 1,000,000 Washington State GO, Ser A, FSA, 5.000%, 7/1/20 1,049,060 1,000,000 Washington State, Economic Development Finance Authority, Biomedical Research Property II RB, MBIA, Callable 12/01/15 @ 100, 5.250%, 6/1/19 1,072,390 -------------------------------------------------------------------------------- 4,310,600 -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS $ 102,667,220 -------------------------------------------------------------------------------- MARKET SHARES VALUE -------------------------------------------------------------------------------- CASH EQUIVALENT -- 0.0% 34,143 ABN Amro Tax Exempt Money Market Fund, 3.460%^ $ 34,143 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 98.9% (Cost $99,690,851) $ 102,701,363 OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1% 1,106,763 -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 103,808,126 ================================================================================ ^ The rate shown is the 7-day effective yield as of September 30, 2007. (A) Variable rate security - the rate reflected is the rate in effect on September 30, 2007. (B) Zero coupon security - the rate reported was the effective yield at time of purchase. AMBAC - American Municipal Bond Assurance Corporation ETM - Escrowed to Maturity FGIC - Financial Guaranty Insurance Corporation FSA - Financial Security Assurance GNMA - Government National Mortgage Association GO - General Obligation GOA - General Obligation of Authority LOC - Letter of Credit MBIA - Municipal Bond Insurance Association PLC - Public Limited Company PSF-GTD - Permanent School Fund - Guaranteed RB - Revenue Bond USD - Unified School District XLCA - XL Capital Assurance See accompanying notes to financial statements. 152 -------------------------------------------------------------------------------- Portfolio of Investments Ultra Short Duration Fixed Income Fund - September 30, 2007 -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 76.5% $ 418,423 FHLMC Pool #G11072, 7.500%, 12/1/15 $ 435,115 19,371 FHLMC CMO/REMIC Ser 1544, Class L (A), 4.210%, 7/15/08 19,278 7,101,084 FHLMC CMO/REMIC Ser 2571, Class FN (A), 6.400%, 8/15/32 7,182,810 1,271,618 FHLMC CMO/REMIC Ser 2575 Class LM, 4.500%, 5/15/32 1,246,180 1,940,904 FHLMC CMO/REMIC Ser 2586, Class WA, 4.000%, 12/15/32 1,871,293 1,227,715 FHLMC CMO/REMIC Ser 2590, Class UL, 3.750%, 3/15/32 1,177,392 1,669,483 FHLMC CMO/REMIC Ser 2594, Class YA, 4.000%, 4/15/23 1,619,101 748,863 FHLMC CMO/REMIC Ser 2640, Class OT, 2.000%, 4/15/22 742,978 1,468,766 FHLMC CMO/REMIC Ser 2649, Class PJ, 3.500%, 6/15/33 1,423,682 864,807 FHLMC CMO/REMIC Ser 2684, Class GN, 3.250%, 5/15/23 858,979 237,895 FHLMC CMO/REMIC Ser 2715, Class QB, 3.500%, 9/15/22 237,211 1,428,518 FHLMC CMO/REMIC Ser 2744, Class JX, 3.500%, 1/15/23 1,416,532 3,513,653 FHLMC CMO/REMIC Ser 2770, Class FH (A), 6.150%, 3/15/34 3,539,874 1,795,707 FHLMC CMO/REMIC Ser 2886, Class BF (A), 6.250%, 11/15/34 1,803,352 4,215,951 FHLMC CMO/REMIC Ser 2921, Class JF (A), 6.250%, 1/15/35 4,270,159 324,442 FHLMC CMO/REMIC Ser 2925, Class CF (A), 6.250%, 1/15/35 321,952 1,060,199 FHLMC CMO/REMIC Ser 2956, Class YB, 6.950%, 1/15/35 979,417 2,415,861 FHLMC CMO/REMIC Ser 3025, Class FC (A), 7.000%, 8/15/35 2,351,687 1,238,832 FHLMC CMO/REMIC Ser 3033, Class BY (A), 7.000%, 9/15/35 1,289,751 736,541 FHLMC CMO/REMIC Ser 3038, Class TA, 6.700%, 9/15/35 734,038 703,998 FHLMC CMO/REMIC Ser 3069, Class KT, 7.000%, 10/15/34 706,701 4,459,695 FHLMC CMO/REMIC Ser 3092, Class TA, 7.250%, 11/15/35 4,354,609 6,540,339 FHLMC CMO/REMIC Ser 3137, Class PJ, 5.125%, 12/15/13 6,489,509 637,417 FHLMC CMO/REMIC Ser 3144, Class TB, 7.200%, 3/15/34 637,752 4,999,732 FHLMC CMO/REMIC Ser 3157, Class TB, 7.800%, 1/15/35 4,934,950 6,577,712 FHLMC CMO/REMIC Ser 3177, Class SW, 7.650%, 6/15/35 6,585,935 $2,258,093 FHLMC CMO/REMIC Ser 3251, Class TA, 7.400%, 6/15/36 2,268,290 352 FHLMC Pool #184967, 7.750%, 8/1/08 353 258,177 FHLMC Pool #B15413, 8.000%, 3/1/11 267,139 76,292 FHLMC Pool #E64944, 7.000%, 7/1/11 78,552 1,058,976 FNMA CMO/REMIC Ser 2002-67, Class AM, 5.000%, 11/25/15 1,057,513 494,589 FNMA CMO/REMIC Ser 2002-87, Class PY, 3.920%, 9/25/27 492,047 1,819,811 FNMA CMO/REMIC Ser 2003-119, Class PU, 4.000%, 11/25/33 1,780,018 765,659 FNMA CMO/REMIC Ser 2003-19, Class ME, 4.000%, 1/25/33 732,734 849,893 FNMA CMO/REMIC Ser 2003-33, Class AM, 4.250%, 5/25/33 818,168 1,284,791 FNMA CMO/REMIC Ser 2003-33, Class AU, 4.000%, 3/25/33 1,226,020 1,031,043 FNMA CMO/REMIC Ser 2003-34, Class AD, 4.000%, 1/25/32 1,008,423 10,868,258 FNMA CMO/REMIC Ser 2003-61, Class FK (A), 6.630%, 8/25/33 11,565,323 3,844,103 FNMA CMO/REMIC Ser 2003-69, Class NF (A), 6.820%, 7/25/33 3,875,916 4,866,805 FNMA