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 five 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 and the Mid Cap Growth Fund (referred to individually as a "Fund" and collectively as the "Funds"). Each of the Growth Opportunities Fund and the Large Cap Growth Fund is a non-diversified open-end management investment company. Each of the Diversified Small Cap Growth Fund, the Large Cap Core Equity 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.

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.

HISTORY OF THE FUNDS

MID CAP GROWTH FUND. 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.

LARGE CAP GROWTH FUND. 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. On October 6, 2003, the Fund replaced its Sub-Advisor with Navellier Management, Inc. Thereafter, Navellier & Associates, Inc. assumed the sub-advisory duties of its sister company, Navellier Management, Inc.

LARGE CAP CORE EQUITY FUND. 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.

DIVERSIFIED SMALL CAP GROWTH FUND. 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.

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. 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.

U.S. Government securities also include securities guaranteed by the Federal Deposit Insurance Corporation ("FDIC") under its Temporary Liquidity Guarantee Program. Under the Temporary Liquidity Guarantee Program, the FDIC guarantees, with the full faith and credit of the U.S. government, the payment of principal and interest on the debt issued by private entities through the earlier of the maturity date of the debt or June 30, 2012.

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.

In September 2008, FNMA was placed into conservatorship overseen by the Federal Housing Finance Agency ("FHFA"). In addition to placing the company in conservatorship, the U.S. Treasury announced three additional steps that it intended to take with respect to FNMA. First, the U.S. Treasury has entered into Senior Preferred Stock Purchase Agreements under which, if the FHFA determines that FNMA's liabilities have exceeded its assets under generally accepted accounting principles, the U.S. Treasury will contribute up to $100 billion in funds to that company in an amount equal to the difference between such liabilities and assets. Second, the U.S. Treasury established a new secured lending credit facility that was available to FNMA until December 2009. Third, the U.S. Treasury initiated a temporary program to purchase FNMA mortgage-backed securities, which expired in December 2009. No assurance can be given that the U.S. Treasury initiatives discussed above with respect to the debt and mortgage-backed securities issued by FNMA will be successful.

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.

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. The Mid Cap Growth Fund may invest up to 20% of its total assets at the time of purchase in securities of foreign issuers. The Large Cap Growth Fund may invest up to 15% of its total assets at the time of purchase in securities of foreign issuers.

EMERGING MARKET COUNTRIES. Emerging market countries are generally countries that are not included in the MSCI World Index. As of March 31, 2010, the countries in the MSCI World Index included: 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. The country composition of the MSCI World Index can change over time. 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 at the time of purchase in emerging market countries. The Growth Opportunities Fund may invest up to 10% of its total assets at the time of purchase in emerging market countries. The Large Cap Growth Fund may invest up to 15% of its total assets at the time of purchase in securities of emerging market countries. 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 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, GDRs, 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"), and Global Depositary Receipts ("GDRs") may also be purchased by the Funds. EDRs, CDRs and GDRs are generally issued by foreign banks and evidence ownership of either foreign or domestic securities. Certain institutions issuing ADRs, ADSs, GDRs 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 remait 0 0 ns 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. 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. A Fund will not make any borrowing that would cause its outstanding borrowings to exceed one-third of the value of its total assets. 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.

Certain of the Funds have adopted nonfundamental limitations which restrict circumstances in which and degree to which the Funds can engage in borrowing. The Large Cap Core Equity Fund will not borrow money (including through reverse repurchase agreements or forward roll transactions involving mortgage-backed securities or similar investment techniques entered into for leveraging purposes), except that the Large Cap Core Equity Fund may borrow for temporary or emergency purposes up to 10% of its total assets; provided, however, the Large Cap Core Equity Fund may not purchase any security while outstanding borrowings exceed 5%. The Mid Cap Growth Fund intends to borrow money only as a temporary measure for extraordinary or emergency purposes. In addition, the Mid Cap Growth Fund may engage in reverse repurchase agreements, forward roll transactions involving mortgage-backed securities or other investment techniques entered into for the purpose of leverage. As a matter of current operating policy, the Diversified Small Cap Growth Fund and the Large Cap Growth Fund intend to borrow money only as a temporary measure for extraordinary or emergency purposes. These policies are not fundamental and may be changed by the Board of Trustees without shareholder approval.

SECURITIES LENDING. In order to generate additional income, a Fund may lend its securities pursuant to agreements requiring that the loan be continuously secured by collateral consisting of: (1) cash in U.S. dollars; (2) securities issued or fully guaranteed by the United States government or issued and unconditionally guaranteed by any agencies thereof; or (3) irrevocable performance letters of credit issued by banks approved by each Fund. All collateral must equal at least 100% of the market value of the loaned securities. A Fund continues to receive interest on the loaned securities while simultaneously earning interest on the investment of cash collateral. Collateral is marked to market daily. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially or become insolvent. The SEC currently requires that the following conditions must be met whenever the Fund's portfolio securities are loaned: (1) the Fund must receive at least 100% cash collateral from the borrower; (2) the borrower must increase such collateral whenever the market value of the securities rises above the level of such collateral; (3) the Fund must be able to terminate the loan at any time; (4) 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; (5) the Fund may pay only reasonable custodian fees approved by the Board in connection with the loan; (6) while voting rights on the loaned securities may pass to the borrower, the Board must terminate the loan and regain the right to vote the securities if a material event adversely affecting the investment occurs, and (7) the Fund may not loan its portfolio securities so that the value of the loaned securities is more than one-third of its total asset value, including collateral received from such loans. 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.

