APPENDIX....................................................................

Touchstone Strategic Trust (the "Trust"), an open-end management investment company, was organized as a Massachusetts business trust on November 18, 1982. The Trust currently offers seven series of shares to investors: the Diversified Small Cap Growth Fund, the Growth Opportunities Fund, the Large Cap Core Equity Fund, the Large Cap Growth Fund, the Large Cap Value Fund, the Micro Cap Growth Fund and the Mid Cap Growth Fund (referred to individually as a "Fund" and collectively as the "Funds"). Each of the Growth Opportunities Fund, the Large Cap Growth Fund and the Large Cap Value Fund is a non-diversified open-end management investment company. Each of the Diversified Small Cap Growth Fund, the Large Cap Core Equity Fund, the Micro Cap Growth Fund and the Mid Cap Growth Fund is a diversified open-end management investment company. This SAI contains information about each Fund. Each Fund has its own investment goal and policies.

Touchstone Advisors, Inc. (the "Advisor") is the investment manager and administrator for each Fund. The Advisor has selected a sub-advisor(s) (individually, a "Sub-Advisor," collectively, the "Sub-Advisors") to manage, on a daily basis, the assets of each Fund. The Advisor has sub-contracted certain administrative and accounting services to JPMorgan Chase Bank, N.A. ("JPMorgan"). Touchstone Securities, Inc. (the "Distributor") is the principal distributor of the Funds' shares. The Distributor and certain Sub-Advisors are affiliates of the Advisor.

Pursuant to an Agreement and Plan of Reorganization, on May 1, 2000, the Mid Cap Growth Fund succeeded to the assets and liabilities of another mutual fund with the same name that was a series of Touchstone Series Trust. The investment goals, strategies, policies and restrictions of the Fund and its predecessor fund are substantially identical.

Pursuant to an Agreement and Plan of Reorganization dated June 30, 2003, the Large Cap Growth Fund series of the Trust was reorganized by acquiring the Navellier Millennium Large Cap Growth Portfolio and the Navellier Performance Large Cap Growth Portfolio. The investment goal and fundamental restrictions of the Touchstone Large Cap Growth Fund did not change, but certain investment strategies changed as a result of the reorganization. The financial data and performance for the Large Cap Growth Fund are carried forward from the Navellier Performance Large Cap Growth Portfolio.

Pursuant to an Agreement and Plan of Reorganization dated May 18, 2006, between the Large Cap Core Equity Fund and the Value Plus Fund, the Large Cap Core Equity Fund acquired all of the assets and liabilities of the Value Plus Fund and the Value Plus Fund was terminated as a series of the Trust on August 14, 2006.

Pursuant to an Agreement and Plan of Reorganization dated August 15, 2007, between the Diversified Small Cap Growth Fund and the Small Cap Growth Fund, the Diversified Small Cap Growth Fund acquired all of the assets and liabilities of the Small Cap Growth Fund and the Small Cap Growth Fund was terminated as a series of the Trust on February 15, 2008.

Shares of each Fund have equal voting rights and liquidation rights. Each Fund shall vote separately on matters submitted to a vote of the shareholders except in matters where a vote of all series of the Trust in the aggregate is required by the Investment Company Act of 1940, as amended (the "1940 Act") or otherwise. Each class of shares of a Fund shall vote separately on matters relating to its plan of distribution pursuant to Rule 12b-1. When matters are submitted to shareholders for a vote, each shareholder is entitled to one vote for each full share owned and fractional votes for fractional shares owned. The Trust does not normally hold annual meetings of shareholders. The Trustees shall promptly call and give notice of a meeting of shareholders for the purpose of voting upon the removal of any Trustee when requested to do so in writing by shareholders holding 10% or more of the Trust's outstanding shares. The Trust will comply with the provisions of Section 16(c) of the 1940 Act in order to facilitate communications among shareholders.

Each share of a Fund represents an equal proportionate interest in the assets and liabilities belonging to that Fund with each other share of that Fund entitled to such dividends and distributions out of the income belonging to the Fund as are declared by the Trust. The shares do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have the authority from time to time to divide or combine the shares of any Fund into a greater or lesser number of shares of that Fund so long as the proportionate beneficial interest in the assets belonging to that Fund and the rights of shares of any other Fund are in no way affected. In case of any liquidation of a Fund, the holders of shares of the Fund being liquidated will be entitled to receive as a class a distribution out of the assets, net of the liabilities, belonging to that Fund. Expenses attributable to any Fund are borne by that Fund. Any general expenses of the Trust not readily identifiable as belonging to a particular Fund are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable. Generally, the Trustees allocate such expenses on the basis of relative net assets or number of shareholders. No shareholder is liable to further calls or to assessment by the Trust without his express consent.

Class A shares, Class B shares, Class C shares, Class Y shares (formerly Class I shares) and Institutional shares of a Fund represent an interest in the same assets of such Fund, have the same rights and are identical in all material respects except that (i) each class of shares may bear different (or no) distribution fees; (ii) each class of shares may be subject to different (or no) sales charges; (iii) certain other class specific expenses will be borne solely by the class to which such expenses are attributable, including transfer agent fees attributable to a specific class of shares, printing and postage expenses related to preparing and distributing materials to current shareholders of a specific class, registration fees incurred by a specific class of shares, the expenses of administrative personnel and services required to support the shareholders of a specific class, litigation or other legal expenses relating to a class of shares, Trustees' fees or expenses incurred as a result of issues relating to a specific class of shares and accounting fees and expenses relating to a specific class of shares; (iv) each class has exclusive voting rights with respect to matters relating to its own distribution arrangements; and (v) certain classes offer different features and services to shareholders and may have different investment minimums. The Board of Trustees may classify and reclassify the shares of a Fund into additional classes of shares at a future date.

Under Massachusetts law, under certain circumstances, shareholders of a Massachusetts business trust could be deemed to have the same type of personal liability for the obligations of the Trust as does a partner of a partnership. However, numerous investment companies registered under the 1940 Act have been formed as Massachusetts business trusts and the Trust is not aware of an instance where such result has occurred. In addition, the Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and provides for the indemnification out of the Trust property for all losses and expenses of any shareholder held personally liable for the obligations of the Trust. Moreover, it provides that the Trust will, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. As a result, and particularly because the Trust assets are readily marketable and ordinarily substantially exceed liabilities, management believes that the risk of shareholder liability is slight and limited to circumstances in which the Trust itself would be unable to meet its obligations. Management believes that, in view of the above, the risk of personal liability is remote.

Each Fund has its own investment goals, strategies and related risks. There can be no assurance that a Fund's investment goals will be met. The investment goals and practices of each Fund are nonfundamental policies that may be changed by the Board of Trustees without shareholder approval, except in those instances where shareholder approval is expressly required. If there is a change in a Fund's investment goal, shareholders should consider whether the Fund remains an appropriate investment in light of their current financial position and needs. The investment restrictions of the Funds are fundamental and can only be changed by vote of a majority of the outstanding shares of the applicable Fund. A more detailed discussion of some of the terms used and investment policies described in the Prospectuses (see "Investment Strategies and Risks") appears below:

FIXED-INCOME AND OTHER DEBT SECURITIES

Fixed-income and other debt instrument securities include all bonds, high yield or "junk" bonds, municipal bonds, debentures, U.S. Government securities, mortgage-related securities including government stripped mortgage-related securities, zero coupon securities and custodial receipts. The market value of fixed-income obligations of the Funds will be affected by general changes in interest rates which will result in increases or decreases in the value of the obligations held by the Funds. The market value of the obligations held by a Fund can be expected to vary inversely to changes in prevailing interest rates. As a result, shareholders should anticipate that the market value of the obligations held by the Fund generally would increase when prevailing interest rates are declining and generally will decrease when prevailing interest rates are rising. Shareholders also should recognize that, in periods of declining interest rates, a Fund's yield will tend to be somewhat higher than prevailing market rates and, in periods of rising interest rates, a Fund's yield will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to a Fund from the continuous sale of its shares will tend to be invested in instruments producing lower yields than the balance of its portfolio, thereby reducing the Fund's current yield. In periods of rising interest rates, the opposite can be expected to occur. In addition, securities in which a Fund may invest may not yield as high a level of current income as might be achieved by investing in securities with less liquidity, less creditworthiness or longer maturities.

Ratings made available by Standard & Poor's Rating Service ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch Ratings are relative and subjective and are not absolute standards of quality. Although these ratings are initial criteria for selection of portfolio investments, a Sub-Advisor also will make its own evaluation of these securities. Among the factors that will be considered are the long-term ability of the issuers to pay principal and interest and general economic trends.

Fixed-income securities may be purchased on a when-issued or delayed-delivery basis. See "When-Issued and Delayed-Delivery Securities" below.

COMMERCIAL PAPER. Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. A variable amount master demand note (which is a type of commercial paper) represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender pursuant to which the lender may determine to invest varying amounts. For a description of commercial paper ratings, see the Appendix to this SAI.

MEDIUM AND LOWER RATED AND UNRATED SECURITIES. Securities rated in the fourth highest category by a rating organization although considered investment grade, may possess speculative characteristics, and changes in economic or other conditions are more likely to impair the ability of issuers of these securities to make interest and principal payments than is the case with respect to issuers of higher grade bonds.

Generally, medium or lower-rated securities and unrated securities of comparable quality, sometimes referred to as "junk bonds," offer a higher current yield than is offered by higher rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions and (ii) are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. The yield of junk bonds will fluctuate over time.

The market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher quality bonds. In addition, medium and lower rated securities and comparable unrated securities generally present a higher degree of credit risk. The risk of loss due to default by these issuers is significantly greater because medium and lower-rated securities and unrated securities of comparable quality generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. Since the risk of default is higher for lower rated debt securities, the Sub-Advisor's research and credit analysis are an especially important part of managing securities of this type held by a Fund. In light of these risks, the Board of Trustees of the Trust has instructed the Sub-Advisor, in evaluating the creditworthiness of an issue, whether rated or unrated, to take various factors into consideration, which may include, as applicable, the issuer's financial resources, its sensitivity to economic conditions and trends, the operating history of and the community support for the facility financed by the issue, the ability of the issuer's management and regulatory matters.

In addition, the market value of securities in lower-rated categories is more volatile than that of higher quality securities, and the markets in which medium and lower-rated or unrated securities are traded are more limited than those in which higher rated securities are traded. The existence of limited markets may make it more difficult for the Funds to obtain accurate market quotations for purposes of valuing their respective portfolios and calculating their respective net asset values. Moreover, the lack of a liquid trading market may restrict the availability of securities for the Funds to purchase and may also have the effect of limiting the ability of a Fund to sell securities at their fair value either to meet redemption requests or to respond to changes in the economy or the financial markets.

Lower-rated debt obligations also present risks based on payment expectations. If an issuer calls the obligation for redemption, a Fund may have to replace the security with a lower yielding security, resulting in a decreased return for shareholders. Also, as the principal value of bonds moves inversely with movements in interest rates, in the event of rising interest rates the value of the securities held by a Fund may decline relatively proportionately more than a portfolio consisting of higher rated securities. If a Fund experiences unexpected net redemptions, it may be forced to sell its higher rated bonds, resulting in a decline in the overall credit quality of the securities held by the Fund and increasing the exposure of the Fund to the risks of lower rated securities. Investments in zero coupon bonds may be more speculative and subject to greater fluctuations in value due to changes in interest rates than bonds that pay interest currently.