CMO/REMIC Ser 2003-81, Class FE (A), 5.630%, 9/25/33 4,931,331 3,271,270 FNMA CMO/REMIC Ser 2004-96, Class LF (A), 6.130%, 12/25/34 3,319,908 1,280,346 FNMA CMO/REMIC Ser 2005-108, Class GU, 5.750%, 7/25/35 1,284,409 3,137,395 FNMA CMO/REMIC Ser 2005-93, Class XT, 7.000%, 10/25/35 3,050,329 3,619,229 FNMA CMO/REMIC Ser 2006-109, Class JS (A), 6.750%, 5/25/36 3,566,976 5,547,065 FNMA CMO/REMIC Ser 2006-14, Class DT, 7.000%, 3/25/36 5,520,097 1,689,560 FNMA CMO/REMIC Ser 2007-9, Class YA, 5.500%, 3/25/37 1,683,670 225,094 FNMA Pool #190658, 7.000%, 2/1/09 226,763 116,232 FNMA Pool #253472, 7.500%, 9/1/10 118,982 173,048 FNMA Pool #519992, 7.000%, 10/1/14 179,038 249,922 FNMA Pool #534851, 7.500%, 4/1/15 259,354 180,625 FNMA Pool #535219, 7.500%, 3/1/15 187,441 154,668 FNMA Pool #535635, 8.500%, 6/1/12 155,320 822,994 FNMA Pool #555646, 7.500%, 9/1/16 854,010 40,845 GNMA ARM Pool #8103 (A), 5.625%, 2/20/16 41,245 39,479 GNMA ARM Pool #8287 (A), 5.125%, 11/20/17 39,711 66,066 GNMA ARM Pool #8297 (A), 5.125%, 12/20/17 66,754 114,066 GNMA ARM Pool #8333 (A), 6.500%, 3/20/18 115,252 55,961 GNMA ARM Pool #8345 (A), 5.875%, 4/20/18 56,387 153 -------------------------------------------------------------------------------- Ultra Short Duration Fixed Income Fund (Continued) -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 76.5% (CONTINUED) $ 79,818 GNMA ARM Pool #8366 (A), 6.375%, 6/20/18 $ 80,635 3,479 GNMA ARM Pool #8404 (A), 5.750%, 9/20/18 3,512 34,235 GNMA ARM Pool #8405 (A), 6.000%, 9/20/18 34,513 6,578 GNMA ARM Pool #8462 (A), 6.375%, 2/20/19 6,655 50,310 GNMA ARM Pool #8489 (A), 6.500%, 4/20/19 50,698 3,530,752 GNMA CMO/REMIC Ser 2003-34, Class PM, 4.000%, 4/20/33 3,455,669 -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS $ 111,689,392 -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 18.9% 2,000,000 FFCB, 5.250%, 9/27/11 2,004,176 5,000,000 FHLB, 4.250%, 9/12/08 4,983,385 3,000,000 FHLB (A), 6.125%, 8/20/08 2,985,300 3,000,000 FHLB (A), 9.000%, 8/16/22 2,989,500 10,000,000 FHLB Discount Note, 6/18/08 9,686,800 3,000,000 FNMA, 6.250%, 6/6/22 2,995,641 2,000,000 FNMA, 6.000%, 9/24/27 1,980,750 -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 27,625,552 -------------------------------------------------------------------------------- CORPORATE BONDS -- 2.9% FINANCIALS -- 2.9% 3,750,000 Countrywide Financial Corp, MTN (A), 5.440%, 2/28/08 3,712,818 500,000 John Deere Capital Corp, MTN (A), 5.383%, 9/25/08 499,871 -------------------------------------------------------------------------------- 4,250,000 TOTAL CORPORATE BONDS $ 4,212,689 -------------------------------------------------------------------------------- FACE AMOUNT VALUE -------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 1.7% $2,488,000 PNC Bank, National Association 4.42% dated 09/28/07 due 10/01/07 repurchase proceeds $2,488,916 (Collateralized by $2,940,000 U.S. Government Obligation FGG 02480 6.50% due 12/01/36; fair value $3,009,825) $ 2,488,000 -------------------------------------------------------------------------------- MARKET SHARES VALUE -------------------------------------------------------------------------------- CASH EQUIVALENT -- 0.0% 571 BlackRock TempFund, Institutional Shares, 5.341%^ $ 571 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES AND REPURCHASE AGREEMENT -- 100.0% (Cost $145,398,635) $ 146,016,204 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.0% 29,230 -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 146,045,434 ================================================================================ ^ The rate shown is the 7-day effective yield as of September 30, 2007. (A) Variable rate security - the rate reflected is the rate in effect on September 30, 2007. ARM - Adjustable Rate Mortgage CMO - Collateralized Mortgage Obligation FFCB - Federal Farm Credit Bank FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association MTN - Medium Term Note REMIC - Real Estate Mortgage Investment Conduit See accompanying notes to financial statements. 