-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H90V5t7xz7LGKqHrO12ZE8fY5HmQ1+NjkMGjkLqx/KjnsP0iTboN5dbn8+8n7l1m y51w4qmnEikzbVLKlnVU2w== 0001144204-08-068421.txt : 20081209 0001144204-08-068421.hdr.sgml : 20081209 20081209100307 ACCESSION NUMBER: 0001144204-08-068421 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081209 DATE AS OF CHANGE: 20081209 EFFECTIVENESS DATE: 20081209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOUCHSTONE FUNDS GROUP TRUST CENTRAL INDEX KEY: 0000914243 IRS NUMBER: 680325521 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08104 FILM NUMBER: 081237300 BUSINESS ADDRESS: STREET 1: 303 BROADWAY STREET 2: SUITE 1100 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5133628000 MAIL ADDRESS: STREET 1: 303 BROADWAY STREET 2: SUITE 1100 CITY: CINCINNATI STATE: OH ZIP: 45202 FORMER COMPANY: FORMER CONFORMED NAME: CONSTELLATION FUNDS DATE OF NAME CHANGE: 20040412 FORMER COMPANY: FORMER CONFORMED NAME: ALPHA SELECT FUNDS DATE OF NAME CHANGE: 19981216 FORMER COMPANY: FORMER CONFORMED NAME: TIP INSTITUTIONAL FUNDS DATE OF NAME CHANGE: 19971205 0000914243 S000005840 TOUCHSTONE SANDS CAPITAL SELECT GROWTH FUND C000016013 CLASS Y CFSIX C000016014 CLASS Z PTSGX 0000914243 S000005841 TOUCHSTONE SHORT DURATION FIXED INCOME FUND C000016015 CLASS Z TSDGX 0000914243 S000005842 TOUCHSTONE MID CAP FUND C000016016 Class Y TMCPX C000039629 Class Z TMCTX C000048891 Class A C000048892 Class C 0000914243 S000005847 TOUCHSTONE VALUE OPPORTUNITIES FUND C000016021 CLASS Z CCEVX C000039632 Class A C000039633 Class C 0000914243 S000005848 TOUCHSTONE DIVERSIFIED SMALL CAP VALUE FUND C000016022 CLASS Z TCSVX C000039634 Class A C000039635 Class C 0000914243 S000005850 TOUCHSTONE CLOVER CORE FIXED INCOME FUND C000016024 CLASS I TCFIX 0000914243 S000006455 TOUCHSTONE HEALTHCARE AND BIOTECHNOLOGY FUND C000017653 CLASS A THBCX C000039640 Class C 0000914243 S000006456 TOUCHSTONE SMALL CAP VALUE OPPORTUNITIES FUND C000017654 CLASS Z TSVOX 0000914243 S000006457 TOUCHSTONE ULTRA SHORT DURATION FIXED INCOME FUND C000017655 CLASS Z TSDOX 0000914243 S000019681 TOUCHSTONE PREMIUM YIELD EQUITY FUND C000055086 CLASS A C000055087 CLASS C C000067757 Class Y 0000914243 S000023404 Touchstone International Growth Fund C000068616 Class A C000068617 Class C C000068618 Class Y N-CSR 1 v133782_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: 9/30/08 ---------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Touchstone Funds Group Trust Annual Report - -------------------------------------------------------------------------------- SEPTEMBER 30, 2008 Annual Report - -------------------------------------------------------------------------------- TOUCHSTONE FUNDS GROUP TRUST Touchstone Clover Core Fixed Income Fund Touchstone Diversified Small Cap Value Fund Touchstone Healthcare and Biotechnology Fund Touchstone International Growth Fund Touchstone Mid Cap Fund Touchstone Premium Yield Equity Fund Touchstone Sands Capital Select Growth Fund Touchstone Short Duration Fixed Income Fund Touchstone Small Cap Value Opportunities Fund Touchstone Ultra Short Duration Fixed Income Fund Touchstone Value Opportunities Fund - -------------------------------------------------------------------------------- [LOGO] TOUCHSTONE(R) INVESTMENTS - -------------------------------------------------------------------------------- Table of Contents - -------------------------------------------------------------------------------- Page - -------------------------------------------------------------------------------- Letter from the President 3 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) 4-27 - -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Unaudited) 28-30 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities 31-36 - -------------------------------------------------------------------------------- Statements of Operations 37-39 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets 40-47 - -------------------------------------------------------------------------------- Financial Highlights 48-71 - -------------------------------------------------------------------------------- Notes to Financial Statements 72-90 - -------------------------------------------------------------------------------- Portfolios of Investments: - -------------------------------------------------------------------------------- Clover Core Fixed Income Fund 91-92 - -------------------------------------------------------------------------------- Diversified Small Cap Value Fund 93-94 - -------------------------------------------------------------------------------- Healthcare and Biotechnology Fund 95 - -------------------------------------------------------------------------------- International Growth Fund 96-97 - -------------------------------------------------------------------------------- Mid Cap Fund 98-99 - -------------------------------------------------------------------------------- Premium Yield Equity Fund 100 - -------------------------------------------------------------------------------- Sands Capital Select Growth Fund 101 - -------------------------------------------------------------------------------- Short Duration Fixed Income Fund 102-103 - -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund 104-105 - -------------------------------------------------------------------------------- Ultra Short Duration Fixed Income Fund 106-107 - -------------------------------------------------------------------------------- Value Opportunities Fund 108 - -------------------------------------------------------------------------------- Report of Independent Registered Public Accounting Firm 109 - -------------------------------------------------------------------------------- Other Items (Unaudited) 110-112 - -------------------------------------------------------------------------------- Management of the Trust (Unaudited) 113-116 - -------------------------------------------------------------------------------- 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, 2008. The crisis that began in the subprime mortgage area last year has intensified, culminating in a series of events that were once unthinkable with the nationalization of several companies, collapse of venerable investment firms and a number of government-sponsored rescues. Congress passed a $700 billion bailout bill, which authorized the Treasury to buy troubled assets from financial institutions. There is also growing realization that problems are global in nature, as several institutions in Europe and other parts of the world have required government assistance. These developments have taken a heavy toll on financial markets. Credit markets have seized up in the United States, and the difference in the spreads between investment-grade and high-yield bonds are at or near all-time highs. In addition, there has been unprecedented illiquidity in short-term bank financing and the commercial paper market, and money market funds have come under scrutiny. In the wake of all this, global equity markets have fallen decisively into bear territory, with the major world indices down by 30% or more. During the year, the U.S. equity markets were extremely volatile; however, U.S. stocks did better than international stocks. Small-cap stocks outperformed large-cap stocks. Growth surpassed value for the second year in a row. One positive is that oil and other commodity prices have fallen significantly from their peaks, and we anticipate significant declines in headline inflation readings in the U.S. and abroad before too long. With the U.S. dollar having rebounded off its lows, the Federal Reserve recently eased monetary policy in a coordinated move with other central banks. We continue to believe that diversification is essential to balancing risk and return. We recommend that you continue to work with your financial professional to employ a sound asset allocation strategy that invests in a combination of stock, bond, and money market mutual funds to help keep your financial strategy on course. In the current market climate, it is critical to maintain a long-term approach to gain the full potential benefits of investing. Touchstone is committed to providing investors access to institutional money managers who act in a sub-advisory capacity. We hope that you will find the enclosed commentaries helpful. We greatly appreciate your continued support. Thank you for including Touchstone as part of your investment plan. Sincerely, /s/ Jill T. McGruder Jill T. McGruder President Touchstone Funds Group Trust 3 - -------------------------------------------------------------------------------- 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 macroeconomic outlook with individual security selection evaluation and techniques. Factors such as the business cycle, Federal Reserve policy, and credit spreads are taken into account to establish an overall framework for sector allocation and yield curve positioning, as well as the overall posture of the Fund. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Clover Core Fixed Income Fund was -1.95% for the fiscal year ended September 30, 2008. The total return of the Lehman Brothers U.S. Aggregate Index was 3.65% for the same period. The Fund's weak performance was predominantly driven by several individual security holdings which experienced severe price declines. The negative impact was magnified due to the steady redemptions from the Fund recently. Adverse liquidity conditions in the bond market led Clover to sell the most liquid holdings to meet these redemptions, thus leaving the less liquid and weaker performing securities at a much higher percentage of the Fund than desired. The Fund's exposure to corporate bonds, specifically in the Financials sector, was the primary detractor from performance. Individual holdings exhibited unprecedented price declines as some companies declared bankruptcy while others experienced extremely poor liquidity and difficulty in raising capital. These individual holdings include Key Bank, Lehman Brothers, Morgan Stanley and SLM Corp. It was nothing less than an extraordinary environment for the bond market. The subprime crisis morphed into a full fledged credit crunch and financial meltdown. This was marked by extremely poor liquidity, limited access to capital, and waning confidence. These conditions drove companies to a massive deleveraging effort which led to a series of negative impacts. Balance sheet assets were marked down significantly. This forced major write downs. The losses needed to be replaced with fresh capital but there was none available in many instances. The companies with the heaviest reliance on funding suffered the most and were forced into bankruptcy, merger or survival mode. Our strategy, which anticipated a steeper yield curve, led us to structured credit notes issued by Morgan Stanley and Lehman Brothers. The potential benefit of this approach was offset by significant price declines in the bonds due to the weakening credit quality of the issuers. Other investments in financial bonds appeared to offer good value, but detracted from performance due to market conditions. The combination of poor market liquidity and Fund redemptions resulted in higher than desired exposure to spread sectors. The Fund's positioning is now dominated by what have become several high beta positions. While the Fund remains predominantly invested in high quality holdings and is relatively neutral in its sector weights, it has a small allocation to high yield bonds. However, the most meaningful aspect of the Fund's positioning is its holdings in the corporate bonds discussed above. 4 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- We expect to see a continued level of above average volatility in the bond market and in the Fund for the foreseeable future. We believe that recent intervention by global central banks has brought our economy back from the brink but we will have to work through a generally weak economy for the next twelve months. With that being said, outside of its Lehman Brothers bond, we believe that all other holdings are of good quality. With that being the case, we expect to eventually see some unusual positive returns from these holdings in the future as they move back towards par from their extremely depressed valuations. The realization of this may be impacted by cash flows. If redemptions continue to be significant, some of these holdings may have to be liquidated before their recovery develops. COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CLOVER CORE FIXED INCOME FUND - CLASS I* AND THE LEHMAN BROTHERS AGGREGATE INDEX - -------------------------------------------------------------------------------- CLOVER CORE FIXED INCOME FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years 10 Years Class I -1.95% 2.02% 3.90% - -------------------------------------------------------------------------------- [LINE CHART] CLOVER CORE FIXED INCOME FUND - CLASS I LEHMAN BROTHERS AGGREGATE INDEX - --------------------------------------- ------------------------------- Date Date 9/30/98 10000 9/30/98 10000 9/30/99 9822 9/30/99 9963 9/30/00 10532.13 9/30/00 10658.42 9/30/01 11792.83 9/30/01 12038.68 9/30/02 12836.49 9/30/02 13074.01 9/30/03 13269.08 9/30/03 13780.01 9/30/04 13663.17 9/30/04 14287.11 9/30/05 13976.06 9/30/05 14687.15 9/30/06 14375.78 9/30/06 15226.17 9/30/07 14960.87 9/30/07 16008.79 9/30/08 14668 9/30/08 16593.11 * The initial public offering of Class I shares commenced on December 6, 1991. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 5 - -------------------------------------------------------------------------------- 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 -8.89% for the fiscal year ended September 30, 2008. The total return of the Russell 2000(R) Value Index was -12.25% for the same period. The Fund's relative outperformance was driven by stock selection in the Financials, Energy and Industrials sectors. Strength in the Financials sector was achieved by careful selection of more conservative credit profiles and avoidance of troubled real estate geographies. The Energy sector was aided by an emphasis on the Natural Gas and Coal industries. The Industrials sector was driven by stock selection in the Machinery industry. These strengths were partially offset by weak selection in the Health Care and Information Technology sectors caused by unrelated negative security-specific events. Among the top performing stocks were Alpha Natural Resources, where a tightening coal supply/demand balance drove improvement in investor sentiment; Bucyrus International, which was buoyed by strength in the mining equipment industry; and Cleveland Cliffs Inc., where emerging economic growth led iron ore prices higher. Detractors from performance included Dollar Thrifty Automotive Group which was hurt by declining travel demand and lower auto resale prices; Pilgrim's Pride Corp. where high feed costs destroyed company profitability, leading to bankruptcy concerns; and Sotheby's, where investor sentiment weakened in anticipation of deterioration in the art market. Market conditions were challenging during the past year, as the stock market repeatedly absorbed bad economic news and large dislocations in the Financials sector. Clover's strategies involve identifying inexpensive stocks with improving fundamentals. We also manage portfolio-level risk as we deploy capital into Fund holdings. These strategies and techniques have allowed the Fund to historically produce attractive returns relative to the benchmark both during the past year and since inception. We believe the Fund is positioned prudently with respect to both risk and opportunity. The Fund remains fully diversified with representation in all major economic sectors. Looking forward, in the near-term we expect a continuation of recent market conditions, with volatility remaining at elevated levels. In this environment, the Fund's diversified structure is useful for diminishing security specific risk, in effect reducing the damage any single issue can cause. Simultaneously, the environment remains excellent for patient stock selection, with valuations in many sectors approaching extremely attractive levels. As always, our goal is to provide an optimal portfolio of inexpensive stocks with improving fundamentals to take advantage of the historically excellent long-term returns of small-cap value stocks. 6 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years 10 Years Class A -14.08% 7.92% 11.60% Class C -9.56% 8.43% 11.45% Class Z -8.89% 9.18% 12.25% - -------------------------------------------------------------------------------- [LINE CHART] DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z RUSSELL 2000 VALUE INDEX - ------------------------------------------ ------------------------ Date Date 9/30/98 10000 9/30/98 10000 9/30/99 12182 9/30/99 10583 9/30/00 15786.65 9/30/00 12209.61 9/30/01 17704.73 9/30/01 12893.35 9/30/02 16166.19 9/30/02 12705.1 9/30/03 20476.1 9/30/03 16727.54 9/30/04 25333.03 9/30/04 21019.82 9/30/05 29459.78 9/30/05 24750.84 9/30/06 31955.02 9/30/06 28218.44 9/30/07 34869.32 9/30/07 29936.94 9/30/08 31761 9/30/08 26269.66 * The chart above represents performance for Class Z shares only, which will vary from the performance of Class A and Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A and Class C shares commenced on November 20, 2006 and the initial public offering of Class Z shares commenced on February 28, 1996. The Class A and Class C performance information is calculated using the historical performance of Class Z. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 7 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE HEALTHCARE & BIOTECHNOLOGY FUND SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Healthcare and Biotechnology Fund invests primarily in common stocks of healthcare and biotechnology companies. The Fund employs rigorous fundamental research with supporting qualitative and technical analysis. Its bottom-up strategy emphasizes fundamental analysis. The Fund seeks companies with improving fundamentals, superior earnings prospects, reasonable valuations, and favorable trading-volume and price patterns. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Healthcare and Biotechnology Fund was -7.82% for the fiscal year ended September 30, 2008. The total return of the S&P 500 Healthcare Index was -12.21% for the same period. During the 12-month period ending September 30, 2008, stock selection in Health Care Providers & Services and positioning in the Biotechnology industry contributed the most to the Fund's relative performance. From a positioning standpoint, stock selection in Health Care Providers & Services helped relative returns. This industry continues to come under significant pressure, as companies in this group have reported lackluster quarterly earnings reports with costs trending worse than expected. Lower "Medicare Advantage" enrollment figures have also hurt the group and the upcoming election will also be a detriment to the group regardless of the political outcome. Within the Biotechnology industry, the Fund emphasized companies that produce orphan drugs, which are for diseases that afflict a small population (less than 200,000 in the U.S.). Companies that receive this designation from the FDA have seven years of market exclusivity within the United States. Also, these companies typically benefit from excellent pricing power, as there are not other competing therapies, and the small population size leads to limited reimbursement pushback. Alexion Pharmaceutical Inc. and BioMarin Pharmaceutical Inc. are two examples of companies that have benefited from launching drugs with the orphan drug status. Alexion Pharmaceuticals Inc. is a Biotechnology company that has benefited from the development of Soliris. This is a drug that treats paroxysmal nocturnal hemoglobinuria or PNH, a rare blood disorder that can lead to disability and premature death. Shares of BioMarin Pharmaceuticals soared after the Food & Drug Administration (FDA) gave approval for its drug, Kuvan, which treats a rare metabolic disease called phenylketonuria. The pricing of the drug exceeded investor expectations. Other Biotechnology contributors were Gilead Sciences and Genzyme Corp. Gilead Sciences continues to deliver strong earnings growth, as their infectious disease drugs for the treatment of HIV continue to gain market share. The company is benefiting from the trend of earlier diagnosis of HIV, leading to higher demand for their drugs, particularly Viread and Atripla. Leitaris was also recently launched; it is a promising compound for the treatment of pulmonary arterial hypertension. Genzyme has positive momentum for its drug, Myozyme, which treats Pompe disease. The company also has benefited from strong pricing power. The Health Care Equipment & Supplies industry detracted from relative performance. This decline was led by Immucor Inc. which agreed to acquire a privately held company, Bioarray Solutions. Shares fell sharply on this news as there was significant dilution incurred from the transaction. The stock was sold as the company was not able to provide any clarity on future product revenues or timeline of new product launches. 8 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- For U.S. equity investors, small-cap stocks outperformed large-cap and mid-cap stocks. Stylistically, value outperformed growth among small-cap and mid-cap stocks. The magnitude of outperformance was the most extreme among small-cap stocks where value outperformed growth. Turner employs a disciplined investment strategy by identifying strong Health Care companies with favorable earnings prospects and reasonable valuations. We also look for unique characteristics within each industry to ensure the Fund is invested in only the best companies. For example, when researching the Pharmaceuticals industry, we analyze pricing trends, intellectual property profiles, and product pipelines. When looking at Biotechnology companies, we focus on clinical trial design, corporate regulatory expertise, clinician feedback, and reimbursement analysis. We utilize these tools so the Fund is positioned to achieve consistent investment returns while maintaining disciplined risk controls. We do not make top-down decisions but instead find opportunities through our investment discipline of fundamental bottom-up research on a company-by-company basis. The Fund remains significantly underweight to the benchmark's 51% concentration in large-cap pharmaceutical companies, as we have found few opportunities with attractive growth prospects. However, as a result of our individual company research, the Fund now has significant weights in two large-cap pharmaceutical companies, Wyeth and Abbott Labs. It also holds Johnson & Johnson, but its weight is significantly underweight the benchmark. Another area in which we are finding opportunities is with Contract Research Organization (CRO) companies which assist large pharmaceutical companies by offering regulatory, pre-clinical, and clinical trial services. They can assist in moving a new drug from its conception to FDA approval without the pharmaceutical company making mistakes in the crucial trial or having to maintain a staff for these services. Examples of CROs that are currently held in the Fund include Charles River Laboratories, Icon, and Kendle International. Historically, the stock market has confounded the levels of extremely bearish sentiment that prevail today and turned upward several months before the economy did. In fact, even in the midst of three of the last four recessions, the stock market actually produced positive returns. In our judgment, corporate profits may hit bottom early next year, and stocks could trough before year's end. We continue to find companies with compelling fundamentals. Balance sheets in the Health Care sector remain flush with cash, keeping open the possibility of stock buybacks, mergers and acquisitions in the sector. The Health Care sector is generally a defensive area during an economic slowdown, leading to good returns on both a relative and absolute basis. 9 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- HEALTHCARE AND BIOTECHNOLOGY FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A -13.15% 7.36% 7.73% Class C -8.53% 7.85% 7.78% - -------------------------------------------------------------------------------- [LINE CHART] HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A S&P 500 HEALTH CARE INDEX - ------------------------------------------- ------------------------- Date Date 2/28/01 9425 2/28/01 10000 9/30/01 10509.82 9/30/01 9467 9/30/02 9284.373 9/30/02 7392.78 9/30/03 11626.82 9/30/03 8238.514 9/30/04 13035.99 9/30/04 8633.139 9/30/05 15786.58 9/30/05 9532.712 9/30/06 16002.86 9/30/06 10252.43 9/30/07 19083.41 9/30/07 11144.39 9/30/08 17589 9/30/08 9783.719 * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on February 28, 2001 and the initial public offering of Class C shares commenced on November 20, 2006. The Class C performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 10 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE INTERNATIONAL GROWTH FUND SUB-ADVISED BY NAVELLIER & ASSOCIATES, INC. INVESTMENT PHILOSOPHY & PROCESS The Touchstone International Growth Fund seeks long-term capital growth by primarily investing in foreign stocks and ADRs of foreign companies believed to have superior reward/risk characteristics. A disciplined quantitative, objective, bottom-up stock selection process is utilized to identify stocks believed to have superior fundamentals relative to the underlying market with above-average potential returns adjusted for risk. This process selects and weights countries based upon the analysis of a country's reward/risk potential and weights stocks using a disciplined methodology. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone International Growth Fund was -26.17 for the year ended September 30, 2008. The total return of the MSCI EAFE(R) Growth Index was -28.19% and the MSCI EAFE(R) Index was -30.13% for the same period. During the past year, the Touchstone International Growth Fund outperformed the MSCI EAFE(R) Growth Index. Through 2007, the MSCI EAFE(R) Index was the Fund's primary benchmark, with the MSCI EAFE(R) Growth Index the secondary. In 2008, the MSCI EAFE(R) Growth Index became the Fund's primary benchmark as it reflects the Fund's growth investment style and allows for flexibility in positioning as an all-cap Fund. The past year was a continuation of the Fund's strong performance on both a relative and absolute basis. Factors affecting the relative outperformance included the Fund's larger than benchmark capitalization bias, higher historical five year EPS growth, market P/E and good sector and country overweights and underweights. Although all sectors posted negative returns for the year, the Fund had relative outperformance in the Financials, Energy and Health Care sectors, while relative underperformance was a result of the Utilities, Telecommunication Services and Information Technology sectors. A country weighting decision to increase the Fund's position in Japan also aided performance. Over the past year, we have seen the last stage of the "Greatest Global Boom Ever" and the subsequent bursting of the commodity bubble over the past 100 days. Oil peaked in July and it, as well as most other commodities, has fallen substantially since that month. When the commodity bubble burst along with one of the greatest liquidity and housing devaluations seen in the past 50 years, major financial institutions fell. The subsequent global recession has cost jobs and bankrupted numerous institutions around the globe. We expect a large bounce from the October lows as the global, coordinated effort to increase liquidity and the global governmental guarantee of financial assets led by the United States take hold. We believe these efforts will provide a base for the next global expansion. The disciplined investment strategy used to manage the Touchstone International Growth Fund helped performance in the volatile environment that the market exhibited in 2007 into 2008. The Fund has strong fundamentals and is diversified with a bias toward defensive companies and companies with strong earnings potential. We expect that the Fund will perform in line with the market over the coming year as it forms a new base and the next trends emerge. In addition, we believe that diversified growth investing will do well in the coming year as global economies lock hands in an effort to prevent a severe global recession. 11 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL GROWTH FUND - CLASS A* AND THE MSCI EAFE GROWTH INDEX - -------------------------------------------------------------------------------- INTERNATIONAL GROWTH FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A -30.40% 9.36% -0.50% Class C -26.66% 9.98% -0.38% Class Y -26.16% 10.65% 0.23% - -------------------------------------------------------------------------------- [LINE CHART] INTERNATIONAL GROWTH FUND - CLASS A MSCI EAFE GROWTH INDEX - ----------------------------------- ---------------------- Date Date 9/5/00 9425 9/5/00 10000 9/30/00 8631.415 9/30/00 9353 9/30/01 5147.776 9/30/01 5953.185 9/30/02 4973.781 9/30/02 5188.796 9/30/03 5785.502 9/30/03 6314.764 9/30/04 6657.956 9/30/04 7388.274 9/30/05 8364.39 9/30/05 9266.373 9/30/06 9685.127 9/30/06 10843.51 9/30/07 12997.44 9/30/07 13900.3 9/30/08 9596.01 9/30/08 9981.802 MSCI EAFE INDEX --------------- Date 9/5/00 10000 9/30/00 9408 9/30/01 6748.358 9/30/02 5718.559 9/30/03 7236.264 9/30/04 8865.871 9/30/05 11199.37 9/30/06 13400.04 9/30/07 16800.98 9/30/08 11738.84 * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares and Class Y shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares commenced on September 5, 2000. The initial public offering of Class C shares and Class Y commenced on September 29, 2008. The Class C and Class Y performance information is calculated using the historical performance of Class A. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 12 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE MID CAP FUND SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Mid Cap Fund seeks long-term capital appreciation by primarily investing in stock of medium capitalization companies. It emphasizes companies operating in a broad range of industries based on a fundamental analysis of each company with consideration to such characteristics as price-to-cash flow, price-to-earnings and price-to-book value ratios. The Fund looks for companies with quality management teams, strong fundamentals, well-positioned balanced sheets and distinctive product opportunities that may be positioned to generate and sustain long-term growth. FUND PERFORMANCE AND POSITIONING The total return for the Touchstone Mid Cap Fund was -25.92% for the fiscal year ended September 30, 2008. The total return of the Russell Midcap(R) Index was - -22.36% for the same period. The largest detractors from the Fund's relative performance were in the Materials and Energy sectors, with Chemicals and Energy Equipment & Services holdings detracting the most. Good relative returns in the Utilities, Industrials, and Information Technology sectors contributed positively to results. Independent Power Producers & Energy Traders, Commercial Services & Supplies, and IT Services holdings were among the outperformers in those sectors. Holdings that contributed positively to Fund performance included Alliance Data Systems and Alexandria Real Estate Equities (a REIT) in the Financials sector. Alliance Data Systems was purchased at a pullback when a proposed merger fell through and since that time the company has experienced continued improving earnings trends. Alexandria Real Estate Equities operates in the area of life sciences real estate, which has held up well because of its association with the Health Care industry. In Utilities, MDU Resources Group Inc., a natural resource company with a solid balance sheet, was another positive contributor. The stocks that detracted from performance in the Materials sector include AbitibiBowater, Inc, a paper and newsprint company. The stock suffered this year due to falling demand for newspaper and some unexpected one-time charges payable by the company. Cleveland-Cliffs, a supplier of iron ore, also performed poorly. For U.S. equity investors, small-cap stocks outperformed large-cap and mid-cap stocks. Stylistically, value outperformed growth among small-cap and mid-cap stocks. The magnitude of outperformance was the most extreme among small-cap stocks where value outperformed growth. The markets have been more volatile this year than they had been in the past 30 years, an environment in which this strategy will typically be challenged. From a style perspective, value companies in the benchmark did the best, a group in which the Fund is underweight due to our bottom-up approach. Risk controls allow the strategy to hold up to 60% in either style. The Fund's tilt to growth hurt relative returns. Turner's focus in managing the Fund remains, as always, on owning stocks that we think have either undervalued assets or strong prospective earnings power. We currently favor shares of companies in the Packaged Software, Data Processing Services, and Commercial Services industries. The Fund is underweight Materials and Utilities, while overweight in Information Technology and Industrials. Although the market faces many hurdles in the near term, from a fundamental standpoint the market seems to be slightly undervalued and earnings outside the Financials sector remain strong. From a valuation standpoint, the S&P 500 Index is trading at 12.6 times next year's earnings. In addition, both corporations and investors have historically high levels of cash on the sidelines patiently waiting to re-enter the market. Inflation concerns appear to be subsiding and the U.S. Government is actively working to shore up investor confidence. Historically, the stock market has confounded the levels of extremely bearish sentiment that prevail today and turned upward several months before the economy did. In fact, even in the midst of three of the last four recessions, the stock market actually produced positive returns. In our judgment, corporate profits may hit bottom early next year, and stocks could trough before year's end. 13 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID CAP FUND - CLASS Y* AND THE RUSSELL MIDCAP INDEX - -------------------------------------------------------------------------------- MIDCAP FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years Since Inception* Class A -30.36% 7.15% 10.39% Class C -25.74% 7.92% 10.98% Class Y -25.92% 8.67% 11.80% Class Z -26.18% 8.37% 11.50% - -------------------------------------------------------------------------------- [LINE CHART] MID CAP FUND - CLASS Y RUSSELL MIDCAP INDEX ---------------------- -------------------- Date Date 1/2/03 10000 1/2/03 10000 9/30/03 12520 9/30/03 12289 9/30/04 14967.66 9/30/04 14814.39 9/30/05 20242.26 9/30/05 18532.8 9/30/06 21679.46 9/30/06 20306.39 9/30/07 25609.95 9/30/07 23935.14 9/30/08 18971 9/30/08 18583.24 * The chart above represents performance for Class Y shares only, which will vary from the performance of Class A shares, Class C shares and Class Z shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class Y shares commenced on January 2, 2003. The initial public offering of Class A shares and Class C commenced on May 14, 2007 and the initial public offering of Class Z shares commenced on April 24, 2006. The Class A, Class C and Class Z performance information is calculated using the historical performance of Class Y. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 14 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE PREMIUM YIELD EQUITY FUND SUB-ADVISED BY MILLER/HOWARD INVESTMENTS, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Premium Yield Equity Fund seeks long-term growth of capital and high current income by focusing on dividend-paying equity securities of U.S. companies believed to possess attractive long-term return potential primarily due to lower than average valuations and improving business outlooks. FUND PERFORMANCE AND POSITIONING Miller/Howard Investments assumed responsibility for sub-advising the Premium Yield Equity Fund on May 23, 2008. From December 3, 2007 (inception of the Fund) through May 22, 2008, Chartwell Investment Partners was sub-advisor to the Fund. The total return of the Touchstone Premium Yield Equity Fund was -21.48% since inception. The total return of the Russell 3000(R) Value Index was -18.63% for the same period. Since inception, the Energy sector had the highest returns. The worst performing sectors since inception of the Fund were Industrials and Materials. Financials and Industrials detracted from performance of the Fund the most. Also since inception, Wilmington Trust, Johnson & Johnson, and Colgate-Palmolive have been among the Fund's best contributors. Detractors include Macquarie Infrastructure, Teck Cominco, and Diana Shipping Inc. The challenges in the global financial markets created a difficult and volatile market environment since Miller/Howard took over the management of the Fund on May 23, 2008. As the impact from the credit crisis began to threaten global economic activity, investors rushed from Industrials and Commodities into core companies with recurring business, stable cash flows and more reliable growth. As the deleveraging and position liquidation "trading noise" settles out of the market (a process that admittedly might take some more time) we expect a reawakening of investors' beliefs in fundamentals to benefit the Fund. The Fund's underweight in the Financials sector helped relative performance in the second quarter, but the bounce-back in banks and Financials from deeply sold levels detracted from relative performance in the third quarter. Companies in the Consumer Staples sector like Procter & Gamble, Sysco Corp., and Colgate-Palmolive fared well as investors looked for safe havens in a slowing economy. Economically sensitive companies (or at least those perceived to be so) were also discounted by the market. Macquarie Infrastructure, Nucor Corp., and Teck Cominco were under pressure. Though we have often extolled the virtues of industry diversification in the Fund for helping to create excellent risk-adjusted returns, this was one period when diversification was no help at all. We have recently seen studies indicating that correlation across markets increases during downturns and decreases during upturns; frankly, it has long been our view that over longer time frames, nearly all equity groups show similar returns but quite different levels of volatility. It is important to keep that reality in mind when the markets run from pillar to post. We, like most participants and observers, were astonished at both the volatility across the various market sectors and the uniformity of negative returns in both domestic sectors and international markets. The Premium Yield Equity Fund is constructed with high-quality dividend-paying companies that are positioned to grow their dividends. Historically, financially strong companies that deliver a consistent level of positive dividend cash flow to investors act as a buffer in a down market. We believe the Fund is well positioned to continue to deliver and grow a high level of current cash flow going forward. The markets and the economy face many challenges, but over time the power of compounding (the redeployment of cash flow into buying more shares that then deliver higher levels of cash flow) will continue to work for long-term investors. 15 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- The clearest takeaway we have from a great deal of discussion and thought about the current situation is not new to us. We want to emphasize, even more than usual, businesses with recurring revenue streams, financial strength, and stability since we do not foresee high levels of economic activity for some time ahead. Since equity prices tend to discount the future rather than the present, we do not necessarily think stocks will have a rough time of it from here, but we do think the risks for cyclically oriented stocks have risen. That said, we do not see the prospects for Materials and Energy fading, since we hardly think the developing world is going to cease developing, and stop needing resources. But continued dividend growth is critical to our investment strategy, and we suspect that fears, at least, of a difficult economy will keep more cyclical kinds of stocks from raising their dividends in the near future. COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PREMIUM YIELD EQUITY FUND - CLASS A* AND THE RUSSELL 3000 VALUE INDEX - -------------------------------------------------------------------------------- PREMIUM YIELD EQUITY FUND TOTAL RETURNS** Since Inception* Class A -21.48% Class C -21.95% Class Y -21.56% - -------------------------------------------------------------------------------- [LINE CHART] PREMIUM YIELD EQUITY FUND - CLASS A RUSSELL 3000 VALUE INDEX ----------------------------------- ------------------------ Date Date 12/3/07 9425 12/3/07 10000 12/31/07 9343.003 12/31/07 9904 1/31/08 9025.34 1/31/08 9506.85 2/29/08 8632.738 2/29/08 9110.414 3/31/08 8507.563 3/31/08 9057.574 4/30/08 8717.7 4/30/08 9486.903 5/31/08 8845.85 5/31/08 9498.287 6/30/08 8181.527 6/30/08 8589.301 7/31/08 7930.354 7/31/08 8594.454 8/31/08 8040.586 8/31/08 8762.046 9/30/08 7400 9/30/08 8137.312 * The chart above represents performance for Class A shares only, which will vary from the performance of Class C shares and Class Y shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class A shares and Class C shares commenced on December 3, 2007. The initial public offering of Class Y shares commenced on August 12, 2008. The Class C and Class Y performance information is calculated using the historical performance of Class A. ** The total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 16 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE SANDS CAPITAL SELECT GROWTH FUND SUB-ADVISED BY SANDS CAPITAL MANAGEMENT, LLC INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Sands Capital Select Growth Fund primarily invests in common stocks of large capitalization U.S. companies that are believed to have above-average potential for revenue or earnings growth. The fund invests in 25 to 30 companies that are generally high-quality seasoned and growing businesses, spread across an array of attractive and growing industries. Sands Capital generally seeks stocks with sustainable above average earnings growth and capital appreciation potential. In addition, Sands Capital looks for companies that have a significant competitive advantage, a leadership position or proprietary niche, a clear mission in an understandable business, financial strength, and are valued rationally in relation to comparable companies, the market, and the business prospects for that particular company. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Sands Capital Select Growth Fund (Class Z) was -25.22% for the fiscal year ended September 30, 2008. The total return of the Russell 1000(R) Growth Index was -20.88% for the same period. The Fund's underperformance versus the benchmark during the year was primarily attributable to the negative effects from security selection. Overweight positions in Las Vegas Sands, National Oilwell Varco, Google, EMC Corp. and Broadcom were the largest detractors from relative performance during the period. Contributors to relative performance for the year include overweight positions in Genzyme, Visa, Genentech, Varian Medical Systems, Amazon.com, and Intuitive Surgical. An overweight position relative to the benchmark in the Health Care sector was the largest contributor to relative performance. No exposure to the Utilities and Materials sectors also positively impacted relative performance. The largest detractor from relative performance was an underweight position in Consumer Staples. Other significant relative detractors include an overweight position in Energy and security selection in the Information Technology sector. We cannot foretell the ultimate macroeconomic and market impacts of the present credit crisis and all of the related dramatic events that have occurred in the worldwide financial system over the last few weeks. The situation clearly had its genesis in the housing bubble and the easy credit that fueled it, which has now engulfed the entire credit market. Its impact will obviously be felt most directly in the Financials sector, but it is also safe to say that most other sectors are likely to be negatively affected as the economy slows down from overall credit sclerosis. Many would describe the state of equity markets with the term, "uncertainty" - uncertainty about the nature and effect of a bailout package, uncertainty regarding the depth to which a tighter credit market affects the overall U.S. and global economies, and simply overall uncertainty about the future. Despite the "feeling" of uncertainty that may seem to pervade now, the reality is that uncertainty is always at the core of equity investing. Uncertainty is literally what defines any market where the value of what is being traded incorporates future cash flows. As unnerving as recent events have been, there is only one question on which we, with our commitment to a bottom-up investment approach, are focused: has the present situation fundamentally changed our investment cases for the businesses owned in the Fund? On this point, we have far greater conviction than any macroeconomic prognosis. In analyzing each of the Fund's holdings relative to its sensitivity to the present macroeconomic malaise, assuming no quick fix for the credit markets in the coming quarters, we conclude that the large majority of these businesses are relatively shielded from continued turmoil in the credit markets specifically and from a macroeconomic slowdown generally. We believe most of the companies in the Fund are likely to weather tough times much better than their competitors, either because their products or services offer such a compelling return-on-investment for the customer that it becomes comparably more attractive as buying decisions become more price-sensitive (e.g., Intuitive Surgical, Salesforce.com, Amazon, EMC, and Google), or because the product or service is relatively non-discretionary and/or customers have few competitive alternatives (e.g., National Oilwell Varco, FMC Technologies, Schlumberger, Visa, Stryker, Genzyme, Varian Medical Systems, Iron Mountain, Chicago Mercantile Exchange, and IntercontinentalExchange). 17 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- Though each of the Fund companies vary in terms of exposure to the potential impact of the present predicament in the credit market, we find a consistent theme resonates as loudly as ever across the businesses: disconnect. Specifically, there is a disconnect between the reality of the state of the businesses and their stock prices. In general, the recent stock prices of companies in the Fund appear to reflect capital outflows and de-leveraging in the equity markets overall rather than significant deterioration in the health of these businesses or even material changes to the future health of these businesses. When the smoke clears and the market reconnects the reality of the businesses to the stock prices, patient investors should benefit tremendously -- and this reconnect process often occurs very quickly. We believe that two businesses are particularly stark reflections of this present disconnect: National Oilwell Varco and IntercontinentalExchange. We believe there are a number of other companies in the Fund that exhibit this disconnect between their stock prices and their business fundamentals. While we fully appreciate how frustrating periods of disconnect are, we can say with confidence that they do not last, even if the market itself does not rebound due to macroeconomic reasons. Over time, stock price appreciation reflects earnings growth. This basic tenet remains as true as ever - even in times when logic takes a backseat to human emotion and the psychology of fear. 18 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SANDS CAPITAL SELECT GROWTH FUND - CLASS Y*, SANDS CAPITAL SELECT GROWTH FUND - CLASS Z* AND THE RUSSELL 1000 GROWTH INDEX - -------------------------------------------------------------------------------- SANDS CAPITAL SELECT GROWTH FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years Since Inception* Class Y -25.03% 3.10% -4.52% Class Z -25.22% 2.88% -4.64% - -------------------------------------------------------------------------------- [LINE CHART] SANDS CAPITAL SELECT GROWTH FUND - CLASS Y - ------------------------------------------ Date 8/11/00 10000 9/30/00 9150 9/30/01 5032.5 9/30/02 4331.976 9/30/03 5892.787 9/30/04 6803.223 9/30/05 7813.501 9/30/06 7603.318 9/30/07 9153.634 9/30/08 6863 SANDS CAPITAL SELECT GROWTH FUND - CLASS Z RUSSELL 1000 GROWTH INDEX - ------------------------------------------ ------------------------- Date Date 8/11/00 10000 8/11/00 10000 9/30/00 9150 9/30/00 9802 9/30/01 5032.5 9/30/01 5328.367 9/30/02 4331.976 9/30/02 4128.952 9/30/03 5892.787 9/30/03 5199.176 9/30/04 6803.223 9/30/04 5589.634 9/30/05 7803.977 9/30/05 6238.032 9/30/06 7573.759 9/30/06 6614.809 9/30/07 9084.724 9/30/07 7894.774 9/30/08 6793 9/30/08 6246.345 * The initial public offering of Class Y shares and Class Z shares commenced on August 27, 2004 and August 11, 2000, respectively. The Class Y performance information is calculated using the historical performance of Class Z. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 19 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE SHORT DURATION FIXED INCOME FUND SUB-ADVISED BY CHARTWELL INVESTMENT PARTNERS INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Short Duration Fixed Income Fund seeks to provide above market income, liquidity, and risk-adjusted total return. Fund management targets these goals using a low risk approach, selecting a core group of securities from better yielding sectors within the government and corporate markets, and enhancing liquidity and yield by combining very short maturities with fixed rate issues in a barbell structure. The Fund avoids higher risk strategies, including exposure to non-dollar currencies and lower quality credits. While the Fund may invest in securities with any maturity or duration, interest rate risk is managed by maintaining an effective duration that is comparable to or less than that of three year U.S. Treasury Notes. FUND PERFORMANCE AND POSITIONING The total return of the Fund was 2.36% for the fiscal year ended September 30, 2008. The total return of the Lehman 1-3 Year U.S. Government Bond Index was 5.90% for the same period. Tremendous financial market volatility and the resulting adverse price performance of non-Treasury securities, including those backed by the agencies, caused the Fund to underperform its index. While the Index had a 63% allocation to Treasury securities, the Fund had none as of the fiscal year end. The Fund's fiscal year was a particularly challenging one where unprecedented illiquidity culminated in the highest spreads (risk premiums) ever seen in modern-day credit markets. Fannie Mae and Freddie Mac, hard hit by the worst housing slump since the Great Depression, were placed in conservatorship by the Federal Housing Finance Agency on September 7, 2008. However, the Treasury stepped in, effectively guaranteeing all obligations of Fannie and Freddie. This is particularly important as almost two thirds of the Fund's assets are ultimately guaranteed by these two entities. The increasing pressure on all financial assets has had a profound impact on shorter duration securities, including many of those purchased by the Fund. As institutional investors, in an effort to meet redemptions, are forced to liquidate security holdings, they often turn to those securities that are easiest to sell and have the smallest price declines. As a result, shorter duration securities, including those backed by the government sponsored enterprises (GSE's), have experienced significant selling pressure. The third quarter of 2008 will likely go down in the history books as a significant transition point for the U.S. financial markets. This historic time culminated with the U.S. House of Representatives failing to pass the Troubled Asset Relief Plan (TARP) on September 29, 2008. While a comprehensive bill was eventually passed in early October, the confidence of the financial markets was badly shaken. In the following weeks, credit spreads, including the often quoted TED spread (a proxy for counterparty risk), hit unprecedented levels. The Federal Reserve, in a coordinated global effort, has responded with lower rates and a host of emergency liquidity measures. We are now beginning to see signs of more efficient flows of capital. We enter the fourth quarter of 2008 with a cautious outlook. Both corporate bond and agency mortgage-backed security spreads are near their all time wides. The Fund currently maintains substantial positions in mortgage-backed securities along with a smaller, but still significant exposure to corporate securities. Given the recent price volatility in these sectors, we will seek to opportunistically reduce the Fund's spread duration (or sensitivity to changes in spread). In an effort to maintain as much upside potential as possible, we will attempt to do this by reducing the Fund's absolute duration which is currently positioned at the longer end of the allowable range. Over the longer term, we believe the Fund should perform well as the liquidity and stimulus programs begin to work their way through the financial system and risk and liquidity premiums begin to normalize in 2009. 20 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SHORT DURATION FIXED INCOME FUND - CLASS Z* AND THE LEHMAN BROTHERS 1-3 YEAR U.S. GOVERNMENT BOND INDEX - -------------------------------------------------------------------------------- SHORT DURATION FIXED INCOME FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years 10 Years Class Z 2.36% 2.94% 3.96% - -------------------------------------------------------------------------------- [LINE CHART] LEHMAN BROTHERS 1-3 YEAR SHORT DURATION FIXED INCOME FUND - CLASS Z U.S. GOVERNMENT BOND INDEX - ------------------------------------------ -------------------------- Date Date 9/30/98 10000 9/30/98 10000 9/30/99 10289 9/30/99 10319 9/30/00 10908.4 9/30/00 10920.6 9/30/01 11926.15 9/30/01 12085.83 9/30/02 12485.49 9/30/02 12792.85 9/30/03 12753.93 9/30/03 13151.05 9/30/04 12988.6 9/30/04 13303.6 9/30/05 13266.55 9/30/05 13448.61 9/30/06 13693.74 9/30/06 13962.34 9/30/07 14404.44 9/30/07 14760.99 9/30/08 14744.39 9/30/08 15631.89 * The initial public offering of Class Z shares commenced on March 1, 1994. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 21 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE SMALL CAP VALUE OPPORTUNITIES FUND SUB-ADVISED BY TURNER INVESTMENT PARTNERS, INC. INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Small Cap Value Opportunities Fund seeks long-term capital appreciation by primarily investing in common stocks of companies with small market capitalizations that are believed to have the potential for growth and that appear to be trading below their perceived value. It invests in securities of companies operating in a broad range of industries. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Small Cap Value Opportunities Fund was - -16.81% for the fiscal year ended September 30, 2008. The total return of the Russell 2000(R) Value Index was -12.25% for the same period. The Industrials and Information Technology sectors were the largest relative detractors from performance during the year. In particular, KHD Humboldt Wedag International LTD, a world leader in the supply of proprietary technologies, equipment and engineering/design services for cement, coal and minerals processing, declined significantly during the year. In the Information Technology sector, Online Resources Corporation and Zoran Corporation were both detractors. Online Resources Corp. is a maker of web-based financial technology. Although the stock price spiked during the third quarter because of its acquisition of a bill payer service, it was not enough to make up for the drag on the overall Financials sector throughout the year. Zoran Corporation, a leading provider of digital solutions for applications in the digital entertainment and imaging markets, also contributed to the sector decline. The Consumer Discretionary sector contributed the most to relative outperformance during the year, led by Multiline Retailers Fred's, Inc. and Zale Corporation. Zale Corp., a leading jewelry company, efficiently cut costs during the year which has resulted in a strong balance sheet. For the one year period, small-cap stocks outperformed large-cap and mid-cap stocks. Stylistically, value outperformed growth among small-cap and mid-cap stocks. The magnitude of outperformance was the most extreme among small-cap stocks where value outperformed growth. The Fund allows for the flexibility to over/underweight a particular sector by up to 5%. As a result of our bottom-up research process, the Fund has been underweight Financials for a significant period of time, which has been beneficial to performance. However, Financials rebounded in the third quarter and our underweight allocation and its lack of exposure to Regional and Savings Banks, which were the best performers, hurt relative returns. In managing the Fund, our focus as always remains on owning undervalued securities with hidden/unrecognized intrinsic value. We currently favor shares of companies in the Medical Specialties, Industrial Machinery, and Property/Casualty industries. The Fund has an underweight in Financials and Information Technology sectors and holds overweight positions in the Health Care and Consumer Staples sectors. Although the market faces many hurdles in the near term, from a fundamental standpoint the market seems to be slightly undervalued and earnings outside the Financials sector remain strong. From a valuation standpoint, the S&P 500 Index is trading at 12.6 times next year's earnings. In addition, both corporations and investors have historically high levels of cash on the sidelines patiently waiting to re-enter the market. Inflation concerns appear to be subsiding and the U.S. Government is actively working to shore up investor confidence. Historically, the stock market has confounded the levels of extremely bearish sentiment that prevail today and turned upward several months before the economy did. In fact, even in the midst of three of the last four recessions, the stock market actually produced positive returns. In our judgment, corporate profits may hit bottom early next year, and stocks could trough before year's end. 22 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z* AND THE RUSSELL 2000 VALUE INDEX - -------------------------------------------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years Since Inception* Class Z -16.81% 9.21% 10.93% - -------------------------------------------------------------------------------- [LINE CHART] SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z RUSSELL 2000 VALUE INDEX - -------------------------------------------- ------------------------ Date Date 3/4/02 10000 3/4/02 10000 9/30/02 9270 9/30/02 8147 9/30/03 12726.78 9/30/03 10726.34 9/30/04 16463.37 9/30/04 13478.72 9/30/05 20467.26 9/30/05 15871.19 9/30/06 21457.87 9/30/06 18094.75 9/30/07 23768.89 9/30/07 19196.72 9/30/08 19775 9/30/08 16845.12 * The initial public offering of Class Z shares commenced on March 4, 2002. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 23 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE ULTRA SHORT DURATION FIXED INCOME FUND SUB-ADVISED BY CHARTWELL INVESTMENT PARTNERS INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Ultra Short Duration Fixed Income Fund seeks to provide above market income, liquidity, and risk-adjusted total return. Fund management targets these goals using a low risk approach, selecting a core group of securities from better yielding sectors within the government and corporate markets, and enhancing liquidity and yield by combining very short maturities with fixed rate issues in a barbell structure. The Fund avoids higher risk strategies, including exposure to non-dollar currencies and lower quality credits. While the Fund may invest in securities with any maturity or duration, interest rate risk is managed by maintaining an effective duration that is comparable to or less than that of one year U.S. Treasury bills. FUND PERFORMANCE AND POSITIONING The total return of the Fund was 1.26% for the fiscal year ended September 30, 2008. The total return of the Merrill Lynch 3-Month U.S. Treasury Bill Index was 2.90% for the same period. The Fund's emphasis on non-Treasury securities drove underperformance versus the benchmark as the U.S. financial crisis came to a head and securities not carrying an "explicit" government guarantee found little demand. The Fund's fiscal year was a particularly challenging one where unprecedented illiquidity culminated in the highest spreads (risk premiums) ever seen in modern-day credit markets. Fannie Mae and Freddie Mac, hard hit by the worst housing slump since the Great Depression, were placed in conservatorship by the Federal Housing Finance Agency on September 7, 2008. However, the Treasury stepped in, effectively guaranteeing all obligations of Fannie and Freddie. This is particularly important as over two thirds of the Fund's assets are ultimately guaranteed by these two entities. The increasing pressure on all financial assets has had a profound impact on shorter duration securities, including many of those purchased by the Fund. As institutional investors, in an effort to meet redemptions, are forced to liquidate security holdings, they often turn to those securities that are easiest to sell and have the smallest price declines. As a result, shorter duration securities, including those backed by the government sponsored enterprises (GSE's), have experienced significant selling pressure. The third quarter of 2008 will likely go down in the history books as a significant transition point for the U.S. financial markets. This historic time culminated with the U.S. House of Representatives failing to pass the Troubled Asset Relief Plan (TARP) on September 29, 2008. While a comprehensive bill was eventually passed in early October, the confidence of the financial markets was badly shaken. In the following weeks, credit spreads, including the often quoted TED spread (a proxy for counterparty risk), hit unprecedented levels. The Federal Reserve, in a coordinated global effort, has responded with lower rates and a host of emergency liquidity measures. We are now beginning to see signs of more efficient flows of capital. We enter the fourth quarter of 2008 with a guarded stance. Both corporate bond and agency mortgage-backed security spreads are near their all time wides. The Fund currently maintains substantial positions in mortgage-backed securities along with a smaller, but still significant exposure to corporate securities. Given the recent price volatility in these sectors, we will seek to opportunistically reduce the Fund's spread duration (or sensitivity to changes in spread). In an effort to maintain as much upside potential as possible, we will attempt to do this by reducing the Fund's absolute duration which is currently positioned at the longer end of the allowable range. Over the longer term, we believe the Fund should perform well as the liquidity and stimulus programs begin to work their way through the financial system and risk and liquidity premiums begin to normalize in 2009. 24 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z* AND THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX - -------------------------------------------------------------------------------- ULTRA SHORT DURATION FIXED INCOME FUND AVERAGE ANNUAL TOTAL RETURNS 1 Year 5 Years 10 Years Class Z 1.26% 3.06% 3.83% - -------------------------------------------------------------------------------- [LINE CHART] MERRILL LYNCH 3-MONTH ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z U.S. TREASURY BILL INDEX - ------------------------------------------------ ------------------------ Date Date 9/30/98 10000 9/30/98 10000 9/30/99 10534 9/30/99 10472.6 9/30/00 11203.96 9/30/00 11078.23 9/30/01 11996.08 9/30/01 11681.33 9/30/02 12349.97 9/30/02 11914.02 9/30/03 12522.87 9/30/03 12071.17 9/30/04 12726.99 9/30/04 12204.43 9/30/05 13069.35 9/30/05 12524.07 9/30/06 13627.41 9/30/06 13087.65 9/30/07 14374.19 9/30/07 13770.43 9/30/08 14555.3 9/30/08 14169.09 * The initial public offering of Class Z shares commenced on March 1, 1994. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 25 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Unaudited) - -------------------------------------------------------------------------------- TOUCHSTONE VALUE OPPORTUNITIES FUND SUB-ADVISED BY CLOVER CAPITAL MANAGEMENT INVESTMENT PHILOSOPHY AND PROCESS The Touchstone Value Opportunities Fund seeks long-term capital appreciation by investing in common stocks of U.S. companies with large, medium and small market capitalizations. The Fund focuses on companies that trade at attractive values relative to cash flow, book value, financial strength, and historical valuations. Using a combination of valuation screens, technical analysis, and fundamental research, the Fund seeks companies that possess attractive long-term return potential due to their lower-than-average valuations and improving business fundamentals. FUND PERFORMANCE AND POSITIONING The total return of the Touchstone Value Opportunities Fund was -16.92% for the fiscal year ended September 30, 2008. The total return of the Russell 3000(R) Value Index was -22.70% for the same period. Stock selection in the Consumer Discretionary and Energy sectors helped contribute to the Fund's positive relative outperformance. Zale Corporation contributed to both absolute and relative returns as the company emerged from its restructuring and repurchased 35% of its stock. Chesapeake Energy, Cabot Oil & Gas and Noble Energy benefited from a combination of growing production and reserve replacement profiles, coupled with favorable industry supply/demand characteristics. Detracting from Fund performance were the Industrials and Materials sectors. While the Fund benefited from late 2006 through mid 2008 from its various holdings that were related to the secular need to build out power generation capacity, the sudden and steep drop in commodity prices in late 2008 negatively impacted these holdings. General Electric, Shaw Group, Stillwater Mining, and Alcoa posted steep price declines. The most significant economic development that impacted the Fund was sudden and swift decline in commodity prices that began in July. Beyond the Industrials and Materials sectors, which were the most directly affected, the Utilities sector was also negatively impacted. Growing concerns about the implications of the upcoming presidential election seemed to weigh on the Health Care sector as well. The Touchstone Value Opportunities Fund is taking advantage of the current market turmoil and buying stocks with favorable fundamentals and at historically attractive valuations. At the heart of the current market decline and economic anxiety is a financial system that is being reshaped before our eyes. Rather than close our eyes and hope for the best, our eyes are wide open as we are actively and diligently investing in companies that are positioned to deliver superior returns to shareholders as the environment improves. We also anticipate becoming more aggressive in certain industries within the Consumer Discretionary sector, due to historically low valuations. 26 - -------------------------------------------------------------------------------- Management's Discussion of Fund Performance (Continued) - -------------------------------------------------------------------------------- COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE VALUE OPPORTUNITIES FUND - CLASS Z* AND THE RUSSELL 3000 VALUE INDEX - -------------------------------------------------------------------------------- VALUE OPPORTUNITIES FUND AVERAGE ANNUAL TOTAL RETURNS** 1 Year 5 Years 10 Years Class A -21.78% 8.10% 7.80% Class C -17.62% 8.65% 7.67% Class Z -16.92% 9.46% 8.48% - -------------------------------------------------------------------------------- [LINE CHART] VALUE OPPORTUNITIES FUND - CLASS Z RUSSELL 3000 VALUE INDEX ---------------------------------- ------------------------ Date Date 9/30/98 10000 9/30/98 10000 9/30/99 10613 9/30/99 11764 9/30/00 12063.8 9/30/00 12863.93 9/30/01 12606.67 9/30/01 11837.39 9/30/02 11803.62 9/30/02 9956.43 9/30/03 14354.39 9/30/03 12434.59 9/30/04 17332.92 9/30/04 15032.17 9/30/05 21636.69 9/30/05 17554.57 9/30/06 23443.35 9/30/06 20108.76 9/30/07 27154.43 9/30/07 22869.69 9/30/08 22558 9/30/08 17678.27 * The chart above represents performance for Class Z shares only, which will vary from the performance of Class A shares and Class C shares based on the differences in loads and fees paid by shareholders in the different classes. The initial public offering of Class Z shares commenced on December 6, 1991 and the initial public offering of Class A shares and Class C shares commenced on November 20, 2006. The Class A and Class C performance information is calculated using the historical performance of Class Z. ** The average annual total returns shown above are adjusted for maximum applicable sales charges. The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 27 - -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Unaudited) September 30, 2008 - -------------------------------------------------------------------------------- The illustrations below provide each Fund's sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund's investments. - -------------------------------------------------------------------------------- CLOVER CORE FIXED INCOME FUND - -------------------------------------------------------------------------------- CREDIT QUALITY (% OF INVESTMENT SECURITIES) U.S. Treasury 12.8 U.S. Agency 56.6 AAA/Aaa 6.9 AA/Aa 6.5 A/A 1.1 BBB/Baa 14.8 BB/Ba 0.8 B/B 0.5 ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financials 31.4 Information Technology 13.7 Industrials 11.4 Consumer Discretionary 10.9 Utilities 7.3 Consumer Staples 7.0 Health Care 6.2 Materials 4.9 Energy 4.2 Miscellaneous 1.4 Investment Funds 19.8 Other Assets/Liabilities (Net) (18.2) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HEALTHCARE AND BIOTECHNOLOGY FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Health Care 97.5 Investment Funds 21.5 Other Assets/Liabilities (Net) (19.0) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INTERNATIONAL GROWTH FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Information Technology 19.0 Health Care 16.7 Financials 13.8 Telecommunication Services 7.7 Energy 7.4 Consumer Staples 7.2 Consumer Discretionary 6.7 Materials 6.4 Industrials 5.5 Utilities 3.8 Investment Fund 78.8 Other Assets/Liabilities (Net) (73.0) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- 28 - -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MID CAP FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Industrials 22.1 Information Technology 17.6 Financials 12.3 Health Care 10.6 Consumer Discretionary 10.6 Consumer Staples 6.5 Energy 5.8 Utilities 5.4 Materials 1.8 Miscellaneous 1.4 Telecommunication Services 1.2 Investment Funds 28.8 Other Assets/Liabilities (Net) (24.1) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PREMIUM YIELD EQUITY FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financials 16.8 Consumer Staples 14.7 Energy 14.7 Health Care 10.7 Telecommunication Services 10.4 Information Technology 7.3 Utilities 6.7 Industrials 6.6 Materials 3.4 Investment Fund 4.6 Other Assets/Liabilities (Net) 4.1 ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SANDS CAPITAL SELECT GROWTH FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Information Technology 26.6 Health Care 24.6 Energy 14.8 Consumer Discretionary 14.0 Financials 10.5 Industrials 3.2 Telecommunication Services 3.1 Investment Funds 21.2 Other Assets/Liabilities (Net) (18.0) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHORT DURATION FIXED INCOME FUND - -------------------------------------------------------------------------------- CREDIT QUALITY (% OF INVESTMENT SECURITIES) U.S. Agency 81.7 AAA 11.0 AA 5.8 A 1.5 ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financials 33.5 Industrials 14.1 Information Technology 11.6 Consumer Discretionary 11.3 Health Care 6.9 Materials 6.3 Consumer Staples 5.7 Utilities 4.3 Energy 3.5 Telecommunication Services 1.7 Investment Fund 17.7 Other Assets/Liabilities (Net) (16.6) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- 29 - -------------------------------------------------------------------------------- Tabular Presentation of Portfolios of Investments (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ULTRA SHORT DURATION FIXED INCOME FUND - -------------------------------------------------------------------------------- CREDIT QUALITY (% OF INVESTMENT SECURITIES) U.S. Agency 82.3 AAA 9.8 AA 5.7 A 2.2 ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- VALUE OPPORTUNITIES FUND - -------------------------------------------------------------------------------- SECTOR ALLOCATION (% OF NET ASSETS) Financials 27.5 Energy 13.0 Health Care 11.7 Consumer Staples 11.6 Consumer Discretionary 9.7 Utilities 6.6 Industrials 6.0 Information Technology 5.2 Telecommunication Services 3.8 Materials 3.3 Investment Funds 22.4 Other Assets/Liabilities (Net) (20.8) ------ TOTAL 100.0 ------ - -------------------------------------------------------------------------------- 30 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities September 30, 2008 - --------------------------------------------------------------------------------
DIVERSIFIED CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL FIXED INCOME VALUE BIOTECHNOLOGY GROWTH FUND FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Investment securities: At cost $ 16,817,998 $ 156,838,663 $ 73,065,926 $ 45,021,741 ================================================================================================================================== Affiliated securities, at market value $ 292,543 $ 3,533,567 $ 1,237,068 $ 20,207,886 Non-affiliated securities, at market value 14,975,142 143,007,571 78,379,358 24,152,757 - ---------------------------------------------------------------------------------------------------------------------------------- At market value - including $ 21,122,404 and $ 13,304,645 of securities loaned for the Diversified Small Cap Value Fund and Healthcare and Biotechnology Fund, respectively. $ 15,267,685 $ 146,541,138 $ 79,616,426 $ 44,360,643 Foreign currency (cost $6,444) -- -- 5,931 -- Dividends and interest receivable 157,384 157,249 44,348 12,882 Receivable for capital shares sold 3,941 61,980 187,414 52,295 Receivable for securities sold -- 643,250 3,001,539 68,425 Receivable for securities lending income -- 11,139 3,102 -- Receivable from Advisor 8,712 -- -- 54,390 Tax reclaim receivable -- -- 2,000 -- Other assets 1,595 7,379 14,318 7,013 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 15,439,317 147,422,135 82,875,078 44,555,648 - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Bank overdrafts -- 502,857 -- 15,000 Dividends payable 2,854 26,550 -- 972 Payable upon return of securities loaned -- 20,978,164 13,160,939 -- Payable for capital shares redeemed 18,606 399,168 146,846 6,310 Payable for securities purchased -- 1,156,283 2,559,781 18,821,982 Payable to Advisor -- 77,628 56,368 -- Payable to other affiliates 3,605 38,270 23,883 8,387 Payable to Trustees 6,073 4,721 3,794 9,000 Other accrued expenses and liabilities 31,615 269,836 35,952 57,192 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 62,753 23,453,477 15,987,563 18,918,843 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 15,376,564 $ 123,968,658 $ 66,887,515 $ 25,636,805 ================================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 17,013,541 $ 129,191,166 $ 64,506,228 $ 26,633,255 Accumulated (distributions in excess of) net investment income (267) 158,648 -- 1 Accumulated net realized gains (losses) on investments and foreign currency transactions (86,397) 4,916,369 (4,169,213) (335,353) Net unrealized appreciation (depreciation) on investments (1,550,313) (10,297,525) 6,551,234 (661,098) Net unrealized depreciation on foreign currency and translation of other assets and liabilities denominated in foreign currency -- -- (734) -- - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 15,376,564 $ 123,968,658 $ 66,887,515 $ 25,636,805 ================================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ -- $ 624,653 $ 60,959,219 $ 25,631,755 ================================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 49,414 4,036,755 2,995,076 ================================================================================================================================== Net asset value and redemption price per share $ -- $ 12.64 $ 15.10 $ 8.56 ================================================================================================================================== Maximum offering price per share $ -- $ 13.41 $ 16.02 $ 9.08 ==================================================================================================================================
31 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) - --------------------------------------------------------------------------------
DIVERSIFIED CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL FIXED INCOME VALUE BIOTECHNOLOGY GROWTH FUND FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------------- PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ -- $ 618,571 $ 5,928,296 $ 2,525 ================================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 49,548 397,815 294 ================================================================================================================================== Net asset value, offering price and redemption price per share* $ -- $ 12.48 $ 14.90 $ 8.57 ================================================================================================================================== PRICING OF CLASS Y SHARES Net assets attributable to Class Y shares $ -- $ -- $ -- $ 2,525 ================================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- -- 296 ================================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ -- $ -- $ 8.54 ================================================================================================================================== PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ -- $ 122,725,434 $ -- $ -- ================================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- 9,722,503 -- -- ================================================================================================================================== Net asset value, offering price and redemption price per share $ -- $ 12.62 $ -- $ -- ================================================================================================================================== PRICING OF CLASS I SHARES Net assets attributable to Class I shares $ 15,376,564 $ -- $ -- $ -- ================================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 1,727,199 -- -- -- ================================================================================================================================== Net asset value, offering price and redemption price per share $ 8.90 $ -- $ -- $ -- ==================================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 32 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) - --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION PREMIUM SELECT FIXED MID CAP YIELD EQUITY GROWTH INCOME FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investment securities: At cost $ 555,031,789 $ 22,985,867 $ 618,596,396 $ 47,459,938 ==================================================================================================================================== Affiliated securities, at market value $ 17,311,821 $ 925,785 $ 20,526,773 $ 511,399 Non-affiliated securities, at market value 511,047,697 18,240,421 563,705,615 46,476,137 - ------------------------------------------------------------------------------------------------------------------------------------ At market value - including $ 106,517,607 and $ 89,069,993 of securities loaned for the Mid Cap Fund and Sands Capital Select Growth Fund, respectively. $ 528,359,518 $ 19,166,206 $ 584,232,388 $ 46,987,536 Cash -- -- -- 491,916 Dividends and interest receivable 459,583 73,021 332,521 206,239 Receivable for capital shares sold 636,433 -- 521,639 -- Receivable for securities sold 11,525,145 771,563 3,424,479 -- Receivable for securities lending income 42,755 -- 60,437 -- Other assets 14,468 19,506 17,715 5,147 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 541,037,902 20,030,296 588,589,179 47,690,838 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Bank overdraft 63,110 -- -- -- Dividends payable -- 212 -- 2,249 Payable upon return of securities loaned 105,177,730 -- 84,147,388 -- Payable for capital shares redeemed 696,983 92 840,009 105,092 Payable for securities purchased 8,922,416 -- 7,824,315 491,916 Payable to Advisor 211,648 964 343,265 9,828 Payable to other affiliates 7,497 4,979 139,264 17,791 Payable to Trustees 4,298 4,718 4,491 4,093 Other accrued expenses and liabilities 141,740 39,118 415,486 71,119 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 115,225,422 50,083 93,714,218 702,088 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 425,812,480 $ 19,980,213 $ 494,874,961 $ 46,988,750 ==================================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 533,734,648 $ 26,186,748 $ 564,613,306 $ 53,014,577 Accumulated net investment income 109,780 6,082 -- -- Accumulated net realized losses on investments (81,359,677) (2,392,956) (35,374,337) (5,553,425) Net unrealized depreciation on investments (26,672,271) (3,819,661) (34,364,008) (472,402) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 425,812,480 $ 19,980,213 $ 494,874,961 $ 46,988,750 ==================================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ 158,495 $ 19,411,195 $ -- $ -- ==================================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 12,122 2,568,518 -- -- ==================================================================================================================================== Net asset value and redemption price per share $ 13.07 $ 7.56 $ -- $ -- ==================================================================================================================================== Maximum offering price per share $ 13.87 $ 8.02 $ -- $ -- ====================================================================================================================================
33 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) - --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION PREMIUM SELECT FIXED MID CAP YIELD EQUITY GROWTH INCOME FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------------------- PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ 30,047 $ 566,726 $ -- $ -- ================================================================================================================================= Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 2,290 74,971 -- -- ================================================================================================================================= Net asset value, offering price and redemption price per share* $ 13.12 $ 7.56 $ -- $ -- ================================================================================================================================= PRICING OF CLASS Y SHARES Net assets attributable to Class Y shares $ 422,356,459 $ 2,292 $ 130,919,630 $ -- ================================================================================================================================= Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 32,147,736 303 19,072,886 -- ================================================================================================================================= Net asset value, offering price and redemption price per share $ 13.14 $ 7.55 $ 6.86 $ -- ================================================================================================================================= PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ 3,267,479 $ -- $ 363,955,331 $ 46,988,750 ================================================================================================================================= Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 250,334 -- 53,566,758 4,899,607 ================================================================================================================================= Net asset value, offering price and redemption price per share $ 13.05 $ -- $ 6.79 $ 9.59 =================================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 34 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) - --------------------------------------------------------------------------------
SMALL CAP ULTRA VALUE SHORT DURATION VALUE OPPORTUNITIES FIXED INCOME OPPORTUNITIES FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------- ASSETS Investment securities: At cost $ 153,344,435 $ 147,479,404 $ 234,467,807 ===================================================================================================================== Affiliated securities, at market value $ -- $ 7,436,454 $ 4,653,025 Non-affiliated securities, at market value 153,871,867 138,259,649 213,841,208 - --------------------------------------------------------------------------------------------------------------------- At market value - including $ 23,050,058 and $ 37,564,761 of securities loaned for the Small Cap Value Opportunities Fund and Value Opportunities Fund, respectively. $ 153,871,867 $ 145,696,103 $ 218,494,233 Cash -- 1,210,266 -- Dividends and interest receivable 189,801 861,969 327,216 Receivable for capital shares sold 168,970 195,022 501,945 Receivable for securities sold 3,977,770 -- 4,756,967 Receivable for securities lending income 31,783 -- 37,182 Other assets 8,743 8,902 27,609 - --------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 158,248,934 147,972,262 224,145,152 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES Bank overdrafts 991,152 -- 551,446 Dividends payable -- 14,750 60,436 Payable upon return of securities loaned 23,350,696 -- 35,830,066 Payable for capital shares redeemed 537,680 772,669 745,272 Payable for securities purchased 1,029,241 3,137,304 5,823,333 Payable to Advisor 109,117 17,124 101,055 Payable to other affiliates 54,878 52,102 46,874 Payable to Trustees 3,710 4,490 3,697 Other accrued expenses and liabilities 59,946 136,565 126,873 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 26,136,420 4,135,004 43,289,052 - --------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 132,112,514 $ 143,837,258 $ 180,856,100 ===================================================================================================================== NET ASSETS CONSIST OF: Paid-in capital $ 153,340,652 $ 156,077,107 $ 198,387,523 Accumulated (distributions in excess of) net investment income 19,450 -- (50,745) Accumulated net realized losses on investments (21,775,020) (10,456,548) (1,507,104) Net unrealized appreciation (depreciation) on investments 527,432 (1,783,301) (15,973,574) - --------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 132,112,514 $ 143,837,258 $ 180,856,100 ===================================================================================================================== PRICING OF CLASS A SHARES Net assets attributable to Class A shares $ -- $ -- $ 8,231,417 ===================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- 611,421 ===================================================================================================================== Net asset value and redemption price per share $ -- $ -- $ 13.46 ===================================================================================================================== Maximum offering price per share $ -- $ -- $ 14.28 =====================================================================================================================
35 - -------------------------------------------------------------------------------- Statements of Assets and Liabilities (Continued) - --------------------------------------------------------------------------------
SMALL CAP ULTRA VALUE SHORT DURATION VALUE OPPORTUNITIES FIXED INCOME OPPORTUNITIES FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------ PRICING OF CLASS C SHARES Net assets attributable to Class C shares $ -- $ -- $ 3,864,670 ================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) -- -- 287,958 ================================================================================================================== Net asset value, offering price and redemption price per share* $ -- $ -- $ 13.42 ================================================================================================================== PRICING OF CLASS Z SHARES Net assets attributable to Class Z shares $ 132,112,514 $ 143,837,258 $ 168,760,013 ================================================================================================================== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 8,550,474 14,763,312 12,550,287 ================================================================================================================== Net asset value, offering price and redemption price per share $ 15.45 $ 9.74 $ 13.45 ==================================================================================================================
* Redemption price per share varies by length of time shares are held. See accompanying notes to financial statements. 36 - -------------------------------------------------------------------------------- Statements of Operations For the Year Ended September 30, 2008 - --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND ------------------------------ DIVERSIFIED PERIOD YEAR CLOVER CORE SMALL CAP HEALTHCARE AND ENDED ENDED FIXED INCOME VALUE BIOTECHNOLOGY SEPTEMBER 30, DECEMBER 31, FUND FUND FUND 2008 (B) 2007 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends from affiliated securities $ 2,926 $ 64,357 $ 75,823 $ 2,251 $ -- Dividends from non-affiliated securities (A) 1,793 2,624,700 458,515 99,239 62,622 Interest 1,005,987 183 36 -- 2,614 Income from securities loaned 4,193 166,495 25,711 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 1,014,899 2,855,735 560,085 101,490 65,236 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Investment advisory fees 83,811 1,170,221 676,816 37,748 23,086 Administration fees 37,249 275,348 135,364 61 -- Shareholder servicing fees -- 290,487 -- -- -- Transfer Agent fees, Class A -- 6,439 91,603 3,439 1,974 Transfer Agent fees, Class C -- 462 6,236 -- -- Transfer Agent fees, Class Z -- 124,571 -- -- -- Transfer Agent fees, Class I 9,436 -- -- -- -- Distribution expenses, Class A -- 771 158,121 9,444 5,772 Distribution expenses, Class C -- 3,492 44,399 -- -- Professional fees 27,463 27,590 23,737 41,250 16,747 Reports to shareholders 10,116 38,118 32,626 32,381 31,800 Registration fees, Class A -- 7,582 2,580 13,136 17,970 Registration fees, Class C -- 7,507 7,428 -- -- Registration fees, Class Z -- 30,853 -- -- -- Registration fees, Class I 15,289 -- -- -- -- Accounting and pricing fees -- -- -- 65,625 74,365 Custodian fees 8,450 20,914 13,471 11,196 8,283 Trustees' fees and expenses 8,788 2,192 6,521 27,000 18,000 Postage and supplies 4,690 -- 6,595 1,587 120 Compliance fees and expenses 1,523 2,113 1,806 90 1,491 Other expenses 6,547 4,032 2,486 3,782 5,502 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES 213,362 2,012,692 1,209,789 246,739 205,110 Fees waived by the Administrator (37,249) (21,337) (127,367) (61) -- Fees waived and/or expenses reimbursed by the Advisor (17,994) -- -- (189,821) (170,469) - ------------------------------------------------------------------------------------------------------------------------------------ NET EXPENSES 158,119 1,991,355 1,082,422 56,857 34,641 - ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) 856,780 864,380 (522,337) 44,633 30,595 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains (losses) from security transactions 292,998 6,992,973 (3,152,100) (320,230) 217,507 Net realized gains from foreign currency transactions -- -- 3,538 -- -- Net change in unrealized appreciation/ depreciation on investments (1,269,633) (21,709,390) (3,345,627) (1,265,129) 197,015 Net change in unrealized appreciation/ depreciation on foreign currency transactions -- -- (941) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (976,635) (14,716,417) (6,495,130) (1,585,359) 414,522 - ------------------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM OPERATIONS $ (119,855) $ (13,852,037) $ (7,017,467) $ (1,540,726) $ 445,117 ==================================================================================================================================== (A) Net of foreign tax withholding of: $ -- $ -- $ 9,673 $ 143 $ 4,407 (B) Effective after the close of business on December 31, 2007, the Fund changed its fiscal year end to September 30. See accompanying notes to financial statements.
37 - -------------------------------------------------------------------------------- Statements of Operations (Continued) - --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION PREMIUM SELECT FIXED MID CAP YIELD EQUITY GROWTH INCOME FUND FUND (B) FUND FUND - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends from affiliated securities $ 305,977 $ 18,517 $ 216,484 $ 42,087 Dividends from non-affiliated securities (A) 3,962,249 1,045,982 2,532,016 234 Interest 721 346 45 2,773,696 Income from securities loaned 411,483 -- 499,379 7,616 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 4,680,430 1,064,845 3,247,924 2,823,633 - ----------------------------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 3,785,848 126,397 5,322,750 132,307 Administration fees 946,442 36,045 1,152,887 105,846 Shareholder servicing fees 16,530 -- 903,298 132,307 Transfer Agent fees, Class A -- 757 -- -- Transfer Agent fees, Class C -- 497 -- -- Transfer Agent fees, Class Y -- 15 30,108 -- Transfer Agent fees, Class Z 15,761 -- 185,464 40,734 Professional fees 61,937 22,428 65,938 29,769 Registration fees, Class A 4,175 12,835 34,511 -- Registration fees, Class C 11,332 11,418 3,877 -- Registration fees, Class Y 6,276 1,494 -- -- Registration fees, Class Z 399 -- -- 16,262 Reports to shareholders 14,615 2,483 70,401 13,390 Custodian fees 30,547 5,031 39,574 9,635 Distribution expenses, Class A 372 44,313 -- -- Distribution expenses, Class C 386 3,809 -- -- Trustees' fees and expenses 6,055 9,041 1,966 4,772 Compliance fees and expenses 3,635 988 4,035 1,703 Postage and supplies 15,798 11,790 -- -- Other expenses 16,563 2,487 24,160 8,886 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 4,936,671 291,828 7,838,969 495,611 Fees waived by the Administrator (661,074) (36,045) (153,618) (104,399) Other operating expenses reimbursed by the Advisor -- (36,254) -- -- - ----------------------------------------------------------------------------------------------------------------------------- NET EXPENSES 4,275,597 219,529 7,685,351 391,212 - ----------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 404,833 845,316 (4,437,427) 2,432,421 - ----------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized gains (losses) from security transactions (79,816,887) (2,420,818) 9,044,188 (1,271,833) Net change in unrealized appreciation/ depreciation on investments (59,420,702) (3,819,661) (165,311,237) 177,951 - ----------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (139,237,589) (6,240,479) (156,267,049) (1,093,882) - ----------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(138,832,756) $ (5,395,163) $(160,704,476) $ 1,338,539 ============================================================================================================================= (A) Net of foreign tax withholding of: $ 20,393 $ 8,541 $ -- $ -- (B)Represents the period from commencement of operations (December 3, 2007) through September 30, 2008.
See accompanying notes to financial statements. 38 - -------------------------------------------------------------------------------- Statements of Operations (Continued) - --------------------------------------------------------------------------------
SMALL CAP ULTRA VALUE SHORT DURATION VALUE OPPORTUNITIES FIXED INCOME OPPORTUNITIES FUND FUND FUND - ---------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends from affiliated securities $ 127,233 $ 112,153 $ 120,154 Dividends from non-affiliated securities (A) 2,011,295 -- 3,026,257 Interest 1,893 8,635,197 1,295 Income from securities loaned 220,694 14,992 130,263 - ---------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 2,361,115 8,762,342 3,277,969 - ---------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 1,525,525 404,936 1,011,976 Administration fees 321,165 323,951 273,508 Shareholder servicing fees 376,858 349,866 99,589 Transfer Agent fees, Class A 425 -- 6,512 Transfer Agent fees, Class C 148 -- 2,232 Transfer Agent fees, Class Z 227,735 112,966 46,461 Postage and supplies 134,839 10,427 9,343 Registration fees, Class A 745 -- 8,888 Registration fees, Class C 594 -- 5,896 Registration fees, Class Z 57,747 20,443 26,461 Reports to shareholders 50,012 22,536 41,105 Professional fees 35,915 35,436 27,457 Custodian fees 36,705 18,419 11,436 Distribution expenses, Class A 994 -- 8,989 Distribution expenses, Class C 1,006 -- 15,011 Trustees' fees and expenses 5,587 4,640 4,645 Compliance fees and expenses 2,219 2,224 1,851 Other expenses 9,266 17,109 4,391 - ---------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 2,787,485 1,322,953 1,605,751 Fees waived by the Administrator (321,165) (205,930) (26,614) Fees waived and/or expenses reimbursed by the Advisor (61,602) -- -- - ---------------------------------------------------------------------------------------------------------- NET EXPENSES 2,404,718 1,117,023 1,579,137 - ---------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (43,603) 7,645,319 1,698,832 - ---------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED LOSSES ON INVESTMENTS Net realized losses from security transactions (20,405,279) (3,298,587) (1,035,681) Net change in unrealized appreciation/ depreciation on investments (9,432,031) (2,400,870) (31,094,111) - ---------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (29,837,310) (5,699,457) (32,129,792) - ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (29,880,913) $ 1,945,862 $ (30,430,960) ========================================================================================================== (A) Net of foreign tax withholding of: $ 276 $ -- $ 1,981
See accompanying notes to financial statements. 39 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
CLOVER CORE DIVERSIFIED FIXED INCOME SMALL CAP FUND VALUE FUND - ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 2008 2007 (A) - ------------------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ 856,780 $ 958,313 $ 864,380 $ (173,328) Net realized gains (losses) from security transactions 292,998 (133,799) 6,992,973 42,191,085 Net change in unrealized appreciation/depreciation on investments (1,269,633) (29,799) (21,709,390) (17,509,698) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (119,855) 794,715 (13,852,037) 24,508,059 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A -- -- (3,956) -- From net investment income, Class C -- -- (2,925) -- From net investment income, Class Z -- -- (857,493) -- From net investment income, Class I (864,148) (961,663) -- -- From net realized gains, Class A -- -- (63,928) (3,401) From net realized gains, Class C -- -- (23,056) (4,650) From net realized gains, Class Z -- -- (41,283,195) (74,856,107) - ------------------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (864,148) (961,663) (42,234,553) (74,864,158) - ------------------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold -- -- 549,659 266,468 Reinvested distributions -- -- 67,890 3,401 Payments for shares redeemed -- -- (88,324) (61,472) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS -- -- 529,225 208,397 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold -- -- 631,196 80,986 Reinvested distributions -- -- 22,064 4,650 Payments for shares redeemed -- -- (69,868) -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS -- -- 583,392 85,636 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold -- -- 19,684,903 17,327,622 Reinvested distributions -- -- 41,080,333 71,871,313 Payments for shares redeemed -- -- (60,102,669) (120,135,425) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS -- -- 662,567 (30,936,490) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I Proceeds from shares sold 3,365,524 2,861,301 -- -- Reinvested distributions 827,891 921,355 -- -- Payments for shares redeemed (7,318,171) (5,819,674) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS I SHARE TRANSACTIONS (3,124,756) (2,037,018) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DECREASE IN NET ASSETS (4,108,759) (2,203,966) (54,311,406) (80,998,556) NET ASSETS Beginning of year 19,485,323 21,689,289 178,280,064 259,278,620 - ------------------------------------------------------------------------------------------------------------------------------------ End of year $ 15,376,564 $ 19,485,323 $ 123,968,658 $ 178,280,064 - ------------------------------------------------------------------------------------------------------------------------------------ ACCUMULATED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME $ (267) $ (267) $ 158,648 $ 278,687 ====================================================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. See accompanying notes to financial statements. 40 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND INTERNATIONAL GROWTH FUND - ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR PERIOD YEAR YEAR ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 2008 2007 (A) 2008 (B)(C) 2007 2006 - ------------------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ (522,337) $ (314,116) $ 44,633 $ 30,595 $ 749 Net realized gains (losses) from security transactions (3,152,100) 5,819,353 (320,230) 217,507 74,677 Net realized gains (losses) from foreign currency transactions 3,538 (3,803) -- -- -- Net change in unrealized appreciation/ depreciation on investments (3,345,627) 3,150,465 (1,265,129) 197,015 212,024 Net change in unrealized appreciation/depreciation from foreign currency transactions (941) 207 -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (7,017,467) 8,652,106 (1,540,726) 445,117 287,450 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A -- -- (44,621) (30,744) (751) From net investment income, Class Y -- -- (11) -- -- From net realized gains, Class A (5,166,603) -- (96,726) -- (61,868) From net realized gains, Class C (220,880) (1,868,667) (10) (143,085) -- From net realized gains, Class Y -- (37) (10) -- -- From return of capital, Class A (1,016,771) -- -- -- -- From return of capital, Calss C (43,469) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (6,447,723) (1,868,704) (141,378) (173,829) (62,619) - ------------------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 48,340,108 9,785,368 25,035,840 2,060,415 1,095,954 Reinvested distributions 5,512,885 1,828,887 140,376 171,620 61,344 Payments for shares redeemed* (33,569,549) (20,162,439) (1,691,354) (545,390) (310,977) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 20,283,444 (8,548,184) 23,484,862 1,686,645 846,321 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold 6,624,608 1,353,028 2,500 -- -- Reinvested distributions 117,545 37 10 -- -- Payments for shares redeemed (1,363,976) (17,481) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 5,378,177 1,335,584 2,510 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS Y Proceeds from shares sold -- 1,353,028 2,500 -- -- Reinvested distributions -- 37 20 -- -- Payments for shares redeemed -- (17,481) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS -- 1,335,584 2,520 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 12,196,431 (429,198) 21,807,788 1,957,933 1,071,152
41 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
HEALTHCARE AND BIOTECHNOLOGY FUND INTERNATIONAL GROWTH FUND - -------------------------------------------------------------------------------------------------------------------------- YEAR YEAR PERIOD YEAR YEAR ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 2008 2007 (A) 2008 (B)(C) 2007 2006 - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 54,691,084 55,120,282 3,829,017 1,871,084 799,932 - -------------------------------------------------------------------------------------------------------------------------- End of period $ 66,887,515 $ 54,691,084 $ 25,636,805 $ 3,829,017 $ 1,871,084 ========================================================================================================================== ACCUMULATED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME $ -- $ (3,803) $ 1 $ -- $ -- ==========================================================================================================================
(A) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Effective after the close of business on December 31, 2007, the Fund changed its fiscal year end to September 30. (C) Classes C and Y represent the period from commencement of operations (September 29, 2008) through September 30, 2008. * The cost of shares redeemed for the International Growth Fund is net of the 2% redemption fee on Fund shares which have been held 60 days or less. For the nine months ended September 30, 2008, these fees were $6,466. For the years ended December 31, 2007 and 2006, these fees were $938 and $161, respectively. See accompanying notes to financial statements. 42 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
PREMIUM MID CAP YIELD EQUITY FUND FUND - -------------------------------------------------------------------------------------------------------------------------- YEAR YEAR PERIOD ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) 2008 (B)(C) - -------------------------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income $ 404,833 $ 1,154,584 $ 845,316 Net realized gains (losses) from security transactions (79,816,887) 3,549,738 (2,420,818) Net change in unrealized appreciation/depreciation on investments (59,420,702) 31,725,301 (3,819,661) - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (138,832,756) 36,429,623 (5,395,163) - -------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A -- -- (797,478) From net investment income, Class C -- -- (13,875) From net investment income, Class Y -- (1,499,729) (18) From net investment income, Class Z -- (12,723) -- From net realized gains, Class A (1,305) -- -- From net realized gains, Class C (475) -- -- From net realized gains, Class Y (4,618,823) -- -- From net realized gains, Class Z (144,841) -- -- From return of capital, Class A -- -- (33,941) From return of capital, Class C -- -- (592) - -------------------------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (4,765,444) (1,512,452) (845,904) - -------------------------------------------------------------------------------------------------------------------------- FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 115,793 219,426 24,689,913 Reinvested distributions 1,304 -- 831,173 Payments for shares redeemed (122,798) (8,322) (11,228) - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (5,701) 211,104 25,509,858 - -------------------------------------------------------------------------------------------------------------------------- CLASS C Proceeds from shares sold 31,391 35,447 696,948 Reinvested distributions 475 -- 14,290 Payments for shares redeemed (26,190) -- (2,334) - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 5,676 35,447 708,904 - -------------------------------------------------------------------------------------------------------------------------- CLASS Y Proceeds from shares sold 211,911,977 397,263,466 2,500 Reinvested distributions 1,066,871 84,244 18 Payments for shares redeemed (130,941,824) (37,176,701) -- - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS 82,037,024 360,171,009 2,518 - -------------------------------------------------------------------------------------------------------------------------- CLASS Z Proceeds from shares sold 2,136,325 16,658,928 -- Reinvested distributions 142,147 1,880 -- Payments for shares redeemed (12,401,165) (1,881,297) -- - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (10,122,693) 14,779,511 -- - -------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (71,683,894) 410,114,242 19,980,213
43 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
PREMIUM MID CAP YIELD EQUITY FUND FUND - -------------------------------------------------------------------------------------------------------------------------- YEAR YEAR PERIOD ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) 2008 (B)(C) - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 497,496,374 87,382,132 -- - -------------------------------------------------------------------------------------------------------------------------- End of period $ 425,812,480 $ 497,496,374 $ 19,980,213 ========================================================================================================================== ACCUMULATED NET INVESTMENT INCOME $ 109,780 $ -- $ 6,082 ==========================================================================================================================
(A) Classes A and C represent the period from commencement of operations (May 14, 2007) through September 30, 2007. (B) Represents the period from commencement of operations (December 3, 2007) through September 30, 2008. (C) Class Y represents the period from commencement of operations (August 12, 2008) through September 30, 2008. See accompanying notes to financial statements. 44 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
SANDS CAPITAL SELECT GROWTH SHORT DURATION FUND FIXED INCOME FUND - ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 2008 2007 - ------------------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ (4,437,427) $ (4,662,715) $ 2,432,421 $ 3,060,514 Net realized (gains) losses from security transactions 9,044,188 (7,733,494) (1,271,833) (339,021) Net change in unrealized appreciation/depreciation on investments (165,311,237) 114,689,804 177,951 645,398 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (160,704,476) 102,293,595 1,338,539 3,366,891 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class Z -- -- (2,449,791) (3,020,621) - ------------------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS -- -- (2,449,791) (3,020,621) - ------------------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS Y Proceeds from shares sold 60,693,615 71,602,921 -- -- Payments for shares redeemed (95,239,473) (74,861,403) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS (34,545,858) (3,258,482) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold 235,792,575 90,095,417 904,404 2,206,972 Reinvested distributions -- -- 2,409,375 2,965,843 Payments for shares redeemed (139,363,795) (142,825,600) (14,406,085) (22,416,499) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS 96,428,780 (52,730,183) (11,092,306) (17,243,684) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (98,821,554) 46,304,930 (12,203,558) (16,897,414) NET ASSETS Beginning of year 593,696,515 547,391,585 59,192,308 76,089,722 - ------------------------------------------------------------------------------------------------------------------------------------ End of year $ 494,874,961 $ 593,696,515 $ 46,988,750 $ 59,192,308 ==================================================================================================================================== ACCUMULATED NET INVESTMENT INCOME $ -- $ -- $ -- $ -- ====================================================================================================================================
See accompanying notes to financial statements. 45 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
SMALL CAP ULTRA SHORT VALUE OPPORTUNITIES DURATION FIXED FUND INCOME FUND - ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 (A) 2007 (B) 2008 2007 - ------------------------------------------------------------------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $ (43,603) $ (25,303) $ 7,645,319 $ 8,192,341 Net realized gains (losses) from security transactions (20,405,279) 15,610,150 (3,298,587) 70,532 Net change in unrealized appreciation/depreciation on investments (9,432,031) 10,302,517 (2,400,870) 152,845 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (29,880,913) 25,887,364 1,945,862 8,415,718 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A (372) -- -- -- From net investment income, Class Z (174,221) -- (7,561,408) (8,051,978) From net realized gains, Class A (30,785) -- -- -- From net realized gains, Class C (7,330) -- -- -- From net realized gains, Class Z (16,312,232) (6,056,120) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (16,524,940) (6,056,120) (7,561,408) (8,051,978) - ------------------------------------------------------------------------------------------------------------------------------------ FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 1,275,883 7,500 -- -- Reinvested distributions 31,157 -- -- -- Payments for shares redeemed (1,293,212) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 13,828 7,500 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C Proceeds from shares sold 135,921 77,703 -- -- Reinvested distributions 7,044 -- -- -- Payments for shares redeemed (214,704) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS (71,739) 77,703 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ CLASS Z Proceeds from shares sold 27,377,000 69,825,768 75,996,643 28,974,657 Reinvested distributions 15,630,203 5,737,368 7,319,453 7,727,531 Payments for shares redeemed (68,546,478) (140,795,265) (79,908,726) (64,736,725) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS (25,539,275) (65,232,129) 3,407,370 (28,034,537) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DECREASE IN NET ASSETS (72,003,039) (45,315,682) (2,208,176) (27,670,797) NET ASSETS Beginning of year 204,115,553 249,431,235 146,045,434 173,716,231 - ------------------------------------------------------------------------------------------------------------------------------------ End of year $ 132,112,514 $ 204,115,553 $ 143,837,258 $ 146,045,434 ==================================================================================================================================== ACCUMULATED NET INVESTMENT INCOME $ 19,450 $ 11,319 $ -- $ 4 ====================================================================================================================================
(A) Classes A and C represent the period from October 1, 2007 through June 13, 2008. (B) Classes A and C represent the period from commencement of operations (July 23, 2007) through September 30, 2007. See accompanying notes to financial statements. 46 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets (Continued) - --------------------------------------------------------------------------------
VALUE OPPORTUNITIES FUND - ------------------------------------------------------------------------------------------------------- YEAR YEAR ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - ------------------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income $ 1,698,832 $ 1,047,831 Net realized gains (losses) from security transactions (1,035,681) 9,316,813 Net change in unrealized appreciation/depreciation on investments (31,094,111) 4,431,805 - ------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (30,430,960) 14,796,449 - ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income, Class A (56,168) (2,180) From net investment income, Class C (10,708) (1,687) From net investment income, Class Z (1,663,047) (1,049,665) From net realized gains, Class A (92,498) (183) From net realized gains, Class C (51,999) (1,928) From net realized gains, Class Z (8,553,559) (18,377,100) - ------------------------------------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (10,427,979) (19,432,743) - ------------------------------------------------------------------------------------------------------- FROM CAPITAL SHARE TRANSACTIONS CLASS A Proceeds from shares sold 10,517,094 520,044 Reinvested distributions 147,326 2,363 Payments for shares redeemed (1,512,627) (61,639) - ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 9,151,793 460,768 - ------------------------------------------------------------------------------------------------------- CLASS C Proceeds from shares sold 4,244,880 434,119 Reinvested distributions 51,418 3,422 Payments for shares redeemed (245,732) (31,321) - ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS 4,050,566 406,220 - ------------------------------------------------------------------------------------------------------- CLASS Z Proceeds from shares sold 118,208,342 17,359,285 Reinvested distributions 9,637,603 18,415,427 Payments for shares redeemed (27,140,352) (24,236,609) - ------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM CLASS Z SHARE TRANSACTIONS 100,705,593 11,538,103 - ------------------------------------------------------------------------------------------------------- TOTAL INCREASE IN NET ASSETS 73,049,013 7,768,797 NET ASSETS Beginning of year 107,807,087 100,038,290 - ------------------------------------------------------------------------------------------------------- End of year $ 180,856,100 $ 107,807,087 ======================================================================================================= DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (50,745) $ (7,541) =======================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. See accompanying notes to financial statements. 47 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- CLOVER CORE FIXED INCOME FUND - CLASS I PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, --------------------------------------------------------------------------- 2008 2007 2006 2005 2004 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 9.51 $ 9.58 $ 9.94 $ 10.27 $ 10.40 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.44 0.45 0.39 0.42 0.43 Net realized and unrealized losses on investments (0.60) (0.07) (0.12) (0.19) (0.13) - ---------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (0.16) 0.38 0.27 0.23 0.30 - ---------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.45) (0.45) (0.40) (0.42) (0.43) Distributions from net realized gains -- -- (0.23) (0.14) -- - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.45) (0.45) (0.63) (0.56) (0.43) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 8.90 $ 9.51 $ 9.58 $ 9.94 $ 10.27 ================================================================================================================================== Total return (1.95%) 4.07% 2.87% 2.27% 2.97% ================================================================================================================================== Net assets at end of year (000's) $ 15,377 $ 19,485 $ 21,689 $ 26,166 $ 32,334 ================================================================================================================================== Ratio of net expenses to average net assets 0.85% 0.87% 0.91%(A) 0.80% 0.80% Ratio of gross expenses to average net assets 1.15% 0.99% 0.95% 0.86% 0.85% Ratio of net investment income to average net assets 4.61% 4.72% 4.13% 3.91% 3.94% Portfolio turnover rate 62% 71% 62% 70% 45%
(A) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 0.89%. See accompanying notes to financial statements. 48 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - --------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 19.56 $ 26.95 - --------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.04 0.02 Net realized and unrealized gains (losses) on investments (1.62) 0.38 - --------------------------------------------------------------------------------------------------- Total from investment operations (1.58) 0.40 - --------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.08) -- Distributions from net realized gains (5.26) (7.79) - --------------------------------------------------------------------------------------------------- Total distributions (5.34) (7.79) - --------------------------------------------------------------------------------------------------- Net asset value at end of period $ 12.64 $ 19.56 =================================================================================================== Total return (B) (8.85%) 1.68%(C) =================================================================================================== Net assets at end of period (000s) $ 625 $ 205 =================================================================================================== Ratio of net expenses to average net assets 1.45% 1.28%(D) Ratio of gross expenses to average net assets 5.87% 1.81%(D) Ratio of net investment income to average net assets 0.67% 0.23%(D) Portfolio turnover rate 67% 79%
(A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 49 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - ----------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 19.48 $ 26.95 - ----------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.01) (0.04) Net realized and unrealized gains (losses) on investments (1.67) 0.36 - ----------------------------------------------------------------------------------------------------- Total from investment operations (1.68) 0.32 - ----------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.06) -- Distributions from net realized gains (5.26) (7.79) - ----------------------------------------------------------------------------------------------------- Total distributions (5.32) (7.79) - ----------------------------------------------------------------------------------------------------- Net asset value at end of period $ 12.48 $ 19.48 ===================================================================================================== Total return (B) (9.56%) 1.26%(C) ===================================================================================================== Net assets at end of period (000s) $ 619 $ 79 ===================================================================================================== Ratio of net expenses to average net assets 2.20% 1.86%(D) Ratio of gross expenses to average net assets 4.39% 1.86%(D) Ratio of net investment loss to average net assets (0.09%) (0.38%)(D) Portfolio turnover rate 67% 79%
(A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 50 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- DIVERSIFIED SMALL CAP VALUE FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, -------------------------------------------------------------------------------- 2008 2007 2006 2005 2004 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of year $ 19.55 $ 25.10 $ 27.63 $ 23.76 $ 19.23 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.09 (0.03) (0.12) (0.14) (0.01) Net realized and unrealized gains (losses) on investments (1.67) 2.27 2.12 4.01 4.57 - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.58) 2.24 2.00 3.87 4.56 - ----------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.09) -- -- -- (0.03) Distributions from net realized gains (5.26) (7.79) (4.53) -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (5.35) (7.79) (4.53) -- (0.03) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value at end of year $ 12.62 $ 19.55 $ 25.10 $ 27.63 $ 23.76 =================================================================================================================================== Total return (8.89%) 9.12% 8.47% 16.29% 23.72% =================================================================================================================================== Net assets at end of year (000's) $ 122,725 $ 177,996 $ 259,279 $ 450,011 $ 540,278 =================================================================================================================================== Ratio of net expenses to average net assets 1.45% 1.43% 1.32%(A) 1.23% 1.22% Ratio of gross expenses to average net assets 1.45% 1.43% 1.32% 1.23% 1.22% Ratio of net investment income (loss) to average net assets 0.63% (0.08%) (0.37%) (0.48%) (0.09%) Portfolio turnover rate 67% 79% 98% 78% 61%
(A) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.31%. See accompanying notes to financial statements. 51 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, ----------------------------------------------------------------------- 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of year $ 18.28 $ 15.91 $ 16.13 $ 13.79 $ 12.31 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment loss (0.11) (0.14) (0.18) (0.16) (0.06) Net realized and unrealized gains (losses) on investments (1.09) 3.10 0.40 3.02 1.55 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (1.20) 2.96 0.22 2.86 1.49 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Distributions from net realized gains (1.65) (0.59) (0.44) (0.52) (0.01) Distributions from return of capital (0.33) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.98) (0.59) (0.44) (0.52) (0.01) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of year $ 15.10 $ 18.28 $ 15.91 $ 16.13 $ 13.79 ==================================================================================================================================== Total return (A) (7.82%) 19.25% 1.37% 21.10% 12.12% ==================================================================================================================================== Net assets at end of year (000's) $ 60,959 $ 53,295 $ 55,120 $ 59,742 $ 35,371 ==================================================================================================================================== Ratio of net expenses to average net assets 1.55% 1.67% 1.85%(B) 1.88% 1.61% Ratio of gross expenses to average net assets 1.73% 1.80% 1.85% 1.88% 1.84% Ratio of net investment loss to average net assets (0.72%) (0.63%) (0.99%) (1.35%) (1.10%) Portfolio turnover rate 127% 156% 158% 169% 163%
(A) Total returns shown exclude the effect of applicable sales loads. (B) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.84%. See accompanying notes to financial statements. 52 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- HEALTHCARE AND BIOTECHNOLOGY FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - -------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 18.19 $ 15.98 - -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (0.16) (0.03) Net realized and unrealized gains (losses) on investments (1.15) 2.83 - -------------------------------------------------------------------------------------------------- Total from investment operations (1.31) 2.80 - -------------------------------------------------------------------------------------------------- Less distributions: Distributions from net realized gains (1.65) -- Distributions from return of capital (0.33) -- - -------------------------------------------------------------------------------------------------- Total distributions (1.98) (0.59) - -------------------------------------------------------------------------------------------------- Net asset value at end of period $ 14.90 $ 18.19 ================================================================================================== Total return (B) (8.53%) 18.15%(C) ================================================================================================== Net assets at end of period (000s) $ 5,929 $ 1,396 ================================================================================================== Ratio of net expenses to average net assets 2.30% 2.23%(D) Ratio of gross expenses to average net assets 2.64% 2.57%(D) Ratio of net investment loss to average net assets (1.46%) (1.27%)(D) Portfolio turnover rate 127% 156%
(A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 53 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- INTERNATIONAL GROWTH FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------------------------------ 2008 (A) 2007 2006 2005 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period $ 11.88 $ 10.25 $ 8.62 $ 7.76 $ 6.79 $ 5.08 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 0.02 0.10 0.01 0.04 0.01 0.10 Net realized and unrealized gains (losses) on investments (3.30) 2.23 1.97 1.09 0.96 1.71 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (3.28) 2.33 1.98 1.13 0.97 1.81 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.02) (0.10) (0.01) (0.04) -- (0.10) Distributions from net realized gains (0.03) (0.60) (0.34) (0.23) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (0.05) (0.70) (0.35) (0.27) -- (0.10) - ------------------------------------------------------------------------------------------------------------------------------------ Paid-in capital from redemption fees 0.01 0.00(B) 0.00(B) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of period $ 8.56 $ 11.88 $ 10.25 $ 8.62 $ 7.76 $ 6.79 ==================================================================================================================================== Total return(C) (27.55%)(D) 22.77% 23.01% 14.57% 14.29% 35.82% ==================================================================================================================================== Net assets at end of period (000s) $ 25,631 $ 3,829 $ 1,871 $ 800 $ 609 $ 640 ==================================================================================================================================== Ratio of net expenses to average net assets 1.48%(E) 1.50% 1.50% 1.50% 1.50% 1.50% Ratio of gross expenses to average net assets 6.42%(E) 8.88% 15.14% 25.80% 23.37% 11.33% Ratio of net investment income (loss) to average net assets 1.16%(E) 1.32% 0.06% 0.64% 0.10% (0.02%) Portfolio turnover rate 35%(E) 91% 67% 75% 86% 161%
(A) Effective after the close of business on December 31, 2007, the Fund changed its fiscal year end to September 30. (B) Amount rounds to less than $0.01. (C) Total returns shown exclude the effect of applicable sales loads. (D) Not annualized. (E) Annualized. See accompanying notes to financial statements. 54 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- INTERNATIONAL GROWTH FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2008 (A) - -------------------------------------------------------------------------------- Net asset value at beginning of period $ 8.52 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00(B) Net realized and unrealized gains on investments 0.08 - -------------------------------------------------------------------------------- Total from investment operations 0.08 - -------------------------------------------------------------------------------- Distributions from net realized gains (0.03) - -------------------------------------------------------------------------------- Net asset value at end of period $ 8.57 ================================================================================ Total return (C) 0.97%(D) ================================================================================ Net assets at end of period (000s) $ 3 ================================================================================ Ratio of net expenses to average net assets 0.73%(E) Ratio of gross expenses to average net assets 832.55%(E) Ratio of net investment income to average net assets 0.80%(E) Portfolio turnover rate 35%(E) (A) Represents the period from commencement of operations (September 29, 2008) through September 30, 2008. (B) Amount rounds to less than $0.01 per share. (C) Total return shown excludes the effect of applicable sales loads. (D) Not annualized. (E) Annualized. See accompanying notes to financial statements. 55 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- INTERNATIONAL GROWTH FUND - CLASS Y PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2008 (A) - -------------------------------------------------------------------------------- Net asset value at beginning of period $ 8.52 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00(B) Net realized and unrealized gains on investments 0.09 - -------------------------------------------------------------------------------- Total from investment operations 0.09 - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.04) Distributions from net realized gains (0.03) - -------------------------------------------------------------------------------- Total distributions (0.07) - -------------------------------------------------------------------------------- Net asset value at end of period $ 8.54 ================================================================================ Total return 1.04%(C) ================================================================================ Net assets at end of period (000s) $ 3 ================================================================================ Ratio of net expenses to average net assets 0.22%(D) Ratio of gross expenses to average net assets 834.03%(D) Ratio of net investment income to average net assets 1.32%(D) Portfolio turnover rate 35%(D) (A) Represents the period from commencement of operations (September 29, 2008) through September 30, 2008. (B) Amount rounds to less than $0.01 per share. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 56 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- MID CAP FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - ------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 17.86 $ 18.14 - ------------------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.02) (0.00)(B) Net realized and unrealized losses on investments (4.60) (0.28) - ------------------------------------------------------------------------------------------- Total from investment operations (4.62) (0.28) - ------------------------------------------------------------------------------------------- Distributions from net realized gains (0.17) -- - ------------------------------------------------------------------------------------------- Net asset value at end of period $ 13.07 $ 17.86 =========================================================================================== Total return (C) (26.11%) (1.54%)(D) =========================================================================================== Net assets at end of period (000s) $ 159 $ 210 =========================================================================================== Ratio of net expenses to average net assets 1.15% 0.94%(E) Ratio of gross expenses to average net assets 4.09% 14.21%(E) Ratio of net investment loss to average net assets (0.16%) (0.09%)(E) Portfolio turnover rate 157% 193%
(A) Represents the period from commencement of operations (May 14, 2007) through September 30, 2007. (B) Amount rounds to less than $0.01 per share. (C) Total returns shown exclude the effect of applicable sales loads. (D) Not annualized. (E) Annualized. MID CAP FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - ------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 17.84 $ 18.14 - ------------------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.15) (0.02) Net realized and unrealized losses on investments (4.40) (0.28) - ------------------------------------------------------------------------------------------- Total from investment operations (4.55) (0.30) - ------------------------------------------------------------------------------------------- Distributions from net realized gains (0.17) -- - ------------------------------------------------------------------------------------------- Net asset value at end of period $ 13.12 $ 17.84 =========================================================================================== Total return (B) (25.74%) (1.65%)(C) =========================================================================================== Net assets at end of period (000s) $ 30 $ 36 =========================================================================================== Ratio of net expenses to average net assets 1.90% 1.35%(D) Ratio of gross expenses to average net assets 31.40% 28.68%(D) Ratio of net investment loss to average net assets (0.91%) (0.51%)(D) Portfolio turnover rate 157% 193%
(A) Represents the period from commencement of operations (May 14, 2007) through September 30, 2007. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 57 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- MID CAP FUND - CLASS Y PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD YEAR ENDED SEPTEMBER 30, ENDED ENDED -------------------------------------------------------- DEC. 31, DEC. 31, 2008 2007 2006 2005 (A) 2004 2003 (B) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79 $ 10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) 0.01 0.11 0.04 (0.01) 0.08 0.01 Net realized and unrealized gains (losses) on investments (4.61) 2.65 1.00 2.47 2.70 3.99 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (4.60) 2.76 1.04 2.46 2.78 4.00 - ------------------------------------------------------------------------------------------------------------------------------------ Less Distributions: Dividends from net investment income -- (0.13) (0.03) -- (0.09) -- Distributions from net realized gains (0.17) -- (1.09) (0.39) (2.19) (1.21) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (0.17) (0.13) (1.12) (0.39) (2.28) (1.21) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of period $ 13.14 $ 17.91 $ 15.28 $ 15.36 $ 13.29 $ 12.79 ==================================================================================================================================== Total return (25.92%) 18.13% 7.10% 18.53%(C) 21.78% 40.24%(C) ==================================================================================================================================== Net assets at end of period (000's) $ 422,356 $ 482,047 $ 87,032 $ 842 $ 410 $ 337 ==================================================================================================================================== Ratio of net expenses to average net assets 0.90% 0.90% 0.91%(D) 1.00%(E) 0.90% 0.90%(E) Ratio of gross expenses to average net assets 1.03% 1.06% 1.81% 8.23%(E) 0.90% 0.90%(E) Ratio of net investment income (loss) to average net assets 0.09% 0.39% 0.82% (0.02%)(E) 0.59% 0.12%(E) Portfolio turnover rate 157% 193% 323% 120%(E) 193% 141%(E)
(A) For the nine-month period ended September 30, 2005. Effective January 1, 2005, the Fund changed its fiscal year end from December 31 to September 30. (B) Represents the period from commencement of operations (January 2, 2003) through December 31, 2003. (C) Not annualized. (D) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 0.90%. (E) Annualized. See accompanying notes to financial statements. 58 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- MID CAP FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR ENDED PERIOD SEPTEMBER 30, ENDED ------------------------ SEPTEMBER 30, 2008 2007 2006 (A) - ---------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 17.85 $ 15.26 $ 16.73 - ---------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (0.08) 0.09 0.01 Net realized and unrealized gains (losses) on investments (4.55) 2.62 (1.48) - ---------------------------------------------------------------------------------------------------------------- Total from investment operations (4.63) 2.71 (1.47) - ---------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income -- (0.12) -- Distributions from net realized gains (0.17) -- -- - ---------------------------------------------------------------------------------------------------------------- Total distributions (0.17) (0.12) -- - ---------------------------------------------------------------------------------------------------------------- Net asset value at end of period $ 13.05 $ 17.85 $ 15.26 ================================================================================================================ Total return (26.18%) 17.84% (8.79%)(B) ================================================================================================================ Net assets at end of period (000's) $ 3,267 $ 15,203 $ 350 ================================================================================================================ Ratio of net expenses to average net assets 1.15% 1.14% 1.16%(C)(D) Ratio of gross expenses to average net assets 1.48% 1.25% 1.82%(C) Ratio of net investment income (loss) to average net assets (0.27%) (0.12%) 0.63%(C) Portfolio turnover rate 157% 193% 323%
(A) Represents the period from commencement of operations (April 24, 2006) through September 30, 2006. (B) Not annualized (C) Annualized. (D) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.15%. See accompanying notes to financial statements. 59 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- PREMIUM YIELD EQUITY FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2008 (A) - -------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.00 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.33 Net realized and unrealized losses on investments (2.44) - -------------------------------------------------------------------------------- Total from investment operations (2.11) - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.32) Distributions from return of capital (0.01) - -------------------------------------------------------------------------------- Total distributions (0.33) - -------------------------------------------------------------------------------- Net asset value at end of period $ 7.56 ================================================================================ Total return (B) (21.48%)(C) ================================================================================ Net assets at end of period (000s) $ 19,411 ================================================================================ Ratio of net expenses to average net assets 1.20%(D) Ratio of gross expenses to average net assets 1.53%(D) Ratio of net investment income to average net assets 4.68%(D) Portfolio turnover rate 181%(D) (A) Represents the period from commencement of operations (December 3, 2007) through September 30, 2008. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 60 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- PREMIUM YIELD EQUITY FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2008 (A) - -------------------------------------------------------------------------------- Net asset value at beginning of period $ 10.00 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.29 Net realized and unrealized losses on investments (2.45) - -------------------------------------------------------------------------------- Total from investment operations (2.16) - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.27) Distributions from return of capital (0.01) - -------------------------------------------------------------------------------- Total distributions (0.28) - -------------------------------------------------------------------------------- Net asset value at end of period $ 7.56 ================================================================================ Total return (B) (21.95%)(C) ================================================================================ Net assets at end of period (000s) $ 567 ================================================================================ Ratio of net expenses to average net assets 1.94%(D) Ratio of gross expenses to average net assets 5.31%(D) Ratio of net investment income to average net assets 3.93%(D) Portfolio turnover rate 181%(D) (A) Represents the period from commencement of operations (December 3, 2007) through September 30, 2008. (B) Total return shown excludes the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 61 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- PREMIUM YIELD EQUITY FUND - CLASS Y PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2008 (A) - -------------------------------------------------------------------------------- Net asset value at beginning of period $ 8.30 - -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.04 Net realized and unrealized losses on investments (0.73) - -------------------------------------------------------------------------------- Total from investment operations (0.69) - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.05) Distributions from return of capital (0.01) - -------------------------------------------------------------------------------- Total distributions (0.06) - -------------------------------------------------------------------------------- Net asset value at end of period $ 7.55 ================================================================================ Total return (8.37%)(B) ================================================================================ Net assets at end of period (000s) $ 2 ================================================================================ Ratio of net expenses to average net assets 0.90%(C) Ratio of gross expenses to average net assets 453.70%(C) Ratio of net investment income to average net assets 3.16%(C) Portfolio turnover rate 181%(C) (A) Represents the period from commencement of operations (August 12, 2008) through September 30, 2008. (B) Not annualized. (C) Annualized. See accompanying notes to financial statements. 62 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- SANDS CAPITAL SELECT GROWTH FUND - CLASS Y PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------ 2008 2007 2006 2005 2004 (A) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period $ 9.15 $ 7.60 $ 7.81 $ 6.80 $ 6.74 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment loss (0.06) (0.05) (0.06) (0.06) -- Net realized and unrealized gains (losses) on investments (2.23) 1.60 (0.15) 1.07 0.06 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.29) 1.55 (0.21) 1.01 0.06 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of period $ 6.86 $ 9.15 $ 7.60 $ 7.81 $ 6.80 ==================================================================================================================================== Total return (25.03%) 20.39% (2.69%) 14.85% 0.89% (B) ==================================================================================================================================== Net assets at end of period (000s) $130,920 $ 213,672 $ 182,001 $ 81,976 $ 32,591 ==================================================================================================================================== Ratio of net expenses to average net assets 1.16% 1.03% 1.10% 1.11% 1.10% (C) Ratio of gross expenses to average net assets 1.19% 1.03% 1.23% 1.19% 1.10% (C) Ratio of net investment loss to average net assets (0.59%) (0.67%) (0.74%) (0.62%) (0.79%)(C) Portfolio turnover rate 39% 24% 24% 24% 11% (C)
(A) Represents the period from commencement of operations (August 27, 2004) through Septembr 30, 2004. (B) Not annualized. (C) Annualized. SANDS CAPITAL SELECT GROWTH FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR YEAR ENDED SEPTEMBER 30, ENDED ------------------------------------------------------------------- OCTOBER 31, 2008 2007 2006 2005 2004 (A) 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period $ 9.08 $ 7.57 $ 7.80 $ 6.80 $ 6.13 $ 4.81 ==================================================================================================================================== Income (loss) from investment operations: Net investment loss (0.06) (0.09) (0.05) (0.03) (0.06) (0.04) (B) Net realized and unrealized gains (losses) on investments (2.23) 1.60 (0.18) 1.03 0.73 1.36 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.29) 1.51 (0.23) 1.00 0.67 1.32 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of period $ 6.79 $ 9.08 $ 7.57 $ 7.80 $ 6.80 $ 6.13 ==================================================================================================================================== Total return (25.22%) 19.95% (2.95%) 14.71% 10.93% (C) 27.44% ==================================================================================================================================== Net assets at end of period (000s) $ 363,955 $ 380,025 $ 365,390 $ 162,999 $ 70,027 $ 43,878 ==================================================================================================================================== Ratio of net expenses to average net assets 1.41% 1.29% 1.35% 1.36% 1.20% (D) 1.17% Ratio of gross expenses to average net assets 1.43% 1.35% 1.48% 1.44% 1.35% (D) 1.45% Ratio of net investment loss to average net assets (0.85%) (0.92%) (0.99%) (0.84%) (0.95%)(D) (0.81%) Portfolio turnover rate 39% 24% 24% 24% 11% (D) 28%
(A) For the eleven-month period ended September 30, 2004. The Fund changed its fiscal year end from October 31 to September 30. (B) Based on average shares outstanding. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 63 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- SHORT DURATION FIXED INCOME FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of year $9.81 $9.76 $9.87 $10.04 $10.14 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 0.45 0.45 0.38 0.31 0.28 Net realized and unrealized gains (losses) on investments (0.22) 0.05 (0.07) (0.10) (0.10) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 0.23 0.50 0.31 0.21 0.18 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends from net investment income (0.45) (0.45) (0.42) (0.38) (0.28) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of year $9.59 $9.81 $9.76 $9.87 $10.04 ==================================================================================================================================== Total return 2.36% 5.19% 3.23% 2.12% 1.84% ==================================================================================================================================== Net assets at end of year (000's) $46,989 $59,192 $76,090 $112,833 $172,213 ==================================================================================================================================== Ratio of net expenses to average net assets 0.74% 0.74% 0.72% 0.61% 0.46% Ratio of gross expenses to average net assets 0.94% 0.82% 0.74% 0.66% 0.60% Ratio of net investment income to average net assets 4.60% 4.62% 3.97% 3.18% 2.49% Portfolio turnover rate 25% 21% 10% 46% 84%
See accompanying notes to financial statements. 64 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
PERIOD PERIOD ENDED ENDED JUNE 13, SEPTEMBER 30, 2008(A) 2007(B) - ----------------------------------------------------------------------------------- Net asset value at beginning of period $ 20.48 $ 21.55 - ----------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.01 (0.00) (C) Net realized and unrealized losses on investments (1.20) (1.07) - ----------------------------------------------------------------------------------- Total from investment operations (1.19) (1.07) - ----------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.02) -- Distributions from net realized gains (1.79) -- - ----------------------------------------------------------------------------------- Total distributions (1.81) -- - ----------------------------------------------------------------------------------- Net asset value at end of period $ 17.48 $ 20.48 =================================================================================== Total return (D) (5.87%)(E) (4.97%)(E) =================================================================================== Net assets at end of period (000s) $ 1,219 $ 8 =================================================================================== Ratio of net expenses to average net assets 1.50% (F) 1.49% (F) Ratio of gross expenses to average net assets 1.89% (F) 72.28% (F) Ratio of net investment loss to average net assets (0.03%)(F) (0.11%)(F) Portfolio turnover rate 222% 127%
(A) On June 13, 2008, Class A merged into Class Z shares. (B) Represents the period from commencement of operations (July 23, 2007) through September 30, 2007. (C) Amount rounds to less than $0.01 per share. (D) Total returns shown exclude the effect of applicable sales loads. (E) Not annualized. (F) Annualized. See accompanying notes to financial statements. 65 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
PERIOD PERIOD ENDED ENDED JUNE 13, SEPTEMBER 30, 2008(A) 2007(B) - ----------------------------------------------------------------------------------- Net asset value at beginning of period $ 20.47 $ 21.55 - ----------------------------------------------------------------------------------- Loss from investment operations: Net investment loss (0.05) (0.02) Net realized and unrealized losses on investments (1.24) (1.06) - ----------------------------------------------------------------------------------- Total from investment operations (1.29) (1.08) - ----------------------------------------------------------------------------------- Distributions from net realized gains (1.79) -- - ----------------------------------------------------------------------------------- Net asset value at end of period $ 17.39 $ 20.47 =================================================================================== Total return (C) (6.38%)(D) (5.01%)(D) =================================================================================== Net assets at end of period (000s) $ 212 $ 81 =================================================================================== Ratio of net expenses to average net assets 2.23% (E) 2.09% (E) Ratio of gross expenses to average net assets 3.54% (E) 2.37% (E) Ratio of net investment loss to average net assets (0.73%)(E) (0.69%)(E) Portfolio turnover rate 222% 127%
(A) On June 13, 2008, Class C merged into Class Z shares. (B) Represents the period from commencement of operations (July 23, 2007) through September 30, 2007. (C) Total returns shown exclude the effect of applicable sales loads. (D) Not annualized. (E) Annualized. See accompanying notes to financial statements. 66 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- SMALL CAP VALUE OPPORTUNITIES FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, --------------------------------------------------------- 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of year $ 20.48 $ 18.94 $ 18.35 $ 16.21 $ 12.72 - ------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) (0.00) (A) (0.02) (0.08) 0.02 (0.04) Net realized and unrealized gains (losses) on investments (3.22) 2.05 0.96 3.76 3.75 - ------------------------------------------------------------------------------------------------------------------------ Total from investment operations (3.22) 2.03 0.88 3.78 3.71 - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.02) -- (0.02) -- -- Distributions from net realized gains (1.79) (0.49) (0.27) (1.64) (0.22) - ------------------------------------------------------------------------------------------------------------------------ Total distributions (1.81) (0.49) (0.29) (1.64) (0.22) - ------------------------------------------------------------------------------------------------------------------------ Net asset value at end of year $ 15.45 $ 20.48 $ 18.94 $ 18.35 $ 16.21 ======================================================================================================================== Total return (16.81%) 10.77% 4.84% 24.32% 29.36% ======================================================================================================================== Net assets at end of year (000s) $132,113 $204,027 $249,431 $74,235 $14,533 ======================================================================================================================== Ratio of net expenses to average net assets 1.50% 1.58% 1.63% (B) 1.46% 1.45% Ratio of gross expenses to average net assets 1.74% 1.71% 1.65% 2.04% 1.82% Ratio of net investment income (loss) to average net assets (0.03%) (0.01%) (0.43%) 0.29% (0.23%) Portfolio turnover rate 222% 127% 99% 193% 272%
(A) Amount rounds to less than $0.01 per share. (B) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.62%. See accompanying notes to financial statements. 67 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- ULTRA SHORT DURATION FIXED INCOME FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, --------------------------------------------------------------------- 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of year $ 10.08 $ 10.06 $ 10.08 $ 10.12 $ 10.17 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 0.47 0.53 0.44 0.30 0.21 Net realized and unrealized gains (losses) on investments (0.34) 0.01 (0.02) (0.03) (0.05) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 0.13 0.54 0.42 0.27 0.16 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends from net investment income (0.47) (0.52) (0.44) (0.31) (0.21) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of year $ 9.74 $ 10.08 $ 10.06 $ 10.08 $ 10.12 ==================================================================================================================================== Total return 1.26% 5.48% 4.28% 2.67% 1.63% ==================================================================================================================================== Net assets at end of year (000s) $ 143,837 $ 146,045 $ 173,716 $ 305,222 $ 391,934 ==================================================================================================================================== Ratio of net expenses to average net assets 0.69% 0.69% 0.69% 0.59% 0.46% Ratio of gross expenses to average net assets 0.82% 0.75% 0.69% 0.62% 0.58% Ratio of net investment income to average net assets 4.72% 5.25% 4.30% 2.93% 2.08% Portfolio turnover rate 56% 26% 38% 68% 44%
See accompanying notes to financial statements. 68 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- VALUE OPPORTUNITIES FUND - CLASS A PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - --------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 17.85 $ 19.51 - --------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.18 0.09 Net realized and unrealized gains (losses) on investments (2.97) 1.95 - --------------------------------------------------------------------------------------------- Total from investment operations (2.79) 2.04 - --------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.17) (0.12) Distributions from net realized gains (1.43) (3.58) - --------------------------------------------------------------------------------------------- Total distributions (1.60) (3.70) - --------------------------------------------------------------------------------------------- Net asset value at end of period $ 13.46 $ 17.85 ============================================================================================= Total return (B) (17.01%) 11.90% (C) ============================================================================================= Net assets at end of period (000s) $ 8,231 $ 472 ============================================================================================= Ratio of net expenses to average net assets 1.20% 1.31% (D) Ratio of gross expenses to average net assets 1.68% 1.31% (D) Ratio of net investment income to average net assets 1.25% 0.77% (D) Portfolio turnover rate 96% 62%
(A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 69 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- VALUE OPPORTUNITIES FUND - CLASS C PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
YEAR PERIOD ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 (A) - ----------------------------------------------------------------------------------------------- Net asset value at beginning of period $ 17.81 $ 19.51 - ----------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.11 0.05 Net realized and unrealized gains (losses) on investments (3.01) 1.93 - ----------------------------------------------------------------------------------------------- Total from investment operations (2.90) 1.98 - ----------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.06) (0.10) Distributions from net realized gains (1.43) (3.58) - ----------------------------------------------------------------------------------------------- Total distributions (1.49) (3.68) - ----------------------------------------------------------------------------------------------- Net asset value at end of period $ 13.42 $ 17.81 =============================================================================================== Total return (B) (17.62%) 11.52% (C) =============================================================================================== Net assets at end of period (000s) $ 3,865 $ 423 =============================================================================================== Ratio of net expenses to average net assets 1.95% 1.86% (D) Ratio of gross expenses to average net assets 2.56% 1.86% (D) Ratio of net investment income to average net assets 0.55% 0.20% (D) Portfolio turnover rate 96% 62%
(A) Represents the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Total returns shown exclude the effect of applicable sales loads. (C) Not annualized. (D) Annualized. See accompanying notes to financial statements. 70 - -------------------------------------------------------------------------------- Financial Highlights (Continued) - -------------------------------------------------------------------------------- VALUE OPPORTUNITIES FUND - CLASS Z PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, --------------------------------------------------------------------- 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of year $ 17.83 $ 18.89 $ 19.00 $ 16.51 $ 14.18 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 0.18 0.18 0.10 0.04 0.06 Net realized and unrealized gains (losses) on investments (2.95) 2.52 1.38 3.90 2.84 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.77) 2.70 1.48 3.94 2.90 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.18) (0.18) (0.10) (0.04) (0.06) Distributions from net realized gains (1.43) (3.58) (1.49) (1.41) (0.51) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.61) (3.76) (1.59) (1.45) (0.57) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at end of year $ 13.45 $ 17.83 $ 18.89 $ 19.00 $ 16.51 ==================================================================================================================================== Total return (16.92%) 15.83% 8.35% 24.83% 20.75% ==================================================================================================================================== Net assets at end of year (000s) $ 168,760 $ 106,912 $ 100,038 $ 171,251 $ 59,714 ==================================================================================================================================== Ratio of net expenses to average net assets 1.14% 1.12% 1.19%(A) 1.13% 1.08% Ratio of gross expenses to average net assets 1.14% 1.17% 1.19% 1.13% 1.08% Ratio of net investment income to average net assets 1.25% 1.03% 0.49% 0.24% 0.39% Portfolio turnover rate 96% 62% 80% 75% 55%
(A) The ratio of net expenses to average net assets excludes the effect of fees paid indirectly. If these expense offsets were included, the ratio would have been 1.18%. See accompanying notes to financial statements. 71 - -------------------------------------------------------------------------------- Notes to Financial Statements September 30, 2008 - -------------------------------------------------------------------------------- 1. ORGANIZATION The Touchstone Funds Group Trust (the Trust), is registered under the Investment Company Act of 1940, as amended, (the Act), as an open-end management investment company. The Trust consists of the following eleven mutual funds, individually, a Fund, and collectively, the Funds: Touchstone Clover Core Fixed Income Fund Touchstone Diversified Small Cap Value Fund Touchstone Healthcare and Biotechnology Fund Touchstone International Growth Fund Touchstone Mid Cap Fund Touchstone Premium Yield Equity Fund Touchstone Sands Capital Select Growth Fund Touchstone Short Duration Fixed Income Fund Touchstone Small Cap Value Opportunities Fund Touchstone Ultra Short Duration Fixed Income Fund Touchstone Value Opportunities Fund Prior to September 26, 2008, the International Growth Fund (formerly the Navellier International Growth Portfolio) was part of the Navellier Millennium Funds, registered under the Act as an open-end management investment company. Effective September 26, 2008, the Fund was merged into the Trust and its fiscal year end was subsequently changed from December 31 to September 30. Prior to September 26, 2008, the Fund charged a redemption fee of 2.00% of the amount redeemed if the shares sold were held for fewer than 60 days. Redemption fees were paid directly to the Fund. Effective September 26, 2008, the Fund no longer charges a redemption fee. Each Fund is registered as a diversified portfolio of the Trust with the exception of the Healthcare and Biotechnology Fund, International Growth Fund, and Sands Capital Select Growth Fund, each of which is non-diversified. The Funds are registered to offer different classes of shares: Class A shares, Class C shares, Class Y shares, Class Z shares, and Class I shares. The assets of each Fund are segregated, and a shareholder's interest is limited to the Fund in which shares are held. The Funds' prospectus provides a description of each Fund's investment objectives, policies, and strategies along with information on the classes of shares currently being offered. Effective June 13, 2008, Class A and Class C shares of the Small Cap Value Opportunities Fund were exchanged for Class Z shares of the Small Cap Value Opportunities Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the Funds' significant accounting policies: SECURITY VALUATION -- The Funds' portfolio securities are valued as of the close of the regular session of trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time). Portfolio securities traded on stock exchanges are valued at the last sale price and portfolio securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price (NOCP). Securities not traded on a particular day, or for which the last sale price is not readily available, are valued at their last broker-quoted bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service. Debt securities for which market quotations are readily available are valued at their most recent bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service. Money market instruments and other debt securities with a remaining maturity of less than 60 days are valued at amortized cost, which approximates market. Securities for which market quotations or the NOCP are not readily available are valued based on fair value as determined by or under the direction of the Board of Trustees. Shares of open-end mutual funds in which the Funds invest are valued at their respective net asset values as reported by the underlying funds. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. 72 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- For securities that principally trade on a foreign market or exchange, a significant gap in time can exist between the time of a particular security's last trade and the time at which a Fund calculates its net asset value. The closing prices of such securities may no longer reflect their market value at the time the Fund calculates its net asset value if an event that could materially affect the value of those securities (a "Significant Event") has occurred between the time of the security's last close and the time that the Fund calculates its net asset value. A Significant Event may relate to a single issuer or to an entire market sector. If the advisor or sub-advisor of a Fund becomes aware of a Significant Event that has occurred with respect to a security or group of securities after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Fund calculates its net asset value, it may request that a Fair Value Committee Meeting be called. In addition, the Funds' administrator or sub-administrator monitors price movements among certain selected indices, securities and/or baskets of securities that may be an indicator that the closing prices received earlier from foreign exchanges or markets may not reflect market value at the time the Fund calculates its net asset value. If price movements in a monitored index or security exceed levels established by the Advisor, the Sub-Administrator notifies the Advisor or Sub-Advisor for any Fund holding the relevant securities that such limits have been exceeded. In such event, the Advisor makes the determination whether a Fair Value Committee meeting should be called based on the information provided. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles (GAAP) from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of September 30, 2008, the Trust does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statements of changes in net assets for a fiscal period. FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are maintained in U.S. dollars and translated into U.S. dollars on the following basis: (1) market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date; and (2) purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. PORTFOLIO SECURITIES LOANED -- Each Fund may lend its portfolio securities. Lending portfolio securities exposes a Fund to the risk that the borrower may fail to return the loaned securities or may not be able to provide additional collateral or that the Fund may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the borrower must agree to maintain collateral marked to market daily, in the form of cash and/or liquid securities, with the Fund's Custodian in an amount at least equal to the market value of the loaned securities. As of September 30, 2008, the following Funds loaned securities and received collateral as follows: 73 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- FAIR VALUE OF VALUE OF SECURITIES COLLATERAL LOANED RECEIVED - -------------------------------------------------------------------------------- Diversified Small Cap Value Fund $ 21,122,404 $ 20,978,164 Healthcare and Biotechnology Fund $ 13,304,645 $ 13,160,939 Mid Cap Fund $106,517,607 $105,177,730 Sands Capital Select Growth Fund $ 89,069,993 $ 84,147,388 Small Cap Value Opportunities Fund $ 23,050,058 $ 23,350,696 Value Opportunities Fund $ 37,564,761 $ 35,830,066 All collateral received as cash and securities is received, held and administered by the Funds' custodian for the benefit of the Funds in the applicable custody account or other account established for the purpose of holding collateral. Pursuant to the Fund's securities lending agreement, and according to normal operating procedures, the custodian segregated an additional $144,240, $143,706, $1,339,877, $4,922,605 and $1,734,695 in collateral the following business day for securities on loan in the Diversified Small Cap Value Fund, Healthcare and Biotechnology Fund, Mid Cap Fund, Sands Capital Select Growth Fund, and Value Opportunities Fund, respectively, as of September 30, 2008. Funds participating in securities lending receive compensation in the form of fees, or retain a portion of interest or dividends on the investment of any cash received as collateral. The Funds also continue to receive interest or dividends on the securities loaned. The loans are secured by collateral valued at least equal, at all times, to the fair value of the securities loaned plus accrued interest. Unrealized gain or loss on the fair value of the securities loaned that may occur during the term of the loan is recognized by the Funds. The Funds have the right under the lending agreement to recover the securities from the borrower on demand. DELAYED DELIVERY TRANSACTIONS -- The Funds may purchase or sell securities on a when-issued or delayed delivery basis. These transactions involve a commitment by the Funds to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed delivery purchases are outstanding, the Funds will set aside liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and take such fluctuations into account when determining net asset value. The Funds may dispose of or renegotiate a delayed delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a capital gain or loss. When the Funds have sold a security on a delayed delivery basis, the Funds do not participate in future gains and losses with respect to the security. REPURCHASE AGREEMENTS -- Repurchase agreements, which are collateralized by U.S. Government obligations, are valued at cost, which together with accrued interest approximates market. At the time each Fund enters into a repurchase agreement, the seller agrees that the value of the underlying collateral securities, including accrued interest, will at all times be equal to or exceed the face amount of the repurchase agreement. SHARE VALUATION -- The net asset value per share of each class of shares of each Fund is calculated daily by dividing the total value of a Fund's assets attributable to that class, less liabilities attributable to that class, by the number of outstanding shares of that class. 74 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- The maximum offering price per share of Class A shares of the Funds is equal to the net asset value per share plus a sales load equal to 6.10% of the net asset value (or 5.75% of the offering price). The maximum offering price per share of Class C, Class Y, Class Z, and Class I shares of the Funds is equal to the net asset value per share. The redemption price per share of each class of shares of the Funds is equal to the net asset value per share. However, Class C shares of the Funds are subject to a contingent deferred sales load of 1.00% of the original purchase price if redeemed within a one-year period from the date of purchase. INVESTMENT INCOME -- Interest income is accrued as earned and includes, where applicable, the pro-rata amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date. DISTRIBUTIONS TO SHAREHOLDERS -- The Healthcare and Biotechnology Fund, International Growth Fund, Mid Cap Fund, and Small Cap Value Opportunities Fund declare and distribute net investment income, if any, annually, as a dividend to shareholders. The Diversified Small Cap Value Fund, Sands Capital Select Growth Fund, and Value Opportunities Fund declare and distribute net investment income, if any, quarterly, as a dividend to shareholders. The Premium Yield Equity Fund declares and distributes net investment income, if any, monthly as a dividend to shareholders. The Clover Core Fixed Income Fund, Short Duration Fixed Income Fund, and Ultra Short Duration Fixed Income Fund declare net investment income daily and distribute it monthly, as a dividend to shareholders. Any net realized capital gains on sales of securities for all Funds are distributed to shareholders at least annually. ALLOCATIONS -- Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for the Funds are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class specific expenses are charged directly to the class incurring the expense. Common expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all Funds daily in relation to net assets of each Fund or another reasonable measure. SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade date. Securities sold are determined on a specific identification basis. ESTIMATES -- The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 3. INVESTMENT TRANSACTIONS Investment transactions (excluding short-term investments and U.S. Government securities) were as follows for the year ended September 30, 2008:
DIVERSIFIED CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL FIXED INCOME VALUE BIOTECHNOLOGY GROWTH FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------- Purchases of investment securities $ 1,994,512 $ 90,913,598 $100,332,001 $ 23,782,214 - --------------------------------------------------------------------------------------------------- Proceeds from sales and maturities $ 661,301 $130,483,375 $ 81,416,256 $ 1,780,276 - ---------------------------------------------------------------------------------------------------
75 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - --------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION PREMIUM SELECT FIXED MID CAP YIELD EQUITY GROWTH INCOME FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------ Purchases of investment securities $ 783,967,967 $ 53,780,674 $ 278,932,637 $ 3,716,473 - ------------------------------------------------------------------------------------------------------ Proceeds from sales and maturities $ 722,459,759 $ 29,299,211 $ 218,833,799 $ 715,338 - ------------------------------------------------------------------------------------------------------
SMALL CAP ULTRA VALUE SHORT DURATION VALUE OPPORTUNITIES FIXED INCOME OPPORTUNITIES FUND FUND FUND - ------------------------------------------------------------------------------------- Purchases of investment securities $ 339,167,886 $ 9,667,370 $ 233,994,762 - ------------------------------------------------------------------------------------- Proceeds from sales and maturities $ 363,820,851 $ 777,379 $ 127,625,444 - -------------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES Certain officers of the Trust are also officers of the Advisor (Touchstone Advisors, Inc.), the Underwriter (Touchstone Securities, Inc.) and/or JPMorgan Chase Bank, N.A. ("JPMorgan" and the Sub-Administrator and Transfer Agent to the Funds). The Advisor and Underwriter are each wholly owned, indirect subsidiaries of The Western and Southern Life Insurance Company (Western-Southern). As of September 30, 2008, 79% and 98% of the International Growth Fund and Premium Yield Equity Fund, respectively, were owned by Western-Southern and subsidiaries. MANAGEMENT & EXPENSE LIMITATIONS AGREEMENTS The Advisor provides general investment supervisory services for the Funds, under terms of an Advisory Agreement. Under the Advisory Agreement, the Funds pay the Advisor a fee, which is computed and accrued daily and paid monthly, at an annual rate based on average daily net assets as shown in the table below. Prior to March 2, 2008, the Advisor entered into an Expense Limitation Agreement to contractually limit operating expenses of the Funds. The maximum operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. For the period October 1, 2007 through March 2, 2008, the Advisor agreed to waive advisory fees and reimburse expenses in order to maintain expense limitations for the Funds as follows: "OTHER TOTAL ADVISORY EXPENSE" EXPENSE FEES CAP CAP - ------------------------------------------------------------------------------ Clover Core Fixed Income Fund - Class I 0.45% 0.40% 0.85% Diversified Small Cap Value Fund - Class A 0.85 0.35 1.45 Diversified Small Cap Value Fund - Class C 0.85 0.35 2.20 Diversified Small Cap Value Fund - Class Z 0.85 0.35 1.45 Healthcare and Biotechnology Fund - Class A 1.00 0.30 1.55 Healthcare and Biotechnology Fund - Class C 1.00 0.30 2.30 Mid Cap Fund - Class A 0.80 0.10 1.15 Mid Cap Fund - Class C 0.80 0.10 1.90 Mid Cap Fund - Class Y 0.80 0.10 0.90 Mid Cap Fund - Class Z 0.80 0.10 1.15 Premium Yield Equity Fund - Class A 0.70 0.25 1.20 Premium Yield Equity Fund - Class C 0.70 0.25 1.95 Sands Capital Select Growth Fund - Class Y 0.85 0.25 1.10 Sands Capital Select Growth Fund - Class Z 0.85 0.25 1.35 76 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- "OTHER TOTAL ADVISORY EXPENSE" EXPENSE FEES CAP CAP - ------------------------------------------------------------------------------ Short Duration Fixed Income Fund - Class Z 0.25 0.24 0.74 Small Cap Value Opportunities Fund - Class A 0.95 0.30 1.50 Small Cap Value Opportunities Fund - Class C 0.95 0.30 2.25 Small Cap Value Opportunities Fund - Class Z 0.95 0.30 1.50 Ultra Short Duration Fixed Income Fund - Class Z 0.25 0.19 0.69 Value Opportunities Fund - Class A 0.74 0.20 1.19 Value Opportunities Fund - Class C 0.74 0.20 1.94 Value Opportunities Fund - Class Z 0.74 0.20 1.19 The "Other Expense Cap" was terminated for all of the Funds except the Sands Capital Select Growth Fund effective March 1, 2008. Effective March 2, 2008, the Advisor entered into an Expense Limitation Agreement to contractually limit operating expenses of the Funds. The maximum operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. The Advisor has agreed to waive advisory fees and reimburse expenses in order to maintain expense limitations for the Funds as follows through January 31, 2009:
CLASS A CLASS C CLASS Y CLASS Z CLASS I - ---------------------------------------------------------------------------------------- Clover Core Fixed Income Fund -- -- -- -- 0.85% Diversified Small Cap Value Fund 1.45% 2.20% -- 1.45% -- Healthcare and Biotechnology Fund 1.55% 2.30% -- -- -- Mid Cap Fund 1.15% 1.90% 0.90% 1.15% -- Premium Yield Equity Fund 1.20% 1.95% 0.95% -- -- Short Duration Fixed Income Fund -- -- -- 0.74% -- Small Cap Value Opportunities Fund -- -- -- 1.50% -- Ultra Short Duration Fixed Income Fund -- -- -- 0.69% -- Value Opportunities Fund 1.19% 1.94% -- 1.19% --
The Advisor entered into an Expense Limitation Agreement to contractually limit operating expenses of the International Growth Fund. The Advisor agreed to waive a portion of its advisory fee and/or reimburse certain Fund expenses in order to limit "Net Expenses" to 1.35%, 2.10%, and 1.10% for Class A, Class C, and Class Y shares, respectively. This expense limitation will remain in effect until at least September 30, 2009. The Advisor has agreed to limit certain Funds other operating expenses ("Other Expenses") to the following levels. These expense limitations will remain in effect until at least January 31, 2009. CLASS Y CLASS Z - ------------------------------------------------------ Sands Capital Select Growth Fund 0.25% 0.25% - ------------------------------------------------------ 77 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- In addition to the base advisory fee shown above, for the Sands Capital Select Growth Fund, a performance fee adjustment will be added to or subtracted from the base advisory fee depending on the performance of the Fund in relation to the investment performance of the Fund's benchmark index, for the preceding twelve month period, as follows:
BASE ANNUAL ADVISORY ADJUSTMENT BENCHMARK BENCHMARK FEES RATE INDEX THRESHOLD(1) - --------------------------------------------------------------------------------------------------------- Russell 1000 Sands Capital Select Growth Fund 0.85% +/-0.15% Growth Index +/-2.50%
(1) See the Funds' Prospectus and Statement of Additional Information for more information regarding the Fund's benchmark performance. For the year ended September 30, 2008, the Advisor's base fee was increased by $423,009 as a result of the performance fee adjustment. During the year ended September 30, 2008, the Advisor waived investment advisory fees, administration fees and/or reimbursed expenses of the Funds as follows:
INVESTMENT OTHER OPERATING ADVISORY ADMINISTRATION EXPENSES FEES WAIVED FEES WAIVED REIMBURSED - -------------------------------------------------------------------------------------------- Clover Core Fixed Income Fund $ 17,994 $ 37,249 $ -- Diversified Small Cap Value Fund $ -- $ 21,337 $ -- Healthcare and Biotechnology Fund $ -- $ 127,367 $ -- International Growth Fund $ 37,748 $ 61 $ 152,073 Mid Cap Fund $ -- $ 661,074 $ -- Premium Yield Equity Fund $ -- $ 36,045 $ 36,254 Sands Capital Select Growth Fund $ -- $ 153,618 $ -- Short Duration Fixed Income Fund $ -- $ 104,399 $ -- Small Cap Value Opportunities Fund $ 59,602 $ 321,165 $ 2,000 Ultra Short Duration Fixed Income Fund $ -- $ 205,930 $ -- Value Opportunities Fund $ -- $ 26,614 $ -- - --------------------------------------------------------------------------------------------
The Advisor has entered into investment sub-advisory agreements with the following parties: CHARTWELL INVESTMENT PARTNERS NAVELLIER & ASSOCIATES, INC. Short Duration Fixed Income Fund International Growth Fund Ultra Short Duration Fixed Income Fund SANDS CAPITAL MANAGEMENT, LLC CLOVER CAPITAL MANAGEMENT, INC. Sands Capital Select Growth Fund Clover Core Fixed Income Fund Diversified Small Cap Value Fund TURNER INVESTMENT PARTNERS, INC. Value Opportunities Fund Healthcare and Biotechnology Fund Mid Cap Fund MILLER/HOWARD INVESTMENTS, INC. Small Cap Value Opportunities Fund Premium Yield Equity Fund The Advisor, not the Funds, pays sub-advisory fees to each Sub-Advisor. 78 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ADMINISTRATION AGREEMENT The Advisor entered into an Administration and Accounting Services Agreement with the Trust, whereby the Advisor is responsible for supplying executive and regulatory compliance services, supervises the preparation of tax returns, and coordinates the preparation of reports to shareholders and reports to, and filings with, the Securities and Exchange Commission and state securities authorities, materials for meetings of the Board of Trustees, calculating the daily net asset value per share and maintaining the financial books and records of each Fund. For its services, the Advisor receives an annual fee of 0.20% of the aggregate average daily net assets of the Trust, Touchstone Investment Trust (excluding Institutional Money Market Fund), Touchstone Strategic Trust, and Touchstone Tax-Free Trust up to and including $6 billion; 0.16% of the next $4 billion of aggregate average daily net assets; and 0.12% of the aggregate average daily net assets of all such assets in excess of $10 billion. The fee is allocated among the Funds on the basis of relative daily net assets. However, through February 28, 2008, the administration fees were limited to an annual fee of 0.146% of the aggregate average daily net assets of the Trust. The fee is allocated among the Funds on the basis of relative daily net assets. The Advisor has engaged JPMorgan as the Sub-Administrator to the Trust. JPMorgan provides administrative and accounting services to the Trust and is compensated directly by the Advisor, not the Trust. TRANSFER AGENT AGREEMENT Under the terms of the Transfer Agent Agreement between the Trust and JPMorgan, JPMorgan maintains the records of each shareholder's account, answers shareholders' inquiries concerning their accounts, processes purchases and redemptions of each Fund's shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. For these services, JPMorgan receives a monthly fee per shareholder account from each Fund. In addition, each Fund pays JPMorgan out-of-pocket expenses including, but not limited to, postage and supplies. For the year ended September 30, 2008, the following Funds reimbursed the Advisor for amounts paid to third parties that provide sub-transfer agency and other administrative services to the Funds. These amounts are included in transfer agent fees on the Statements of Operations: AMOUNT - ------------------------------------------------ Clover Core Fixed Income Fund $ 1,838 Diversified Small Cap Value Fund $ 55,936 Healthcare and Biotechnology Fund $ 45,882 Mid Cap Fund $ 4,328 Premium Yield Equity Fund $ 398 Sands Capital Select Growth Fund $134,699 Short Duration Fixed Income Fund $ 34,480 Small Cap Value Opportunities Fund $111,663 Ultra Short Duration Fixed Income Fund $ 68,964 PLANS OF DISTRIBUTION The Trust has adopted a Distribution and Shareholder Services Plan for Class A shares of the Diversified Small Cap Value Fund, Healthcare and Biotechnology Fund, International Growth Fund, Mid Cap Fund, Premium Yield Equity Fund, Small Cap Value Opportunities Fund, and Value Opportunities Fund (Class A Plan) under which each Fund may directly or indirectly bear expenses relating to the distribution of Class A shares of the Trust and for providing shareholder services to Class A shares. The Fund will incur and/or reimburse expenses for distribution and shareholder service of Class A shares at an annual rate not to exceed 0.25% of the average daily net assets of Class A shares. 79 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- The Trust has adopted a Distribution and Shareholder Services Plan for Class C shares of the Diversified Small Cap Value Fund, Healthcare and Biotechnology Fund, Mid Cap Fund, Premium Yield Equity Fund, Small Cap Value Opportunities Fund, and Value Opportunities Fund (Class C Plan) under which each Fund may directly or indirectly bear expenses relating to the distribution of Class C shares of the Trust and for providing shareholder services to Class C shares. The Fund will incur and/or reimburse expenses for distribution and shareholder services of Class C shares at an annual rate not to exceed 1.00% and 0.25%, respectively, of the average daily net assets of Class C shares. The combination of these fees is not to exceed 1.00% of the average daily net assets of Class C shares. The Trust has adopted a Shareholder Services Plan for Class Z shares of the Diversified Small Cap Value Fund, Mid Cap Fund, Sands Capital Select Growth Fund, Short Duration Fixed Income Fund, Small Cap Value Opportunities Fund, Ultra Short Duration Fixed Income Fund, and Value Opportunities Fund (Class Z Plan) under which each Fund may directly or indirectly bear expenses for providing shareholder services. The Fund will incur and/or reimburse expense for shareholder service of Class Z shares at an annual rate not to exceed 0.25% of the average daily net assets of Class Z shares. UNDERWRITING AGREEMENT The Underwriter is the Funds' principal underwriter and, as such, acts as exclusive agent for distribution of the Funds' shares. Under the terms of the Underwriting Agreement between the Trust and Underwriter, the Underwriter earned the following from underwriting and broker commissions on the sale of shares of the following Funds for the year ended September 30, 2008: AMOUNT - -------------------------------------------- Diversified Small Cap Value Fund $ 819 Healthcare and Biotechnology Fund $ 42,073 International Growth Fund $240,000 Mid Cap Fund $ 644 Premium Yield Equity Fund $ 63 Small Cap Value Opportunities Fund $ 909 Value Opportunities Fund $ 6,906 In addition, the Underwriter collected $65, $6,923, $23, $20 and $72 of contingent deferred sales charges on the redemption of Class C shares of the Diversified Small Cap Value Fund, Healthcare and Biotechnology Fund, Premium Yield Equity Fund, Small Cap Value Opportunities Fund and Value Opportunities Fund, respectively, for the year ended September 30, 2008. COMPLIANCE SERVICES AGREEMENT Under the terms of the Compliance Services Agreement between the Trust and JPMorgan, JPMorgan provides certain compliance services to the Trust and provides administrative support services to the Funds' Compliance Program and Chief Compliance Officer. For these services, JPMorgan receives a quarterly fee from each Fund. 80 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- AFFILIATED INVESTMENTS Each Fund may invest in the Touchstone Institutional Money Market Fund, subject to compliance with several conditions set forth in an order received by the Trust from the Securities and Exchange Commission. To the extent that the other Touchstone Funds are invested in the Touchstone Institutional Money Market Fund, the Advisor and Administrator will be paid additional fees from the Touchstone Institutional Money Market Fund that will not be waived or reimbursed. A summary of each Fund's investment, as applicable, in the Touchstone Institutional Money Market Fund for the year ended September 30, 2008, is as follows:
SHARE ACTIVITY -------------------------------------------- BALANCE BALANCE VALUE 09/30/07 PURCHASES SALES 09/30/08 DIVIDENDS 09/30/08 - --------------------------------------------------------------------------------------------------------------------------------- Clover Core Fixed Income Fund -- 6,231,409 (5,938,866) 292,543 $ 2,926 $ 292,543 - --------------------------------------------------------------------------------------------------------------------------------- Diversified Small Cap Value Fund -- 40,136,418 (36,602,851) 3,533,567 $ 64,357 $ 3,533,567 - --------------------------------------------------------------------------------------------------------------------------------- Healthcare and Biotechnology Fund -- 46,985,146 (45,748,078) 1,237,068 $ 75,823 $ 1,237,068 - --------------------------------------------------------------------------------------------------------------------------------- International Growth Fund -- 20,207,886 -- 20,207,886 $ 2,251 $ 20,207,886 - --------------------------------------------------------------------------------------------------------------------------------- Mid Cap Fund -- 223,454,745 (206,142,924) 17,311,821 $ 305,977 $ 17,311,821 - --------------------------------------------------------------------------------------------------------------------------------- Premium Yield Equity Fund -- 4,785,956 (3,860,171) 925,785 $ 18,517 $ 925,785 - --------------------------------------------------------------------------------------------------------------------------------- Sands Capital Select Growth Fund -- 174,330,328 (153,803,555) 20,526,773 $ 216,484 $ 20,526,773 - --------------------------------------------------------------------------------------------------------------------------------- Short Duration Fixed Income Fund -- 35,347,843 (34,836,444) 511,399 $ 42,087 $ 511,399 - --------------------------------------------------------------------------------------------------------------------------------- Small Cap Value Opportunities Fund -- 55,970,551 (55,970,551) -- $ 127,233 $ -- - --------------------------------------------------------------------------------------------------------------------------------- Ultra Short Duration Fixed Income Fund -- 95,744,498 (88,308,044) 7,436,454 $ 112,153 $ 7,436,454 - --------------------------------------------------------------------------------------------------------------------------------- Value Opportunities Fund -- 120,221,027 (115,568,002) 4,653,025 $ 120,154 $ 4,653,025 - ---------------------------------------------------------------------------------------------------------------------------------
81 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- 5. CAPITAL SHARE TRANSACTIONS Proceeds and payments on capital shares as shown in the Statements of Changes in Net Assets are the result of the following capital share transactions for the periods shown:
CLOVER CORE DIVERSIFIED HEALTHCARE AND FIXED INCOME SMALL CAP BIOTECHNOLOGY FUND VALUE FUND FUND - ------------------------------------------------------------------------------------------------------------------------------------ YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2008 2007 2008 2007(A) 2008 2007(B) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A Shares issued -- -- 40,375 13,314 2,903,539 577,797 Shares reinvested -- -- 5,193 175 322,958 118,145 Shares redeemed -- -- (6,641) (3,002) (2,104,559) (1,244,584) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding -- -- 38,927 10,487 1,121,938 (548,642) Shares outstanding, beginning of period -- -- 10,487 -- 2,914,817 3,463,459 - ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period -- -- 49,414 10,487 4,036,755 2,914,817 ==================================================================================================================================== CLASS C Shares issued -- -- 49,334 3,821 399,569 77,729 Shares reinvested -- -- 1,702 239 6,931 2 Shares redeemed -- -- (5,548) -- (85,392) (1,024) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in shares outstanding -- -- 45,488 4,060 321,108 76,707 Shares outstanding, beginning of period -- -- 4,060 -- 76,707 -- - ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of period -- -- 49,548 4,060 397,815 76,707 ==================================================================================================================================== CLASS Z Shares issued -- -- 1,467,825 835,178 -- -- Shares reinvested -- -- 3,138,321 3,697,084 -- -- Shares redeemed -- -- (3,986,333) (5,758,231) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in shares outstanding -- -- 619,813 (1,225,969) -- -- Shares outstanding, beginning of year -- -- 9,102,690 10,328,659 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year -- -- 9,722,503 9,102,690 -- -- ==================================================================================================================================== CLASS I Shares issued 348,886 299,959 -- -- -- -- Shares reinvested 86,355 96,670 -- -- -- -- Shares redeemed (758,011) (609,712) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net decrease in shares outstanding (322,770) (213,083) -- -- -- -- Shares outstanding, beginning of year 2,049,969 2,263,052 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding, end of year 1,727,199 2,049,969 -- -- -- -- ====================================================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. (B) Class C represents the period from commencement of operations (November 20, 2006) through September 30, 2007. 82 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - --------------------------------------------------------------------------------
INTERNATIONAL GROWTH MID CAP PREMIUM YIELD FUND FUND EQUITY FUND - -------------------------------------------------------------------------------------------------------------------------------- PERIOD YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, DEC. 31, DEC. 31, SEPT. 30, SEPT. 30, SEPT. 30, 2008(A) 2007 2006 2008 2007(B) 2008(C)(D) - -------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares issued 2,815,460 174,634 116,198 7,252 12,263 2,474,926 Shares reinvested 16,399 14,495 6,102 77 -- 95,010 Shares redeemed (158,988) (49,485) (32,565) (6,994) (476) (1,418) - -------------------------------------------------------------------------------------------------------------------------------- Net increase in shares outstanding 2,672,871 139,644 89,735 335 11,787 2,568,518 Shares outstanding, beginning of period 322,205 182,561 92,826 11,787 -- -- - -------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period 2,995,076 322,205 182,561 12,122 11,787 2,568,518 ================================================================================================================================ CLASS C Shares issued 293 -- -- 1,930 2,002 73,588 Shares reinvested 1 -- -- 28 -- 1,637 Shares redeemed -- -- -- (1,670) -- (254) - -------------------------------------------------------------------------------------------------------------------------------- Net increase in shares outstanding 294 -- -- 288 2,002 74,971 Shares outstanding, beginning of period -- -- -- 2,002 -- -- - -------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period 294 -- -- 2,290 2,002 74,971 ================================================================================================================================ CLASS Y Shares issued 294 -- -- 13,570,336 23,351,224 301 Shares reinvested 2 -- -- 62,610 5,229 2 Shares redeemed -- -- -- (8,397,326) (2,141,213) -- - -------------------------------------------------------------------------------------------------------------------------------- Net increase in shares outstanding 296 -- -- 5,235,620 21,215,240 303 Shares outstanding, beginning of period -- -- -- 26,912,116 5,696,876 -- - -------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period 296 -- -- 32,147,736 26,912,116 303 ================================================================================================================================ CLASS Z Shares issued -- -- -- 130,930 938,463 -- Shares reinvested -- -- -- 8,376 117 -- Shares redeemed -- -- -- (740,760) (109,748) -- - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding -- -- -- (601,454) 828,832 -- Shares outstanding, beginning of year -- -- -- 851,788 22,956 -- - -------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of year -- -- -- 250,334 851,788 -- ================================================================================================================================
(A) Effective after the close of business on December 31, 2007, the Fund changed its fiscal year end to September 30. (B) Classes A and C represent the period from commencement of operations (May 14, 2007) through September 30, 2007. (C) Classes A and C represent the period from commencement of operations (December 3, 2007) through September 30, 2008. (D) Class Y represents the period from commencement of operations (August 12, 2008) through September 30, 2008. 83 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - --------------------------------------------------------------------------------
SANDS CAPITAL SELECT SHORT DURATION FIXED SMALL CAP VALUE GROWTH FUND INCOME FUND OPPORTUNITIES FUND - --------------------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2008 2007 2008 2007 2008(A) 2007(B) - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares issued -- -- -- -- 71,759 375 Shares reinvested -- -- -- -- 1,773 -- Shares redeemed -- -- -- -- (73,907) -- - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding -- -- -- -- (375) 375 Shares outstanding, beginning of period -- -- -- -- 375 -- - --------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- -- -- -- 375 ================================================================================================================================= CLASS C Shares issued -- -- -- -- 8,000 3,942 Shares reinvested -- -- -- -- 402 -- Shares redeemed -- -- -- -- (12,344) -- - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding -- -- -- -- (3,942) 3,942 Shares outstanding, beginning of period -- -- -- -- 3,942 -- - --------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- -- -- -- 3,942 ================================================================================================================================= CLASS Y Shares issued 7,214,667 8,624,881 -- -- -- -- Shares redeemed (11,497,010) (9,208,013) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Net decrease in shares outstanding (4,282,343) (583,132) -- -- -- -- Shares outstanding, beginning of year 23,355,229 23,938,361 -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of year 19,072,886 23,355,229 -- -- -- -- ================================================================================================================================= CLASS Z Shares issued 28,675,860 11,118,165 92,468 225,346 1,576,959 3,458,155 Shares reinvested -- -- 246,218 302,626 889,469 284,028 Shares redeemed (16,958,619) (17,560,077) (1,471,017) (2,289,520) (3,876,635) (6,948,731) - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding 11,717,241 (6,441,912) (1,132,331) (1,761,548) (1,410,207) (3,206,548) Shares outstanding, beginning of year 41,849,517 48,291,429 6,031,938 7,793,486 9,960,681 13,167,229 - --------------------------------------------------------------------------------------------------------------------------------- Shares outstanding, end of year 53,566,758 41,849,517 4,899,607 6,031,938 8,550,474 9,960,681 =================================================================================================================================
(A) Classes A and C represent the period from October 1, 2007 through June 13, 2008. (B) Classes A and C represent the period from commencement of operations (July 23, 2007) through September 30, 2007. 84 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE OPPORTUNITIES FIXED INCOME FUND FUND - ---------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2008 2007 2008 2007(A) - ---------------------------------------------------------------------------------------------------- CLASS A Shares issued -- -- 675,272 29,890 Shares reinvested -- -- 9,547 134 Shares redeemed -- -- (99,826) (3,596) - ---------------------------------------------------------------------------------------------------- Net increase in shares outstanding -- -- 584,993 26,428 Shares outstanding, beginning of period -- -- 26,428 -- - ---------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- 611,421 26,428 ==================================================================================================== CLASS C Shares issued -- -- 276,218 25,258 Shares reinvested -- -- 3,269 201 Shares redeemed -- -- (15,293) (1,695) - ---------------------------------------------------------------------------------------------------- Net increase in shares outstanding -- -- 264,194 23,764 Shares outstanding, beginning of period -- -- 23,764 -- - ---------------------------------------------------------------------------------------------------- Shares outstanding, end of period -- -- 287,958 23,764 ==================================================================================================== CLASS Z Shares issued 7,586,012 2,872,100 7,691,116 985,780 Shares reinvested 735,459 765,481 605,666 1,102,429 Shares redeemed (8,051,565) (6,416,115) (1,742,914) (1,388,951) - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding 269,906 (2,778,534) 6,553,868 699,258 Shares outstanding, beginning of year 14,493,406 17,271,940 5,996,419 5,297,161 - ---------------------------------------------------------------------------------------------------- Shares outstanding, end of year 14,763,312 14,493,406 12,550,287 5,996,419 ====================================================================================================
(A) Classes A and C represent the period from commencement of operations (November 20, 2006) through September 30, 2007. 6. FEDERAL TAX INFORMATION FEDERAL INCOME TAX - It is each Fund's policy to continue to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which a Fund so qualifies and distributes at least 90% of its taxable net income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed. Accordingly, no provision for income taxes has been made. In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also each Fund's intention to declare and pay as dividends in each calendar year an amount equal to the sum of at least 98% of its net investment income (earned during the calendar year) and 98% of its net realized capital gains (earned during the twelve months ending October 31) plus undistributed amounts from prior years. 85 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- The tax character of distributions paid for the periods ended September 30, 2008 and 2007 was as follows:
CLOVER CORE DIVERSIFIED HEALTHCARE AND FIXED INCOME SMALL CAP VALUE BIOTECHNOLOGY FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 2008 2007 2008 2007 - ---------------------------------------------------------------------------------------------------------------------------- From ordinary income $ 864,148 $ 961,663 $ 15,124,522 $ 15,097,780 $ 1,403,820 $ -- From long-term capital gains -- -- 27,110,031 59,766,378 3,983,663 1,868,704 From return of capital -- -- -- -- 1,060,240 -- - ---------------------------------------------------------------------------------------------------------------------------- $ 864,148 $ 961,663 $ 42,234,553 $ 74,864,158 $ 6,447,723 $ 1,868,704 - ----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PREMIUM GROWTH MID CAP YIELD EQUITY FUND FUND FUND - ---------------------------------------------------------------------------------------------------------- PERIOD YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008* 2007** 2008 2007 2008 - ---------------------------------------------------------------------------------------------------------- From ordinary income $ 52,616 $ 83,830 $ 4,685,264 $ 1,512,452 $ 811,372 From long-term capital gains 88,762 89,999 80,180 -- -- From return of capital -- -- -- -- 34,532 - ---------------------------------------------------------------------------------------------------------- $ 141,378 $ 173,829 $ 4,765,444 $ 1,512,452 $ 845,904 - ----------------------------------------------------------------------------------------------------------
SANDS CAPITAL SHORT DURATION SMALL CAP SELECT GROWTH FIXED INCOME VALUE OPPORTUNITIES FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 2008 2007 2008 2007 - ---------------------------------------------------------------------------------------------------------------------- From ordinary income $ -- $ -- $ 2,449,791 $ 3,020,621 $ 4,124,200 $ 2,373,051 From long-term capital gains -- -- -- -- 12,400,740 3,683,069 - ---------------------------------------------------------------------------------------------------------------------- $ -- $ -- $ 2,449,791 $ 3,020,621 $ 16,524,940 $ 6,056,120 - ----------------------------------------------------------------------------------------------------------------------
86 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - --------------------------------------------------------------------------------
ULTRA SHORT DURATION VALUE FIXED INCOME OPPORTUNITIES FUND FUND - ---------------------------------------------------------------------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2008 2007 2008 2007 - ---------------------------------------------------------------------------------------- From ordinary income $ 7,561,408 $ 8,051,978 $ 1,739,423 $ 6,672,464 From long-term capital gains -- -- 8,688,556 12,760,280 - ---------------------------------------------------------------------------------------- $ 7,561,408 $ 8,051,978 $ 10,427,979 $ 19,432,744 - ----------------------------------------------------------------------------------------
* Represents the period from January 1, 2008 through September 30, 2008. ** Effective January 1, 2008, the Fund changed its tax year end from December 31 to September 30. The following information is computed on a tax basis for each item as of September 30, 2008:
DIVERSIFIED CLOVER CORE SMALL CAP HEALTHCARE AND INTERNATIONAL PREMIUM FIXED INCOME VALUE BIOTECHNOLOGY GROWTH MID CAP YIELD EQUITY FUND FUND FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------------------ Tax cost of portfolio investments $ 16,818,006 $ 157,246,889 $ 73,295,990 $ 45,166,243 $ 556,485,739 $ 22,979,578 - ------------------------------------------------------------------------------------------------------------------------------------ Gross unrealized appreciation 43,014 8,668,470 8,643,305 501,242 10,881,586 172,653 Gross unrealized depreciation (1,593,335) (19,374,221) (2,322,869) (1,306,842) (39,007,807) (3,986,025) - ------------------------------------------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) (1,550,321) (10,705,751) 6,320,436 (805,600) (28,126,221) (3,813,372) Post-October losses -- -- (3,939,149) -- (80,456,822) (2,392,951) Capital loss carryforward (86,389) -- -- (190,851) -- -- Undistributed ordinary income 2,587 -- -- 973 109,780 -- Undistributed long-term capital gains -- 5,509,793 -- -- 551,095 -- Other temporary differences (2,854) (26,550) -- (972) -- (212) - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated earnings (deficit) $ (1,636,977) $ (5,222,508) $ 2,381,287 $ (996,450) $(107,922,168) $ (6,206,535) ====================================================================================================================================
SMALL CAP ULTRA SANDS CAPITAL SHORT DURATION VALUE SHORT DURATION VALUE SELECT GROWTH FIXED INCOME OPPORTUNITIES FIXED INCOME OPPORTUNITIES FUND FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------- Tax cost of portfolio investments $ 624,038,534 $ 47,459,943 $ 154,204,845 $ 147,479,407 $ 235,508,011 - --------------------------------------------------------------------------------------------------------------------- Gross unrealized appreciation 54,406,260 216,326 8,628,854 976,028 7,172,052 Gross unrealized depreciation (94,212,406) (688,733) (8,961,832) (2,759,332) (24,185,830) - --------------------------------------------------------------------------------------------------------------------- Net unrealized depreciation (39,806,146) (472,407) (332,978) (1,783,304) (17,013,778) Post-October losses -- (1,287,774) (21,030,436) (3,221,493) (466,900) Capital loss carryforward (29,932,199) (4,265,646) -- (7,235,052) -- Undistributed ordinary income -- 2,249 -- 14,750 9,691 Undistributed long-term capital gains -- -- 135,276 -- -- Other temporary difference -- (2,249) -- (14,750) (60,436) - --------------------------------------------------------------------------------------------------------------------- Accumulated deficit $ (69,738,345) $ (6,025,827) $ (21,228,138) $ (12,239,849) $ (17,531,423) =====================================================================================================================
The difference between the tax cost of portfolio investments and the financial statement cost of portfolio investments is primarily due to wash sales. 87 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- As of September 30, 2008, the Funds had the following capital loss carryforwards for federal income tax purposes. EXPIRES FUND AMOUNT SEPTEMBER 30, - ------------------------------------------------------------------------ Clover Core Fixed Income Fund $ 86,389 2015 ------------ International Growth Fund $ 190,851 2016 ------------ Sands Capital Select Growth Fund $ 7,727,477 2010 5,719,519 2011 2,692,298 2014 13,792,905 2015 ------------ $ 29,932,199 ------------ Short Duration Fixed Income Fund $ 1,994,293 2012 96,050 2013 1,027,850 2014 852,134 2015 295,319 2016 ------------ $ 4,265,646 ------------ Ultra Short Duration Fixed Income Fund $ 6,699,046 2012 371,187 2014 164,819 2015 ------------ $ 7,235,052 ------------ The capital loss carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders. During the year ended September 30, 2008, the funds utilized capital loss carryforwards as follows: AMOUNT - ------------------------------------------------------------------- Clover Core Fixed Income Fund $ 205,963 Sands Capital Select Growth Fund $ 12,683,947 Ultra Short Duration Fixed Income Fund $ 6,821 Certain reclassifications of the components of net assets, as presented below, are the result of permanent differences between financial statement and income tax reporting requirements. These reclassifications have no impact on the net assets or net asset value per share of the Funds and are designed to present the Funds' capital accounts on a tax basis. The following reclassifications of net investment loss, tax character of distributions, paydown and real estate investment trust gains and losses have been made to the following Funds for the year ended September 30, 2008:
ACCUMULATED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME (LOSS) GAINS (LOSSES) - -------------------------------------------------------------------------------------- Clover Core Fixed Income Fund $ -- $ 7,368 $ (7,368) Diversified Small Cap Value Fund $ 49,555 $ (120,045) $ 70,490 Healthcare and Biotechnology Fund $ (1,197,977) $ 526,140 $ 671,837 Mid Cap Fund $ -- $ (295,053) $ 295,053 Premium Yield Equity Fund $ (34,532) $ 6,670 $ 27,862 Sands Capital Select Growth Fund $ (4,437,427) $ 4,437,427 $ -- Short Duration Fixed Income Fund $ -- $ 17,370 $ (17,370) Small Cap Value Opportunities Fund $ (1,518) $ 226,327 $ (224,809) Ultra Short Duration Fixed Income Fund $ -- $ (83,915) $ 83,915 Value Opportunities Fund $ -- $ (12,113) $ 12,113
88 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. On October 1, 2007, the Funds adopted FIN 48. The Funds have analyzed their tax positions taken on Federal income tax returns for all open tax years (tax years ended September 30, 2005 through 2008) for purposes of implementing FIN 48 and have concluded that no provision for income tax is required in their financial statements. 7. COMMITMENTS AND CONTINGENCIES The Funds indemnify the Trust's officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 8. CONCENTRATIONS/RISKS Certain Funds invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, the Funds may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility on the Fund's net asset value and magnified effect on the total return. 89 - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- 9. SPECIAL MEETING OF SHAREHOLDERS On September 26, 2008, a Special Meeting of Shareholders was held to approve or disapprove an Agreement and Plan of Reorganization providing for the transfer of all of the assets and liabilities of the Navellier International Growth Portfolio to the Touchstone International Growth Fund in exchange for shares of the Touchstone International Growth Fund and the subsequent liquidation of the Navellier International Growth Portfolio. The acquisition was approved as follows: NUMBER OF VOTES ----------------------------------------------------------- FOR AGAINST ABSTAIN ----------------------------------------------------------- 268,330 5,607 4,041 BEFORE AFTER REORGANIZATION REORGANIZATION - ------------------------------------------------------------------------------- NAVELLIER TOUCHSTONE TOUCHSTONE INTERNATIONAL INTERNATIONAL INTERNATIONAL GROWTH GROWTH GROWTH PORTFOLIO FUND FUND - ------------------------------------------------------------------------------- Shares 627,111 -- 627,111 Net Assets $ 5,783,631 $ -- $ 5,783,631 Net Asset Value $ 9.22 $ -- $ 9.22 Unrealized Depreciation $ (501,657) $ -- $ (501,657) Accumulated Net Realized Loss $ (208,792) $ -- $ (208,792) 10. SUBSEQUENT EVENT On September 30, 2008, the Board of Trustees approved a change of sub-advisor to the Short Duration Fixed Income Fund and the Ultra Short Duration Fixed Income Fund (the "Funds"). Effective October 1, 2008, the Funds' sub-advisor changed from Chartwell Investment Partners to Fort Washington Investment Advisors, Inc. Fort Washington Investment Advisors, Inc. is a wholly-owned, indirect subsidiary of Western-Southern. 90 - -------------------------------------------------------------------------------- Portfolio of Investments Clover Core Fixed Income Fund - September 30, 2008 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 46.8% $ 862,464 FHLMC CMO Ser 3225 Class EO PO (A), .00%, 10/15/36 $ 658,672 674,709 FHLMC CMO/REMIC Ser 3100 PO (A), .00%, 1/15/36 529,545 245,613 FHLMC Giant Gold Pool #11570, 5.00%, 4/1/19 245,992 566,595 FHLMC Gold #08062, 5.00%, 6/1/35 552,805 593,513 FHLMC Gold #08168, 6.00%, 12/1/36 601,377 511,470 FHLMC Pool #C01844, 4.50%, 4/1/34 485,277 6,764 FNMA CMO/REMIC Ser 1994-17, Class H, 6.00%, 2/25/09 6,773 423,401 FNMA Pool #254759, 4.50%, 6/1/18 417,175 557,229 FNMA Pool #255111, 5.50%, 3/1/34 556,803 3,471 FNMA Pool #369214, 5.00%, 4/1/09 3,476 35,034 FNMA Pool #535301, 6.50%, 4/1/15 36,393 352,378 FNMA Pool #694431, 5.00%, 3/1/18 353,537 303,980 FNMA Pool #738783, 7.00%, 2/1/25 321,233 366,401 FNMA Pool #888284, 5.50%, 4/1/37 365,719 290,566 FNMA Pool #890042, 5.50%, 7/1/22 293,338 297,374 FNMA Pool #975116, 5.00%, 5/1/38 289,951 616,230 GNMA CMO PAC-1(11) Ser 2006-26 PO (A), .00%, 6/20/36 478,801 93,806 GNMA CMO/REMIC Ser 2004-59, Class DA, 5.00%, 6/16/34 93,206 1,518 GNMA Pool #196477, 10.00%, 4/15/10 1,643 13,215 GNMA Pool #202886, 8.00%, 3/15/17 14,418 3,572 GNMA Pool #221235, 8.50%, 7/15/17 3,928 12,244 GNMA Pool #331786, 8.00%, 8/15/22 13,417 65,457 GNMA Pool #376400, 6.50%, 2/15/24 67,459 61,177 GNMA Pool #439478, 7.00%, 1/15/27 64,570 130,963 GNMA Pool #457921, 5.50%, 12/15/28 132,014 88,075 GNMA Pool #462622, 6.50%, 3/15/28 90,769 35,783 GNMA Pool #533974, 6.50%, 5/15/32 36,810 86,552 GNMA Pool #570400, 6.50%, 9/15/31 89,091 27,092 GNMA Pool #781029, 6.50%, 5/15/29 27,879 127,988 GNMA Pool #781096, 6.50%, 12/15/28 131,719 62,011 GNMA Pool #781231, 7.00%, 12/15/30 64,963 98,751 GNMA Pool #781276, 6.50%, 4/15/31 101,572 59,455 GNMA Pool #781328, 7.00%, 9/15/31 62,605 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS $ 7,192,930 - -------------------------------------------------------------------------------- CORPORATE BONDS -- 24.7% FINANCIALS -- 9.6% $ 250,000 Associates Corp. NA, 6.95%, 11/1/18 206,255 300,000 Ford Motor Credit Company LLC, 8.63%, 11/1/10 212,736 200,000 Goldman Sachs Group, 6.13%, 2/15/33 144,322 300,000 Key Bank NA, 5.80%, 7/1/14 200,093 650,000 Lehman Brothers Holdings, MTN (B), 8.00%, 3/5/09 81,250 500,000 Morgan Stanley, MTN (B), 7.50%, 10/23/08 349,999 450,000 SLM, MTN Ser A, 5.38%, 5/15/14 279,000 - -------------------------------------------------------------------------------- 1,473,655 - -------------------------------------------------------------------------------- UTILITIES -- 7.4% 350,000 AES, 9.38%, 9/15/10 350,000 215,000 Consolidated Natural Gas, Ser C, 6.25%, 11/1/11 216,920 320,000 Dominion Resources, Inc., 7.00%, 6/15/38 301,085 300,000 Exelon Generation, 6.20%, 10/1/17 263,646 - -------------------------------------------------------------------------------- 1,131,651 - -------------------------------------------------------------------------------- ENERGY -- 3.2% 475,000 XTO Energy, 7.50%, 4/15/12 497,455 - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 2.5% 367,000 Conagra Foods, 7.88%, 9/15/10 387,295 - -------------------------------------------------------------------------------- MATERIALS -- 2.0% 351,000 Alcoa, 5.72%, 2/23/19 310,368 - -------------------------------------------------------------------------------- TOTAL CORPORATE BONDS $ 3,800,424 - -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 9.3% 150,000 U.S. Treasury Bond, 6.25%, 8/15/23 180,105 250,000 U.S. Treasury Bond, 5.50%, 8/15/28 284,746 180,000 U.S. Treasury Note, 4.38%, 12/15/10 189,183 400,000 U.S. Treasury Note, 3.38%, 11/30/12 409,624 105,000 U.S. Treasury Note, 4.63%, 2/15/17 111,735 250,000 U.S. Treasury Note, 4.25%, 11/15/17 259,102 - -------------------------------------------------------------------------------- TOTAL U.S. TREASURY OBLIGATIONS $ 1,434,495 - -------------------------------------------------------------------------------- 91 - -------------------------------------------------------------------------------- Clover Core Fixed Income Fund (Continued) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- Asset-Backed Securities -- 11.2% $ 300,000 Countrywide Alternative Loan Trust, Ser 2005-J13, Class 2A8, 5.50%, 11/25/35 $ 208,905 500,000 CS First Boston Mortgage Securities, Ser 2005-C5, Class A3, 5.10%, 8/15/38 470,151 500,000 Merrill Lynch Mortgage Investors, Ser 1998-C1, Class A3, 6.72%, 11/15/26 501,164 600,000 Wachovia Bank Commercial Mortgage Trust, Ser 2003-C5, Class B, 4.11%, 6/15/35 536,793 - -------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES $ 1,717,013 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATION -- 5.4% 750,000 TVA, 5.88%, 4/1/36 $ 830,280 - -------------------------------------------------------------------------------- MARKET SHARES VALUE - -------------------------------------------------------------------------------- INVESTMENT FUND -- 1.9% 292,543 Touchstone Institutional Money Market Fund^ $ 292,543 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.3% (Cost $16,817,998) $ 15,267,685 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7% 108,879 - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 15,376,564 ================================================================================ ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. (A) Zero Coupon security - The rate reported was the effective yield at the time of purchase. (B) Variable rate security - the rate reflected is the rate in effect on September 30, 2008. CMO - Collateralized Mortgage Obligation FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association PO - Principal Only Security MTN - Medium Term Note REMIC - Real Estate Mortgage Investment Conduit TVA - Tennessee Valley Authority See accompanying notes to financial statements. 92 - -------------------------------------------------------------------------------- Portfolio of Investments Diversified Small Cap Value Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 98.4% SHARES VALUE - -------------------------------------------------------------------------------- FINANCIALS -- 31.4% American Campus Communities, Inc. 46,995 $ 1,592,190 Anworth Mortgage Asset Corp. 136,070 805,534 Argo Group International Holdings Ltd.* 32,296 1,190,108 Aspen Insurance Holdings Ltd. 38,915 1,070,163 Astoria Financial Corp. 40,455 838,632 BioMed Realty Trust, Inc. 30,000 793,500 City Holding Co. 28,550 1,206,238 Columbia Banking System, Inc. 60,170 1,066,814 F.N.B. Corp. + 51,080 816,258 First Merchants Corp. 18,465 421,002 First Niagara Financial Group, Inc. 66,160 1,042,020 FirstMerit Corp. 48,375 1,015,875 Flushing Financial Corp. 64,450 1,127,875 Flushing Financial Corp. 31,920 1,452,997 Highwoods Properties, Inc. 28,615 1,017,549 Home Properties, Inc. + 22,965 1,330,822 IBERIABANK Corp. 26,735 1,412,944 Independent Bank Corp. 33,535 1,045,286 Investment Technology Group, Inc.* 30,030 913,813 IPC Holdings Ltd. 32,280 975,179 Lexington Realty Trust + 77,865 1,340,835 LTC Properties, Inc. 45,170 1,324,384 MFA Mortgage Investments, Inc. 101,135 657,378 Montpelier Re Holdings Ltd. 43,590 719,671 Nara Bancorp, Inc. + 68,310 765,072 National Penn Bancshares, Inc. + 24,480 357,408 National Retail Properties, Inc. + 53,755 1,287,432 Navigators Group, Inc.* 16,715 969,470 New Alliance Bancshares, Inc. + 79,675 1,197,515 Phoenix Companies, Inc. 122,070 1,127,927 Platinum Underwriters Holdings Ltd. 32,585 1,156,116 Potlatch Corp. + 22,921 1,063,305 Prosperity Bancshares, Inc. 30,070 1,022,079 Senior Housing Properties Trust 32,685 778,884 South Financial Group, Inc. + 54,500 399,485 Sterling Bancshares, Inc. 86,602 904,991 Sun Communities, Inc. 52,400 1,038,044 United Bankshares, Inc. + 12,090 423,150 Waddell & Reed Financial, Inc., Class A 24,090 596,228 Webster Financial Corp. 23,370 590,093 - -------------------------------------------------------------------------------- 38,854,266 - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 13.7% Arris Group, Inc.* 78,250 604,873 Avocent Corp.* 31,005 634,362 Black Box Corp. 32,385 1,118,254 Brocade Communications Systems, Inc.* 98,520 573,386 CommScope, Inc.* 17,370 601,697 CSG Systems International, Inc.* 28,580 501,007 CTS Corp. 43,645 557,783 Digital River, Inc.* 19,095 618,678 EarthLink, Inc.* 102,120 868,020 Fairchild Semiconductor International, Inc.* 73,320 651,815 Finisar Corp.* 388,744 392,631 Insight Enterprises, Inc.* 53,450 716,765 j2 Global Communications, Inc.* 33,240 776,154 NICE Systems Ltd. ADR* 29,735 809,981 Perot Systems Corp., Class A* 54,040 937,594 SeaChange International, Inc.* 174,325 1,683,979 SonicWALL, Inc.* 94,540 495,390 SPSS, Inc.* 21,520 631,827 Symmetricom, Inc.* 76,215 378,789 Technitrol, Inc. 42,300 625,617 United Online, Inc. 112,635 1,059,895 VeriFone Holdings, Inc.* 36,600 605,364 Vignette Corp.* 49,270 529,160 Zoran Corp.* 78,935 644,110 - -------------------------------------------------------------------------------- 17,017,131 - -------------------------------------------------------------------------------- INDUSTRIALS -- 11.4% A.O. Smith Corp. 22,680 888,829 American Commercial Lines, Inc.* + 68,650 730,436 Ampco-Pittsburgh Corp. 22,545 583,916 Ceradyne, Inc.* 35,635 1,306,378 Consolidated Graphics, Inc.* 10,720 325,138 EnPro Industries, Inc.* 20,785 772,371 HUB Group, Inc., Class A* 29,225 1,100,321 Hubbell, Inc., Class B 26,460 927,423 Interline Brands, Inc.* 52,510 851,187 Orbital Sciences Corp.* + 52,670 1,262,499 Pacer International, Inc. + 29,610 487,677 Quanta Services, Inc.* + 28,555 771,271 School Specialty, Inc.* 26,415 823,884 SkyWest, Inc. 34,775 555,705 Sykes Enterprises, Inc.* 32,755 719,300 URS Corp.* 33,703 1,235,889 YRC Worldwide, Inc.* + 64,400 770,224 - -------------------------------------------------------------------------------- 14,112,448 - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 10.9% 99 Cents Only Stores* 76,890 843,483 ArvinMeritor, Inc. + 49,240 642,090 Asbury Automotive Group, Inc. 65,660 756,403 Brown Shoe Co., Inc. 91,725 1,502,455 Build-A-Bear Workshop, Inc.* + 89,012 648,007 CEC Entertainment, Inc.* 19,895 660,514 Dollar Tree, Inc.* 15,260 554,854 Ethan Allen Interiors, Inc. + 23,205 650,204 Hot Topic, Inc.* 75,160 496,808 Jackson Hewitt Tax Service, Inc. 41,470 636,150 JAKKS Pacific, Inc.* 51,455 1,281,743 OfficeMax, Inc. 56,795 504,908 Rent-A-Center, Inc.* 45,560 1,015,077 Service Corp. International 65,280 545,741 Skechers U.S.A., Inc., Class A* 57,305 964,443 Tenneco, Inc.* + 45,565 484,356 Wet Seal, Inc., Class A* + 128,955 468,107 Zale Corp.* + 33,670 841,750 - -------------------------------------------------------------------------------- 13,497,093 - -------------------------------------------------------------------------------- 93 - -------------------------------------------------------------------------------- Diversified Small Cap Value Fund (Continued) - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 98.4% (CONTINUED) SHARES VALUE - -------------------------------------------------------------------------------- UTILITIES -- 7.3% AGL Resources, Inc. 24,680 $ 774,458 Atmos Energy Corp. 33,890 902,152 Avista Corp. 54,975 1,193,508 Black Hills Corp. 26,035 808,907 Cleco Corp. 40,270 1,016,818 MGE Energy, Inc. 20,555 730,730 Nicor, Inc. + 18,955 840,654 ONEOK, Inc. 14,540 500,176 Southwest Gas Corp. 23,230 702,940 UniSource Energy Corp. 22,045 643,494 Westar Energy, Inc. 40,660 936,806 - -------------------------------------------------------------------------------- 9,050,643 - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 7.0% Church & Dwight Co., Inc. 13,870 861,188 Elizabeth Arden, Inc.* 43,390 851,746 Pantry, Inc.* 85,755 1,817,148 Pilgrim's Pride Corp., Class B + 60,090 149,624 Sanderson Farms, Inc. + 20,200 742,148 Spartan Stores, Inc. + 41,265 1,026,673 TreeHouse Foods, Inc.* 65,460 1,944,163 Universal Corp. + 27,165 1,333,530 - -------------------------------------------------------------------------------- 8,726,220 - -------------------------------------------------------------------------------- HEALTH CARE -- 6.2% AMERIGROUP Corp.* 40,400 1,020,100 Celera Corp.* 36,980 571,341 Chemed Corp. 9,505 390,275 Haemonetics Corp.* 14,525 896,483 ICU Medical, Inc.* 30,000 912,300 Invacare Corp. + 25,550 616,777 Par Pharmaceutical Cos., Inc.* 63,880 785,085 PSS World Medical, Inc.* + 59,215 1,154,692 Symmetry Medical, Inc.* 36,185 671,594 Varian, Inc.* 14,505 622,265 - -------------------------------------------------------------------------------- 7,640,912 - -------------------------------------------------------------------------------- MATERIALS -- 4.9% Buckeye Technologies, Inc.* 55,995 458,599 Chemtura Corp. 105,900 482,904 Compass Minerals International, Inc. 23,870 1,250,548 Ferro Corp. 35,685 717,269 Hecla Mining Co.* + 77,905 364,595 Innospec, Inc. 30,780 371,207 Kaiser Aluminum Corp. 10,645 457,203 Myers Industries, Inc. 62,695 790,584 OM Group, Inc.* 20,685 465,413 Spartech Corp. 17,075 169,043 Stillwater Mining Co.* + 100,105 581,610 - -------------------------------------------------------------------------------- 6,108,975 - -------------------------------------------------------------------------------- ENERGY -- 4.2% Bronco Drilling Co., Inc.* 19,310 197,348 Cabot Oil & Gas Corp. 32,010 1,156,842 Forest Oil Corp.* 15,174 752,630 Foundation Coal Holdings, Inc. 25,370 902,665 GulfMark Offshore, Inc.* 11,750 527,340 Nordic American Tanker Shipping Ltd. 8,295 265,938 Pioneer Drilling Co.* 33,910 451,003 USEC, Inc.* + 117,730 636,919 Whiting Petroleum Corp.* 4,900 349,174 - -------------------------------------------------------------------------------- 5,239,859 - -------------------------------------------------------------------------------- MISCELLANEOUS -- 1.4% iShares Russell 2000 Value Index + 26,500 1,781,860 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 122,029,407 - -------------------------------------------------------------------------------- INVESTMENT FUNDS -- 19.8% BBH Securities Lending Fund ** 20,978,164 20,978,164 Touchstone Institutional Money Market Fund^ 3,533,567 3,533,567 - -------------------------------------------------------------------------------- TOTAL INVESTMENT FUNDS $ 24,511,731 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 118.2% (Cost $156,838,663) $ 146,541,138 LIABILITIES IN EXCESS OF OTHER ASSETS -- (18.2%) (22,572,480) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 123,968,658 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan, as of September 30, 2008, was $ 21,122,404. ** Represents collateral for securities loaned. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. ADR - American Depository Receipt See accompanying notes to financial statements. 94 - -------------------------------------------------------------------------------- Portfolio of Investments Healthcare and Biotechnology Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 92.5% SHARES VALUE - -------------------------------------------------------------------------------- HEALTH CARE -- 92.5% Abbott Laboratories 62,200 $ 3,581,476 Aetna, Inc. 35,610 1,285,877 Alcon, Inc. 3,020 487,760 Alexion Pharmaceuticals, Inc.* 16,400 644,520 Allergan, Inc. 38,020 1,958,030 Amedisys, Inc.* 14,450 703,282 Auxilium Pharmaceuticals, Inc.* 20,390 660,636 Baxter International, Inc. 78,200 5,132,265 Beckman Coulter, Inc. 24,340 1,727,897 Becton, Dickinson & Co. 18,330 1,471,166 Celgene Corp.* 23,430 1,482,650 Charles River Laboratories International, Inc.* + 23,500 1,304,955 Covance, Inc.* + 23,890 2,112,115 Covidien Ltd. 40,510 2,177,818 DENTSPLY International, Inc. 67,270 2,525,316 Express Scripts, Inc.* + 46,600 3,440,012 Genentech, Inc.* 22,950 2,035,206 Genzyme Corp.* 33,040 2,672,606 Gilead Sciences, Inc.* 91,660 4,177,862 Haemonetics Corp.* 9,260 571,527 Henry Schein, Inc.* + 27,952 1,504,936 ICON PLC ADR* 55,220 2,112,165 Intuitive Surgical, Inc.* 3,210 773,546 Johnson & Johnson 72,040 4,990,930 Kendle International, Inc.* + 29,750 1,330,123 Medco Health Solutions, Inc.* 36,440 1,639,800 Myriad Genetics, Inc.* 11,510 746,769 Onyx Pharmaceuticals, Inc.* 17,740 641,833 Perrigo Co. + 21,440 824,582 Rigel Pharmaceuticals, Inc.* + 14,670 342,545 Thermo Fisher Scientific, Inc.* + 47,230 2,597,650 United Therapeutics Corp.* 8,220 864,497 Wyeth 51,720 1,910,537 XenoPort, Inc.* 29,140 1,412,999 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 61,845,888 - -------------------------------------------------------------------------------- FOREIGN COMMON STOCK -- 5.0% HEALTH CARE -- 5.0% CSL Ltd. 114,440 3,372,531 - -------------------------------------------------------------------------------- INVESTMENT FUNDS -- 21.5% BBH Securities Lending Fund ** 13,160,939 13,160,939 Touchstone Institutional Money Market Fund^ 1,237,068 1,237,068 - -------------------------------------------------------------------------------- TOTAL INVESTMENT FUNDS $ 14,398,007 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 119.0% (Cost $73,065,926) $ 79,616,426 LIABILITIES IN EXCESS OF OTHER ASSETS -- (19.0%) (12,728,911) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 66,887,515 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan, as of September 30, 2008, was $13,304,645. ** Represents collateral for securities loaned. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. ADR - American Depository Receipt See accompanying notes to financial statements. 95 - -------------------------------------------------------------------------------- Portfolio of Investments International Growth Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 94.2% SHARES VALUE - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 19.0% Aixtron AG ADR (Germany) 31,631 $ 189,786 ARM Holdings PLC ADR (Britain) 59,481 309,301 Canon, Inc. ADR (Japan) 12,332 465,533 Hitachi Ltd. ADR (Japan) 9,249 641,788 Konami Corp. ADR (Japan) 11,417 289,878 Logitech International S.A. ADR (Switzerland)* 17,975 419,177 Nidec Corp. ADR (Japan) 16,375 249,719 Nintendo Co., Ltd. ADR (Japan) 12,143 620,504 Nokia Oyj ADR (Finland) 19,299 359,926 Research In Motion Ltd. (Canada)* 5,323 363,561 SAP AG ADR (Germany) 11,867 634,054 Trend Micro, Inc. ADR (Japan) 9,191 341,962 - -------------------------------------------------------------------------------- 4,885,189 - -------------------------------------------------------------------------------- HEALTH CARE -- 16.7% Alcon, Inc. ADR (Switzerland) 4,072 657,669 Bayer AG ADR (Germany) 7,664 558,932 Covidien, Ltd. (United States) 5,715 307,238 Fresenius Medical Care AG & Co. KGaA ADR (Germany) 6,515 338,389 GlaxoSmithKline PLC ADR (Britain) 9,278 403,222 ICON PLC ADR (Ireland)* 23,298 891,148 Novo-Nordisk A/S ADR (Denmark) 15,154 775,885 Teva Pharmaceutical Industries Ltd. ADR (Israel) 8,042 368,243 - -------------------------------------------------------------------------------- 4,300,726 - -------------------------------------------------------------------------------- FINANCIALS -- 13.8% Allianz SE ADR (Germany) 31,427 430,864 AXA ADR (France) 21,945 716,723 Banco Santander S.A. ADR (Spain) 39,513 593,485 Credit Suisse Group ADR (Switzerland) 11,722 565,938 HSBC Holdings PLC ADR (Britain) 7,650 618,350 ING Groep N.V. ADR (Netherlands) 14,354 307,176 Mitsubishi UFJ Financial Group, Inc. ADR (MUFG) (Japan) 33,769 295,141 - -------------------------------------------------------------------------------- 3,527,677 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 7.7% America Movil ADR (Mexico) 5,686 263,603 BT Group PLC ADR (Britain) 7,271 210,932 China Mobile Ltd. ADR (Hong Kong) 7,271 364,132 Telefonica S.A. ADR (Spain) 8,508 608,236 Telenor ASA ADR (Norway) 5,992 218,304 Vodafone Group PLC ADR (Britain) 13,612 300,825 - -------------------------------------------------------------------------------- 1,966,032 - -------------------------------------------------------------------------------- ENERGY -- 7.4% EnCana Corp. (Canada) 5,541 364,210 Santos Ltd. ADR (Australia) 5,497 350,819 Schlumberger Ltd. (United States) 5,526 431,525 StatoilHydro ASA ADR (Norway) 19,197 456,888 Total S.A. ADR (France) 5,017 304,432 - -------------------------------------------------------------------------------- 1,907,874 - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 7.2% British American Tobacco PLC ADR (Britain) 9,642 597,804 Diageo PLC ADR (Britain) 4,159 286,389 Nestle S.A. ADR (Switzerland) 14,281 613,369 Tesco PLC ADR (Britain) 16,783 347,848 - -------------------------------------------------------------------------------- 1,845,410 - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 6.7% Honda Motor Co., Ltd. ADR (Japan) 16,564 498,742 Makita Corp. ADR (Japan) 9,347 192,455 Matsushita Electric Industrial Co., Ltd. ADR (Japan) 37,564 650,984 Sony Corp. ADR (Japan) 12,362 381,615 - -------------------------------------------------------------------------------- 1,723,796 - -------------------------------------------------------------------------------- MATERIALS -- 6.4% Alumina Ltd. ADR (Australia) 13,510 136,451 ArcelorMittal ADR (Luxembourg) 5,308 262,109 Barrick Gold Corp. (Canada) 5,701 209,455 BASF AG ADR (Germany) 6,835 328,059 Companhia Vale do Rio Doce ADR (Brazil) 10,544 201,918 Potash Corp. of Saskatchewan, Inc. (Canada) 2,080 274,580 Syngenta AG ADR (Switzerland) 5,090 215,409 - -------------------------------------------------------------------------------- 1,627,981 - -------------------------------------------------------------------------------- INDUSTRIALS -- 5.5% ABB Ltd. ADR (Switzerland)* 15,517 301,030 BAE Systems PLC ADR (Britain) 10,035 294,773 Chicago Bridge & Iron Co. N.V. ADR (Netherlands) 8,929 171,794 Kubota Corp. ADR (Japan) 11,954 375,356 Siemens AG ADR (Germany) 2,734 256,695 - -------------------------------------------------------------------------------- 1,399,648 - -------------------------------------------------------------------------------- UTILITIES -- 3.8% E.ON AG ADR (Germany) 12,216 616,017 Veolia Environnement ADR (France) 8,537 352,407 - -------------------------------------------------------------------------------- 968,424 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 24,152,757 - -------------------------------------------------------------------------------- 96 - -------------------------------------------------------------------------------- International Growth Fund (Continued) - -------------------------------------------------------------------------------- MARKET SHARES VALUE - -------------------------------------------------------------------------------- INVESTMENT FUND -- 78.8% Touchstone Institutional Money Market Fund^ 20,207,886 $ 20,207,886 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 173.0% (Cost $45,021,741) $ 44,360,643 LIABILITIES IN EXCESS OF OTHER ASSETS -- (73.0%) (18,723,838) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 25,636,805 ================================================================================ * Non-income producing security. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. ADR - American Depository Receipt See accompanying notes to financial statements. 97 - -------------------------------------------------------------------------------- Portfolio of Investments Mid Cap Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 95.3% SHARES VALUE - -------------------------------------------------------------------------------- INDUSTRIALS -- 22.1% AMETEK, Inc. 151,440 $ 6,174,209 Armstrong World Industries, Inc. 185,270 5,354,303 Brink's Co. 129,770 7,918,564 Copart, Inc.* 145,130 5,514,940 Corrections Corp. of America* 212,540 5,281,619 Covanta Holding Corp.* + 267,260 6,398,204 FTI Consulting, Inc.* 67,360 4,866,086 Kansas City Southern* + 123,470 5,477,129 Kirby Corp.* 85,635 3,248,992 Lincoln Electric Holdings, Inc. 82,460 5,303,003 Republic Services, Inc. 256,430 7,687,771 Roper Industries, Inc. + 119,970 6,833,491 SunPower Corp., Class A* + 41,250 2,925,863 Teleflex, Inc. 83,480 5,300,145 Thomas & Betts Corp.* 101,450 3,963,652 Trinity Industries, Inc. + 135,250 3,479,983 URS Corp.* 106,110 3,891,054 Wabtec Corp. 84,470 4,327,398 - -------------------------------------------------------------------------------- 93,946,406 - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 17.6% Alliance Data Systems Corp.* + 177,430 11,245,512 Amphenol Corp., Class A 77,790 3,122,491 BMC Software, Inc.* 152,610 4,369,224 Convergys Corp.* 278,450 4,115,491 Global Payments, Inc. 151,960 6,816,926 Harris Corp. 76,730 3,544,926 Itron, Inc.* + 82,720 7,323,202 McAfee, Inc.* 226,900 7,705,524 Novell, Inc.* 809,090 4,158,723 QLogic Corp.* 313,900 4,821,504 Sybase, Inc.* + 357,977 10,961,255 Synopsys, Inc.* 345,900 6,900,705 - -------------------------------------------------------------------------------- 75,085,483 - -------------------------------------------------------------------------------- FINANCIALS -- 12.3% Alexandria Real Estate Equities, Inc. + 64,600 7,304,969 Arch Capital Group Ltd.* 98,690 7,207,331 Douglas Emmett, Inc. 267,820 6,178,607 Essex Property Trust + 38,340 4,536,772 Hanover Insurance Group, Inc. 130,720 5,950,374 KeyCorp + 251,200 2,999,328 Nationwide Health Properties, Inc. + 151,600 5,454,568 New York Community Bancorp, Inc. 194,764 3,270,088 Rayonier, Inc. + 126,220 5,976,517 SLM Corp.* 272,060 3,357,220 - -------------------------------------------------------------------------------- 52,235,774 - -------------------------------------------------------------------------------- HEALTH CARE -- 10.6% Cephalon, Inc.* + 94,650 7,334,428 Covance, Inc.* + 61,090 5,400,967 Hill-Rom Holdings, Inc. + 238,310 7,223,176 King Pharmaceuticals, Inc.* 422,010 4,042,856 Omnicare, Inc. 254,550 7,323,403 OSI Pharmaceuticals, Inc.* + 48,050 2,368,385 Perrigo Co. + 144,550 5,559,393 Varian Medical Systems, Inc.* + 105,120 6,005,506 - -------------------------------------------------------------------------------- 45,258,114 - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 10.6% Burger King Holdings, Inc. 233,940 5,745,566 Dollar Tree, Inc.* 178,980 6,507,713 DreamWorks Animation SKG, Class A* 204,530 6,432,469 H&R Block, Inc. 342,270 7,718,188 Hasbro, Inc. 152,420 5,292,022 Jarden Corp.* 217,390 5,097,796 O'Reilly Automotive, Inc.* 92,530 2,477,028 PetSmart, Inc. + 236,480 5,843,421 - -------------------------------------------------------------------------------- 45,114,203 - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 6.5% Alberto-Culver Co. 262,500 7,150,500 Church & Dwight Co., Inc. + 139,190 8,642,307 Constellation Brands, Inc., Class A* 278,370 5,973,820 Herbalife Ltd 149,540 5,909,821 - -------------------------------------------------------------------------------- 27,676,448 - -------------------------------------------------------------------------------- ENERGY -- 5.8% Alpha Natural Resources, Inc.* 44,940 2,311,264 FMC Technologies, Inc.* 67,740 3,153,297 Frontier Oil Corp. 154,720 2,849,942 Mariner Energy, Inc.* 195,800 4,013,900 Penn Virginia Corp. 94,620 5,056,494 Petrohawk Energy Corp.* 104,680 2,264,228 Pioneer Natural Resources Co. + 45,220 2,364,102 Superior Energy Services, Inc.* 92,180 2,870,485 - -------------------------------------------------------------------------------- 24,883,712 - -------------------------------------------------------------------------------- UTILITIES -- 5.4% Integrys Energy Group, Inc. 125,890 6,286,947 MDU Resources Group, Inc. 117,710 3,413,590 NSTAR + 184,380 6,176,730 UGI Corp. 274,550 7,077,899 - -------------------------------------------------------------------------------- 22,955,166 - -------------------------------------------------------------------------------- MATERIALS -- 1.8% Celanese Corp. 73,450 2,049,990 Sigma-Aldrich Corp. + 105,770 5,544,463 - -------------------------------------------------------------------------------- 7,594,453 - -------------------------------------------------------------------------------- MISCELLANEOUS -- 1.4% iShares Russell Midcap Index Fund + 73,400 6,030,544 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 1.2% SBA Communications Corp., Class A* + 196,740 5,089,664 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 405,869,967 - -------------------------------------------------------------------------------- 98 - -------------------------------------------------------------------------------- Mid Cap Fund (Continued) - -------------------------------------------------------------------------------- MARKET SHARES VALUE - -------------------------------------------------------------------------------- INVESTMENT FUNDS -- 28.8% BBH Securities Lending Fund ** 105,177,730 $ 105,177,730 Touchstone Institutional Money Market Fund^ 17,311,821 17,311,821 - -------------------------------------------------------------------------------- TOTAL INVESTMENT FUNDS $ 122,489,551 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 124.1% (Cost $555,031,789) $ 528,359,518 - -------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (24.1%) (102,547,038) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 425,812,480 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan, as of September 30, 2008, was $106,517,607. ** Represents collateral for securities loaned. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. See accompanying notes to financial statements. 99 - -------------------------------------------------------------------------------- Portfolio of Investments Premium Yield Equity Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 91.3% SHARES VALUE - -------------------------------------------------------------------------------- FINANCIALS -- 16.8% Apartment Investment & Management Co. 15,272 $ 534,840 Arthur J. Gallagher & Co. 18,000 461,880 First Industrial Realty Trust, Inc. 22,205 636,840 ING Groep N.V. ADR 9,900 211,860 Lloyds TSB Group PLC ADR 14,400 240,912 Northstar Realty Finance Corp. 41,000 317,750 Potlatch Corp. 9,800 454,622 Wilmington Trust Corp. 16,830 485,209 - -------------------------------------------------------------------------------- 3,343,913 - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 14.7% Colgate-Palmolive Co. 10,600 798,710 Kraft Foods, Inc., Class A 15,815 517,941 McCormick & Co., Inc. 12,800 492,160 Procter & Gamble Co. 8,300 578,427 Sysco Corp. 17,700 545,691 - -------------------------------------------------------------------------------- 2,932,929 - -------------------------------------------------------------------------------- ENERGY -- 14.7% Enerplus Resources Fund 19,300 717,767 Hugoton Royalty Trust 25,700 689,788 Kinder Morgan Management LLC* 17,206 846,535 Spectra Energy Corp. 28,500 678,300 - -------------------------------------------------------------------------------- 2,932,390 - -------------------------------------------------------------------------------- HEALTH CARE -- 10.7% Abbott Laboratories 9,100 523,978 Brookdale Senior Living, Inc. 17,400 382,626 Johnson & Johnson 10,600 734,368 Merck & Co., Inc. 15,900 501,804 - -------------------------------------------------------------------------------- 2,142,776 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 10.4% AT&T, Inc. 19,600 547,232 BCE, Inc. 21,265 738,108 BT Group PLC ADR 15,300 443,853 Windstream Corp. 32,700 357,738 - -------------------------------------------------------------------------------- 2,086,931 - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 7.3% Microchip Technology, Inc. 17,300 509,139 Paychex, Inc. 17,600 581,328 Taiwan Semiconductor Manufacturing Co. Ltd. ADR 39,784 372,776 - -------------------------------------------------------------------------------- 1,463,243 - -------------------------------------------------------------------------------- UTILITIES -- 6.7% National Grid PLC ADR 7,400 475,228 NiSource, Inc. 35,400 522,504 Pepco Holdings, Inc. 15,200 348,232 - -------------------------------------------------------------------------------- 1,345,964 - -------------------------------------------------------------------------------- INDUSTRIALS -- 6.6% Diana Shipping, Inc. 18,000 354,420 Macquarie Infrastructure Company Trust 20,700 273,447 R. R. Donnelley & Sons Co. 13,000 318,890 Seaspan Corp. 20,400 369,036 - -------------------------------------------------------------------------------- 1,315,793 - -------------------------------------------------------------------------------- MATERIALS -- 3.4% Nucor Corp. 7,100 280,450 Teck Cominco Ltd., Class B 13,600 396,032 - -------------------------------------------------------------------------------- 676,482 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 18,240,421 - -------------------------------------------------------------------------------- INVESTMENT FUND -- 4.6% Touchstone Institutional Money Market Fund^ 925,785 $ 925,785 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 95.9% (Cost $22,985,867) $ 19,166,206 OTHER ASSETS IN EXCESS OF LIABILITIES -- 4.1% 814,007 - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 19,980,213 ================================================================================ * Non-income producing security. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. ADR - American Depository Receipt See accompanying notes to financial statements. 100 - -------------------------------------------------------------------------------- Portfolio of Investments Sands Capital Select Growth Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 96.9% SHARES VALUE - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 26.7% Apple, Inc.* 234,120 $ 26,610,079 Broadcom Corp., Class A* 753,600 14,039,568 EMC Corp.* + 1,544,600 18,473,416 Google, Inc., Class A* 95,200 38,129,505 Salesforce.com, Inc.* + 321,600 15,565,440 Visa, Inc., Class A 309,544 19,002,906 - -------------------------------------------------------------------------------- 131,820,914 - -------------------------------------------------------------------------------- HEALTH CARE -- 24.6% Abraxis BioScience* + 47,025 3,242,844 Allergan, Inc. 520,600 26,810,900 Cerner Corp.* + 146,000 6,517,440 Genzyme Corp.* 407,200 32,938,408 Intuitive Surgical, Inc.* 79,000 19,037,420 Mindray Medical International Ltd. ADR 53,913 1,818,485 Stryker Corp. + 216,700 13,500,410 Varian Medical Systems, Inc.* + 314,000 17,938,820 - -------------------------------------------------------------------------------- 121,804,727 - -------------------------------------------------------------------------------- ENERGY -- 14.8% FMC Technologies, Inc.* + 319,000 14,849,450 National-Oilwell Varco, Inc.* + 588,433 29,556,989 Schlumberger Ltd. 371,200 28,987,008 - -------------------------------------------------------------------------------- 73,393,447 - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 14.0% Amazon.com, Inc.* + 505,170 36,756,169 Las Vegas Sands Corp.* + 375,800 13,570,138 Starbucks Corp.* 1,266,000 18,825,420 - -------------------------------------------------------------------------------- 69,151,727 - -------------------------------------------------------------------------------- FINANCIALS -- 10.5% CME Group, Inc. 44,600 16,569,346 IntercontinentalExchange, Inc.* 240,187 19,378,287 Moody's Corp. + 466,900 15,874,600 - -------------------------------------------------------------------------------- 51,822,233 - -------------------------------------------------------------------------------- INDUSTRIALS -- 3.2% Expeditors International of Washington, Inc. 284,600 9,915,464 Iron Mountain, Inc.* 252,200 6,156,202 - -------------------------------------------------------------------------------- 16,071,666 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 3.1% America Movil SAB de C.V. ADR 334,200 15,493,513 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 479,558,227 - -------------------------------------------------------------------------------- INVESTMENT FUNDS -- 21.2% BBH Securities Lending Fund ** 84,147,388 $ 84,147,388 Touchstone Institutional Money Market Fund^ 20,526,773 20,526,773 - -------------------------------------------------------------------------------- TOTAL INVESTMENT FUNDS $ 104,674,161 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 118.1% (Cost $618,596,396) $ 584,232,388 LIABILITIES IN EXCESS OF OTHER ASSETS -- (18.1%) (89,357,427) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 494,874,961 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan, as of September 30, 2008, was $89,069,993. ** Represents collateral for securities loaned. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. ADR - American Depository Receipt See accompanying notes to financial statements. 101 - -------------------------------------------------------------------------------- Portfolio of Investments - -------------------------------------------------------------------------------- Short Duration Fixed Income Fund - September 30, 2008 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 64.4% $ 617,431 FHLMC CMO/REMIC Ser 2510, Class TA, 4.000%, 6/15/32 $ 594,463 748,251 FHLMC CMO/REMIC Ser 2515, Class ED, 5.000%, 3/15/17 752,808 1,139,225 FHLMC CMO/REMIC Ser 2543, Class YJ, 4.500%, 3/15/32 1,131,351 791,767 FHLMC CMO/REMIC Ser 2566, Class LM, 4.500%, 4/15/32 785,185 704,174 FHLMC CMO/REMIC Ser 2575, Class QP, 4.500%, 11/15/31 702,027 624,362 FHLMC CMO/REMIC Ser 2583, Class ND, 4.250%, 12/15/10 625,245 704,618 FHLMC CMO/REMIC Ser 2590, Class QY, 3.750%, 4/15/28 669,496 1,337,308 FHLMC CMO/REMIC Ser 2590, Class UL, 3.750%, 3/15/32 1,274,722 1,053,895 FHLMC CMO/REMIC Ser 2596, Class QE, 4.000%, 3/15/33 1,003,714 2,263,354 FHLMC CMO/REMIC Ser 2649, Class PJ, 3.500%, 6/15/33 2,117,725 1,087,061 FHLMC CMO/REMIC Ser 2682, Class HG, 4.000%, 4/15/17 1,081,878 1,712,326 FHLMC CMO/REMIC Ser 2744, Class TA, 5.500%, 3/15/26 1,716,415 404,536 FHLMC CMO/REMIC Ser 2892, Class A, 5.000%, 5/15/21 407,848 998,921 FHLMC CMO/REMIC Ser 3138, Class PA, 5.500%, 2/15/27 1,016,662 783,289 FHLMC CMO/REMIC Ser 3178, Class MA, 6.000%, 10/15/26 797,763 132,736 FHLMC Pool #C66916, 7.000%, 5/1/32 139,516 123,370 FHLMC Pool #D94598, 6.500%, 4/1/21 127,754 95,139 FHLMC Pool #E97227, 7.000%, 9/1/14 98,691 2,867 FHLMC Pool #G10288, 6.000%, 9/1/09 2,899 16,850 FHLMC Pool #G10446, 6.500%, 2/1/11 17,456 163,422 FHLMC Pool #G30085, 7.500%, 10/1/17 177,896 13,035 FNMA CMO/REMIC Ser 1999-15, Class PC, 6.000%, 9/25/18 13,163 804,717 FNMA CMO/REMIC Ser 2002-71, Class AP, 5.000%, 11/25/32 793,344 1,000,000 FNMA CMO/REMIC Ser 2003-106, Class WC, 4.500%, 8/25/18 1,001,343 798,726 FNMA CMO/REMIC Ser 2003-119, Class PU, 4.000%, 11/25/33 785,382 547,886 FNMA CMO/REMIC Ser 2003-19, Class ME, 4.000%, 1/25/33 528,988 260,029 FNMA CMO/REMIC Ser 2003-30, Class MB, 4.000%, 6/25/27 259,822 2,632,050 FNMA CMO/REMIC Ser 2003-34, Class GJ, 4.000%, 2/25/33 2,522,446 776,192 FNMA CMO/REMIC Ser 2003-42, Class CA, 4.000%, 5/25/33 734,519 240,511 FNMA CMO/REMIC Ser 2003-66, Class AP, 3.500%, 11/25/32 226,879 1,920,100 FNMA CMO/REMIC Ser 2006-2, Class GH, 5.500%, 6/25/32 1,938,904 10,131 FNMA Pool #250477, 6.000%, 1/1/11 10,329 9,722 FNMA Pool #303096, 7.500%, 12/1/09 9,812 94,929 FNMA Pool #313429, 7.000%, 3/1/12 99,217 175,194 FNMA Pool #323441, 7.000%, 12/1/13 179,685 172,630 FNMA Pool #323832, 7.500%, 7/1/29 187,055 10,152 FNMA Pool #334593, 7.000%, 5/1/24 10,753 398,506 FNMA Pool #546474, 7.000%, 1/1/15 417,843 972 FNMA Pool #6222, 9.000%, 4/1/16 977 493,502 FNMA Pool #647567, 6.000%, 6/1/17 504,996 269,287 FNMA Pool #665773, 7.500%, 6/1/31 291,907 625,307 FNMA Pool #725284, 7.000%, 11/1/18 655,649 1,941,305 FNMA Pool #838790, 4.500%, 8/1/35 1,839,202 19,172 GNMA ARM Pool #8426 (A), 5.125%, 11/20/18 19,431 891,691 GNMA CMO/REMIC Ser 2002-72, Class AB, 4.500%, 10/20/32 864,155 6,116 GNMA Pool #2707, 5.500%, 1/20/14 6,328 6,234 GNMA Pool #2802, 5.500%, 7/20/14 6,450 99,215 GNMA Pool #2843, 5.500%, 11/20/14 102,647 78,904 GNMA Pool #344233, 8.000%, 2/15/23 86,520 191,482 GNMA Pool #345123, 8.000%, 12/15/23 209,963 39,203 GNMA Pool #462486, 6.500%, 1/15/13 40,897 56,215 GNMA Pool #569337, 6.500%, 4/15/22 57,547 75,851 GNMA Pool #578189, 6.000%, 2/15/32 77,253 102 Short Duration Fixed Income Fund (Continued) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 64.4% (CONTINUED) $ 91,470 GNMA Pool #780322, 8.000%, 11/15/22 $ 100,167 41,637 GNMA Pool #780327, 8.000%, 11/15/17 45,307 315,457 GNMA Pool #780604, 7.000%, 7/15/12 331,203 95,915 GNMA Pool #814, 8.000%, 8/20/17 104,261 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS $ 30,305,858 - -------------------------------------------------------------------------------- CORPORATE BONDS -- 5.6% FINANCIALS -- 5.6% 1,000,000 American Express Credit Company, MTN (A), 5.109%, 10/27/08 940,402 500,000 CIT Group, Inc., 5.000%, 11/24/08 484,369 500,000 Goldman Sachs Group, Inc., MTN (A), 3.294%, 12/22/08 498,995 250,000 Morgan Stanley, 3.875%, 1/15/09 230,005 500,000 Wells Fargo & Company, MTN, 3.980%, 10/29/10 491,200 - -------------------------------------------------------------------------------- TOTAL CORPORATE BONDS $ 2,644,971 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 17.0% 3,000,000 FHLB (A), 8.000%, 12/3/08 2,977,500 4,500,000 FHLB Discount Note, 10/30/08 4,498,187 500,000 FHLMC, 4.050%, 6/30/10 501,552 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 7,977,239 - -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 2.7% PENNSYLVANIA -- 2.7% 750,000 Commonwealth Fing Auth RB, Ser A, 3.860%, 6/1/11 745,658 500,000 Pennsylvania State Tpk Commn BANS RB, Ser B, 5.290%, 10/15/09 500,700 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS $ 1,246,358 - -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 9.2% 750,000 Caterpillar Financial Asset Trust Ser 2008-A, Class A2B (A), 4.360%, 10/25/08 750,000 1,500,000 CNH Equipment Trust, Ser 2008-B, Class A3B (A), 3.888%, 10/16/08 1,464,990 1,631,251 Harley-Davidson Motorcycle Trust Ser 2006-1, Class A2, 5.040%, 10/15/12 1,633,632 459,527 Wells Fargo Mortgage Backed Securities, Ser 2006-16, Class A12, 5.000%, 11/25/36 453,089 - -------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES $ 4,301,711 - -------------------------------------------------------------------------------- MARKET SHARES VALUE - -------------------------------------------------------------------------------- INVESTMENT FUND -- 1.1% 511,399 Touchstone Institutional Money Market Fund^ $ 511,399 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $47,459,938) $ 46,987,536 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.0% 1,214 - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 46,988,750 ================================================================================ ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. (A) Variable rate security - the rate reflected is the rate in effect on September 30, 2008. ARM - Adjustable Rate Mortgage BANS - Bond Anticipation Notes CMO - Collateralized Mortgage Obligation FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association MTN - Medium Term Note RB - Revenue Bond REMIC - Real Estate Mortgage Investment Conduit See accompanying notes to financial statements. 103 - -------------------------------------------------------------------------------- Portfolio of Investments Small Cap Value Opportunities Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 98.8% SHARES VALUE - -------------------------------------------------------------------------------- FINANCIALS -- 33.4% Argo Group International Holdings Ltd.* 48,840 $ 1,799,754 Berkshire Hills Bancorp, Inc. 7,810 249,920 BioMed Realty Trust, Inc. 92,360 2,442,921 Cash America International, Inc. 40,860 1,472,594 Corporate Office Properties Trust 51,290 2,069,552 CVB Financial Corp. 108,930 1,514,127 Dime Community Bancshares, Inc. 82,170 1,250,627 DuPont Fabros Technology, Inc. 91,280 1,392,020 EastGroup Properties, Inc. 35,410 1,718,801 EZCORP, Class A* 101,780 1,913,464 First Citizens BancShares, Inc. 6,410 1,147,390 First Financial Northwest, Inc. 87,310 901,039 FPIC Insurance Group, Inc.* 34,856 1,791,250 Green Bankshares, Inc. + 20,583 483,906 Investors Bancorp, Inc.* + 84,880 1,277,444 IPC Holdings Ltd. 53,470 1,615,329 Kearny Financial Corp. 97,370 1,191,809 Mid-America Apartment Communities, Inc. + 31,250 1,535,625 Navigators Group, Inc.* 33,150 1,922,700 NGP Capital Resources Co. + 101,110 1,473,173 PICO Holdings, Inc.* 16,460 591,079 Platinum Underwriters Holdings Ltd. 49,990 1,773,645 Potlatch Corp. + 43,520 2,018,893 ProAssurance Corp.* 22,350 1,251,600 Prosperity Bancshares, Inc. 50,840 1,728,052 Signature Bank* 65,360 2,279,757 South Financial Group, Inc. + 95,670 701,261 SVB Financial Group* + 35,860 2,077,011 SWS Group, Inc. 85,560 1,724,890 UCBH Holdings + 123,740 793,173 UMB Financial Corp. 1,940 101,889 - -------------------------------------------------------------------------------- 44,204,695 - -------------------------------------------------------------------------------- INDUSTRIALS -- 14.1% Altra Holdings, Inc.* 120,670 1,781,089 Atlas Air Worldwide Holdings, Inc.* 29,640 1,194,788 Casella Waste Systems, Inc., Class A* 116,040 1,362,310 DXP Enterprises, Inc.* 34,880 1,859,453 EnPro Industries, Inc.* 32,050 1,190,978 Genesee & Wyoming, Inc.* 39,150 1,468,908 KHD Humboldt Wedag International Ltd.* 60,160 1,153,869 L.B. Foster Co., Class A* 39,760 1,209,499 Michael Baker Corp.* 38,630 1,344,324 Moog, Inc., Class A* 31,550 1,352,864 NN, Inc. 69,050 887,293 Powell Industries, Inc.* 34,860 1,422,637 Titan International, Inc. + 35,770 762,616 Werner Enterprises, Inc. + 75,810 1,645,835 - -------------------------------------------------------------------------------- 18,636,463 - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 11.6% Avid Technology, Inc.* + 46,520 1,119,271 CyberSource Corp.* 63,170 1,017,669 EMS Technologies, Inc.* 51,750 1,154,543 Exar Corp.* 169,310 1,296,915 Interwoven, Inc.* 96,491 1,362,453 Mentor Graphics Corp.* 93,120 1,056,912 Plexus Corp.* 50,480 1,044,936 S1 Corp.* 136,130 833,116 Silicon Laboratories, Inc.* + 33,630 1,032,441 Take-Two Interactive Software, Inc.* 90,200 1,479,280 TNS, Inc.* 80,520 1,559,671 Verigy Ltd.* 71,318 1,161,057 Websense, Inc.* 54,740 1,223,439 - -------------------------------------------------------------------------------- 15,341,703 - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 11.3% 99 Cents Only Stores* 39,090 428,817 Aaron Rents, Inc. 65,030 1,760,362 America's Car-Mart, Inc.* + 54,820 1,019,104 ATC Technology Corp.* 74,990 1,780,263 California Pizza Kitchen, Inc.* 67,520 868,982 Career Education Corp.* 37,840 618,684 Children's Place Retail Stores, Inc.* 29,110 970,819 Fred's, Inc. + 124,470 1,769,963 Jo-Ann Stores, Inc.* 66,090 1,386,568 Jos. A. Bank Clothiers, Inc.* + 30,850 1,036,560 Mediacom Communications Corp.* + 164,750 975,320 PetMed Express, Inc.* 41,490 651,393 Zale Corp.* + 64,590 1,614,750 - -------------------------------------------------------------------------------- 14,881,585 - -------------------------------------------------------------------------------- HEALTH CARE -- 6.9% Amedisys, Inc.* + 26,210 1,275,641 AmSurg Corp.* 62,990 1,604,355 Analogic Corp. 22,087 1,099,049 CONMED Corp.* 59,120 1,891,840 Invacare Corp. + 48,370 1,167,652 STERIS Corp. 54,430 2,045,479 - -------------------------------------------------------------------------------- 9,084,016 - -------------------------------------------------------------------------------- MATERIALS -- 6.3% Koppers Holdings, Inc. 25,120 939,739 Minerals Technologies, Inc. 19,280 1,144,461 Pan American Silver Corp.* 38,030 845,407 Rock-Tenn Co. 26,540 1,061,069 Sensient Technologies Corp. 54,860 1,543,212 Solutia, Inc.* 88,120 1,233,680 Stepan Co. 29,290 1,598,355 - -------------------------------------------------------------------------------- 8,365,923 - -------------------------------------------------------------------------------- 104 - -------------------------------------------------------------------------------- Small Cap Value Opportunities Fund (Continued) - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 98.8% (CONTINUED) SHARES VALUE - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 5.7% BJ's Wholesale Club, Inc.* 26,420 $ 1,026,681 Chiquita Brands International, Inc.* + 87,300 1,380,213 Omega Protein Corp.* 113,950 1,340,052 Pantry, Inc.* 65,360 1,384,979 SunOpta, Inc.* 168,140 1,035,742 TreeHouse Foods, Inc.* 44,980 1,335,906 - -------------------------------------------------------------------------------- 7,503,573 - -------------------------------------------------------------------------------- UTILITIES -- 4.3% Avista Corp. 86,950 1,887,685 New Jersey Resources Corp. + 64,725 2,322,980 Piedmont Natural Gas Co., Inc. + 46,240 1,477,830 - -------------------------------------------------------------------------------- 5,688,495 - -------------------------------------------------------------------------------- ENERGY -- 3.5% Delek US Holdings, Inc. 77,890 722,040 International Coal Group, Inc.* + 185,020 1,154,525 Petroleum Development Corp.* 20,580 913,135 PetroQuest Energy, Inc. 38,930 597,576 Trico Marine Services, Inc.* + 71,930 1,228,564 - -------------------------------------------------------------------------------- 4,615,840 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 1.7% General Communication, Inc., Class A* 148,870 1,378,536 Shenandoah Telecommunications Co. 37,170 820,342 - -------------------------------------------------------------------------------- 2,198,878 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 130,521,171 - -------------------------------------------------------------------------------- INVESTMENT FUND -- 17.7% BBH Securities Lending Fund ** 23,350,696 $ 23,350,696 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 116.5% (Cost $153,344,435) $ 153,871,867 LIABILITIES IN EXCESS OF OTHER ASSETS -- (16.5%) (21,759,353) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 132,112,514 ================================================================================ * Non-income producing security. + All or a portion of the security is on loan. The total value of securities on loan, as of September 30, 2008, was $23,050,058. ** Represents collateral for securities loaned. See accompanying notes to financial statements. 105 - -------------------------------------------------------------------------------- Portfolio of Investments Ultra Short Duration Fixed Income Fund - September 30, 2008 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 61.1% $ 7,137,179 FHLMC CMO/REMIC Ser 2553, Class IH, 5.500%, 10/15/32 $ 2,071,893 6,224,251 FHLMC CMO/REMIC Ser 2571, Class FN (A), 3.138%, 10/15/08 6,044,789 1,040,164 FHLMC CMO/REMIC Ser 2575 Class LM, 4.500%, 5/15/32 1,037,667 1,556,063 FHLMC CMO/REMIC Ser 2586, Class WA, 4.000%, 12/15/32 1,516,920 1,064,382 FHLMC CMO/REMIC Ser 2590, Class UL, 3.750%, 3/15/32 1,014,569 1,384,693 FHLMC CMO/REMIC Ser 2594, Class YA, 4.000%, 4/15/23 1,359,752 10,829,122 FHLMC CMO/REMIC Ser 2625, Class IO, 5.000%, 12/15/31 1,228,694 1,256,162 FHLMC CMO/REMIC Ser 2649, Class PJ, 3.500%, 6/15/33 1,175,338 4,815,635 FHLMC CMO/REMIC Ser 2660, Class PB, 5.000%, 8/15/26 4,850,154 450,959 FHLMC CMO/REMIC Ser 2682, Class HG, 4.000%, 4/15/17 448,809 52,200 FHLMC CMO/REMIC Ser 2684, Class GN, 3.250%, 5/15/23 52,144 442,895 FHLMC CMO/REMIC Ser 2744, Class JX, 3.500%, 1/15/23 442,643 3,088,954 FHLMC CMO/REMIC Ser 2770, Class FH (A), 2.888%, 10/15/08 3,007,048 1,745,651 FHLMC CMO/REMIC Ser 2886, Class BF (A), 2.988%, 10/15/08 1,616,272 3,640,823 FHLMC CMO/REMIC Ser 2892, Class A, 5.000%, 5/15/21 3,670,628 4,215,951 FHLMC CMO/REMIC Ser 2921, Class JF (A), 2.988%, 1/15/35 3,944,435 319,930 FHLMC CMO/REMIC Ser 2925, Class CF (A), 2.988%, 10/15/08 301,505 1,060,155 FHLMC CMO/REMIC Ser 2956, Class YB, 6.950%, 1/15/35 916,720 2,286,378 FHLMC CMO/REMIC Ser 3025, Class FC (A), 4.464%, 10/1/08 2,084,045 4,000,000 FHLMC CMO/REMIC Ser 3033, Class AT, 5.000%, 1/15/27 4,021,317 1,206,720 FHLMC CMO/REMIC Ser 3033, Class BY (A), 4.714%, 10/1/08 1,083,314 705,482 FHLMC CMO/REMIC Ser 3038, Class TA, 6.700%, 9/15/35 600,174 1,956,033 FHLMC CMO/REMIC Ser 3073, Class LA, 5.000%, 12/15/17 1,973,091 4,921,716 FHLMC CMO/REMIC Ser 3137, Class PJ, 5.125%, 12/15/13 4,948,489 2,151,269 FHLMC CMO/REMIC Ser 3196, Class PA, 5.250%, 8/15/11 2,175,615 6,793,948 FHLMC CMO/REMIC Ser 3405, Class CI, 5.500%, 1/15/38 1,438,235 140,901 FHLMC Pool #B15413, 8.000%, 3/1/11 147,169 42,368 FHLMC Pool #E64944, 7.000%, 7/1/11 44,322 326,411 FHLMC Pool #G11072, 7.500%, 12/1/15 344,028 400,879 FNMA CMO/REMIC Ser 2002-67, Class AM, 5.000%, 11/25/15 401,827 2,000,000 FNMA CMO/REMIC Ser 2003-106, Class WC, 4.500%, 8/25/18 2,002,686 1,514,377 FNMA CMO/REMIC Ser 2003-119, Class PU, 4.000%, 11/25/33 1,489,077 627,356 FNMA CMO/REMIC Ser 2003-19, Class ME, 4.000%, 1/25/33 605,717 2,321,763 FNMA CMO/REMIC Ser 2003-27, Class PC, 4.500%, 5/25/26 2,320,952 715,436 FNMA CMO/REMIC Ser 2003-33, Class AM, 4.250%, 5/25/33 694,133 1,057,508 FNMA CMO/REMIC Ser 2003-33, Class AU, 4.000%, 3/25/33 1,018,039 856,861 FNMA CMO/REMIC Ser 2003-34, Class AD, 4.000%, 1/25/32 848,566 3,844,103 FNMA CMO/REMIC Ser 2003-69, Class NF (A), 3.964%, 10/1/08 3,878,229 12,494,841 FNMA CMO/REMIC Ser 2003-79, Class XI, 5.000%, 2/25/32 1,772,854 4,448,438 FNMA CMO/REMIC Ser 2003-81, Class FE (A), 3.707%, 10/25/08 4,234,037 8,133,204 FNMA CMO/REMIC Ser 2004-95, Class BI, 5.500%, 12/25/24 1,434,979 3,271,270 FNMA CMO/REMIC Ser 2004-96, Class LF (A), 4.207%, 10/25/08 3,083,882 936,673 FNMA CMO/REMIC Ser 2005-108, Class GU, 5.750%, 7/25/35 948,256 2,258,497 FNMA CMO/REMIC Ser 2006-109, Class JS (A), 6.750%, 10/1/08 2,041,947 960,050 FNMA CMO/REMIC Ser 2006-2, Class GH, 5.500%, 6/25/32 969,452 1,525,599 FNMA CMO/REMIC Ser 2006-73, Class PJ, 6.000%, 2/25/28 1,554,118 1,232,840 FNMA CMO/REMIC Ser 2007-9, Class YA, 5.500%, 3/25/37 1,228,159 3,907,136 FNMA CMO/REMIC Ser 2008-35, Class IO, 4.500%, 4/25/23 529,999 12,063,438 FNMA CMO/REMIC Ser 2008-36, Class IA, 4.500%, 10/25/22 1,529,639 7,963 FNMA Pool #190658, 7.000%, 2/1/09 8,024 60,234 FNMA Pool #253472, 7.500%, 9/1/10 61,473 137,196 FNMA Pool #519992, 7.000%, 10/1/14 144,726 178,311 FNMA Pool #534851, 7.500%, 4/1/15 187,727 131,732 FNMA Pool #535219, 7.500%, 3/1/15 138,688 68,053 FNMA Pool #535635, 8.500%, 6/1/12 70,755 559,055 FNMA Pool #555646, 7.500%, 9/1/16 588,674 106 - -------------------------------------------------------------------------------- Ultra Short Duration Fixed Income Fund (Continued) - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 61.1% (CONTINUED) $ 31,258 GNMA ARM Pool #8103 (A), 5.500%, 2/20/16 $ 32,017 35,462 GNMA ARM Pool #8287 (A), 5.125%, 11/20/17 36,196 52,015 GNMA ARM Pool #8297 (A), 5.125%, 12/20/17 52,341 87,030 GNMA ARM Pool #8333 (A), 5.500%, 10/1/08 89,341 51,824 GNMA ARM Pool #8345 (A), 5.500%, 4/20/18 53,134 72,864 GNMA ARM Pool #8366 (A), 5.375%, 10/1/08 74,078 2,774 GNMA ARM Pool #8404 (A), 5.625%, 9/20/18 2,821 29,690 GNMA ARM Pool #8405 (A), 5.625%, 9/20/18 30,238 6,042 GNMA ARM Pool #8462 (A), 5.375%, 10/1/08 6,112 39,427 GNMA ARM Pool #8489 (A), 5.500%, 10/1/08 40,445 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS $ 87,763,117 - -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 4.7% 750,000 Caterpillar Financial Asset Trust Ser 2008-A, Class A2B (A), 4.360%, 10/25/08 750,000 1,500,000 CNH Equipment Trust Ser 2008-B, Class A3B (A), 3.888%, 10/16/08 1,464,990 880,282 Harley-Davidson Motorcycle Trust Ser 2005-2, Class A2, 4.070%, 2/15/12 875,730 856,407 Harley-Davidson Motorcycle Trust Ser 2006-1, Class A2, 5.040%, 10/15/12 857,657 1,000,000 Nissan Auto Lease Trust Ser 2008-A, Class A2B (A), 4.038%, 10/15/08 1,000,000 1,838,108 Wells Fargo Mortgage Backed Securities, Ser 2006-16, Class A12, 5.000%, 11/25/36 1,812,358 - -------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES $ 6,760,735 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 20.8% 7,000,000 FHLB (A), 8.000%, 12/3/08 6,947,500 8,000,000 FHLB Discount Note, 10/2/08 7,999,887 5,000,000 FHLB Discount Note, 10/30/08 4,997,985 3,500,000 FHLMC, 4.050%, 6/30/10 3,510,864 2,000,000 FNMA, 4.750%, 12/17/12 2,009,844 2,000,000 FNMA, 4.750%, 7/23/13 2,008,130 2,500,000 FNMA, 4.510%, 1/16/14 2,507,148 - -------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 29,981,358 - -------------------------------------------------------------------------------- CORPORATE BONDS -- 5.9% FINANCIALS -- 5.9% 2,000,000 American Express Credit Company, MTN (A), 5.109%, 10/27/08 1,880,806 1,500,000 CIT Group, Inc., MTN, 5.000%, 11/24/08 1,453,106 1,935,000 Goldman Sachs Group, Inc., MTN (A), 3.294%, 12/22/08 1,931,113 750,000 Morgan Stanley, 3.875%, 1/15/09 690,014 1,000,000 PNC Funding Corp., 4.500%, 3/10/10 989,984 1,600,000 Wells Fargo & Company, MTN, 3.980%, 10/29/10 1,571,838 - -------------------------------------------------------------------------------- TOTAL CORPORATE BONDS $ 8,516,861 - -------------------------------------------------------------------------------- MUNICIPAL BONDS -- 3.6% PENNSYLVANIA -- 3.6% 2,750,000 Commonwealth Fing Auth PA Rev, Ser A, 3.860%, 6/1/11 2,734,078 2,500,000 Pennsylvania State Tpk Commn BANS, Ser B, 5.290%, 10/15/09 2,503,500 - -------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS $ 5,237,578 - -------------------------------------------------------------------------------- MARKET SHARES VALUE - -------------------------------------------------------------------------------- INVESTMENT FUND -- 5.2% 7,436,454 Touchstone Institutional Money Market Fund^ $ 7,436,454 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 101.3% (Cost $147,479,404) $ 145,696,103 LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.3%) (1,858,845) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 143,837,258 ================================================================================ ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. (A) Variable rate security - the rate reflected is the rate in effect on September 30, 2008. ARM - Adjustable Rate Mortgage BANS - Bond Anticipation Notes CMO - Collateralized Mortgage Obligation FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association MTN - Medium Term Note REMIC - Real Estate Mortgage Investment Conduit See accompanying notes to financial statements. 107 - -------------------------------------------------------------------------------- Portfolio of Investments Value Opportunities Fund - September 30, 2008 - -------------------------------------------------------------------------------- MARKET COMMON STOCKS -- 98.4% SHARES VALUE - -------------------------------------------------------------------------------- FINANCIALS -- 27.5% Assurant, Inc. 71,760 $ 3,946,800 Bank of New York Mellon Corp. 154,390 5,030,026 Citigroup, Inc. 217,775 4,466,565 Fifth Third Bancorp + 299,710 3,566,549 Invesco Ltd. + 255,520 5,360,810 JPMorgan Chase & Co. 121,920 5,693,663 KeyCorp + 319,825 3,818,711 Lincoln National Corp. 57,800 2,474,418 Loews Corp. 90,946 3,591,458 PNC Financial Services Group, Inc. 45,315 3,385,031 Simon Property Group, Inc. + 44,115 4,279,155 US Bancorp + 116,605 4,200,112 - -------------------------------------------------------------------------------- 49,813,298 - -------------------------------------------------------------------------------- ENERGY -- 13.0% Cabot Oil & Gas Corp. 60,555 2,188,458 Chevron Texaco Corp. 99,785 8,230,267 Exxon Mobil Corp. 89,590 6,957,559 Oceaneering International, Inc.* 58,820 3,136,282 Peabody Energy Corp. 65,110 2,929,950 - -------------------------------------------------------------------------------- 23,442,516 - -------------------------------------------------------------------------------- HEALTH CARE -- 11.7% Boston Scientific Corp.* 193,020 2,368,355 Hospira, Inc.* 74,800 2,857,360 Johnson & Johnson 61,565 4,265,223 Merck & Co., Inc. 166,970 5,269,574 WellPoint, Inc.* 67,170 3,141,541 Wyeth 90,195 3,331,803 - -------------------------------------------------------------------------------- 21,233,856 - -------------------------------------------------------------------------------- CONSUMER STAPLES -- 11.6% CVS/Caremark Corp. + 72,580 2,443,043 HJ Heinz Co. 98,315 4,906,901 Kraft Foods, Inc.- Class A 88,510 2,898,703 Lorillard, Inc. 52,257 3,718,086 Philip Morris International, Inc. 53,375 2,567,338 Procter & Gamble Co. 64,120 4,468,522 - -------------------------------------------------------------------------------- 21,002,593 - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 9.7% H&R Block, Inc. + 195,350 4,405,143 McDonald's Corp. 38,205 2,357,249 Time Warner, Inc. + 335,030 4,392,243 Walt Disney Co. 67,960 2,085,692 Zale Corp.* + 172,270 4,306,750 - -------------------------------------------------------------------------------- 17,547,077 - -------------------------------------------------------------------------------- UTILITIES -- 6.6% DPL, Inc. + 105,975 2,628,180 Exelon Corp. 77,720 4,866,827 National Fuel Gas Co. + 105,635 4,455,684 - -------------------------------------------------------------------------------- 11,950,691 - -------------------------------------------------------------------------------- INDUSTRIALS -- 6.0% General Cable Corp.* 74,525 2,655,326 Raytheon Co. 49,025 2,623,328 Shaw Group, Inc.* 94,635 2,908,133 Waste Management, Inc. 83,075 2,616,032 - -------------------------------------------------------------------------------- 10,802,819 - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 5.2% Corning, Inc. 143,525 2,244,731 International Business Machines Corp. 23,845 2,788,911 Symantec Corp.* 126,080 2,468,646 TriQuint Semiconductor, Inc.* 410,850 1,967,972 - -------------------------------------------------------------------------------- 9,470,260 - -------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 3.8% AT&T, Inc. 148,495 4,145,980 Verizon Communications, Inc. 84,200 2,701,978 - -------------------------------------------------------------------------------- 6,847,958 - -------------------------------------------------------------------------------- MATERIALS -- 3.3% Alcoa, Inc. 107,630 2,430,285 Ball Corp. 87,865 3,469,789 - -------------------------------------------------------------------------------- 5,900,074 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS $ 178,011,142 - -------------------------------------------------------------------------------- INVESTMENT FUNDS -- 22.4% BBH Securities Lending Fund ** 35,830,066 35,830,066 Touchstone Institutional Money Market Fund^ 4,653,025 4,653,025 - -------------------------------------------------------------------------------- TOTAL INVESTMENT FUNDS $ 40,483,091 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 120.8% (Cost $234,467,807) $ 218,494,233 LIABILITIES IN EXCESS OF OTHER ASSETS -- (20.8%) (37,638,133) - -------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 180,856,100 ================================================================================ * Non-income producing security. ^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc. See Note 4. + All or a portion of the security is on loan. The total value of securities on loan, as of September 30, 2008, was $37,564,761. ** Represents collateral for securities loaned. See accompanying notes to financial statements. 108 - -------------------------------------------------------------------------------- Report of Independent Registered Public Accounting Firm - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Touchstone Funds Group Trust We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Touchstone Funds Group Trust, comprised of Touchstone Clover Core Fixed Income Fund, Touchstone Diversified Small Cap Value Fund, Touchstone Short Duration Fixed Income Fund, Touchstone Ultra Short Duration Fixed Income Fund, Touchstone Small Cap Value Opportunities Fund, Touchstone Healthcare & Biotechnology Fund, Touchstone Value Opportunities Fund (collectively, the "Former Turner Funds"), Touchstone Mid Cap Fund, Touchstone Sands Capital Select Growth Fund and Touchstone Premium Yield Equity Fund as of September 30, 2008, and the related statements of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended and financial highlights for each of the three years in the period then ended, and the accompanying statement of assets and liabilities, including the portfolio of investments of Touchstone International Growth Fund (formerly, the Navellier International Growth Fund) as of September 30, 2008, and the related statements of operations and changes in net assets and financial highlights for the nine month period then ended (collectively, the "Funds"). These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the two years in the period ended September 30, 2005 of the Former Turner Funds and Touchstone Mid Cap Fund were audited by other auditors whose report dated November 29, 2005, expressed an unqualified opinion on those financial highlights. The financial highlights for the year ended October 31, 2003 of the Touchstone Sands Capital Select Growth Fund were audited by other auditors whose report dated December 12, 2003, expressed an unqualified opinion on those financial highlights. The statement of operations for the year ended December 31, 2007, the statements of changes in net assets for each of the two years in the period then ended and financial highlights for each of the five years in the period then ended of the Touchstone International Growth Fund were audited by other auditors whose report dated February 27, 2008, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position for the first ten of the eleven Funds referred to above of the Touchstone Funds Group Trust at September 30, 2008, the results of their operations for the year then ended and the changes in their net assets for each of the two years in the period then ended and financial highlights for each of the three years in the period then ended and the financial position of the Touchstone International Growth Fund at September 30, 2008 and the related statements of its operations and changes in net assets and financial highlights for the nine month period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Cincinnati, Ohio November 25, 2008 109 - -------------------------------------------------------------------------------- Other Items (Unaudited) - -------------------------------------------------------------------------------- DIVIDENDS RECEIVED DEDUCTION For corporate shareholders, the following ordinary dividends paid during the year ended September 30, 2008 qualify for the corporate dividends received deduction: Diversified Small Cap Value Fund 6% International Growth Fund 97% Mid Cap Fund 34% Premium Yield Equity Fund 100% Value Opportunities Fund 99% PROXY VOTING DISCLOSURE The Sub-Advisor is responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Sub-Advisor uses in fulfilling this responsibility and information regarding how those proxies were voted during the twelve month period ended June 30, are available without charge upon request by calling toll free 1.800.543.0407. These items are also available on the Securities and Exchange Commission's (the Commission) website at http://www.sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The Trust files a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the Commission's website; (ii) may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; and (iii) will be made available to shareholders upon request by calling 1.800.543.0407. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. SCHEDULE OF SHAREHOLDER EXPENSES As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including reinvested dividends or other distributions; and (2) ongoing costs, including investment advisory fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six Months Ended September 30, 2008" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. 110 - -------------------------------------------------------------------------------- Other Items (Continued) - -------------------------------------------------------------------------------- SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
NET EXPENSE BEGINNING ENDING PAID DURING RATIO ACCOUNT ACCOUNT THE SIX MONTHS ANNUALIZED VALUE VALUE ENDED SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30, 2008 2008 2008 2008* - -------------------------------------------------------------------------------------------------------- CLOVER CORE FIXED INCOME FUND Class I Actual 0.85% $ 1,000.00 $ 932.10 $ 4.11 Class I Hypothetical 0.85% $ 1,000.00 $ 1,020.75 $ 4.30 DIVERSIFIED SMALL CAP VALUE FUND Class A Actual 1.45% $ 1,000.00 $ 1,012.80 $ 7.29 Class A Hypothetical 1.45% $ 1,000.00 $ 1,017.75 $ 7.31 Class C Actual 2.20% $ 1,000.00 $ 1,009.60 $ 11.03 Class C Hypothetical 2.20% $ 1,000.00 $ 1,014.02 $ 11.06 Class Z Actual 1.45% $ 1,000.00 $ 1,012.60 $ 7.27 Class Z Hypothetical 1.45% $ 1,000.00 $ 1,017.78 $ 7.29 HEALTHCARE AND BIOTECHNOLOGY FUN D Class A Actual 1.55% $ 1,000.00 $ 966.70 $ 7.63 Class A Hypothetical 1.55% $ 1,000.00 $ 1,017.25 $ 7.82 Class C Actual 2.34% $ 1,000.00 $ 961.90 $ 11.49 Class C Hypothetical 2.34% $ 1,000.00 $ 1,013.29 $ 11.79 INTERNATIONAL GROWTH FUND Class A Actual 1.48% $ 1,000.00 $ 792.60 $ 6.62 Class A Hypothetical 1.48% $ 1,000.00 $ 1,017.62 $ 7.45 Class C Actual** 1.46% $ 1,000.00 $ 1,009.70 $ 0.04 Class C Hypothetical** 1.46% $ 1,000.00 $ 1,000.10 $ 0.04 Class Y Actual** 0.44% $ 1,000.00 $ 1,010.40 $ 0.01 Class Y Hypothetical** 0.44% $ 1,000.00 $ 1,000.12 $ 0.01 MID CAP FUND Class A Actual 1.15% $ 1,000.00 $ 860.40 $ 5.35 Class A Hypothetical 1.15% $ 1,000.00 $ 1,019.25 $ 5.80 Class C Actual 1.90% $ 1,000.00 $ 868.30 $ 8.87 Class C Hypothetical 1.90% $ 1,000.00 $ 1,015.50 $ 9.57 Class Y Actual 0.90% $ 1,000.00 $ 861.60 $ 4.19 Class Y Hypothetical 0.90% $ 1,000.00 $ 1,020.49 $ 4.55 Class Z Actual 1.15% $ 1,000.00 $ 860.30 $ 5.36 Class Z Hypothetical 1.15% $ 1,000.00 $ 1,019.24 $ 5.81
111 - -------------------------------------------------------------------------------- Other Items (Continued) - -------------------------------------------------------------------------------- SCHEDULE OF SHAREHOLDER EXPENSES (CONTINUED)
NET EXPENSE BEGINNING ENDING PAID DURING RATIO ACCOUNT ACCOUNT THE SIX MONTHS ANNUALIZED VALUE VALUE ENDED SEPTEMBER 30, APRIL 1, SEPTEMBER 30, SEPTEMBER 30, 2008 2008 2008 2008* - --------------------------------------------------------------------------------------------------------- PREMIUM YIELD EQUITY FUND Class A Actual 1.20% $ 1,000.00 $ 869.70 $ 5.61 Class A Hypothetical 1.20% $ 1,000.00 $ 1,019.00 $ 6.06 Class C Actual 1.95% $ 1,000.00 $ 866.60 $ 9.09 Class C Hypothetical 1.95% $ 1,000.00 $ 1,015.26 $ 9.81 Class Y Actual*** 0.90% $ 1,000.00 $ 916.30 $ 1.18 Class Y Hypothetical*** 0.90% $ 1,000.00 $ 1,005.60 $ 1.23 SANDS CAPITAL SELECT GROWTH FUND Class Y Actual 1.10% $ 1,000.00 $ 870.60 $ 5.14 Class Y Hypothetical 1.10% $ 1,000.00 $ 1,019.51 $ 5.55 Class Z Actual 1.35% $ 1,000.00 $ 869.40 $ 6.30 Class Z Hypothetical 1.35% $ 1,000.00 $ 1,018.26 $ 6.81 SHORT DURATION FIXED INCOME FUND Class Z Actual 0.74% $ 1,000.00 $ 991.80 $ 3.69 Class Z Hypothetical 0.74% $ 1,000.00 $ 1,021.30 $ 3.74 SMALL CAP VALUE OPPORTUNITIES FUND Class Z Actual 1.50% $ 1,000.00 $ 927.40 $ 7.23 Class Z Hypothetical 1.50% $ 1,000.00 $ 1,017.50 $ 7.57 ULTRA SHORT DURATION FIXED INCOME FUND Class Z Actual 0.69% $ 1,000.00 $ 1,002.00 $ 3.45 Class Z Hypothetical 0.69% $ 1,000.00 $ 1,021.55 $ 3.49 VALUE OPPORTUNITIES FUND Class A Actual 1.19% $ 1,000.00 $ 878.90 $ 5.58 Class A Hypothetical 1.19% $ 1,000.00 $ 1,019.07 $ 5.99 Class C Actual 1.93% $ 1,000.00 $ 875.30 $ 9.04 Class C Hypothetical 1.93% $ 1,000.00 $ 1,015.35 $ 9.72 Class Z Actual 1.08% $ 1,000.00 $ 879.30 $ 5.06 Class Z Hypothetical 1.08% $ 1,000.00 $ 1,019.62 $ 5.44
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by [number of days in most recent fiscal half-year/365 [or366]] (to reflect the one-half year period). ** The example is based on an investment of $1,000 invested at the beginning of the period (September 29, 2008) and held for the entire period through September 30, 2008. *** The example is based on an investment of $1,000 invested at the beginning of the period (August 12, 2008) and held for the entire period through September 30, 2008. 112 - -------------------------------------------------------------------------------- Management of the Trust (Unaudited) - -------------------------------------------------------------------------------- Listed below is basic information regarding the Trustees and principal officers of the Trust. The Trust's Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling 1.800.543.0407.
INTERESTED TRUSTEES(1): - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME OFFICE(2) AND TOUCHSTONE OTHER ADDRESS POSITION(S) LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4) - ------------------------------------------------------------------------------------------------------------------------------------ Jill T. McGruder Trustee and Until Senior Vice President of The Western and 42 Director of Touchstone President retirement at Southern Life Insurance Company; President and LaRosa's (a Advisors, Inc age 75 or until a director of IFS Financial Services, Inc. (a restaurant 303 Broadway she resigns or holding company); Director of Capital Analysts chain) Cincinnati, OH is removed Incorporated (an investment advisor and Year of Birth: Trustee since broker-dealer), Integrated Investment 1955 1999 Services, Inc. until April 2007 (the Trust's former administrator, accounting and transfer agent), IFS Fund Distributors, Inc. (a broker-dealer), Touchstone Advisors, Inc. (the Trust's investment advisor) and Touchstone Securities, Inc. (the Trust's distributor); President and a director of IFS Agency Services, Inc. (an insurance agency), W&S Financial Group Distributors, Inc. (an annuity distributor) and IFS Systems, Inc.; Senior Vice President and a director of W&S Brokerage Services, Inc. (a broker-dealer); Director, President and Chief Executive Officer of Integrity Life Insurance Company and National Integrity Life Insurance Company; President of Touchstone Tax-Free Trust, Touchstone Investment Trust, Touchstone Variable Series Trust, Touchstone Strategic Trust, Touchstone Funds Group Trust and Touchstone Institutional Funds Trust; President of Touchstone Advisors, Inc., and Touchstone Securities, Inc. until 2004. - ------------------------------------------------------------------------------------------------------------------------------------
113 - -------------------------------------------------------------------------------- Management of the Trust (Continued) - --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES: - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4) - ------------------------------------------------------------------------------------------------------------------------------------ Phillip R. Cox Trustee Until President and Chief 42 Director of the Federal Reserve 303 Broadway retirement at Executive Officer of Cox Bank of Cleveland and Duke Energy Cincinnati, OH age 75 or until Financial Corp. (a (a utility company); Chairman of Year of Birth: he resigns or is financial services The Cincinnati Bell Telephone 1947 removed company). Company LLC; Director of The Trustee since Timken Company (a manufacturer of 1994 bearings, alloy steels and related products and services); Director of Diebold, Incorporated (a provider of integrated self- service delivery and security systems). - ------------------------------------------------------------------------------------------------------------------------------------ H. Jerome Lerner Trustee Until Principal of HJL 42 None 303 Broadway retirement at Enterprises (a privately Cincinnati, OH age 75 or until held investment Year of Birth: he resigns or is company). 1938 removed Trustee since 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Donald C. Trustee Until Executive for Duro Bag 42 Trustee of Jewish Hospital, Siekmann retirement at Manufacturing Co. (a bag Greater Cincinnati Arts & 303 Broadway age 75 or until manufacturer); President Education Center and Cincinnati Cincinnati, OH he resigns or is of Shor Foundation for Arts Association Year of Birth: removed Epilepsy 1938 Trustee since Research (a charitable 2005 foundation); Trustee of Riverfront Funds (mutual funds) from 1999 - 2004. - ------------------------------------------------------------------------------------------------------------------------------------
114 - -------------------------------------------------------------------------------- Management of the Trust (Continued) - --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED): - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4) - ------------------------------------------------------------------------------------------------------------------------------------ Robert E. Trustee Until Retired Partner of KPMG LLP (a 42 Trustee of Tri-Health Stautberg retirement at certified public accounting firm). Physician 303 Broadway age 75 or until Vice President of St. Xavier High Enterprise Corporation. Cincinnati, OH he resigns or is School. Year of removed Birth: 1934 Trustee since 1994 - ------------------------------------------------------------------------------------------------------------------------------------ John P. Trustee Until CEO, Chairman and Director of 42 None Zanotti retirement at Avaton, Inc. (a wireless 303 Broadway age 75 or until entertainment company). President Cincinnati, OH he resigns or is of Cincinnati Biomedical (a life Year of removed science and economic development Birth: 1948 Trustee since company) from July 2003 until 2002 2005. CEO, Chairman and Director of Astrum Digital Information (an information monitoring company) from 2000 until 2001; President of Great American Life Insurance Company from 1999 until 2000. - ------------------------------------------------------------------------------------------------------------------------------------
(1) Ms. McGruder, as a director of Touchstone Advisors, Inc., the Trust's investment advisor, and Touchstone Securities, Inc., the Trust's distributor and an officer of affiliates of the advisor and distributor, is an "interested person" of the Trust within the meaning of Section 2(A)(19) of the 1940 Act. Mr. Barrett, as President and Chairman of The Western and Southern Life Insurance Company and Western-Southern Life Assurance Company, parent companies of Touchstone Advisors, Inc. and Touchstone Securities, Inc., Chairman of Fort Washington Investment Advisors, Inc., a Trust sub-advisor and an officer of other affiliates of the advisor and distributor is an "interested person" of the Trust within the meaning of Section 2(A)(19) of the 1940 Act. (2) Each Trustee is elected to serve until the age of 75 or until he or she sooner resigns or is removed. (3) The Touchstone Fund Complex consists of 11 series of the Trust, 4 series of Touchstone Institutional Funds Trust, 5 series of Touchstone Investment Trust, 7 series of Touchstone Strategic Trust, 4 series of Touchstone Tax-Free Trust, and 11 variable annuity series of Touchstone Variable Series Trust. (4) Each Trustee is also a Trustee of Touchstone Institutional Funds Trust, Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone Tax-Free Trust, and Touchstone Variable Series Trust. 115 - -------------------------------------------------------------------------------- Management of the Trust (Continued) - --------------------------------------------------------------------------------
PRINCIPAL OFFICERS (1): - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF FUNDS OVERSEEN TERM OF IN THE NAME POSITION(S) OFFICE AND TOUCHSTONE OTHER ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(2) HELD - ------------------------------------------------------------------------------------------------------------------------------------ Jill T. McGruder President Until See biography above. 42 See biography Touchstone and Trustee resignation, above. Advisors, Inc. removal or 303 Broadway disqualification Cincinnati, OH President since Year of Birth: 1955 2004; President from 2000-2002 - ------------------------------------------------------------------------------------------------------------------------------------ Brian E. Hirsch Until Senior Vice 42 None Touchstone Vice resignation, President-Compliance of IFS Advisors, Inc. President removal or Financial 303 Broadway and Chief disqualification Services, Inc., Director of Cincinnati, OH Compliance Vice President Compliance of W&S Brokerage Year of Birth: 1956 Officer since 2003 Services, Inc.; Chief Compliance Officer of Puglisi & Co. from 2001 until 2002. - ------------------------------------------------------------------------------------------------------------------------------------ William A. Dent Vice Until Senior Vice President of 42 None Touchstone President resignation, Touchstone Advisors, Inc.; Advisors, Inc. removal or Marketing Director of 303 Broadway disqualification Promontory Interfinancial Cincinnati, OH Vice President Network from 2002-2003; Year of Birth: 1963 since 2004 Senior Vice President of McDonald Investments from 1998 - 2001. - ------------------------------------------------------------------------------------------------------------------------------------ Terrie A. Wiedenheft Controller Until Senior Vice President, Chief 42 None Touchstone and Treasurer resignation, Financial Officer and Advisors, Inc. removal or Treasurer of Integrated 303 Broadway disqualification Investment Services, Inc. Cincinnati, OH Controller since (until April 2007), Year of Birth: 1962 2000 IFS Fund Distributors, Treasurer since Inc. and W&S Brokerage 2003 Services, Inc.; Chief Financial Officer of IFS Financial Services, Inc., Touchstone Advisors, Inc. and Touchstone Securities, Inc. and Assistant Treasurer of Fort Washington Investment Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Jay S. Fitton Secretary Until Assistant Vice President and 42 None JPMorgan resignation, Senior Counsel of JPMorgan; 303 Broadway removal or Director and Senior Counsel Cincinnati, OH disqualification of Integrated Investment Year of Birth: 1970 Secretary since Services, Inc. and IFS Fund 2006 Distributors, Inc. until April 2007 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Each Trustee is also a Trustee of Touchstone Institutional Funds Trust, Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone Tax-Free Trust, and Touchstone Variable Series Trust. (2) The Touchstone Fund Complex consists of 11 series of the Trust, 4 series of Touchstone Institutional Funds Trust, 5 series of Touchstone Investment Trust, 7 series of Touchstone Strategic Trust, 4 series of Touchstone Tax-Free Trust, and 11 series of Touchstone Variable Series Trust. 116 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 JPMorgan Chase Bank, N.A. P.O. Box 5354 Cincinnati, Ohio 45201-5354 SHAREHOLDER SERVICE 800.543.0407 * A Member of Western & Southern Financial Group(R) - -------------------------------------------------------------------------------- [LOGO] TOUCHSTONE(R) INVESTMENTS 303 Broadway, Suite 1100 Cincinnati, OH 45202-4203 ITEM 2. CODE OF ETHICS. At the end of the period covered by this report, the registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that the registrant has at least one audit committee financial expert serving on its audit committee. Mr. Donald Siekmann is the registrant's audit committee financial expert and is an independent trustee within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees. Audit fees totaled approximately $172,700 for the September 30, 2008 fiscal year and approximately $247,100 for the September 30, 2007 fiscal year, including fees associated with the annual audit and filings of the registrant's Form N-1A and Form N-SAR. $16,000 of the 2008 fees are associated with additional filings of Form N1-A and Form N-14. $14,000 of the 2007 fees are associated with additional filings of Form N1-A and Form N-14. (b) Audit-Related Fees. Audit-related fees totaled approximately $6,000 for the September 30, 2008 fiscal year and $116,000 for the September 30, 2007 fiscal year and consisted of limited internal control testing in fiscal year 2008 and SAS 70 internal control reviews of the registrant's fund accountant and transfer agent in fiscal year 2007. (c) Tax Fees. Tax fees totaled approximately $100,600 for the September 30, 2008 fiscal year and $96,750 for the September 30, 2007 fiscal year and consisted of fees for tax compliance and tax consultation services during both years. (d) All Other Fees. There were no fees for all other services to the registrant during the September 30, 2008 or September 30, 2007 fiscal years. (e) (1) Audit Committee Pre-Approval Policies. The Audit Committee's pre-approval policies describe the types of audit, audit-related, tax and other services that have the general pre-approval of the Audit Committee. The pre-approval policies provide that annual audit service fees, tax services not specifically granted pre-approval, services exceeding pre-approved cost levels and other services that have not received general pre-approval will be subject to specific pre-approval by the Audit Committee. The pre-approval policies further provide that the Committee may grant general pre-approval to other audit services (statutory audits and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings), audit-related services (accounting consultations related to accounting, financial reporting or disclosure matters not classified as "audit services," assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities, agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters and assistance with internal control reporting requirements under Form N-SAR and Form N-CSR), tax services that have historically been provided by the auditor that the Committee believes would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence and permissible non-audit services classified as "all other services" that are routine and recurring services. (e)(2) All services described in paragraphs (b) through (d) of Item 4 were approved by the Audit Committee. (f) Not applicable (g) The aggregate non-audit fees for services to the registrant, its investment adviser (excluding its sub-advisor) and any entity controlling, controlled by or under common control with the advisor that provides ongoing services to the registrant were approximately $135,600 for the fiscal year ended September 30, 2008 and $295,500 for the fiscal year ended September 30, 2007. (h) Not applicable ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable ITEM 6. SCHEDULE OF INVESTMENTS. The Schedule of Investments in securities of unaffiliated issuers is included in the Annual Report. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Governance Committee will consider shareholder recommendations for nomination to the Board only in the event that there is a vacancy on the Board. Shareholders who wish to submit recommendations for nominations to the Board to fill the vacancy must submit their recommendations in writing to John P. Zanotti, Chairman of the Governance Committee, c/o Touchstone, 303 Broadway, Suite 1100, Cincinnati, OH 45202. Shareholders should include appropriate information on the background and qualifications of any person recommended to the Governance Committee (e.g., a resume), as well as the candidate's contact information and a written consent from the candidate to serve if nominated and elected. Shareholder recommendations for nominations to the Board will be accepted on an ongoing basis and such recommendations will be kept on file for consideration in the event of a future vacancy on the Board. ITEM 11. CONTROLS AND PROCEDURES. (a) Based on an evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures are effective as of a date within 90 days of the filing date of this report. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) The Code of Ethics for Senior Financial Officers was filed on December 9, 2005 with Registrant's N-CSR for the September 30, 2005 fiscal year and is hereby incorporated by reference. (a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed herewith. (b) Certification required by Item 11(b) of Form N-CSR is filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Touchstone Funds Group Trust ---------------------------- By (Signature and Title) /s/ Jill T. McGruder - ------------------------------------ Jill T. McGruder President Date: December 7, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Jill T. McGruder - --------------------------------- Jill T. McGruder President Date: December 7, 2008 /s/ Terrie A. Wiedenheft - ---------------------------------- Terrie A. Wiedenheft Controller & Treasurer Date: December 3, 2008 EX-99.CERT 2 v133782_ex99-cert.txt Exhibit 99.CERT CERTIFICATIONS I, Jill T. McGruder, certify that: 1. I have reviewed this report on Form N-CSR of Touchstone Funds Group Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 7, 2008 /s/ Jill T. McGruder -------------------------------------- Jill T. McGruder, President Exhibit 99.CERT CERTIFICATIONS I, Terrie A. Wiedenheft, certify that: 1. I have reviewed this report on Form N-CSR of Touchstone Funds Group Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (c) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (d) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 3, 2008 /s/ Terrie A. Wiedenheft -------------------------------------- Terrie A. Wiedenheft, Controller & Treasurer EX-99.906CERT 3 v133782_ex99-906cert.txt Exhibit 99.906CERT CERTIFICATION Jill T. McGruder, Chief Executive Officer, and Terrie A. Wiedenheft, Chief Financial Officer of Touchstone Funds Group Trust (the "Registrant"), each certify to the best of her knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended September 30, 2008 (the "Form N-CSR") fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chief Executive Officer Chief Financial Officer Touchstone Funds Group Trust Touchstone Funds Group Trust /s/ Jill T. McGruder /s/ Terrie A. Wiedenheft - --------------------------- ------------------------------- Jill T. McGruder Terrie A. Wiedenheft Date: December 7, 2008 Date: December 3, 2008 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----