Subsequent to its purchase by a Fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require sale of these securities by the Fund, but the Sub-Advisor will consider this event in its determination of whether the Fund should continue to hold the securities.

The market for lower-rated debt securities may be thinner and less active than that for higher rated debt securities, which can adversely affect the prices at which the former are sold. If market quotations are not available, lower-rated debt securities will be valued in accordance with procedures established by the Board of Trustees, including the use of outside pricing services. Judgment plays a greater role in valuing high yield corporate debt securities than is the case for securities for which more external sources for quotations and last sale information is available. Adverse publicity and changing investor perception may affect the ability of outside pricing services to value lower-rated debt securities and the ability to dispose of these securities.

In considering investments for a Fund, the Sub-Advisor will attempt to identify those issuers of high yielding debt securities whose financial condition is adequate to meet future obligations or has improved or is expected to improve in the future. The Sub-Advisor's analysis focuses on relative values based on such factors as interest or dividend coverage, asset coverage, earnings prospects and the experience and managerial strength of the issuer.

A Fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise exercise its rights as a security holder to seek to protect the interest of security holders if it determines this to be in the best interest of the Fund.

CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. Certificates of deposit are receipts issued by a depository institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior to maturity. Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Investments in time deposits maturing in more than seven days will be subject to the SEC's restrictions that limit investments in illiquid securities to no more than 15% of the value of a Fund's net assets.

U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities. Some U.S. Government securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ only in their interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others are supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home Loan Banks; (ii) the discretionary authority of the U.S. Government to purchase the agency's obligations, such as securities of the Federal National Mortgage Association ("FNMA"); or (iii) only the credit of the issuer, such as securities of the Student Loan Marketing Association. No assurance can be given that the U.S. Government will provide financial support in the future to U.S. Government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the United States.

Securities guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. Government or any of its agencies, authorities or instrumentalities; and (ii) participation interests in loans made to foreign governments or other entities that are so guaranteed. The secondary market for certain of these participation interests is limited and, therefore, may be regarded as illiquid.

MORTGAGE-RELATED SECURITIES. There are several risks associated with mortgage-related securities generally. One is that the monthly cash inflow from the underlying loans may not be sufficient to meet the monthly payment requirements of the mortgage-related security. Prepayment of principal by mortgagors or mortgage foreclosures will shorten the term of the underlying mortgage pool for a mortgage-related security. Early returns of principal will affect the average life of the mortgage-related securities remaining in a Fund. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. In periods of rising interest rates, the rate of prepayment tends to decrease, thereby lengthening the average life of a pool of mortgage-related securities. Conversely, in periods of falling interest rates the rate of prepayment tends to increase, thereby shortening the average life of a pool. Reinvestment of prepayments may occur at higher or lower interest rates than the original investment, thus affecting the yield of a Fund. Because prepayments of principal generally occur when interest rates are declining, it is likely that a Fund will have to reinvest the proceeds of prepayments at lower interest rates than those at which the assets were previously invested. If this occurs, a Fund's yield will correspondingly decline. Thus, mortgage-related securities may have less potential for capital appreciation in periods of falling interest rates than other fixed-income securities of comparable maturity, although these securities may have a comparable risk of decline in market value in periods of rising interest rates. To the extent that a Fund purchases mortgage-related securities at a premium, unscheduled prepayments, which are made at par, will result in a loss equal to any unamortized premium.

Collateralized Mortgage Obligations ("CMOs") are obligations fully collateralized by a portfolio of mortgages or mortgage-related securities. Payments of principal and interest on the mortgages are passed through to the holders of the CMOs on the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Fund invests, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage-related securities.

Mortgage-related securities may not be readily marketable. To the extent any of these securities are not readily marketable in the judgment of the Sub-Advisor, the Funds' restrictions on investments in illiquid instruments will apply.

STRIPPED MORTGAGE-RELATED SECURITIES. These securities are either issued and guaranteed, or privately issued but collateralized by, securities issued by the Government National Mortgage Association ("GNMA"), FNMA or the Federal Home Loan Mortgage Corporation ("FHLMC"). These securities represent beneficial ownership interests in either periodic principal distributions ("principal-only") or interest distributions ("interest-only") on mortgage-related certificates issued by GNMA, FNMA or FHLMC, as the case may be. The certificates underlying the stripped mortgage-related securities represent all or part of the beneficial interest in pools of mortgage loans. A Fund will invest in stripped mortgage-related securities in order to enhance yield or to benefit from anticipated appreciation in value of the securities at times when its Sub-Advisor believes that interest rates will remain stable or increase. In periods of rising interest rates, the expected increase in the value of stripped mortgage-related securities may offset all or a portion of any decline in value of the securities held by the Fund.

Investing in stripped mortgage-related securities involves the risks normally associated with investing in mortgage-related securities. See "Mortgage-Related Securities" above. In addition, the yields on stripped mortgage-related securities are extremely sensitive to the prepayment experience on the mortgage loans underlying the certificates collateralizing the securities. If a decline in the level of prevailing interest rates results in a rate of principal prepayments higher than anticipated, distributions of principal will be accelerated, thereby reducing the yield to maturity on interest-only stripped mortgage-related securities and increasing the yield to maturity on principal-only stripped mortgage-related securities. Sufficiently high prepayment rates could result in a Fund not fully recovering its initial investment in an interest-only stripped mortgage-related security. Under current market conditions, the Fund expects that investments in stripped mortgage-related securities will consist primarily of interest-only securities. Stripped mortgage-related securities are currently traded in an over-the-counter market maintained by several large investment-banking firms. There can be no assurance that the Fund will be able to affect a trade of a stripped mortgage-related security at a time when it wishes to do so. The Fund will acquire stripped mortgage-related securities only if a secondary market for the securities exists at the time of acquisition. Except for stripped mortgage-related securities based on fixed rate FNMA and FHLMC mortgage certificates that meet certain liquidity criteria established by the Board of Trustees, a Fund will treat government stripped mortgage-related securities and privately-issued mortgage-related securities as illiquid and will limit its investments in these securities, together with other illiquid investments, to not more than 15% of net assets.

ZERO COUPON SECURITIES. Zero coupon U.S. Government securities are debt obligations that are issued or purchased at a significant discount from face value. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity or the particular interest payment date at a rate of interest reflecting the market rate of the security at the time of issuance. Zero coupon securities do not require the periodic payment of interest. These investments benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher rate of return to attract investors who are willing to defer receipt of cash. These investments may experience greater volatility in market value than U.S. Government securities that make regular payments of interest. A Fund accrues income on these investments for tax and accounting purposes, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the Fund's distribution obligations, in which case the Fund will forego the purchase of additional income producing assets with these funds. Zero coupon securities include Separately Traded Registered Interest and Principal Securities ("STRIPS"). STRIPS are securities underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities. They also include Coupons Under Book Entry Safekeeping ("CUBES"), which are component parts of U.S. Treasury bonds and represent scheduled interest and principal payments on the bonds.

CUSTODIAL RECEIPTS. Custodial receipts or certificates include Certificates of Accrual on Treasury Securities ("CATS"), Treasury Investment Growth Receipts ("TIGRs") and Financial Corporation certificates ("FICO Strips"). CATS, TIGRs and FICO Strips are securities underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities. The underwriters of these certificates or receipts purchase a U.S. Government security and deposit the security in an irrevocable trust or custodial account with a custodian bank, which then issues receipts or certificates that evidence ownership of the periodic unmatured coupon payments and the final principal payment on the U.S. Government security. Custodial receipts evidencing specific coupon or principal payments have the same general attributes as zero coupon U.S. Government securities, described above. Although typically under the terms of a custodial receipt a Fund is authorized to assert its rights directly against the issuer of the underlying obligation, the Fund may be required to assert through the custodian bank such rights as may exist against the underlying issuer. Thus, if the underlying issuer fails to pay principal and/or interest when due, a Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the issuer. In addition, if the trust or custodial account in which the underlying security has been deposited were determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying security would be reduced in respect of any taxes paid.

LOANS AND OTHER DIRECT DEBT INSTRUMENTS. These are instruments in amounts owed by a corporate, governmental or other borrower to another party. They may represent amounts owed to lenders or lending syndicates (loans and loan participations), to suppliers of goods or services (trade claims or other receivables) or to other parties. Direct debt instruments purchased by a Fund may have a maturity of any number of days or years, may be secured or unsecured, and may be of any credit quality. Direct debt instruments involve the risk of loss in the case of default or insolvency of the borrower. Direct debt instruments may offer less legal protection to a Fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Direct debt instruments also may include standby financing commitments that obligate a Fund to supply additional cash to the borrower on demand at a time when a Fund would not have otherwise done so, even if the borrower's condition makes it unlikely that the amount will ever be repaid.

These instruments will be considered illiquid securities and so will be limited in accordance with the Funds' restrictions on illiquid securities.

ILLIQUID SECURITIES

Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "1933 Act"), securities that are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities that have not been registered under the 1933 Act are referred to as "private placements" or "restricted securities" and are purchased directly from the issuer or in the secondary market. Investment companies do not typically hold a significant amount of these restricted securities or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and an investment company might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. An investment company might also have to register such restricted securities in order to dispose of them, which would result in additional expense and delay. Adverse market conditions could impede such a public offering of securities. Each Fund may not invest more than 15% of its net assets in securities that are illiquid or otherwise not readily marketable.

In recent years, however, a large institutional market has developed for certain securities that are not registered under the 1933 Act, including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale of such investments to the general public or to certain institutions may not be indicative of their liquidity.

o RULE 144A SECURITIES. The Securities and Exchange Commission (the "SEC") has adopted Rule 144A, which allows a broader institutional trading market for securities otherwise subject to restriction on their resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act on resales of certain securities to qualified institutional buyers. The Advisor anticipates that the market for certain restricted securities such as institutional commercial paper will expand further as a result of this regulation and the development of automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers Automated Quotation System ("NASDAQ").

A Sub-Advisor will monitor the liquidity of Rule 144A securities in each Fund's portfolio under the supervision of the Board of Trustees. In reaching liquidity decisions, the Sub-Advisor will consider, among other things, the following factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers and other potential purchasers wishing to purchase or sell the security; (3) dealer undertakings to make a market in the security and (4) the nature of the security and of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).

A Fund may purchase securities in the United States that are not registered for sale under federal securities laws but which can be resold to institutions under SEC Rule 144A or under an exemption from such laws. Provided that a dealer or institutional trading market in such securities exists, these restricted securities or Rule 144A securities are treated as exempt from the Funds' limit on illiquid securities. The Board of Trustees of the Trust, with advice and information from the respective Sub-Advisor, will determine the liquidity of restricted securities or Rule 144A securities by looking at factors such as trading activity and the availability of reliable price information and, through reports from such Sub-Advisor, the Board of Trustees of the Trust will monitor trading activity in restricted securities. If institutional trading in restricted securities or Rule 144A securities were to decline, a Fund's illiquidity could increase and the Fund could be adversely affected.

o SECTION 4(2) COMMERCIAL PAPER. A Fund may invest in commercial paper issued in reliance on the exemption from registration afforded by
Section 4(2) of the 1933 Act. Section 4(2) commercial paper is restricted as to disposition under federal securities laws and is generally sold to institutional investors who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) commercial paper is normally resold to other institutional investors through or with the assistance of the issuer or investment dealers who make a market in Section 4(2) commercial paper, thus providing liquidity. The Sub-Advisor believes that Section 4(2) commercial paper and possibly certain other restricted securities that meet the criteria for liquidity established by the Trustees are quite liquid. The Fund intends therefore, to treat the restricted securities which meet the criteria for liquidity established by the Trustees, including
Section 4(2) commercial paper, as determined by the Sub-Advisor, as liquid and not subject to the investment limitation applicable to illiquid securities. In addition, because Section 4(2) commercial paper is liquid, the Fund does not intend to subject such paper to the limitation applicable to restricted securities.