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INTERESTED
TRUSTEES(1):
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         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 DURING PAST
                                      LENGTH                                                    IN THE           5 YEARS (4)
                                      OF TIME                                                   TOUCHSTONE
                                      SERVED(2)                                                 FUND
                                                                                                COMPLEX(3)
---------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder        Trustee and   Until        President and CEO of IFS Financial                 46      Director of
Touchstone              President     retirement   Services, Inc. (a holding company).                        LaRosa's (a
Advisors, Inc                         at age 75                                                               restaurant chain),
303 Broadway                          or until                                                                Capital Analysts
Cincinnati, OH                        she                                                                     Incorporated (an
Year of Birth: 1955                   resigns or                                                              investment
                                      is removed                                                              advisor and
                                                                                                              broker-dealer),
                                      Trustee                                                                 IFS Financial
                                      since 1999                                                              Services, Inc. (a
                                                                                                              holding
                                                                                                              company), ,
                                                                                                              Integrity
                                                                                                              and
                                                                                                              National
                                                                                                              Integrity
                                                                                                              Life
                                                                                                              Insurance
                                                                                                              Co.,
                                                                                                              Touchstone
                                                                                                              Securities
                                                                                                              (the
                                                                                                              Trust's
                                                                                                              distributor),
                                                                                                              Touchstone
                                                                                                              Advisors
                                                                                                              (the
                                                                                                              Trust's
                                                                                                              investment
                                                                                                              advisor
                                                                                                              and
                                                                                                              administrator)
                                                                                                              and
                                                                                                              W&S
                                                                                                              Financial
                                                                                                              Group
                                                                                                              Distributors
                                                                                                              (a
                                                                                                              distribution
                                                                                                              company.
---------------------------------------------------------------------------------------------------------------------------------

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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 DURING PAST
                                      LENGTH                                                      IN THE          5 YEARS (4)
                                      OF TIME                                                     TOUCHSTONE
                                      SERVED(2)                                                   FUND
                                                                                                  COMPLEX(3)
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Phillip R. Cox           Trustee      Until        President and Chief Executive Officer of           46      Director of
105 East Fourth Street                retirement   Cox Financial Corp. (a financial services                  Cincinnati Bell
Cincinnati, OH                        at age 75    company).                                                  (a communications
Year of Birth: 1947                   or until                                                                company),
                                      he resigns                                                              Bethesda Inc. (a
                                      or is                                                                   hospital), Timken
                                      removed                                                                 Co. (a
                                                                                                              manufacturing
                                      Trustee                                                                 company), Diebold
                                      since 1999                                                              (a technology
                                                                                                              solutions
                                                                                                              company), and
                                                                                                              Ohio Business
                                                                                                              Alliance for
                                                                                                              Higher Education.
                                                                                                              Director of Duke
                                                                                                              Energy from 1994
                                                                                                              - 2008.
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H. Jerome Lerner         Trustee      Until        Principal of HJL Enterprises (a privately          46      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
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Donald C. Siekmann       Trustee      Until        Executive for Duro Bag Manufacturing Co. (a        46      None
c/o Touchstone                        retirement   bag manufacturer) from 2002 -2008.
Advisors, Inc.                        at age 75
303 Broadway                          or until
Cincinnati, OH                        he resigns
Year of Birth: 1938                   or is
                                      removed

                                      Trustee
                                      since 2005
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John P. Zanotti          Trustee      Until        CEO, Chairman and Director of Avaton, Inc.         46      Director of Q Med
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) from
Cincinnati, OH                        he resigns   company) from 2003 - 2007. Chairman of                     2004 - 2007.
Year of Birth: 1948                   or is        Integrated Media Technologies (a media
                                      removed      company)

                                      Trustee
                                      since 2002
---------------------------------------------------------------------------------------------------------------------------------
Susan J. Hickenlooper    Trustee      Until        Trustee of Episcopal Retirement Homes              46      Trustee of
c/o Touchstone                        retirement   Foundation                                                 Gateway Trust (a
Advisors, Inc.                        at age 75                                                               charitable
303 Broadway                          or until                                                                organization)
Cincinnati, OH                        he resigns                                                              from 2006 - 2008,
Year of Birth: 1946                   or is                                                                   Trustee of
                                      removed                                                                 Cincinnati Parks
                                                                                                              Foundation (a
                                      Trustee                                                                 charitable
                                      since 2009                                                              organization).
---------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
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 Advisors, Inc.                             removal or
303 Broadway                                          disqualification
Cincinnati, OH
Year of Birth: 1955                                   President since
                                                      2004; President
                                                      from 2000-2002

------------------------------------------------------------------------------------------------------------
Brian E. Hirsch                  Vice President       Until  resignation,   Senior Vice President of
Touchstone Advisors, Inc.                             removal or            Compliance and Fund
303 Broadway                                          disqualification      Administration of IFS
Cincinnati, OH                                                              Financial Services, Inc.
Year of Birth: 1956                                   Vice President
                                                      since 2003

------------------------------------------------------------------------------------------------------------
Steven M. Graziano               Vice President       Until resignation,    President of Touchstone
Touchstone Advisors, Inc.                             removal or            Advisors, Inc.; Executive Vice
303 Broadway                                          disqualification      President of Pioneer
Cincinnati, OH                                                              Investment Management, Head of
Year of Birth: 1954                                   Vice President        Retail Distribution and
                                                      since 2009            Strategic Marketing 2007 -
                                                                            2008; Executive Vice President
                                                                            of Pioneer Investment
                                                                            Management, Chief Marketing
                                                                            Officer 2002 - 2007.
------------------------------------------------------------------------------------------------------------
Timothy D. Paulin                Vice President       Until resignation,    Vice President of Investment
Touchstone Advisors, Inc.                             removal or            Research and Product
303 Broadway                                          disqualification      Management of Touchstone
Cincinnati, OH                                                              Advisors, Inc.; Director of
Year of Birth: 1963                                   Vice President        Product Design of Klein
                                                      since 2010            Decisions, Inc. 2003 - 2010.

