UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03651
Touchstone Strategic Trust – March 5/3
(Exact name of registrant as specified in charter)
303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203
(Address of principal executive offices) (Zip code)
Jill T. McGruder
303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-638-8194
Date of fiscal year end: July 31
Date of reporting period: January 31, 2013
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
January 31, 2013
(Unaudited)
Semi-Annual Report
Touchstone Strategic Trust
Touchstone International Value Fund
Touchstone Micro Cap Value Fund
Touchstone Small Company Value Fund
Touchstone Strategic Income Fund
Table of Contents
Page | |
Tabular Presentation of Portfolios of Investments | 3 - 4 |
Portfolios of Investments: | |
Touchstone International Value Fund | 5 |
Touchstone Micro Cap Value Fund | 7 |
Touchstone Small Company Value Fund | 11 |
Touchstone Strategic Income Fund | 13 |
Statements of Assets and Liabilities | 19 - 20 |
Statements of Operations | 21 |
Statements of Changes in Net Assets | 22 - 23 |
Statements of Changes in Net Assets - Capital Stock Activity | 24 - 27 |
Financial Highlights | 28 - 35 |
Notes to Financial Statements | 36 - 52 |
Other Items | 53 - 58 |
Privacy Protection Policy | 59 |
2 |
Tabular Presentation of Portfolios of Investments (Unaudited)
January 31, 2013
Touchstone International Value Fund | ||||
Sector Allocation* | (% of Net Assets) | |||
Financials | 24.4 | % | ||
Industrials | 19.2 | |||
Consumer Staples | 11.7 | |||
Energy | 11.1 | |||
Health Care | 7.7 | |||
Information Technology | 6.1 | |||
Consumer Discretionary | 6.0 | |||
Utilities | 5.1 | |||
Materials | 4.4 | |||
Telecommunication Services | 3.2 | |||
Investment Funds | 1.4 | |||
Other Assets/Liabilities (Net) | (0.3 | ) | ||
Total | 100.0 | % |
Touchstone Micro Cap Value Fund | ||||
Sector Allocation* | (% of Net Assets) | |||
Financials | 37.0 | % | ||
Industrials | 14.5 | |||
Information Technology | 11.4 | |||
Consumer Discretionary | 11.0 | |||
Health Care | 6.6 | |||
Consumer Staples | 5.4 | |||
Energy | 3.3 | |||
Materials | 3.3 | |||
Utilities | 2.9 | |||
Telecommunication Services | 1.4 | |||
Investment Fund | 4.2 | |||
Other Assets/Liabilities (Net) | (1.0 | ) | ||
Total | 100.0 | % |
Touchstone Small Company Value Fund | ||||
Sector Allocation* | (% of Net Assets) | |||
Financials | 21.6 | % | ||
Industrials | 19.3 | |||
Information Technology | 14.6 | |||
Consumer Discretionary | 12.1 | |||
Materials | 9.9 | |||
Energy | 7.8 | |||
Consumer Staples | 4.5 | |||
Health Care | 4.3 | |||
Utilities | 1.9 | |||
Investment Funds | 12.0 | |||
Other Assets/Liabilities (Net) | (8.0 | ) | ||
Total | 100.0 | % |
* Sector classifications are based upon the Global Industry Classification Standard (GICS®).
3 |
Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)
Touchstone Strategic Income Fund | ||||
Credit Quality** | (% of Fixed Income Securities) | |||
AAA/Aaa | 26.4 | % | ||
AA/Aa | 1.6 | |||
A/A | 9.7 | |||
BBB/Baa | 40.6 | |||
BB/Ba | 12.8 | |||
B/B | 6.8 | |||
NR | 2.1 | |||
100.0 | % | |||
Credit Quality** | (% of Preferred Stocks) | |||
A/A | 12.2 | % | ||
BBB/Baa | 53.1 | |||
BB/Ba | 22.6 | |||
NR | 12.1 | |||
100.0 | % | |||
Sector Allocation* | (% of Net Assets) | |||
Fixed Income Securities | 50.1 | % | ||
Preferred Stocks | 32.7 | |||
Common Stocks | ||||
Financials | 4.1 | |||
Utilities | 2.1 | |||
Health Care | 2.0 | |||
Energy | 1.9 | |||
Telecommunication Services | 1.4 | |||
Industrials | 1.4 | |||
Information Technology | 0.5 | |||
Consumer Staples | 0.4 | |||
Investment Funds | 4.3 | |||
Other Assets/Liabilities (Net) | (0.9 | ) | ||
Total | 100.0 | % |
* | Sector classifications are based upon the Global Industry Classification Standard (GICS®). |
** | Composite of Standard and Poors, Moody's and Fitch ratings. |
4 |
Portfolio of Investments
Touchstone International Value Fund – January 31, 2013 (Unaudited)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 98.9% | ||||||||
United Kingdom — 21.9% | ||||||||
Anglo American PLC | 57,198 | $ | 1,711,350 | |||||
Barclays PLC | 486,931 | 2,324,530 | ||||||
BP PLC | 466,546 | 3,453,664 | ||||||
Dairy Crest Group PLC | 230,547 | 1,522,550 | ||||||
DS Smith PLC | 534,928 | 1,880,037 | ||||||
Imperial Tobacco Group PLC | 95,539 | 3,553,242 | ||||||
Invensys PLC | 397,272 | 2,167,443 | ||||||
National Grid PLC | 251,605 | 2,759,388 | ||||||
Sage Group PLC (The) | 255,886 | 1,309,624 | ||||||
Vodafone Group PLC | 1,284,280 | 3,505,434 | ||||||
24,187,262 | ||||||||
Japan — 13.6% | ||||||||
Amada Co. Ltd. | 372,000 | 2,326,907 | ||||||
Canon, Inc. | 64,200 | 2,362,436 | ||||||
ITOCHU Corp. | 280,700 | 3,173,971 | ||||||
Mabuchi Motor Co. Ltd. | 44,900 | 2,015,578 | ||||||
Nintendo Co. Ltd. | 4,000 | 390,180 | ||||||
Sumitomo Corp. | 167,600 | 2,166,364 | ||||||
Yokogawa Electric Corp. | 232,300 | 2,588,592 | ||||||
15,024,028 | ||||||||
Norway — 8.0% | ||||||||
DNB ASA | 181,501 | 2,538,336 | ||||||
Marine Harvest ASA* | 2,651,070 | 2,654,516 | ||||||
Orkla ASA | 216,867 | 1,913,451 | ||||||
Seadrill Ltd. | 40,300 | 1,599,104 | ||||||
Seadrill Ltd. | 3,248 | 128,602 | ||||||
8,834,009 | ||||||||
Switzerland — 7.8% | ||||||||
ABB Ltd. | 66,772 | 1,432,217 | ||||||
ABB Ltd. ADR | 32,000 | 685,120 | ||||||
Helvetia Holding AG | 1,877 | 766,228 | ||||||
Novartis AG | 54,749 | 3,729,947 | ||||||
Zurich Insurance Group AG | 6,762 | 1,945,268 | ||||||
8,558,780 | ||||||||
Netherlands — 7.5% | ||||||||
Delta Lloyd NV | 130,000 | 2,557,673 | ||||||
ING Groep NV* | 250,643 | 2,535,052 | ||||||
Royal Dutch Shell PLC | 89,522 | 3,173,729 | ||||||
8,266,454 | ||||||||
France — 6.2% | ||||||||
Casino Guichard Perrachon SA | 24,531 | 2,403,172 | ||||||
GDF Suez | 40,936 | 839,853 | ||||||
Sanofi | 36,025 | 3,514,993 | ||||||
UBISOFT Entertainment* | 10,600 | 102,331 | ||||||
6,860,349 | ||||||||
Singapore — 6.2% | ||||||||
Jardine Cycle & Carriage Ltd. | 110,000 | 4,498,121 | ||||||
United Overseas Bank Ltd. | 151,000 | 2,299,802 | ||||||
6,797,923 | ||||||||
Germany — 4.2% | ||||||||
Deutsche Boerse AG | 33,106 | 2,178,104 | ||||||
MTU Aero Engines Holding AG | 25,543 | 2,435,029 | ||||||
4,613,133 | ||||||||
Italy — 4.1% | ||||||||
Eni SpA | 71,591 | 1,797,333 | ||||||
Finmeccanica SpA* | 103,514 | 680,264 | ||||||
Snam SpA | 395,008 | 1,997,325 | ||||||
4,474,922 | ||||||||
Brazil — 2.8% | ||||||||
Brookfield Incorporacoes SA | 518,300 | 879,732 | ||||||
Embraer SA ADR | 67,800 | 2,235,366 | ||||||
3,115,098 | ||||||||
Spain — 2.7% | ||||||||
Banco Santander SA | 349,388 | 2,931,294 | ||||||
Austria — 2.5% | ||||||||
Erste Group Bank AG* | 82,000 | 2,759,536 | ||||||
United States — 2.3% | ||||||||
Philip Morris International, Inc. | 29,000 | 2,556,640 | ||||||
Russia — 1.9% | ||||||||
Rosneft Oil Co. GDR* | 240,300 | 2,138,670 | ||||||
Denmark — 1.9% | ||||||||
Danske Bank AS* | 110,125 | 2,112,431 | ||||||
Korea — 1.7% | ||||||||
Shinhan Financial Group Co. Ltd. | 50,850 | 1,912,260 | ||||||
Hong Kong — 1.7% | ||||||||
Dongyue Group | 870,100 | 581,159 | ||||||
Yue Yuen Industrial Holdings Ltd. | 382,700 | 1,283,003 | ||||||
1,864,162 | ||||||||
Israel — 1.1% | ||||||||
Teva Pharmaceutical Industries Ltd. ADR | 32,300 | 1,227,077 | ||||||
Luxembourg — 0.8% | ||||||||
ArcelorMittal | 40,188 | 688,362 | ||||||
Oriflame Cosmetics SA-SDR | 6,538 | 214,305 | ||||||
902,667 | ||||||||
Total Common Stocks | $ | 109,136,695 | ||||||
Investment Fund — 1.4% | ||||||||
Touchstone Institutional Money Market Fund^ | 1,571,546 | 1,571,546 |
5 |
Touchstone International Value Fund (Continued)
Market | ||||
Value | ||||
Total Investment Securities —100.3% | ||||
(Cost $105,738,447) | $ | 110,708,241 | ||
Liabilities in Excess of Other Assets — (0.3%) | (373,397 | ) | ||
Net Assets — 100.0% | $ | 110,334,844 |
* | Non-income producing security. |
^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
PLC - Public Limited Company
SDR - Special Drawing Rights
Other Information:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation inputs at Reporting Date:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 109,136,695 | $ | — | $ | — | $ | 109,136,695 | ||||||||
Investment Fund | 1,571,546 | — | — | 1,571,546 | ||||||||||||
$ | 110,708,241 |
See accompanying Notes to Financial Statements.
6 |
Portfolio of Investments
Touchstone Micro Cap Value Fund – January 31, 2013 (Unaudited)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 96.8% | ||||||||
Financials — 37.0% | ||||||||
1st United Bancorp, Inc. | 3,153 | $ | 20,242 | |||||
Access National Corp. | 1,674 | 25,964 | ||||||
ACNB Corp. | 1,097 | 17,848 | ||||||
AG Mortgage Investment Trust, Inc. REIT | 659 | 16,739 | ||||||
American Equity Investment Life Holding Co. | 33,239 | 448,062 | ||||||
American River Bankshares* | 2,032 | 14,854 | ||||||
Ameris Bancorp* | 1,481 | 19,638 | ||||||
AmeriServ Financial, Inc.* | 4,390 | 13,082 | ||||||
Ames National Corp. | 1,000 | 21,879 | ||||||
Apollo Residential Mortgage, Inc. REIT | 2,403 | 54,404 | ||||||
Artio Global Investors, Inc. | 4,975 | 9,801 | ||||||
AV Homes, Inc.* | 2,240 | 33,354 | ||||||
Bancorp, Inc.* | 4,907 | 57,804 | ||||||
BancTrust Financial Group, Inc.* | 3,873 | 11,038 | ||||||
Banner Corp. | 1,444 | 43,609 | ||||||
Berkshire Hills Bancorp, Inc. | 18,955 | 458,711 | ||||||
BNC Bancorp | 2,726 | 22,626 | ||||||
BofI Holding, Inc.* | 19,525 | 624,019 | ||||||
Bridge Capital Holdings* | 1,493 | 23,425 | ||||||
C&F Financial Corp. | 478 | 19,426 | ||||||
Camden National Corp. | 1,022 | 34,492 | ||||||
Capital City Bank Group, Inc.* | 1,753 | 19,634 | ||||||
Capital Southwest Corp. | 228 | 24,590 | ||||||
CapLease, Inc. REIT | 82,728 | 478,995 | ||||||
Cardinal Financial Corp. | 4,311 | 70,442 | ||||||
Cedar Realty Trust, Inc. REIT | 7,098 | 39,110 | ||||||
Center Bancorp, Inc. | 28,343 | 339,549 | ||||||
Centerstate Banks, Inc. | 4,691 | 41,515 | ||||||
Central Valley Community Bancorp | 1,529 | 13,455 | ||||||
CIFC Corp.* | 1,378 | 12,168 | ||||||
Citizens, Inc.* | 3,312 | 33,153 | ||||||
Codorus Valley Bancorp, Inc. | 996 | 15,687 | ||||||
Community Bankers Trust Corp.* | 4,221 | 12,663 | ||||||
Consolidated-Tomoka Land Co. | 288 | 10,365 | ||||||
Consumer Portfolio Services, Inc.* | 3,611 | 24,844 | ||||||
Crawford & Co. - Class B | 3,979 | 28,927 | ||||||
Dime Community Bancshares, Inc. | 33,470 | 462,221 | ||||||
Doral Financial Corp.* | 20,145 | 13,276 | ||||||
Eagle Bancorp, Inc.* | 2,716 | 61,273 | ||||||
EMC Insurance Group, Inc. | 13,444 | 335,562 | ||||||
Farmers Capital Bank Corp.* | 1,637 | 24,768 | ||||||
Farmers National Banc Corp. | 4,114 | 27,070 | ||||||
FBR & Co.* | 3,494 | 13,871 | ||||||
Fidelity Southern Corp.* | 2,021 | 22,615 | ||||||
First Bancorp, Inc. NC | 2,218 | 28,169 | ||||||
First Bancorp, Inc./ME | 587 | 9,721 | ||||||
First Busey Corp. | 2,193 | 9,956 | ||||||
First California Financial Group, Inc.* | 2,404 | 19,280 | ||||||
First Financial Holdings, Inc. | 18,900 | 286,335 | ||||||
First M&F Corp. | 1,742 | 14,319 | ||||||
First Marblehead Corp. (The)* | 11,686 | 11,342 | ||||||
First Merchants Corp. | 2,717 | 40,891 | ||||||
First Pactrust Bancorp, Inc. | 25,400 | 298,704 | ||||||
Firstbank Corp. | 1,788 | 20,902 | ||||||
German American Bancorp, Inc. | 1,739 | 38,832 | ||||||
GFI Group, Inc. | 12,035 | 40,919 | ||||||
Gladstone Capital Corp. | 31,383 | 284,958 | ||||||
Gladstone Commercial Corp. REIT | 18,800 | 347,988 | ||||||
Gramercy Capital Corp. REIT* | 3,226 | 11,581 | ||||||
Great Southern Bancorp, Inc. | 384 | 9,546 | ||||||
Guaranty Bancorp* | 17,243 | 35,865 | ||||||
Hanmi Financial Corp.* | 30,451 | 500,919 | ||||||
Heartland Financial USA, Inc. | 3,161 | 74,884 | ||||||
Heritage Commerce Corp.* | 1,580 | 10,286 | ||||||
Heritage Oaks Bancorp* | 1,727 | 10,017 | ||||||
Home Federal Bancorp, Inc. | 881 | 11,330 | ||||||
Home Loan Servicing Solutions Ltd. | 2,731 | 59,372 | ||||||
Homeowners Choice, Inc. | 968 | 21,877 | ||||||
HomeStreet, Inc.* | 405 | 10,214 | ||||||
Horizon Bancorp. | 821 | 16,363 | ||||||
ICG Group, Inc.* | 2,411 | 28,931 | ||||||
Imperial Holdings, Inc.* | 4,797 | 20,147 | ||||||
Independent Bank Corp. | 12,987 | 402,467 | ||||||
JMP Group, Inc. | 33,050 | 218,130 | ||||||
KCAP Financial, Inc. | 2,320 | 23,989 | ||||||
Lakeland Bancorp, Inc. | 5,594 | 54,542 | ||||||
Lakeland Financial Corp. | 745 | 18,208 | ||||||
LNB Bancorp, Inc. | 1,788 | 13,142 | ||||||
MainSource Financial Group, Inc. | 35,058 | 483,800 | ||||||
Marlin Business Services Corp. | 1,399 | 30,777 | ||||||
MBT Financial Corp.* | 3,705 | 13,301 | ||||||
Meadowbrook Insurance Group, Inc. | 18,474 | 115,832 | ||||||
Mercantile Bank Corp. | 582 | 9,603 | ||||||
MetroCorp Bancshares, Inc.* | 3,485 | 35,129 | ||||||
Middleburg Financial Corp. | 772 | 14,274 | ||||||
MidSouth Bancorp, Inc. | 1,851 | 27,876 | ||||||
MidWestOne Financial Group, Inc. | 978 | 23,374 | ||||||
Monmouth Real Estate Investment Corp. - Class A REIT | 45,146 | 490,286 | ||||||
MPG Office Trust, Inc. REIT* | 11,530 | 34,705 | ||||||
MVC Capital, Inc. | 24,422 | 297,216 | ||||||
National Bankshares, Inc. | 1,185 | 40,100 | ||||||
NewBridge Bancorp* | 3,201 | 20,550 | ||||||
NewStar Financial, Inc.* | 1,590 | 22,673 | ||||||
NGP Capital Resources Co. | 46,452 | 338,171 | ||||||
Northrim BanCorp, Inc. | 10,336 | 225,118 | ||||||
Oriental Financial Group, Inc. | 6,531 | 93,850 | ||||||
Orrstown Financial Services, Inc.* | 1,563 | 19,350 | ||||||
Pacific Mercantile Bancorp* | 2,271 | 13,172 | ||||||
Peapack Gladstone Financial Corp. | 1,285 | 18,877 | ||||||
Peoples Bancorp, Inc. | 2,068 | 44,876 | ||||||
Phoenix Cos., Inc. (The)* | 478 | 12,992 | ||||||
Preferred Bank* | 2,597 | 39,033 | ||||||
Premier Financial Bancorp, Inc. | 1,479 | 16,787 | ||||||
QCR Holdings, Inc. | 905 | 14,073 | ||||||
Radian Group, Inc. | 27,880 | 179,268 | ||||||
RAIT Financial Trust REIT | 4,777 | 32,914 | ||||||
Renasant Corp. | 25,652 | 498,931 | ||||||
Republic First Bancorp, Inc.* | 4,842 | 12,057 | ||||||
Safeguard Scientifics, Inc.* | 20,170 | 311,425 | ||||||
Seacoast Banking Corp. of Florida* | 12,030 | 21,534 |
7 |
Touchstone Micro Cap Value Fund (Continued)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 96.8% (Continued) | ||||||||
Financials — (Continued) | ||||||||
Security National Financial Corp. - Class A* | 1,453 | $ | 17,654 | |||||
Shore Bancshares, Inc. | 1,852 | 9,816 | ||||||
Sierra Bancorp | 1,822 | 22,702 | ||||||
Simmons First National Corp. - Class A | 14,188 | 362,220 | ||||||
Southwest Bancorp, Inc.* | 2,498 | 31,999 | ||||||
STAG Industrial, Inc. REIT | 2,528 | 49,852 | ||||||
State Bank Financial Corp. | 3,457 | 55,174 | ||||||
Sterling Bancorp. | 42,819 | 410,634 | ||||||
Stewart Information Services Corp. | 2,969 | 78,857 | ||||||
Stratus Properties, Inc.* | 1,065 | 11,065 | ||||||
Suffolk Bancorp* | 1,013 | 14,010 | ||||||
Sun Bancorp, Inc.* | 7,444 | 25,756 | ||||||
SWS Group, Inc.* | 3,867 | 25,484 | ||||||
Taylor Capital Group, Inc.* | 1,848 | 32,063 | ||||||
Triangle Capital Corp. | 2,980 | 81,175 | ||||||
Trico Bancshares | 971 | 16,002 | ||||||
United Community Banks, Inc.* | 3,472 | 36,421 | ||||||
United Community Financial Corp.* | 7,445 | 23,005 | ||||||
United Insurance Holdings Corp. | 29,154 | 172,009 | ||||||
Univest Corp. of Pennsylvania | 1,612 | 27,211 | ||||||
ViewPoint Financial Group, Inc. | 20,791 | 439,730 | ||||||
Virginia Commerce Bancorp, Inc.* | 4,486 | 58,946 | ||||||
Washington Trust Bancorp, Inc. | 17,913 | 472,187 | ||||||
Waterstone Financial, Inc.* | 1,414 | 10,577 | ||||||
West Bancorporation, Inc. | 3,298 | 36,509 | ||||||
Western Asset Mortgage Capital Corp. REIT | 1,576 | 34,120 | ||||||
Wilshire Bancorp, Inc.* | 3,690 | 22,657 | ||||||
WSFS Financial Corp. | 8,642 | 392,952 | ||||||
Yadkin Valley Financial Corp.* | 4,242 | 14,253 | ||||||
13,657,860 | ||||||||
Industrials — 14.5% | ||||||||
AAR Corp. | 10,116 | 190,687 | ||||||
Accuride Corp.* | 6,976 | 26,230 | ||||||
Aceto Corp. | 26,718 | 278,936 | ||||||
American Railcar Industries, Inc. | 1,378 | 54,211 | ||||||
American Superconductor Corp.* | 3,676 | 9,741 | ||||||
American Woodmark Corp.* | 1,760 | 48,946 | ||||||
Apogee Enterprises, Inc. | 5,916 | 144,646 | ||||||
Arkansas Best Corp. | 999 | 10,509 | ||||||
Asset Acceptance Capital Corp.* | 3,445 | 18,500 | ||||||
CAI International, Inc.* | 431 | 10,809 | ||||||
CBIZ, Inc.* | 60,611 | 367,303 | ||||||
Ceco Environmental Corp. | 20,966 | 231,884 | ||||||
Celadon Group, Inc. | 14,727 | 291,742 | ||||||
Cenveo, Inc.* | 6,325 | 15,812 | ||||||
Consolidated Graphics, Inc.* | 4,343 | 159,084 | ||||||
Dolan Co. (The)* | 22,992 | 80,702 | ||||||
Douglas Dynamics, Inc. | 762 | 10,043 | ||||||
Ducommun, Inc.* | 16,065 | 257,522 | ||||||
Energy Recovery, Inc.* | 8,573 | 31,977 | ||||||
EnergySolutions, Inc.* | 9,890 | 37,879 | ||||||
EnerNOC, Inc.* | 1,570 | 24,256 | ||||||
Federal Signal Corp.* | 6,514 | 52,373 | ||||||
FuelCell Energy, Inc.* | 15,725 | 17,140 | ||||||
Furmanite Corp.* | 3,141 | 16,679 | ||||||