No Fund will invest more than 10% of its total assets in restricted securities (excluding Rule 144A securities).

FOREIGN SECURITIES

Investing in securities issued by foreign companies and governments involves considerations and potential risks not typically associated with investing in obligations issued by the U.S. Government and domestic corporations. Less information may be available about foreign companies than about domestic companies and foreign companies generally are not subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic companies. The values of foreign investments are affected by changes in currency rates or exchange control regulations, restrictions or prohibitions on the repatriation of foreign currencies, application of foreign tax laws, including withholding taxes, changes in governmental administration or economic or monetary policy (in the United States or abroad) or changed circumstances in dealings between nations. Costs are also incurred in connection with conversions between various currencies. In addition, foreign brokerage commissions and custody fees are generally higher than those charged in the United States, and foreign securities markets may be less liquid, more volatile and less subject to governmental supervision than in the United States. Investments in foreign countries could be affected by other factors not present in the United States, including expropriation, confiscatory taxation, lack of uniform accounting and auditing standards and potential difficulties in enforcing contractual obligations and could be subject to extended clearance and settlement periods.

The Growth Opportunities Fund may invest up to 10% of its total assets at the time of purchase in the securities of foreign issuers traded outside of the U.S. market. The Mid Cap Growth Fund may invest up to 20% of its total assets in securities of foreign issuers traded outside of the U.S. market. The Large Cap Growth Fund may invest up to 15% of its total assets in foreign securities traded in the U.S. market. The Large Cap Value Fund may invest in common stocks of foreign large cap companies.

EMERGING MARKET COUNTRIES. Emerging market countries are countries other than Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. When a Fund invests in securities of a company in an emerging market country, it invests in securities issued by a company that (i) is organized under the laws of an emerging market country, (ii) maintains its principal place of business in an emerging market country, (iii) has its principal trading market for its securities in an emerging market country, (iv) derives at least 50% of its revenues or profits from operations within emerging market countries, or has at least 50% of its assets located in emerging market countries. The Mid Cap Growth Fund may invest up to 10% of its total assets in emerging market countries. The Growth Opportunities Fund may invest up to 10% of its total assets in emerging market countries. The Large Cap Growth Fund may invest up to 15% of its total assets in securities of emerging market countries traded in the U.S. market. The Micro Cap Growth Fund and the Diversified Small Cap Growth Fund may also invest in securities of companies in emerging market countries.

Investments in securities of issuers based in emerging market countries entail all of the risks of investing in foreign issuers outlined in this section to a heightened degree. These heightened risks include: (i) expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the smaller size of the market for such securities and a low or nonexistent volume of trading, resulting in a lack of liquidity and in price volatility; (iii) certain national policies which may restrict a Fund's investment opportunities, including restrictions on investing in issuers in industries deemed sensitive to relevant national interests; and (iv) the absence of developed capital markets and legal structures governing private or foreign investment and private property and the possibility that recent favorable economic and political developments could be slowed or reversed by unanticipated events.

CURRENCY EXCHANGE RATES. A Fund's share value may change significantly when the currencies, other than the U.S. dollar, in which the Fund's investments are denominated, strengthen or weaken against the U.S. dollar. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries as seen from an international perspective. Currency exchange rates can also be affected unpredictably by intervention by U.S. or foreign governments or central banks or by currency controls or political developments in the United States or abroad.

ADRS, ADSS, EDRS AND CDRS. American Depositary Receipts ("ADRs") and American Depositary Shares ("ADSs") are U.S. dollar-denominated receipts typically issued by domestic banks or trust companies that represent the deposit with those entities of securities of a foreign issuer. They are publicly traded on exchanges or over-the-counter in the United States. European Depositary Receipts ("EDRs"), which are sometimes referred to as Continental Depositary Receipts ("CDRs"), may also be purchased by the Funds. EDRs and CDRs are generally issued by foreign banks and evidence ownership of either foreign or domestic securities. Certain institutions issuing ADRs, ADSs or EDRs may not be sponsored by the issuer of the underlying foreign securities. A non-sponsored depositary may not provide the same shareholder information that a sponsored depositary is required to provide under its contractual arrangements with the issuer of the underlying foreign securities.

OPTIONS

A Fund may write (sell), to a limited extent, only covered call and put options ("covered options") in an attempt to increase income. However, the Fund may forego the benefits of appreciation on securities sold or may pay more than the market price on securities acquired pursuant to call and put options written by the Fund.

When a Fund writes a covered call option, it gives the purchaser of the option the right to buy the underlying security at the price specified in the option (the "exercise price") by exercising the option at any time during the option period. If the option expires unexercised, the Fund will realize income in an amount equal to the premium received for writing the option. If the option is exercised, a decision over which the Fund has no control, the Fund must sell the underlying security to the option holder at the exercise price. By writing a covered call option, the Fund foregoes, in exchange for the premium less the commission ("net premium"), the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price.

When a Fund writes a covered put option, it gives the purchaser of the option the right to sell the underlying security to the Fund at the specified exercise price at any time during the option period. If the option expires unexercised, the Fund will realize income in the amount of the premium received for writing the option. If the put option is exercised, a decision over which the Fund has no control, the Fund must purchase the underlying security from the option holder at the exercise price. By writing a covered put option, the Fund, in exchange for the net premium received, accepts the risk of a decline in the market value of the underlying security below the exercise price.

A Fund may terminate its obligation as the writer of a call or put option by purchasing an option with the same exercise price and expiration date as the option previously written. This transaction is called a "closing purchase transaction." Where the Fund cannot effect a closing purchase transaction, it may be forced to incur brokerage commissions or dealer spreads in selling securities it receives or it may be forced to hold underlying securities until an option is exercised or expires.

When a Fund writes an option, an amount equal to the net premium received by the Fund is included in the liability section of the Fund's Statement of Assets and Liabilities as a deferred credit. The amount of the deferred credit will be subsequently marked to market to reflect the current market value of the option written. The current market value of a traded option is the last sale price or, in the absence of a sale, the mean between the closing bid and asked price. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, the Fund will realize a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold), and the deferred credit related to such option will be eliminated. If a call option is exercised, the Fund will realize a gain or loss from the sale of the underlying security and the proceeds of the sale will be increased by the premium originally received. The writing of covered call options may be deemed to involve the pledge of the securities against which the option is being written.

When a Fund writes a call option, it will "cover" its obligation by segregating the underlying security on the books of the Fund's custodian or by placing liquid securities in a segregated account at the Fund's custodian. When a Fund writes a put option, it will "cover" its obligation by placing liquid securities in a segregated account or by earmarking assets at the Fund's custodian.

A Fund may purchase call and put options on any securities in which it may invest. The Fund would normally purchase a call option in anticipation of an increase in the market value of such securities. The purchase of a call option would entitle the Fund, in exchange for the premium paid, to purchase a security at a specified price during the option period. The Fund would ordinarily have a gain if the value of the securities increased above the exercise price sufficiently to cover the premium and would have a loss if the value of the securities remained at or below the exercise price during the option period.

A Fund would normally purchase put options in anticipation of a decline in the market value of securities in its portfolio ("protective puts") or securities of the type in which it is permitted to invest. The purchase of a put option would entitle the Fund, in exchange for the premium paid, to sell a security, which may or may not be held in the Fund's portfolio, at a specified price during the option period. The purchase of protective puts is designed merely to offset or hedge against a decline in the market value of the Fund's portfolio securities. Put options also may be purchased by the Fund for the purpose of affirmatively benefiting from a decline in the price of securities which the Fund does not own. The Fund would ordinarily recognize a gain if the value of the securities decreased below the exercise price sufficiently to cover the premium and would recognize a loss if the value of the securities remained at or above the exercise price. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of underlying portfolio securities.

The Funds have adopted certain other nonfundamental policies concerning option transactions that are discussed below. A Fund's activities in options may also be restricted by the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated investment company.

The hours of trading for options on securities may not conform to the hours during which the underlying securities are traded. To the extent that the option markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying securities markets that cannot be reflected in the option markets. It is impossible to predict the volume of trading that may exist in such options, and there can be no assurance that viable exchange markets will develop or continue.

OPTIONS ON STOCKS. A Fund may write or purchase options on stocks. A call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying stock at the exercise price at any time during the option period. Similarly, a put option gives the purchaser of the option the right to sell, and obligates the writer to buy the underlying stock at the exercise price at any time during the option period. A covered call option with respect to which a Fund owns the underlying stock sold by the Fund exposes the Fund during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying stock or to possible continued holding of a stock which might otherwise have been sold to protect against depreciation in the market price of the stock. A covered put option sold by a Fund exposes the Fund during the term of the option to a decline in price of the underlying stock.

To close out a position when writing covered options, a Fund may make a "closing purchase transaction" which involves purchasing an option on the same stock with the same exercise price and expiration date as the option which it has previously written on the stock. The Fund will realize a profit or loss for a closing purchase transaction if the amount paid to purchase an option is less or more, as the case may be, than the amount received from the sale thereof. To close out a position as a purchaser of an option, the Fund may make a "closing sale transaction" which involves liquidating the Fund's position by selling the option previously purchased.

OPTIONS ON SECURITIES INDEXES. Such options give the holder the right to receive a cash settlement during the term of the option based upon the difference between the exercise price and the value of the index. Such options will be used for the purposes described above under "Options on Securities" or, to the extent allowed by law, as a substitute for investment in individual securities.

Options on securities indexes entail risks in addition to the risks of options on securities. The absence of a liquid secondary market to close out options positions on securities indexes is more likely to occur, although the Fund generally will only purchase or write such an option if the Sub-Advisor believes the option can be closed out.

Use of options on securities indexes also entails the risk that trading in such options may be interrupted if trading in certain securities included in the index is interrupted. The Fund will not purchase such options unless the respective Sub-Advisor believes the market is sufficiently developed such that the risk of trading in such options is no greater than the risk of trading in options on securities.

Price movements in a Fund's portfolio may not correlate precisely with movements in the level of an index and, therefore, the use of options on indexes cannot serve as a complete hedge. Because options on securities indexes require settlement in cash, the Sub-Advisor may be forced to liquidate portfolio securities to meet settlement obligations.

When a Fund writes a put or call option on a securities index it will cover the position by placing liquid securities in a segregated asset account or by earmarking assets with the Fund's custodian.

Options on securities indexes are generally similar to options on stock except that the delivery requirements are different. Instead of giving the right to take or make delivery of stock at a specified price, an option on a security index gives the holders the right to receive a cash "exercise settlement amount" equal to (a) the amount, if any, by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of the exercise, multiplied by
(b) a fixed "index multiplier." Receipt of this cash amount will depend upon the closing level of the index upon which the option is based being greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash received will be equal to such difference between the closing price of the index and the exercise price of the option expressed in dollars or a foreign currency, as the case may be, times a specified multiple.