154 -------------------------------------------------------------------------------- Portfolio of Investments Value Opportunities Fund - September 30, 2007 -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 96.4% SHARES VALUE -------------------------------------------------------------------------------- FINANCIAL SERVICES -- 22.8% Ace 33,350 $ 2,020,010 Assurant 26,100 1,396,350 Bank of New York 36,149 1,595,617 CIT Group 36,000 1,447,200 Citigroup 72,325 3,375,407 Host Hotels & Resorts+ 52,525 1,178,661 Loews 61,850 2,990,447 Morgan Stanley+ 21,400 1,348,200 PNC Financial Services Group 51,550 3,510,554 RenaissanceRe Holdings 32,475 2,124,190 US Bancorp 40,925 1,331,290 Wachovia+ 46,850 2,349,528 -------------------------------------------------------------------------------- 24,667,454 -------------------------------------------------------------------------------- ENERGY -- 15.5% Chesapeake Energy 44,250 1,560,255 Chevron Texaco 33,750 3,158,325 Exxon Mobil 58,625 5,426,330 Noble Energy 27,350 1,915,594 Peabody Energy 61,600 2,948,792 Valero Energy 25,400 1,706,372 -------------------------------------------------------------------------------- 16,715,668 -------------------------------------------------------------------------------- UTILITIES -- 15.1% AT&T 86,775 3,671,449 Comcast, Class A*+ 109,075 2,637,434 DPL+ 55,475 1,456,774 Edison International 23,475 1,301,689 Exelon 47,375 3,570,180 National Fuel Gas+ 37,100 1,736,651 Verizon Communications 44,225 1,958,283 -------------------------------------------------------------------------------- 16,332,460 -------------------------------------------------------------------------------- HEALTH CARE -- 10.9% Abbott Laboratories 28,575 1,532,192 Barr Pharmaceuticals* 29,800 1,695,918 CVS/Caremark 76,225 3,020,796 Johnson & Johnson 25,000 1,642,500 McKesson 26,350 1,549,117 Pfizer 51,225 1,251,427 WellPoint* 13,350 1,053,582 -------------------------------------------------------------------------------- 11,745,532 -------------------------------------------------------------------------------- PRODUCER DURABLES -- 7.8% General Electric 133,875 5,542,425 Joy Global 28,475 1,448,239 Teradyne* 102,575 1,415,535 -------------------------------------------------------------------------------- 8,406,199 -------------------------------------------------------------------------------- CONSUMER STAPLES -- 7.5% Altria Group 26,775 1,861,666 HJ Heinz 34,575 1,597,365 Kraft Foods, Class A 65,075 2,245,738 Procter & Gamble 33,425 2,351,115 -------------------------------------------------------------------------------- 8,055,884 -------------------------------------------------------------------------------- MATERIALS AND PROCESSING -- 7.2% Goldcorp+ 130,700 3,994,192 Shaw Group* 64,275 3,734,378 -------------------------------------------------------------------------------- 7,728,570 -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 6.0% McDonald's 38,350 2,088,925 Republic Services 55,287 1,808,438 Walt Disney 73,500 2,527,664 -------------------------------------------------------------------------------- 6,425,027 -------------------------------------------------------------------------------- TECHNOLOGY -- 3.6% Hewlett Packard 29,575 1,472,538 RF Micro Devices*+ 170,850 1,149,821 TriQuint Semiconductor* 261,350 1,283,229 -------------------------------------------------------------------------------- 3,905,588 -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 103,982,382 -------------------------------------------------------------------------------- INVESTMENT FUND -- 10.6% BlackRock Institutional Money Market Trust, 5.37% ** ^ 11,407,980 $ 11,407,980 -------------------------------------------------------------------------------- CASH EQUIVALENT -- 4.4% BlackRock TempFund, Institutional Shares, 5.34% ^ 4,737,822 $ 4,737,822 -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 111.4% (Cost $105,007,647) $ 120,128,184 LIABILITIES IN EXCESS OF OTHER ASSETS -- (11.4%) (12,321,097) -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 107,807,087 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan as of September 30, 2007, was $11,068,728. ** Represents collateral for securities loaned. ^ The rate shown is the 7-day effective yield as of September 30, 2007. See accompanying notes to financial statements. 155 -------------------------------------------------------------------------------- Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Touchstone Funds Group Trust We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Touchstone Funds Group Trust, comprised of Touchstone Clover Core Fixed Income Fund, Touchstone Diversified Small Cap Value Fund, Touchstone Short Duration Fixed Income Fund, Touchstone Ultra Short Duration Fixed Income Fund, Touchstone Small Cap Value Opportunities Fund, Touchstone Healthcare & Biotechnology Fund, Touchstone Strategic Value and High Income Fund, Touchstone Value Opportunities Fund (collectively, the "Former Turner Funds"), Touchstone Mid Cap Fund ("Former Westlake Fund"), Touchstone Diversified Value Fund, Touchstone Diversified Growth Fund, Touchstone Small Cap Fund, Touchstone Family Heritage Fund, Touchstone Pitcairn Taxable Bond Fund, Touchstone Tax-Exempt Bond Fund, Touchstone Sands Capital Select Growth Fund, and Touchstone International Equity Fund (collectively, the "Former Pitcairn Funds"), (the seventeen funds collectively referred to as the "Funds", and formerly known as the "Constellation Funds" which were comprised of the former funds listed in Note 1 to the Financial Statements) as of September 30, 2007, and the related statements of operations for the year then ended and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. We have also audited the financial highlights of the Former Turner Funds for each of the two years or periods in the period ended September 30, 2003 and the Former Westlake Fund for the period ended December 31, 2003. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended September 30, 2005 of the Former Turner Funds and Former Westlake Fund were audited by other auditors whose report dated November 29, 2005, expressed an unqualified opinion on those financial highlights. The financial highlights for each of the two years in the period ended October 31, 2003 of the Former Pitcairn Funds were audited by other auditors whose report dated December 12, 2003, expressed an unqualified an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds comprising Touchstone Funds Group Trust at September 30, 2007, the results of their operations for the year then ended and the changes in their net assets and financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the financial highlights referred to above are presented fairly, in all material respects, for the Former Turner Funds for each of the two years or periods in the period ended September 30, 2003, and for the Former Westlake Fund for the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Cincinnati, Ohio November 26, 2007 156 -------------------------------------------------------------------------------- Other Items (Unaudited) -------------------------------------------------------------------------------- PROXY VOTING DISCLOSURE The Sub-Advisor is responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Sub-Advisor uses in fulfilling this responsibility and information regarding how those proxies were voted during the twelve month period ended June 30, are available without charge upon request by calling toll free 1.800.543.0407. These items are also available on the Securities and Exchange Commission's (the Commission) website at http://www.sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The Trust files a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the Commission's website; (ii) may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; and (iii) will be made available to shareholders upon request by calling 1.800.543.0407. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. SCHEDULE OF SHAREHOLDER EXPENSES As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including reinvested dividends or other distributions; and (2) ongoing costs, including investment advisory fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six Months Ended September 30, 2007" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. 157 -------------------------------------------------------------------------------- Other Items (Continued) -------------------------------------------------------------------------------- SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES NET EXPENSE BEGINNING ENDING PAID DURING RATIO ACCOUNT ACCOUNT THE SIX MONTHS ANNUALIZED VALUE VALUE ENDED SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30, 2007 2007 2007 2007* ----------------------------------------------------------------------------------------------------------------- CLOVER CORE FIXED INCOME FUND Class I Actual 0.85% $ 1,000.00 $ 1,018.10 $ 4.30 Class I Hypothetical 0.85% $ 1,000.00 $ 1,020.81 $ 4.31 DIVERSIFIED GROWTH FUND Class A Actual 1.10% $ 1,000.00 $ 1,097.10 $ 5.78 Class A Hypothetical 1.10% $ 1,000.00 $ 1,019.55 $ 5.57 DIVERSIFIED SMALL CAP VALUE FUND Class A Actual 1.25% $ 1,000.00 $ 986.90 $ 6.21 Class A Hypothetical 1.25% $ 1,000.00 $ 1,018.82 $ 6.31 Class C Actual 1.82% $ 1,000.00 $ 983.30 $ 9.07 Class C Hypothetical 1.82% $ 1,000.00 $ 1,015.93 $ 9.21 Class Z Actual 1.45% $ 1,000.00 $ 986.40 $ 7.22 Class Z Hypothetical 1.45% $ 1,000.00 $ 1,017.79 $ 7.34 DIVERSIFIED VALUE FUND Class A Actual 1.09% $ 1,000.00 $ 1,038.50 $ 5.58 Class A Hypothetical 1.09% $ 1,000.00 $ 1,019.60 $ 5.53 Class C Actual 1.82% $ 1,000.00 $ 1,035.20 $ 9.29 Class C Hypothetical 1.82% $ 1,000.00 $ 1,015.94 $ 9.20 FAMILY HERITAGE(R) FUND Class A Actual 1.30% $ 1,000.00 $ 1,051.60 $ 6.69 Class A Hypothetical 1.30% $ 1,000.00 $ 1,018.55 $ 6.58 Class C Actual 2.04% $ 1,000.00 $ 1,046.40 $ 10.45 Class C Hypothetical 2.04% $ 1,000.00 $ 1,014.86 $ 10.29 HEALTHCARE & BIOTECHNOLOGY FUND Class A Actual 1.55% $ 1,000.00 $ 1,137.50 $ 8.30 Class A Hypothetical 1.55% $ 1,000.00 $ 1,017.30 $ 7.84 Class C Actual 2.23% $ 1,000.00 $ 1,134.70 $ 11.92 Class C Hypothetical 2.23% $ 1,000.00 $ 1,013.90 $ 11.25 INTERNATIONAL EQUITY FUND Class A Actual 1.45% $ 1,000.00 $ 1,090.00 $ 7.60 Class A Hypothetical 1.45% $ 1,000.00 $ 1,017.80 $ 7.33 Class C Actual 2.20% $ 1,000.00 $ 1,085.60 $ 11.48 Class C Hypothetical 2.20% $ 1,000.00 $ 1,014.06 $ 11.09