Genco Shipping & Trading Ltd.* | 4,056 | 13,547 | ||||||
General Finance Corp.* | 2,160 | 10,670 | ||||||
Gibraltar Industries, Inc.* | 4,284 | 74,413 | ||||||
Global Power Equipment Group, Inc. | 1,105 | 18,133 | ||||||
GP Strategies Corp.* | 16,920 | 362,088 | ||||||
Great Lakes Dredge & Dock Corp. | 32,120 | 301,286 | ||||||
Greenbrier Cos., Inc.* | 4,469 | 89,067 | ||||||
H&E Equipment Services, Inc. | 1,080 | 20,822 | ||||||
Insteel Industries, Inc. | 2,379 | 36,066 | ||||||
Kimball International, Inc. - Class B | 4,744 | 51,235 | ||||||
LB Foster Co. - Class A | 228 | 9,875 | ||||||
Lydall, Inc.* | 1,596 | 24,387 | ||||||
Marten Transport Ltd. | 22,170 | 451,381 | ||||||
Michael Baker Corp. | 402 | 10,327 | ||||||
Navigant Consulting, Inc.* | 30,670 | 353,625 | ||||||
NCI Building Systems, Inc.* | 2,849 | 44,103 | ||||||
Orion Marine Group, Inc.* | 29,052 | 226,606 | ||||||
Pacer International, Inc.* | 2,494 | 10,151 | ||||||
Patriot Transportation Holding, Inc.* | 519 | 13,375 | ||||||
PGT, Inc.* | 2,130 | 10,437 | ||||||
Pike Electric Corp. | 19,464 | 202,426 | ||||||
PMFG, Inc.* | 2,444 | 20,554 | ||||||
PowerSecure International, Inc.* | 26,915 | 233,891 | ||||||
Rand Logistics, Inc.* | 1,813 | 12,256 | ||||||
Republic Airways Holdings, Inc.* | 3,284 | 27,553 | ||||||
Schawk, Inc. | 13,929 | 178,848 | ||||||
Standex International Corp. | 766 | 43,394 | ||||||
Vitran Corp., Inc.* | 20,894 | 137,274 | ||||||
5,375,401 | ||||||||
Information Technology — 11.4% | ||||||||
Alpha & Omega Semiconductor Ltd.* | 29,892 | 242,424 | ||||||
ANADIGICS, Inc.* | 10,345 | 26,690 | ||||||
Audience, Inc.* | 820 | 10,020 | ||||||
Aviat Networks, Inc.* | 7,260 | 27,225 | ||||||
Avid Technology, Inc.* | 2,058 | 15,229 | ||||||
Axcelis Technologies, Inc.* | 7,353 | 9,927 | ||||||
Blucora, Inc.* | 4,229 | 62,843 | ||||||
Checkpoint Systems, Inc.* | 1,947 | 23,481 | ||||||
CIBER, Inc.* | 83,012 | 280,581 | ||||||
Computer Task Group, Inc.* | 17,466 | 334,299 | ||||||
Comtech Telecommunications Corp. | 5,100 | 135,150 | ||||||
CTS Corp. | 33,493 | 333,255 | ||||||
Daktronics, Inc. | 1,921 | 22,783 | ||||||
EXFO, Inc. (Canada)* | 44,142 | 241,015 | ||||||
Global Cash Access Holdings, Inc.* | 33,459 | 252,615 | ||||||
Intevac, Inc.* | 2,347 | 9,881 | ||||||
IntraLinks Holdings, Inc.* | 4,924 | 31,858 | ||||||
IXYS Corp. | 19,892 | 191,759 | ||||||
Kemet Corp.* | 1,965 | 11,318 | ||||||
Kopin Corp.* | 3,475 | 12,024 | ||||||
Limelight Networks, Inc.* | 5,007 | 11,817 | ||||||
Mattson Technology, Inc.* | 8,130 | 10,650 | ||||||
MeetMe, Inc.* | 2,941 | 7,970 | ||||||
Mercury Systems, Inc.* | 1,523 | 11,194 |
8 |
Touchstone Micro Cap Value Fund (Continued)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 96.8% (Continued) | ||||||||
Information Technology — (Continued) | ||||||||
ModusLink Global Solutions, Inc.* | 3,300 | $ | 9,603 | |||||
Oclaro, Inc.* | 12,287 | 19,905 | ||||||
OCZ Technology Group, Inc.* | 11,835 | 26,629 | ||||||
Perficient, Inc.* | 27,780 | 332,249 | ||||||
Pericom Semiconductor Corp.* | 26,644 | 188,373 | ||||||
Photronics, Inc.* | 44,110 | 264,219 | ||||||
Radisys Corp.* | 3,030 | 11,817 | ||||||
Rudolph Technologies, Inc.* | 25,245 | 340,555 | ||||||
Seachange International, Inc.* | 3,249 | 36,226 | ||||||
Silicon Graphics International Corp.* | 5,111 | 74,314 | ||||||
STEC, Inc.* | 2,986 | 15,109 | ||||||
Supertex, Inc. | 15,000 | 286,800 | ||||||
support.com, Inc.* | 2,222 | 9,266 | ||||||
TechTarget, Inc.* | 2,458 | 12,487 | ||||||
Viasystems Group, Inc.* | 766 | 10,793 | ||||||
Westell Technologies, Inc. - Class A* | 138,376 | 253,228 | ||||||
Zygo Corp.* | 620 | 9,864 | ||||||
4,217,445 | ||||||||
Consumer Discretionary — 11.0% | ||||||||
1-800-Flowers.com, Inc. - Class A* | 2,717 | 10,922 | ||||||
Bassett Furniture Industries, Inc. | 1,625 | 22,619 | ||||||
Beazer Homes USA, Inc.* | 4,128 | 77,689 | ||||||
Big 5 Sporting Goods Corp. | 928 | 12,871 | ||||||
Bluegreen Corp.* | 1,033 | 9,917 | ||||||
Cache, Inc.* | 44,223 | 109,231 | ||||||
Carriage Services, Inc. | 18,470 | 258,211 | ||||||
Casual Male Retail Group, Inc.* | 43,782 | 200,959 | ||||||
Christopher & Banks Corp.* | 4,708 | 29,190 | ||||||
Citi Trends, Inc.* | 16,000 | 207,040 | ||||||
Core-Mark Holding Co., Inc. | 195 | 9,775 | ||||||
Corinthian Colleges, Inc.* | 3,817 | 9,390 | ||||||
Daily Journal Corp.* | 101 | 10,045 | ||||||
Digital Generation, Inc.* | 2,420 | 24,224 | ||||||
Entravision Communications Corp. - Class A | 6,827 | 12,835 | ||||||
Exide Technologies* | 10,885 | 37,444 | ||||||
Fisher Communications, Inc. | 1,093 | 38,780 | ||||||
Flexsteel Industries, Inc. | 442 | 10,369 | ||||||
Fred's, Inc. - Class A | 23,404 | 309,401 | ||||||
Furniture Brands International, Inc.* | 8,696 | 12,000 | ||||||
Global Sources Ltd.* | 1,942 | 15,924 | ||||||
Gray Television, Inc.* | 4,834 | 18,079 | ||||||
hhgregg, Inc.* | 5,309 | 45,020 | ||||||
Hooker Furniture Corp. | 22,990 | 347,149 | ||||||
Hovnanian Enterprises, Inc. - Class A* | 23,597 | 134,739 | ||||||
Isle of Capri Casinos, Inc.* | 2,278 | 16,014 | ||||||
Krispy Kreme Doughnuts, Inc.* | 10,445 | 135,785 | ||||||
LIN TV Corp. - Class A* | 6,154 | 65,663 | ||||||
M/I Homes, Inc.* | 4,218 | 114,898 | ||||||
McClatchy Co. (The) - Class A* | 5,708 | 16,667 | ||||||
Motorcar Parts of America, Inc.* | 20,190 | 134,667 | ||||||
OfficeMax, Inc. | 14,708 | 158,552 | ||||||
Perry Ellis International, Inc. | 13,914 | 268,540 | ||||||
Spartan Motors, Inc. | 39,920 | 226,346 | ||||||
Standard Motor Products, Inc. | 18,080 | 419,637 | ||||||
Stein Mart, Inc. | 25,120 | 212,013 | ||||||
Tuesday Morning Corp.* | 4,661 | 39,152 | ||||||
Universal Electronics, Inc.* | 1,946 | 37,169 | ||||||
Valuevision Media, Inc. - Class A* | 6,242 | 16,916 | ||||||
VOXX International Corp.* | 13,657 | 131,927 | ||||||
Winnebago Industries, Inc.* | 3,740 | 70,013 | ||||||
Zale Corp.* | 2,262 | 11,129 | ||||||
4,048,911 | ||||||||
Health Care — 6.6% | ||||||||
Albany Molecular Research, Inc.* | 1,726 | 10,304 | ||||||
Alphatec Holdings, Inc.* | 5,814 | 10,058 | ||||||
AMAG Pharmaceuticals, Inc.* | 630 | 10,048 | ||||||
Amedisys, Inc.* | 2,956 | 32,871 | ||||||
AMN Healthcare Services, Inc.* | 2,173 | 26,402 | ||||||
Astex Pharmaceuticals* | 20,907 | 70,038 | ||||||
BioScrip, Inc.* | 31,343 | 351,982 | ||||||
Cambrex Corp.* | 17,934 | 210,724 | ||||||
Codexis, Inc.* | 5,539 | 13,127 | ||||||
Cross Country Healthcare, Inc.* | 39,495 | 223,147 | ||||||
Curis, Inc.* | 4,035 | 12,831 | ||||||
Cynosure, Inc. - Class A* | 625 | 16,688 | ||||||
Enzo Biochem, Inc.* | 3,333 | 9,632 | ||||||
Enzon Pharmaceuticals, Inc. | 3,439 | 17,023 | ||||||
Gentiva Health Services, Inc.* | 4,110 | 40,730 | ||||||
Geron Corp.* | 29,892 | 47,229 | ||||||
Healthways, Inc.* | 27,900 | 293,508 | ||||||
Hi-Tech Pharmacal Co., Inc. | 473 | 17,312 | ||||||
Insmed, Inc.* | 5,797 | 33,912 | ||||||
Medical Action Industries, Inc.* | 2,096 | 9,663 | ||||||
Pacific Biosciences of California, Inc.* | 5,928 | 14,701 | ||||||
Palomar Medical Technologies, Inc.* | 1,578 | 15,417 | ||||||
PDI, Inc.* | 1,272 | 9,857 | ||||||
Providence Service Corp. (The)* | 8,195 | 151,853 | ||||||
Rigel Pharmaceuticals, Inc.* | 1,769 | 11,605 | ||||||
RTI Biologics, Inc.* | 2,694 | 13,254 | ||||||
Solta Medical, Inc.* | 6,476 | 16,579 | ||||||
SurModics, Inc.* | 415 | 10,006 | ||||||
Symmetry Medical, Inc.* | 31,801 | 340,589 | ||||||
Synergetics USA, Inc.* | 34,400 | 178,880 | ||||||
Targacept, Inc.* | 3,908 | 17,547 | ||||||
Transcept Pharmaceuticals, Inc.* | 1,626 | 9,496 | ||||||
US Physical Therapy, Inc. | 7,453 | 183,344 | ||||||
Zeltiq Aesthetics, Inc.* | 2,161 | 9,444 | ||||||
2,439,801 | ||||||||
Consumer Staples — 5.4% | ||||||||
Alliance One International, Inc.* | 4,232 | 15,320 | ||||||
Boulder Brands, Inc.* | 11,344 | 152,350 | ||||||
Central European Distribution Corp.* | 12,255 | 26,348 | ||||||
Chiquita Brands International, Inc.* | 47,162 | 346,641 | ||||||
John B Sanfilippo & Son, Inc. | 513 | 9,455 | ||||||
Nash Finch Co. | 18,476 | 383,747 | ||||||
Omega Protein Corp.* | 29,545 | 204,156 | ||||||
Overhill Farms, Inc.* | 87,300 | 395,469 | ||||||
Spartan Stores, Inc. | 28,880 | 469,011 | ||||||
2,002,497 |
9 |
Touchstone Micro Cap Value Fund (Continued)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 96.8% (Continued) | ||||||||
Energy — 3.3% | ||||||||
Amyris, Inc.* | 6,115 | $ | 18,590 | |||||
Basic Energy Services, Inc.* | 14,751 | 190,730 | ||||||
Cal Dive International, Inc.* | 13,284 | 25,240 | ||||||
Callon Petroleum Co.* | 6,090 | 31,364 | ||||||
Emerald Oil, Inc.* | 1,667 | 9,919 | ||||||
Endeavour International Corp.* | 13,405 | 72,923 | ||||||
Gastar Exploration Ltd.* | 11,520 | 12,557 | ||||||
Green Plains Renewable Energy, Inc.* | 2,308 | 18,025 | ||||||
Gulf Island Fabrication, Inc. | 2,098 | 48,716 | ||||||
Harvest Natural Resources, Inc.* | 1,029 | 9,549 | ||||||
James River Coal Co.* | 6,923 | 20,838 | ||||||
Knightsbridge Tankers Ltd. | 2,389 | 15,959 | ||||||
Miller Energy Resources, Inc.* | 2,786 | 11,228 | ||||||
North American Energy Partners, Inc. (Canada)* | 53,206 | 197,926 | ||||||
PetroQuest Energy, Inc.* | 47,950 | 246,463 | ||||||
PHI, Inc.* | 298 | 9,861 | ||||||
Rentech, Inc. | 9,893 | 30,372 | ||||||
Scorpio Tankers, Inc.* | 8,409 | 70,888 | ||||||
Synergy Resources Corp.* | 5,454 | 33,815 | ||||||
Teekay Tankers Ltd. - Class A | 10,234 | 29,269 | ||||||
Triangle Petroleum Corp.* | 6,627 | 41,684 | ||||||
Uranium Energy Corp.* | 5,044 | 11,349 | ||||||
Vantage Drilling Co.* | 16,814 | 31,442 | ||||||
Westmoreland Coal Co.* | 1,741 | 17,480 | ||||||
Willbros Group, Inc.* | 4,832 | 31,601 | ||||||
1,237,788 | ||||||||
Materials — 3.3% | ||||||||
Chase Corp. | 528 | 9,937 | ||||||
General Moly, Inc.* | 8,947 | 33,014 | ||||||
Gold Reserve, Inc.* | 7,696 | 22,318 | ||||||
Golden Minerals Co.* | 2,141 | 7,429 | ||||||
Golden Star Resources Ltd. (Canada)* | 50,899 | 80,929 | ||||||
Great Panther Silver Ltd. (Canada)* | 91,204 | 137,718 | ||||||
Horsehead Holding Corp.* | 26,300 | 261,948 | ||||||
Landec Corp.* | 3,254 | 38,397 | ||||||
PH Glatfelter Co. | 28,142 | 522,878 | ||||||
Quaker Chemical Corp. | 769 | 43,964 | ||||||
Spartech Corp.* | 1,386 | 13,209 | ||||||
US Concrete, Inc.* | 2,806 | 33,391 | ||||||
Vista Gold Corp.* | 3,876 | 8,799 | ||||||
1,213,931 | ||||||||
Utilities — 2.9% | ||||||||
Chesapeake Utilities Corp. | 10,921 | 518,311 | ||||||
Unitil Corp. | 20,093 | 538,091 | ||||||
1,056,402 | ||||||||
Telecommunication Services — 1.4% | ||||||||
Neutral Tandem, Inc. | 9,791 | 27,121 | ||||||
Premiere Global Services, Inc.* | 21,871 | 204,931 | ||||||
Shenandoah Telecommunications Co. | 3,691 | 54,110 | ||||||
USA Mobility, Inc. | 21,035 | 243,165 | ||||||
529,327 | ||||||||
Total Common Stocks | $ | 35,779,363 | ||||||
Investment Fund — 4.2% | ||||||||
Touchstone Institutional Money Market Fund^ | 1,540,800 | 1,540,800 | ||||||
Total Investment Securities —101.0% | ||||||||
(Cost $31,147,865) | 37,320,163 | |||||||
Liabilities in Excess of Other Assets — (1.0%) | (383,845 | ) | ||||||
Net Assets — 100.0% | $ | 36,936,318 |
* | Non-income producing security. |
^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
Portfolio Abbreviations:
REIT - Real Estate Investment Trust
Other Information:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation inputs at Reporting Date:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | 35,779,363 | — | — | 35,779,363 | ||||||||||||
Investment Fund | 1,540,800 | — | — | 1,540,800 | ||||||||||||
$ | 37,320,163 |
See accompanying Notes to Financial Statements.
10 |
Portfolio of Investments
Touchstone Small Company Value Fund – January 31, 2013 (Unaudited)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 96.0% | ||||||||
Financials — 21.6% | ||||||||
Anworth Mortgage Asset Corp. REIT | 75,370 | $ | 471,816 | |||||
Astoria Financial Corp. | 36,770 | 358,140 | ||||||
Brookline Bancorp, Inc. | 48,760 | 429,576 | ||||||
Capitol Federal Financial, Inc. | 35,890 | 421,708 | ||||||
Cohen & Steers, Inc.† | 6,570 | 216,087 | ||||||
CVB Financial Corp. | 39,510 | 434,610 | ||||||
Evercore Partners, Inc. - Class A | 7,160 | 274,371 | ||||||
First Financial Bancorp | 29,790 | 455,489 | ||||||
Greenhill & Co., Inc. | 3,425 | 201,732 | ||||||
Hanover Insurance Group, Inc. (The) | 13,625 | 566,255 | ||||||
Hercules Technology Growth Capital, Inc. | 44,870 | 548,760 | ||||||
Iberiabank Corp. | 15,090 | 776,984 | ||||||
Infinity Property & Casualty Corp. | 8,090 | 481,112 | ||||||
Manning & Napier, Inc. | 26,830 | 378,303 | ||||||
Potlatch Corp. REIT | 2,830 | 122,794 | ||||||
Sterling BanCorp. | 35,085 | 336,465 | ||||||
Summit Hotel Properties, Inc. REIT | 38,200 | 351,058 | ||||||
UMB Financial Corp. | 11,160 | 494,053 | ||||||
Westamerica Bancorporation | 6,105 | 271,184 | ||||||
7,590,497 | ||||||||
Industrials — 19.3% | ||||||||
ABM Industries, Inc. | 38,090 | 834,933 | ||||||
Barnes Group, Inc. | 18,770 | 448,603 | ||||||
Brady Corp. - Class A | 14,380 | 501,718 | ||||||
Con-way, Inc. | 17,850 | 560,133 | ||||||
Curtiss-Wright Corp. | 20,925 | 745,976 | ||||||
Harsco Corp. | 18,720 | 477,173 | ||||||
Kaydon Corp. | 26,850 | 665,880 | ||||||
Knight Transportation, Inc. | 56,960 | 908,512 | ||||||
Knoll, Inc. | 21,355 | 354,066 | ||||||
Resources Connection, Inc. | 55,550 | 678,266 | ||||||
Ritchie Bros Auctioneers, Inc.† | 27,450 | 601,430 | ||||||
6,776,690 | ||||||||
Information Technology — 14.6% | ||||||||
ADTRAN, Inc.† | 24,920 | 503,384 | ||||||
Brooks Automation, Inc. | 68,380 | 640,037 | ||||||
Cohu, Inc. | 34,730 | 363,970 | ||||||
Forrester Research, Inc. | 16,065 | 454,158 | ||||||
Intersil Corp. - Class A | 89,230 | 771,840 | ||||||
Methode Electronics, Inc. | 41,400 | 398,268 | ||||||
Micrel, Inc. | 79,130 | 823,743 | ||||||
MKS Instruments, Inc. | 22,530 | 626,334 | ||||||
Tessera Technologies, Inc. | 31,330 | 549,842 | ||||||
5,131,576 | ||||||||
Consumer Discretionary — 12.1% | ||||||||
Columbia Sportswear Co.† | 5,930 | 302,964 | ||||||
Dana Holding Corp. | 18,120 | 291,370 | ||||||
Ethan Allen Interiors, Inc. | 6,900 | 199,479 | ||||||
Finish Line, Inc. (The) - Class A | 36,120 | 673,277 | ||||||
Fred's, Inc. - Class A | 21,290 | 281,454 | ||||||
Guess?, Inc. | 19,840 | 537,466 | ||||||
Hillenbrand, Inc. | 10,520 | 260,369 | ||||||
Jones Group, Inc. (The) | 22,250 | 266,999 | ||||||
Men's Wearhouse, Inc. (The) | 17,640 | 535,374 | ||||||
Regis Corp. | 15,450 | 274,238 | ||||||
Sotheby's | 17,410 | 625,367 | ||||||
4,248,357 | ||||||||
Materials — 9.9% | ||||||||
AMCOL International Corp. | 13,520 | 399,246 | ||||||
Globe Specialty Metals, Inc. | 39,500 | 598,820 | ||||||
Haynes International, Inc. | 10,490 | 536,249 | ||||||
Kronos Worldwide, Inc.† | 13,330 | 258,469 | ||||||
Noranda Aluminum Holding Corp. | 95,400 | 561,906 | ||||||
Schnitzer Steel Industries, Inc. - Class A | 21,360 | 621,149 | ||||||
Tronox Ltd. - Class A† | 26,670 | 505,396 | ||||||
3,481,235 | ||||||||
Energy — 7.8% | ||||||||
Bristow Group, Inc. | 3,115 | 177,493 | ||||||
CARBO Ceramics, Inc.† | 6,340 | 507,897 | ||||||
EXCO Resources, Inc.† | 88,430 | 566,836 | ||||||
Tidewater, Inc. | 11,465 | 563,734 | ||||||
Tsakos Energy Navigation Ltd. | 44,100 | 186,101 | ||||||
W&T Offshore, Inc. | 41,970 | 738,672 | ||||||
2,740,733 | ||||||||
Consumer Staples — 4.5% | ||||||||
Andersons, Inc. (The) | 11,250 | 530,438 | ||||||
Fresh del Monte Produce, Inc. | 21,500 | 566,525 | ||||||
Universal Corp. | 8,775 | 477,184 | ||||||
1,574,147 | ||||||||
Health Care — 4.3% | ||||||||
Hill-Rom Holdings, Inc. | 12,120 | 402,142 | ||||||
Meridian Bioscience, Inc. | 25,360 | 531,292 | ||||||
STERIS Corp. | 15,145 | 571,421 | ||||||
1,504,855 | ||||||||
Utilities — 1.9% | ||||||||
ALLETE, Inc. | 6,009 | 277,255 | ||||||
Black Hills Corp. | 9,335 | 376,667 | ||||||
653,922 | ||||||||
Total Common Stocks | $ | 33,702,012 |
11 |
Touchstone Small Company Value Fund (Continued)
Market | ||||||||
Shares | Value | |||||||
Investment Funds — 12.0% | ||||||||
Invesco Government & Agency | ||||||||
Portfolio** | 3,241,053 | $ | 3,241,053 | |||||
Touchstone Institutional Money Market | ||||||||
Fund^ | 965,133 | 965,133 | ||||||
Total Investment Funds | $ | 4,206,186 | ||||||
Total Investment Securities — 108.0% | ||||||||
(Cost $36,279,625) | 37,908,198 | |||||||
Liabilities in Excess of Other Assets — (8.0%) | (2,796,658 | ) | ||||||
Net Assets — 100.0% | $ | 35,111,540 |
† | All or a portion of the security is on loan. The total value of the securities on loan as of January 31, 2013 was $3,216,105. |
** | Represents collateral for securities loaned. |
^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
Portfolio Abbreviations:
REIT - Real Estate Investment Trust
Other Informations:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation inputs at Reporting Date:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 33,702,012 | $ | — | $ | — | $ | 33,702,012 | ||||||||
Investment Funds | 4,206,186 | — | — | 4,206,186 | ||||||||||||
$ | 37,908,198 |
See accompanying Notes to Financial Statements.