The writer of the option is obligated, in return for the premium received, to make delivery of this amount. The writer may offset its position in securities index options prior to expiration by entering into a closing transaction on an exchange or the option may expire unexercised. Because the value of an index option depends upon movements in the level of the index rather than the price of a particular security, whether the Fund will realize a gain or loss from the purchase or writing of options on an index depends upon movements in the level of securities prices in the market generally or, in the case of certain indexes, in an industry or market segment, rather than movements in price of a particular security. Accordingly, successful use by a Fund of options on security indexes will be subject to the Sub-Advisor's ability to predict correctly movement in the direction of that securities market generally or of a particular industry. This requires different skills and techniques than predicting changes in the price of individual securities.

RELATED INVESTMENT POLICIES. A Fund may purchase and write put and call options on securities indexes listed on domestic and, in the case of those Funds which may invest in foreign securities, on foreign exchanges. A securities index fluctuates with changes in the market values of the securities included in the index.

OPTIONS ON FOREIGN CURRENCIES. Options on foreign currencies are used for hedging purposes in a manner similar to that in which futures contracts on foreign currencies, or forward contracts, are utilized. For example, a decline in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Fund may purchase put options on the foreign currency. If the value of the currency does decline, a Fund will have the right to sell such currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, the Fund may purchase call options thereon. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in such rates. Options on foreign currencies may be written for the same types of hedging purposes. For example, where a Fund anticipates a decline in the dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the options will most likely not be exercised, and the diminution in value of portfolio securities will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency, which, if rates move in the manner projected, will expire, unexercised and allow the Fund to hedge such increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund would be required to purchase or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates.

The Funds may write covered call options on foreign currencies. A call option written on a foreign currency by a Fund is "covered" if the Fund owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currency held in its portfolio. A call option is also covered if the Fund has a call on the same foreign currency and in the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of the call written or (b) is greater than the exercise price of the call written if the difference is maintained by the Fund in cash and liquid securities in a segregated account with its custodian.

The Funds may also write call options on foreign currencies that are not covered for cross-hedging purposes. A call option on a foreign currency is for cross-hedging purposes if it is not covered, but is designed to provide a hedge against a decline in the U.S. dollar value of a security which the Fund owns or has the right to acquire and which is denominated in the currency underlying the option due to an adverse change in the exchange rate. In such circumstances, the Fund collateralizes the option by maintaining in a segregated account with its custodian, cash or liquid securities in an amount not less than the value of the underlying foreign currency in U.S. dollars marked to market daily.

RELATED INVESTMENT POLICIES. A Fund that invests in foreign securities may write covered put and call options and purchase put and call options on foreign currencies for the purpose of protecting against declines in the dollar value of portfolio securities and against increases in the dollar cost of securities to be acquired. The Fund may use options on currency to cross-hedge, which involves writing or purchasing options on one currency to hedge against changes in exchange rates for a different, but related currency. As with other types of options, however, the writing of an option on foreign currency will constitute only a partial hedge up to the amount of the premium received, and the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may be used to hedge against fluctuations in exchange rates although, in the event of exchange rate movements adverse to the Fund's position, it may not forfeit the entire amount of the premium plus related transaction costs. In addition, the Fund may purchase call options on currency when the Sub-Advisor anticipates that the currency will appreciate in value. There is no assurance that a liquid secondary market on an options exchange will exist for any particular option, or at any particular time. If the Fund is unable to effect a closing purchase transaction with respect to covered options it has written, the Fund will not be able to sell the underlying currency or dispose of assets held in a segregated account until the options expire. Similarly, if the Fund is unable to effect a closing sale transaction with respect to options it has purchased, it would have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying currency. The Fund pays brokerage commissions or spreads in connection with its options transactions.

As in the case of forward contracts, certain options on foreign currencies are traded over-the-counter and involve liquidity and credit risks that may not be present in the case of exchange-traded currency options. A Fund's ability to terminate over-the-counter options ("OTC Options") will be more limited than the exchange-traded options. It is also possible that broker-dealers participating in OTC Options transactions will not fulfill their obligations. Until such time as the staff of the SEC changes its position, the Fund will treat purchased OTC Options and assets used to cover written OTC Options as illiquid securities. With respect to options written with primary dealers in U.S. Government securities pursuant to an agreement requiring a closing purchase transaction at a formula price, the amount of illiquid securities may be calculated with reference to the repurchase formula.

FORWARD CURRENCY CONTRACTS. Because, when investing in foreign securities, a Fund buys and sells securities denominated in currencies other than the U.S. dollar and receives interest, dividends and sale proceeds in currencies other than the U.S. dollar, such Funds from time to time may enter into forward currency transactions to convert to and from different foreign currencies and to convert foreign currencies to and from the U.S. dollar. A Fund either enters into these transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or uses forward currency contracts to purchase or sell foreign currencies.

A forward currency contract is an obligation by a Fund to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract. Forward currency contracts establish an exchange rate at a future date. These contracts are transferable in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward currency contract generally has no deposit requirement and is traded at a net price without commission. Each Fund maintains with its custodian a segregated account of liquid securities in an amount at least equal to its obligations under each forward currency contract. Neither spot transactions nor forward currency contracts eliminate fluctuations in the prices of the Fund's securities or in foreign exchange rates, or prevent loss if the prices of these securities should decline.

A Fund may enter into foreign currency hedging transactions in an attempt to protect against changes in foreign currency exchange rates between the trade and settlement dates of specific securities transactions or changes in foreign currency exchange rates that would adversely affect a portfolio position or an anticipated investment position. Since consideration of the prospect for currency parities will be incorporated into a Sub-Advisor's long-term investment decisions, a Fund will not routinely enter into foreign currency hedging transactions with respect to security transactions; however, the Sub-Advisors believe that it is important to have the flexibility to enter into foreign currency hedging transactions when they determine that the transactions would be in a Fund's best interest. Although these transactions tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time they tend to limit any potential gain that might be realized should the value of the hedged currency increase. The precise matching of the forward currency contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of such securities between the date the forward currency contract is entered into and the date it matures. The projection of currency market movements is extremely difficult, and the successful execution of a hedging strategy is highly uncertain.

While these contracts are not presently regulated by the Commodity Futures Trading Commission (the "CFTC"), the CFTC may in the future assert authority to regulate forward currency contracts. In such event the Fund's ability to utilize forward currency contracts may be restricted. Forward currency contracts may reduce the potential gain from a positive change in the relationship between the U.S. dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The use of forward currency contracts may not eliminate fluctuations in the underlying U.S. dollar equivalent value of the prices of or rates of return on a Fund's foreign currency denominated portfolio securities and the use of such techniques will subject a Fund to certain risks.

The matching of the increase in value of a forward currency contract and the decline in the U.S. dollar equivalent value of the foreign currency denominated asset that is the subject of the hedge generally will not be precise. In addition, a Fund may not always be able to enter into forward currency contracts at attractive prices and this will limit the Fund's ability to use such contract to hedge or cross-hedge its assets. Also, with regard to a Fund's use of cross-hedges, there can be no assurance that historical correlations between the movements of certain foreign currencies relative to the U.S. dollar will continue. Thus, at any time poor correlation may exist between movements in the exchange rates of the foreign currencies underlying a Fund's cross-hedges and the movements in the exchange rates of the foreign currencies in which the Fund's assets that are the subject of such cross-hedges are denominated.

BORROWING AND LENDING

BORROWING. The Funds may borrow money from banks (including their custodian bank) or from other lenders to the extent permitted under applicable law, for temporary or emergency purposes and to meet redemptions and may pledge their assets to secure such borrowings. The 1940 Act requires the Funds to maintain asset coverage of at least 300% for all such borrowings, and should such asset coverage at any time fall below 300%, the Funds would be required to reduce their borrowings within three days to the extent necessary to meet the requirements of the 1940 Act. To reduce their borrowings, the Funds might be required to sell securities at a time when it would be disadvantageous to do so. In addition, because interest on money borrowed is a Fund expense that it would not otherwise incur, the Funds may have less net investment income during periods when its borrowings are substantial. The interest paid by the Funds on borrowings may be more or less than the yield on the securities purchased with borrowed funds, depending on prevailing market conditions.

A Fund will not make any borrowing that would cause its outstanding borrowings to exceed one-third of the value of its total assets. As a matter of current operating policy, each Fund (except the Large Cap Value Fund) intends to borrow money only as a temporary measure for extraordinary or emergency purposes. The Large Cap Value Fund intends to borrow money only for temporary purposes to meet redemptions or to pay dividends. These policies are not fundamental and may be changed by the Board of Trustees without shareholder approval.

LENDING. By lending its securities, a Fund can increase its income by continuing to receive interest on the loaned securities as well as by either investing the cash collateral in short-term securities or obtaining yield in the form of interest paid by the borrower when U.S. Government obligations are used as collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. Each Fund will adhere to the following conditions whenever its securities are loaned: (i) the Fund must receive at least 100 percent cash collateral or equivalent securities from the borrower; (ii) the borrower must increase this collateral whenever the market value of the securities including accrued interest rises above the level of the collateral; (iii) the Fund must be able to terminate the loan at any time; (iv) the Fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions on the loaned securities, and any increase in market value; (v) the Fund may pay only reasonable custodian fees in connection with the loan; and (vi) voting rights on the loaned securities may pass to the borrower; provided, however, that if a material event adversely affecting the investment occurs, the Board of Trustees must terminate the loan and regain the right to vote the securities.

As a matter of current operating policy, the Large Cap Growth Fund intends to limit the amount of loans of portfolio securities to no more than 25% of its net assets. This policy may be changed by the Board of Trustees without shareholder approval.