------------------------------------------------------------------------------------------------------------
Joseph Melcher                   Chief                Until resignation,    Vice President of Compliance
Touchstone Advisors, Inc.        Compliance Officer   removal or            of IFS Financial Services (a
303 Broadway                                          disqualification      holding company); Assistant
Cincinnati, OH                                                              Vice President of Compliance
Year of Birth: 1973                                   Chief Compliance      of IFS Financial Services 2005
                                                      Officer since 2010    - 2010.

------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft             Controller           Until  resignation,   Chief Financial Officer and
Touchstone Advisors, Inc.        and Treasurer        removal or            Senior Vice President of IFS
303 Broadway                                          disqualification      Financial Services, Inc.
Cincinnati, OH
Year of Birth: 1962                                   Controller since
                                                      2000

                                                      Treasurer since 2003
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
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
                              EQUITY SECURITIES IN       EQUITY SECURITIES IN      EQUITY SECURITIES IN
                               THE LARGE CAP CORE      THE GROWTH OPPORTUNITIES         THE MID CAP
                                   EQUITY FUND                   FUND                   GROWTH FUND
                            -------------------------------------------------------------------------------
Phillip R. Cox                        None                       None                      None
H. Jerome Lerner                      None                       None                      None
Jill T. McGruder               $50,001 - $100,000            $1 - $10,000            $10,001 - $50,000
Donald C. Siekmann                    None                       None               $50,001 - $100,000
Susan J. Hickenlooper                 None                       None                      None
John P. Zanotti                   $1 - $10,000                   None                  $1 - $10,000

                                                                                     AGGREGATE DOLLAR
                                 DOLLAR RANGE OF                                      RANGE OF EQUITY
                              EQUITY SECURITIES IN         DOLLAR RANGE OF           SECURITIES IN THE
                              THE DIVERSIFIED SMALL      EQUITY SECURITIES IN         TOUCHSTONE FUND
                                 CAP GROWTH FUND       THE LARGE CAP GROWTH FUND        Complex(1)
                            -------------------------------------------------------------------------------
Phillip R. Cox                        None                       None                      None
H. Jerome Lerner                      None                       None                  Over $100,000
Jill T. McGruder                  $1 - $10,000            $50,001 - $100,000           Over $100,000
Donald C. Siekmann                    None                  Over $100,000              Over $100,000
Susan J. Hickenlooper                 None                       None               $50,001 - $100,000
John P. Zanotti                   $1 - $10,000               $1 - $10,000           $50,001 - $100,000

                                                        AGGREGATE COMPENSATION
                                  COMPENSATION          FROM THE TOUCHSTONE FUND
NAME                             FROM TRUST(1)               COMPLEX(1),(2)
----                             -------------               --------------
Philip R. Cox                        $14,583                    $87,500
H. Jerome Lerner                     $12,583                    $75,500
Jill T. McGruder                       $0                         $0
Donald C. Siekmann                   $13,917                    $83,500
Susan J. Hickenlooper                $8,875                     $53,250
John P. Zanotti                      $13,333                    $80,000

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

Diversified Small Cap               1.05%
Growth Fund

--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
GROWTH OPPORTUNITIES FUND                         1.15% for Class A shares
--------------------------------------------------------------------------------
                                                  1.90% for Class C shares
--------------------------------------------------------------------------------
                                                  0.90% for Class Y shares
--------------------------------------------------------------------------------
                                                  0.75% 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
                                         03/31/10        03/31/09      03/31/08
                                         --------        --------      --------
Mid Cap Growth Fund(1)                  $6,166,823      $6,821,984    $9,248,908
Growth Opportunities Fund(2)             $321,163        $341,272      $488,853
Large Cap Core Equity Fund(3)            $341,730        $432,371      $653,058
Large Cap Growth Fund (4)               $5,987,078      $6,821,984    $9,248,908
Diversified Small Cap Growth Fund (5)    $289,583        $321,173      $181,305

ADMINISTRATIVE FEES                 FOR THE FISCAL YEAR  FOR THE FISCAL YEAR  FOR THE FISCAL YEAR
                                       ENDED 03/31/10       ENDED 03/31/09       ENDED 03/31/08
                                       --------------       --------------       --------------
Mid Cap Growth Fund                      $1,541,720           $1,705,505           $2,312,246
Large Cap Core Equity Fund                $105,149             $133,037             $201,368
Growth Opportunities Fund                 $77,390              $69,589              $98,026
Large Cap Growth Fund                    $1,682,037           $2,035,336           $1,993,889
Diversified Small Cap Growth Fund         $55,159              $61,176              $34,534

                                                          FOR THE          FOR THE          FOR THE
                                                        FISCAL YEAR      FISCAL YEAR      FISCAL YEAR
                                                           ENDED            ENDED            ENDED
                                                         03/31/10          03/31/09         03/31/08
                                                      --------------------------------------------------
Mid Cap Growth Fund - TCW                                $1,559,004       $1,751,312      $2,568,921
Mid Cap Growth Fund - Westfield                          $2,299,057       $2,506,585      $3,210,000
Large Cap Growth Fund - Navellier                        $3,364,790       $4,027,547      $3,976,088
Large Cap Core Equity Fund - Todd/Veredus                 $170,923         $215,824        $326,436
Growth Opportunities Fund - Westfield                     $231,710         $198,950        $292,708
Diversified Small Cap Growth Fund - Ft. Washington        $138,126         $152,644         $81,860