158 -------------------------------------------------------------------------------- Other Items (Continued) -------------------------------------------------------------------------------- SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES NET EXPENSE BEGINNING ENDING PAID DURING RATIO ACCOUNT ACCOUNT THE SIX MONTHS ANNUALIZED VALUE VALUE ENDED SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30, 2007 2007 2007 2007* -------------------------------------------------------------------------------------------------------------- MID CAP FUND Class A Actual** 0.95% $ 1,000.00 $ 984.60 $ 3.60 Class A Hypothetical** 0.95% $ 1,000.00 $ 1,015.56 $ 3.65 Class C Actual** 1.35% $ 1,000.00 $ 983.50 $ 5.12 Class C Hypothetical** 1.35% $ 1,000.00 $ 1,014.01 $ 5.20 Class Y Actual 0.90% $ 1,000.00 $ 1,046.10 $ 4.62 Class Y Hypothetical 0.90% $ 1,000.00 $ 1,020.56 $ 4.56 Class Z Actual 1.14% $ 1,000.00 $ 1,045.70 $ 5.84 Class Z Hypothetical 1.14% $ 1,000.00 $ 1,019.36 $ 5.76 PITCAIRN TAXABLE BOND FUND Class II Actual 0.89% $ 1,000.00 $ 1,018.20 $ 4.50 Class II Hypothetical 0.89% $ 1,000.00 $ 1,020.61 $ 4.51 SANDS CAPITAL SELECT GROWTH FUND Class Y Actual 0.97% $ 1,000.00 $ 1,142.30 $ 5.23 Class Y Hypothetical 0.97% $ 1,000.00 $ 1,020.19 $ 4.93 Class Z Actual 1.22% $ 1,000.00 $ 1,140.70 $ 6.57 Class Z Hypothetical 1.22% $ 1,000.00 $ 1,018.93 $ 6.20 SHORT DURATION FIXED INCOME FUND Class Z Actual 0.74% $ 1,000.00 $ 1,022.60 $ 3.75 Class Z Hypothetical 0.74% $ 1,000.00 $ 1,021.36 $ 3.75 SMALL CAP FUND Class A Actual 1.10% $ 1,000.00 $ 982.40 $ 5.47 Class A Hypothetical 1.10% $ 1,000.00 $ 1,019.55 $ 5.57 Class C Actual 1.84% $ 1,000.00 $ 978.30 $ 9.12 Class C Hypothetical 1.84% $ 1,000.00 $ 1,015.84 $ 9.30 SMALL CAP VALUE OPPORTUNITIES FUND Class A Actual*** 1.49% $ 1,000.00 $ 950.30 $ 2.79 Class A Hypothetical*** 1.49% $ 1,000.00 $ 1,006.73 $ 2.87 Class C Actual*** 2.09% $ 1,000.00 $ 949.90 $ 3.91 Class C Hypothetical*** 2.09% $ 1,000.00 $ 1,005.58 $ 4.02 Class Z Actual 1.44% $ 1,000.00 $ 1,015.90 $ 7.26 Class Z Hypothetical 1.44% $ 1,000.00 $ 1,017.86 $ 7.27
159 -------------------------------------------------------------------------------- Other Items (Continued) -------------------------------------------------------------------------------- SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
EXPENSES NET EXPENSE BEGINNING ENDING PAID DURING RATIO ACCOUNT ACCOUNT THE SIX MONTHS ANNUALIZED VALUE VALUE ENDED SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30, 2007 2007 2007 2007* ------------------------------------------------------------------------------------------------------------ STRATEGIC VALUE AND HIGH INCOME FUND Class A Actual 0.50% $ 1,000.00 $ 990.60 $ 2.49 Class A Hypothetical 0.50% $ 1,000.00 $ 1,022.56 $ 2.53 Class C Actual 1.25% $ 1,000.00 $ 987.60 $ 6.23 Class C Hypothetical 1.25% $ 1,000.00 $ 1,018.80 $ 6.33 Class Y Actual 0.25% $ 1,000.00 $ 991.80 $ 1.25 Class Y Hypothetical 0.25% $ 1,000.00 $ 1,023.82 $ 1.27 TAX-EXEMPT BOND FUND Class A Actual 0.70% $ 1,000.00 $ 1,012.30 $ 3.53 Class A Hypothetical 0.70% $ 1,000.00 $ 1,021.56 $ 3.55 ULTRA SHORT DURATION FIXED INCOME FUND Class Z Actual 0.69% $ 1,000.00 $ 1,023.20 $ 3.50 Class Z Hypothetical 0.69% $ 1,000.00 $ 1,021.61 $ 3.50 VALUE OPPORTUNITIES FUND Class A Actual 1.31% $ 1,000.00 $ 1,071.20 $ 6.82 Class A Hypothetical 1.31% $ 1,000.00 $ 1,018.49 $ 6.64 Class C Actual 1.88% $ 1,000.00 $ 1,068.00 $ 9.73 Class C Hypothetical 1.88% $ 1,000.00 $ 1,015.66 $ 9.48 Class Z Actual 1.11% $ 1,000.00 $ 1,071.90 $ 5.77 Class Z Hypothetical 1.11% $ 1,000.00 $ 1,019.50 $ 5.62
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by [number of days in most recent fiscal half-year/365] (to reflect the one-half year period). ** The example is based on an investment of $1,000 invested at the beginning of the period (May 14, 2007) and held for the entire period through September 30, 2007. *** The example is based on an investment of $1,000 invested at the beginning of the period (July 23, 2007) and held for the entire period through September 30, 2007. 160 -------------------------------------------------------------------------------- Management of the Trust (Unaudited) -------------------------------------------------------------------------------- Listed below is basic information regarding the Trustees and principal officers of the Trust. The Trust's Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling 1.800.543.0407.