---------------------------------------------------------------------------------------------------------------------------------
INTERESTED
TRUSTEES(1):
---------------------------------------------------------------------------------------------------------------------------------
         NAME           POSITION       TERM OF     PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS     NUMBER            OTHER
       ADDRESS          HELD WITH      OFFICE                                                     OF FUNDS        DIRECTORSHIPS
    YEAR OF BIRTH       TRUST            AND                                                      OVERSEEN          HELD(4)
                                       LENGTH                                                      IN THE
                                       OF TIME                                                   TOUCHSTONE
                                      SERVED(2)                                                     FUND
                                                                                                 COMPLEX(3)
---------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder        Trustee and   Until        Senior Vice President of The Western and           41      Director of
Touchstone              President     retirement   Southern Life Insurance Company.                           LaRosa's (a
Advisors, Inc                         at age 75    President, CEO and a director of IFS                       restaurant chain).
303 Broadway                          or until     Financial Services, Inc. (a holding
Cincinnati, OH                        she          company). She is a director of Capital
Year of Birth: 1955                   resigns or   Analysts Incorporated (an investment
                                      is removed   advisor and broker-dealer), IFS Fund
                                                   Distributors, Inc. (a broker-dealer),
                                      Trustee      Touchstone Advisors, Inc. (the Trust's
                                      since 1999   investment advisor and administrator), W&S
                                                   Financial Group Distributors, Inc. (an
                                                   annuity distributor) and Touchstone
                                                   Securities, Inc. (the Trust's
                                                   distributor). She is also President and a
                                                   director of IFS Systems, Inc.  She is
                                                   Senior Vice President and a director of W&S
                                                   Brokerage Services, Inc. (a broker-dealer).
                                                   She is President and Chief Executive
                                                   Officer of Integrity Life Insurance Company
                                                   and National Integrity Life Insurance
                                                   Company.  She is President of Touchstone
                                                   Tax-Free Trust, Touchstone Investment
                                                   Trust, Touchstone Variable Series Trust,
                                                   Touchstone Strategic Trust, Touchstone
                                                   Funds Group Trust and Touchstone
                                                   Institutional Funds Trust. She was
                                                   President of Touchstone Advisors, Inc., and
                                                   Touchstone Securities, Inc. until 2004.
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT
TRUSTEES:
---------------------------------------------------------------------------------------------------------------------------------
         NAME           POSITION       TERM OF     PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS     NUMBER            OTHER
       ADDRESS          HELD WITH      OFFICE                                                     OF FUNDS        DIRECTORSHIPS
    YEAR OF BIRTH       TRUST            AND                                                      OVERSEEN          HELD(4)
                                       LENGTH                                                      IN THE
                                       OF TIME                                                   TOUCHSTONE
                                      SERVED(2)                                                     FUND
                                                                                                 COMPLEX(3)
---------------------------------------------------------------------------------------------------------------------------------
Phillip R. Cox           Trustee      Until        President and Chief Executive Officer of           41      Director of Duke
105 East Fourth Street                retirement   Cox Financial Corp. (a financial services                  Energy (a utility
Cincinnati, OH                        at age 75    company).                                                  company)
Year of Birth: 1947                   or until
                                      he resigns
                                      or is
                                      removed

                                      Trustee
                                      since 1999

---------------------------------------------------------------------------------------------------------------------------------
H. Jerome Lerner         Trustee      Until        Principal of HJL Enterprises (a privately          41      None
c/o Touchstone                        retirement   held investment company).
Advisors, Inc.                        at age 75
303 Broadway                          or until
Cincinnati, OH                        he resigns
Year of Birth: 1938                   or is
                                      removed

                                      Trustee
                                      since 1989

---------------------------------------------------------------------------------------------------------------------------------
Donald C. Siekmann       Trustee      Until        Executive for Duro Bag Manufacturing Co. (a        41      None
c/o Touchstone                        retirement   bag manufacturer); President of Shor
Advisors, Inc.                        at age 75    Foundation for Epilepsy Research (a
303 Broadway                          or until     charitable foundation); Trustee of
Cincinnati, OH                        he resigns   Riverfront Funds (mutual funds) from 1999 -
Year of Birth: 1938                   or is        2004.
                                      removed

                                      Trustee
                                      since 2005

---------------------------------------------------------------------------------------------------------------------------------
Robert E.                Trustee      Until        Retired Partner of KPMG LLP (a certified           41      Trustee of
Stautberg                             retirement   public accounting firm). He is Vice                        Tri-Health
c/o Touchstone                        at age 75    President of St. Xavier High School.                       Physician
Advisors, Inc.                        or until                                                                Enterprise
303 Broadway                          he resigns                                                              Corporation.
Cincinnati, OH                        or is
Year of Birth: 1934                   removed

                                      Trustee
                                      since 1999

---------------------------------------------------------------------------------------------------------------------------------
John P. Zanotti          Trustee      Until        CEO, Chairman and Director of Avaton, Inc.         41      Director of QMed
c/o Touchstone                        retirement   (a wireless entertainment company) until                   (a health care
Advisors, Inc.                        at age 75    2006. President of Cincinnati Biomedical                   management
303 Broadway                          or until     (a life science and economic development                   company).
Cincinnati, OH                        he resigns   company).
Year of Birth: 1948                   or is
                                      removed

                                      Trustee
                                      since 2002
---------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
PRINCIPAL
OFFICERS:
------------------------------------------------------------------------------------------------------------
             NAME                     POSITION         TERM OF OFFICE AND   PRINCIPAL OCCUPATION(S) DURING
            ADDRESS              HELD WITH TRUST(1)      LENGTH OF TIME              PAST 5 YEARS
         YEAR OF BIRTH                                       SERVED
------------------------------------------------------------------------------------------------------------
Jill T. McGruder                 President            Until resignation,    See biography above.
Touchstone                                            removal or
Advisors, Inc.                                        disqualification
303 Broadway
Cincinnati, OH                                        President since
Year of Birth: 1955                                   2004; President
                                                      from 2000-2002
------------------------------------------------------------------------------------------------------------
Gene L. Needles                  Vice President       Until resignation,    President of Touchstone
Touchstone                                            removal or            Advisors, Inc., Touchstone
Advisors, Inc.                                        disqualification      Securities, Inc. and
303 Broadway                                                                Touchstone Investments.
Cincinnati, OH                                        Vice President        President of AIM Distributors
Year of Birth: 1954                                   since 2008            from 2004 - 2008.  CEO of AIM
                                                                            Distributors from 2005 - 2008.
------------------------------------------------------------------------------------------------------------
Brian E. Hirsch                  Vice President and   Until resignation,    Senior Vice
Touchstone                       Chief Compliance     removal or            President-Compliance of IFS
Advisors, Inc.                   Officer              disqualification      Financial Services, Inc.,
303 Broadway                                                                Director of Compliance of W&S
Cincinnati, OH                                        Vice President        Brokerage Services, Inc.
Year of Birth: 1956                                   since 2003
------------------------------------------------------------------------------------------------------------
William A. Dent                  Vice President       Until resignation,    Senior Vice President of
Touchstone                                            removal or            Touchstone Advisors, Inc.;
Advisors, Inc.                                        disqualification      Marketing Director of
303 Broadway                                                                Promontory Interfinancial
Cincinnati, OH                                        Vice President        Network from 2002-2003.
Year of Birth: 1963                                   since 2004
------------------------------------------------------------------------------------------------------------
Gregory A. Harris                Vice President       Until resignation,    Vice President-Fund
Touchstone Advisors, Inc.                             removal or            Administration of Touchstone
303 Broadway                                          disqualification      Investments; Managing
Cincinnati, OH                                                              Director, Fund Project
Year of Birth: 1968                                   Vice President        Services, Inc. 1998 - 2007.
                                                      since 2007
------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft             Controller           Until resignation,    Senior Vice President, Chief
Touchstone                       and Treasurer        removal or            Financial Officer and
Advisors, Inc.                                        disqualification      Treasurer of IFS Fund
303 Broadway                                                                Distributors, Inc.; Senior
Cincinnati, OH                                        Controller since      Vice President and Chief
Year of Birth: 1962                                   2000                  Financial Officer of W & S
                                                                            Brokerage Services, Inc.;
                                                      Treasurer since 2003  Chief Financial Officer of IFS
                                                                            Financial Services, Inc.,
                                                                            Touchstone Advisors, Inc. and
                                                                            Touchstone Securities, Inc.;
                                                                            Senior Vice President and
                                                                            Chief Financial Officer of
                                                                            Fort Washington Investment
                                                                            Advisors, Inc. Vice-President
                                                                            and Treasurer of IIS Broadway
                                                                            Corp. She served as Senior
                                                                            Vice President, Chief
                                                                            Financial Officer and
                                                                            Treasurer of Integrated
                                                                            Investment Services, Inc. up
                                                                            to April 2007.
------------------------------------------------------------------------------------------------------------
Jay S. Fitton                    Secretary            Until resignation,    Assistant Vice President and
JPMorgan.                                             removal or            Senior Counsel at JPMorgan
303 Broadway                                          disqualification      Chase Bank, N.A.
Cincinnati, OH
Year of Birth: 1970                                   Secretary since
                                                      2006. Assistant
                                                      Secretary from 2002
                                                      - 2006
------------------------------------------------------------------------------------------------------------

                             DOLLAR RANGE OF        DOLLAR RANGE OF         DOLLAR RANGE OF         DOLLAR RANGE OF
                           EQUITY SECURITIES IN   EQUITY SECURITIES IN   EQUITY SECURITIES IN    EQUITY SECURITIES IN
                           THE LARGE CAP GROWTH    THE LARGE CAP CORE         THE GROWTH        THE MID CAP GROWTH FUND
                                   FUND               EQUITY FUND         OPPORTUNITIES FUND
                           --------------------------------------------------------------------------------------------
Phillip R. Cox                     None                   None                   None              $10,001 - $50,000
H. Jerome Lerner                   None                   None                   None                    None
Jill T. McGruder            $50,001 - $100,000     $50,001 - $100,000      $10,001 - $50,000      $50,001 - $100,000
Donald C. Siekmann            Over $100,000               None                   None                Over $100,000
Robert E. Stautberg         $50,001 - $100,000            None                   None             $50,001 - $100,000
John P. Zanotti             $10,001 - $50,000      $10,001 - $50,000         $1 - $10,000            $1 - $10,000

                               DOLLAR RANGE OF          AGGREGATE DOLLAR
                            EQUITY SECURITIES IN         RANGE OF EQUITY
                           THE LARGE CAP VALUE FUND     SECURITIES IN THE
                                                         TOUCHSTONE FUND
                                                           COMPLEX(1)
                           ----------------------------------------------
Phillip R. Cox                      None                $10,001 - $50,000
H. Jerome Lerner                    None                  Over $100,000
Jill T. McGruder                $1 - $10,000              Over $100,000
Donald C. Siekmann                  None                  Over $100,000
Robert E. Stautberg                 None                  Over $100,000
John P. Zanotti                     None               $50,001 - $100,000

                                                         AGGREGATE COMPENSATION
                                     COMPENSATION       FROM THE TOUCHSTONE FUND
NAME                                 FROM TRUST(1)             COMPLEX(1,2)
----                                -------------             ------------
Philip R. Cox                           $11,458                $68,750
H. Jerome Lerner                        $12,708                $76,250
Jill T. McGruder                         None                   None
Donald C. Siekmann                      $10,708                $64,250
Robert E. Stautberg                     $12,041                $72,250
John P. Zanotti                         $7,958                 $47,750

Mid Cap Growth Fund                 0.80%

Large Cap Core Equity Fund          0.65% on the first $100 million
                                    0.60% from $100 million to $200 million
                                    0.55% from $200 million to $300 million
                                    0.50% thereafter

Large Cap Growth Fund               0.75% on the first $200 million
                                    0.70% from $200 million to $1 billion
                                    0.65% thereafter

Growth Opportunities Fund           0.83% on the first $500 million
                                    0.80% from $500 million to $1 billion
                                    0.75% thereafter

Micro Cap Growth Fund               1.25%

Large Cap Value Fund                0.75%

Diversified Small Cap Growth Fund   1.05%

--------------------------------------------------------------------------------
LARGE CAP GROWTH FUND                             1.25% for Class A shares
--------------------------------------------------------------------------------
                                                  2.00% for Class B shares
--------------------------------------------------------------------------------
                                                  2.00% for Class C shares
--------------------------------------------------------------------------------
                                                  0.99% for Class Y shares
--------------------------------------------------------------------------------
MID CAP GROWTH FUND                               1.50% for Class A shares
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                                  2.25% for Class B shares
--------------------------------------------------------------------------------
                                                  2.25% for Class C shares
--------------------------------------------------------------------------------
                                                  1.25% for Class Y shares
--------------------------------------------------------------------------------
LARGE CAP CORE EQUITY FUND                        1.15% for Class A shares
--------------------------------------------------------------------------------
                                                  1.90% for Class C shares
--------------------------------------------------------------------------------
MICRO CAP GROWTH FUND                             1.58% for Class A shares
--------------------------------------------------------------------------------
                                                  2.33% for Class C shares
--------------------------------------------------------------------------------
                                                  1.33% for Class Y shares
--------------------------------------------------------------------------------
LARGE CAP VALUE FUND                              1.35% for Class A shares
--------------------------------------------------------------------------------
                                                  2.10% for Class C shares
--------------------------------------------------------------------------------
GROWTH OPPORTUNITIES FUND                         1.24% for Class A shares
--------------------------------------------------------------------------------
                                                  1.99% for Class C shares
--------------------------------------------------------------------------------
                                                  0.99% for Class Y shares
--------------------------------------------------------------------------------
                                                  0.84% for Institutional shares
--------------------------------------------------------------------------------
DIVERSIFIED SMALL CAP GROWTH FUND                 1.40% for Class A shares
--------------------------------------------------------------------------------
                                                  2.15% for Class C shares
--------------------------------------------------------------------------------
                                                  1.15% for Class Y shares
--------------------------------------------------------------------------------

                                     FOR THE          FOR THE           FOR THE
                                      YEAR             YEAR              YEAR
ADVISORY FEES                         ENDED            ENDED             ENDED
                                    03/31/08         03/31/07          03/31/06
                                   ----------       ----------        ----------
Mid Cap Growth Fund(1)             $9,248,908       $8,436,781        $7,640,242
Growth Opportunities Fund(2)        $488,853         $705,662         $1,053,963
Large Cap Core Equity Fund(3)       $653,058         $474,047          $130,011
Micro Cap Growth Fund(4)            $754,844        $1,029,804         $831,824
Large Cap Value Fund(5)             $348,118         $204,009           $5,781
Large Cap Growth Fund(6)           $7,064,421       $7,703,319        $5,021,672

                                                FOR THE
                                                 YEAR
                                                 ENDED          FOR THE PERIOD
                                               03/31/08       09/06/06 - 3/31/07
                                               --------       ------------------

                                                FOR THE             FOR THE
                                                 YEAR                YEAR
SPONSOR FEES                                     ENDED               ENDED
                                               03/31/07            03/31/06
                                               --------            --------
Mid Cap Growth Fund(1)                        $1,555,989          $1,910,078
Large Cap Core Equity Fund(3)                   $95,624             $40,002
Micro Cap Growth Fund(4)                       $ 127,496           $133,093
Large Cap Value Fund(5)                         $34,389             $1,542

                                            FOR THE PERIOD
                                           09/06/06-3/31/07
                                           ----------------
Diversified Small Cap Growth Fund(7)            $6,767

TCW Investment Management Company               0.50%
Westfield Capital Management Company, LP        0.50%

LARGE CAP GROWTH FUND
Navellier & Associates, Inc.                    0.40% of the first $1 billion
                                                0.35% thereafter

LARGE CAP CORE EQUITY FUND
Todd Investment Advisors, Inc.                  0.325% on the first $100 million
                                                0.30% on the next $100 million
                                                0.275% on the next $100 million
                                                0.25% thereafter

GROWTH OPPORTUNITIES FUND
Westfield Capital Management Company, LP        0.60% on the first $50 million
                                                0.50% on the next $450 million
                                                0.40% on the next $500 million
                                                0.35% thereafter

MICRO CAP GROWTH FUND
Bjurman, Barry & Associates                     0.55%

LARGE CAP VALUE FUND
JS Asset Management, LLC                        0.40% on the first $250 million
                                                0.35% thereafter

DIVERSIFIED SMALL CAP GROWTH FUND
Fort Washington Investment Advisors, Inc.       0.50%

                                                      FOR THE          FOR THE          FOR THE
                                                    FISCAL YEAR      FISCAL YEAR      FISCAL YEAR
                                                       ENDED            ENDED            ENDED
                                                      03/31/08         03/31/07        03/31/06
                                                    ---------------------------------------------
Mid Cap Growth Fund - TCW                            $2,568,921       $2,470,247      $2,308,714
                    - Westfield                      $3,210,000       $2,817,252      $2,468,066
Large Cap Growth Fund - Navellier                    $3,976,088       $4,321,638      $2,818,473
Large Cap Core Equity Fund - Todd                     $326,436         $200,757         $50,112
Growth Opportunities Fund - Mastrapasqua                 $0            $160,341        $601,964
                          - Westfield*                $292,708         $253,053           $0
Micro Cap Growth Fund - Bjurman                       $460,017         $699,716        $566,749
Large Cap Value Fund - JS Asset Management            $185,539         $109,162           $0

                                                      FOR THE FISCAL   FOR THE PERIOD
                                                        YEAR ENDED       09/06/06 -
                                                         03/31/08         03/31/07
                                                      -------------------------------
Diversified Small Cap Growth Fund - Ft. Washington       $81,860          $24,907

--------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER                  TYPE OF ACCOUNT         NUMBER OF     TOTAL                  BENEFICIAL OWNERSHIP
                                                           ACCOUNTS      ASSETS IN              IN FUND
                                                                         ACCOUNTS
--------------------------------------------------------------------------------------------------------------------
Susan Suvall                 Registered Investment              6        $949.3Million          None
(TCW)                        Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            9        $478.3 Million
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                     24       $1.3 Billion
--------------------------------------------------------------------------------------------------------------------
John A. Gibbons              Registered Investment              6        $1.38 Billion          None
(TCW)                        Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            9        $478.3 Million
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                     24       $1.30 Billion
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
William Muggia (Westfield)   Registered Investment              11       $2,651,651,530         None
                             Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            4        $764,092,406
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                    583       $7,782,102,206
--------------------------------------------------------------------------------------------------------------------
Arthur Bauernfeind           Registered Investment              11       $2,651,651,530         None
(Westfield)                  Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            1        $16,678,469
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                    586       $8,511,795,246
--------------------------------------------------------------------------------------------------------------------
Ethan Meyers                 Registered Investment              11       $2,651,651,530         None
(Westfield)                  Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            1        $16,678,469
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                    581       $8,468,963,504
--------------------------------------------------------------------------------------------------------------------
Scott Emerman                Registered Investment              11       $2,651,651,530         None
(Westfield)                  Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            1        $16,678,469
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                    581       $8,469,769,388
--------------------------------------------------------------------------------------------------------------------
Matthew Strobeck             Registered Investment              11       $2,651,651,530         None
(Westfield)                  Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            1        $16,678,469
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                    584       $8,498,371,327
--------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER                 TYPE OF ACCOUNT          NUMBER OF      TOTAL                 BENEFICIAL
                                                           ACCOUNTS       ASSETS IN             OWNERSHIP
                                                                          ACCOUNTS              IN FUND
-----------------------------------------------------------------------------------------------------------------
Curtiss Scott             Registered Investment Companies        1        $80.74Million         $100,001-$500,000
------------------------------------------------------------------------------------------------
                          Other Pooled Investment                0        $0
                          Vehicles
------------------------------------------------------------------------------------------------
                          Other Accounts                        82        $2.6 Billion
-----------------------------------------------------------------------------------------------------------------
John White                Registered Investment Companies        5        $207.9 Million        $100,001-$500,000
------------------------------------------------------------------------------------------------
                          Other Pooled Investment                0        $0
                          Vehicles
------------------------------------------------------------------------------------------------
                          Other Accounts                        82        $2.6 Billion
-----------------------------------------------------------------------------------------------------------------
Robert Bordogna           Registered Investment Companies        2        $126.1 Million        None
------------------------------------------------------------------------------------------------
                          Other Pooled Investment                0        $0
                          Vehicles
------------------------------------------------------------------------------------------------
                          Other Accounts                        82        $2.6 Billion
-----------------------------------------------------------------------------------------------------------------
Bosworth Todd             Registered Investment Companies        1        $80.7 Million         None
------------------------------------------------------------------------------------------------
                          Other Pooled Investment                0        $0
                          Vehicles
------------------------------------------------------------------------------------------------
                          Other Accounts                        82        $2.6 Billion
-----------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER                 TYPE OF ACCOUNT          NUMBER OF        TOTAL                BENEFICIAL OWNERSHIP
                                                           ACCOUNTS         ASSETS IN            IN FUND
                                                                            ACCOUNTS
---------------------------------------------------------------------------------------------------------------------
Louis Navellier           Registered Investment Companies         2         $204 Million         $100,001-$500,000
-------------------------------------------------------------------------------------------------
                          Other Pooled Investment                 0         $0
                          Vehicles
-------------------------------------------------------------------------------------------------
                          Other Accounts                        7,687       $2,796 Million
---------------------------------------------------------------------------------------------------------------------
Shawn Price               Registered Investment Companies         1         $18 Million          $100,001-$500,000
-------------------------------------------------------------------------------------------------
                          Other Pooled Investment                 0         $0
                          Vehicles
-------------------------------------------------------------------------------------------------
                          Other Accounts                        6,472       $2,513 Million
---------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER                  TYPE OF ACCOUNT         NUMBER OF     TOTAL                  BENEFICIAL OWNERSHIP
                                                           ACCOUNTS      ASSETS IN              IN FUND
                                                                         ACCOUNTS
--------------------------------------------------------------------------------------------------------------------
William Muggia              Registered Investment               11       $3,205,457,656         None
                            Companies
------------------------------------------------------------------------------------------------
                            Other Pooled Investment             4        $764,092,406
                            Vehicles
------------------------------------------------------------------------------------------------
                            Other Accounts                     583       $7,782,102,206
--------------------------------------------------------------------------------------------------------------------
Arthur Bauernfeind          Registered Investment               11       $3,205,457,656         None
                            Companies
------------------------------------------------------------------------------------------------
                            Other Pooled Investment             1        $16,678,469
                            Vehicles
------------------------------------------------------------------------------------------------
                            Other Accounts                     586       $8,511,795,246
--------------------------------------------------------------------------------------------------------------------
Ethan Meyers                Registered Investment               11       $3,205,457,656         None
                            Companies
------------------------------------------------------------------------------------------------
                            Other Pooled Investment             1        $16,678,469
                            Vehicles
------------------------------------------------------------------------------------------------
                            Other Accounts                     581       $8,468,963,504
--------------------------------------------------------------------------------------------------------------------
Scott Emerman               Registered Investment               11       $3,205,457,656         None
                            Companies
------------------------------------------------------------------------------------------------
                            Other Pooled Investment             1        $16,678,469
                            Vehicles
------------------------------------------------------------------------------------------------
                            Other Accounts                     581       $8,469,769,388
--------------------------------------------------------------------------------------------------------------------
Matthew Strobeck            Registered Investment               11       $3,205,457,656         None
                            Companies
------------------------------------------------------------------------------------------------
                            Other Pooled Investment             1        $16,678,469
                            Vehicles
------------------------------------------------------------------------------------------------
                            Other Accounts                     584       $8,498,371,327
--------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER                 TYPE OF ACCOUNT          NUMBER OF        TOTAL                 BENEFICIAL
                                                           ACCOUNTS         ASSETS IN             OWNERSHIP
                                                                            ACCOUNTS              IN FUND
-------------------------------------------------------------------------------------------------------------
O. Thomas Barry III       Registered Investment Companies         6         $388 Million          None
--------------------------------------------------------------------------------------------------
                          Other Pooled Investment                 0         $0
                          Vehicles
--------------------------------------------------------------------------------------------------
                          Other Accounts                         15         $116 Million
-------------------------------------------------------------------------------------------------------------
Stephen Shipman           Registered Investment Companies         6         $388 Million          None
--------------------------------------------------------------------------------------------------
                          Other Pooled Investment                 0         $0
                          Vehicles
--------------------------------------------------------------------------------------------------
                          Other Accounts                         27         $44 Million
-------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER                TYPE OF ACCOUNT           NUMBER OF      TOTAL                 BENEFICIAL OWNERSHIP
                                                           ACCOUNTS       ASSETS IN             IN FUND
                                                                          ACCOUNTS
--------------------------------------------------------------------------------------------------------------------
John Schneider          Registered Investment Companies          5        $267.5 Million        None
------------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         2        $25.9 Million
------------------------------------------------------------------------------------------------
                        Other Accounts                           5        $33.6 Million
--------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
                                     TYPE OF              NUMBER OF               TOTAL           BENEFICIAL OWNERSHIP
PORTFOLIO MANAGER                    ACCOUNT               ACCOUNTS             ASSETS IN              IN FUND
                                                                                ACCOUNTS
----------------------------------------------------------------------------------------------------------------------
Richard R. Jandrain     Registered Investment Companies          1        $41.9 Million            $100,001-$500,000
III
-------------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-------------------------------------------------------------------------------------------------
                        Other Accounts                           4        $125.1 Million
----------------------------------------------------------------------------------------------------------------------
Daniel J. Kapusta       Registered Investment Companies          1        $41.9 Million            $50,001 - $100,000
-------------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-------------------------------------------------------------------------------------------------
                        Other Accounts                           4        $125.1 Million
----------------------------------------------------------------------------------------------------------------------
David K. Robinson       Registered Investment Companies          1        $41.9 Million             $50,001-$100,000
-------------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-------------------------------------------------------------------------------------------------
                        Other Accounts                           4        $125.1 Million
----------------------------------------------------------------------------------------------------------------------
Bihag Patel             Registered Investment Companies          1        $41.9 Million            $10,001 - $50,000
-------------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-------------------------------------------------------------------------------------------------
                        Other Accounts                           4        $125.1 Million
----------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------
NAME OF FUND                        FISCAL PERIOD              COMMISSION AMOUNT
--------------------------------------------------------------------------------
Growth Opportunities Fund            4-1-07 - 3-31-08          $105,373
--------------------------------------------------------------------------------
Growth Opportunities Fund            4-1-06 - 3-31-07          $315,965
--------------------------------------------------------------------------------
Growth Opportunities Fund            4-1-05 - 3-31-06          $196,719
--------------------------------------------------------------------------------
Large Cap Core Equity Fund           4-1-07 - 3-31-08          $130,630
--------------------------------------------------------------------------------
Large Cap Core Equity Fund           4-1-06 - 3-31-07          $63,017
--------------------------------------------------------------------------------
Large Cap Core Equity Fund           4-1-05 - 3-31-06          $7,805
--------------------------------------------------------------------------------
Mid Cap Growth Fund                  4-1-07 - 3-31-08          $2,037,669
--------------------------------------------------------------------------------
Mid Cap Growth Fund                  4-1-06 - 3-31-07          $1,668,351
--------------------------------------------------------------------------------
Mid Cap Growth Fund                  4-1-05 - 3-31-06          $1,925,105
--------------------------------------------------------------------------------
Large Cap Growth Fund                4-1-07 - 3-31-08          $581,620
--------------------------------------------------------------------------------
Large Cap Growth Fund                4-1-06 - 3-31-07          $1,391,344
--------------------------------------------------------------------------------
Large Cap Growth Fund                4-1-05 - 3-31-06          $1,130,573
--------------------------------------------------------------------------------
Micro Cap Growth Fund                4-1-07 - 3-31-08          $241,079
--------------------------------------------------------------------------------
Micro Cap Growth Fund                4-1-06 - 3-31-07          $447,141
--------------------------------------------------------------------------------
Micro Cap Growth Fund                4-1-05 - 3-31-06          $401,769
--------------------------------------------------------------------------------
Large Cap Value Fund                 4-1-07 - 3-31-08          $120,095
--------------------------------------------------------------------------------
Large Cap Value Fund                 4-1-06 - 3-31-07          $132,470
--------------------------------------------------------------------------------
Large Cap Value Fund                 3-6-06 - 3-31-06          $26,668
--------------------------------------------------------------------------------
Diversified Small Cap Growth Fund    4-1-07 - 3-31-08          $63,541
--------------------------------------------------------------------------------
Diversified Small Cap Growth Fund    9-6-06 - 3-31-07          $35,918
--------------------------------------------------------------------------------