                                            OTHER ACCOUNTS MANAGED
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER              TYPE OF ACCOUNT              NUMBER OF    TOTAL                  BENEFICIAL OWNERSHIP
                                                            ACCOUNTS     ASSETS IN              IN FUND
                                                                         ACCOUNTS
----------------------------------------------------------------------------------------------------------------------
Susan Suvall                 Registered Investment              3        $396.7 Million         None
(TCW)                        Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            8        $237.6 Million
                             Vehicles
----------------------------------------------------------------------------------------------------------------------
                             Other Accounts                     9        $784.2 Million
----------------------------------------------------------------------------------------------------------------------
John A. Gibbons              Registered Investment              3        $396.7 Million         None
(TCW)                        Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            8        $237.6 Million
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                     9        $784.2 Million
----------------------------------------------------------------------------------------------------------------------
William Muggia (Westfield)   Registered Investment              9        $2.1 Billion           None
                             Companies
------------------------------------------------------------------------------------------------
                             Other Pooled Investment            15       $762.6 Million
                             Vehicles
------------------------------------------------------------------------------------------------
                             Other Accounts                    587       $9.6 Billion

----------------------------------------------------------------------------------------------------------------------

                                                   OTHER ACCOUNTS MANAGED
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER              TYPE OF ACCOUNT               NUMBER OF    TOTAL                 BENEFICIAL
                                                             ACCOUNTS     ASSETS IN             OWNERSHIP
                                                                          ACCOUNTS              IN FUND
-------------------------------------------------------------------------------------------------------------------
Curtiss Scott             Registered Investment Companies        1        $68.8 Million         $100,001-$500,000
------------------------------------------------------------------------------------------------
                          Other Pooled Investment                0        $0
                          Vehicles
------------------------------------------------------------------------------------------------
                          Other Accounts                        74        $2.0 Billion
-------------------------------------------------------------------------------------------------------------------
John White                Registered Investment Companies        5        $181.1 Million        $100,001-$500,000
------------------------------------------------------------------------------------------------
                          Other Pooled Investment                0        $0
                          Vehicles
------------------------------------------------------------------------------------------------
                          Other Accounts                        70        $1.9 Billion
-------------------------------------------------------------------------------------------------------------------

                                                   OTHER ACCOUNTS MANAGED
-----------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER               TYPE OF ACCOUNT                NUMBER OF    TOTAL                BENEFICIAL OWNERSHIP
                                                               ACCOUNTS     ASSETS IN            IN FUND
                                                                            ACCOUNTS
-----------------------------------------------------------------------------------------------------------------------
Louis Navellier           Registered Investment Companies         2         $48 Million          $500,001-$1,000,000
-----------------------------------------------------------------------------------------------------------------------
                          Other Pooled Investment                 0         $0
                          Vehicles
-------------------------------------------------------------------------------------------------
                          Other Accounts                        4,403       $1.66 Billion
-----------------------------------------------------------------------------------------------------------------------
Shawn Price               Registered Investment Companies         1         $12 Million          $100,001-$500,000
-------------------------------------------------------------------------------------------------
                          Other Pooled Investment                 0         $0
                          Vehicles
-------------------------------------------------------------------------------------------------
                          Other Accounts                        3,893       $1.51 Billion
-----------------------------------------------------------------------------------------------------------------------

                                                   OTHER ACCOUNTS MANAGED
-----------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER            TYPE OF ACCOUNT               NUMBER OF   TOTAL                 BENEFICIAL OWNERSHIP
                                                           ACCOUNTS    ASSETS IN             IN FUND
                                                                       ACCOUNTS
-----------------------------------------------------------------------------------------------------------------
William Muggia            Registered Investment               9        $2.5 Billion          None
                          Companies
---------------------------------------------------------------------------------------------
                          Other Pooled Investment             15       $762.6 Million
                          Vehicles
---------------------------------------------------------------------------------------------
                          Other Accounts                     587       $9.6 Billion


-----------------------------------------------------------------------------------------------------------------

                                                   OTHER ACCOUNTS MANAGED
------------------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGER            TYPE OF ACCOUNT                  NUMBER OF   TOTAL               BENEFICIAL OWNERSHIP
                                                              ACCOUNTS    ASSETS IN           IN FUND
                                                                          ACCOUNTS
------------------------------------------------------------------------------------------------------------------
Richard R. Jandrain     Registered Investment Companies          1        $138.6 Million       $100,001-$500,000
III
-----------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-----------------------------------------------------------------------------------------------
                        Other Accounts                          14        $778.6 Million
------------------------------------------------------------------------------------------------------------------
Daniel J. Kapusta       Registered Investment Companies          1        $138.6 Million       $100,001-$500,000
-----------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-----------------------------------------------------------------------------------------------
                        Other Accounts                          14        $778.6 Million
------------------------------------------------------------------------------------------------------------------
David K. Robinson       Registered Investment Companies          1        $138.6 Million        $50,001-$100,000
-----------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-----------------------------------------------------------------------------------------------
                        Other Accounts                          14        $778.6 Million
------------------------------------------------------------------------------------------------------------------
Bihag Patel             Registered Investment Companies          1        $138.6 Million       $10,001 - $50,000
-----------------------------------------------------------------------------------------------
                        Other Pooled Investment Vehicles         0        0
-----------------------------------------------------------------------------------------------
                        Other Accounts                          14        $778.6 Million
------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------
NAME OF FUND                            FISCAL PERIOD          COMMISSION AMOUNT
--------------------------------------------------------------------------------
Growth Opportunities Fund                4-1-09 - 3-31-10      $134,934
--------------------------------------------------------------------------------
Growth Opportunities Fund                4-1-08 - 3-31-09      $68,924
--------------------------------------------------------------------------------
Growth Opportunities Fund                4-1-07 - 3-31-08      $105,373
--------------------------------------------------------------------------------
Large Cap Core Equity Fund               4-1-09 - 3-31-10      $44,457
--------------------------------------------------------------------------------
Large Cap Core Equity Fund               4-1-08 - 3-31-09      $103,981
--------------------------------------------------------------------------------
Large Cap Core Equity Fund               4-1-07 - 3-31-08      $130,630
--------------------------------------------------------------------------------
Mid Cap Growth Fund                      4-1-09 - 3-31-10      $1,902,728
--------------------------------------------------------------------------------
Mid Cap Growth Fund                      4-1-08 - 3-31-09      $2,330,956
--------------------------------------------------------------------------------
Mid Cap Growth Fund                      4-1-07 - 3-31-08      $2,037,669
--------------------------------------------------------------------------------
Large Cap Growth Fund                    4-1-09 - 3-31-10      $679,025
--------------------------------------------------------------------------------
Large Cap Growth Fund                    4-1-08 - 3-31-09      $1,101,097
--------------------------------------------------------------------------------
Large Cap Growth Fund                    4-1-07 - 3-31-08      $581,620
--------------------------------------------------------------------------------
Diversified Small Cap Growth Fund        4-1-09 - 3-31-10      $86,481
--------------------------------------------------------------------------------
Diversified Small Cap Growth Fund        4-1-08 - 3-31-09      $150,276
--------------------------------------------------------------------------------
Diversified Small Cap Growth Fund        4-1-07 - 3-31-08      $63,541
--------------------------------------------------------------------------------