INTERESTED TRUSTEES(1): ----------------------------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4) ----------------------------------------------------------------------------------------------------------------------------------- Jill T. McGruder Trustee and Until Senior Vice President of The Western 52 Director of Touchstone Advisors, Inc President retirement at and Southern Life Insurance Company; LaRosa's (a 303 Broadway age 75 or until President and a director of IFS restaurant chain). Cincinnati, OH she resigns or Financial Services, Inc. (a holding Year of Birth: 1955 is removed company); Director of Capital Trustee since Analysts Incorporated (an investment 1999 advisor and broker-dealer), Integrated Investment Services, Inc. until April 2007 (the Trust's former administrator, accounting and transfer agent), IFS Fund Distributors, Inc. (a broker-dealer), Touchstone Advisors, Inc. (the Trust's investment advisor) and Touchstone Securities, Inc. (the Trust's distributor); President and a director of IFS Agency Services, Inc. (an insurance agency), W&S Financial Group Distributors, Inc. (an annuity distributor) and IFS Systems, Inc.; Senior Vice President and a director of W&S Brokerage Services, Inc. (a broker-dealer); Director, President and Chief Executive Officer of Integrity Life Insurance Company and National Integrity Life Insurance Company; President of Touchstone Tax-Free Trust, Touchstone Investment Trust, Touchstone Variable Series Trust, Touchstone Strategic Trust, Touchstone Funds Group Trust and Touchstone Institutional Funds Trust; President of Touchstone Advisors, Inc., and Touchstone Securities, Inc. until 2004. ----------------------------------------------------------------------------------------------------------------------------------- John F. Barrett Trustee Until Chairman of the Board, President and 52 Director of The The Western and retirement at Chief Executive Officer of The Andersons (an Southern Life age 75 or until Western and Southern Life Insurance agribusiness and Insurance Company he resigns or Company, Western-Southern Life retailing 400 Broadway is Assurance Company and Western & company); Cincinnati, OH removed Southern Financial Group, Inc.; Convergys Year of Birth: 1949 Trustee since Director and Chairman of Columbus Corporation (a 2002 Life Insurance Company; Fort provider of Washington Investment Advisors, business support Inc., Integrity Life Insurance systems and Company and National Integrity Life customer care Insurance Company; Director of Eagle operations) and Realty Group, Inc., Eagle Realty Fifth Third Bancorp. Investments, Inc. and Integrated Investment Services, Inc. (until April 2007); Director, Chairman and CEO of WestAd, Inc.; President and Trustee of Western & Southern Financial Fund, Inc. -----------------------------------------------------------------------------------------------------------------------------------
161 -------------------------------------------------------------------------------- Management of the Trust (Continued) --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES: ----------------------------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4) ----------------------------------------------------------------------------------------------------------------------------------- Phillip R. Cox Trustee Until President and Chief Executive 52 Director of the 303 Broadway retirement at Officer of Cox Financial Corp. Federal Reserve Cincinnati, OH age 75 or until (a financial services company). Bank of Cleveland Year of Birth: 1947 he resigns or and Duke Energy (a is removed utility company); Trustee since Chairman of The 1994 Cincinnati Bell Telephone Company LLC; Director of The Timken Company (a manufacturer of bearings, alloy steels and related products and services); Director of Diebold, Incorporated (a provider of integrated self-service delivery and security systems). ----------------------------------------------------------------------------------------------------------------------------------- H. Jerome Lerner Trustee Until Principal of HJL Enterprises (a 52 None 303 Broadway retirement at privately held investment company). Cincinnati, OH age 75 or until Year of Birth: 1938 he resigns or is removed Trustee since 1999 ----------------------------------------------------------------------------------------------------------------------------------- Donald C. Siekmann Trustee Until Executive for Duro Bag Manufacturing 52 Trustee of Jewish 303 Broadway retirement at Co. (a bag manufacturer); President Hospital, Greater Cincinnati, OH age 75 or until of Shor Foundation for Epilepsy Cincinnati Arts & Year of Birth: 1938 he resigns or Research (a charitable foundation); Education Center is removed Trustee of Riverfront Funds (mutual and Cincinnati Arts Trustee since funds) from 1999 - 2004. Association 2005 -----------------------------------------------------------------------------------------------------------------------------------
162 -------------------------------------------------------------------------------- Management of the Trust (Continued) --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED): ----------------------------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4) ----------------------------------------------------------------------------------------------------------------------------------- Robert E. Stautberg Trustee Until Retired Partner of KPMG LLP (a 52 Trustee of Tri-Health 303 Broadway retirement at certified public accounting Physician Enterprise Cincinnati, OH age 75 or until firm). Vice President of St. Xavier Corporation. Year of Birth: 1934 he resigns or High School. is removed Trustee since 1994 ----------------------------------------------------------------------------------------------------------------------------------- John P. Zanotti Trustee Until CEO, Chairman and Director of 52 None 303 Broadway retirement at Avaton, Inc. (a wireless Cincinnati, OH age 75 or until entertainment company). President Year of Birth: 1948 he resigns or is of Cincinnati Biomedical (a life removed science and economic development Trustee since company) from July 2003 until 2005. 2002 CEO, Chairman and Director of Astrum Digital Information (an information monitoring company) from 2000 until 2001; President of Great American Life Insurance Company from 1999 until 2000. -----------------------------------------------------------------------------------------------------------------------------------