                                   BROKERAGE TRANSACTIONS  BROKERAGE COMMISSIONS
                                   DIRECTED TO RESEARCH       FROM RESEARCH
                                   ----------------------  ---------------------
Growth Opportunities Fund               $6,542,918               $7,185
Mid Cap Growth Fund                     $109,690,963             $141,961
Large Cap Growth Fund                   $110,964,306             $99,796
Micro Cap Growth Fund                   $5,516,160               $13,352
Large Cap Value Fund                    $24,190,213              $39,057
Large Cap Core Equity Fund              $2,953,183               $3,567
Diversified Small Cap Growth Fund       $1,952,199               $3,235

                                                     NUMBER OF SHARES   MARKET VALUE
FUND                  BROKER-DEALER                     ON 3-31-08       ON 3-31-08
------------------------------------------------------------------------------------
Large Cap Value Fund  Wachovia Bank & Trust Company       54,900         $1,482,300
                      Citigroup Global Markets            74,400         $1,593,648

----------------------------------------------------------------------------------------
                                    CLASS A  CLASS B*  CLASS C  CLASS Y**  INSTITUTIONAL
----------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund   X                  X        X
----------------------------------------------------------------------------------------
Growth Opportunities Fund           X                  X        X          X
----------------------------------------------------------------------------------------
Large  Cap Core Equity Fund         X                  X
----------------------------------------------------------------------------------------
Large Cap Growth Fund               X        X         X        X
----------------------------------------------------------------------------------------
Large Cap Value Fund                X                  X
----------------------------------------------------------------------------------------
Micro Cap Growth Fund               X                  X        X
----------------------------------------------------------------------------------------
Mid Cap Growth Fund                 X        X         X        X
----------------------------------------------------------------------------------------

CLASS           SALES CHARGE                                 12B-1 FEE     CONVERSION  FEATURE
-------------------------------------------------------------------------------------------------------
A               Maximum 5.75% initial sales charge             0.25%       None
                reduced for purchases of $50,000 and
                over; purchases of $1 million or more
                sold without an initial sales charge may
                be subject to a 1.00% CDSC if redeemed
                during 1st year and a commission was paid
                to an unaffiliated dealer

B               Maximum 5.00% CDSC during 1st year             1.00%       Class B Shares automatically
                that decreases incrementally and is                        convert to Class A shares
                0 after 6 years                                            after approximately 8 years

C               1.00% CDSC during 1st year                     1.00%       None

Y               None                                           None        None

Institutional   None                                           None        None
-------------------------------------------------------------------------------------------------------

                                   Sales          Sales          Dealer
                                   Charge as      Charge as %    Reallowance
                                   % of Offering  of Net Amount  as % of Net
                                   Price          Invested       Amount Invested
                                   -------------  -------------  ---------------
Less than $50,000                      5.75%        6.10%           5.00%
$50,000 but less than $100,000         4.50%        4.71%           3.75%
$100,000 but less than $250,000        3.50%        3.63%           2.75%
$250,000 but less than $500,000        2.95%        3.04%           2.25%
$500,000 but less than $1,000,000      2.25%        2.30%           1.75%
$1,000,000 or more                     None         None

Amount of Investment                                     Dealer Fee
--------------------                                     ----------
$1 million but less than $3 million                        1.00%
$3 million but less than $5 million                        0.75%
$5 million but less than $25 million                       0.50%
$25 million or more                                        0.25%

YEAR SINCE PURCHASE PAYMENT MADE         CDSC AS A % OF AMOUNT SUBJECT TO CHARGE
--------------------------------------------------------------------------------
       First                                           5.00%
       Second                                          4.00%
       Third                                           3.00%
       Fourth                                          2.00%
       Fifth                                           1.00%
       Sixth                                           1.00%
       Seventh and thereafter*                         None
--------------------------------------------------------------------------------

                                        AMOUNT            EXPIRATION DATE

Diversified Small Cap Growth Fund       $11,436,443       March 31, 2014

Growth Opportunities Fund               $21,887,780       March 31, 2011
                                        $17,098,132       March 31, 2012
                                        $1,976,702        March 31, 2013

Large Cap Growth Fund*                  $26,177,120       March 31, 2015

Micro Cap Growth Fund                   $2,247,184        March 31, 2015
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------
FUND                                  SHAREHOLDER                                                   % OF CLASS
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Charles Schwab & Company, Inc.                                20.42%
Class A                               Cust SPL Custody Bnft
                                      101 Montgomery Street San Francisco, CA
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Merrill Lynch, Pierce Fenner & Smith Incorporated**           27.22%
Class A                               For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Merrill Lynch, Pierce Fenner & Smith Incorporated**           36.23%
Class B                               For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Merrill Lynch, Pierce Fenner & Smith Incorporated**           51.98%
Class C                               For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               The Western & Southern Life Insurance Co.*,**                 9.72%
Class Y                               400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Prudential Investment Mutual Fund                             74.57%
Class Y                               100 Mulberry Street
                                      Newark, NJ
--------------------------------------------------------------------------------------------------------------
Growth Opportunities Fund - Class A   Charles Schwab & Company, Inc.                                11.03%
                                      Mutual Funds - Special Custody
                                      101 Montgomery Street San Francisco, CA
--------------------------------------------------------------------------------------------------------------
Growth  Opportunities Fund-Class C    Merrill Lynch, Pierce Fenner & Smith Incorporated             12.10%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class A           Merrill Lynch, Pierce Fenner & Smith Incorporated             6.81%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class A           Charles Schwab & Company, Inc.                                5.97%
                                      Mutual Funds - Special Custody
                                      101 Montgomery Street San Francisco, CA
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class A           Fifth Third Bank  - Trustee                                   5.05%
                                      FBO Various Fascorp Record Kept Plans
                                      8515 E. Orchard 2T2 Centennial, CO
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class B           Merrill Lynch, Pierce Fenner & Smith Incorporated             16.37%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class C           Merrill Lynch, Pierce Fenner & Smith Incorporated**           30.76%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund-Class A    Fifth Third Bank  - Trustee                                   16.12%
                                      FBO Various Fascorp Record Kept Plans
                                      8515 E. Orchard 2T2 Centennial, CO
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund-Class A    The Western & Southern Life Insurance Co.*,**                 28.65%
                                      400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund-Class A    The Western & Southern Financial Group*,**                    32.33%
                                      400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund - Class C  Merrill Lynch, Pierce Fenner & Smith Incorporated             29.16%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund - Class C  The Western & Southern Financial Group*                       6.03%
                                      400 Broadway  Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class A         Western & Southern Life Insurance Co.*, **                    33.96%
                                      400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class A         Merrill Lynch, Pierce Fenner & Smith Incorporated             9.02%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class C         Merrill Lynch, Pierce Fenner & Smith Incorporated**           30.72%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class Y         RBC Capital Markets Corp FBO Jon Larson                       12.89%
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class Y         RBC Capital Markets Corp FBO Madeline Galkin                  9.22%
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class Y         RBC Capital Markets Corp FBO Dirk Frauenfel                   14.91%
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class Y         RBC Capital Markets Corp FBO Thomas                           15.29%
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class Y         RBC Capital Markets Corp FBO Christine A.                     5.66%
--------------------------------------------------------------------------------------------------------------
Micro Cap Growth Fund-Class Y         RBC Capital Markets Corp FBO Eileen Hokkane                   6.83%
--------------------------------------------------------------------------------------------------------------
Large Cap Value Fund-Class A          National Financial Services FBO John Swanson                  15.54%
--------------------------------------------------------------------------------------------------------------
Large Cap Value Fund-Class A          Western & Southern Life Insurance Co.*,**                     28.07%
                                      400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Value Fund-Class A          Fifth Third Bank  - Trustee                                   6.43%
                                      FBO Various Fascorp Record Kept Plans
                                      8515 E. Orchard 2T2 Centennial, CO
--------------------------------------------------------------------------------------------------------------
Large Cap Value Fund-Class A          National Financial Services FBO Cignet Partner                5.18%
--------------------------------------------------------------------------------------------------------------
Large Cap Value Fund -Class C         Merrill Lynch, Pierce Fenner & Smith Incorporated             6.14%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Fifth Third Bank  - Trustee                                   21.02%
-Class A                              FBO Various Fascorp Record Kept Plans
                                      8515 E. Orchard 2T2 Centennial, CO
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Western & Southern Financial Group*,**                        45.56%
-Class Y                              400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Prudential Investment Mutual Fund**                           41.10%
-Class Y                              100 Mulberry Street
                                      Newark, NJ
--------------------------------------------------------------------------------------------------------------

SUB-ADMINISTRATIVE FEES               FOR THE FISCAL YEAR     FOR THE PERIOD
                                         ENDED 03/31/08    01/01/07 - 03/31/07
                                         --------------    -------------------

Mid Cap Growth Fund                         $920,499             $224,619
Large Cap Core Equity Fund                  $80,161              $20,306
Growth Opportunities Fund                   $39,007              $11,486
Micro Cap Growth Fund                       $48,013              $15,114
Large Cap Value Fund                        $36,924               $8,146
Large Cap Growth Fund                       $794,217             $201,123
Diversified Small Cap Growth Fund           $13,830               $2,284

                                            3-31-06 -        3-31-05 -
                                            12-31-06         3-31-06
                                            --------------------------
Mid Cap Growth Fund                         $51,750          $69,000
Large Cap Core Equity Fund                  $29,125          $39,000
Growth Opportunities Fund                   $34,750          $51,000
Micro Cap Growth Fund                       $33,750          $43,976
Large Cap Value Fund                        $23,625          $2,621
Large Cap Growth Fund                       $57,375          $76,500

                                            3-31-06          3-31-05 -
                                            12-31-06         3-31-06
                                            --------------------------
Mid Cap Growth Fund                         $309,976         $384,261
Large Cap Core Equity Fund                  $26,311          $11,000
Growth Opportunities Fund                   $32,169          $61,496
Micro Cap Growth Fund                       $35,129          $36,599
Large Cap Value Fund                        $9,534           $424
Large Cap Growth Fund                       $332,190         $296,223

                                            9-06-06
                                            12-31-06
                                            -------
Diversified Small Cap Growth Fund           $1,870

ADMINISTRATIVE FEES (ADVISOR)         FOR THE FISCAL YEAR     FOR THE PERIOD
                                         ENDED 03/31/08    01/01/07 - 03/31/07
                                         --------------    -------------------

Mid Cap Growth Fund                        $2,312,246            $553,216
Large Cap Core Equity Fund                  $201,368             $32,721
Growth Opportunities Fund                   $98,026              $28,499
Micro Cap Growth Fund                       $120,776             $37,205
Large Cap Value Fund                        $92,832              $19,937
Large Cap Growth Fund                      $1,993,889            $497,624
Diversified Small Cap Growth Fund           $34,534               $5,612

COMPLIANCE FEES                    FOR THE FISCAL YEAR  FOR THE FISCAL YEAR  FOR THE FISCAL YEAR
                                      ENDED 03/31/08       ENDED 03/31/07       ENDED 03/31/06
                                      --------------       --------------       --------------

Mid Cap Growth Fund                       $4,400               $4,714               $3,601
Large Cap Core Equity Fund                $1,754               $1,514                $24
Growth Opportunities Fund                 $1,016                $657                 $553
Micro Cap Growth Fund                     $1,104                $736                 $219
Large Cap Value Fund                       $968                 $700                 $10
Large Cap Growth Fund                     $4,195               $5,093               $1,975

                                   FOR THE FISCAL YEAR     FOR THE PERIOD
                                      ENDED 03/31/08    09/06/06 - 03/31/07
                                      --------------    -------------------
Diversified Small Cap Growth Fund          $480                 $600

BOND AND COMMERCIAL PAPER RATINGS

Set forth below are descriptions of the ratings of Moody's, S&P and Fitch, which represent their opinions as to the quality of the securities which they undertake to rate. It should be emphasized, however, that ratings are relative and subjective and are not absolute standards of quality.

Aaa      Bonds that are rated Aaa are judged to be the best quality. They carry
         the smallest degree of investment risk and are generally referred to as
         "gilt edged." Interest payments are protected by a large or by an
         exceptionally stable margin and principal is secure. While the various
         protective elements are likely to change, such changes as can be
         visualized are most unlikely to impair the fundamentally strong
         position of such issues.

Aa       Bonds that are rated Aa are judged to be of high quality by all
         standards. Together with the Aaa group they comprise what are generally
         known as high-grade bonds. They are rated lower than the best bonds
         because margins of protection may not be as large as in Aaa securities
         or fluctuations of protective elements may be of greater amplitude or
         there may be other elements present which make the long-term risks
         appear somewhat larger than in Aaa securities.

A        Bonds that are rated A possess many favorable investment attributes and
         are to be considered as upper medium grade obligations. Factors giving
         security to principal and interest are considered adequate, but
         elements may be present which suggest a susceptibility to impairment
         sometime in the future.

Baa      Bonds that are rated Baa are considered as medium grade obligations,
         i.e., they are neither highly protected nor poorly secured. Interest
         payments and principal security appear adequate for the present but
         certain protective elements may be lacking or may be characteristically
         unreliable over any great length of time. Such bonds lack outstanding
         investment characteristics and in fact have speculative characteristics
         as well.

Ba       Bonds that are rated Ba are judged to have speculative elements; their
         future cannot be considered as well assured. Often the protection of
         interest and principal payments may be very moderate and thereby not
         well safeguarded during both good and bad times over the future.
         Uncertainty of position characterizes bonds in this class.

B        Bonds that are rated B generally lack characteristics of a desirable
         investment. Assurance of interest and principal payments or of
         maintenance of other terms of the contract over any long period of time
         may be small.

Caa      Bonds that are rated Caa are of poor standing. Such issues may be in
         default or there may be present elements of danger with respect to
         principal or interest.

Ca       Bonds that are rated Ca represent obligations that are speculative in a
         high degree. Such issues are often in default or have other marked
         shortcomings.

C        Bonds that are rated C are the lowest rated class of bonds, and issues
         so rated can be regarded as having extremely poor prospects of ever
         attaining any real investment standing.

                               S&P'S BOND RATINGS

AAA      Bonds rated AAA have the highest rating assigned by S&P. Capacity to
         pay interest and repay principal is extremely strong.

AA       Bonds rated AA have a very strong capacity to pay interest and repay
         principal and differ from higher rated issues only in a small degree.

A        Bonds rated A have a strong capacity to pay interest and repay
         principal although they are somewhat more susceptible to the adverse
         effects of changes in circumstances and economic conditions than bonds
         in the highest rated categories.

BBB      Bonds rated BBB are regarded as having an adequate capacity to pay
BB, B,   interest and repay principal. Whereas they normally exhibit adequate
CCC,     protection parameters, adverse economic conditions or changing
CC, C    circumstances are more likely to lead to a weakened capacity to pay
         interest and repay principal for bonds in this category than in higher
         rated categories. Bonds rated BB, B, CCC, CC, and C are regarded, on
         balance, as predominantly speculative with respect to capacity to pay
         interest and repay principal in accordance with the terms of this
         obligation. BB indicates the lowest degree of speculation and C the
         highest degree of speculation. While such bonds will likely have some
         quality and protective characteristics, they are outweighed by large
         uncertainties of major risk exposures to adverse conditions.

D        Bonds rated D are in default, and payment of interest and/or repayment
         of principal is in arrears.

      Plus (+) or Minus (-). The ratings from "AA" to "CCC" may be modified by

the addition of a plus or minus sign to show relative standing within the major rating categories.

NR Not rated.

FITCH RATINGS:

AAA - "AAA ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events."

AA - "AA ratings denote a very low expectation of credit risk. They indicate strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events."

A - "A ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings."

BBB - "BBB ratings indicate that there is currently a low expectation of credit risk. Capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment grade category."

BB - "BB ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade."

B - "B ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment."

CCC, CC, C - "Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A 'CC' rating indicates that default of some kind appears probable. 'C' ratings signal imminent default."

DDD, DD and D - "Securities are not meeting current obligations and are extremely speculative. 'DDD' designates the highest potential for recovery of amounts outstanding on any securities involved. For U.S. corporates, for example, 'DD' indicates expected recovery of 50%-90% of such outstanding, and 'D' the lowest recovery potential, i.e. below 50%."

UNRATED. Where no rating has been assigned or where a rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the effect of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa-1, A-1, Baa-1, Ba-1 and B-1.

A-1      This designation indicates that the degree of safety regarding
         timely payment is strong. Those issues determined to possess
         extremely strong safety characteristics are denoted with a
         plus sign (+) designation.

A-2      Capacity for timely payment on issues with this designation is
         satisfactory. However, the relative degree of safety is not as
         high as for issues designated "A-1."

A-3      Issues carrying this designation have an adequate capacity for
         timely payment. The are, however, more vulnerable to the
         adverse effects of changes in circumstances than obligations
         carrying the higher designations.

B        Issues rated "B" are regarded as having only speculative
         capacity for timely payment.

C        This rating is assigned to short-term debt obligations with a
         doubtful capacity for payment.

D        Debt rated "D" is in payment default. The "D" rating category
         is used when interest payments or principal payments are not
         made on the date due, even if the applicable grace period has
         not expired, unless S&P believes such payments will be made
         during such grace period.

MOODY'S COMMERCIAL PAPER RATINGS

Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; well-established access to a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained.

MIG-1    "Notes which are rated MIG-1 are judged to be of the best quality.
         There is present strong protection by established cash flows, superior
         liquidity support or demonstrated broad-based access to the market for
         refinancing."

MIG-2    "Notes which are rated MIG-2 are judged to be of high quality. Margins
         of protection are ample although not so large as in the preceding
         group."

                          S&P'S CORPORATE NOTE RATINGS

SP-1     "Debt rated SP-1 has very strong or strong capacity to pay principal
         and interest. Those issues determined to possess overwhelming safety
         characteristics will be given a plus (+) designation."

SP-2     "Debt rated SP-2 has satisfactory capacity to pay principal and
         interest."

SP-3     "Debt rated SP-3 has speculative capacity to pay principal and
         interest."