                                     BROKERAGE                BROKERAGE
                                     TRANSACTIONS             COMMISSIONS FROM
FUND                                 DIRECTED TO RESEARCH     RESEARCH
--------------------------------------------------------------------------------
Growth Opportunities Fund            $457,797                 $579
Mid Cap Growth Fund                  $153,694,113             $306,937
Large Cap Growth Fund                $164,573,896             $131,248
Large Cap Core Equity Fund           $23,369,955              $27,521
Diversified Small Cap Growth Fund    $45,782,480              $15,719

                                             Amount          Percentage of          Percentage of
                                               of              Aggregate              Aggregate
Broker             Fund                   Commissions       Commissions Paid     Transactions Effected
---------          ----                   -----------       ----------------     ---------------------
Cowen & Company    Mid Cap Growth Fund       $2,608               0.14%                  0.10%

MARCH 31, 2009 FISCAL YEAR
                                             Amount          Percentage of          Percentage of
                                               of              Aggregate              Aggregate
Broker             Fund                   Commissions       Commissions Paid     Transactions Effected
---------          ----                   -----------       ----------------     ---------------------
Cowen & Company    Mid Cap Growth Fund       $21,388              0.92%                  0.90%

MARCH 31, 2008 FISCAL YEAR
                                             Amount          Percentage of          Percentage of
                                               of              Aggregate              Aggregate
Broker             Fund                   Commissions       Commissions Paid     Transactions Effected
---------          ----                   -----------       ----------------     ---------------------
Stifel, Nicolaus
 & Co. Inc.        Mid Cap Growth Fund       $1,143               0.06%                  0.03%
Cowen & Company    Mid Cap Growth Fund       $7,720               0.38%                  0.31%

----------------------------------------------------------------------------------------------------------------------
                                                  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
----------------------------------------------------------------------------------------------------------------------
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           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
                                          $3,627,106     March 31, 2017
                                          $5,932,361     March 31, 2018

Growth Opportunities Fund                 $21,887,780    March 31, 2011
                                          $17,098,132    March 31, 2012
                                          $1,976,702     March 31, 2013
                                          $3,131,509     March 31, 2017
                                          $766,520       March 31, 2018


Large Cap Growth Fund                     $26,177,120    March 31, 2015
                                          $41,526,594    March 31, 2017
                                          $270,375,659   March 31, 2018


Large Cap Core Equity Fund                $1,053,666     March 31, 2017
                                          $9,043,103     March 31, 2018

Mid Cap Growth Fund                       $55,424,720    March 31, 2017
                                          $76,128,744    March 31, 2018