(1) Ms. McGruder, as a director of Touchstone Advisors, Inc., the Trust's investment advisor, and Touchstone Securities, Inc., the Trust's distributor and an officer of affiliates of the advisor and distributor, is an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. Mr. Barrett, as President and Chairman of The Western and Southern Life Insurance Company and Western-Southern Life Assurance Company, parent companies of Touchstone Advisors, Inc. and Touchstone Securities, Inc., Chairman of Fort Washington Investment Advisors, Inc., a Trust sub-advisor and an officer of other affiliates of the advisor and distributor is an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. (2) Each Trustee is elected to serve until the age of 75 or until he or she sooner resigns or is removed. (3) The Touchstone Fund Complex consists of 17 series of the Trust, 5 series of Touchstone Investment Trust, 8 series of Touchstone Strategic Trust, 4 series of Touchstone Tax-Free Trust, 15 variable annuity series of Touchstone Variable Series Trust, and 3 series of Touchstone Institutional Funds Trust. (4) Each Trustee is also a Trustee of Touchstone Strategic Trust, Touchstone Tax-Free Trust, Touchstone Variable Series Trust, Touchstone Investment Trust, and Touchstone Institutional Funds Trust. 163 -------------------------------------------------------------------------------- Management of the Trust (Continued) --------------------------------------------------------------------------------
PRINCIPAL OFFICERS(1): ---------------------------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(2) HELD ---------------------------------------------------------------------------------------------------------------------------------- Jill T. McGruder President Until resignation, See biography above. 52 See biography Touchstone and Trustee removal or above. Advisors, Inc. disqualification 303 Broadway President since Cincinnati, OH 2004; President Year of Birth: 1955 from 2000-2002 ---------------------------------------------------------------------------------------------------------------------------------- Brian E. Hirsch Vice Until resignation, Senior Vice President-Compliance 52 None Touchstone Advisors, Inc. President removal or of IFS Financial Services, Inc., 303 Broadway and Chief disqualification Director of Compliance of W&S Cincinnati, OH Compliance Vice President Brokerage Services, Inc.; Chief Year of Birth: 1956 Officer since 2003 Compliance Officer of Puglisi & Co. from 2001 until 2002. ---------------------------------------------------------------------------------------------------------------------------------- James H. Grifo Vice Until resignation, President of Touchstone 52 None Touchstone Securities, Inc. President removal or Securities, Inc. and Touchstone 303 Broadway disqualification Advisors, Inc.; Managing Director, Cincinnati, OH Vice President Deutsche Asset Management until Year of Birth: 1951 since 2004 2001. ---------------------------------------------------------------------------------------------------------------------------------- William A. Dent Vice Until resignation, Senior Vice President of 52 None Touchstone Advisors, Inc. President removal or Touchstone Advisors, Inc.; 303 Broadway disqualification Marketing Director of Promontory Cincinnati, OH Vice President Interfinancial Network from Year of Birth: 1963 since 2004 2002-2003; Senior Vice President of McDonald Investments from 1998 - 2001. ---------------------------------------------------------------------------------------------------------------------------------- Terrie A. Wiedenheft Controller Until resignation, Senior Vice President, Chief 52 None Touchstone and Treasurer removal or Financial Officer and Treasurer of Advisors, Inc. disqualification Integrated Investment Services, 303 Broadway Controller since Inc. (until April 2007), IFS Fund Cincinnati, OH 2000 Distributors, Inc. and W&S Year of Birth: 1962 Treasurer since Brokerage Services, Inc.; Chief 2003 Financial Officer of IFS Financial Services, Inc., Touchstone Advisors, Inc. and Touchstone Securities, Inc. and Assistant Treasurer of Fort Washington Investment Advisors, Inc. ---------------------------------------------------------------------------------------------------------------------------------- Jay S. Fitton Secretary Until resignation, Assistant Vice President and 52 None JP Morgan removal or Senior Counsel of JP Morgan; 303 Broadway disqualification Director and Senior Counsel of Cincinnati, OH Secretary since 2006 Integrated Investment Services, Year of Birth: 1970 Inc. and IFS Fund Distributors, Inc. until April 2007. ----------------------------------------------------------------------------------------------------------------------------------