12 |
Portfolio of Investments
Touchstone Strategic Income Fund – January 31, 2013 (unaudited)
Principal | Market | |||||||
Amount | Value | |||||||
Corporate Bonds — 32.7% | ||||||||
Financials — 12.8% | ||||||||
$ | 375,000 | American Financial Group, Inc., | ||||||
9.875%, 6/15/19 | $ | 479,765 | ||||||
2,000,000 | American Tower Corp., | |||||||
4.500%, 1/15/18 | 2,208,250 | |||||||
1,000,000 | AXA SA, 144a, 6.379%, 12/31/49(A) | 995,000 | ||||||
2,240,000 | BioMed Realty LP, 3.850%, 4/15/16 | 2,372,283 | ||||||
1,750,000 | Charles Schwab Corp. (The), | |||||||
7.000%, 2/28/49(A) | 2,021,495 | |||||||
1,000,000 | Cullen/Frost Capital Trust II, | |||||||
1.861%, 3/1/34(A) | 825,490 | |||||||
4,101,000 | DDR Corp. MTN, 7.500%, 7/15/18 | 5,048,913 | ||||||
1,850,000 | Export-Import Bank of Korea, | |||||||
4.375%, 9/15/21 | 2,021,896 | |||||||
2,000,000 | Ford Motor Credit Co. LLC, | |||||||
4.250%, 2/3/17 | 2,132,108 | |||||||
5,400,000 | General Electric Capital Corp., Ser A, | |||||||
7.125%, 12/15/49(A) | 6,192,450 | |||||||
1,600,000 | Goldman Sachs Capital II, | |||||||
4.000%, 6/1/43(A) | 1,304,000 | |||||||
2,250,000 | Hutchison Whampoa International 11 | |||||||
Ltd., 144a, 3.500%, 1/13/17 | 2,371,781 | |||||||
2,550,000 | JPMorgan Chase & Co., | |||||||
7.900%, 4/29/49(A) | 2,933,520 | |||||||
1,625,000 | PNC Financial Services Group, Inc., | |||||||
6.750%, 7/29/49(A) | 1,864,541 | |||||||
500,000 | PNC Financial Services Group, Inc., | |||||||
8.250%, 5/29/49(A) | 506,032 | |||||||
3,600,000 | Wachovia Capital Trust III, | |||||||
5.570%, 12/29/49(A) | 3,600,000 | |||||||
900,000 | Wells Fargo & Co., Ser K, | |||||||
7.980%, 3/29/49(A) | 1,035,000 | |||||||
37,912,524 | ||||||||
Consumer Discretionary — 7.5% | ||||||||
1,000,000 | BorgWarner, Inc., 5.750%, 11/1/16 | 1,120,062 | ||||||
1,250,000 | Dana Holding Corp., 6.500%, 2/15/19 | 1,337,500 | ||||||
1,950,000 | Darden Restaurants, Inc., | |||||||
4.500%, 10/15/21 | 2,037,670 | |||||||
1,000,000 | DIRECTV Holdings LLC, | |||||||
5.200%, 3/15/20 | 1,134,772 | |||||||
1,000,000 | Interpublic Group of Cos., Inc. (The), | |||||||
6.250%, 11/15/14 | 1,071,250 | |||||||
1,075,000 | Lear Corp., 7.875%, 3/15/18 | 1,158,312 | ||||||
1,250,000 | Macy's Retail Holdings, Inc., | |||||||
6.650%, 7/15/24 | 1,529,172 | |||||||
1,930,000 | MGM Resorts International, | |||||||
4.250%, 4/15/15 | 2,091,638 | |||||||
2,560,000 | Newell Rubbermaid, Inc., | |||||||
4.000%, 6/15/22 | 2,654,083 | |||||||
2,000,000 | Omnicom Group, Inc., | |||||||
4.450%, 8/15/20 | 2,180,724 | |||||||
1,815,000 | O'Reilly Automotive, Inc., | |||||||
3.800%, 9/1/22 | 1,871,868 | |||||||
2,000,000 | Toll Brothers Finance Corp., | |||||||
5.875%, 2/15/22 | 2,272,992 | |||||||
1,647,000 | Visteon Corp., 6.750%, 4/15/19 | 1,762,290 | ||||||
22,222,333 | ||||||||
Industrials — 4.1% | ||||||||
1,910,000 | Asciano Finance Ltd., 144a, | |||||||
3.125%, 9/23/15 | 1,966,809 | |||||||
2,500,000 | B/E Aerospace, Inc., 5.250%, 4/1/22 | 2,631,250 | ||||||
1,620,000 | Continental Airlines 2012-2 Class A | |||||||
Pass Thru Certificates, | ||||||||
4.000%, 10/29/24 | 1,701,000 | |||||||
1,775,000 | Delta Air Lines 2012-1 Class A Pass | |||||||
Through Trust, 4.750%, 5/7/20 | 1,921,438 | |||||||
2,725,000 | Ryder System, Inc. MTN, | |||||||
2.500%, 3/1/18 | 2,782,609 | |||||||
1,220,000 | US Airways 2012-2 Class A Pass | |||||||
Through Trust, 4.625%, 6/3/25 | 1,259,650 | |||||||
12,262,756 | ||||||||
Materials — 3.4% | ||||||||
1,000,000 | AngloGold Ashanti Holdings PLC, | |||||||
5.375%, 4/15/20 | 1,047,620 | |||||||
1,525,000 | FMG Resources August 2006 Pty Ltd., | |||||||
144a, 7.000%, 11/1/15 | 1,589,812 | |||||||
2,500,000 | Freeport-McMoRan Copper & Gold, | |||||||
Inc., 3.550%, 3/1/22 | 2,436,428 | |||||||
2,000,000 | Rio Tinto Finance USA Ltd., | |||||||
3.500%, 11/2/20 | 2,114,632 | |||||||
2,200,000 | Westvaco Corp., 8.200%, 1/15/30 | 2,848,054 | ||||||
10,036,546 | ||||||||
Energy — 2.7% | ||||||||
1,800,000 | Enbridge Energy Partners LP, | |||||||
4.200%, 9/15/21 | 1,914,269 | |||||||
2,000,000 | Enterprise Products Operating LLC, | |||||||
4.050%, 2/15/22 | 2,159,238 | |||||||
850,000 | Gazprom OAO Via Gaz Capital SA, | |||||||
144a, 7.510%, 7/31/13 | 872,780 | |||||||
1,500,000 | Kinder Morgan Energy Partners LP, | |||||||
3.950%, 9/1/22 | 1,564,845 | |||||||
875,000 | SSE PLC MTN (GBP), 5.453%, 9/29/49(A) | 1,439,784 | ||||||
7,950,916 | ||||||||
Information Technology — 1.1% | ||||||||
1,760,000 | CA, Inc., 5.375%, 12/1/19 | 2,003,037 | ||||||
1,000,000 | KLA-Tencor Corp., 6.900%, 5/1/18 | 1,192,415 | ||||||
3,195,452 | ||||||||
Health Care — 0.5% | ||||||||
1,500,000 | Cigna Corp., 4.000%, 2/15/22 | 1,606,062 | ||||||
Utilities — 0.3% | ||||||||
1,000,000 | NextEra Energy Capital Holdings, Inc., | |||||||
6.650%, 6/15/67(A) | 1,075,500 |
13 |
Touchstone Strategic Income Fund (Continued)
Principal | Market | |||||||
Amount | Value | |||||||
Corporate Bonds — 32.7% (Continued) | ||||||||
Consumer Staples — 0.3% | ||||||||
$ | 1,000,000 | CVS Caremark Corp., 2.750%, 12/1/22 | $ | 984,288 | ||||
Total Corporate Bonds | $ | 97,246,377 | ||||||
Sovereign Government Obligations — 5.6% | ||||||||
1,870,000 | Brazil Notas do Tesouro Nacional Serie | |||||||
F (BRL), 10.000%, 1/1/14 | 960,543 | |||||||
1,900,000 | Brazil Notas do Tesouro Nacional Serie | |||||||
F (BRL), 10.000%, 1/1/17 | 991,799 | |||||||
4,300,000 | New Zealand Government Bond | |||||||
(NZD), 6.000%, 12/15/17 | 4,091,246 | |||||||
7,500,000 | Poland Government Bond (PLN), | |||||||
5.000%, 4/25/16 | 2,549,253 | |||||||
3,700,000 | Province of British Columbia (CAD), | |||||||
5.300%, 6/18/14 | 3,912,897 | |||||||
1,850,000 | Province of New Brunswick Canada | |||||||
(CAD), 4.300%, 12/3/15 | 1,995,382 | |||||||
1,800,000 | South Australian Government | |||||||
Financing Authority (AUD), | ||||||||
5.750%, 9/20/17 | 2,041,977 | |||||||
Total Sovereign Government | ||||||||
Obligations | $ | 16,543,097 | ||||||
U.S. Treasury Obligations — 4.2% | ||||||||
3,691,662 | FHLMC REMIC, Ser 2638 Class ST, | |||||||
7.444%, 2/15/18(A) | 218,732 | |||||||
3,447,235 | FHLMC REMIC, Ser 3199 Class DS, | |||||||
6.944%, 8/15/36(A) | 621,749 | |||||||
5,271,718 | FNMA REMIC, Ser 2008-60, Class SA, | |||||||
6.296%, 7/25/38(A) | 787,537 | |||||||
14,369,598 | GNMA, Ser 2011-126, Class IO, | |||||||
1.619%, 4/16/53(A) | 1,199,747 | |||||||
16,712,758 | GNMA, Ser 2011-64, Class IX, | |||||||
1.118%, 10/16/44(A) | 1,089,354 | |||||||
17,791,351 | GNMA, Ser 2011-78, Class IX, | |||||||
1.246%, 8/16/46(A) | 1,295,531 | |||||||
6,374,925 | GNMA, Ser 2011-83, Class NI, | |||||||
4.500%, 10/16/37 | 823,058 | |||||||
13,157,262 | GNMA, Ser 2012-27, Class IO, | |||||||
1.358%, 4/16/53(A) | 1,030,740 | |||||||
19,647,219 | GNMA, Ser 2012-33, Class IO, | |||||||
1.347%, 6/16/52(A) | 1,543,683 | |||||||
17,549,579 | GNMA, Ser 2012-46, Class IO, | |||||||
1.420%, 9/16/53(A) | 1,385,750 | |||||||
16,404,275 | GNMA, Ser 2012-67, Class IO, | |||||||
1.642%, 10/16/53(A) | 1,558,686 | |||||||
9,921,193 | GNMA, Ser 2012-86, Class IO, | |||||||
1.293%, 12/16/53(A) | 835,335 | |||||||
Total U.S. Treasury Obligations | $ | 12,389,902 | ||||||
Commercial Mortgage-Backed Securities — 2.7% | ||||||||
1,738,000 | Citigroup Commercial Mortgage Trust, | |||||||
Ser 2006-C5, Class A4, | ||||||||
5.431%, 10/15/49 | 1,981,836 | |||||||
856,660 | Greenwich Capital Commercial | |||||||
Funding Corp., Ser 2004-GG1, Class | ||||||||
A7, 5.317%, 6/10/36(A) | 887,875 | |||||||
2,170,000 | GS Mortgage Securities Corp. II, Ser | |||||||
2013-GC10, Class A5, | ||||||||
2.943%, 2/10/46 | 2,235,075 | |||||||
1,600,000 | LB-UBS Commercial Mortgage Trust, | |||||||
Ser 2006-C6, Class A4, | ||||||||
5.372%, 9/15/39 | 1,824,966 | |||||||
1,000,000 | Morgan Stanley Capital I Trust | |||||||
2003-IQ6, Ser 2003-IQ6, Class C, | ||||||||
144a, 5.129%, 12/15/41(A) | 1,040,054 | |||||||
Total Commercial | ||||||||
Mortgage-Backed Securities | $ | 7,969,806 | ||||||
U.S. Government Mortgage-Backed | ||||||||
Obligations — 1.6% | ||||||||
81,714 | FHLMC, Pool #972110, | |||||||
2.366%, 10/1/32(A) | 82,873 | |||||||
249,452 | FHLMC, Pool #G03170, 6.500%, 8/1/37 | 279,613 | ||||||
231,733 | FHLMC, Pool #G12780, 6.500%, 9/1/22 | 258,404 | ||||||
33,909 | FNMA, Pool #738900, | |||||||
2.935%, 7/1/18(A) | 34,009 | |||||||
348,632 | FNMA, Pool #844415, 5.500%, 10/1/35 | 380,490 | ||||||
1,241,847 | FNMA, Pool #AB1952, 4.000%, 12/1/40 | 1,371,237 | ||||||
893,730 | FNMA, Pool #AB1953, 4.000%, 12/1/40 | 981,543 | ||||||
1,148,047 | FNMA, Pool #AB3387, 4.000%, 8/1/41 | 1,222,567 | ||||||
Total U.S. Government | ||||||||
Mortgage-Backed Obligations | $ | 4,610,736 | ||||||
Asset-Backed Securities — 1.5% | ||||||||
950,372 | ACS Pass Through Trust, Ser 2006-1A, | |||||||
Class G1, 144a, 0.476%, 6/20/31(A) | 881,470 | |||||||
1,286,355 | Conseco Financial Corp., Ser 1998-4, | |||||||
Class A7, 6.870%, 4/1/30(A) | 1,378,778 | |||||||
894,852 | Mid-State Capital Corp. Trust, Ser | |||||||
2005-1, Class M2, 7.079%, 1/15/40 | 934,299 | |||||||
1,371,694 | RAMP Trust, Ser 2003-RZ5, Class A7, | |||||||
4.970%, 9/25/33(B) | 1,411,933 | |||||||
Total Asset-Backed Securities | $ | 4,606,480 | ||||||
Term Loan — 0.9% | ||||||||
Financials — 0.9% | ||||||||
2,710,000 | VML US Finance LLC Loan Tranche | |||||||
Term Loan, 0.737%, 11/15/16 | 2,671,599 | |||||||
Total Term Loan | $ | 2,671,599 | ||||||
Non-Agency Collateralized Mortgage | ||||||||
Obligations — 0.9% | ||||||||
269,712 | Bear Stearns Asset Backed Securities | |||||||
Trust, Ser 2003-AC7, Class A2, | ||||||||
5.750%, 1/25/34(B) | 280,550 |
14 |
Touchstone Strategic Income Fund (Continued)
Principal | Market | |||||||
Amount | Value | |||||||
Non-Agency Collateralized Mortgage | ||||||||
Obligations — 0.9% (Continued) | ||||||||
$ | 811,356 | Countrywide Alternative Loan Trust, | ||||||
Ser 2004-30CB, Class 3A1, | ||||||||
5.000%, 2/25/20 | $ | 835,441 | ||||||
16,226 | Merrill Lynch Mortgage Investors, Inc., | |||||||
Ser 2003-A1, Class 2A, | ||||||||
2.485%, 12/25/32(A) | 16,752 | |||||||
596,421 | RALI Trust, Ser 2004-QS6, Class A1, | |||||||
5.000%, 5/25/19 | 604,400 | |||||||
591,381 | Wells Fargo Mortgage Backed | |||||||
Securities Trust, Ser 2004-X, Class | ||||||||
1A5, 2.665%, 11/25/34(A) | 599,636 | |||||||
227,252 | Wells Fargo Mortgage Backed | |||||||
Securities Trust, Ser 2006-3, Class | ||||||||
A1, 5.500%, 3/25/36 | 228,762 | |||||||
Total Non-Agency Collateralized | ||||||||
Mortgage Obligations | $ | 2,565,541 | ||||||
Shares | ||||||||
Preferred Stocks — 32.7% | ||||||||
Financials — 22.2% | ||||||||
54,000 | Alexandria Real Estate Equities, Inc., | |||||||
Ser E, 6.45% | 1,439,100 | |||||||
90,000 | Allianz SE, 8.38% | 2,317,500 | ||||||
46,000 | American Financial Group, Inc., 7.00% | 1,221,300 | ||||||
31,133 | Ameriprise Financial, Inc., 7.75% | 876,083 | ||||||
107,000 | Arch Capital Group Ltd., Ser C, 6.75% | 2,872,950 | ||||||
86,750 | Aviva PLC, 8.25% | 2,449,820 | ||||||
74,225 | Citigroup Capital VII, 7.13% | 1,895,706 | ||||||
30,000 | Citigroup Capital XIII, 7.88%(A) | 835,800 | ||||||
60,000 | Corporate-Backed Trust Certificates, | |||||||
Ser AIG, 6.13% | 1,487,400 | |||||||
20,500 | Corporate-Backed Trust Certificates, | |||||||
Ser HSBC, 6.25% | 513,730 | |||||||
26,500 | Countrywide Capital IV, 6.75% | 667,270 | ||||||
71,800 | Credit Suisse AG, 7.90% | 1,830,900 | ||||||
95,000 | Digital Realty Trust, Inc., Ser E, 7.00% | 2,544,100 | ||||||
80,000 | Duke Realty Corp., 8.38% | 2,024,000 | ||||||
36,000 | Duke Realty Corp., Ser K, 6.50% | 909,000 | ||||||
147,505 | Endurance Specialty Holdings Ltd., Ser | |||||||
B, 7.50% | 4,054,912 | |||||||
37,000 | First Niagara Financial Group, Inc., Ser | |||||||
B, 8.63%(A) | 1,101,490 | |||||||
1,000 | First Tennessee Bank NA, 144a, | |||||||
3.75%(A) | 725,625 | |||||||
31,800 | Harris Preferred Capital Corp., Ser A, | |||||||
7.38% | 820,440 | |||||||
20,000 | Health Care REIT, Inc., Ser I, 6.50% | 1,167,000 | ||||||
47,300 | JPMorgan Chase Capital XXIX, 6.70% | 1,234,530 | ||||||
66,880 | Kimco Realty Corp., Ser H, 6.90% | 1,802,416 | ||||||
92,526 | Kimco Realty Corp., Ser I, 6.00% | 2,399,199 | ||||||
87,000 | Lloyds Banking Group PLC, 7.75% | 2,409,900 | ||||||
24,800 | Merrill Lynch Preferred Capital Trust III, | |||||||
7.00%† | 626,696 | |||||||
61,390 | MetLife, Inc., 5.00% | 2,995,218 | ||||||
28,089 | Morgan Stanley Capital Trust VIII, | |||||||
6.45% | 704,472 | |||||||
76,000 | PNC Financial Services Group, Inc., Ser | |||||||
P, 6.13%(A) | 2,056,560 | |||||||
46,000 | PS Business Parks, Inc., Ser S, 6.45% | 1,199,680 | ||||||
67,000 | PS Business Parks, Inc., Ser U, 5.75% | 1,678,350 | ||||||
92,000 | Public Storage, 5.90% | 2,415,000 | ||||||
37,000 | Public Storage, Ser P, 6.50% | 989,380 | ||||||
70,800 | Realty Income Corp., Ser F, 6.63% | 1,890,360 | ||||||
75,000 | Regency Centers Corp., Ser 6, 6.63% | 1,971,750 | ||||||
102,000 | Renaissancere Holdings Ltd., Ser C, | |||||||
6.08% | 2,576,520 | |||||||
18,500 | Stifel Financial Corp., 6.70% | 494,135 | ||||||
73,200 | US Bancorp, Ser F, 6.50%(A) | 2,102,304 | ||||||
70,000 | US Bancorp, Ser G, 6.00%(A) | 1,883,000 | ||||||
73,775 | Vornado Realty LP, 7.88% | 2,011,106 | ||||||
26,000 | Vornado Realty Trust, Ser J, 6.88% | 704,340 | ||||||
65,899,042 | ||||||||
Utilities — 3.4% | ||||||||
35,000 | Alabama Power Co., 6.45% | 1,006,250 | ||||||
23,000 | Constellation Energy Group, Inc., Ser | |||||||
A, 8.63% | 593,630 | |||||||
68,400 | DTE Energy Co., 5.25% | 1,751,040 | ||||||
51,000 | DTE Energy Co., 6.50% | 1,381,590 | ||||||
20,000 | Entergy Louisiana LLC, 5.88% | 538,000 | ||||||
30,000 | Entergy Mississippi, Inc., 6.00% | 828,300 | ||||||
20,000 | Georgia Power Co., Ser 07-A, 6.50% | 2,249,376 | ||||||
17,184 | Southern California Edison Co., | |||||||
4.63%(A) | 1,726,992 | |||||||
10,075,178 | ||||||||
Consumer Discretionary — 2.9% | ||||||||
60,000 | Comcast Corp., 5.00% | 1,515,000 | ||||||
78,500 | General Motors Co., Ser B, 4.75% | 3,400,620 | ||||||
65,009 | Telephone & Data Systems, Inc., 6.88% | 1,735,740 | ||||||
30,000 | Telephone & Data Systems, Inc., 5.88% | 752,100 | ||||||
46,700 | United States Cellular Corp., 6.95% | 1,245,956 | ||||||
8,649,416 | ||||||||
Industrials — 2.6% | ||||||||
110,600 | Seaspan Corp., 9.50%† | 3,016,062 | ||||||
68,000 | Stanley Black & Decker, Inc., 5.75% | 1,761,880 | ||||||
51,000 | United Technologies Corp., 7.50% | 2,903,940 | ||||||
7,681,882 | ||||||||
Materials — 1.0% | ||||||||
86,950 | AngloGold Ashanti Holdings Finance | |||||||
PLC, 6.00% | 2,948,474 | |||||||
Energy — 0.6% | ||||||||
39,500 | Apache Corp., Ser D, 6.00% | 1,869,535 | ||||||
Total Preferred Stocks | $ | 97,123,527 |
15 |
Touchstone Strategic Income Fund (Continued)
Market | ||||||||
Shares | Value | |||||||
Common Stocks — 13.8% | ||||||||
Financials — 4.1% | ||||||||
80,000 | American Capital Agency Corp. REIT | $ | 2,530,400 | |||||
197,000 | CYS Investments, Inc. REIT | 2,561,000 | ||||||
81,982 | Hospitality Properties Trust REIT | 2,067,586 | ||||||
65,750 | Starwood Property Trust, Inc. REIT | 1,685,830 | ||||||
270,000 | Two Harbors Investment Corp. REIT | 3,353,400 | ||||||
12,198,216 | ||||||||
Utilities — 2.1% | ||||||||
19,730 | NextEra Energy, Inc. | 1,421,546 | ||||||
70,970 | PPL Corp.* | 3,881,349 | ||||||
24,910 | Wisconsin Energy Corp. | 982,201 | ||||||
6,285,096 | ||||||||
Health Care — 2.0% | ||||||||
44,826 | Covidien PLC (Iran) | 2,794,453 | ||||||
53,968 | Pfizer, Inc. | 1,472,247 | ||||||
29,689 | Roche Holding AG ADR | 1,647,146 | ||||||
5,913,846 | ||||||||
Energy — 1.9% | ||||||||
37,000 | BP PLC ADR | 1,647,240 | ||||||
15,000 | Marathon Petroleum Corp. | 1,113,150 | ||||||
25,000 | Valero Energy Corp. | 1,093,250 | ||||||
47,000 | Williams Cos., Inc. (The) | 1,647,350 | ||||||
5,500,990 | ||||||||
Telecommunication Services — 1.4% | ||||||||
33,728 | BCE, Inc. (Canada) | 1,498,198 | ||||||
560,000 | Telstra Corp. Ltd. (Australia) | 2,686,242 | ||||||
4,184,440 | ||||||||
Industrials — 1.4% | ||||||||
27,500 | Eaton Corp. PLC | 1,566,125 | ||||||
18,200 | Fluor Corp. | 1,179,906 | ||||||
25,000 | Ryder System, Inc. | 1,419,500 | ||||||
4,165,531 | ||||||||
Information Technology — 0.5% | ||||||||
35,421 | Analog Devices, Inc. | 1,545,772 | ||||||
Consumer Staples — 0.4% | ||||||||
31,850 | Altria Group, Inc. | 1,072,708 | ||||||
Total Common Stocks | $ | 40,866,599 | ||||||
Number | ||||||||
of | ||||||||
Contracts | ||||||||
Purchased Call Option — 0.0% | ||||||||
1,900 | US 10 Year Strike Price $134.00, | |||||||
Expiration 03/22/13 | 59,375 | |||||||
Investment Funds — 4.3% | ||||||||
135,400 | American Income Fund, Inc.† | 1,182,042 | ||||||
23,600 | Eaton Vance Tax-Advantaged | |||||||
Dividend Income Fund | 430,228 | |||||||
19,400 | Invesco Government & Agency | |||||||
Portfolio** | 19,400 | |||||||
35,000 | SPDR Gold Shares* | 5,642,000 | ||||||
5,645,326 | Touchstone Institutional Money | |||||||
Market Fund^ | 5,645,326 | |||||||
Total Investment Funds | $ | 12,918,996 | ||||||
Total Investment Securities —100.9% | ||||||||
(Cost $284,140,345) | $ | 299,572,035 | ||||||
Liabilities in Excess of Other Assets — (0.9%) | (2,653,377 | ) | ||||||
Net Assets — 100.0% | $ | 296,918,658 |
(A) | Variable rate security - the rate reflected is the rate in effect as of January 31, 2013. |
(B) | Step Bond. A bond that pays an initial interest rate for the first period and then a higher interest rate for the following periods until maturity. The interest rate shown reflects the rate in effect at January 31, 2013. |
† | All or a portion of the security is on loan. The total value of the securities on loan as of January 31, 2013 was $18,854. |
* | Non-income producing security. |
** | Represents collateral for securities loaned. |
^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
BRL - Brazilian Real
CAD - Canadian Dollar
EUR - Euro
FHLMC - Federal Home Loan Mortgage Association
FNMA - Federal National Mortgage Association
GBP - British Pound
GNMA - Government National Mortgage Association
16 |
Touchstone Strategic Income Fund (Continued)
NZD - New Zealand Dollar
PLN - Polish Zloty
LLC - Limited Liability Company
MTN - Medium Term Note
PLC - Public Limited Company
REIT - Real Estate Investment Trust
REMIC - Real Estate Mortgage Investment Conduit
144a - This is a restricted security that was sold in a transaction exempt from Rule 144a of the Securities Act of 1933. This security may be sold in transactions exempt from registration, normally to qualified institutional buyers. At January 31, 2012 these securities were valued at $9,403,277 or 3.2% of net assets. These securities were deemed liquid pursuant to procedures approved by the Board of Trustees.
Other Information:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation inputs at Reporting Date:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Corporate Bonds | $ | — | $ | 97,246,377 | $ | — | $ | 97,246,377 | ||||||||
Sovereign Government Obligations | — | 16,543,097 | — | 16,543,097 | ||||||||||||
U.S. Treasury Obligations | — | 12,389,902 | — | 12,389,902 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 7,969,806 | — | 7,969,806 | ||||||||||||
U.S.Government Mortgage-Backed Obligations | — | 4,610,736 | — | 4,610,736 | ||||||||||||
Asset-Backed Securities | — | 4,606,480 | — | 4,606,480 | ||||||||||||
Term Loan | — | 2,671,599 | — | 2,671,599 | ||||||||||||
Non-Agency Collateralized Mortgage Obligations | — | 2,565,541 | — | 2,565,541 | ||||||||||||
Preferred Stocks | 97,123,527 | — | — | 97,123,527 | ||||||||||||
Common Stocks | 40,866,599 | — | — | 40,866,599 | ||||||||||||
Purchased Call Option | 59,375 | — | — | 59,375 | ||||||||||||
Investment Funds | 12,918,996 | — | — | 12,918,996 | ||||||||||||
$ | 299,572,035 |
17 |
Touchstone Strategic Income Fund (Continued)
Valuation inputs at Reporting Date:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Other Financial Instruments*** | ||||||||||||||||
Assets | ||||||||||||||||
Forward Currency Contract | $ | — | $ | 144,159 | $ | — | $ | 144,159 | ||||||||
Interest Rate Contracts - Futures | 57,775 | — | — | 57,775 | ||||||||||||
$ | 201,934 | |||||||||||||||
Liabilities: | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (576,372 | ) | $ | — | $ | (576,372 | ) | ||||||
Interest Rate Contracts - Futures | (23,675 | ) | — | — | (23,675 | ) | ||||||||||
$ | (600,047 | ) |
*** | Other Financial Instruments are derivative instruments not reflected in total investments. Amounts shown represent unrealized appreciation (depreciation). |
Futures Contracts
The Fund had the following futures contracts, brokered by Morgan Stanley, open at January 31, 2013:
Unrealized | ||||||||||||||
Expiration | Number of | Notional | Appreciation/ | |||||||||||
Description | Date | Contracts | Value | (Depreciation) | ||||||||||
90 Day Euro Futures | March 2015 | 250 | 62,034,375 | $ | 57,775 | |||||||||
90 Day Euro Futures | December 2013 | 250 | 62,246,875 | (23,675 | ) | |||||||||
10 Yr. U.S. Treasury | ||||||||||||||
Notes Futures | March 2013 | 110 | 14,440,938 | — | ||||||||||
$ | 34,100 |
Forward Foreign Currency Exchange Contracts
Unrealized | ||||||||||||||
Contract to | Appreciation/ | |||||||||||||
Counterparty | Value Date | Receive | Deliver | (Depreciation) | ||||||||||
Brown Brothers Harriman | 02/15/2013 | EUR | 5,150,000 | USD | 6,848,470 | $ | 144,159 | |||||||
Brown Brothers Harriman | 02/15/2013 | USD | 6,546,577 | EUR | 5,150,000 | (446,641 | ) | |||||||
Brown Brothers Harriman | 02/27/2013 | USD | 4,146,996 | AUD | 4,000,000 | (16,240 | ) | |||||||
Brown Brothers Harriman | 03/25/2013 | USD | 2,300,614 | PLN | 7,500,000 | (113,491 | ) | |||||||
$ | (432,213 | ) |
See accompanying Notes to Financial Statements.