--------------------------------------------------------------------------------------------------------------
FUND                                  SHAREHOLDER                                                   % OF CLASS
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Pershing LLC                                                  10.34%
Class A                               1 Pershing Plaza
                                      Jersey City, NJ 07399
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Prudential Investment Management                              10.30%
Class A                               100 Mulberry Street
                                      Newark, NJ 07102
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Fifth Third Bank  - Trustee                                   9.09%
Class A                               FBO Various Fascorp Record Kept Plans
                                      8515 E. Orchard 2T2 Centennial, CO
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Merrill Lynch, Pierce Fenner & Smith Incorporated             35.18%
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             47.75%
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.*                    14.54%
Class Y                               400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Prudential Investment Management Service                      66.04%
Class Y                               100 Mulberry Street
                                      Newark, NJ 07102
--------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund -               Merrill Lynch, Pierce Fenner & Smith Incorporated             9.83%
Class Y                               For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Growth  Opportunities Fund-Class C    Merrill Lynch, Pierce Fenner & Smith Incorporated             19.02%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------
FUND                                  SHAREHOLDER                                                   % OF CLASS
--------------------------------------------------------------------------------------------------------------
Growth Opportunities Fund-Class Y     Charles Schwab & Co.                                          35.47%
                                      101 Montgomery St
                                      San Francisco, CA 94104
--------------------------------------------------------------------------------------------------------------
Growth Opportunities Fund-Class Y     Merrill Lynch, Pierce Fenner & Smith Incorporated             52.83%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Growth Opportunities                  Morgan Keegan Co. Inc.                                        16.12%
Fund-Institutional Shares             50 North Front Street
                                      Memphis, TN 38103
--------------------------------------------------------------------------------------------------------------
Growth Opportunities                  Charles Schwab & Co.                                          16.41%
Fund-Institutional Shares             101 Montgomery St
                                      San Francisco, CA 94104
--------------------------------------------------------------------------------------------------------------
Growth Opportunities                  Ventura County Community Foundation                           7.55%
Fund-Institutional Shares             1317 Del Norte Rd Suite 150
                                      Camarillo, CA 93010
--------------------------------------------------------------------------------------------------------------
Growth Opportunities                  UBS Financial Services Inc                                    38.95%
Fund-Institutional Shares             FBO Memorial Health
                                      17360 Brookhurst St
                                      Fountain Valley, CA 92708
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class A           Pershing LLC                                                  5.42%
                                      1 Pershing Plaza
                                      Jersey City, NJ 07399
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class A           Charles Schwab & Company, Inc.                                6.15%
                                      Mutual Funds - Special Custody
                                      101 Montgomery Street San Francisco, CA
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class B           Merrill Lynch, Pierce Fenner & Smith Incorporated             17.96%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class B           Pershing LLC                                                  8.92%
                                      1 Pershing Plaza
                                      Jersey City, NJ 07399
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class C           Merrill Lynch, Pierce Fenner & Smith Incorporated             28.84%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class C           Pershing LLC                                                  6.03%
                                      1 Pershing Plaza
                                      Jersey City, NJ 07399
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class Y           Merrill Lynch, Pierce Fenner & Smith Incorporated             84.17%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund-Class Y           Wilmington Trust Risc                                         5.33%
                                      FBO Tri-State Breeders
                                      PO Box 52129
                                      Phoenix, AZ 85072
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund-Class A    Fifth Third Bank  - Trustee                                   20.42%
                                      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.*                    11.51%
                                      400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund-Class A    The Western & Southern Financial Group*,**                    43.18%
                                      400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund - Class C  Merrill Lynch, Pierce Fenner & Smith Incorporated             10.99%
                                      For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------
FUND                                  SHAREHOLDER                                                   % OF CLASS
--------------------------------------------------------------------------------------------------------------
Large Cap Core Equity Fund - Class C  The Western & Southern Financial Group*                       12.39%
                                      400 Broadway  Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Fifth Third Bank  - Trustee                                   30.88%
-Class A                              FBO Various Fascorp Record Kept Plans
                                      8515 E. Orchard 2T2 Centennial, CO
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     US Bank National                                              5.73%
-Class A                              1555 N Rivercenter Drive Suite 302
                                      Milwaukee, WI 53212
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Western & Southern Financial Group*                           24.81%
-Class Y                              400 Broadway Cincinnati, OH
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Prudential Investment Mutual Fund                             11.28%
-Class Y                              100 Mulberry Street
                                      Newark, NJ 07102
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Charles Schwab & Co.                                          40.38%
-Class Y                              101 Montgomery St
                                      San Francisco, CA 94104
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Dingle & Co                                                   6.00%
-Class Y                              PO Box 75000
                                      Detroit, MI 48275
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Wachovia Bank                                                 8.47%
-Class Y                              FBO Retirement
                                      1525 West WT Harris Blvd
                                      Charlotte, NC 28288
--------------------------------------------------------------------------------------------------------------
Diversified Small Cap Growth Fund     Merrill Lynch, Pierce Fenner & Smith Incorporated             19.52%
-Class C                              For the Sole Benefit of its Customers
                                      4800 Deer Lake Drive East Jacksonville, FL
--------------------------------------------------------------------------------------------------------------

SUB-ADMINISTRATIVE FEES                FOR THE FISCAL YEAR  FOR THE FISCAL YEAR  FOR THE FISCAL YEAR
                                          ENDED 03/31/10       ENDED 03/31/09       ENDED 03/31/08
                                          --------------       --------------       --------------
Mid Cap Growth Fund                          $397,024             $648,529             $920,499
Large Cap Core Equity Fund                   $54,517              $53,126              $80,161
Growth Opportunities Fund                    $44,790              $26,526              $39,007
Large Cap Growth Fund                        $444,524             $813,606             $794,217
Diversified Small Cap Growth Fund            $44,864              $24,423              $13,830

COMPLIANCE FEES                       FOR THE FISCAL YEAR  FOR THE FISCAL YEAR  FOR THE FISCAL YEAR
                                         ENDED 03/31/10       ENDED 03/31/09       ENDED 03/31/08
                                         --------------       --------------       --------------
Mid Cap Growth Fund                          $6,192               $5,387               $4,400
Large Cap Core Equity Fund                   $2,257               $1,296               $1,754
Growth Opportunities Fund                    $2,672               $1,319               $1,016
Large Cap Growth Fund                        $5,975               $5,387               $4,400
Diversified Small Cap Growth Fund            $2,150               $1,115                $480

APPENDIX

DESCRIPTION OF SECURITIES RATINGS

Moody's Investors Service, Inc. ("Moody's"), Standard &Poor's(R) ("S&P") and Fitch Ratings, Inc. ("Fitch") are private services that provide ratings of the credit quality of debt obligations. A description of the ratings assigned by Moody's, S&P(R) and Fitch are provided below. These ratings represent the opinions of these rating services as to the quality of the securities that they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. The Advisor and/or Sub-Advisor attempts to discern variations in credit rankings of the rating services and to anticipate changes in credit ranking. However, subsequent to purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum rating required for purchase by the Fund. In that event, the Advisor and/or Sub-Advisor will consider whether it is in the best interest of the Fund to continue to hold the securities.

Moody's credit ratings must be construed solely as statements of opinion and not as statements of fact or recommendations to purchase, sell or hold any securities.