(1) Each officer also holds the same office with Touchstone Tax-Free Trust, Touchstone Strategic Trust, Touchstone Variable Series Trust, Touchstone Investment Trust, and Touchstone Institutional Funds Trust. (2) The Touchstone Fund Complex consists of 17 series of the Trust, 5 series of Touchstone Investment Trust, 8 series of Touchstone Strategic Trust, 4 series of Touchstone Tax-Free Trust, 15 series of Touchstone Variable Series Trust, and 3 series of Touchstone Institutional Funds Trust. 164 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. TOUCHSTONE INVESTMENTS DISTRIBUTOR Touchstone Securities, Inc.* 303 Broadway Cincinnati, Ohio 45202-4203 800.638.8194 www.touchstoneinvestments.com INVESTMENT ADVISOR Touchstone Advisors, Inc.* 303 Broadway Cincinnati, Ohio 45202-4203 TRANSFER AGENT JP Morgan P.O. Box 5354 Cincinnati, Ohio 45201-5354 SHAREHOLDER SERVICE 800.543.0407 * A Member of Western & Southern Financial Group(R) -------------------------------------------------------------------------------- [LOGO] TOUCHSTONE(R) INVESTMENTS 303 Broadway, Suite 1100 Cincinnati, OH 45202-4203 TSF-56-TFGT-AR-0710 ITEM 2. CODE OF ETHICS. At the end of the period covered by this report, the registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that the registrant has at least one audit committee financial expert serving on its audit committee. Mr. Robert Stautberg is the registrant's audit committee financial expert and is an independent trustee within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees. Audit fees totaled approximately $247,100 for the September 30, 2007 fiscal year and approximately $342,000 for the September 30, 2006 fiscal year, including fees associated with the annual audit and filings of the registrant's Form N-1A and Form N-SAR. $14,000 of the 2007 fees are associated with additional filings of Form N1-A and Form N-14. (b) Audit-Related Fees. Audit-related fees totaled approximately $116,000 for the September 30, 2007 fiscal year and $0 for the September 30, 2006 fiscal year and consisted of SAS 70 internal control reviews of the registrant's fund accountant and transfer agent during both years. (c) Tax Fees. Tax fees totaled approximately $96,750 for the September 30, 2007 fiscal year and $38,000 for the September 30, 2006 fiscal year and consisted of fees for tax compliance and tax consultation services during both years. (d) All Other Fees. There were no fees for all other services to the registrant during the September 30, 2007 or September 30, 2006 fiscal years. (e) (1) Audit Committee Pre-Approval Policies. The Audit Committee's pre-approval policies describe the types of audit, audit-related, tax and other services that have the general pre-approval of the Audit Committee. The pre-approval policies provide that annual audit service fees, tax services not specifically granted pre-approval, services exceeding pre-approved cost levels and other services that have not received general pre-approval will be subject to specific pre-approval by the Audit Committee. The pre-approval policies further provide that the Committee may grant general pre-approval to other audit services (statutory audits and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings), audit-related services (accounting consultations related to accounting, financial reporting or disclosure matters not classified as "audit services," assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities, agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters and assistance with internal control reporting requirements under Form N-SAR and Form N-CSR), tax services that have historically been provided by the auditor that the Committee believes would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence and permissible non-audit services classified as "all other services" that are routine and recurring services. (e)(2) All services described in paragraphs (b) through (d) of Item 4 were approved by the Audit Committee. (f) Not applicable (g) The aggregate non-audit fees for services to the registrant, its investment adviser (excluding its sub-advisor) and any entity controlling, controlled by or under common control with the adviser that provides ongoing services to the registrant were approximately $295,500 for the fiscal year ended September 30, 2007 and $101,700 for the fiscal year ended September 30, 2006. (h) Not applicable ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable ITEM 6. SCHEDULE OF INVESTMENTS. The Schedule of Investments in securities of unaffiliated issuers is included in the Annual Report. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Governance Committee will consider shareholder recommendations for nomination to the Board only in the event that there is a vacancy on the Board. Shareholders who wish to submit recommendations for nominations to the Board to fill the vacancy must submit their recommendations in writing to Phillip R. Cox, Chairman of the Governance Committee, c/o Touchstone, 303 Broadway, Suite 1100, Cincinnati, OH 45202. Shareholders should include appropriate information on the background and qualifications of any person recommended to the Governance Committee (e.g., a resume), as well as the candidate's contact information and a written consent from the candidate to serve if nominated and elected. Shareholder recommendations for nominations to the Board will be accepted on an ongoing basis and such recommendations will be kept on file for consideration in the event of a future vacancy on the Board. ITEM 11. CONTROLS AND PROCEDURES. (a) Based on an evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures are effective as of a date within 90 days of the filing date of this report. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) The Code of Ethics for Senior Financial Officers was filed on December 9, 2005 with Registrant's N-CSR for the September 30, 2005 fiscal year and is hereby incorporated by reference. (a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed herewith. (b) Certification required by Item 11(b) of Form N-CSR is filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Touchstone Funds Group Trust ---------------------------- By (Signature and Title) /s/ Jill T. McGruder -------------------------------------------- Jill T. McGruder President Date: December 3, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Jill T. McGruder -------------------------------------------- Jill T. McGruder President Date: December 3, 2007 /s/ Terrie A. Wiedenheft -------------------------------------------- Terrie A. Wiedenheft Controller & Treasurer Date: December 3, 2007