18 |
Statements of Assets and Liabilities
January 31, 2013 (Unaudited)
Touchstone | Touchstone | Touchstone | Touchstone | |||||||||||||
International | Micro Cap | Small Company | Strategic | |||||||||||||
Value | Value | Value | Income | |||||||||||||
Fund | Fund | Fund | Fund | |||||||||||||
Assets | ||||||||||||||||
Investments, at cost | $ | 105,738,447 | $ | 31,147,865 | $ | 36,279,625 | $ | 284,140,345 | ||||||||
Affiliated securities, at market value | $ | 1,571,546 | $ | 1,540,800 | $ | 965,133 | $ | 5,645,326 | ||||||||
Non-affiliated securities, at market value | 109,136,695 | 35,779,363 | 36,943,065 | 293,926,709 | ||||||||||||
Investments, at value (A) | $ | 110,708,241 | $ | 37,320,163 | $ | 37,908,198 | $ | 299,572,035 | ||||||||
Cash deposits held at prime broker* | — | — | — | 101,563 | ||||||||||||
Foreign Currency (B) | — | — | — | 92,405 | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | 144,159 | ||||||||||||
Dividends and interest receivable | 293,558 | 14,432 | 21,101 | 2,005,989 | ||||||||||||
Receivable for capital shares sold | 3,051 | 58,064 | 10,249 | 1,761,286 | ||||||||||||
Receivable for investments sold | 471,179 | 358,954 | 675,448 | 526,733 | ||||||||||||
Receivable for variation margin on futures contracts | — | — | — | 34,100 | ||||||||||||
Receivable for securities lending income | 204 | — | 6,786 | 2,244 | ||||||||||||
Receivable from other affiliates | 7,954 | 7,752 | 6,894 | — | ||||||||||||
Tax reclaim receivable | 139,332 | — | — | — | ||||||||||||
Other assets | 2,150 | 14,452 | 8,206 | 18,565 | ||||||||||||
Total Assets | 111,625,669 | 37,773,817 | 38,636,882 | 304,259,079 | ||||||||||||
Liabilities | ||||||||||||||||
Foreign currency (B) | 224,309 | — | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | 576,372 | ||||||||||||
Payable for return of collateral for securities on loan | — | — | 3,241,053 | 19,400 | ||||||||||||
Payable for capital shares redeemed | 180,270 | 351,518 | 91,058 | 610,257 | ||||||||||||
Payable for investments purchased | 741,629 | 403,905 | 144,121 | 5,941,370 | ||||||||||||
Payable to Investment Advisor | 79,302 | 44,027 | 25,441 | 127,909 | ||||||||||||
Payable to other affiliates | — | — | — | 33,551 | ||||||||||||
Payable to Trustees | 4,028 | 3,161 | 3,263 | 4,437 | ||||||||||||
Payable for professional services | 16,015 | 16,039 | 16,327 | 15,184 | ||||||||||||
Other accrued expenses and liabilities | 45,272 | 18,849 | 4,079 | 11,941 | ||||||||||||
Total Liabilities | 1,290,825 | 837,499 | 3,525,342 | 7,340,421 | ||||||||||||
Net Assets | $ | 110,334,844 | $ | 36,936,318 | $ | 35,111,540 | $ | 296,918,658 | ||||||||
Net assets consist of: | ||||||||||||||||
Paid-in capital | $ | 230,306,700 | $ | 31,460,116 | $ | 32,658,101 | $ | 300,449,016 | ||||||||
Accumulated net investment income (loss) | 903,154 | 106,668 | 89,621 | (824,930 | ) | |||||||||||
Accumulated net realized gains (losses) on investments, foreign currency transactions, futures and credit default swaps | (125,838,053 | ) | (802,764 | ) | 735,245 | (17,745,541 | ) | |||||||||
Net unrealized appreciation on investments, foreign currencytransactions and futures | 4,963,043 | 6,172,298 | 1,628,573 | 15,040,113 | ||||||||||||
Net Assets | $ | 110,334,844 | $ | 36,936,318 | $ | 35,111,540 | $ | 296,918,658 | ||||||||
(A) Includes market value of securities on loan of: | $ | — | $ | — | $ | 3,216,105 | $ | 18,854 | ||||||||
(B) Cost of foreign currency: | $ | (224,316 | ) | $ | — | $ | — | $ | 90,385 | |||||||
* Represents segregated cash for futures contracts. |
See accompanying Notes to Financial Statements.
19 |
Statements of Assets and Liabilities (Continued)
Touchstone | Touchstone | Touchstone | Touchstone | |||||||||||||
International | Micro Cap | Small Company | Strategic | |||||||||||||
Value | Value | Value | Income | |||||||||||||
Fund | Fund | Fund | Fund | |||||||||||||
Pricing of Class A Shares | ||||||||||||||||
Net assets applicable to Class A shares | $ | 7,050,787 | $ | 15,429,340 | $ | 2,575,052 | $ | 52,787,664 | ||||||||
Shares of beneficial interest outstanding | ||||||||||||||||
(unlimited number of shares authorized, no par value) | 894,676 | 3,379,895 | 151,061 | 4,852,064 | ||||||||||||
Net asset value price per share* | $ | 7.88 | $ | 4.57 | $ | 17.05 | $ | 10.88 | ||||||||
Maximum offering price per share | $ | 8.36 | $ | 4.85 | $ | 18.09 | $ | 11.54 | ||||||||
Pricing of Class C Shares | ||||||||||||||||
Net assets applicable to Class C shares | $ | 227,780 | $ | 3,537,832 | $ | 1,484,827 | $ | 25,571,338 | ||||||||
Shares of beneficial interest outstanding | ||||||||||||||||
(unlimited number of shares authorized, no par value) | 30,952 | 887,358 | 93,393 | 2,376,811 | ||||||||||||
Net asset value, offering price per share** | $ | 7.36 | $ | 3.99 | $ | 15.90 | $ | 10.76 | ||||||||
Pricing of Class Y Shares | ||||||||||||||||
Net assets applicable to Class Y shares | $ | 33,570,974 | $ | 17,966,472 | $ | 6,160,105 | $ | 202,368,801 | ||||||||
Shares of beneficial interest outstanding | ||||||||||||||||
(unlimited number of shares authorized, no par value) | 4,261,482 | 3,614,180 | 356,090 | 18,556,507 | ||||||||||||
Net asset value, offering price and redemption price per share | $ | 7.88 | $ | 4.97 | $ | 17.30 | $ | 10.91 | ||||||||
Pricing of Institutional Class Shares | ||||||||||||||||
Net assets applicable to Institutional Class Shares | $ | 69,485,303 | $ | 2,674 | $ | 24,891,556 | $ | 16,190,855 | ||||||||
Shares of beneficial interest outstanding | ||||||||||||||||
(unlimited number of shares authorized, no par value) | 8,818,011 | 538 | 1,438,230 | 1,485,180 | ||||||||||||
Net asset value, offering price and redemption price per share | $ | 7.88 | $ | 4.97 | $ | 17.31 | $ | 10.90 |
* There is no sales load on subscriptions of $1 million or more. Redemption that were part of a $1 million or more subscription may be subject to a contingent deferred sales load.
** Redemption price per share varies by length of time shares are held.
See accompanying Notes to Financial Statements.
20 |
Statements of Operations
For the Six Months Ended January 31, 2013 (Unaudited)
Touchstone | Touchstone | Touchstone | Touchstone | |||||||||||||
International | Micro Cap | Small Company | Strategic | |||||||||||||
Value | Value | Value | Income | |||||||||||||
Fund | Fund | Fund | Fund | |||||||||||||
Investment Income | ||||||||||||||||
Dividends from affiliated funds | $ | 1,144 | $ | 1,330 | $ | 300 | $ | 2,861 | ||||||||
Dividends from non-affiliated securities(A) | 1,486,330 | 526,604 | 597,958 | 4,190,279 | ||||||||||||
Interest | — | — | — | 3,643,283 | ||||||||||||
Income from securities loaned | 6,490 | — | 27,600 | 6,982 | ||||||||||||
Total Investment Income | 1,493,964 | 527,934 | 625,858 | 7,843,405 | ||||||||||||
Expenses | ||||||||||||||||
Investment advisory fees | 576,796 | 189,185 | 175,480 | 1,099,950 | ||||||||||||
Administration fees | 101,132 | 33,310 | 34,337 | 253,645 | ||||||||||||
Compliance fees and expenses | 577 | 577 | 577 | 577 | ||||||||||||
Custody fees | 33,048 | 2,337 | 2,592 | 4,114 | ||||||||||||
Professional fees | 22,681 | 18,559 | 18,827 | 24,864 | ||||||||||||
Transfer Agent fees, Fund Level | 4,057 | 6,905 | 1,889 | 11,949 | ||||||||||||
Transfer Agent fees, Class A | 9,436 | 11,880 | 2,388 | 9,114 | ||||||||||||
Transfer Agent fees, Class C | 408 | 1,315 | 347 | 4,827 | ||||||||||||
Transfer Agent fees, Class Y | 613 | 1,353 | 652 | 3,262 | ||||||||||||
Transfer Agent fees, Institutional Class | 6 | 6 | 6 | 6 | ||||||||||||
Registration Fees, Fund Level | 26,997 | 22,402 | 21,304 | 24,186 | ||||||||||||
Registration Fees, Class A | 3,732 | 3,138 | 2,873 | 3,090 | ||||||||||||
Registration Fees, Class C | 3,732 | 3,138 | 2,873 | 3,090 | ||||||||||||
Registration Fees, Class Y | 3,732 | 3,138 | 2,873 | 3,090 | ||||||||||||
Registration Fees, Institutional Class | 1,292 | 1,292 | 1,292 | 1,292 | ||||||||||||
Interest expense on futures | 1,645 | — | — | — | ||||||||||||
Reports to Shareholders, Fund Level | 1,138 | 2,430 | 442 | 3,759 | ||||||||||||
Reports to Shareholders, Class A | 7,920 | 5,216 | 5,381 | 4,252 | ||||||||||||
Reports to Shareholders, Class C | 3,336 | 3,377 | 3,482 | 3,750 | ||||||||||||
Reports to Shareholders, Class Y | 3,436 | 3,394 | 3,756 | 3,537 | ||||||||||||
Reports to Shareholders, Institutional Class | 3,152 | 3,152 | 3,152 | 3,152 | ||||||||||||
Distribution expenses, Class A | 8,993 | 19,101 | 3,143 | 66,488 | ||||||||||||
Distribution and shareholder servicing expenses, Class C | 928 | 19,075 | 7,557 | 125,609 | ||||||||||||
Trustee fees | 4,217 | 3,221 | 3,338 | 4,833 | ||||||||||||
Other expenses | 35,088 | 22,233 | 12,779 | 43,414 | ||||||||||||
Total Expenses | 858,092 | 379,734 | 311,340 | 1,705,850 | ||||||||||||
Fees waived and/or reimbursed by the Advisor and/or Affiliates(B) | (281,229 | ) | (87,209 | ) | (126,331 | ) | (638,340 | ) | ||||||||
Net Expenses | 576,863 | 292,525 | 185,009 | 1,067,510 | ||||||||||||
Net Investment Income | 917,101 | 235,409 | 440,849 | 6,775,895 | ||||||||||||
Realized and Unrealized Gain (Loss) on Investments | ||||||||||||||||
Net realized gain on investments from non affiliated securities(C) | 11,581,394 | 837,186 | 7,422,955 | 2,399,611 | ||||||||||||
Net realized gain (loss) on futures | 1,731,179 | — | — | (694,443 | ) | |||||||||||
Net realized gain (loss) on foreign currency | 47,882 | — | — | (198,195 | ) | |||||||||||
Net realized loss on credit default swaps | — | — | — | (734,589 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) on investments | 2,353,628 | 3,971,523 | (1,556,827 | ) | 2,794,468 | |||||||||||
Net change in unrealized appreciation (depreciation) on futures | (616,795 | ) | — | — | 78,321 | |||||||||||
Net change in unrealized appreciation on swaps | — | — | — | 393,648 | ||||||||||||
Net change in unrealized depreciation on foreign currency transactions | (14,640 | ) | — | — | (809,218 | ) | ||||||||||
Net Realized and Unrealized Gain (Loss) on Investments | 15,082,648 | 4,808,709 | 5,866,128 | 3,229,603 | ||||||||||||
Change in Net Assets Resulting from Operations | $ | 15,999,749 | $ | 5,044,118 | $ | 6,306,977 | $ | 10,005,498 | ||||||||
(A) Net of foreign tax withholding of: | $ | 77,066 | $ | — | $ | 543 | $ | 7,189 |
(B)See Note 4 in Notes to Financial Statements.
(C)On August 28, 2012, Micro Cap Value Fund had a redemption-in-kind transfer of securities in the amount of $5,101,284. The net realized loss on the transaction of $262,527 will not be realized by the Fund for tax purposes.
See accompanying Notes to Financial Statements.
21 |
Statements of Changes in Net Assets
Touchstone | ||||||||
International | ||||||||
Value Fund | ||||||||
For the | ||||||||
Six Months | ||||||||
Ended | For the | |||||||
January 31, | Year | |||||||
2013 | Ended | |||||||
(Unaudited) | July 31, 2012 | |||||||
From Operations | ||||||||
Net investment income (loss) | $ | 917,101 | $ | 3,442,761 | ||||
Net realized gain (loss) on investments, foreign currency transactions, futures and credit default swaps | 13,360,455 | (17,953,383 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments, foreign currency transactions, futures and credit default swaps | 1,722,193 | (11,138,358 | ) | |||||
Change in Net Assets from Operations | 15,999,749 | (25,648,980 | ) | |||||
Distributions to Shareholders from: | ||||||||
Net investment income, Class A | (200,165 | ) | (235,511 | ) | ||||
Net investment income, Class B | — | (2,271 | ) | |||||
Net investment income, Class C | (5,583 | ) | (4,001 | ) | ||||
Net investment income, Class Y | (1,045,091 | ) | (4,485,965 | ) | ||||
Net investment income, Institutional Class | (2,282,278 | ) | — | |||||
Net realized gains, Class A | — | — | ||||||
Net realized gains, Class B | — | — | ||||||
Net realized gains, Class C | — | — | ||||||
Net realized gains, Class Y | — | — | ||||||
Net realized gains, Institutional Class | — | — | ||||||
Total Distributions | (3,533,117 | ) | (4,727,748 | ) | ||||
Net Decrease from Share Transactions(A) | (33,336,264 | ) | (25,818,561 | ) | ||||
Total Decrease in Net Assets | (20,869,632 | ) | (56,195,289 | ) | ||||
Net Assets | ||||||||
Beginning of period | 131,204,476 | 187,399,765 | ||||||
End of period | $ | 110,334,844 | $ | 131,204,476 | ||||
Accumulated Net Investment Income (Loss) | $ | 903,154 | $ | 3,519,170 |
(A) For details on share transaction by class, see statements of changes in net assets - capital stock activity on pages 24 - 27.
See accompanying Notes to Financial Statements.
22 |
Statements of Changes in Net Assets (Continued)
Touchstone | Touchstone | Touchstone | ||||||||||||||||||||
Micro Cap Value | Small Company | Strategic Income | ||||||||||||||||||||
Fund | Value Fund | Fund | ||||||||||||||||||||
For the | For the | For the | ||||||||||||||||||||
Six Months | Six Months | Six Months | ||||||||||||||||||||
Ended | For the | Ended | For the | Ended | For the | |||||||||||||||||
January 31, | Year | January 31, | Year | January 31, | Year | |||||||||||||||||
2013 | Ended | 2013 | Ended | 2013 | Ended | |||||||||||||||||
(Unaudited) | July 31, 2012 | (Unaudited) | July 31, 2012 | (Unaudited) | July 31, 2012 | |||||||||||||||||
$ | 235,409 | $ | (7,695 | ) | $ | 440,849 | $ | 489,338 | $ | 6,775,895 | $ | 9,855,913 | ||||||||||
837,186 | 3,937,528 | 7,422,955 | (424,944 | ) | 772,384 | 1,572,178 | ||||||||||||||||
3,971,523 | (3,692,332 | ) | (1,556,827 | ) | (1,948,627 | ) | 2,457,219 | 6,431,184 | ||||||||||||||
5,044,118 | 237,501 | 6,306,977 | (1,884,233 | ) | 10,005,498 | 17,859,275 | ||||||||||||||||
(70,758 | ) | — | (51,750 | ) | (2,318 | ) | (1,232,074 | ) | (1,802,345 | ) | ||||||||||||
— | — | — | — | — | (18,189 | ) | ||||||||||||||||
(9,054 | ) | — | (15,394 | ) | — | (492,986 | ) | (872,785 | ) | |||||||||||||
(92,350 | ) | — | (152,069 | ) | (178,879 | ) | (4,810,093 | ) | (7,695,009 | ) | ||||||||||||
(14 | ) | — | (581,905 | ) | — | (402,962 | ) | — | ||||||||||||||
(809,691 | ) | — | (405,557 | ) | (105,551 | ) | — | — | ||||||||||||||
— | — | — | (28,722 | ) | — | — | ||||||||||||||||
(224,449 | ) | — | (244,214 | ) | (95,427 | ) | — | — | ||||||||||||||
(872,692 | ) | — | (1,038,414 | ) | (3,097,507 | ) | — | — | ||||||||||||||
(123 | ) | — | (3,726,864 | ) | — | — | — | |||||||||||||||
(2,079,131 | ) | — | (6,216,167 | ) | (3,508,404 | ) | (6,938,115 | ) | (10,388,328 | ) | ||||||||||||
(8,243,674 | ) | (8,557,753 | ) | (17,637,484 | ) | (6,484,815 | ) | 18,601,321 | 102,918,716 | |||||||||||||
(5,278,687 | ) | (8,320,252 | ) | (17,546,674 | ) | (11,877,452 | ) | 21,668,704 | 110,389,663 | |||||||||||||
42,215,005 | 50,535,257 | 52,658,214 | 64,535,666 | 275,249,954 | 164,860,291 | |||||||||||||||||
$ | 36,936,318 | $ | 42,215,005 | $ | 35,111,540 | $ | 52,658,214 | $ | 296,918,658 | $ | 275,249,954 | |||||||||||
$ | 106,668 | $ | 43,435 | $ | 89,621 | $ | 449,890 | $ | (824,930 | ) | $ | (662,710 | ) |
23 |
Statements of Changes in Net Assets - Capital Stock Activity
Touchstone International | ||||||||||||||||
Value Fund | ||||||||||||||||
For the Six Months | ||||||||||||||||
Ended | For the Year | |||||||||||||||
January 31, 2013 | Ended | |||||||||||||||
(Unaudited) | July 31, 2012 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class A(A) | ||||||||||||||||
Proceeds from Shares sold | 20,876 | $ | 155,809 | 58,685 | $ | 425,756 | ||||||||||
Proceeds from Shares issued in connection with merger(B) | 20,734 | 154,261 | — | — | ||||||||||||
Reinvestment of distributions | 24,523 | 185,642 | 32,566 | 220,471 | ||||||||||||
Cost of Shares redeemed | (200,493 | ) | (1,497,238 | ) | (279,814 | ) | (1,978,776 | ) | ||||||||
Change in Net Assets from Class A Share Transactions | (134,360 | ) | (1,001,526 | ) | (188,563 | ) | (1,332,549 | ) | ||||||||
Class B(A) | ||||||||||||||||
Proceeds from Shares sold | — | — | 760 | 5,040 | ||||||||||||
Reinvestment of distributions | — | — | 249 | 1,675 | ||||||||||||
Cost of Shares redeemed | (2,292 | ) | (16,594 | ) | (19,681 | ) | (140,313 | ) | ||||||||
Cost of Shares redeemed in connection with merger(B) | (20,936 | ) | (154,261 | ) | — | — | ||||||||||
Change in Net Assets from Class B Share Transactions | (23,228 | ) | (170,855 | ) | (18,672 | ) | (133,598 | ) | ||||||||
Class C | ||||||||||||||||
Proceeds from Shares sold | 7,182 | 50,916 | 80 | 577 | ||||||||||||
Reinvestment of distributions | 760 | 5,380 | 592 | 3,764 | ||||||||||||
Cost of Shares redeemed | (2,668 | ) | (18,668 | ) | (10,005 | ) | (68,022 | ) | ||||||||
Change in Net Assets from Class C Share Transactions | 5,274 | 37,628 | (9,333 | ) | (63,681 | ) | ||||||||||
Class Y(A) | ||||||||||||||||
Proceeds from Shares sold | 175,101 | 1,275,152 | 1,674,072 | 11,922,066 | ||||||||||||
Reinvestment of distributions | 96,638 | 731,550 | 563,720 | 3,810,747 | ||||||||||||
Cost of Shares redeemed | (13,501,303 | ) | (100,064,959 | ) | (5,663,691 | ) | (40,021,546 | ) | ||||||||
Change in Net Assets from Class Y Share Transactions | (13,229,564 | ) | (98,058,257 | ) | (3,425,899 | ) | (24,288,733 | ) | ||||||||
Institutional Class(C) | ||||||||||||||||
Proceeds from Shares sold | 10,152,077 | 76,059,977 | — | — | ||||||||||||
Reinvestment of distributions | 301,490 | 2,282,278 | — | — | ||||||||||||
Cost of Shares redeemed | (1,635,556 | ) | (12,485,509 | ) | — | — | ||||||||||
Change in Net Assets from Institutional Class Share Transactions | 8,818,011 | 65,856,746 | — | — | ||||||||||||
Net Decrease from Share Transactions | (4,563,867 | ) | $ | (33,336,264 | ) | (3,642,467 | ) | $ | (25,818,561 | ) |
(A) | Effective September 10, 2012, Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares. See Note 8 in the Notes to Financial Statements. |
(B) | See Note 8 in the Notes to Financial Statements. |
(C) | Touchstone International Value Fund and Touchstone Micro Cap Value Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying Notes to Financial Statements.
24 |
Statements of Changes in Net Assets - Capital Stock Activity (Continued)
Touchstone Micro Cap | ||||||||||||||
Value Fund | ||||||||||||||
For the Six Months | ||||||||||||||
Ended | For the Year | |||||||||||||
January 31, 2013 | Ended | |||||||||||||
(Unaudited) | July 31, 2012 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
285,179 | $ | 1,267,102 | 1,111,506 | $ | 4,596,130 | |||||||||
31,683 | 143,842 | — | — | |||||||||||
156,038 | 662,719 | — | — | |||||||||||
(621,351 | ) | (2,779,267 | ) | (1,855,492 | ) | (7,747,734 | ) | |||||||
(148,451 | ) | (705,604 | ) | (743,986 | ) | (3,151,604 | ) | |||||||
— | — | 1,027 | 3,419 | |||||||||||
— | — | — | — | |||||||||||
(2,255 | ) | (8,898 | ) | (105,845 | ) | (370,269 | ) | |||||||
(36,022 | ) | (143,842 | ) | — | — | |||||||||
(38,277 | ) | (152,740 | ) | (104,818 | ) | (366,850 | ) | |||||||
57,804 | 218,465 | 157,093 | 581,866 | |||||||||||
29,506 | 109,265 | — | — | |||||||||||
(221,131 | ) | (866,574 | ) | (613,063 | ) | (2,258,494 | ) | |||||||
(133,821 | ) | (538,844 | ) | (455,970 | ) | (1,676,628 | ) | |||||||
491,648 | 2,356,975 | 1,583,163 | 7,015,294 | |||||||||||
184,691 | 854,583 | — | — | |||||||||||
(2,101,688 | ) | (10,060,681 | ) | (2,285,257 | ) | (10,377,965 | ) | |||||||
(1,425,349 | ) | (6,849,123 | ) | (702,094 | ) | (3,362,671 | ) | |||||||
508 | 2,500 | — | — | |||||||||||
30 | 137 | — | — | |||||||||||
— | — | — | — | |||||||||||
538 | 2,637 | — | — | |||||||||||
(1,745,360 | ) | $ | (8,243,674 | ) | (2,006,868 | ) | $ | (8,557,753 | ) |
25 |
Statements of Changes in Net Assets - Capital Stock Activity (Continued)
Touchstone Small Company | ||||||||||||||||
Value Fund | ||||||||||||||||
For the Six Months | ||||||||||||||||
Ended | For the Year | |||||||||||||||
January 31, 2013 | Ended | |||||||||||||||
(Unaudited) | July 31, 2012 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class A(A) | ||||||||||||||||
Proceeds from Shares sold | 17,642 | $ | 314,909 | 42,004 | $ | 764,162 | ||||||||||
Proceeds from Shares issued in connection with merger(B) | 13,540 | 257,661 | — | — | ||||||||||||
Reinvestment of distributions | 22,399 | 356,765 | 4,197 | 72,924 | ||||||||||||
Cost of Shares redeemed | (21,320 | ) | (373,412 | ) | (29,328 | ) | (520,810 | ) | ||||||||
Change in Net Assets from Class A Share Transactions | 32,261 | 555,923 | 16,873 | 316,276 | ||||||||||||
Class B(A) | ||||||||||||||||
Proceeds from Shares sold | — | — | 73 | 1,292 | ||||||||||||
Reinvestment of distributions | — | — | 1,596 | 26,161 | ||||||||||||
Cost of Shares redeemed | (4,092 | ) | (70,261 | ) | (14,812 | ) | (251,299 | ) | ||||||||
Cost of Shares redeemed in connection with merger(B) | (14,403 | ) | (257,661 | ) | — | — | ||||||||||
Change in Net Assets from Class B Share Transactions | (18,495 | ) | (327,922 | ) | (13,143 | ) | (223,846 | ) | ||||||||
Class C | ||||||||||||||||
Proceeds from Shares sold | 11,227 | 169,310 | 19,501 | 328,598 | ||||||||||||
Reinvestment of distributions | 5,681 | 83,853 | 1,654 | 27,004 | ||||||||||||
Cost of Shares redeemed | (16,919 | ) | (289,755 | ) | (25,789 | ) | (429,175 | ) | ||||||||
Change in Net Assets from Class C Share Transactions | (11 | ) | (36,592 | ) | (4,634 | ) | (73,573 | ) | ||||||||
Class Y(A) | ||||||||||||||||
Proceeds from Shares sold | 31,054 | 564,934 | 323,005 | 5,919,691 | ||||||||||||
Reinvestment of distributions | 61,876 | 996,884 | 180,666 | 3,182,398 | ||||||||||||
Cost of Shares redeemed | (2,434,714 | ) | (46,463,390 | ) | (864,713 | ) | (15,605,761 | ) | ||||||||
Change in Net Assets from Class Y Share Transactions | (2,341,784 | ) | (44,901,572 | ) | (361,042 | ) | (6,503,672 | ) | ||||||||
Institutional Class(C) | ||||||||||||||||
Proceeds from Shares sold | 1,728,155 | 33,342,233 | — | — | ||||||||||||
Reinvestment of distributions | 265,436 | 4,308,769 | — | — | ||||||||||||
Cost of Shares redeemed | (555,361 | ) | (10,578,323 | ) | — | — | ||||||||||
Change in Net Assets from Institutional Class Share Transactions | 1,438,230 | 27,072,679 | — | — | ||||||||||||
Net Increase (Decrease) from Share Transactions | (889,799 | ) | $ | (17,637,484 | ) | (361,946 | ) | $ | (6,484,815 | ) |
(A) | Effective September 10, 2012, Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares. See Note 8 in the Notes to Financial Statements. |
(B) | See Note 8 in the Notes to Financial Statements. |
(C) | Touchstone Small Company Value Fund and Touchstone Strategic Income Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying Notes to Financial Statements.
26 |
Statements of Changes in Net Assets - Capital Stock Activity (Continued)
Touchstone Strategic | ||||||||||||||
Income Fund | ||||||||||||||
For the Six Months | ||||||||||||||
Ended | For the Year | |||||||||||||
January 31, 2013 | Ended | |||||||||||||
(Unaudited) | July 31, 2012 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
1,110,640 | $ | 12,036,650 | 3,151,163 | $ | 32,993,481 | |||||||||
32,891 | 356,537 | — | — | |||||||||||
85,938 | 928,781 | 108,355 | 1,138,265 | |||||||||||
(972,917 | ) | (10,574,247 | ) | (1,090,958 | ) | (11,399,562 | ) | |||||||
256,552 | 2,747,721 | 2,168,560 | 22,732,184 | |||||||||||
2,142 | 23,134 | 10,853 | 112,457 | |||||||||||
49 | 524 | 1,224 | 12,788 | |||||||||||
(1,976 | ) | (22,352 | ) | (28,737 | ) | (299,913 | ) | |||||||
(32,946 | ) | (356,537 | ) | — | — | |||||||||
(32,731 | ) | (355,231 | ) | (16,660 | ) | (174,668 | ) | |||||||
366,890 | 3,929,082 | 995,418 | 10,267,593 | |||||||||||
29,328 | 313,403 | 52,091 | 540,105 | |||||||||||
(378,686 | ) | (4,054,098 | ) | (311,646 | ) | (3,227,988 | ) | |||||||
17,532 | 188,387 | 735,863 | 7,579,710 | |||||||||||
3,969,381 | 43,086,176 | 9,153,874 | 96,044,311 | |||||||||||
150,390 | 1,628,783 | 242,894 | 2,554,364 | |||||||||||
(4,133,898 | ) | (44,832,918 | ) | (2,467,026 | ) | (25,817,185 | ) | |||||||
(14,127 | ) | (117,959 | ) | 6,929,742 | 72,781,490 | |||||||||
1,858,136 | 20,191,330 | — | — | |||||||||||
37,205 | 402,962 | — | — | |||||||||||
(410,161 | ) | (4,455,889 | ) | — | — | |||||||||
1,485,180 | 16,138,403 | — | — | |||||||||||
1,712,406 | $ | 18,601,321 | 9,817,505 | $ | 102,918,716 |
27 |
Financial Highlights
Touchstone International Value Fund—Class A |
Selected Data for a Share Outstanding Throughout Each Period |
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 7.06 | $ | 8.42 | $ | 7.33 | $ | 7.24 | $ | 12.23 | $ | 15.54 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(A) | 0.05 | 0.14 | 0.17 | 0.14 | 0.20 | 0.40 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 1.00 | (1.30 | ) | 1.09 | 0.19 | (3.59 | ) | (2.28 | ) | |||||||||||||||
Total from investment operations | 1.05 | (1.16 | ) | 1.26 | 0.33 | (3.39 | ) | (1.88 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.23 | ) | (0.20 | ) | (0.17 | ) | (0.24 | ) | (0.17 | ) | (0.43 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (1.43 | ) | (1.00 | ) | ||||||||||||||||
Total distributions | (0.23 | ) | (0.20 | ) | (0.17 | ) | (0.24 | ) | (1.60 | ) | (1.43 | ) | ||||||||||||
Net asset value at end of period | $ | 7.88 | $ | 7.06 | $ | 8.42 | $ | 7.33 | $ | 7.24 | $ | 12.23 | ||||||||||||
Total return(B) | 14.95 | %(C) | (13.67 | %) | 17.17 | % | 4.34 | % | (24.64 | %) | (13.81 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 7,051 | $ | 7,266 | $ | 10,258 | $ | 10,216 | $ | 11,754 | $ | 20,160 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 1.37 | %(D)(E) | 1.40 | %(E) | 1.42 | %(E) | 1.43 | %(E) | 1.47 | %(E) | 1.50 | % | ||||||||||||
Gross expenses | 2.24 | %(D) | 1.68 | % | 1.61 | % | 1.59 | % | 1.59 | % | 1.60 | % | ||||||||||||
Net investment income | 1.23 | %(D) | 2.00 | % | 2.10 | % | 1.87 | % | 2.74 | % | 2.80 | % | ||||||||||||
Portfolio turnover rate | 113 | %(C) | 121 | % | 131 | % | 137 | % | 104 | % | 155 | % |
Touchstone International Value Fund—Class C |
Selected Data for a Share Outstanding Throughout Each Period |
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 6.59 | $ | 7.85 | $ | 6.84 | $ | 6.79 | $ | 11.61 | $ | 14.81 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(A) | 0.02 | 0.08 | 0.10 | 0.08 | 0.14 | 0.30 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.93 | (1.21 | ) | 1.01 | 0.18 | (3.42 | ) | (2.18 | ) | |||||||||||||||
Total from investment operations | 0.95 | (1.13 | ) | 1.11 | 0.26 | (3.28 | ) | (1.88 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.18 | ) | (0.13 | ) | (0.10 | ) | (0.21 | ) | (0.11 | ) | (0.32 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (1.43 | ) | (1.00 | ) | ||||||||||||||||
Total distributions | (0.18 | ) | (0.13 | ) | (0.10 | ) | (0.21 | ) | (1.54 | ) | (1.32 | ) | ||||||||||||
Net asset value at end of period | $ | 7.36 | $ | 6.59 | $ | 7.85 | $ | 6.84 | $ | 6.79 | $ | 11.61 | ||||||||||||
Total return(B) | 14.58 | %(C) | (14.37 | %) | 16.23 | % | 3.59 | % | (25.18 | %) | (14.43 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 228 | $ | 169 | $ | 275 | $ | 310 | $ | 378 | $ | 721 | ||||||||||||
Ratio to average net assets: | 2.11 | %(D)(E) | 2.15 | %(E) | 2.17 | %(E) | 2.18 | %(E) | 2.22 | %(E) | 2.26 | % | ||||||||||||
Net expenses | ||||||||||||||||||||||||
Gross expenses | 10.46 | %(D) | 2.43 | % | 2.36 | % | 2.34 | % | 2.34 | % | 2.36 | % | ||||||||||||
Net investment income | 0.49 | %(D) | 1.24 | % | 1.28 | % | 1.11 | % | 2.01 | % | 2.19 | % | ||||||||||||
Portfolio turnover rate | 113 | %(C) | 121 | % | 131 | % | 137 | % | 104 | % | 155 | % |
(A) | The net investment income per share is based on average shares outstanding for the period. |
(B) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
(C) | Not annualized. |
(D) | Annualized. |
(E) | Includes interest expense relating to settlement of foreign futures. Interest expense was less than 0.005% for the six months ended |
January 31, 2013 and 0.02%, 0.01%, 0.01% and 0.02% for the years ended July 31, 2012, 2011, 2010 and 2009, respectively.
See accompanying notes to financial statements.
28 |
Financial Highlights (Continued)
Touchstone International Value Fund—Class Y |
Selected Data for a Share Outstanding Throughout Each Period |
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013(A) | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 7.07 | $ | 8.44 | $ | 7.35 | $ | 7.25 | $ | 12.24 | $ | 15.55 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(B) | 0.06 | 0.16 | 0.18 | 0.16 | 0.22 | 0.45 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 1.00 | (1.31 | ) | 1.10 | 0.19 | (3.59 | ) | (2.30 | ) | |||||||||||||||
Total from investment operations | 1.06 | (1.15 | ) | 1.28 | 0.35 | (3.37 | ) | (1.85 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.22 | ) | (0.19 | ) | (0.25 | ) | (0.19 | ) | (0.46 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (1.43 | ) | (1.00 | ) | ||||||||||||||||
Total distributions | (0.25 | ) | (0.22 | ) | (0.19 | ) | (0.25 | ) | (1.62 | ) | (1.46 | ) | ||||||||||||
Net asset value at end of period | $ | 7.88 | $ | 7.07 | $ | 8.44 | $ | 7.35 | $ | 7.25 | $ | 12.24 | ||||||||||||
Total return | 15.13 | %(C) | (13.47 | %) | 17.42 | % | 4.61 | % | (24.36 | %) | (13.56 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 33,571 | $ | 123,607 | $ | 176,521 | $ | 229,888 | $ | 233,968 | $ | 420,993 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 0.99 | %(D)(E) | 1.15 | %(E) | 1.17 | %(E) | 1.18 | %(E) | 1.22 | %(E) | 1.26 | % | ||||||||||||
Gross expenses | 1.43 | %(D) | 1.43 | % | 1.36 | % | 1.34 | % | 1.34 | % | 1.36 | % | ||||||||||||
Net investment income | 1.61 | %(D) | 2.27 | % | 2.22 | % | 2.18 | % | 3.01 | % | 3.13 | % | ||||||||||||
Portfolio turnover rate | 113 | %(C) | 121 | % | 131 | % | 137 | % | 104 | % | 155 | % |
Touchstone International Value Fund—Institutional Class |
Selected Data for a Share Outstanding Throughout Each Period |
Period Ended | ||||
January 31, | ||||
2013(F) | ||||
(Unaudited) | ||||
Net asset value at beginning of period | $ | 7.43 | ||
Income (loss) from investment operations: | ||||
Net investment income(B) | 0.05 | |||
Net realized and unrealized gains on investments | 0.65 | |||
Total from investment operations | 0.70 | |||
Distributions from: | ||||
Net investment income | (0.25 | ) | ||
Realized capital gains | — | |||
Total distributions | (0.25 | ) | ||
Net asset value at end of period | $ | 7.88 | ||
Total return | 9.56 | %(C) | ||
Ratios and supplemental data: | ||||
Net assets at end of period (000's) | $ | 69,485 | ||
Ratio to average net assets: | ||||
Net expenses | 0.96 | %(D)(E) | ||
Gross expenses | 1.42 | %(D) | ||
Net investment income | 1.64 | %(D) | ||
Portfolio turnover rate | 113 | %(C) |
(A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 8 in the Notes to Financial Statements. |
(B) | The net investment income per share is based on average shares outstanding for the period. |
(C) | Not annualized. |
(D) | Annualized. |
(E) | Includes interest expense relating to settlement of foreign futures. Interest expense was less than 0.005% for the six months ended January 31, 2013 and 0.02%, 0.01%, 0.01% and 0.02% for the years ended July 31, 2012, 2011, 2010 and 2009, respectively. |
(F) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying notes to financial statements.
29 |
Financial Highlights (Continued)
Touchstone Micro Cap Value Fund—Class A |
Selected Data for a Share Outstanding Throughout Each Period |
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 4.25 | $ | 4.24 | $ | 3.63 | $ | 3.01 | $ | 3.49 | $ | 6.73 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)(A) | 0.03 | — | (B) | (0.01 | ) | (0.01 | ) | 0.01 | 0.01 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.55 | 0.01 | 0.62 | 0.63 | (0.47 | ) | (0.75 | ) | ||||||||||||||||
Total from investment operations | 0.58 | 0.01 | 0.61 | 0.62 | (0.46 | ) | (0.74 | ) | ||||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.02 | ) | — | — | — | (0.01 | ) | — | ||||||||||||||||
Realized capital gains | (0.24 | ) | — | — | — | (0.01 | ) | (2.50 | ) | |||||||||||||||
Total distributions | (0.26 | ) | — | — | — | (0.02 | ) | (2.50 | ) | |||||||||||||||
Net asset value at end of period | $ | 4.57 | $ | 4.25 | $ | 4.24 | $ | 3.63 | $ | 3.01 | $ | 3.49 | ||||||||||||
Total return(C) | 14.19 | %(D) | 0.24 | % | 16.80 | % | 20.60 | % | (13.18 | %) | (12.41 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 15,429 | $ | 15,010 | $ | 18,117 | $ | 11,649 | $ | 7,497 | $ | 10,552 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 1.60 | %(E) | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | ||||||||||||
Gross expenses | 2.11 | %(E) | 2.01 | % | 1.96 | % | 2.07 | % | 2.14 | % | 2.06 | % | ||||||||||||
Net investment income (loss) | 1.19 | %(E) | (0.07 | %) | (0.33 | %) | (0.41 | %) | 0.40 | % | 0.16 | % | ||||||||||||
Portfolio turnover rate | 45 | %(D)(F) | 48 | % | 59 | % | 56 | % | 46 | % | 49 | % |
Touchstone Micro Cap Value Fund—Class C |
Selected Data for a Share Outstanding Throughout Each Period |
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 3.75 | $ | 3.77 | $ | 3.25 | $ | 2.72 | $ | 3.17 | $ | 6.39 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)(A) | 0.01 | (0.03 | ) | (0.04 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.48 | 0.01 | 0.56 | 0.57 | (0.43 | ) | (0.70 | ) | ||||||||||||||||
Total from investment operations | 0.49 | (0.02 | ) | 0.52 | 0.53 | (0.44 | ) | (0.72 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.01 | ) | — | — | — | — | — | |||||||||||||||||
Realized capital gains | (0.24 | ) | — | — | — | (0.01 | ) | (2.50 | ) | |||||||||||||||
Total distributions | (0.25 | ) | — | — | — | (0.01 | ) | (2.50 | ) | |||||||||||||||
Net asset value at end of period | $ | 3.99 | $ | 3.75 | $ | 3.77 | $ | 3.25 | $ | 2.72 | $ | 3.17 | ||||||||||||
Total return(C) | 13.62 | %(D) | (0.53 | %) | 16.00 | % | 19.49 | % | (13.75 | %) | (12.95 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 3,538 | $ | 3,830 | $ | 5,563 | $ | 2,876 | $ | 1,446 | $ | 1,749 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 2.35 | %(E) | 2.35 | % | 2.35 | % | 2.35 | % | 2.35 | % | 2.35 | % | ||||||||||||
Gross expenses | 3.00 | %(E) | 2.76 | % | 2.71 | % | 2.82 | % | 2.88 | % | 2.81 | % | ||||||||||||
Net investment income (loss) | 0.44 | %(E) | (0.82 | %) | (1.10 | %) | (1.17 | %) | (0.35 | %) | (0.62 | %) | ||||||||||||
Portfolio turnover rate | 45 | %(D)(F) | 48 | % | 59 | % | 56 | % | 46 | % | 49 | % |
(A) | The net investment income/(loss) per share is based on average shares outstanding for the period. |
(B) | Less than $0.005 per share. |
(C) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
(D) | Not annualized. |
(E) | Annualized. |
(F) | Portfolio turnover rate excludes securities delivered from processing a redemption-in-kind. |
See accompanying notes to financial statements.
30 |
Financial Highlights (Continued)
Touchstone Micro Cap Value Fund—Class Y
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013(A) | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 4.61 | $ | 4.58 | $ | 3.92 | $ | 3.24 | $ | 3.75 | $ | 7.02 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)(B) | 0.04 | 0.01 | — | (C) | (0.01 | ) | 0.02 | 0.02 | ||||||||||||||||
Net realized and unrealized gains (losses) on | ||||||||||||||||||||||||
investments | 0.59 | 0.02 | 0.66 | 0.69 | (0.51 | ) | (0.78 | ) | ||||||||||||||||
Total from investment operations | 0.63 | 0.03 | 0.66 | 0.68 | (0.49 | ) | (0.76 | ) | ||||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.03 | ) | — | — | — | (0.01 | ) | (0.01 | ) | |||||||||||||||
Realized capital gains | (0.24 | ) | — | — | — | (0.01 | ) | (2.50 | ) | |||||||||||||||
Total distributions | (0.27 | ) | — | — | — | (0.02 | ) | (2.51 | ) | |||||||||||||||
Net asset value at end of period | $ | 4.97 | (D) | $ | 4.61 | $ | 4.58 | $ | 3.92 | $ | 3.24 | $ | 3.75 | |||||||||||
Total return | 14.05 | % | 0.66 | % | 16.84 | % | 20.99 | % | (12.86 | %) | (12.23 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 17,966 | $ | 23,232 | $ | 26,317 | $ | 21,195 | $ | 17,394 | $ | 22,662 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 1.34 | %(E) | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | ||||||||||||
Gross expenses | 1.68 | %(E) | 1.76 | % | 1.71 | % | 1.82 | % | 1.89 | % | 1.82 | % | ||||||||||||
Net investment income (loss) | 1.45 | %(E) | 0.17 | % | (0.08 | %) | (0.16 | %) | 0.64 | % | 0.37 | % | ||||||||||||
Portfolio turnover rate | 45 | %(D)(F) | 48 | % | 59 | % | 56 | % | 46 | % | 49 | % |
Touchstone Micro Cap Value Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period |
Period Ended | ||||
January 31, | ||||
2013(G) | ||||
(Unaudited) | ||||
Net asset value at beginning of period | $ | 4.92 | ||
Income (loss) from investment operations: | ||||
Net investment income(B) | 0.03 | |||
Net realized and unrealized gains on investments | 0.29 | |||
Total from investment operations | 0.32 | |||
Distributions from: | ||||
Net investment income | (0.03 | ) | ||
Realized capital gains | (0.24 | ) | ||
Total distributions | (0.27 | ) | ||
Net asset value at end of period | $ | 4.97 | ||
Total return | 6.89 | %(D) | ||
Ratios and supplemental data: | ||||
Net assets at end of period (000's) | $ | 3 | ||
Ratio to average net assets: | ||||
Net expenses | 1.25 | %(E) | ||
Gross expenses | 453.70 | %(E) | ||
Net investment income | 1.54 | %(E) | ||
Portfolio turnover rate | 45 | %(D)(F) |
(A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 8 in the Notes to Financial Statements. |
(B) | The net investment income/(loss) per share is based on average shares outstanding for the period. |
(C) | Less than $0.005 per share. |
(D) | Not annualized. |
(E) | Annualized. |
(F) | Portfolio turnover rate excludes securities delivered from processing a redemption-in-kind. |
(G) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying notes to financial statements.
31 |
Financial Highlights (Continued)
Touchstone Small Company Value Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 17.80 | $ | 19.43 | $ | 16.15 | $ | 13.33 | $ | 16.84 | $ | 20.09 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(A) | 0.18 | 0.11 | 0.08 | 0.06 | 0.18 | 0.14 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 2.42 | (0.66 | ) | 3.23 | 2.83 | (3.51 | ) | (0.90 | ) | |||||||||||||||
Total from investment operations | 2.60 | (0.55 | ) | 3.31 | 2.89 | (3.33 | ) | (0.76 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.36 | ) | (0.02 | ) | (0.03 | ) | (0.07 | ) | (0.18 | ) | (0.12 | ) | ||||||||||||
Realized capital gains | (2.99 | ) | (1.06 | ) | — | — | — | (2.37 | ) | |||||||||||||||
Total distributions | (3.35 | ) | (1.08 | ) | (0.03 | ) | (0.07 | ) | (0.18 | ) | (2.49 | ) | ||||||||||||
Net asset value at end of period | $ | 17.05 | $ | 17.80 | $ | 19.43 | $ | 16.15 | $ | 13.33 | $ | 16.84 | ||||||||||||
Total return(B) | 16.28 | %(C) | (2.65 | %) | 20.52 | % | 21.69 | % | (19.56 | %) | (3.95 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 2,575 | $ | 2,114 | $ | 1,980 | $ | 2,241 | $ | 1,275 | $ | 1,682 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 1.21 | %(D) | 1.24 | % | 1.36 | % | 1.41 | % | 1.45 | % | 1.45 | % | ||||||||||||
Gross expenses | 2.49 | %(D) | 1.66 | % | 1.60 | % | 1.56 | % | 1.55 | % | 1.50 | % | ||||||||||||
Net investment income | 2.01 | %(D) | 0.63 | % | 0.43 | % | 0.39 | % | 1.42 | % | 0.77 | % | ||||||||||||
Portfolio turnover rate | 133 | %(C) | 62 | % | 93 | % | 65 | % | 68 | % | 60 | % |
Touchstone Small Company Value Fund—Class C
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 16.67 | $ | 18.38 | $ | 15.37 | $ | 12.73 | $ | 16.07 | $ | 19.31 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)(A) | 0.11 | (0.02 | ) | (0.07 | ) | (0.06 | ) | 0.08 | — | (E) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 2.27 | (0.63 | ) | 3.08 | 2.70 | (3.33 | ) | (0.87 | ) | |||||||||||||||
Total from investment operations | 2.38 | (0.65 | ) | 3.01 | 2.64 | (3.25 | ) | (0.87 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.16 | ) | — | — | — | (0.09 | ) | — | ||||||||||||||||
Realized capital gains | (2.99 | ) | (1.06 | ) | — | — | — | (2.37 | ) | |||||||||||||||
Total distributions | (3.15 | ) | (1.06 | ) | — | — | (0.09 | ) | (2.37 | ) | ||||||||||||||
Net asset value at end of period | $ | 15.90 | $ | 16.67 | $ | 18.38 | $ | 15.37 | $ | 12.73 | $ | 16.07 | ||||||||||||
Total return(B) | 15.95 | %(C) | (3.39 | %) | 19.58 | % | 20.83 | % | (20.17 | %) | (4.74 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 1,485 | $ | 1,557 | $ | 1,802 | $ | 828 | $ | 399 | $ | 384 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 1.96 | %(D) | 1.99 | % | 2.11 | % | 2.16 | % | 2.20 | % | 2.20 | % | ||||||||||||
Gross expenses | 3.28 | %(D) | 2.41 | % | 2.35 | % | 2.31 | % | 2.30 | % | 2.25 | % | ||||||||||||
Net investment (loss) | 1.26 | %(D) | (0.11 | %) | (0.39 | %) | (0.37 | %) | 0.68 | % | 0.01 | % | ||||||||||||
Portfolio turnover rate | 133 | %(C) | 62 | % | 93 | % | 65 | % | 68 | % | 60 | % |
(A) | The net investment income/(loss) per share is based on average shares outstanding for the period. |
(B) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
(C) | Not annualized. |
(D) | Annualized. |
(E) | Less than $0.005 per share. |
See accompanying notes to financial statements.
32 |
Financial Highlights (Continued)
Touchstone Small Company Value Fund—Class Y
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013(A) | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 18.04 | $ | 19.67 | $ | 16.34 | $ | 13.48 | $ | 17.04 | $ | 20.29 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(B) | 0.21 | 0.16 | 0.13 | 0.11 | 0.21 | 0.19 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 2.45 | (0.67 | ) | 3.27 | 2.85 | (3.55 | ) | (0.91 | ) | |||||||||||||||
Total from investment operations | 2.66 | (0.51 | ) | 3.40 | 2.96 | (3.34 | ) | (0.72 | ) | |||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.41 | ) | (0.06 | ) | (0.07 | ) | (0.10 | ) | (0.22 | ) | (0.16 | ) | ||||||||||||
Realized capital gains | (2.99 | ) | (1.06 | ) | — | — | — | (2.37 | ) | |||||||||||||||
Total distributions | (3.40 | ) | (1.12 | ) | (0.07 | ) | (0.10 | ) | (0.22 | ) | (2.53 | ) | ||||||||||||
Net asset value at end of period | $ | 17.30 | $ | 18.04 | $ | 19.67 | $ | 16.34 | $ | 13.48 | $ | 17.04 | ||||||||||||
Total return | 16.41 | %(C) | (2.42 | %) | 20.80 | % | 22.00 | % | (19.32 | %) | (3.68 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 6,160 | $ | 48,677 | $ | 60,170 | $ | 59,572 | $ | 65,235 | $ | 86,463 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 0.94 | %(D) | 0.99 | % | 1.11 | % | 1.16 | % | 1.20 | % | 1.19 | % | ||||||||||||
Gross expenses | 1.49 | %(D) | 1.41 | % | 1.35 | % | 1.31 | % | 1.30 | % | 1.24 | % | ||||||||||||
Net investment income | 2.28 | %(D) | 0.89 | % | 0.68 | % | 0.67 | % | 1.68 | % | 1.05 | % | ||||||||||||
Portfolio turnover rate | 133 | %(C) | 62 | % | 93 | % | 65 | % | 68 | % | 60 | % |
Touchstone Small Company Value Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period |
Period Ended | ||||
January 31, | ||||
2013(E) | ||||
(Unaudited) | ||||
Net asset value at beginning of period | $ | 19.26 | ||
Income (loss) from investment operations: | ||||
Net investment income(B) | 0.17 | |||
Net realized and unrealized gains on investments | 1.30 | |||
Total from investment operations | 1.47 | |||
Distributions from: | ||||
Net investment income | (0.43 | ) | ||
Realized capital gains | (2.99 | ) | ||
Total distributions | (3.42 | ) | ||
Net asset value at end of period | $ | 17.31 | ||
Total return | 9.18 | %(C) | ||
Ratios and supplemental data: | ||||
Net assets at end of period (000's) | $ | 24,892 | ||
Ratio to average net assets: | ||||
Net expenses | 0.85 | %(D) | ||
Gross expenses | 1.45 | %(D) | ||
Net investment income | 2.37 | %(D) | ||
Portfolio turnover rate | 133 | %(C) |
(A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 8 in the Notes to Financial Statements. |
(B) | The net investment income per share is based on average shares outstanding for the period. |
(C) | Not annualized. |
(D) | Annualized. |
(E) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying notes to financial statements.
33 |
Financial Highlights (Continued)
Touchstone Strategic Income Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 10.76 | $ | 10.47 | $ | 10.00 | $ | 8.93 | $ | 9.36 | $ | 11.15 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.25 | 0.49 | (A) | 0.52 | (A) | 0.51 | (A) | 0.56 | (A) | 0.53 | (A) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.12 | 0.31 | 0.44 | 1.26 | (0.39 | ) | (1.41 | ) | ||||||||||||||||
Total from investment operations | 0.37 | 0.80 | 0.96 | 1.77 | 0.17 | (0.88 | ) | |||||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.51 | ) | (0.49 | ) | (0.70 | ) | (0.59 | ) | (0.58 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (0.01 | ) | (0.33 | ) | ||||||||||||||||
Total distributions | (0.25 | ) | (0.51 | ) | (0.49 | ) | (0.70 | ) | (0.60 | ) | (0.91 | ) | ||||||||||||
Net asset value at end of period | $ | 10.88 | $ | 10.76 | $ | 10.47 | $ | 10.00 | $ | 8.93 | $ | 9.36 | ||||||||||||
Total return(B) | 3.51 | %(C) | 7.86 | % | 9.90 | % | 20.27 | % | 3.02 | % | (8.46 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 52,788 | $ | 49,458 | $ | 25,400 | $ | 19,461 | $ | 13,406 | $ | 14,768 | ||||||||||||
Ratio to average net assets: | 0.89 | %(D) | 0.95 | % | 1.02 | % | 1.12 | % | 1.18 | % | 1.21 | % | ||||||||||||
Net expenses | ||||||||||||||||||||||||
Gross expenses | 1.33 | %(D) | 1.60 | % | 1.61 | % | 1.65 | % | 1.65 | % | 1.60 | % | ||||||||||||
Net investment income | 4.55 | %(D) | 4.65 | % | 4.99 | % | 5.27 | % | 7.05 | % | 5.21 | % | ||||||||||||
Portfolio turnover rate | 46 | %(C) | 47 | % | 42 | % | 31 | % | 32 | % | 32 | % |
Touchstone Strategic Income Fund-Class C
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013 | Year Ended July 31, | |||||||||||||||||||||||
(Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 10.65 | $ | 10.36 | $ | 9.90 | $ | 8.85 | $ | 9.29 | $ | 11.07 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.20 | 0.40 | (A) | 0.44 | (A) | 0.43 | (A) | 0.49 | (A) | 0.45 | (A) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.12 | 0.32 | 0.44 | 1.25 | (0.38 | ) | (1.40 | ) | ||||||||||||||||
Total from investment operations | 0.32 | 0.72 | 0.88 | 1.68 | 0.11 | (0.95 | ) | |||||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.21 | ) | (0.43 | ) | (0.42 | ) | (0.63 | ) | (0.54 | ) | (0.50 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (0.01 | ) | (0.33 | ) | ||||||||||||||||
Total distributions | (0.21 | ) | (0.43 | ) | (0.42 | ) | (0.63 | ) | (0.55 | ) | (0.83 | ) | ||||||||||||
Net asset value at end of period | $ | 10.76 | $ | 10.65 | $ | 10.36 | $ | 9.90 | $ | 8.85 | $ | 9.29 | ||||||||||||
Total return(B) | 3.05 | %(C) | 7.16 | % | 9.09 | % | 19.20 | % | 2.29 | % | (9.12 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 25,571 | $ | 25,115 | $ | 16,818 | $ | 12,504 | $ | 8,468 | $ | 9,780 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 1.67 | %(D) | 1.70 | % | 1.77 | % | 1.87 | % | 1.93 | % | 1.96 | % | ||||||||||||
Gross expenses | 2.11 | %(D) | 2.35 | % | 2.36 | % | 2.40 | % | 2.40 | % | 2.35 | % | ||||||||||||
Net investment income | 3.77 | %(D) | 3.82 | % | 4.25 | % | 4.53 | % | 6.32 | % | 4.26 | % | ||||||||||||
Portfolio turnover rate | 46 | %(C) | 47 | % | 42 | % | 31 | % | 32 | % | 32 | % |
(A) | The net investment income per share is based on average shares outstanding for the period. |
(B) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
(C) | Not annualized. |
(D) | Annualized. |
See accompanying notes to financial statements.
34 |
Financial Highlights (Continued)
Touchstone Strategic Income Fund - Class Y
Selected Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
January 31, | ||||||||||||||||||||||||
2013(A) | Year Ended July 31, | |||||||||||||||||||||||
(unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
Net asset value at beginning of period | $ | 10.79 | $ | 10.49 | $ | 10.02 | $ | 8.95 | $ | 9.38 | $ | 11.18 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.27 | 0.50 | (B) | 0.54 | (B) | 0.53 | (B) | 0.57 | (B) | 0.55 | (B) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.12 | 0.33 | 0.45 | 1.26 | (0.38 | ) | (1.41 | ) | ||||||||||||||||
Total from investment operations | 0.39 | 0.83 | 0.99 | 1.79 | 0.19 | (0.86 | ) | |||||||||||||||||
Distributions from: | ||||||||||||||||||||||||
Net investment income | (0.27 | ) | (0.53 | ) | (0.52 | ) | (0.72 | ) | (0.61 | ) | (0.61 | ) | ||||||||||||
Realized capital gains | — | — | — | — | (0.01 | ) | (0.33 | ) | ||||||||||||||||
Total distributions | (0.27 | ) | (0.53 | ) | (0.52 | ) | (0.72 | ) | (0.62 | ) | (0.94 | ) | ||||||||||||
Net asset value at end of period | $ | 10.91 | $ | 10.79 | $ | 10.49 | $ | 10.02 | $ | 8.95 | $ | 9.38 | ||||||||||||
Total return | 3.65 | %(C) | 8.21 | % | 10.15 | % | 20.39 | % | 3.38 | % | (8.30 | %) | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets at end of period (000's) | $ | 202,369 | $ | 200,325 | $ | 122,125 | $ | 80,807 | $ | 59,493 | $ | 90,639 | ||||||||||||
Ratio to average net assets: | ||||||||||||||||||||||||
Net expenses | 0.59 | %(D) | 0.70 | % | 0.77 | % | 0.87 | % | 0.93 | % | 0.96 | % | ||||||||||||
Gross expenses | 1.03 | %(D) | 1.35 | % | 1.36 | % | 1.40 | % | 1.40 | % | 1.35 | % | ||||||||||||
Net investment income | 4.85 | %(D) | 4.80 | % | 5.22 | % | 5.51 | % | 7.29 | % | 5.28 | % | ||||||||||||
Portfolio turnover rate | 46 | %(C) | 47 | % | 42 | % | 31 | % | 32 | % | 32 | % |
Touchstone Strategic Income Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period |
Period Ended | ||||
January 31, | ||||
2013(E) | ||||
(Unaudited) | ||||
Net asset value at beginning of period | $ | 10.86 | ||
Income (loss) from investment operations: | ||||
Net investment income | 0.19 | |||
Net realized and unrealized gains on investments | 0.09 | |||
Total from investment operations | 0.28 | |||
Distributions from: | ||||
Net investment income | (0.24 | ) | ||
Realized capital gains | — | |||
Total distributions | (0.24 | ) | ||
Net asset value at end of period | $ | 10.90 | ||
Total return | 2.63 | %(C) | ||
Ratios and supplemental data: | ||||
Net assets at end of period (000's) | $ | 16,191 | ||
Ratio to average net assets: | ||||
Net expenses | 0.59 | %(D) | ||
Gross expenses | 1.09 | %(D) | ||
Net investment income | 4.85 | %(D) | ||
Portfolio turnover rate | 46 | %(C) |
(A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 8 in the Notes to Financial Statements. |
(B) | The net investment income per share is based on average shares outstanding for the period. |
(C) | Not annualized. |
(D) | Annualized. |
(E) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying notes to financial statements.
35 |
Notes to Financial Statements
January 31, 2013 (Unaudited)
1. Organization
The Touchstone Strategic Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) as an open-end management investment company. The Trust was established as a Massachusetts business trust under a Declaration of Trust dated November 18, 1982. The Trust consists of twenty-two funds including the following four funds, individually, a “Fund”, and collectively, the “Funds”:
Touchstone International Value Fund (“International Value Fund”)
Touchstone Micro Cap Value Fund (“Micro Cap Value Fund”)
Touchstone Small Company Value Fund (“Small Company Value Fund”)
Touchstone Strategic Income Fund (“Strategic Income Fund”)
Each Fund is an open-end, diversified management investment company.
The Declaration of Trust permits the Trust to issue an unlimited number of shares of beneficial interest of each Fund. The Funds are registered to offer the following classes of shares: Class A shares, Class C shares, Class Y shares, and Institutional Class shares. The assets of each Fund are segregated, and a shareholder’s interest is limited to the Fund in which shares are held. The Funds’ prospectus provides a description of each Fund’s investment goals, policies, and strategies along with information on the classes of shares currently being offered.
2. Significant Accounting Policies
The following is a summary of the Funds’ significant accounting policies:
Security valuation and fair value measurements — All investments in securities are recorded at their estimated fair value. The Funds define the term “market value”, as used throughout this report, as the estimated fair value. The Funds use various methods to measure fair value of their portfolio securities on a recurring basis. Generally accepted accounting principles in the United States (“U.S. GAAP”) establish a hierarchy that prioritizes inputs to valuation methods. These inputs are summarized in the three broad levels listed below:
• Level 1 – | quoted prices in active markets for identical securities |
• Level 2 – | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
• Level 3 – | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market instruments are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.
The aggregate value by input level, as of January 31, 2013, for each Fund’s investments, as well as a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining value, if applicable, is included in each Fund’s Portfolio of Investments, which also includes a breakdown of the Fund’s investments by geographic/industry concentration, if any. The Funds did not hold any Level 3 categorized securities during the six months ended January 31, 2013.
All transfers in and out of the levels are recognized at the value at the end of the period. During the period ended January 31, 2013, there were no transfers between Levels 1, 2 and 3 for all Funds.
36 |
Notes to Financial Statements (Continued)
The Funds’ portfolio securities are valued as of the close of the regular session of trading on the New York Stock Exchange (“NYSE”) (currently 4:00 p.m., Eastern time). Portfolio securities traded on stock exchanges are valued at the last sale price, and to the extent these securities are actively traded, they are categorized in Level 1 of the fair value hierarchy. Portfolio securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Securities not traded on a particular day, or for which the last sale price is not readily available, are valued at their last broker-quoted bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service and are categorized in Level 2. Money market instruments and other debt securities with a remaining maturity of less than 60 days are valued at amortized cost, which approximates market value and are categorized in Level 2. While this method provides consistency in valuation (and may only be used if it approximates market value), it may result in periods during which value, as determined by amortized cost, is higher or lower than the price that would be received if the Fund sold the investment. Securities for which market quotations or the NOCP are not readily available are valued based on fair value as determined by or under the direction of the Board of Trustees and are categorized in Level 3. Shares of open end mutual funds in which the Funds invest are valued at their respective net asset values as reported by the underlying funds and are categorized in Level 1. The prices for foreign securities are reported in local currency and translated into U.S. dollars using currency exchange rates.
Level 2 Valuation— Securities mainly traded on a non-U.S. exchange are generally valued according to the preceding closing values on that exchange. However, if an event that may change the value of a security occurs after the time that the closing value on the non-U.S. exchange was determined, but before the close of regular trading on the NYSE, the security may be priced based on fair value. This may cause the value of the security on the books of the Fund to be significantly different from the closing value on the non-U.S. exchange and may affect the calculation of the net asset value (“NAV”) of the Fund. Any debt securities held by the Fund for which market quotations are not readily available are generally priced at their most recent bid prices as obtained from one or more of the major market makers for such securities.
Level 3 Valuation— Securities held by the Fund that do not have readily available market quotations, or securities for which the available market quotations are not reliable, are priced at their fair value using procedures approved by the Funds’ Board of Trustees. A Fund may use fair value pricing under the following circumstances, among others:
• | If the value of a security has been materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets on which the security is traded. |
• | If the exchange on which a portfolio security is principally traded closes early or if trading in a particular portfolio security was halted during the day and did not resume prior to the Fund’s NAV calculation. |
• | If a security is so thinly traded that reliable market quotations are unavailable due to infrequent trading. |
• | If the validity of market quotations is not reliable. |
Certain Funds invest in securities of other investment companies, including exchange-traded funds (“ETFs”), open-end funds and closed-end funds. Open-end funds are investment companies that issue new shares continuously and redeem shares daily. Closed-end funds are investment companies that typically issue a fixed number of shares that trade on a securities exchange or over-the-counter. An ETF is an investment company that seeks to track the performance of an index by holding in its portfolio shares of all the companies, or a representative sample of the companies, that are components of a particular index. ETFs are traded on a securities exchange based on their market value. The risks of investment in other investment companies typically reflect the risks of the types of securities in which investment companies invest. Investments in ETFs and closed-end funds are subject to the additional risk that shares of the fund may trade at a premium or discount to their NAV per share. When the Fund invests in another investment company, shareholders of the Fund indirectly bear their
37 |
Notes to Financial Statements (Continued)
proportionate share of the other investment company’s fees and expenses, including operating, registration, trustee, licensing and marketing, as well as their share of the Fund’s fees and expenses.
New accounting pronouncements — In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11,“Disclosures about Offsetting Assets and Liabilities”. ASU No. 2011-11 requires disclosures to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under the International Financial Reporting Standards (“IFRS”).The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of assets and liabilities, as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, ASU No. 2011-11 requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. New disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is evaluating the impact of ASU No. 2011-11 on the financial statements and disclosures.
Options — The Funds may write or purchase financial option contracts primarily to hedge against changes in the value of equity securities (or securities that the Funds intend to purchase), against fluctuations in fair value caused by changes in prevailing market interest rates or foreign currency exchange rates and against changes in overall equity market volatility. In addition, the Funds may utilize options in an attempt to generate gains from option premiums or to reduce overall portfolio risk. The Funds’ option strategy primarily focuses on the use of writing call options on equity indexes. When the Funds write or purchase an option, an amount equal to the premium received or paid by the Funds is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Funds on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Funds have realized a gain or loss on investment transactions. The Funds, as writers of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bear the market risk of an unfavorable change in the price of the security underlying the written option. The Funds, as purchasers of an option, bear the risk that the counterparties to the option may not have the ability to meet the terms of the option contracts. There is minimal counterparty credit risk involved in entering into option contracts since they are exchanged-traded instruments and the exchange’s clearinghouse, as counterparty to all exchange-traded options, guarantees the options against default. Options are valued at the last quoted sales price. If there is no such reported sale on the valuation date, long option positions are valued at the most recent bid price, and short option positions are valued at the most recent ask price. As of January 31, 2013, the Fund had no written options.
Futures Contracts — A Fund may buy and sell futures contracts and related options to manage its exposure to changing interest rates and securities prices. Some strategies reduce a Fund’s exposure to price fluctuations, while others tend to increase its market exposure. Futures and options on futures can be volatile instruments and involve certain risks that could negatively impact a Fund’s return. In order to avoid leveraging and related risks, when a Fund purchases futures contracts, it will collateralize its position by depositing an amount of cash or liquid securities, equal to the market value of the futures positions held, less margin deposits, in a segregated account with its custodian or otherwise “cover” its position in a manner consistent with the 1940 Act or the rules of the Securities and Exchange Commission interpretations thereunder. Collateral equal to the current market value of the futures position will be marked to market on a daily basis.
When the contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of ) the closing transactions and the Fund’s basis in the contract. Risks of entering into futures
38 |
Notes to Financial Statements (Continued)
contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. Second, it is possible that a lack of liquidity for futures contracts could exist in the secondary market resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that the Funds could lose more than the original margin deposit required to initiate the futures transaction. Finally, the risk exists that losses could exceed amounts disclosed on the Statements of Assets and Liabilities. There is minimal counterparty credit risk involved in entering into futures contracts since they are exchange-traded instruments and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. As of January 31, 2013, the Strategic Income Fund held future contracts as shown on the Portfolio of Investments and had cash in the amount of $101,563 held as collateral for future contracts.
Swap Contracts — The Funds may enter into swap transactions, which are financial instruments that typically involve the exchange of cash flows between two parties on specified dates (settlement dates), where the cash flows are based on agreed-upon prices, rates, indices, etc. The nominal amount on which the cash flows are calculated is called the notional amount. Swaps are individually negotiated and structured to include exposure to a variety of different types of investments or market factors, such as interest rates, foreign currency rates, mortgage securities, corporate borrowing rates, security prices, indexes or inflation rates.
Swap agreements may increase or decrease the overall volatility of the investments of a Fund and its share price. The performance of swap agreements may be affected by a change in the specific interest rate, currency, or other factors that determine the amounts of payments due to and from a Fund. If a swap agreement calls for payments by a Fund, the Fund must be prepared to make such payments when due. In addition, if the counter-party’s creditworthiness declines, the value of a swap agreement would be likely to decline, potentially resulting in losses.
Generally, swap agreements have a fixed maturity date that will be agreed upon by the parties. The agreement can be terminated before the maturity date only under limited circumstances, such as default by one of the parties or insolvency, among others, and can be transferred by a party only with the prior written consent of the other party. A Fund may be able to eliminate its exposure under a swap agreement either by assignment or by other disposition, or by entering into an offsetting swap agreement with the same party or a similarly creditworthy party. If the counter-party is unable to meet its obligations under the contract, declares bankruptcy, defaults or becomes insolvent, a Fund may not be able to recover the money it expected to receive under the contract.
A swap agreement can be a form of leverage, which can magnify a Fund’s gains or losses. In order to reduce the risk associated with leveraging, a Fund may cover its current obligations under swap agreements according to guidelines established by the SEC. If a Fund enters into a swap agreement on a net basis, it will segregate assets with a daily value at least equal to the excess, if any, of the Fund’s accrued obligations under the swap agreement over the accrued amount the Fund is entitled to receive under the agreement. If a Fund enters into a swap agreement on other than a net basis, it will segregate assets with a value equal to the full amount of the Fund’s accrued obligations under the agreement.
Swaps other than security-based swaps are included in the definition of “commodity interests” under the Commodity Exchange Act (the “CEA”). Under recent amendments to Rule 4.5 under the CEA, a Fund may be considered a commodity pool if it trades more than a de minimis amount of commodity interests (including swaps). Under such circumstances, the Fund and its investment advisor may be subject to regulation by the Commodity Futures Trading Commission (“CFTC”). None of theTouchstone Funds intends to trade above the de minimis limitation, and the Strategic Income Fund’s investment advisor has claimed an exemption from registering with the CFTC.
39 |
Notes to Financial Statements (Continued)
Credit default swap is an agreement between a Fund and a counterparty that enables the Fund to buy or sell protection against a credit event related to a referenced debt obligation. One party, acting as a “protection buyer,” makes periodic payments to the other party, a “protection seller,” in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds.
As the protection buyer in a credit default swap, a Fund may pay a premium (by means of periodic payments) in return for the right to deliver specified bonds or loans to the protection seller and receive the par (or other agreed-upon) value upon default or similar events by the issuer of the underlying reference obligation. If no default occurs, the protection seller would keep the stream of payments and would have no further obligations to the Fund. As the protection buyer, the Fund bears the risk that the investment might expire worthless and/or that the protection seller may fail to satisfy its payment obligations to the Fund in the event of a default or similar event. In addition, when the Fund is a protection buyer, the Fund’s investment would only generate income in the event of an actual default or similar event by the issuer of the underlying reference obligation.
A Fund may also use credit default swaps for investment purposes by selling a credit default swap, in which case, the Fund, as the protection seller, would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the protection buyer in the event of a default or similar event by the third-party issuer of the underlying reference obligation. In return for its obligation, the Fund would receive from the protection buyer a periodic stream of payments over the term of the contract. If no credit event occurs, the Fund would keep the stream of payments and would have no payment obligations. As the protection seller in a credit default swap, the Fund effectively adds economic leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap.
In addition to the risks applicable to derivatives generally, credit default swaps involve special risks because they may be difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty).
Foreign currency translation — The books and records of the Funds are maintained in U.S. dollars and translated into U.S. dollars on the following basis:
(1) | market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date; and |
(2) | purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. |
The Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities.
Forward foreign currency contracts — A forward foreign currency contract is an agreement between two parties to buy and sell a specific currency at a price that is set on the date of the contract. The forward contract calls for delivery of the currency on a future date that is specified in the contract. Risks related to the use of forwards include the possible failure of counterparties to meet the terms of the forward agreement, the failure of the counterparties to timely post collateral, the risk that currency movements will not occur thereby reducing the Fund’s total return, and the potential for losses in excess of the Fund’s initial investment.
The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily and the change in value is recorded by a
40 |
Notes to Financial Statements (Continued)
Fund as an unrealized gain or loss. Realized gains or losses, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, are recorded upon delivery or receipt of the currency.
During the six months ended January 31, 2013, the Funds used forward foreign currency contracts to enhance potential gains, hedge against anticipated currency exchange rates, maintain diversity and liquidity of the portfolio and adjust exposure to foreign currencies.
Derivative instruments and hedging activities — The following table sets forth the fair value of the Funds’ derivative financial instruments by primary risk exposure as of January 31, 2013:
Fair Value of Derivative Investments | ||||||||||
As of January 31, 2013 | ||||||||||
Asset | Liability | |||||||||
Derivatives | Derivatives | |||||||||
Derivatives not accounted for as hedging | Unrealized | Unrealized | ||||||||
Fund | instruments under ASC 815 | Appreciation | Depreciation | |||||||
Strategic Income Fund | Purchased Options - Interest Rate Contracts* | $ | 89,062 | $ | — | |||||
Forward-Foreign Currency Exchange Contracts** | 144,159 | (576,372 | ) | |||||||
Futures- Interest Rate Contracts*** | 57,775 | (23,675 | ) |
* | Statements of Assets and Liabilities Location: Investments, at value. |
** Statements of Assets and Liabilities Location: Unrealized appreciation on forward foreign currency contracts and unrealized depreciation on forward foreign currency contracts, respectively.
*** Statements of Assets and Liabilities Location: Receivable for variation margin on futures contracts. Only current day’s variation margin is reported within the receivables of the statements of assets and liabilities. Includes cumulative unrealized appreciation/(depreciation) of future contracts as reported in the Portfolio of Investments and within the components of net assets section of the Statement of Assets and Liabilities.
The Effect of Derivative Investments on the Statement of Operations | ||||||||||
for the Six Months Ended January 31, 2013 | ||||||||||
Change in | ||||||||||
Unrealized | ||||||||||
Realized Gain/ | Appreciation | |||||||||
Derivatives not accounted for as hedging | loss | /(Depreciation) | ||||||||
Fund | instruments under ASC 815 | on Derivatives | on Derivatives | |||||||
International Value Fund | Futures - Equity Contracts* | $ | 1,731,179 | $ | (616,795 | ) | ||||
Strategic Income Fund | Purchased Options- Interest Rate Contract** | — | 89,063 | |||||||
Forward - Foreign Currency Exchange | ||||||||||
Contracts*** | (203,344 | ) | (820,348 | ) | ||||||
Futures - Interest Rate Contracts* | (694,443 | ) | 78,321 | |||||||
Swap - Credit Contracts**** | (734,589 | ) | 393,648 |
* Statements of Operations Location: Net realized gain (loss) on futures and net change in unrealized appreciation (depreciation) on futures, respectively.
** | Statements of Operations Location: Net change in unrealized appreciation (depreciation) on investments. |
*** Statements of Operations Location: Net realized gain (loss) on foreign currency and net change in unrealized appreciation (depreciation) on foreign currency transaction, respectively.
**** Statements of Operations Location: Net realized loss on credit default swaps and net change in unrealized appreciation on swaps, respectively.
41 |
Notes to Financial Statements (Continued)
For the six months ended January 31, 2013, the average quarterly balance of outstanding derivative financial instruments were as follows:
International | Strategic | |||||||
Value | Income | |||||||
Fund | Fund | |||||||
Equity contracts: | ||||||||
Options - Average number of contracts | — | 633 | ||||||
Futures - Average number of contracts | 103 | — | ||||||
Interest rate contracts: | ||||||||
Futures - Average number of contracts | — | 253 | ||||||
Credit contracts: | ||||||||
Swaps - Average number of contracts | — | — | * | |||||
Forward foreign currency exchange contracts: | ||||||||
Average number of contracts | — | 5 | ||||||
Average U.S. dollar amount purchased | — | $ | 14,706,154 | |||||
Average U.S. dollar amount sold | — | $ | 2,901,871 |
* Average quarterly balance was less than 1.
Portfolio securities loaned — Each Fund may lend its portfolio securities. Lending portfolio securities exposes a Fund to the risk that the borrower may fail to return the loaned securities or may not be able to provide additional collateral or that the Fund may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the borrower must agree to maintain cash collateral with the Funds’ custodian in an amount at least equal to the market value of the loaned securities. The loaned securities are secured by collateral valued at least equal, at all times, to the market value of the securities loaned plus accrued interest, if any. When the collateral falls below specified amounts the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The cash collateral is reinvested by the Funds’ custodian into an approved investment vehicle.
As of January 31, 2013, the following Funds loaned securities and received collateral as follows:
Market Value of | Market Value of | |||||||
Securities | Collateral | |||||||
Fund | Loaned | Received | ||||||
Small Company Value Fund | $ | 3,216,105 | $ | 3,241,053 | ||||
Strategic Income Fund | 18,854 | 19,400 |
All collateral received as cash is received, held and administered by the Funds’ custodian for the benefit of the Funds in the applicable custody account or other account established for the purpose of holding collateral.
Funds participating in securities lending receive compensation in the form of fees, or retain a portion of interest or dividends on the investment of any cash received as collateral. The Funds also continue to receive interest or dividends on the securities loaned.
Unrealized gain or loss on the market value of the securities loaned that may occur during the term of the loan is recognized by the Funds. The Funds have the right under the lending agreement to recover the securities from the borrower on demand.
Share valuation — The NAV per share of each class of shares of each Fund is calculated daily by dividing the total value of a Fund’s assets attributable to that class, less liabilities attributable to that class, by the number of outstanding shares of that class.
The maximum offering price per share of Class A shares of the Funds is equal to the NAV per share plus a sales load equal to 6.10% of the NAV (or 5.75% of the offering price). There is no sales load on purchases of
42 |
Notes to Financial Statements (Continued)
$1 million or more of Class A shares. The maximum offering price per share of Class C, Class Y, and Institutional Class shares of the Funds is equal to the NAV per share.
The redemption price per share of each class of shares of the Funds is generally equal to the NAV per share. However, Class A redemptions that were part of no load $1 million subscriptions may be subject to a contingent deferred sales charge (“CDSC”) of up to 1%. Additionally, purchases of Class C shares of the Funds are subject to a CDSC of 1.00% of the original purchase price if redeemed within a one-year period from the date of purchase.
Investment income — Dividend income from securities is recognized on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Funds, where applicable. Interest income from securities is recorded on the basis of interest accrued, premium amortized and discount accreted.
Distributions to shareholders — Each Fund intends to distribute to its shareholders substantially all of its income and capital gains. The Micro Cap Value Fund and International Value Fund declare and distribute net investment income, if any, annually, as a dividend to shareholders. The Small Company Value Fund declares and distributes net investment income, if any, quarterly, as a dividend to shareholders. The Strategic Income Fund declares and distributes net investment income, if any, monthly as a dividend to shareholders. Each Fund makes distributions of capital gains, if any, at least annually, net of applicable capital loss carryforwards. Income distributions and capital gain distributions are determined in accordance with income tax regulations. Recognition of the funds net investment income that invest in underlying funds is affected by the timing of dividend declarations by investee funds.
Allocations — Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for a Fund are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class specific expenses are charged directly to the class incurring the expense. Common expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon their proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all Funds daily in relation to net assets of each Fund or another reasonable measure.
Security transactions — Security transactions are reflected for financial reporting purposes as of the trade date, which may cause the NAV as stated in the accompanying financial statements to be different than the NAV applied to Fund share transactions. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis.
Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. Investment Transactions
Investment transactions (excluding short-term investments and U.S. Government securities) were as follows for the six months ended January 31, 2013:
Small | ||||||||||||||||
International | Micro Cap | Company | Strategic | |||||||||||||
Value Fund | Value Fund* | Value Fund | Income Fund | |||||||||||||
Purchases of investment securities | $ | 119,735,613 | $ | 15,584,077 | $ | 49,981,478 | $ | 71,512,652 | ||||||||
Proceeds from sales and maturities | $ | 152,283,593 | $ | 21,098,306 | $ | 78,241,188 | $ | 52,458,158 |
* | Micro Cap Value Fund had a redemption-in-kind on August 28, 2012, which resulted in a redemption out of the Fund of $5,653,786 and is excluded from the proceeds from sales above. The redemption was comprised of securities and cash in the amount of $5,101,284 and $552,502, respectively. |
43 |
Notes to Financial Statements (Continued)
For the six months ended January 31, 2013, purchases and proceeds from sales and maturities in U.S. Government Securities for Strategic Income Fund were $74,789,070, and $75,515,616, respectively.
4. Transactions with Affiliates and Other Related Parties
Certain officers of the Trust are also officers of Touchstone Advisors, Inc. (the “Advisor”), Touchstone Securities, Inc. (the “Underwriter”) or BNY Mellon Investment Servicing (U.S) Inc. (“BNY Mellon”), the Sub-Administrator and Transfer Agent to the Funds. The Advisor and Underwriter are each wholly owned, indirect subsidiaries of The Western and Southern Life Insurance Company (“Western-Southern”).
MANAGEMENT & EXPENSE LIMITATIONS AGREEMENTS
The Advisor provides general investment supervisory services for the Funds, under terms of an Advisory Agreement. Effective September 10, 2012, under the Advisory Agreement, the Funds pay the Advisor a fee, which is computed and accrued daily and paid monthly, at an annual rate based on average daily net assets as shown in the table below.
Touchstone International Value Fund | 1.00 | % | ||
Touchstone Micro Cap Value Fund | 1.00 | % | ||
Touchstone Small Company Value Fund | 0.90 | % | ||
Touchstone Strategic Income Fund | 0.70 | % |
Prior to September 10, 2012, Fifth Third Asset Management, Inc. (“FTAM” or the “Former Advisor”) served as the advisor to the Funds. For its services, the Funds paid the Former Advisor the same fees listed above.
Effective September 10, 2012, the Advisor has entered into investment sub-advisory agreements with the following parties:
Barrow, Hanley, Mewhinney & Strauss, LLC | Fifth Third Asset Management, Inc. |
International Value Fund | Strategic Income Fund |
DePrince, Race & Zollo, Inc. | Russell Implementation Services, Inc. |
Small Company Value Fund | Micro Cap Value Fund* |
* | Effective January 16, 2013, Russell Implementation Services, Inc. became the interim sub-adviser of the Micro Cap Value Fund. Prior to January 16, 2013, Fifth Third Asset Management, Inc. was the sub-adviser. |
The Advisor, not the Funds, paid sub-advisory fees to each Sub-Advisor.
Effective September 10, 2012, the Advisor entered into an expense limitation agreement (“Expense Limitation Agreement”) to contractually limit operating expenses of the Funds, excluding dividend expenses relating to short sales, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, the cost of “Acquired Fund Fees and Expenses”, if any, and other extraordinary expenses not incurred in the ordinary course of business. The maximum operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. The Advisor has agreed to separately waive class level expenses, administration fees and reimburse expenses in order to maintain expense limitations for the Funds as follows:
Institutional | ||||||||||||||||
Fund | Class A | Class C | Class Y | Class | ||||||||||||
Touchstone International Value Fund | 1.36 | % | 2.11 | % | 1.11 | % | 0.96 | % | ||||||||
Touchstone Micro Cap Value Fund | 1.60 | % | 2.35 | % | 1.35 | % | 1.25 | % | ||||||||
Touchstone Small Company Value Fund | 1.20 | % | 1.95 | % | 0.95 | % | 0.85 | % | ||||||||
Touchstone Strategic Income Fund | 0.94 | % | 1.69 | % | 0.69 | % | 0.59 | % |
These expense limitations will remain in effect until at least November 29, 2013 for all the Funds.
44 |
Notes to Financial Statements (Continued)
Prior to September 10, 2012, the Former Advisor was contractually obligated to maintain the expense limitations for the Funds as follows:
Institutional | ||||||||||||||||
Fund | Class A | Class B* | Class C | Class** | ||||||||||||
Touchstone International Value Fund | 1.37 | % | 2.12 | % | 2.12 | % | 1.12 | % | ||||||||
Touchstone Micro Cap Value Fund | 1.60 | % | 2.35 | % | 2.35 | % | 1.35 | % | ||||||||
Touchstone Small Company Value Fund | 1.20 | % | 1.95 | % | 1.95 | % | 0.95 | % | ||||||||
Touchstone Strategic Income Fund | 0.94 | % | 1.69 | % | 1.69 | % | 0.69 | % |
* | Funds had Class B shares outstanding immediately prior to the reorganization, which were exchanged for Class A Shares of the corresponding Touchstone Fund. |
** | Funds had Institutional Class shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund. |
During the period September 10, 2012 through January 31, 2013, the Advisor waived investment advisory fees and administration fees or reimbursed expenses of the Funds as follows:
Investment | Other | |||||||||||
Advisory | Administration | Operating | ||||||||||
Fees | Fees | Expenses | ||||||||||
Fund | Waived | Waived | Reimbursed | |||||||||
Touchstone International Value Fund | $ | 106,721 | $ | 76,314 | $ | 27,111 | ||||||
Touchstone Micro Cap Value Fund | — | 17,295 | 23,378 | |||||||||
Touchstone Small Company Value Fund | 36,779 | 24,454 | 19,472 | |||||||||
Touchstone Strategic Income Fund | 204,938 | 200,266 | 3,918 |
For the period August 1, 2012 through September 9, 2012, the Former Advisor accrued and waived investment advisory fees of the funds, which are included in the Investment Advisory Fees and fees waived or reimbursed by the Advisor or affiliates on the Statement of Operations, as follows:
Investment | Investment | |||||||
Advisory | Advisory | |||||||
Fees Accrued | Fees Waived | |||||||
Touchstone International Value Fund | $ | 141,519 | $ | 46,265 | ||||
Touchstone Micro Cap Value Fund | 44,902 | 38,662 | ||||||
Touchstone Small Company Value Fund | 50,718 | 35,743 | ||||||
Touchstone Strategic Income Fund | 304,383 | 175,839 |
Effective September 10, 2012, under the terms of the Expense Limitation Agreement, the Advisor is entitled to recover, subject to approval by the Funds’ Board of Trustees, such amounts waived or reimbursed for a period of up to three years from the year in which the Advisor reduced its compensation or assumed expenses for a Fund. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount. As of January 31, 2013, the Advisor may seek recoupment of previously waived and reimbursed fees as follows:
Expiration | ||||
January | ||||
Fund | 31, 2016 | |||
Touchstone International Value Fund | $ | 200,272 | ||
Touchstone Micro Cap Value Fund | 21,745 | |||
Touchstone Small Company Value Fund | 71,704 | |||
Touchstone Strategic Income Fund | 409,122 |
The Advisor did not recover any recoupment for the period September 10, 2012 through January 31, 2013.
45 |
Notes to Financial Statements (Continued)
For the period August 1, 2012 through September 9, 2012, the Former Advisor was entitled to recover amounts waived or reimbursed by a Fund. The Former Advisor did not recover waived and reimbursed fees on the Funds.
ADMINISTRATION AGREEMENT
Effective September 10, 2012, the Advisor entered into an Administration and Accounting Services Agreement with the Trust, whereby the Advisor is responsible for: supplying executive and regulatory compliance services; supervising the preparation of tax returns; coordinating the preparation of reports to shareholders and reports to, and filings with, the Securities and Exchange Commission (the “SEC”) and state securities authorities, as well as materials for meetings of the Board ofTrustees; calculating the daily net asset value per share; and maintaining the financial books and records of each Fund. For its services, the Advisor receives an annual fee of 0.20% on the first $6 billion of the aggregate average daily net assets of the Trust, Touchstone Investment Trust (excluding Institutional Money Market Fund), Touchstone Funds Group Trust, and Touchstone Tax-Free Trust; 0.16% of the next $4 billion of aggregate average daily net assets; and 0.12% of the aggregate average daily net assets over $10 billion. The fee is allocated among the Funds on the basis of relative daily net assets.
The Advisor has engaged BNY Mellon as the Sub-Administrator to theTrust. BNY Mellon provides administrative and accounting services to the Trust and is compensated directly by the Advisor, not the Trust.
Prior to September 10, 2012, FTAM served as the administrator (the “Former Administrator”) to the Funds. For its services, the Funds paid the Former Administrator a fee which was computed daily and paid monthly based on the average daily net assets of the Funds as shown in the table below. The fees were prorated among the Funds based upon their average daily net assets.
Former Administration Fee | Average Daily Net Assets |
0.20% | Up to $1 billion |
0.18% | In excess of $1 billion up to $2 billion |
0.17% | In excess of $2 billion |
For certain Funds, FTAM voluntarily agreed to waive a portion of its administration fee. The Small Company Value Fund was also subject to an annual $20,000 minimum fee. FTAM contractually agreed to waive fees or reimburse all Funds pursuant to an expense limitation agreement.
For the period August 1, 2012 through September 9, 2012, the Former Administrator accrued and waived administration fees of the Funds, which are included in the Administration fees and fees waived or reimbursed by the Advisor or affiliates on the Statement of Operations, as follows:
Administration | Administration | |||||||
Fees | Fees | |||||||
Fund | Accrued | Waived | ||||||
International Value Fund | $ | 24,818 | $ | 24,818 | ||||
Micro Cap Value Fund | 7,874 | 7,874 | ||||||
Small Company Value Fund | 9,883 | 9,883 | ||||||
Strategic Income Fund | 53,379 | 53,379 |
TRANSFER AGENT AGREEMENT
Effective September 10, 2012, under the terms of the Transfer Agent Agreement between the Trust and BNY Mellon, BNY Mellon maintains the records of each shareholder’s account, answers shareholders’ inquiries concerning their accounts, processes purchases and redemptions of each Fund’s shares, acts as dividend and distribution disbursing agent, and performs other shareholder service functions. For these services, BNY Mellon receives a monthly fee per shareholder account from each Fund. In addition, each Fund pays out-of-pocket expenses
46 |
Notes to Financial Statements (Continued)
incurred by BNY Mellon, including, but not limited to, postage and supplies. Prior to September 10, 2012, FTAM provided transfer agent services.
PLANS OF DISTRIBUTION AND SHAREHOLDER SERVICING FEE ARRANGEMENTS
Effective September 10, 2012, the Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act for each class of shares it offers that are subject to 12b-1 distribution fees. The plans allow each Fund to pay distribution and other fees for the sale and distribution of its shares and for services provided to shareholders. Under the Class A plan, each Fund offering Class A shares pays an annual fee of up to 0.25% of average daily net assets that are attributable to Class A shares. Under the Class C plan, each Fund pays an annual fee of up to 1.00% of average daily net assets that are attributable to Class C shares (of which up to 0.75% is a distribution fee and up to 0.25% is a shareholder servicing fee).
For the period ended September 10, 2012 through January 31, 2013, the Funds accrued the following distribution fees for Class A shares and distribution and shareholder servicing fees for Class C shares, respectively, which are included in the distribution and shareholder servicing expenses on the Statement of Operations.
Distribution | ||||||||
and | ||||||||
Shareholder | ||||||||
Distribution | Servicing | |||||||
Expense | Expenses | |||||||
Accrued | Accrued | |||||||
Fund | Class A | Class C | ||||||
International Value Fund | $ | 7,402 | $ | 682 | ||||
Micro Cap Value Fund | 15,865 | 15,724 | ||||||
Small Company Value Fund | 2,616 | 6,042 | ||||||
Strategic Income Fund | 55,870 | 104,334 |
Prior to September 10, 2012, the Funds had a Distribution Plan (the “Former Plan”) pursuant to Rule 12b-1 under the Act. FTAM Funds Distributor, Inc. was the distributor/principal underwriter (the “Former Distributor”). Under the terms of the Plan, the Funds compensated the Former Distributor from the net assets of the Funds’ Class A, Class B, and Class C shares to finance activities intended to result in the sales of each Fund’s shares. The Plan provided that the Funds incurred fees accrued daily and paid monthly to the Former Distributor at annual rates up to or equal to 0.25% for Class A shares, 1.00% for Class B shares, and 0.75% for Class C shares based on average daily net assets of the respective classes in the Plan. In addition, the Funds had a Shareholder Servicing Plan with the Former Distributor with respect to Class C shares. The Former Distributor, as well as other financial institutions received fees computed at a rate of up to 0.25%, based on average daily net assets. For the period August 1, 2012 through September 9, 2012, the Former Distributor received the the following fees, which are included in the distribution and shareholder servicing expenses on the Statement of Operations.
Shareholder | ||||||||||||
Distribution | Distribution | Servicing | ||||||||||
Expense | Expense | Expense | ||||||||||
Accrued | Accrued | Accrued | ||||||||||
Fund | Class A | Class C | Class C | |||||||||
International Value Fund | $ | 1,591 | $ | 210 | $ | 36 | ||||||
Micro Cap Value Fund | 3,236 | 2,536 | 815 | |||||||||
Small Company Value Fund | 527 | 1,178 | 337 | |||||||||
Strategic Income Fund | 10,618 | 16,012 | 5,263 |
47 |
Notes to Financial Statements (Continued)
UNDERWRITING AGREEMENT
Effective September 10, 2012, the Underwriter is the Funds’ principal underwriter and, as such, acts as exclusive agent for distribution of the Funds’ shares. Under the terms of the Underwriting Agreement between the Trust and Underwriter, the Underwriter earned the following from underwriting and broker commissions on the sale of shares of the following Funds during the period September 10, 2012 through January 31, 2013:
Fund | Amount | |||
International Value Fund | $ | 258 | ||
Micro Cap Value Fund | 2,819 | |||
Small Company Value Fund | 2,925 | |||
Strategic Income Fund | 173,995 |
In addition, the Underwriter collected CDSC on the redemption of Class C shares of the following Funds during the period September 10, 2012 through January 31, 2013:
Fund | Amount | |||
Micro Cap Value Fund | $ | 313 | ||
Small Company Value Fund | 310 | |||
Strategic Income Fund | 2,524 |
Prior to September 10, 2012, the Former Distributor earned commissions on certain sales of Class A shares as well as CDSC on certain redemptions of Class A, Class B, and Class C shares. For the period August 1, 2012 through September 9, 2012, the Former Distributor earned the following commissions on Class A shares and CDSC on Class A, Class B, and Class C shares:
Commissions | CDSC | CDSC | CDSC | |||||||||||||
Fund | Class A | Class A | Class B | Class C | ||||||||||||
International Value Fund | $ | 15 | $ | — | $ | 19 | $ | — | ||||||||
Micro Cap Value Fund | 301 | — | — | — | ||||||||||||
Small Company Value Fund | 171 | — | — | 6 | ||||||||||||
Strategic Income Fund | 7,512 | — | 35 | 1,924 |
AFFILIATED INVESTMENTS
Each Fund may invest in the Touchstone Institutional Money Market Fund, subject to compliance with several conditions set forth in an exemptive order received by the Trust from the SEC. To the extent that the other Touchstone Funds are invested in theTouchstone Institutional Money Market Fund, the Advisor and Administrator will be paid additional fees from the Touchstone Institutional Money Market Fund that will not be waived or reimbursed.
A summary of each Fund’s investment, as applicable, in the Fifth Third Institutional Money Market Fund and the Touchstone Institutional Money Market Fund for the six months ended January 31, 2013, is as follows:
Share Activity | ||||||||||||||||||||||||
Balance | Balance | Value | ||||||||||||||||||||||
Fund | 07/31/12 | Purchases | Sales | 01/31/13 | Dividends | 01/31/13 | ||||||||||||||||||
International Value Fund | 19,659,316 | 54,566,462 | 72,654,232 | 1,571,546 | $ | 1,144 | $ | 1,571,546 | ||||||||||||||||
Micro Cap Value Fund | 3,917,629 | 10,284,463 | (12,661,292 | ) | 1,540,800 | 1,330 | 1,540,800 | |||||||||||||||||
Small Company Value Fund | 2,236,290 | 30,524,908 | 31,796,065 | 965,133 | 300 | 965,133 | ||||||||||||||||||
Strategic Income Fund | 9,388,244 | 66,079,156 | 69,822,074 | 5,645,326 | 2,861 | 5,645,326 |
5. Federal Tax Information
Federal income tax — It is each Fund’s policy to continue to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which a Fund so qualifies and distributes at least 90% of its investment company taxable income, the Fund (but not
48 |
Notes to Financial Statements (Continued)
the shareholders) will be relieved of federal income tax on the income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also each Fund’s intention to declare and pay as dividends in each calendar year at least 98% of its investment company taxable income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ending October 31) plus undistributed amounts from prior years.
The tax character of distributions paid for the years ended July 31, 2012 and July 31, 2011 was as follows:
International | Micro Cap | |||||||||||||||
Value Fund | Value Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
July 31, | July 31, | July 31, | July 31, | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
From ordinary income | $ | 4,727,748 | $ | 5,411,319 | $ | — | $ | — | ||||||||
From long-term capital gains | — | — | — | — | ||||||||||||
$ | 4,727,748 | $ | 5,411,319 | $ | — | $ | — |
Small Company | Strategic | |||||||||||||||
Value Fund | Income Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
July 31, | July 31, | July 31, | July 31, | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
From ordinary income | $ | 167,449 | $ | 264,384 | $ | 10,351,922 | $ | 6,592,368 | ||||||||
From long-term capital gains | 3,340,955 | — | — | — | ||||||||||||
$ | 3,508,404 | $ | 264,384 | $ | 10,351,922 | $ | 6,592,368 |
The following information is computed on a tax basis for each item as of July 31, 2012:
International | Micro Cap | |||||||
Value Fund | Value Fund | |||||||
Tax cost of portfolio investments | $ | 126,733,198 | $ | 41,663,975 | ||||
Gross unrealized appreciation | 9,494,097 | 4,186,885 | ||||||
Gross unrealized depreciation | (7,233,831 | ) | (3,542,252 | ) | ||||
Net unrealized appreciation (depreciation) | 2,260,266 | 644,633 | ||||||
Net unrealized appreciation (depreciation) on foreign currency and futures contracts | 7,889 | — | ||||||
Accumulated capital and other losses | (138,225,815 | ) | (33,118 | ) | ||||
Undistributed ordinary income | 3,519,170 | — | ||||||
Undistributed capital gains | — | 1,899,700 | ||||||
Accumulated earnings (deficit) | $ | (132,438,490 | ) | $ | 2,511,215 |
49 |
Notes to Financial Statements (Continued)
Small Company | Strategic | |||||||
Value Fund | Income Fund | |||||||
Tax cost of portfolio investments | $ | 50,541,932 | $ | 258,378,047 | ||||
Gross unrealized appreciation | 5,510,550 | 15,599,661 | ||||||
Gross unrealized depreciation | (3,385,173 | ) | (3,046,589 | ) | ||||
Net unrealized appreciation (depreciation) | 2,125,377 | 12,553,072 | ||||||
Net unrealized appreciation (depreciation) on foreign currency and futures contracts and swap contracts | — | (398,241 | ) | |||||
Accumulated capital and other losses | (124,397 | ) | (18,163,572 | ) | ||||
Undistributed ordinary income | 361,649 | (589,000 | ) | |||||
Undistributed capital gains | — | — | ||||||
Accumulated earnings (deficit) | $ | 2,362,629 | $ | (6,597,741 | ) |
The difference between the tax cost of portfolio investments and the financial statement cost is primarily due to wash sale loss deferrals, differences between book and tax methods for premium and market discounts, passive foreign investment company losses and return of capital distributions.
As of July 31, 2012, the Funds had the following capital loss carryforwards for federal income tax purposes:
No | No | |||||||||||||||||||||||
Expiration | Expiration | |||||||||||||||||||||||
Fund | 2017 | 2018 | 2019 | Short Term * | Long Term * | Total | ||||||||||||||||||
International Value Fund | $ | 49,777,567 | $ | 70,912,135 | $ | — | $ | 17,536,113 | $ | — | $ | 138,225,815 | ||||||||||||
Small Company Value Fund | — | — | — | — | 124,397 | 124,397 | ||||||||||||||||||
Strategic Income Fund | — | 7,962,360 | 10,201,212 | — | — | 18,163,572 |
* The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. The Act makes changes to several tax rules impacting the Funds. In general, the provisions of the Act was effective for the Funds’ fiscal year ending July 31, 2012. Although the Act provides several benefits, including the unlimited carryover of future capital losses, there may be a greater likelihood that all or a portion of each Fund’s pre-enactment capital loss carryovers may expire without being utilized due to the fact that post-enactment capital losses must be utilized before pre-enactment capital loss carryovers may be utilized. Under the Act, new capital losses may now be carried forward indefinitely, and retain the character of the original loss as compared with pre-enactment law, where capital losses could be carried forward for up to eight years, and carried forward as short-term capital losses, irrespective of the character of the original loss.
The capital loss carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.
As of January 31, 2013, the Trust had the following federal tax cost resulting in net unrealized appreciation (depreciation) as follows:
Net | ||||||||||||||||
Gross | Gross | Unrealized | ||||||||||||||
Federal Tax | Unrealized | Unrealized | Appreciation | |||||||||||||
Fund | Cost | Appreciation | Depreciation | (Depreciation) | ||||||||||||
International Value Fund | $ | 105,738,447 | $ | 7,027,679 | $ | (2,057,885 | ) | $ | 4,969,794 | |||||||
Micro Cap Value Fund | 31,147,865 | 6,956,461 | (784,163 | ) | 6,172,298 | |||||||||||
Small Company Value Fund | 36,279,625 | 2,462,553 | (833,980 | ) | 1,628,573 | |||||||||||
Strategic Income Fund | 284,140,345 | 18,332,798 | (2,901,108 | ) | 15,431,690 |
The Funds have analyzed their tax positions taken on Federal income tax returns for all open tax years (tax years ended July 31, 2009 through 2012) and have concluded that no provision for income tax is required in their financial statements.
6. Commitments and Contingencies
The Funds indemnify theTrust’s officers andTrustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that
50 |
Notes to Financial Statements (Continued)
contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect the risk of loss to be remote.
7. Risks Associated with Foreign Investments
Some of the Funds may invest in the securities of foreign issuers. Investing in securities issued by companies whose principal business activities are outside the U.S. may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitations on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign stock markets, while growing in volume and sophistication, are generally not as developed as those in the U.S., and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker-dealers, and issuers than in the U.S.
8. Fund Mergers
On September 5, 2012, the Shareholders of the Fifth Third Funds (the “Reorganizing Funds”) approved an Agreement and Plan of Reorganization (the “Plan”) providing for the transfer of all assets and liabilities of each Reorganizing Fund to the correspondingTouchstone Fund as noted below. The merger took place on September 10, 2012. The Funds’ fiscal year end will be March 31.
Net | Shares | |||||||||
Reorganizing Funds* | Touchstone Funds | Assets | Outstanding | |||||||
Fifth Third International Equity Fund | International Value Fund | $ | 112,680,107 | 15,128,870 | ||||||
Fifth Third Micro Cap Value Fund | Micro Cap Value Fund | 37,623,112 | 8,102,256 | |||||||
Fifth Third Small Cap Value Fund | Small Company Value Fund | 43,877,380 | 2,282,753 | |||||||
Fifth Third Strategic Income Fund | Strategic Income Fund | 272,087,369 | 25,088,186 |
* | Funds had Class B shares and Institutional Class shares outstanding immediately prior to the reorganization. Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares of the corresponding Touchstone Fund. On September 10, 2012, the Funds began issuing a new Institutional Class share. |
The following is a summary of shares outstanding, net assets and net asset value per share for the merger of Class B into Class A immediately before and after the September 10, 2012 reorganization:
Before Reorganization | Class B Shares Issued | After Reorganization | ||||||||||||||
Class A | Class B | Class A | ||||||||||||||
International Value Fund | ||||||||||||||||
Shares outstanding | 970,419 | 20,936 | — | 991,153 | ||||||||||||
Shares Issued | — | — | 20,734 | (A) | — | |||||||||||
Net Assets | $ | 7,220,692 | $ | 154,261 | — | $ | 7,374,953 | |||||||||
Net Asset Value | $ | 7.44 | $ | 7.37 | — | $ | 7.44 | |||||||||
Micro Cap Value Fund | ||||||||||||||||
Shares outstanding | 3,407,681 | 36,022 | — | 3,439,364 | ||||||||||||
Shares Issued | — | — | 31,683 | (B) | — | |||||||||||
Net Assets | $ | 15,470,242 | $ | 143,842 | — | $ | 15,614,084 | |||||||||
Net Asset Value | $ | 4.54 | $ | 3.99 | — | $ | 4.54 |
51 |
Notes to Financial Statements (Continued)
Before Reorganization | Class B Shares Issued | After Reorganization | ||||||||||||||
Class A | Class B | Class A | ||||||||||||||
Small Company Value Fund | ||||||||||||||||
Shares outstanding | 121,898 | 14,403 | — | 135,438 | ||||||||||||
Shares Issued | — | — | 13,540 | (C) | — | |||||||||||
Net Assets | $ | 2,319,750 | $ | 257,661 | — | $ | 2,577,411 | |||||||||
Net Asset Value | $ | 19.03 | $ | 17.89 | — | $ | 19.03 | |||||||||
Strategic Income Fund | ||||||||||||||||
Shares outstanding | 4,641,586 | 32,946 | — | 4,674,477 | ||||||||||||
Shares Issued | — | — | 32,891 | (D) | — | |||||||||||
Net Assets | $ | 50,303,845 | $ | 356,537 | — | $ | 50,660,382 | |||||||||
Net Asset Value | $ | 10.84 | $ | 10.82 | — | $ | 10.84 |
(A) | Reflects a 0.9903:1 stock split which occurred on the date of reorganization, September 10, 2012. |
(B) | Reflects a 0.8796:1 stock split which occurred on the date of reorganization, September 10, 2012. |
(C) | Reflects a 0.9401:1 stock split which occurred on the date of reorganization, September 10, 2012. |
(D) | Reflects a 0.9986:1 stock split which occurred on the date of reorganization, September 10, 2012. |
9. Subsequent Events
Subsequent events occurring after the date of this report have been evaluated for potential impact to this report through the date financial statements were issued.
On February 21, 2013, The Board of Trustees (the “Board”) of the Trust approved changes to the name and investment strategy of the Touchstone Micro Cap Value Fund (the “Fund”). Effective on or about April 26, 2013, the Fund will be renamed theTouchstone Small Cap Growth Fund and will seek long-term capital growth as its investment goal by investing, under normal circumstances, at least 80% of its assets in equity securities of small-cap companies. The Board also approved the selection of Apex Capital Management, Inc., as sub-advisor to the Fund and the termination of Russell Implementation Services, Inc., the Fund’s current interim sub-advisor, to be effective on or about April 26, 2013. Additionally, the Board approved breakpoints in both the Fund’s advisory and sub-advisory fees, which will lower the management fee for shareholders as the Fund grows. Finally, the Board approved lowering the Fund’s total operating expense limitation, which will reduce total shareholder expenses.
52 |
Other Items (Unaudited)
Proxy Voting Guidelines
The Sub-Advisors are responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Sub-Advisors use in fulfilling this responsibility and information regarding how those proxies were voted during the 12-month period ended June 30 are available without charge upon request by calling toll free 1.800.543.0407. These items are also available on the Securities and Exchange Commission’s (the Commission) website at http://www.sec.gov.
Quarterly Portfolio Disclosure
The Trust files a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the Commission’s website; (ii) may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; and (iii) will be made available to shareholders upon request by calling 1.800.543.0407. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Schedule of Shareholder Expenses
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including reinvested dividends or other distributions; and (2) ongoing costs, including investment advisory fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period August 1, 2012 through January 31, 2013.
Actual Expenses
The first line for each share class of a Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the six months ended January 31, 2013” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class of a Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
53 |
Other Items (Unaudited) (Continued)
Expenses | ||||||||||||||||||
Net Expense | Beginning | Ending | Paid During | |||||||||||||||
Ratio | Account | Account | the Period | |||||||||||||||
Annualized | Value | Value | Ended | |||||||||||||||
January 31, | August 1, | January 31, | January 31, | |||||||||||||||
2013 | 2012 | 2013 | 2013* | |||||||||||||||
Touchstone International Value Fund | ||||||||||||||||||
Class A | Actual | 1.36 | % | $ | 1,000.00 | $ | 1,149.50 | $ | 7.37 | |||||||||
Class A | Hypothetical | 1.36 | % | $ | 1,000.00 | $ | 1,018.35 | $ | 6.92 | |||||||||
Class C | Actual | 2.11 | % | $ | 1,000.00 | $ | 1,145.80 | $ | 11.41 | |||||||||
Class C | Hypothetical | 2.11 | % | $ | 1,000.00 | $ | 1,014.57 | $ | 10.71 | |||||||||
Class Y | Actual | 0.99 | % | $ | 1,000.00 | $ | 1,151.30 | $ | 5.37 | |||||||||
Class Y | Hypothetical | 0.99 | % | $ | 1,000.00 | $ | 1,020.21 | $ | 5.04 | |||||||||
Institutional Class | Actual** | 0.96 | % | $ | 1,000.00 | $ | 1,095.60 | $ | 3.97 | |||||||||
Institutional Class | Hypothetical | 0.96 | % | $ | 1,000.00 | $ | 1,020.37 | $ | 4.89 | |||||||||
Touchstone Micro Cap Value Fund | ||||||||||||||||||
Class A | Actual | 1.60 | % | $ | 1,000.00 | $ | 1,141.90 | $ | 8.64 | |||||||||
Class A | Hypothetical | 1.60 | % | $ | 1,000.00 | $ | 1,017.14 | $ | 8.13 | |||||||||
Class C | Actual | 2.35 | % | $ | 1,000.00 | $ | 1,136.20 | $ | 12.65 | |||||||||
Class C | Hypothetical | 2.35 | % | $ | 1,000.00 | $ | 1,013.36 | $ | 11.93 | |||||||||
Class Y | Actual | 1.34 | % | $ | 1,000.00 | $ | 1,140.50 | $ | 7.23 | |||||||||
Class Y | Hypothetical | 1.34 | % | $ | 1,000.00 | $ | 1,018.45 | $ | 6.82 | |||||||||
Institutional Class | Actual** | 1.25 | % | $ | 1,000.00 | $ | 1,068.90 | $ | 5.10 | |||||||||
Institutional Class | Hypothetical | 1.25 | % | $ | 1,000.00 | $ | 1,018.90 | $ | 6.36 | |||||||||
Touchstone Small Company Value Fund | ||||||||||||||||||
Class A | Actual | 1.21 | % | $ | 1,000.00 | $ | 1,162.80 | $ | 6.60 | |||||||||
Class A | Hypothetical | 1.21 | % | $ | 1,000.00 | $ | 1,019.11 | $ | 6.16 | |||||||||
Class C | Actual | 1.96 | % | $ | 1,000.00 | $ | 1,159.50 | $ | 10.67 | |||||||||
Class C | Hypothetical | 1.96 | % | $ | 1,000.00 | $ | 1,015.32 | $ | 9.96 | |||||||||
Class Y | Actual | 0.94 | % | $ | 1,000.00 | $ | 1,164.10 | $ | 5.13 | |||||||||
Class Y | Hypothetical | 0.94 | % | $ | 1,000.00 | $ | 1,020.47 | $ | 4.79 | |||||||||
Institutional Class | Actual** | 0.85 | % | $ | 1,000.00 | $ | 1,091.80 | $ | 3.51 | |||||||||
Institutional Class | Hypothetical | 0.85 | % | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 | |||||||||
Touchstone Strategic Income Fund | ||||||||||||||||||
Class A | Actual | 0.89 | % | $ | 1,000.00 | $ | 1,035.10 | $ | 4.57 | |||||||||
Class A | Hypothetical | 0.89 | % | $ | 1,000.00 | $ | 1,020.72 | $ | 4.53 | |||||||||
Class C | Actual | 1.67 | % | $ | 1,000.00 | $ | 1,030.50 | $ | 8.55 | |||||||||
Class C | Hypothetical | 1.67 | % | $ | 1,000.00 | $ | 1,016.79 | $ | 8.49 | |||||||||
Class Y | Actual | 0.59 | % | $ | 1,000.00 | $ | 1,036.50 | $ | 3.03 | |||||||||
Class Y | Hypothetical | 0.59 | % | $ | 1,000.00 | $ | 1,022.23 | $ | 3.01 | |||||||||
Institutional Class | Actual** | 0.59 | % | $ | 1,000.00 | $ | 1,026.30 | $ | 2.36 | |||||||||
Institutional Class | Hypothetical | 0.59 | % | $ | 1,000.00 | $ | 1,022.23 | $ | 3.01 |
* | Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect one-half year period). |
** | The Fund began issuing Institutional Class shares on September 10, 2012. Expenses are equal to the fund's annualized expense ratio multiplied by the expense ratio multiplied by the average account value over the period, multiplied by 144/365 (to relfect the period September 10, 2012 to January 31, 2013). Actual returns are for the period September 10, 2012 through January 31, 2013. |
54 |
Other Items (Unaudited) (Continued)
Advisory Agreement Approval Disclosure
At a meeting held on May 17, 2012, the Board of Trustees (the “Board” or “Trustees”) of the Touchstone StrategicTrust (the “Trust”), and by a separate vote, the IndependentTrustees of theTrust, approved an amendment to the Investment Advisory Agreement between the Trust and the Advisor adding each Fund and also initially approved a Sub-Advisory Agreement between the Advisor and each Fund’s respective Sub-Advisor.
In determining whether to approve the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreements, the Advisor furnished information necessary for a majority of the Independent Trustees to make the determination that approval of the amendment to the Investment Advisory Agreement and each Sub-Advisory Agreement was in the best interests of the respective Funds and their shareholders. The Board took into account certain information and materials relating to the Funds, the Advisor and the Sub-Advisors that the Board had received in connection with a special meeting of the Board held on March 13, 2012. The information provided to the Board included: (1) a comparison of the Funds’ proposed advisory fee and other fees and anticipated expense ratios with those of comparable funds; (2) performance information of comparable investment products; (3) the Advisor’s and its affiliates’ estimated revenues and costs of providing services to the Funds; and (4) information about the Advisor’s and Sub-Advisors’ personnel. Prior to voting, the IndependentTrustees reviewed the proposed approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreements with management and with experienced independent legal counsel and received materials from such counsel discussing the legal standards for their consideration of the Investment Advisory Agreement and each Sub-Advisory Agreement with respect to the Funds. The Independent Trustees also reviewed the proposed approval of the amendment to the Investment Advisory Agreement and each Sub-Advisory Agreement with independent legal counsel in private sessions at which no representatives of management were present.
In approving the amendment to the Investment Advisory Agreement, the Board considered various factors, among them: (1) the nature, extent and quality of services to be provided to the Funds, including the personnel that will provide such services; (2) the Advisor’s anticipated compensation and profitability; (3) a comparison of fees with other advisers; (4) anticipated economies of scale; and (5) the terms of the Investment Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.
Nature, Extent and Quality of Advisor Services. The Board considered the level and depth of knowledge of the Advisor, including the professional experience and qualifications of senior personnel. In evaluating the quality of services to be provided by the Advisor, the Board took into account its familiarity with the Advisor’s senior management through Board meetings, discussions and reports during the preceding year. The Board also took into account the Advisor’s compliance policies and procedures. The quality of administrative and other services provided to other funds managed by the Advisor, including the Advisor’s role in coordinating the activities of those funds’ other service providers, was also considered. The Board also considered the Advisor’s relationship with its affiliates and the resources available to them, as well as any potential conflicts of interest. The Board discussed the Advisor’s effectiveness in monitoring the performance of the Trust’s other subadvisors, and the Advisor’s timeliness in responding to performance issues.The Board considered the Advisor’s process for monitoring the Sub-Advisors, which would include an examination of both qualitative and quantitative elements of each Sub-Advisor’s organization, personnel, procedures, investment discipline, infrastructure and performance. The Board considered that the Advisor would conduct regular on-site compliance visits with each Sub-Advisor, during which the Advisor would examine a wide variety of factors, such as the financial condition of each Sub-Advisor, the quality of each Sub-Advisor’s systems, the effectiveness of each Sub-Advisor’s disaster recovery programs, trade allocation and execution procedures, compliance with each Sub-Advisor’s policies and procedures, results of regulatory examinations and any other factors that might affect the quality of services that each Sub-Advisor provides to the applicable Fund. The Board noted that the Advisor’s compliance monitoring processes also would include quarterly reviews of compliance reports, and that any issues arising from such reports and the Advisor’s compliance visits to each Sub-Advisor would be reported to the Board.
The Trustees concluded that they were satisfied with the nature, extent and quality of services to be provided to each Fund by the Advisor under the Investment Advisory Agreement.
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Other Items (Unaudited) (Continued)
Advisor’s Compensation and Profitability. The Board took into consideration the financial condition and anticipated profitability of the Advisor and its affiliates and the direct and indirect benefits to be derived by the Advisor and its affiliates from the Advisor’s relationship with the Funds. The Board noted that the Advisor had contractually agreed to waive advisory fees and administrative fees and/or reimburse expenses in order to limit the Funds’ net operating expenses and will pay sub-advisory fees out of the advisory fees the Advisor receives from the Funds. The Board reviewed the anticipated profitability of the Advisor’s relationship with the Funds and also considered whether the Advisor has the financial wherewithal to provide a high level of services to the Funds, noting the ongoing commitment of the Advisor’s parent company with respect to providing support and resources as needed. The Board also considered that the Funds’ prospective distributor, an affiliate of the Advisor, will receive Rule 12b-1 distribution fees from the Funds and will receive a portion of the sales charges on sales or redemptions of certain classes of shares. The Board also noted that the Advisor will derive benefits to its reputation and other benefits from its association with the Funds.
The Board recognized that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it will provide to each Fund and the entrepreneurial risk that it will assume as Advisor. Based upon their review, the Trustees concluded that the Advisor’s and its affiliates’ level of profitability, if any, to be derived from their relationship with each Fund was reasonable and not excessive.
Expenses and Performance. The Board compared each Fund’s proposed advisory fees and total expense ratios with those of comparable funds. The Board took into account the Funds’ estimated total expenses for its Class A, Class C, Class Y and Institutional Shares after estimated reimbursements. The Board also took into account that the Advisor had contractually agreed to limit the Funds’ net operating expenses until at least September 10, 2013.
The Board also considered the effect of each Fund’s potential growth and size on its performance and expenses. The Board noted that the Advisor had agreed to wave a portion of its fees and/or reimburse expenses of the Funds in order to reduce each Fund’s operating expenses to targeted levels. The Board noted that the sub-advisory fees under the Sub-Advisory Agreement with respect to each Fund will be paid by the Advisor out of the advisory fee it receives from the Fund and considered the impact of such sub-advisory fees on the profitability of the Advisor. In reviewing the proposed expense ratios and performance of the respective Acquired Funds, the Board also took into account the nature, extent and quality of the services to be provided to the Funds by the Advisor and its affiliates.
The Board considered, among other data, the specific factors set forth below with respect to each Fund:
Touchstone International Value Fund. The Fund’s proposed advisory fee and proposed total expense ratio (net of applicable expense waivers and reimbursements) were above the median and below the median, respectively, of its peer group. The Board took into account the performance of a composite of accounts and funds managed by the Sub-Advisor that had similar investment objectives and investment strategies to those the Sub-Advisor proposed to use in managing the Fund. The Board also took into account its familiarity with the Sub-Advisor, owing to the Sub-Advisor’s management of anotherTouchstone Fund. In addition, the Board took into consideration certain differences between how the Fund was currently being managed and how the Fund would be managed by the Sub-Advisor as well as the impact these differences were expected to have on the Fund’s performance.
Touchstone Micro Cap Value Fund. The Fund’s proposed advisory fee and proposed total expense ratio (net of applicable expense waivers and reimbursements) were above the median and below the median, respectively, of its peer group. The Board took into account that the Fifth Third Micro Cap Value Fund (the “Acquired Fund”), a series of Fifth Third Funds, was expected to be merged into the Fund on or about September 10, 2012. Accordingly, the Board considered the performance of the Acquired Fund under the management of the Sub-Advisor, the Acquired Fund’s current investment advisor. The Board took into account that the portfolio management team currently managing the Acquired Fund was expected to manage the Fund following the merger of the Acquired Fund into the Fund.
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Other Items (Unaudited) (Continued)
Touchstone Small Company Value Fund. The Fund’s proposed advisory fee and proposed total expense ratio (net of applicable expense waivers and reimbursements) were below the median of its peer group. The Board took into account the performance of accounts and funds managed by the Sub-Advisor that had similar investment objectives and investment strategies to those the Sub-Advisor proposed to use in managing the Fund. The Board also took into account its familiarity with the Sub-Advisor, owing to the Sub-Advisor’s management of another Touchstone Fund. In addition, the Board took into consideration certain differences between how the Fund was currently being managed and how the Fund would be managed by the Sub-Advisor as well as the impact these differences were expected to have on the Fund’s performance.
Touchstone Strategic Income Fund. The Fund’s proposed advisory fee and proposed total expense ratio (net of applicable expense waivers and reimbursements) were above the median and below the median, respectively, of its peer group. The Board took into account that the Fifth Third Strategic Income Fund (the “Acquired Fund”), a series of Fifth Third Funds, was expected to be merged into the Fund on or about September 10, 2012. Accordingly, the Board considered the performance of the Acquired Fund under the management of the Sub-Advisor, the Acquired Fund’s current investment advisor. The Board took into account that the portfolio management team currently managing the Acquired Fund was expected to manage the Fund following the merger of the Acquired Fund into the Fund.
Economies of Scale. The Board considered the effect of each Fund’s potential growth and size on its performance and expenses. The Board took into account management’s discussion of the Funds’ advisory fee structure. The Board noted that the proposed advisory fee schedule did not contain breakpoints. The Board concluded that, given each Fund’s limited capacity, adding breakpoints to the advisory fee at specified levels would not be appropriate at this time. The Board also noted that if a Fund’s assets increase over time, the Fund might realize other economies of scale if assets increase proportionally more than certain other expenses. The Board also considered the fact that, under the Investment Advisory Agreement, the advisory fee payable to the Advisor by a Fund will be reduced by the total sub-advisory fee paid by the Advisor to the Fund’s Sub-Advisor.
Conclusion. In considering the approval of the amendment to the Funds’ Investment Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Trustees evaluated all information available to them on a Fund-by-Fund basis, and their determinations were made separately with respect to each Fund. The Board reached the following conclusions regarding the Investment Advisory Agreement with the Advisor, among others: (a) the Advisor demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains an appropriate compliance program; (c) each Fund’s proposed advisory fee is reasonable relative to those of similar funds and the services to be provided by the Advisor. Based on their conclusions, the Trustees determined with respect to each Fund that approval of the amendment to the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.
In approving the Funds’ respective Sub-Advisory Agreements, the Board considered various factors with respect to each Fund and the applicable Sub-Advisory Agreement, among them: (1) the nature, extent and quality of services to be provided to the Fund, including the personnel providing such services; (2) the Sub-Advisor’s proposed compensation; (3) a comparison of the proposed sub-advisory fee and the performance of the respective Acquired Funds (or the performance of comparable funds in the case of Touchstone International Value Fund and Touchstone Small Company Value Fund), which were to be merged into the Funds; and (4) the terms of the Sub-Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.
Nature, Extent and Quality of Services Provided; Investment Personnel. The Board considered information provided by the Advisor regarding the services to be provided by each Sub-Advisor. The Board also considered each Sub-Advisor’s level of knowledge and investment style. The Board reviewed the experience and credentials of the applicable investment personnel who will be responsible for managing the investment of portfolio securities with respect to the Funds. The Board also noted each Sub-Advisor’s brokerage practices.
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Other Items (Unaudited) (Continued)
Sub-Advisor’s Compensation. The Board also took into consideration the financial condition of each Sub-Advisor and any indirect benefits to be derived by each Sub-Advisor and its affiliates from the Sub-Advisor’s relationship with the Funds. In considering the anticipated profitability to each Sub-Advisor of its relationship with the Funds, the Board noted the undertaking of the Advisor to maintain expense limitations for the Funds and also noted that the sub-advisory fees under the Sub-Advisory Agreements will be paid by the Advisor out of the advisory fees that it will receive under the Investment Advisory Agreement and are negotiated at arm’s-length. As a consequence, the anticipated profitability to each Sub-Advisor of its relationship with a Fund was not a substantial factor in the Board’s deliberations. For similar reasons, the Board did not consider the potential economies of scale in each Sub-Advisor’s management of the applicable Fund to be a substantial factor in its consideration.
Sub-Advisory Fees and Fund Performance. The Board considered that each Fund will pay an advisory fee to the Advisor and that the Advisor will pay a sub-advisory fee to the Sub-Advisor out of the advisory fee it receives from the respective Fund. The Board considered the amount to be retained by the Advisor and the sub-advisory fee to be paid to each Sub-Advisor with respect to the various services to be provided by the Advisor and the Sub-Advisor. The Board also noted that the Advisor negotiated the sub-advisory fee with each of the Sub-Advisors at arm’s-length. The Board considered the proposed sub-advisory fee for each Fund and concluded that each Fund’s proposed sub-advisory fee was reasonable in light of the services to be received by the Fund and the other factors considered.
As noted above, the Board considered the Sub-Advisors’ long-term performance record in managing the respective Acquired Funds, which were each to be merged into the Funds or, in the case of Touchstone International Value Fund and Touchstone Small Company Value Fund, the Sub-Advisor’s long-term performance record in managing comparable funds. The Board also noted the Advisor’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Trust’s other sub-advisors. The Board was mindful of the Advisor’s focus on the performance of sub-advisors and the Advisor’s ways of addressing underperformance.
Conclusion. In considering the approval of the Sub-Advisory Agreement with respect to each Fund, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Board reached the following conclusions regarding each Sub-Advisory Agreement, among others: (a) the Sub-Advisor is qualified to manage each Fund’s assets in accordance with the Fund’s investment goals and policies; (b) the Sub-Advisor maintains an appropriate compliance program; (c) each Fund’s proposed advisory fee is reasonable relative to those of similar funds and to the services to be provided by the Advisor and the Sub-Advisor; and (e) the Sub-Advisor’s proposed investment strategies are appropriate for pursuing the investment goals of each Fund. Based on its conclusions, the Board determined that approval of the Sub-Advisory Agreement with respect to each Fund was in the best interests of the Fund and its shareholders.
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PRIVACY PROTECTION POLICY
We Respect Your Privacy
Thank you for your decision to invest with us. Touchstone and its affiliates have always placed a high value on the trust and confidence our clients place in us. We believe that confidence must be earned and validated through time. In today’s world, when technology allows the sharing of information at light speeds, trust must be reinforced by our sincere pledge to take the steps necessary to ensure that the information you share with us is treated with respect and confidentiality.
Our Pledge to Our Clients
• | We collect only the information we need to service your account and administer our business. |
• | We are committed to keeping your information confidential and we place strict limits and controls on the use and sharing of your information. |
• | We make every effort to ensure the accuracy of your information. |
We Collect the Following Nonpublic Personal Information About You:
• | Information we receive from you on or in applications or other forms, correspondence, or conversations, including, but not limited to, your name, address, phone number, social security number, assets, income and date of birth; and |
• | Information about your transactions with us, our affiliates, or others, including, but not limited to, your account number and balance, payment history, parties to transactions, cost basis information, and other financial information. |
Categories of Information We Disclose and Parties to Whom We Disclose
We do not disclose any nonpublic personal information about our current or former clients to nonaffiliated third parties, except as required or permitted by law.
We Place Strict Limits and Controls on the Use and Sharing of Your Information
• | We restrict access to nonpublic personal information about you to authorized employees who need the information to administer your business. |
• | We maintain physical, electronic and procedural safeguards that comply with federal standards to protect this information. |
• | We do not disclose any nonpublic personal information about our current or former clients to anyone, except as required or permitted by law or as described in this document. |
• | We will not sell your personal information to anyone. |
We May Provide Information to Service Your Account
Sometimes it is necessary to provide information about you to various companies such as transfer agents, custodians, broker-dealers and marketing service firms to facilitate the servicing of your account. These organizations have a legitimate business need to see some of your personal information in order for us to provide service to you. We may disclose to these various companies the information that we collect as described above. We require that these companies, including our own subsidiaries and affiliates, strictly maintain the confidentiality of this information and abide by all applicable laws. Companies within our corporate family that may receive this information are financial service providers and insurance companies. We do not permit these associated companies to sell the information for their own purposes, and we never sell our customer information.
This policy is applicable to the following affiliated companies: Touchstone Funds Group Trust, Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone Tax-Free Trust, Touchstone Variable Series Trust, Touchstone Institutional Funds Trust, Touchstone Securities, Inc.,* and W&S Brokerage Services, Inc.
* Touchstone Securities, Inc. serves as the underwriter to the Touchstone Funds.
A Member of Western & Southern Financial Group®
The Privacy Protection Policy is not part of the Semi-Annual Report.
59 |
Touchstone Investments
Distributor
Touchstone Securities, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203 800.638.8194
www.touchstoneinvestments.com
Investment Advisor
Touchstone Advisors, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
Transfer Agent
BNY Mellon Investment Servicing (US) Inc.
4400 Computer Drive
Westborough, MA 01581
Shareholder Service
800.543.0407
* A Member of Western & Southern Financial Group
TSF-54DD-TST-SAR-1301
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed registrants.
Not applicable.
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | Not applicable. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Touchstone Strategic Trust |
By (Signature and Title)* | /s/ Jill T. McGruder |
Jill T. McGruder, President | |
(principal executive officer) |
Date | 04/01/13 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Jill T. McGruder |
Jill T. McGruder, President | |
(principal executive officer) |
Date | 04/01/13 |
By (Signature and Title)* | /s/ Terrie A. Wiedenheft |
Terrie A. Wiedenheft, Controller and Treasurer | |
(principal financial officer) |
Date | 04/01/13 |
* Print the name and title of each signing officer under his or her signature.