An S&P issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). The opinion evaluates the obligor's capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. It takes into consideration the creditworthiness of guarantors, insurers or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell or hold a financial obligation inasmuch as it does not comment as to market price or suitability for a particular investor.

Fitch credit ratings are an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, and repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving their money back in accordance with the terms on which they invested. Fitch's credit-ratings cover the global spectrum of corporate, sovereign (including supra-national and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.

SHORT-TERM CREDIT RATINGS

Moody's short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.

Moody's employs the following:

"P-1" - Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

"P-2" - Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

"P-3" - Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

"NP" - Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider.

An S&P short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days, including commercial paper. The following summarizes the rating categories used by S&P for short-term issues:

"A-1" - Obligations are rated in the highest category and indicate that the obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

"B" - Obligations are regarded as having significant speculative characteristics. Ratings of "B-1," "B-2," and "B-3" may be assigned to indicate finer distinctions within the "B" category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

"B-1" - Obligations are regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative - grade obligors.

"B-2" - Obligations are regarded as having significant speculative characteristics and the obligor has an average speculative - grade capacity to meet its financial commitments over the short-term compared to other speculative
- grade obligors.

"B-3" - Obligations are regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative - grade obligors.

"C" - Obligations are currently vulnerable to nonpayment and are dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation.

"D" - Obligations are in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Local Currency and Foreign Currency Risks - Country risk considerations are a standard part of S&P's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream, and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as "short term" based on market convention. Typically, this means up to 13 months for corporate, structured and sovereign obligations, and up to 36 months for obligations in U.S. public finance markets. The following summarizes the rating categories used by Fitch for short-term obligations:

"F1" - Securities possess the highest short-term credit quality. This designation indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.

"F2" - Securities possess good short-term credit quality. This designation indicates good intrinsic capacity for timely payment of financial commitments.

"F3" - Securities possess fair short-term credit quality. This designation indicates that the intrinsic capacity for timely payment of financial commitments is adequate.

"B" - Securities possess speculative short-term credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

"C" - Securities possess high short-term default risk. This designation indicates that default is a real possibility.

"RD" (Restricted default) - This designation indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.

"D" (Default) - This designation indicates a broad-based default event for an entity, or the default of a specific short-term obligation.

Specific limitations relevant to the Short-Term Ratings scale include:

o The ratings do not predict a specific percentage of default likelihood over any given time period.

o The ratings do not opine on the market value of any issuer's securities or stock, or the likelihood that this value may change.

o The ratings do not opine on the liquidity of the issuer's securities or stock.

o The ratings do not opine on the possible loss severity on an obligation should an obligation default.

o The ratings do not opine on any quality related to an issuer or transaction's profile other than the agency's opinion on the relative vulnerability to default of the rated issuer or obligation.

LONG-TERM CREDIT RATINGS

Moody's long-term obligation ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings use Moody's Global Scale and reflect both the likelihood of default and any financial loss suffered in the event of default.

The following summarizes the ratings used by Moody's for long-term debt:

"Aaa" - Obligations rated "Aaa" are judged to be of the highest quality, with minimal credit risk.

"Aa" - Obligations rated "Aa" are judged to be of high quality and are subject to very low credit risk.

"A" - Obligations rated "A" are considered upper-medium grade and are subject to low credit risk.

"Baa" - Obligations rated "Baa" are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

"Ba" - Obligations rated "Ba" are judged to have speculative elements and are subject to substantial credit risk.

"B" - Obligations rated "B" are considered speculative and are subject to high credit risk.

"Caa" - Obligations rated "Caa" are judged to be of poor standing and are subject to very high credit risk.

"Ca" - Obligations rated "Ca" are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

"C" - Obligations rated "C" are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from "Aa" through "Caa." The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

Issue credit ratings are based, in varying degrees, on the following considerations:

o Likelihood of payment--capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;

o Nature of and provisions of the obligation;

o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

The following summarizes the ratings used by S&P for long-term issues:

"AAA" - An obligation rated "AAA" has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

"AA" - An obligation rated "AA" differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Obligations rated "BB," "B," "CCC," "CC," and "C" are regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation and "C" the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

"B" - An obligation rated "B" is more vulnerable to nonpayment than obligations rated "BB," but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to nonpayment.

"C" - A "C" rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the "C" rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument's terms.

"D" - An obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payment will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

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.

"N.R." - This indicates that no rating has been requested, that there is insufficient information on which to base a rating or that S&P does not rate a particular obligation as a matter of policy.

Local Currency and Foreign Currency Risks - Country risk considerations are a standard part of S&P's analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government's own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment.

The following summarizes long-term ratings used by Fitch:

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

"AA" - Securities considered to be very high credit quality. "AA" ratings denote expectations of very low credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

"A" - Securities considered to be high credit quality. "A" ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

"BBB" - Securities considered to be good credit quality. "BBB" ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

"BB" - Securities considered to be speculative. "BB" ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.

"B" - Securities considered to be highly speculative. "B" ratings indicate that material credit risk is present.

"CCC" - Securities have substantial credit risk. "CCC" ratings indicate that substantial credit risk is present.

"CC" - Securities have very high levels of credit risk. "CC" ratings indicate very high levels of credit risk.

"C" - Securities have exceptionally high levels of credit risk. "C" indicates exceptionally high levels of credit risk.

Defaulted obligations typically are not assigned "D" ratings, but are instead rated in the "B" to "C" rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.

Note: The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the "AAA" obligation rating category, or to corporate or public finance obligation ratings in the categories below "B."

Specific limitations relevant to the corporate obligation rating scale include:

o The ratings do not predict a specific percentage of default likelihood or expected loss over any given time period.

o The ratings do not opine on the market value of any issuer's securities or stock, or the likelihood that this value may change.

o The ratings do not opine on the liquidity of the issuer's securities or stock.

o The ratings do not opine on the suitability of an issuer as a counterparty to trade credit.

o The ratings do not opine on any quality related to an issuer's business, operational or financial profile other than the agency's opinion on its relative vulnerability to default and relative recovery should a default occur.

NOTES TO SHORT-TERM AND LONG-TERM CREDIT RATINGS

Watchlist: Moody's uses the Watchlist to indicate that a rating is under review for possible change in the short-term. A rating can be placed on review for possible upgrade ("UPG"), on review for possible downgrade ("DNG"), or more rarely with direction uncertain ("UNC"). A credit is removed from the Watchlist when the rating is upgraded, downgraded or confirmed.

Rating Outlooks: A Moody's rating outlook is an opinion regarding the likely direction of a rating over the medium term. Where assigned, rating outlooks fall into the following four categories: Positive ("POS"), Negative ("NEG"), Stable ("STA") and Developing ("DEV" -- contingent upon an event). In the few instances where an issuer has multiple outlooks of differing directions, an "(m)" modifier (indicating multiple, differing outlooks) will be displayed, and Moody's written research will describe any differences and provide the rationale for these differences. A "RUR" (Rating(s) Under Review) designation indicates that the issuer has one or more ratings under review for possible change, and thus overrides the outlook designation. When an outlook has not been assigned to an eligible entity, "NOO" (No Outlook) may be displayed.

Creditwatch: CreditWatch highlights the potential direction of a short- or long-term rating. It focuses on identifiable events and short-term trends that cause ratings to be placed under special surveillance by S&P's analytical staff. These may include mergers, recapitalizations, voter referendums, regulatory action or anticipated operating developments. Ratings appear on CreditWatch when such an event or a deviation from an expected trend occurs and additional information is necessary to evaluate the current rating. A listing, however, does not mean a rating change is inevitable, and whenever possible, a range of alternative ratings will be shown. CreditWatch is not intended to include all ratings under review, and rating changes may occur without the ratings having first appeared on CreditWatch. The "positive" designation means that a rating may be raised; "negative" means a rating may be lowered; and "developing" means that a rating may be raised, lowered or affirmed.

Rating Outlook: An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An outlook is not necessarily a precursor of a rating change or future CreditWatch action.

o "Positive" means that a rating may be raised.

o "Negative" means that a rating may be lowered.

o "Stable" means that a rating is not likely to change.

o "Developing" means a rating may be raised or lowered.

Rating Watch: Rating Watches indicate that there is a heightened probability of a rating change and the likely direction of such a change. These are designated as "Positive," indicating a potential upgrade, "Negative," for a potential downgrade, or "Evolving," if ratings may be raised, lowered or affirmed. However, ratings that are not on Rating Watch can be raised or lowered without being placed on Rating Watch first if circumstances warrant such an action.

A Rating Watch is typically event-driven and, as such, it is generally resolved over a relatively short period. The event driving the Watch may be either anticipated or have already occurred, but in both cases, the exact rating implications remain undetermined. The Watch period is typically used to gather further information and/or subject the information to further analysis. Additionally, a Watch may be used where the rating implications are already clear, but where a triggering event (e.g. shareholder or regulatory approval) exists. The Watch will typically extend to cover the period until the triggering event is resolved, or its outcome is predictable with a high enough degree of certainty to permit resolution of the Watch.

Rating Watches can be employed by all analytical groups and are applied to the ratings of individual entities and/or individual instruments. At the lowest categories of speculative grade ("CCC", "CC" and "C") the high volatility of credit profiles may imply that almost all ratings should carry a Watch. Watches are nonetheless only applied selectively in these categories, where a committee decides that particular events or threats are best communicated by the addition of the Watch designation.

Rating Outlook: Timing is informative but not critical to the choice of a Watch rather than an Outlook. A discrete event that is largely clear and the terms of which are defined, but which will not happen for more than six months - such as a lengthy regulatory approval process - would nonetheless likely see ratings placed on Watch rather than a revision to the Outlook.

An Outlook revision may, however, be deemed more appropriate where a series of potential event risks has been identified, none of which individually warrants a Watch but which cumulatively indicate heightened probability of a rating change over the following one to two years.

A revision to the Outlook may also be appropriate where a specific event has been identified, but where the conditions and implications of that event are largely unclear and subject to high execution risk over an extended period - for example a proposed, but politically controversial, privatization.

MUNICIPAL NOTE RATINGS

Moody's uses three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade ("MIG") and are divided into three levels - "MIG-1" through "MIG-3". In addition, those short-term obligations that are of speculative quality are designated "SG", or speculative grade. MIG ratings expire at the maturity of the obligation. The following summarizes the ratings used by Moody's for these short-term obligations:

"MIG-1" - This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.

"MIG-2" - This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

"MIG-3" - This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

"SG" - This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

In the case of variable rate demand obligations ("VRDOs"), a two-component rating is assigned; a long- or short-term debt rating and a demand obligation rating. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the ability to receive purchase price upon demand ("demand feature"), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or "VMIG" rating.

When either the long- or short-term aspect of a VRDO is not rated, that piece is designated "NR", e.g., "Aaa/NR" or "NR/VMIG-1".

VMIG rating expirations are a function of each issue's specific structural or credit features.

"VMIG-1" - This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

"VMIG-2" - This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

"VMIG-3" - This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

"SG" - This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

An S&P U.S. municipal note rating reflects the liquidity factors and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:

o Amortization schedule--the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

o Source of payment--the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

Note rating symbols are as follows:

"SP-1" - The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay debt service are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative capacity to pay principal and interest.

Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings.