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: March 31
Date of reporting period: March 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.
March 31, 2013
Annual Report
Touchstone Strategic Trust
Touchstone International Value Fund
Touchstone Small Cap Growth Fund
(formerly known as Touchstone Micro Cap Value Fund)
Touchstone Small Company Value Fund
Touchstone Strategic Income Fund
Table of Contents
| | Page |
| Letter from the President | 3 |
| Management's Discussion of Fund Performance (Unaudited) | 4 - 18 |
| Tabular Presentation of Portfolios of Investments | 19 - 20 |
| Portfolios of Investments: | |
| Touchstone International Value Fund | 21 |
| Touchstone Small Cap Growth Fund (formerly known as Touchstone Micro Cap Value Fund) | 23 |
| Touchstone Small Company Value Fund | 28 |
| Touchstone Strategic Income Fund | 30 |
| Statements of Assets and Liabilities | 36 - 37 |
| Statements of Operations | 38 - 39 |
| Statements of Changes in Net Assets | 40 - 43 |
| Statements of Changes in Net Assets - Capital Stock Activity | 44 - 47 |
| Financial Highlights | 48 - 55 |
| Notes to Financial Statements | 56 - 74 |
| Report of Independent Registered Public Accounting Firm | 75 |
| Other Items (Unaudited) | 76 - 80 |
| Management of the Trust (Unaudited) | 81 - 83 |
| Privacy Protection Policy | 87 |
Letter from the President
Dear Shareholder:
We are pleased to provide you with the Touchstone Strategic Trust Annual Report. The fiscal year end of the Fifth Third Fund Trust was changed from July 31 to March 31 when Touchstone completed its acquisition of Fifth Third Funds in September 2012. Therefore, you are receiving this annual report for an abbreviated eight-month period. Inside you will find key financial information and manager commentaries for the period ended March 31, 2013.
At the outset of the period, U.S. equity markets were preoccupied with politics, including the U.S. Presidential campaign and election, and the uncertainty surrounding the fiscal cliff debate that lasted through year-end. Equity markets finished 2012 with positive returns and 2013 ushered in a resurgent bull market as investors brushed off political uncertainties resulting from U.S. debt and sequester negotiations.
Outside the U.S., the period was marked by improving confidence as European fiscal concerns lessened and Chinese economic data showed modest improvement. The European Central Bank enacted stimulus measures early in the period to offset Europe’s widespread debt crisis, contributing to improving investor confidence and a global equity rally through period end.
International stocks outperformed U.S. stocks and value stocks outpaced growth stocks for the period. From a market capitalization perspective, mid-cap stocks led small- and large-cap stocks, though each generated double-digit returns.
In the U.S., the Federal Reserve’s third round of quantitative easing was in place as the period commenced and the low interest rate environment persisted throughout. The non-U.S. Treasury sectors of the bond market outperformed the investment grade sectors.
We continue to believe that diversification is essential to balancing risk and return. We recommend that you consult with your financial professional to build an asset allocation strategy that meets your long-term goals.
Touchstone is committed to helping investors achieve their financial goals by providing access to a distinctive selection of institutional asset managers who are known and respected for proficiency in their specific areas of expertise.
We thank you for including Touchstone as part of your investment plan.
Sincerely,
Jill T. McGruder
President
Touchstone Strategic Trust
Management's Discussion of Fund Performance (Unaudited)
Touchstone International Value Fund
Sub-Advised by Barrow, Hanley, Mewhinney & Strauss, LLC
Investment Philosophy
The Touchstone International Value Fund seeks long-term capital growth by primarily investing in equity securities of non-U.S. companies believed to be undervalued and searches for companies that have price-to-earnings and price-to-book ratios below the market, free cash flow ratios at or below the market and dividend yields above the market.
Fund Performance
The Touchstone International Value Fund (Class A Shares) underperformed its benchmark, the MSCI EAFE Index, for the eight-month period ended March 31, 2013. The Fund’s total return was 11.15 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was 18.45 percent. Prior to September 10, 2012, the performance, rating and ranking history for this Fund was that of the Fifth Third International Equity Fund, managed by Fifth Third Asset Management.
Market Environment
Since the financial crises of 2008, global equity market returns have been increasingly driven by coordinated stimulus and government intervention. Stock correlations within individual sectors have also risen dramatically, particularly in the historically defensive sectors such as Health Care, Consumer Staples, Utilities, and Telecommunication Services. The resulting dispersion of returns has been at all-time lows, which has made it difficult for individual companies to distinguish themselves. Consequently, the markets have been challenging for active equity managers to generate excess returns.
The fourth quarter of 2012 was strong for international equities, whether developed or emerging. The eurozone was mostly stable during the period, following the European Central Bank’s (ECB) reassuring promise to buy bonds in a euro-style version of Quantitative Easing (“QE”). In Asia, previous fears of a Chinese hard landing abated as the country’s new administration took office and evidence of increased economic activity emerged. In Japan, the election of the country’s new prime minister generated much excitement, as did the Liberal Democratic Party’s new commitment to aggressive monetary easing to weaken the yen, which should be a boost for Japanese exporters. Across asset classes, risk aversion was a priority for some investors, whose concerns over macro-economic events led them to the perceived safety of government bonds and other strategies to hedge risk. However, in a continued environment of massive global liquidity and a lower interest rate environment in many parts of the world, investors were rewarded for moving out of the risk spectrum into stocks and other higher beta1 assets. Sector performance was driven by improved expectations for a stable and improving global economy as stocks in the Financials and Consumer Discretionary sectors led the market. Energy stocks lagged on lower commodity prices, while investors moved away from the Utilities and Telecommunication Services sectors, which were last year’s safe havens.
Throughout the first quarter of 2013, equity market performance around the globe was generally strong but experienced a significant reversal in leadership over the prior quarter. The best performance occurred in some of the most mature, developed markets—led by the U.S. and Japan—where expansionary monetary policies drove demand for risk assets. Emerging markets lagged, as Chinese growth prospects cooled. Meanwhile, sectors that are more exposed to developed markets—such as Financials, Health Care, and Consumer stocks—performed well. Japanese equities continued to rally on expectations of further actions by the Bank of Japan and central government to stimulate growth. Prospects for economic growth in Europe remain muted as the continent continues to work through the mire of its sovereign debt crisis. Cyprus’ banking crisis late in the first quarter put pressure on many European banks, effectively creating headwinds for the remainder of the quarter. U.S.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
asset markets were propelled during the period and continued to generate upward momentum. The United States’ easy monetary policy positively impacted the private sector, as household debt service declined materially from its peak in 2007.
Portfolio Review
Throughout the eight-month period, stock selection and weighting within the Materials sector was the largest contributor to the Fund’s relative performance. Stock selection in the Utilities sector also contributed during the period. Stock selection and weighting in the Financials, Information Technology, and Consumer Discretionary sectors were the primary detractors during the period. From a regional standpoint, the Fund’s underweight position and stock selection in Europe, primarily in the Financials sector, also detracted for the period. Weak stock selection in Japan was the largest detractor for the Fund over the period.
Stocks that detracted from performance throughout the period were Vodafone Group PLC (Telecommunication Services sector), Philip Morris International Inc. and Imperial Tobacco Group PLC (Consumer Staples sector), Teva Pharmaceutical Industries Ltd. (Health Care sector) and ING Groep N.V. and Banco Santander S.A. (Financials sector). Vodafone Group, a U.K.-based communications company, suffered due to weak operating results in Southern Europe and from a general reduction of dividends throughout the industry in Continental Europe. Vodafone’s management reduced cash flow guidance for fiscal 2013, which also contributed to the stock’s poor performance. Philip Morris International, a manufacturer of tobacco products, underperformed significantly during the fourth quarter, after having produced solid performance during the first nine months of 2012. All tobacco stocks sold off during the quarter, regardless of where they did business, as investors were rattled about possible U.S. price wars that might be instigated by Altria Group Inc. That said, Altria Group announced cigarette price increases in November and Philip Morris International stock suffered as a result. Imperial Tobacco Group, a British multinational tobacco company, suffered chiefly from a geography problem, given that more than 60 percent of its earnings come from Europe and the United Kingdom and many of the consumers in these regions are enduring severe economic pressure. Teva Pharmaceutical Industries, an Israel-based global pharmaceutical company, saw its stock decline as the company suffered through a CEO transition, weak earnings from its European business, and concern over the contribution to earnings from its largest branded drug, Copaxone. ING Groep, a European-based financial company, performed poorly after the financial crisis in Cyprus put pressure on all banking institutions in the eurozone and generated concerns over deposit outflows in southern Europe. Banco Santander, a Spain-based financial company, was weak in the quarter largely as a result of the Cypriot proposal to penalize depositors.
Contributors to performance for the period were Amada Company Ltd., Mabuchi Motor Co. Ltd., Embraer S.A. and MTU Aero Engines Holdings AG (Industrials sector), Canon Inc. (Information Technology sector), Itochu Corp. (Consumer Discretionary sector) and Novartis AG (Health Care sector). Amada Company, a Japan-based manufacturing company, performed positively due to a substantial weakening of the yen as well as increased optimism that the global economy will avoid a near-term recession. Mabuchi Motor Co., a Japan-based auto motor company, announced plans to reduce its capital expenditures in 2013 and increase the company’s dividend, which benefited the stock. Embraer, a Brazil-based aircraft manufacturer, saw its shares move higher primarily due to increased orders for the company’s aircraft. After a mid-January order for 20 aircraft, the company announced another airline company’s order of 47 E-Jets, with options for an additional 47. MTU Aero Engines Holdings is a German-based company that manufactures aircraft engine components and provides engine maintenance. The company’s positive performance during the period was the result of continued strong trends in the commercial aerospace industry and company management’s guidance of volume growth of new engines throughout 2016. Canon is a Japan-based manufacturing company, which operates in the office, consumer and industrial market segments. Canon’s shares ended the quarter on a high note as the yen weakened and the company’s DSLR (digital single-lens reflex) camera business continued to show solid order trends. The DSLR segment continues to benefit from duopoly status, strong pricing on lenses, and increasing penetration
Management's Discussion of Fund Performance (Unaudited)
(Continued)
in developing countries. Itochu, a Japan-based trading company, posted solid operational results during the period, as shares were driven by improved investor sentiment on Japan as well as some movement in commodities in which the company is invested. Novartis, a multinational pharmaceutical company based in Switzerland, remained a solid performer primarily because of its strong new drug pipeline and its implementation of cost reductions. Though some of its drugs suffered from the “patent cliff,” whereby the patents on their drugs had expired, Novartis still maintained a diverse product lineup with many products not impacted by patent expiration issues.
Outlook
Globally, margins and profits remain at high levels and companies are generating significant amounts of free cash flow. As a result, we expect “return of capital” will continue to be an important theme in 2013, as companies deploy cash to increase dividends, share repurchases, and global mergers and acquisitions activity. Furthermore, we believe that despite several years of robust equity returns, most markets around the world are still reasonably valued and we continue to find attractive individual stock opportunities in every major region of the world for the Fund’s relatively concentrated portfolio. While the last year was particularly challenging, we believe the Fund’s fundamental, concentrated process is well positioned for the market environment going forward. As such, we anticipate stocks will continue to become less correlated and individual company fundamentals will matter more. In our opinion, the Fund, comprised of a collection of companies with discounted valuations and above-average earnings and yield prospects, is strategically positioned to capitalize on these opportunities.
1Beta is a measure of the volatility of a portfolio relative to its benchmark.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone International Value Fund - Class A* and the MSCI EAFE Index
| * | The chart above represents performance of Class A shares only, which will vary from the performance of Class C shares, Class Y shares and Institutional Class shares based on the differences in loads and fees paid by shareholders in the different classes. Class A shares commenced operations on August 18, 1994, Class C shares commenced operations on April 25, 1996, Class Y shares commenced operations on October 9, 1998 and Institutional Class shares commenced operations on September 10, 2012. The Class C shares performance information was calculated using the historical performance of Class A shares for periods prior to April 25,1996, Class Y shares performance information was calculated using the historical performance of Class A shares for periods prior to October 9, 1998 and Institutional Class shares performance information was calculated using the historical performance of Class A shares for periods prior to September 10, 2012. The returns have been restated for sales charges and for fees applicable to Class C, Class Y, and Institutional Class shares. |
| ** | The average annual total returns shown above are adjusted for maximum applicable sales charges. |
The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Note to Chart
MSCI EAFE is a free float-adjusted market capitalization index that is designed to measure developed market equity performance excluding the U.S. and Canada.
Management's Discussion of Fund Performance (Unaudited)
Touchstone Small Cap Growth Fund
Sub-Advised by Russell Implementation Services, Inc.
As discussed here and in the Subsequent Events section of the Notes to Financial Statements, the Touchstone Micro Cap Value Fund became the Touchstone Small Cap Growth Fund on April 26, 2013. This Annual Report presents the financial information and manager commentaries relating to the Fund as it existed during the relevant period, August 1, 2012 through March 31, 2013. In other words, this discussion and the remainder of the Annual Report are applicable to the previous micro-cap strategies and investments employed by the Fund through March 31, 2013 and are not financial information and commentaries related to the Fund’s small-cap growth strategies and investments that came into effect on April 26, 2013. Following this commentary and throughout this Annual Report the Touchstone Micro Cap Value Fund is referred to by its current name,Touchstone Small Cap Growth Fund.
Investment Philosophy
For the period of August 1, 2012 through January 15, 2013, the Touchstone Micro Cap Value Fund was sub-advised by Fifth Third Asset Management, Inc. For the period of January 16, 2013 through March 31, 2013, the Fund was managed by Russell Implementation Services, Inc. The Fund seeks capital appreciation by investing primarily in equity securities of micro-cap companies.
Fund Performance
The Touchstone Micro Cap Value Fund (Class A Shares) underperformed its benchmark, the Russell Microcap® Value Index, for the 8-month period ended March 31, 2013. The Fund’s total return was 20.93 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was 22.15 percent.
Market Environment
Merger and Acquisition activity can be an important driver for the micro-cap sector and buy-out activity accelerated in 2012 in part due to anticipated changes to the tax code. Avoidance of the “Fiscal Cliff” and signs of improving employment conditions helped spur the market higher into the first quarter of 2013.
The Consumer Discretionary and Industrials sectors were the strongest performing sectors as signs of continued, albeit modest, economic growth in the U.S. has been an important driver of investor interest in these more cyclical sectors. The Energy sector was the only sector to experience negative returns during this period. A decline in the price of oil was the main performance driver.
Portfolio Review
For the period August 1, 2012 through March 31, 2013, there was wide performance dispersions across the sectors. The top returning sectors were Consumer Discretionary, Industrials, and Health Care. The weakest sectors were Energy and Utilities.
Stocks that contributed to performance for the period included OfficeMax Inc. (Consumer Discretionary sector), a retail office products company which provided strong performance following a buyout offer from competitor Office Depot, Inc. (Consumer Discretionary sector). Power Secure International (Industrials sector), which provides products and services to electric utilities, saw strong performance due to better than expected earnings and contract wins. BioScrip, Inc. (Health Care sector), which provides home infusion services, rallied on improving business conditions and acquisitions. Ducommun Inc. (Industrials sector), an aerospace and defense product and service provider, outperformed following stronger than expected earnings.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
Stocks that detracted from performance for the period included Inteliquent (name changed to Neutral Tandem, Inc.) (Information Technology sector), a telecommunications equipment provider that reported a large earnings miss, guided down estimates and announced executive departures. The Dolan Co. (Consumer Discretionary sector), a professional services company, reported an earnings miss and a write down of assets, which put downward pressure on the stock. Great Panther Silver Ltd. (Materials sector), a silver mining and production company, has seen earnings weakness due to cost overruns. Endeavor International Corp. (Energy sector), an oil and gas exploration and production company, has seen significant share price weakness partly due to production shortfalls and halted operations at one well due to storm damage. A cash position that averaged approximately 6.5% of the Fund’s portfolio also detracted from performance.
Outlook
On February 21, 2013, the Board of Trustees approved changes to the Fund’s name, sub-advisor, and investment goals and strategy. Effective April 26, 2013, the Fund was renamed the Touchstone Small Cap Growth Fund and will seek long-term capital growth by primarily investing in small-cap companies.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Small Cap Growth Fund - Class A*, Russell 2000® Value Index and the Russell Microcap® Value Index
| * | The chart above represents performance of Class A shares only, which will vary from the performance of Class C shares, Class Y shares and Institutional Class shares based on the differences in loads and fees paid by shareholders in the different classes. Class A shares and Class C shares commenced operations on August 13, 2001, Class Y shares commenced operations on February 1, 1998 and Institutional Class shares commenced operations on September 10, 2012. The Class A and Class C shares performance information was calculated using the historical performance of Class Y shares for periods prior to August 13, 2001 and Institutional Class shares performance information was calculated using the historical performance of Class Y shares for periods prior to September 10, 2012. The returns have been restated for sales charges and for fees applicable to Class A, Class C and Institutional Class shares. |
| ** | The average annual total returns shown above are adjusted for maximum applicable sales charges. |
The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Notes to Chart
The Russell 2000®Value Index measures the performance for those Russell 2000®companies with lower price-to book ratios and lower forecasted growth values.
The Russell Microcap®Value Index measures the performance of those Russell Microcap companies with lower price-to-book ratios and lower forecasted growth values.
Management's Discussion of Fund Performance (Unaudited)
Touchstone Small Company Value Fund
Sub-Advised by DePrince, Race & Zollo, Inc.
Investment Philosophy
The Touchstone Small Company Value Fund seeks long-term capital appreciation by investing primarily in common stocks of small-cap companies that appear to be trading below their perceived value. The Fund utilizes a bottom-up security selection process that consists of three factors: dividend yield, low valuation, and a fundamental catalyst. For the period of August 1, 2012 to September 9, 2012, the Fund was sub-advised by Fifth Third Asset Management, Inc. Following an acquisition by Touchstone Advisors, Inc. of certain Fifth Third Funds, DePrince, Race & Zollo Inc. was appointed the Fund’s sub-advisor effective September 10, 2012 and repositioned the portfolio to realign with its new strategy resulting in elevated turnover in the portfolio.
Fund Performance
The Touchstone Small Company Value Fund (Class A Shares) underperformed its benchmark, the Russell 2000® Value Index, for the eight-month period ended March 31, 2013. The Fund’s total return was 20.74 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was 23.01 percent.
Market Environment
In the past eight months, the markets experienced a significant change in sentiment. Despite slower global activity and mixed economic data as the third quarter of 2012 closed, markets were supported by companies reporting in-line earnings on reduced expectations and the announcement of another round of quantitative easing by the Federal Reserve (the “Fed”). Even with a slower economic backdrop, U.S. companies continued to execute operationally, and equity market valuations remained attractive relative to alternative investments and historical averages. The fourth quarter of 2012 was marked by economic and political uncertainty both domestically and overseas. Investors grew concerned over the pace of the economic recovery, the impending fiscal cliff decision, and the presidential election. However, gains in employment boosted consumer confidence, which continues to drive the recovery in the auto and housing markets. Improvements in manufacturing and service sectors also supported global markets in the quarter. Amid the dramatic macro-economic swings that dominated markets in 2012, the stock market was able to remain forward-looking as economic conditions improved. This resulted in the U.S. major stock indexes reaching record highs during the first quarter of 2013 as investors continued to move money into U.S. equities.
Portfolio Review
Stock selection in the Energy sector and an underweight to the Consumer Discretionary sector were the largest detractors from Fund performance during the period. Additional detracting sectors for the period were the Materials and Telecommunication Services sectors. Throughout the eight-month period, overall stock selection and an overweight of the Health Care sector were the largest overall contributors to the Fund’s performance. The Information Technology, Utilities, and Consumer Staples sectors were additional contributors to performance during the period.
Among the individual stocks that contributed to Fund performance were Brooks Automation Inc. and Methode Electronics Inc. (both from the Information Technology sector), ALLETE Inc. and Black Hills Corp. (both from the Utilities sector). United Stationers Inc., Ryder System Inc., Harsco Corp. (all from the Industrials sector), Kronos Worldwide, Inc., and Titanium Metals Corp. (both from the Materials sector), and Steris Corporation and Meridian Bioscience, Inc. (both from the Health Care sector) were also contributors. Brooks Automation, a provider of automation, vacuums and instrumentation solutions, saw its shares rise during the period. The company reduced costs, achieved several new design wins in its core semiconductor business, and remained
Management's Discussion of Fund Performance (Unaudited)
(Continued)
committed to its emerging growth opportunity in the life sciences segment. Methode Electronics, a manufacturer of component and subsystem devices, saw its shares benefit due to positive results from its recently launched program for center consoles and trailer brake switches in General Motors’ GMT900 replacement platform. This is the largest program in company history and should continue to boost revenues. Methode Electronics also produces the TouchSensor program for Whirlpool appliances, which is beneficial as well. The Fund’s two Utilities sector holdings, ALLETE and Black Hills, also contributed to relative performance. Ryder System, a truck leasing company, exhibited better-than-expected earnings results on improved margins. Demand for this cost efficient alternative to purchasing trucks remains strong, and we believe Ryder’s margins will continue to improve as they integrate their new fleet of more energy efficient and technologically advanced trucks. United Stationers, a wholesale distributor of business products, had solid earnings and an accretive acquisition. Kronos Worldwide produces titanium dioxide, a key chemical component in making paint, and is directly tied to the housing and plastic markets. The stock’s performance was due to tighter inventory levels, better pricing, and improving construction outlooks in the U.S. and Asia. Titanium Metals accepted a takeover bid by Precision Castparts Corp. and was sold in December. Steris is a maker of antibacterial gel used in hospitals and doctor’s offices. The company got a positive FDA announcement, as expected, late in the third quarter of 2012 and released earnings that showed significant improvement in net income and free cash flow as a result of increased sales and better expense management. Meridian Bioscience is the maker of diagnostic test kits sold to clinics and hospitals for use in detecting strep A & B, along with numerous other infectious diseases. The company benefitted from the FDA approval of new tests.
Among the individual stocks that detracted from Fund performance were Noranda Aluminum Holding Corp. and Schnitzer Steel Industries Inc. (both from the Materials sector) and W&T Offshore Inc. (Energy sector). Noranda Aluminum, a producer of aluminum products and rolled aluminum coils, suffered as a result of international growth concerns. However, Noranda Aluminum is vertically integrated and should see incremental profitability improvement from increases in its bauxite capacity—a key input to alumina and aluminum production—through dredging and rail expansion in Jamaica. Aluminum supply should also tighten as high-cost producers are under severe cost pressures. Schnitzer Steel Industries, a recycler of ferrous and nonferrous scrap material, was also negatively impacted by international growth factors. We remain constructive on Schnitzer Steel, as the company is seeing positive results from its internal cost reduction program. Company management has reduced its selling, general and administrative (SG&A) expenses by 10 percent in the past year and plans to continue the program through year-end. The company is also growing its auto parts segment, which should benefit from strengthening domestic auto sales. Better auto sales and construction activity provided incremental sources of scrap supply, which should boost processing spreads. W&T Offshore is an exploration and production company with concentrations in the Gulf of Mexico, and onshore operations in the Permian Basin and East Texas. W&T Offshore traded lower on growth and production concerns despite beating its earnings expectations for the fourth quarter of 2012. The company remains committed to diversifying its onshore assets through acquisitions and we expect it should benefit from seven additional horizontal drilling sites planned this year at the Yellow Rose Wolfberry project. EXCO Resources, Inc. is tied to natural gas prices, which were rising in the second half of the year until December when they were negatively impacted by the milder winter weather. EXCO is divesting non-strategic assets and expects to generate close to $1 billion in proceeds to fund significant oil acquisitions going forward.
Outlook
With regard to the Fund, we believe low relative valuations combined with improving earnings outlooks and supportive central bank policies should provide a supportive backdrop for the portfolio as we enter the second quarter of 2013. We also expect the Fund to remain positioned in companies that can benefit from the ongoing economic recovery, albeit to a lesser degree than it was at the beginning of the year. For example, at the end of the first quarter, the Fund’s bottom-up process led the Fund’s portfolio to an overweight in economically sensitive sectors such as Information Technology, Industrials, and Materials.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
We believe the fundamental backdrop for financial companies continues to show improvement. These stocks have screened well on a valuation basis for several quarters, but we are now gaining conviction in fundamental catalysts to increase the Fund’s exposure to the space. As the yield curve steepens, the housing and commercial real estate markets recover, and credit quality and loan growth improve, we remain constructive on bank stocks. Furthermore, we believe increased mergers and acquisitions activity should also continue to fuel the positive sentiment toward the sector. Going forward, we remain concerned that the weakness in Europe and Asia could impact the domestic economic recovery, even though it continues to show incremental signs of strength. We are also concerned the strong momentum may not be sustainable given the tepid rate of recovery we’ve seen in the underlying economy.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
Comparison of the Change in Value of a $10,000 Investment in the Small Company Value Fund - Class A* and the Russell 2000® Value Index
| * | The chart above represents performance of Class A shares only, which will vary from the performance of Class C shares, Class Y shares and Institutional Class shares based on the differences in loads and fees paid by shareholders in the different classes. Class A shares, Class C shares and Class Y shares commenced operations on April 1, 2003, and Institutional Class shares commenced operations on September 10, 2012. Institutional Class shares performance information was calculated using the historical performance of Class A shares for periods prior to September 10, 2012. The returns have been restated for sales charges and for fees applicable to Institutional Class shares. |
| ** | The average annual total returns shown above are adjusted for maximum applicable sales charges. |
The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Note to Chart
The Russell 2000® Value Index measures the performance for those Russell 2000® companies with lower price-to book ratios and lower forecasted growth values.
Management's Discussion of Fund Performance (Unaudited)
Touchstone Strategic Income Fund
Sub-Advised by Fifth Third Asset Management, Inc.
Investment Philosophy
The Fund seeks a high level of income consistent with reasonable risk by investing in a variety of income-producing asset classes including debt securities, common stock, and preferred stock. A top-down macro-economic perspective, along with bottom-up security selection analysis, with an emphasis on quality, relative value, and high current income is employed. The approach seeks to maximize risk-adjusted returns through fundamental research, quantitative modeling, and capital structure analysis by evaluating companies on such factors as sales, assets, earnings, markets, and management. Correlation analysis, the statistical measure of how two securities move in relation to each other, is conducted between asset classes in an effort to build a portfolio with low correlation to both stocks and bonds.
Fund Performance
The Touchstone Strategic Income Fund (Class A Shares) outperformed its benchmark the Barclays U.S. Aggregate Bond Index for the eight-month period ended March 31, 2013. The Fund’s total return was 4.77 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was 0.29 percent.
Market Environment
The macro-economic backdrop was characterized by spread tightening, yield compression, and an increasingly sharp investor focus on yield as fixed-income assets delivered solid performance during the eight-month period. Upward yield pressure was kept in check by a combination of coordinated quantitative easing among the world’s central banks and a continued slow-growth environment still burdened by high debt amounts.
While the beginning of the period did not provide much reason to celebrate, the markets still indicated that they generally felt reassured by continued policy support for liquidity, especially in Europe. Accordingly, the U. S. Treasury market began the period flat to slightly negative, restrained by the tilt toward an environment that favored “risk-on” strategies. U.S. economic data remained relatively weak, albeit steady, as Europe continued to wallow in recession. Stocks finished with strength at the outset of the period. As corporate spreads continued to narrow, bonds also improved. Gold began the period reinvigorated by the strong talk of more monetary stimulus and climbed sharply. Real Estate Investment Trusts (REITs), in contrast, underperformed the general stock market.
Toward year-end 2012, the markets generally avoided downward volatility aside from a brief selloff after the U.S. election. The Federal Reserve (Fed) gave a hint of an exit strategy in its last meeting of the year stating it would target 6.5% unemployment as the best time to withdraw stimulus. For the most part, this environment created a “grind it out” ending to 2012. U.S. stocks were flat to slightly down as they consolidated large gains made earlier in the period. Long-term U.S. Treasury bonds rose from historic lows on hopes of better growth ahead and, at year-end, a deal to avoid the front page crisis known as the “fiscal cliff.”
The equity markets started off 2013 with continued reports of solid earnings in the U.S. Overall, economic data in the U. S. proved steady as the Fed reiterated its accommodative stance, despite continued speculation that its quantitative easing policies would start unwinding sometime in 2013. Meanwhile, the ongoing relative calm in the Eurozone was read by investors as a net positive as well. In early 2013, a sovereign debt scare arose in Cyprus as bank customer savings were “bailed in” to rescue banks there with fresh liquidity. However, the rest of early 2013 passed relatively quietly in Europe with very limited cross-border, sovereign-debt contagion. Simultaneously, Japan’s economy showed signs of life as that country’s new regime reiterated their intent to weaken the yen until deflation was defeated.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
Portfolio Review
Core bond holdings contributed to Fund performance during the period, led by new purchases and credit rating upgrades. Sovereign bond holdings outperformed, led by Polish government bonds. The Fund’s Investment Grade and High Yield Corporate Bond holdings also outperformed, led by positions in the Industrials and Consumer Discretionary sectors.
The Fund’s Preferred allocation performed well, and benefited from the lower systemic risk in Europe and new issue selection. Even though call risk weighed on appreciation potential, Preferred holdings outperformed, led by American Financial Group, Inc. and First Horizon National Corp. (Financials sector). Selections of new issues and Convertible holdings also helped relative performance. The Fund’s Non-Convertible Preferred allocation kept up with the strong market, with contributions from some of the larger holdings in General Electric Company (Industrials sector), Endurance Specialty Holdings Ltd., Arch Capital Group Ltd., and JPMorgan Chase & Co. (all in the Financials sector). Call activity in Preferreds picked up during the period and the Fund sold issues that Fund management anticipated would be called and were trading at negative yields to their call dates.
Investments in natural resources underperformed in both the Core bond and Preferred portion of the Fund’s portfolio due to weaker oil prices. Additionally, gold continued to have an adverse effect on the Fund’s portfolio. This resulted in selling the Fund’s direct exposure to gold at the end of the period, while continuing to hold some exposure to gold mining on the belief they were oversold. A single gold holding detracted the most from Fund performance, when the Convertible Preferred holding declined during the period on a mix of bad sentiment, labor issues, and a worrisome change of senior management.
The Fund’s equity exposure was additive to performance. The environment shifted from “risk-off” to “risk on” during the period. In this same timeframe, both DDR Corp. and MeadWestvaco Corp. (Consumer Goods sector) were primary contributors to equity performance. Other contributors were Telstra Corp. Ltd. (Technology sector) and Valero Energy Corp. (Utilities sector) which provided strong performance as refinery stocks were in favor. Telstra, which contributed strongly over the period, hit its target and was sold. The Fund added Marathon Petroleum Corp. (Materials sector) while exiting Rockwell Automation, Inc. (Industrial Goods sector) after it rallied on earnings.
The Fund’s Real Estate Investment Trust (REIT) holdings contributed mixed performance. While the Fund’s REIT allocation benefitted particularly from positions in Two Harbors Investment Corp., Starwood Property Trust, Inc., and Hospitality Properties Trust (all in the Financials sector), several of the Fund’s mortgage REITs detracted amid worries that a pickup in mortgage refinancing activity would cause massive cuts to dividends and declines in book value.
Significant changes to the Fund’s portfolio over the period included adding exposure to Equities, Convertibles, and High Yield Corporate Bonds. Stocks that had performed well were sold as they climbed to what we believed were fair value and therefore offered limited potential for further price appreciation.
Outlook
We are doubtful that Fed policies alone will stimulate growth. Nonetheless, we expect to maintain a healthy yield premium to Core bond mandates even as we remain disciplined and wary of market imbalances that may be developing and creating risk. Although interest rates continue to defy expectations, we believe the seeds are being sown for a sustained rise in yields.
While we thought the period would end more eventfully, not much changed. Equities in the U.S. look poised to advance, in our belief, as there appears to be few other options for investors to pursue as credit spreads approach pre-crisis levels and U.S. Treasury yields remain very low. Despite speculation on the part of analysts, the Fed has not moved from its current position. While investors will look to the earnings season for clues on
Management's Discussion of Fund Performance (Unaudited)
(Continued)
the market’s direction, nervousness abounds. In keeping with our view that we will continue to experience a relatively slow growth environment, especially in light of the ongoing pullback in government spending referred to as “sequestration,” we remain neutral on the direction of interest rates at this time. Additionally, our belief is that the stock market will continue to work forward (perhaps after a correction), but at a slower and more defensive pace. From a relative value standpoint the common wisdom seems to indicate that there simply aren’t many alternatives to equities worth considering. Common wisdom, however, can be quickly undone. We see at least two wild cards on the horizon that could do just that: Europe’s ongoing Sovereign debt saga, and the tense geopolitical situation in Asia, which seems to be growing hotter by the moment. Even as we revisit our short position on the yen, we are looking for cooler heads to prevail in that region, too.
Management's Discussion of Fund Performance (Unaudited)
(Continued)
Comparison of the Change in Value of a $10,000 Investment in the
Touchstone Strategic Income Fund - Class A* and the Barclays U.S. Aggregate Bond Index
| * | The chart above represents performance of Class A shares only, which will vary from the performance of Class C shares, Class Y shares and Institutional Class shares based on the differences in loads and fees paid by shareholders in the different classes. Class A shares commenced operations on April 1, 2004, Class C shares commenced operations on October 29, 2001, Class Y shares commenced operations on September 1, 1998 and Institutional Class shares commenced operations on September 10, 2012. The Class A shares, Class C shares and Class Y shares performance information was calculated using the historical performance of the Fifth Third/ Maxus Income Fund Investor shares, with an inception date of March 10, 1985, for periods prior to April 1, 2004, October 29, 2001 and September 1, 1998, respectively. Institutional Class shares performance information was calculated using the historical performance of Class Y shares for the periods prior to September 10, 2012. The returns have been restated for sales charges and for fees applicable to Class A, Class C, Class Y and Institutional Class shares. |
| ** | The average annual total returns shown above are adjusted for maximum applicable sales charges. |
The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Note to Chart
Barclays U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years.
Tabular Presentation of Portfolios of Investments (Unaudited)
March 31, 2013
The tables below provide each Fund’s sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.
| Touchstone International Value Fund | | | |
| Sector Allocation* | | (% of Net Assets) | |
| Financials | | | 24.4 | % |
| Industrials | | | 17.7 | |
| Consumer Staples | | | 11.2 | |
| Energy | | | 10.5 | |
| Consumer Discretionary | | | 8.2 | |
| Health Care | | | 8.0 | |
| Utilities | | | 5.2 | |
| Information Technology | | | 4.9 | |
| Materials | | | 4.4 | |
| Telecommunication Services | | | 3.1 | |
| Investment Funds | | | 18.7 | |
| Other Assets/Liabilities (Net) | | | (16.3 | ) |
| Total | | | 100.0 | % |
| | | | | |
| Touchstone Small Company Value Fund |
| Sector Allocation* | | (% of Net Assets) | |
| Financials | | | 25.6 | % |
| Industrials | | | 17.8 | |
| Information Technology | | | 16.4 | |
| Consumer Discretionary | | | 12.5 | |
| Materials | | | 10.9 | |
| Energy | | | 5.1 | |
| Health Care | | | 4.3 | |
| Consumer Staples | | | 3.5 | |
| Utilities | | | 1.3 | |
| Investment Funds | | | 16.3 | |
| Other Assets/Liabilities (Net) | | | (13.7 | ) |
| Total | | | 100.0 | % |
| | | | | |
| Touchstone Small Cap Growth Fund | | | |
| Sector Allocation* | | (% of Net Assets) | |
| Financials | | | 38.3 | % |
| Industrials | | | 15.1 | |
| Information Technology | | | 10.9 | |
| Consumer Discretionary | | | 10.8 | |
| Health Care | | | 6.6 | |
| Consumer Staples | | | 4.8 | |
| Materials | | | 3.7 | |
| Energy | | | 3.2 | |
| Utilities | | | 3.1 | |
| Telecommunication Services | | | 1.5 | |
| Rights | | | 0.0 | |
| Investment Fund | | | 1.9 | |
| Other Assets/Liabilities (Net) | | | 0.1 | |
| Total | | | 100.0 | % |
| | | | | |
* Sector classifications are based upon the Global Industry Classification Standard (GICS®).
Tabular Presentation of Portfolios of Investments (Unaudited)
March 31, 2013 (Continued)
| Touchstone Strategic Income Fund | | | |
| Credit Quality* | | (% of Fixed Income Securities) | |
| AAA/Aaa | | | 25.2 | % |
| AA/Aa | | | 7.0 | |
| A/A | | | 4.8 | |
| BBB/Baa | | | 38.1 | |
| BB/Ba | | | 13.3 | |
| B/B | | | 6.7 | |
| NR | | | 4.9 | |
| | | | 100.0 | % |
| Credit Quality* | | (% of Preferred Stocks) | |
| A/A | | | 13.4 | |
| BBB/Baa | | | 52.6 | |
| BB/Ba | | | 8.6 | |
| NR | | | 25.4 | |
| | | | 100.0 | % |
| Sector Allocation** | | (% of Net Assets) | |
| Fixed Income Securities | | | 51.4 | |
| Preferred Stocks | | | 31.0 | |
| Common Stocks | | | | |
| Financials | | | 4.3 | |
| Health Care | | | 2.4 | |
| Energy | | | 2.3 | |
| Utilities | | | 2.1 | |
| Industrials | | | 1.4 | |
| Information Technology | | | 0.8 | |
| Telecommunication Services | | | 0.6 | |
| Consumer Staples | | | 0.5 | |
| Consumer Discretionary | | | 0.3 | |
| Investment Funds | | | 1.8 | |
| Other Assets/Liabilities (Net) | | | 1.1 | |
| Total | | | 100.0 | % |
| * | Composite of Standard and Poors, Moody's and Fitch ratings. |
| ** | Sector classifications are based upon the Global Industry Classification Standard (GICS®). |
Portfolio of Investments
Touchstone International Value Fund – March 31, 2013
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Common Stocks— 97.6% | | | | | | | | |
| | | | | | | | | |
| United Kingdom — 23.9% | | | | | | | | |
| Anglo American PLC | | | 68,198 | | | $ | 1,753,317 | |
| Barclays PLC | | | 580,231 | | | | 2,566,883 | |
| BP PLC | | | 555,946 | | | | 3,884,941 | |
| Dairy Crest Group PLC | | | 274,747 | | | | 1,789,260 | |
| DS Smith PLC | | | 697,428 | | | | 2,318,650 | |
| Imperial Tobacco Group PLC | | | 113,839 | | | | 3,976,661 | |
| Invensys PLC | | | 295,972 | | | | 1,577,606 | |
| National Grid PLC | | | 299,805 | | | | 3,484,887 | |
| Royal Dutch Shell PLC - Class A | | | 106,622 | | | | 3,442,814 | |
| Sage Group PLC (The) | | | 304,886 | | | | 1,587,596 | |
| Vodafone Group PLC | | | 1,385,480 | | | | 3,928,261 | |
| | | | | | | | 30,310,876 | |
| | | | | | | | | |
| Japan — 13.4% | | | | | | | | |
| Amada Co. Ltd. | | | 443,000 | | | | 2,922,431 | |
| Canon, Inc. | | | 76,500 | | | | 2,803,686 | |
| ITOCHU Corp. | | | 334,500 | | | | 4,082,865 | |
| Mabuchi Motor Co. Ltd. | | | 55,000 | | | | 2,956,392 | |
| Sumitomo Corp. | | | 199,700 | | | | 2,509,641 | |
| Yokogawa Electric Corp. | | | 182,100 | | | | 1,818,388 | |
| | | | | | | | 17,093,403 | |
| | | | | | | | | |
| Switzerland — 8.0% | | | | | | | | |
| ABB Ltd. | | | 79,572 | | | | 1,794,625 | |
| ABB Ltd. ADR† | | | 38,100 | | | | 867,156 | |
| Helvetia Holding AG | | | 2,277 | | | | 917,468 | |
| Novartis AG | | | 61,149 | | | | 4,344,780 | |
| Zurich Insurance Group AG | | | 8,062 | | | | 2,243,738 | |
| | | | | | | | 10,167,767 | |
| | | | | | | | | |
| Norway — 6.9% | | | | | | | | |
| DNB ASA | | | 181,501 | | | | 2,661,569 | |
| Marine Harvest ASA* | | | 2,651,070 | | | | 2,457,825 | |
| Orkla ASA | | | 216,867 | | | | 1,733,971 | |
| Seadrill Ltd.† | | | 48,000 | | | | 1,786,080 | |
| Seadrill Ltd. | | | 3,248 | | | | 117,725 | |
| | | | | | | | 8,757,170 | |
| | | | | | | | | |
| France — 6.6% | | | | | | | | |
| Casino Guichard Perrachon SA | | | 29,231 | | | | 3,071,780 | |
| GDF Suez | | | 48,736 | | | | 938,337 | |
| Sanofi | | | 42,925 | | | | 4,361,719 | |
| | | | | | | | 8,371,836 | |
| | | | | | | | | |
| Singapore — 6.6% | | | | | | | | |
| Jardine Cycle & Carriage Ltd. | | | 131,000 | | | | 5,400,113 | |
| United Overseas Bank Ltd. | | | 180,000 | | | | 2,957,552 | |
| | | | | | | | 8,357,665 | |
| | | | | | | | | |
| Germany — 6.3% | | | | | | | | |
| Daimler AG | | | 51,000 | | | | 2,774,823 | |
| Deutsche Boerse AG | | | 39,406 | | | | 2,386,474 | |
| MTU Aero Engines Holding AG | | | 30,443 | | | | 2,885,786 | |
| | | | | | | | 8,047,083 | |
| | | | | | | | | |
| Netherlands — 5.7% | | | | | | | | |
| Aegon N.V. | | | 412,600 | | | | 2,481,037 | |
| Delta Lloyd N.V. | | | 154,900 | | | | 2,656,722 | |
| ING Groep NV* | | | 298,643 | | | | 2,119,656 | |
| | | | | | | | 7,257,415 | |
| | | | | | | | | |
| Italy — 3.2% | | | | | | | | |
| Eni SpA | | | 85,291 | | | | 1,916,566 | |
| Snam SpA | | | 470,708 | | | | 2,145,615 | |
| | | | | | | | 4,062,181 | |
| | | | | | | | | |
| Brazil — 2.9% | | | | | | | | |
| Brookfield Incorporacoes SA | | | 617,600 | | | | 761,016 | |
| Embraer SA ADR | | | 80,800 | | | | 2,882,136 | |
| | | | | | | | 3,643,152 | |
| | | | | | | | | |
| Spain — 2.2% | | | | | | | | |
| Banco Santander SA | | | 416,288 | | | | 2,797,238 | |
| | | | | | | | | |
| Austria — 2.1% | | | | | | | | |
| Erste Group Bank AG* | | | 97,700 | | | | 2,721,403 | |
| | | | | | | | | |
| Denmark — 1.8% | | | | | | | | |
| Danske Bank AS* | | | 131,225 | | | | 2,346,365 | |
| | | | | | | | | |
| Russia — 1.7% | | | | | | | | |
| Rosneft OAO GDR | | | 286,300 | | | | 2,184,241 | |
| | | | | | | | | |
| Korea — 1.7% | | | | | | | | |
| Shinhan Financial Group Co. Ltd. | | | 60,550 | | | | 2,168,720 | |
| | | | | | | | | |
| Israel — 1.2% | | | | | | | | |
| Teva Pharmaceutical Industries Ltd. ADR | | | 38,500 | | | | 1,527,680 | |
| | | | | | | | | |
| Hong Kong — 1.2% | | | | | | | | |
| Yue Yuen Industrial Holdings Ltd. | | | 455,700 | | | | 1,485,235 | |
| | | | | | | | | |
| United States — 1.0% | | | | | | | | |
| Philip Morris International, Inc. | | | 13,100 | | | | 1,214,501 | |
| | | | | | | | | |
| Cayman Islands — 0.7% | | | | | | | | |
| Dongyue Group† | | | 1,581,600 | | | | 916,864 | |
| | | | | | | | | |
| Luxembourg — 0.5% | | | | | | | | |
| Arcelormittal | | | 47,888 | | | | 616,924 | |
| Total Common Stocks | | | | | | $ | 124,047,719 | |
| | | | | | | | | |
| Investment Funds— 18.7% | | | | | | | | |
| Invesco Government & Agency | | | | | | | | |
| Portfolio, Institutional Class** | | | 2,451,274 | | | | 2,451,274 | |
| Touchstone Institutional Money Market | | | | | | | | |
| Fund^ | | | 21,291,834 | | | | 21,291,834 | |
| Total Investment Funds | | | | | | $ | 23,743,108 | |
Touchstone International Value Fund
March 31, 2013 (Continued)
| | | Market | |
| | | Value | |
| | | | |
| Total Investment Securities —116.3% | | | | |
| (Cost $147,078,306) | | $ | 147,790,827 | |
| | | | | |
| Liabilities in Excess of Other Assets — (16.3%) | | | (20,722,798 | ) |
| | | | | |
| Net Assets — 100.0% | | $ | 127,068,029 | |
| * | Non-income producing security. |
| ** | Represents collateral for securities loaned. |
| ^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of March 31, 2013 was $2,379,203. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
PLC - Public Limited Company
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 | | $ | 124,047,719 | | | $ | — | | | $ | — | | | $ | 124,047,719 | |
| Investment Funds | | | 23,743,108 | | | | — | | | | — | | | | 23,743,108 | |
| | | | | | | | | | | | | | | $ | 147,790,827 | |
See accompanying Notes to Financial Statements.
Portfolio of Investments
Touchstone Small Cap Growth Fund – March 31, 2013
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Common Stocks— 98.0% | | | | | | | | |
| | | | | | | | | |
| Financials — 38.3% | | | | | | | | |
| 1st United Bancorp, Inc. | | | 3,153 | | | $ | 20,368 | |
| Access National Corp. | | | 1,674 | | | | 27,454 | |
| ACNB Corp. | | | 1,097 | | | | 18,276 | |
| AG Mortgage Investment Trust, Inc. REIT | | | 659 | | | | 16,785 | |
| American Equity Investment Life Holding Co. | | | 33,239 | | | | 494,929 | |
| American River Bankshares* | | | 2,032 | | | | 15,260 | |
| Ameris Bancorp* | | | 1,481 | | | | 21,252 | |
| Ameriserv Financial, Inc.* | | | 4,390 | | | | 13,741 | |
| Ames National Corp. | | | 1,000 | | | | 20,860 | |
| Apollo Residential Mortgage, Inc. REIT | | | 2,403 | | | | 53,563 | |
| Artio Global Investors, Inc. | | | 4,975 | | | | 13,531 | |
| AV Homes, Inc.* | | | 2,240 | | | | 29,859 | |
| Bancorp, Inc.* | | | 4,907 | | | | 67,962 | |
| Banner Corp. | | | 1,444 | | | | 45,963 | |
| Berkshire Hills Bancorp, Inc. | | | 18,955 | | | | 484,111 | |
| BNC Bancorp | | | 2,726 | | | | 27,315 | |
| Bofi Holding, Inc.* | | | 11,120 | | | | 398,986 | |
| Bridge Capital Holdings* | | | 1,493 | | | | 22,753 | |
| C&F Financial Corp. | | | 478 | | | | 19,574 | |
| Camden National Corp. | | | 1,022 | | | | 33,808 | |
| Capital City Bank Group, Inc.* | | | 1,753 | | | | 21,650 | |
| Capital Southwest Corp. | | | 228 | | | | 26,220 | |
| CapLease, Inc. REIT | | | 47,072 | | | | 299,849 | |
| Cardinal Financial Corp. | | | 4,311 | | | | 78,374 | |
| Cedar Realty Trust, Inc. REIT | | | 7,098 | | | | 43,369 | |
| Center Bancorp, Inc. | | | 28,343 | | | | 352,303 | |
| Centerstate Banks, Inc. | | | 4,691 | | | | 40,249 | |
| Central Valley Community Bancorp | | | 1,529 | | | | 12,951 | |
| CIFC Corp.* | | | 1,378 | | | | 11,341 | |
| Citizens, Inc.* | | | 3,312 | | | | 27,788 | |
| Codorus Valley Bancorp, Inc. | | | 996 | | | | 16,354 | |
| Community Bankers Trust Corp.* | | | 4,221 | | | | 13,803 | |
| Consolidated-Tomoka Land Co. | | | 288 | | | | 11,303 | |
| Consumer Portfolio Services, Inc.* | | | 3,611 | | | | 42,285 | |
| Crawford & Co. - Class B | | | 3,979 | | | | 30,201 | |
| Dime Community Bancshares, Inc. | | | 33,470 | | | | 480,629 | |
| Doral Financial Corp.* | | | 20,145 | | | | 14,196 | |
| Eagle Bancorp, Inc.* | | | 2,716 | | | | 59,453 | |
| EMC Insurance Group, Inc. | | | 9,971 | | | | 262,536 | |
| Farmers Capital Bank Corp.* | | | 1,637 | | | | 30,776 | |
| Farmers National Banc Corp. | | | 4,114 | | | | 25,959 | |
| FBR & Co.* | | | 874 | | | | 16,535 | |
| Fidelity Southern Corp.* | | | 2,021 | | | | 23,242 | |
| First Bancorp Troy | | | 2,218 | | | | 29,921 | |
| First Bancorp, Inc. | | | 587 | | | | 10,572 | |
| First Busey Corp. | | | 2,193 | | | | 10,022 | |
| First California Financial Group, Inc.* | | | 2,404 | | | | 20,482 | |
| First Financial Holdings, Inc. | | | 16,180 | | | | 339,133 | |
| First M&F Corp. | | | 1,742 | | | | 24,649 | |
| First Marblehead Corp. (The)* | | | 11,686 | | | | 11,803 | |
| First Merchants Corp. | | | 2,717 | | | | 42,032 | |
| First Pactrust Bancorp, Inc. | | | 25,400 | | | | 289,560 | |
| Firstbank Corp. | | | 1,788 | | | | 24,782 | |
| German American Bancorp, Inc. | | | 1,739 | | | | 40,014 | |
| GFI Group, Inc. | | | 12,035 | | | | 40,197 | |
| Gladstone Capital Corp. | | | 31,383 | | | | 288,724 | |
| Gladstone Commercial Corp. REIT | | | 18,800 | | | | 366,036 | |
| Gramercy Capital Corp. REIT* | | | 3,226 | | | | 16,807 | |
| Great Southern Bancorp, Inc. | | | 384 | | | | 9,366 | |
| Guaranty Bancorp* | | | 17,243 | | | | 36,210 | |
| Hanmi Financial Corp.* | | | 25,048 | | | | 400,768 | |
| Heartland Financial USA, Inc. | | | 3,161 | | | | 79,878 | |
| Heritage Commerce Corp.* | | | 1,580 | | | | 10,633 | |
| Heritage Oaks Bancorp* | | | 1,727 | | | | 9,844 | |
| Home Federal Bancorp, Inc. | | | 881 | | | | 11,277 | |
| Home Loan Servicing Solutions Ltd. | | | 2,731 | | | | 63,714 | |
| Homeowners Choice, Inc. | | | 968 | | | | 26,378 | |
| HomeStreet, Inc.* | | | 405 | | | | 9,048 | |
| Horizon Bancorp | | | 821 | | | | 16,592 | |
| ICG Group, Inc.* | | | 2,411 | | | | 30,089 | |
| Imperial Holdings, Inc.* | | | 4,797 | | | | 19,428 | |
| Independent Bank Corp. | | | 12,987 | | | | 423,246 | |
| JMP Group, Inc. | | | 33,050 | | | | 228,376 | |
| KCAP Financial, Inc. | | | 2,320 | | | | 24,986 | |
| Lakeland Bancorp, Inc. | | | 5,594 | | | | 55,101 | |
| Lakeland Financial Corp. | | | 745 | | | | 19,884 | |
| LNB Bancorp, Inc. | | | 1,788 | | | | 14,858 | |
| MainSource Financial Group, Inc. | | | 35,058 | | | | 492,214 | |
| Marlin Business Services Corp. | | | 1,399 | | | | 32,443 | |
| MBT Financial Corp.* | | | 3,705 | | | | 14,450 | |
| Meadowbrook Insurance Group, Inc. | | | 18,474 | | | | 130,242 | |
| Mercantile Bank Corp. | | | 582 | | | | 9,725 | |
| MetroCorp Bancshares, Inc.* | | | 3,485 | | | | 35,164 | |
| Middleburg Financial Corp. | | | 772 | | | | 14,985 | |
| MidSouth Bancorp, Inc. | | | 1,851 | | | | 30,097 | |
| MidWestOne Financial Group, Inc. | | | 978 | | | | 23,286 | |
| Monmouth Real Estate Investment Corp. - Class A REIT | | | 45,146 | | | | 503,378 | |
| MPG Office Trust, Inc. REIT* | | | 11,530 | | | | 31,708 | |
| MVC Capital, Inc. | | | 24,422 | | | | 313,334 | |
| National Bankshares, Inc. | | | 1,185 | | | | 41,392 | |
| NewBridge Bancorp* | | | 3,201 | | | | 18,854 | |
| NewStar Financial, Inc.* | | | 1,590 | | | | 21,036 | |
| NGP Capital Resources Co. | | | 46,452 | | | | 330,274 | |
| NorthRim Bancorp, Inc. | | | 10,336 | | | | 232,250 | |
| Oriental Financial Group, Inc. | | | 6,531 | | | | 101,296 | |
| Orrstown Financial Services, Inc.* | | | 1,563 | | | | 23,117 | |
| Pacific Mercantile Bancorp* | | | 2,271 | | | | 13,285 | |
| Peapack Gladstone Financial Corp. | | | 1,285 | | | | 19,159 | |
| Peoples Bancorp, Inc. | | | 2,068 | | | | 46,303 | |
| Phoenix Cos., Inc. (The)* | | | 478 | | | | 14,708 | |
| Preferred Bank* | | | 2,597 | | | | 40,981 | |
| Premier Financial Bancorp, Inc. | | | 1,479 | | | | 17,142 | |
| QCR Holdings, Inc. | | | 905 | | | | 14,932 | |
| Radian Group, Inc. | | | 27,880 | | | | 298,595 | |
| RAIT Financial Trust REIT | | | 4,777 | | | | 38,073 | |
| Renasant Corp. | | | 25,652 | | | | 574,092 | |
| Republic First Bancorp, Inc.* | | | 4,842 | | | | 13,412 | |
| Safeguard Scientifics, Inc.* | | | 20,170 | | | | 318,686 | |
| Seacoast Banking Corp. of Florida* | | | 12,030 | | | | 25,143 | |
| Security National Financial Corp. - Class A* | | | 1,453 | | | | 10,433 | |
Touchstone Small Cap Growth Fund
March 31, 2013 (Continued)
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Common Stocks — 98.0% (Continued) | | | | | | | | |
| | | | | | | | | |
| Financials — (Continued) | | | | | | | | |
| Shore Bancshares, Inc.* | | | 1,852 | | | $ | 12,631 | |
| Sierra Bancorp | | | 1,822 | | | | 23,959 | |
| Simmons First National Corp. - Class A | | | 14,188 | | | | 359,240 | |
| Southwest Bancorp, Inc.* | | | 2,498 | | | | 31,375 | |
| STAG Industrial, Inc. REIT | | | 2,528 | | | | 53,771 | |
| State Bank Financial Corp. | | | 3,457 | | | | 56,591 | |
| Sterling Bancorp. | | | 42,819 | | | | 435,041 | |
| Stewart Information Services Corp. | | | 2,969 | | | | 75,620 | |
| Stratus Properties, Inc.* | | | 1,065 | | | | 17,072 | |
| Suffolk Bancorp* | | | 1,013 | | | | 14,425 | |
| Sun Bancorp, Inc.* | | | 7,444 | | | | 25,384 | |
| SWS Group, Inc.* | | | 3,867 | | | | 23,395 | |
| Taylor Capital Group, Inc.* | | | 1,848 | | | | 29,550 | |
| Triangle Capital Corp. | | | 2,980 | | | | 83,410 | |
| Trico Bancshares | | | 971 | | | | 16,604 | |
| Trustmark Corp. | | | 484 | | | | 12,108 | |
| United Community Banks, Inc.* | | | 3,472 | | | | 39,372 | |
| United Community Financial Corp.* | | | 7,445 | | | | 28,887 | |
| United Insurance Holdings Corp. | | | 29,154 | | | | 167,052 | |
| Univest Corp. of Pennsylvania | | | 1,612 | | | | 28,081 | |
| ViewPoint Financial Group, Inc. | | | 20,791 | | | | 418,107 | |
| Virginia Commerce Bancorp, Inc.* | | | 4,486 | | | | 63,028 | |
| Washington Trust Bancorp, Inc. | | | 17,913 | | | | 490,458 | |
| Waterstone Financial, Inc.* | | | 1,414 | | | | 11,694 | |
| West Bancorporation, Inc. | | | 3,298 | | | | 36,608 | |
| Western Asset Mortgage Capital Corp. | | | | | | | | |
| REIT | | | 1,576 | | | | 36,626 | |
| Wilshire Bancorp, Inc.* | | | 3,690 | | | | 25,018 | |
| WSFS Financial Corp. | | | 8,642 | | | | 420,347 | |
| Yadkin Valley Financial Corp.* | | | 4,242 | | | | 17,010 | |
| | | | | | | | 13,728,779 | |
| | | | | | | | | |
| Industrials — 15.1% | | | | | | | | |
| AAR Corp. | | | 10,116 | | | | 186,033 | |
| Accuride Corp.* | | | 6,976 | | | | 37,601 | |
| Aceto Corp. | | | 26,718 | | | | 295,768 | |
| American Railcar Industries, Inc. | | | 1,378 | | | | 64,408 | |
| American Superconductor Corp.* | | | 3,676 | | | | 9,778 | |
| American Woodmark Corp.* | | | 1,760 | | | | 59,893 | |
| Apogee Enterprises, Inc. | | | 5,916 | | | | 171,268 | |
| Arkansas Best Corp. | | | 999 | | | | 11,668 | |
| Asset Acceptance Capital Corp.* | | | 3,445 | | | | 23,219 | |
| CAI International, Inc.* | | | 431 | | | | 12,421 | |
| CBIZ, Inc.* | | | 60,611 | | | | 386,698 | |
| Ceco Environmental Corp. | | | 19,257 | | | | 248,993 | |
| Celadon Group, Inc. | | | 11,391 | | | | 237,616 | |
| Cenveo, Inc.* | | | 6,325 | | | | 13,599 | |
| Consolidated Graphics, Inc.* | | | 4,343 | | | | 169,811 | |
| Dolan Co. (The)* | | | 22,992 | | | | 54,951 | |
| Douglas Dynamics, Inc. | | | 762 | | | | 10,531 | |
| Ducommun, Inc.* | | | 15,820 | | | | 313,078 | |
| Energy Recovery, Inc.* | | | 8,573 | | | | 31,720 | |
| EnergySolutions, Inc.* | | | 9,890 | | | | 37,088 | |
| EnerNOC, Inc.* | | | 1,570 | | | | 27,271 | |
| Federal Signal Corp.* | | | 6,514 | | | | 53,024 | |
| FuelCell Energy, Inc.* | | | 15,725 | | | | 14,841 | |
| Furmanite Corp.* | | | 3,141 | | | | 21,013 | |
| Genco Shipping & Trading Ltd. | | | 4,056 | | | | 11,681 | |
| General Finance Corp.* | | | 2,160 | | | | 9,719 | |
| Gibraltar Industries, Inc.* | | | 4,284 | | | | 78,183 | |
| Global Power Equipment Group, Inc. | | | 1,105 | | | | 19,470 | |
| GP Strategies Corp.* | | | 15,321 | | | | 365,559 | |
| Great Lakes Dredge & Dock Corp. | | | 32,120 | | | | 216,168 | |
| Greenbrier Cos., Inc.* | | | 4,469 | | | | 101,491 | |
| H&E Equipment Services, Inc. | | | 1,080 | | | | 22,032 | |
| Insteel Industries, Inc. | | | 2,379 | | | | 38,825 | |
| Kimball International, Inc. - Class B | | | 4,744 | | | | 42,981 | |
| LB Foster Co. | | | 228 | | | | 10,098 | |
| Lydall, Inc.* | | | 1,596 | | | | 24,499 | |
| Marten Transport Ltd. | | | 17,620 | | | | 354,691 | |
| Michael Baker Corp. | | | 402 | | | | 9,849 | |
| Navigant Consulting, Inc.* | | | 30,670 | | | | 403,004 | |
| NCI Building Systems, Inc.* | | | 2,849 | | | | 49,487 | |
| Orion Marine Group, Inc.* | | | 26,031 | | | | 258,748 | |
| Pacer International, Inc.* | | | 2,494 | | | | 12,545 | |
| Patriot Transportation Holding, Inc.* | | | 519 | | | | 14,439 | |
| PGT, Inc.* | | | 2,130 | | | | 14,633 | |
| Pike Electric Corp. | | | 19,464 | | | | 276,973 | |
| PMFG, Inc.* | | | 2,444 | | | | 15,079 | |
| Powersecure International, Inc.* | | | 17,663 | | | | 224,497 | |
| Rand Logistics, Inc.* | | | 1,813 | | | | 11,105 | |
| Republic Airways Holdings, Inc.* | | | 3,284 | | | | 37,897 | |
| Schawk, Inc. | | | 13,929 | | | | 153,080 | |
| Standex International Corp. | | | 766 | | | | 42,299 | |
| Vitran Corp., Inc.* | | | 15,516 | | | | 94,958 | |
| | | | | | | | 5,406,281 | |
| | | | | | | | | |
| Information Technology — 10.9% | | | | | | | | |
| Alpha & Omega Semiconductor Ltd.* | | | 27,158 | | | | 241,163 | |
| ANADIGICS, Inc.* | | | 10,345 | | | | 20,689 | |
| Audience, Inc.* | | | 820 | | | | 12,505 | |
| Aviat Networks, Inc.* | | | 7,260 | | | | 24,466 | |
| Avid Technology, Inc.* | | | 2,058 | | | | 12,904 | |
| Axcelis Technologies, Inc.* | | | 7,353 | | | | 9,191 | |
| Blucora, Inc.* | | | 4,229 | | | | 65,465 | |
| Checkpoint Systems, Inc.* | | | 1,947 | | | | 25,428 | |
| CIBER, Inc.* | | | 76,971 | | | | 361,764 | |
| Computer Task Group, Inc. | | | 14,036 | | | | 300,230 | |
| Comtech Telecommunications Corp. | | | 5,100 | | | | 123,828 | |
| CTS Corp. | | | 33,493 | | | | 349,667 | |
| Daktronics, Inc. | | | 1,921 | | | | 20,170 | |
| EXFO, Inc. (Canada)* | | | 16,496 | | | | 83,965 | |
| Global Cash Access Holdings, Inc.* | | | 29,169 | | | | 205,641 | |
| Intevac, Inc.* | | | 2,347 | | | | 11,078 | |
| Intralinks Holdings, Inc.* | | | 4,924 | | | | 31,317 | |
| IXYS Corp. | | | 19,892 | | | | 190,764 | |
| Kemet Corp.* | | | 1,965 | | | | 12,281 | |
| Kopin Corp.* | | | 3,475 | | | | 12,858 | |
| Limelight Networks, Inc.* | | | 5,007 | | | | 10,314 | |
| Mattson Technology, Inc.* | | | 8,130 | | | | 11,219 | |
| MeetMe, Inc.* | | | 2,941 | | | | 6,705 | |
| Mercury Systems, Inc.* | | | 1,523 | | | | 11,225 | |
| ModusLink Global Solutions, Inc.* | | | 3,300 | | | | 10,889 | |
Touchstone Small Cap Growth Fund
March 31, 2013 (Continued)
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Common Stocks — 98.0% (Continued) | | | | | | | | |
| | | | | | | | | |
| Information Technology — (Continued) | | | | | | | | |
| Oclaro, Inc.* | | | 12,287 | | | $ | 15,482 | |
| OCZ Technology Group, Inc.* | | | 11,835 | | | | 21,303 | |
| Perficient, Inc.* | | | 27,780 | | | | 323,915 | |
| Pericom Semiconductor Corp.* | | | 26,644 | | | | 181,446 | |
| Photronics, Inc.* | | | 44,110 | | | | 294,655 | |
| Radisys Corp.* | | | 3,030 | | | | 14,908 | |
| Rudolph Technologies, Inc.* | | | 18,218 | | | | 214,608 | |
| Seachange International, Inc.* | | | 3,249 | | | | 38,631 | |
| Silicon Graphics International Corp.* | | | 5,111 | | | | 70,276 | |
| STEC, Inc.* | | | 2,986 | | | | 13,198 | |
| Supertex, Inc. | | | 13,859 | | | | 307,808 | |
| support.com, Inc.* | | | 2,222 | | | | 9,288 | |
| TechTarget, Inc.* | | | 2,458 | | | | 12,020 | |
| Viasystems Group, Inc.* | | | 766 | | | | 9,989 | |
| Westell Technologies, Inc. - Class A* | | | 112,122 | | | | 225,365 | |
| Zygo Corp.* | | | 620 | | | | 9,182 | |
| | | | | | | | 3,927,800 | |
| | | | | | | | | |
| Consumer Discretionary — 10.8% | | | | | | | | |
| 1-800-Flowers.Com, Inc. - Class A* | | | 2,717 | | | | 13,503 | |
| Bassett Furniture Industries, Inc. | | | 1,625 | | | | 25,935 | |
| Beazer Homes USA, Inc.* | | | 4,128 | | | | 65,388 | |
| Big 5 Sporting Goods Corp. | | | 928 | | | | 14,486 | |
| Bluegreen Corp.* | | | 1,033 | | | | 10,165 | |
| Cache, Inc.* | | | 11,814 | | | | 49,855 | |
| Carriage Services, Inc. | | | 16,664 | | | | 354,110 | |
| Christopher & Banks Corp.* | | | 4,708 | | | | 30,272 | |
| Citi Trends, Inc.* | | | 16,000 | | | | 163,680 | |
| Core-Mark Holding Co., Inc. | | | 195 | | | | 10,005 | |
| Corinthian Colleges, Inc.* | | | 3,817 | | | | 8,016 | |
| Daily Journal Corp.* | | | 101 | | | | 11,211 | |
| Destination Xl Group, Inc.* | | | 43,782 | | | | 222,850 | |
| Digital Generation, Inc.* | | | 2,420 | | | | 15,561 | |
| Entravision Communications Corp. - Class A | | | 6,827 | | | | 21,778 | |
| Exide Technologies* | | | 10,885 | | | | 29,390 | |
| Fisher Communications, Inc. | | | 1,093 | | | | 42,889 | |
| Flexsteel Industries, Inc. | | | 442 | | | | 10,935 | |
| Fred's, Inc. - Class A | | | 19,870 | | | | 271,822 | |
| Furniture Brands International, Inc.* | | | 8,696 | | | | 8,695 | |
| Global Sources Ltd. | | | 1,942 | | | | 14,682 | |
| Gray Television, Inc.* | | | 4,834 | | | | 22,671 | |
| hhgregg, Inc.* | | | 5,309 | | | | 58,664 | |
| Hooker Furniture Corp. | | | 22,990 | | | | 366,461 | |
| Hovnanian Enterprises, Inc. - Class A* | | | 23,597 | | | | 136,155 | |
| Isle of Capri Casinos, Inc.* | | | 2,278 | | | | 14,329 | |
| Krispy Kreme Doughnuts, Inc.* | | | 10,445 | | | | 150,826 | |
| LIN TV Corp. - Class A* | | | 6,154 | | | | 67,632 | |
| M/I Homes, Inc.* | | | 4,218 | | | | 103,130 | |
| Mcclatchy Co. (The) - Class A* | | | 5,708 | | | | 16,553 | |
| Motorcar Parts of America, Inc.* | | | 20,190 | | | | 123,765 | |
| Perry Ellis International, Inc. | | | 13,322 | | | | 242,327 | |
| Spartan Motors, Inc. | | | 39,920 | | | | 211,975 | |
| Standard Motor Products, Inc. | | | 15,316 | | | | 424,560 | |
| Stein Mart, Inc. | | | 25,120 | | | | 210,506 | |
| Tuesday Morning Corp.* | | | 4,661 | | | | 36,169 | |
| Universal Electronics, Inc.* | | | 1,946 | | | | 45,244 | |
| Valuevision Media, Inc.* | | | 6,242 | | | | 21,597 | |
| VOXX International Corp.* | | | 13,657 | | | | 146,266 | |
| Winnebago Industries, Inc.* | | | 3,740 | | | | 77,194 | |
| Zale Corp.* | | | 2,262 | | | | 8,890 | |
| | | | | | | | 3,880,142 | |
| | | | | | | | | |
| Health Care — 6.6% | | | | | | | | |
| Albany Molecular Research, Inc.* | | | 1,726 | | | | 18,140 | |
| Alphatec Holdings, Inc.* | | | 5,814 | | | | 12,268 | |
| AMAG Pharmaceuticals, Inc.* | | | 630 | | | | 15,026 | |
| Amedisys, Inc.* | | | 2,956 | | | | 32,871 | |
| AMN Healthcare Services, Inc.* | | | 2,173 | | | | 34,399 | |
| Astex Pharmaceuticals* | | | 20,907 | | | | 93,245 | |
| Bioscrip, Inc.* | | | 21,724 | | | | 276,112 | |
| Cambrex Corp.* | | | 17,934 | | | | 229,376 | |
| Codexis, Inc.* | | | 5,539 | | | | 13,238 | |
| Cross Country Healthcare, Inc.* | | | 39,495 | | | | 209,718 | |
| Curis, Inc.* | | | 4,035 | | | | 13,235 | |
| Cynosure, Inc. - Class A* | | | 625 | | | | 16,356 | |
| Enzo Biochem, Inc.* | | | 3,333 | | | | 8,399 | |
| Enzon Pharmaceuticals, Inc. | | | 3,439 | | | | 13,068 | |
| Gentiva Health Services, Inc.* | | | 4,110 | | | | 44,470 | |
| Geron Corp.* | | | 29,892 | | | | 31,984 | |
| Healthways, Inc.* | | | 25,603 | | | | 313,637 | |
| Hi-Tech Pharmacal Co., Inc. | | | 473 | | | | 15,661 | |
| Insmed, Inc.* | | | 5,797 | | | | 43,420 | |
| Medical Action Industries, Inc.* | | | 2,096 | | | | 12,575 | |
| Pacific Biosciences of California, Inc.* | | | 5,928 | | | | 14,761 | |
| Palomar Medical Technologies, Inc.* | | | 1,578 | | | | 21,287 | |
| PDI, Inc.* | | | 1,272 | | | | 7,505 | |
| Providence Service Corp. (The)* | | | 7,009 | | | | 129,596 | |
| Rigel Pharmaceuticals, Inc.* | | | 1,769 | | | | 12,012 | |
| RTI Biologics, Inc.* | | | 2,694 | | | | 10,614 | |
| Solta Medical, Inc.* | | | 6,476 | | | | 14,247 | |
| SurModics, Inc.* | | | 415 | | | | 11,309 | |
| Symmetry Medical, Inc.* | | | 31,801 | | | | 364,121 | |
| Synergetics USA, Inc.* | | | 34,400 | | | | 119,368 | |
| Targacept, Inc.* | | | 3,908 | | | | 16,726 | |
| Transcept Pharmaceuticals, Inc.* | | | 1,626 | | | | 7,789 | |
| US Physical Therapy, Inc. | | | 6,430 | | | | 172,646 | |
| Zeltiq AESthetics, Inc.* | | | 2,161 | | | | 8,255 | |
| | | | | | | | 2,357,434 | |
| | | | | | | | | |
| Consumer Staples — 4.8% | | | | | | | | |
| Alliance One International, Inc.* | | | 4,232 | | | | 16,462 | |
| Boulder Brands, Inc.* | | | 11,344 | | | | 101,869 | |
| Central European Distribution Corp.* | | | 12,255 | | | | 4,105 | |
| Chiquita Brands International, Inc.* | | | 25,483 | | | | 197,748 | |
| John B Sanfilippo & Son, Inc. | | | 513 | | | | 10,250 | |
| Nash Finch Co. | | | 15,413 | | | | 301,787 | |
| Omega Protein Corp.* | | | 25,573 | | | | 274,910 | |
| Overhill Farms, Inc.* | | | 77,743 | | | | 307,085 | |
| Spartan Stores, Inc. | | | 28,880 | | | | 506,844 | |
| | | | | | | | 1,721,060 | |
Touchstone Small Cap Growth Fund
March 31, 2013 (Continued)
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Common Stocks — 98.0% (Continued) | | | | | | | | |
| | | | | | | | | |
| Materials — 3.7% | | | | | | | | |
| Chase Corp. | | | 528 | | | $ | 10,201 | |
| General Moly, Inc.* | | | 8,947 | | | | 19,773 | |
| Gold Reserve, Inc.* | | | 7,696 | | | | 21,549 | |
| Golden Minerals Co.* | | | 2,141 | | | | 5,096 | |
| Golden Star Resources Ltd. (Canada)* | | | 50,899 | | | | 81,438 | |
| Great Panther Silver Ltd. (Canada)* | | | 77,313 | | | | 100,507 | |
| Horsehead Holding Corp.* | | | 26,300 | | | | 286,144 | |
| Landec Corp.* | | | 3,254 | | | | 47,085 | |
| PH Glatfelter Co. | | | 28,142 | | | | 657,960 | |
| PolyOne Corp. | | | 439 | | | | 10,715 | |
| Quaker Chemical Corp. | | | 769 | | | | 45,386 | |
| US Concrete, Inc.* | | | 2,806 | | | | 38,751 | |
| Vista Gold Corp.* | | | 3,876 | | | | 8,372 | |
| | | | | | | | 1,332,977 | |
| | | | | | | | | |
| Energy — 3.2% | | | | | | | | |
| Amyris, Inc.* | | | 6,115 | | | | 18,834 | |
| Basic Energy Services, Inc.* | | | 12,077 | | | | 165,093 | |
| Cal Dive International, Inc.* | | | 13,284 | | | | 23,911 | |
| Callon Petroleum Co.* | | | 6,090 | | | | 22,533 | |
| Emerald Oil, Inc.* | | | 1,667 | | | | 11,736 | |
| Endeavour International Corp.* | | | 7,674 | | | | 22,638 | |
| Gastar Exploration Ltd.* | | | 11,520 | | | | 20,275 | |
| Green Plains Renewable Energy, Inc.* | | | 2,308 | | | | 26,404 | |
| Gulf Island Fabrication, Inc. | | | 2,098 | | | | 44,184 | |
| Harvest Natural Resources, Inc.* | | | 1,029 | | | | 3,612 | |
| James River Coal Co.* | | | 6,923 | | | | 12,115 | |
| Knightsbridge Tankers Ltd. | | | 2,389 | | | | 19,590 | |
| Miller Energy Resources, Inc.* | | | 2,786 | | | | 10,336 | |
| North American Energy Partners, Inc. (Canada)* | | | 49,835 | | | | 226,251 | |
| PetroQuest Energy, Inc.* | | | 47,950 | | | | 212,898 | |
| PHI, Inc.* | | | 298 | | | | 10,195 | |
| Rentech, Inc. | | | 9,893 | | | | 23,249 | |
| Scorpio Tankers, Inc. | | | 8,409 | | | | 75,008 | |
| Synergy Resources Corp.* | | | 5,454 | | | | 37,414 | |
| Teekay Tankers Ltd. - Class A | | | 10,234 | | | | 29,167 | |
| Triangle Petroleum Corp.* | | | 6,627 | | | | 43,738 | |
| Uranium Energy Corp.* | | | 5,044 | | | | 11,097 | |
| Vantage Drilling Co.* | | | 16,814 | | | | 29,424 | |
| Westmoreland Coal Co.* | | | 1,741 | | | | 19,778 | |
| Willbros Group, Inc.* | | | 4,832 | | | | 47,450 | |
| | | | | | | | 1,166,930 | |
| | | | | | | | | |
| Utilities — 3.1% | | | | | | | | |
| Chesapeake Utilities Corp. | | | 10,921 | | | | 535,675 | |
| Unitil Corp. | | | 20,093 | | | | 565,216 | |
| | | | | | | | 1,100,891 | |
| | | | | | | | | |
| Telecommunication Services — 1.5% | | | | | | | | |
| Neutral Tandem, Inc. | | | 9,791 | | | | 32,017 | |
| Premiere Global Services, Inc.* | | | 21,871 | | | | 240,362 | |
| Shenandoah Telecommunications Co. | | | 3,691 | | | | 56,214 | |
| USA Mobility, Inc. | | | 16,137 | | | | 214,138 | |
| | | | | | | | 542,731 | |
| Total Common Stocks | | | | | | $ | 35,165,025 | |
| | | Number | | | | |
| | | of | | | | |
| | | Rights | | | | |
| | | | | | | |
| Rights—0.0% | | | | | | | | |
| | | | | | | | | |
| Financials — 0.0% | | | | | | | | |
| | | | | | | | | |
| United Community Finanacial Rights, 0.00% | | | 7,445 | | | | 463 | |
| | | Shares | | | | |
| | | | | | | |
| Investment Fund — 1.9% | | | | | | | | |
| Touchstone Institutional Money Market Fund^ | | | 689,381 | | | | 689,381 | |
| | | | | | | | | |
| Total Investment Securities —99.9% | | | | | | | | |
| (Cost $28,288,116) | | | | | | $ | 35,854,869 | |
| | | | | | | | | |
| Other Assets in Excess of Liabilities — 0.1% | | | | | | | 23,773 | |
| | | | | | | | | |
| Net Assets — 100.0% | | | | | | $ | 35,878,642 | |
| * | Non-income producing security. |
| ^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
Portfolio Abbreviations:
REIT - Real Estate Investment Trust
Touchstone Small Cap Growth Fund
March 31, 2013 (Continued)
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 | | $ | 35,165,025 | | | $ | — | | | $ | — | | | $ | 35,165,025 | |
| Rights | | | — | | | | 463 | | | | — | | | | 463 | |
| Investment Fund | | | 689,381 | | | | — | | | | — | | | | 689,381 | |
| | | | | | | | | | | | | | | $ | 35,854,869 | |
See accompanying Notes to Financial Statements.
Portfolio of Investments
Touchstone Small Company Value Fund – March 31, 2013
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Common Stocks— 97.4% | | | | | | | | |
| | | | | | | | | |
| Financials — 25.6% | | | | | | | | |
| Anworth Mortgage Asset Corp. REIT | | | 101,130 | | | $ | 640,153 | |
| Astoria Financial Corp. | | | 55,480 | | | | 547,033 | |
| Brookline Bancorp, Inc. | | | 57,090 | | | | 521,803 | |
| Campus Crest Communities, Inc. REIT | | | 41,510 | | | | 576,989 | |
| Capitol Federal Financial, Inc. | | | 45,700 | | | | 551,599 | |
| Capstead Mortgage Corp. REIT | | | 38,420 | | | | 492,545 | |
| Cohen & Steers, Inc.† | | | 4,970 | | | | 179,269 | |
| CVB Financial Corp. | | | 48,220 | | | | 543,439 | |
| First Financial Bancorp | | | 33,500 | | | | 537,675 | |
| Hanover Insurance Group, Inc. (The) | | | 11,885 | | | | 590,447 | |
| Hercules Technology Growth Capital, Inc. | | | 47,460 | | | | 581,385 | |
| Iberiabank Corp. | | | 15,960 | | | | 798,319 | |
| Infinity Property & Casualty Corp. | | | 8,560 | | | | 481,072 | |
| Manning & Napier, Inc. | | | 22,790 | | | | 376,947 | |
| National Bank Holdings Corp. - Class A | | | 16,670 | | | | 305,061 | |
| Sterling BanCorp. | | | 37,165 | | | | 377,596 | |
| Sterling Financial Corp. | | | 4,650 | | | | 100,858 | |
| Summit Hotel Properties, Inc. REIT | | | 51,390 | | | | 538,053 | |
| UMB Financial Corp. | | | 12,870 | | | | 631,531 | |
| Westamerica Bancorporation | | | 10,815 | | | | 490,245 | |
| | | | | | | | 9,862,019 | |
| | | | | | | | | |
| Industrials — 17.8% | | | | | | | | |
| ABM Industries, Inc. | | | 41,300 | | | | 918,512 | |
| Barnes Group, Inc. | | | 15,200 | | | | 439,736 | |
| Brady Corp.- Class A | | | 13,910 | | | | 466,402 | |
| Con-way, Inc. | | | 15,640 | | | | 550,684 | |
| Curtiss-Wright Corp. | | | 23,335 | | | | 809,724 | |
| Harsco Corp. | | | 20,360 | | | | 504,317 | |
| Kaydon Corp. | | | 28,400 | | | | 726,472 | |
| Knight Transportation, Inc. | | | 60,250 | | | | 970,025 | |
| Resources Connection, Inc. | | | 59,670 | | | | 757,809 | |
| Ritchie Bros Auctioneers, Inc.† | | | 29,040 | | | | 630,168 | |
| Simpson Manufacturing Co., Inc. | | | 3,470 | | | | 106,217 | |
| | | | | | | | 6,880,066 | |
| | | | | | | | | |
| Information Technology — 16.4% | | | | | | | | |
| ADTRAN, Inc.† | | | 26,280 | | | | 516,402 | |
| Brooks Automation, Inc. | | | 66,640 | | | | 678,395 | |
| Cohu, Inc. | | | 36,740 | | | | 343,886 | |
| Diebold, Inc. | | | 17,530 | | | | 531,510 | |
| Forrester Research, Inc. | | | 19,485 | | | | 616,700 | |
| Intersil Corp.- Class A | | | 102,160 | | | | 889,814 | |
| Methode Electronics, Inc. | | | 37,150 | | | | 478,492 | |
| Micrel, Inc. | | | 85,860 | | | | 902,389 | |
| MKS Instruments, Inc. | | | 24,000 | | | | 652,800 | |
| Tessera Technologies, Inc. | | | 38,290 | | | | 717,938 | |
| | | | | | | | 6,328,326 | |
| | | | | | | | | |
| Consumer Discretionary — 12.5% | | | | | | | | |
| Columbia Sportswear Co.† | | | 3,680 | | | | 212,998 | |
| Dana Holding Corp. | | | 19,100 | | | | 340,553 | |
| Ethan Allen Interiors, Inc. | | | 13,260 | | | | 436,519 | |
| Finish Line, Inc. (The) - Class A | | | 40,120 | | | | 785,951 | |
| Fred's, Inc. - Class A | | | 24,510 | | | | 335,297 | |
| Guess?, Inc. | | | 20,990 | | | | 521,182 | |
| Hillenbrand, Inc. | | | 10,790 | | | | 272,771 | |
| Jones Group, Inc. (The) | | | 23,950 | | | | 304,644 | |
| Men's Wearhouse, Inc. (The) | | | 22,220 | | | | 742,592 | |
| Regis Corp. | | | 16,340 | | | | 297,225 | |
| Sotheby's | | | 15,420 | | | | 576,862 | |
| | | | | | | | 4,826,594 | |
| | | | | | | | | |
| Materials — 10.9% | | | | | | | | |
| AMCOL International Corp. | | | 16,785 | | | | 506,739 | |
| Cabot Corp. | | | 11,820 | | | | 404,244 | |
| Globe Specialty Metals, Inc. | | | 41,810 | | | | 581,995 | |
| Haynes International, Inc. | | | 11,110 | | | | 614,383 | |
| Kronos Worldwide, Inc.† | | | 24,250 | | | | 379,512 | |
| Noranda Aluminum Holding Corp. | | | 108,880 | | | | 488,871 | |
| Schnitzer Steel Industries, Inc.- Class A | | | 24,440 | | | | 651,570 | |
| Tronox Ltd.† | | | 29,750 | | | | 589,348 | |
| | | | | | | | 4,216,662 | |
| | | | | | | | | |
| Energy — 5.1% | | | | | | | | |
| CARBO Ceramics, Inc. | | | 220 | | | | 20,035 | |
| EXCO Resources, Inc.† | | | 57,050 | | | | 406,766 | |
| Tidewater, Inc. | | | 13,815 | | | | 697,658 | |
| Tsakos Energy Navigation Ltd. | | | 46,650 | | | | 202,928 | |
| W&T Offshore, Inc. | | | 44,370 | | | | 630,054 | |
| | | | | | | | 1,957,441 | |
| | | | | | | | | |
| Health Care — 4.3% | | | | | | | | |
| Hill-Rom Holdings, Inc. | | | 12,770 | | | | 449,759 | |
| Meridian Bioscience, Inc. | | | 26,470 | | | | 604,045 | |
| STERIS Corp. | | | 14,605 | | | | 607,714 | |
| | | | | | | | 1,661,518 | |
| | | | | | | | | |
| Consumer Staples — 3.5% | | | | | | | | |
| Andersons, Inc. (The) | | | 9,965 | | | | 533,327 | |
| Fresh del Monte Produce, Inc. | | | 22,740 | | | | 613,525 | |
| Universal Corp.† | | | 3,385 | | | | 189,695 | |
| | | | | | | | 1,336,547 | |
| | | | | | | | | |
| Utilities — 1.3% | | | | | | | | |
| ALLETE, Inc. | | | 4,679 | | | | 229,365 | |
| Black Hills Corp. | | | 6,575 | | | | 289,563 | |
| | | | | | | | 518,928 | |
| Total Common Stocks | | | | | | $ | 37,588,101 | |
Touchstone Small Company Value Fund
March 31, 2013 (Continued)
| | | | | | Market | |
| | | Shares | | | Value | |
| | | | | | | |
| Investment Funds— 16.3% | | | | | | | | |
| Invesco Government & Agency | | | | | | | | |
| Portfolio, Institutional Class** | | | 2,941,216 | | | $ | 2,941,216 | |
| Touchstone Institutional Money Market | | | | | | | | |
| Fund^ | | | 3,323,029 | | | | 3,323,029 | |
| Total Investment Funds | | | | | | $ | 6,264,245 | |
| | | | | | | | | |
| Total Investment Securities —113.7% | | | | | | | | |
| (Cost $41,575,924) | | | | | | $ | 43,852,346 | |
| | | | | | | | | |
| Liabilities in Excess of Other Assets — (13.7%) | | | | | | | (5,270,584 | ) |
| | | | | | | | | |
| Net Assets — 100.0% | | | | | | $ | 38,581,762 | |
| ** | Represents collateral for securities loaned. |
| ^ | Affiliated Fund. See Note 4 in Notes to Financial Statements. |
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of March 31, 2013 was $2,864,696. |
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 | | $ | 37,588,101 | | | $ | — | | | $ | — | | | $ | 37,588,101 | |
| Investment Funds | | | 6,264,245 | | | | — | | | | — | | | | 6,264,245 | |
| | | | | | | | | | | | | | | $ | 43,852,346 | |
See accompanying Notes to Financial Statements.
Portfolio of Investments
Touchstone Strategic Income Fund – March 31, 2013
| Principal | | | | | Market | |
| Amount | | | | | Value | |
| | | | | | | |
| | | | | Corporate Bonds— 30.1% | | | | |
| | | | | | | | | |
| | | | | Financials — 13.1% | | | | |
| $ | 375,000 | | | American Financial Group, Inc., | | | | |
| | | | | 9.875%, 6/15/19 | | $ | 508,794 | |
| | 2,000,000 | | | American Tower Corp., | | | | |
| | | | | 4.500%, 1/15/18 | | | 2,199,592 | |
| | 1,000,000 | | | AXA SA, 144a, 6.379%, 12/31/49(A) | | | 992,500 | |
| | 2,240,000 | | | BioMed Realty LP, 3.850%, 4/15/16 | | | 2,378,094 | |
| | 1,750,000 | | | Charles Schwab Corp. (The), | | | | |
| | | | | 7.000%, 2/28/49(A) | | | 2,035,938 | |
| | 4,101,000 | | | DDR Corp. MTN, 7.500%, 7/15/18 | | | 5,029,093 | |
| | 1,850,000 | | | Export-Import Bank of Korea, | | | | |
| | | | | 4.375%, 9/15/21 | | | 2,044,561 | |
| | 2,000,000 | | | Ford Motor Credit Co. LLC, | | | | |
| | | | | 4.250%, 2/3/17 | | | 2,140,364 | |
| | 5,400,000 | | | General Electric Capital Corp., Ser A, | | | | |
| | | | | 7.125%, 12/15/49(A) | | | 6,280,551 | |
| | 1,600,000 | | | Goldman Sachs Capital II, | | | | |
| | | | | 4.000%, 6/1/43(A) | | | 1,346,000 | |
| | 2,250,000 | | | Hutchison Whampoa International 11 | | | | |
| | | | | Ltd., 144a, 3.500%, 1/13/17 | | | 2,395,415 | |
| | 2,550,000 | | | JPMorgan Chase & Co., | | | | |
| | | | | 7.900%, 4/29/49(A) | | | 2,929,514 | |
| | 1,625,000 | | | PNC Financial Services Group, Inc., | | | | |
| | | | | 6.750%, 7/29/49(A) | | | 1,858,573 | |
| | 500,000 | | | PNC Financial Services Group, Inc., | | | | |
| | | | | 8.250%, 5/29/49(A) | | | 503,048 | |
| | 3,600,000 | | | Wachovia Capital Trust III, | | | | |
| | | | | 5.570%, 12/31/49(A) | | | 3,612,600 | |
| | 1,175,000 | | | Wells Fargo & Co., Ser K, | | | | |
| | | | | 7.980%, 3/29/49(A) | | | 1,355,656 | |
| | | | | | | | 37,610,293 | |
| | | | | | | | | |
| | | | | Consumer Discretionary — 6.7% | | | | |
| | 1,250,000 | | | Dana Holding Corp., 6.500%, 2/15/19 | | | 1,340,625 | |
| | 1,000,000 | | | DIRECTV Holdings LLC, | | | | |
| | | | | 5.200%, 3/15/20 | | | 1,143,206 | |
| | 956,000 | | | Lear Corp., 7.875%, 3/15/18 | | | 1,037,260 | |
| | 1,250,000 | | | Macy's Retail Holdings, Inc., | | | | |
| | | | | 6.650%, 7/15/24 | | | 1,548,466 | |
| | 1,930,000 | | | MGM Resorts International, | | | | |
| | | | | 4.250%, 4/15/15 | | | 2,095,256 | |
| | 2,560,000 | | | Newell Rubbermaid, Inc., | | | | |
| | | | | 4.000%, 6/15/22 | | | 2,685,919 | |
| | 1,000,000 | | | Omnicom Group, Inc., | | | | |
| | | | | 4.450%, 8/15/20 | | | 1,087,652 | |
| | 1,000,000 | | | O'Reilly Automotive, Inc., | | | | |
| | | | | 3.800%, 9/1/22 | | | 1,036,934 | |
| | 2,000,000 | | | Royal Caribbean Cruises Ltd., | | | | |
| | | | | 5.250%, 11/15/22 | | | 2,025,000 | |
| | 2,000,000 | | | Toll Brothers Finance Corp., | | | | |
| | | | | 5.875%, 2/15/22 | | | 2,236,262 | |
| | 1,250,000 | | | United States Cellular Corp., | | | | |
| | | | | 6.950%, 12/15/33 | | | 1,317,662 | |
| | 1,647,000 | | | Visteon Corp., 6.750%, 4/15/19 | | | 1,762,290 | |
| | | | | | | | 19,316,532 | |
| | | | | | | | | |
| | | | | Industrials — 3.7% | | | | |
| | 1,910,000 | | | Asciano Finance Ltd., 144a, | | | | |
| | | | | 3.125%, 9/23/15 | | | 1,967,829 | |
| | 2,500,000 | | | B/E Aerospace, Inc., 5.250%, 4/1/22 | | | 2,578,125 | |
| | 1,620,000 | | | Continental Airlines 2012-2 Class A | | | | |
| | | | | Pass Through Trust, | | | | |
| | | | | 4.000%, 10/29/24 | | | 1,684,800 | |
| | 2,881,352 | | | Delta Air Lines 2002-1 Class G-1 Pass | | | | |
| | | | | Through Trust, 6.718%, 1/2/23 | | | 3,205,504 | |
| | 1,220,000 | | | US Airways 2012-2 Class A Pass | | | | |
| | | | | Through Trust, 4.625%, 6/3/25 | | | 1,271,850 | |
| | | | | | | | 10,708,108 | |
| | | | | | | | | |
| | | | | Energy — 2.7% | | | | |
| | 1,800,000 | | | Enbridge Energy Partners LP, | | | | |
| | | | | 4.200%, 9/15/21 | | | 1,896,980 | |
| | 2,000,000 | | | Enterprise Products Operating LLC, | | | | |
| | | | | 4.050%, 2/15/22 | | | 2,169,022 | |
| | 850,000 | | | Gazprom OAO Via Gaz Capital SA, | | | | |
| | | | | 144a, 7.510%, 7/31/13 | | | 867,510 | |
| | 1,500,000 | | | Kinder Morgan Energy Partners LP, | | | | |
| | | | | 3.950%, 9/1/22 | | | 1,593,754 | |
| | 875,000 | | | SSE PLC MTN (GBP), 5.453%, 9/29/49(A) | | | 1,375,101 | |
| | | | | | | | 7,902,367 | |
| | | | | | | | | |
| | | | | Materials — 1.8% | | | | |
| | 1,525,000 | | | FMG Resources August 2006 Pty Ltd., | | | | |
| | | | | 144a, 7.000%, 11/1/15 | | | 1,597,437 | |
| | 2,500,000 | | | Freeport-Mcmoran Copper & Gold, | | | | |
| | | | | Inc., 3.550%, 3/1/22 | | | 2,485,020 | |
| | 1,000,000 | | | Rio Tinto Finance USA Ltd., | | | | |
| | | | | 3.500%, 11/2/20 | | | 1,053,862 | |
| | | | | | | | 5,136,319 | |
| | | | | | | | | |
| | | | | Information Technology — 1.1% | | | | |
| | 1,760,000 | | | CA, Inc., 5.375%, 12/1/19 | | | 1,991,876 | |
| | 1,000,000 | | | KLA-Tencor Corp., 6.900%, 5/1/18 | | | 1,198,806 | |
| | | | | | | | 3,190,682 | |
| | | | | | | | | |
| | | | | Health Care — 0.6% | | | | |
| | 1,500,000 | | | Cigna Corp., 4.000%, 2/15/22 | | | 1,620,372 | |
| | | | | | | | | |
| | | | | Utilities — 0.4% | | | | |
| | 1,000,000 | | | NextEra Energy Capital Holdings, Inc., | | | | |
| | | | | 6.650%, 6/15/67(A) | | | 1,072,500 | |
| | | | | Total Corporate Bonds | | $ | 86,557,173 | |
| | | | | | | | | |
| | | | | Sovereign Government Obligations — 8.6% | | | | |
| | 1,870,000 | | | Brazil Notas do Tesouro Nacional Serie | | | | |
| | | | | F (BRL), 10.000%, 1/1/14 | | | 937,683 | |
| | 1,900,000 | | | Brazil Notas do Tesouro Nacional Serie | | | | |
| | | | | F (BRL), 10.000%, 1/1/17 | | | 960,160 | |
| | 67,320,000 | | | Mexican Bonos (MXN), | | | | |
| | | | | 6.250%, 6/16/16 | | | 5,738,119 | |
| | 4,300,000 | | | New Zealand Government Bond | | | | |
| | | | | (NZD), 6.000%, 12/15/17 | | | 4,091,974 | |
| | 7,500,000 | | | Poland Government Bond (PLN), | | | | |
| | | | | 5.000%, 4/25/16 | | | 2,417,639 | |
Touchstone Strategic Income Fund
March 31, 2013 (Continued)
| Principal | | | | | Market | |
| Amount | | | | | Value | |
| | | | | Sovereign Government Obligations — 8.6% | | | | |
| | | | | (Continued) | | | | |
| $ | 3,700,000 | | | Province of British Columbia (CAD), | | | | |
| | | | | 5.300%, 6/18/14 | | $ | 3,824,493 | |
| | 1,850,000 | | | Province of New Brunswick Canada | | | | |
| | | | | (CAD), 4.300%, 12/3/15 | | | 1,961,472 | |
| | 2,750,000 | | | Province of Ontario Canada (CAD), | | | | |
| | | | | 1.900%, 9/8/17 | | | 2,721,115 | |
| | 1,800,000 | | | South Australian Government | | | | |
| | | | | Financing Authority (AUD), | | | | |
| | | | | 5.750%, 9/20/17 | | | 2,031,896 | |
| | | | | Total Sovereign Government | | | | |
| | | | | Obligations | | $ | 24,684,551 | |
| | | | | | | | | |
| | | | | Agency Collateralized Mortgage | | | | |
| | | | | Obligations — 4.7% | | | | |
| | 3,176,581 | | | FHLMC REMIC, Ser 2638 Class ST, | | | | |
| | | | | 7.447%, 2/15/18(A) | | | 159,588 | |
| | 3,325,974 | | | FHLMC REMIC, Ser 3199 Class DS, | | | | |
| | | | | 6.947%, 8/15/36(A) | | | 567,058 | |
| | 4,982,873 | | | FNMA REMIC, Ser 2008-60 Class SA, | | | | |
| | | | | 6.296%, 7/25/38(A) | | | 683,360 | |
| | 23,416,618 | | | GNMA, 1.398%, 6/16/52 | | | 1,600,783 | |
| | 14,338,646 | | | GNMA, Ser 2011-126 Class IO, | | | | |
| | | | | 1.597%, 4/16/53(A) | | | 1,181,849 | |
| | 14,253,750 | | | GNMA, Ser 2011-64 Class IX, | | | | |
| | | | | 1.076%, 10/16/44(A) | | | 891,287 | |
| | 17,723,300 | | | GNMA, Ser 2011-78, Class IX, | | | | |
| | | | | 1.244%, 8/16/46(A) | | | 1,270,548 | |
| | 6,181,440 | | | GNMA, Ser 2011-83, Class NI, | | | | |
| | | | | 4.500%, 10/16/37 | | | 751,710 | |
| | 13,123,435 | | | GNMA, Ser 2012-27 Class IO, | | | | |
| | | | | 1.357%, 4/16/53(A) | | | 1,017,539 | |
| | 19,601,331 | | | GNMA, Ser 2012-33 Class IO, | | | | |
| | | | | 1.346%, 6/16/52(A) | | | 1,524,925 | |
| | 17,514,051 | | | GNMA, Ser 2012-46 Class IO, | | | | |
| | | | | 1.418%, 9/16/53(A) | | | 1,366,429 | |
| | 16,378,197 | | | GNMA, Ser 2012-67 Class IO, | | | | |
| | | | | 1.641%, 10/16/53(A) | | | 1,538,748 | |
| | 9,902,902 | | | GNMA, Ser 2012-86 Class IO, | | | | |
| | | | | 1.293%, 12/16/53(A) | | | 826,189 | |
| | | | | Total Agency Collateralized | | | | |
| | | | | Mortgage Obligations | | $ | 13,380,013 | |
| | | | | | | | | |
| | | | | Commercial Mortgage-Backed Securities — 2.9% | | | | |
| | 2,170,000 | | | GS Mortgage Securities Corp. II, Ser | | | | |
| | | | | 2013-GC10 Class A5, | | | | |
| | | | | 2.943%, 2/10/46 | | | 2,194,258 | |
| | 2,530,000 | | | JP Morgan Chase Commercial | | | | |
| | | | | Mortgage Securities Corp., Ser | | | | |
| | | | | 2001-CIB2, Class D, | | | | |
| | | | | 6.847%, 4/15/35(A) | | | 2,594,743 | |
| | 1,044,776 | | | Nomura Asset Acceptance Corp. | | | | |
| | | | | Alternative Loan Trust Series | | | | |
| | | | | 2005-AR4, 4.172%, 8/25/35(A) | | | 1,001,349 | |
| 2,375,000 | | | Wachovia Bank Commercial Mortgage | | | | |
| | | | | Trust Series 2006-C23, | | | | |
| | | | | 5.466%, 1/15/45(A) | | | 2,638,264 | |
| | | | | Total Commercial | | | | |
| | | | | Mortgage-Backed Securities | | $ | 8,428,614 | |
| | | | | | | | | |
| | | | | Asset-Backed Securities — 1.8% | | | | |
| | 889,980 | | | ACS Pass Through Trust, Ser 2006-1A, | | | | |
| | | | | Class G1, 144a, 0.473%, 6/20/31(A) | | | 825,456 | |
| | 1,255,834 | | | Conseco Financial Corp., Ser 1998-4, | | | | |
| | | | | Class A7, 6.870%, 4/1/30(A) | | | 1,345,307 | |
| | 850,000 | | | Ford Credit Auto Owner Trust 2013-A, | | | | |
| | | | | 1.860%, 8/15/19 | | | 852,552 | |
| | 879,545 | | | Mid-State Capital Corp. Trust, Ser | | | | |
| | | | | 2005-1, Class M2, 7.079%, 1/15/40 | | | 918,164 | |
| | 1,271,239 | | | RAMP Trust, Ser 2003-RZ5, Class A7, | | | | |
| | | | | 4.970%, 9/25/33(B) | | | 1,309,824 | |
| | | | | Total Asset-Backed Securities | | $ | 5,251,303 | |
| | | | | | | | | |
| | | | | U.S. Government Mortgage-Backed | | | | |
| | | | | Obligations — 1.5% | | | | |
| | 81,197 | | | FHLMC, Pool #972110, | | | | |
| | | | | 2.366%, 10/1/32(A) | | | 82,218 | |
| | 233,967 | | | FHLMC, Pool #G03170, 6.500%, 8/1/37 | | | 263,167 | |
| | 228,524 | | | FHLMC, Pool #G12780, 6.500%, 9/1/22 | | | 254,886 | |
| | 31,172 | | | FNMA, Pool #738900, | | | | |
| | | | | 2.935%, 7/1/18(A) | | | 31,291 | |
| | 320,148 | | | FNMA, Pool #844415, 5.500%, 10/1/35 | | | 351,200 | |
| | 1,205,297 | | | FNMA, Pool #AB1952, 4.000%, 12/1/40 | | | 1,323,040 | |
| | 866,062 | | | FNMA, Pool #AB1953, 4.000%, 12/1/40 | | | 945,252 | |
| | 1,079,609 | | | FNMA, Pool #AB3387, 4.000%, 8/1/41 | | | 1,153,416 | |
| | | | | Total U.S. Government | | | | |
| | | | | Mortgage-Backed Obligations | | $ | 4,404,470 | |
| | | | | | | | | |
| | | | | Term Loan— 0.9% | | | | |
| | | | | | | | | |
| | | | | Financials — 0.9% | | | | |
| | 2,710,000 | | | VML US Finance LLC Loan Tranche | | | | |
| | | | | Term Loan, 11/15/16(C) | | | 2,677,263 | |
| | | | | | | | | |
| | | | | Non-Agency Collateralized Mortgage | | | | |
| | | | | Obligations — 0.9% | | | | |
| | 261,783 | | | Bear Stearns Asset Backed Securities | | | | |
| | | | | Trust, Ser 2003-AC7, Class A2, | | | | |
| | | | | 5.750%, 1/25/34(B) | | | 272,361 | |
| | 778,225 | | | Countrywide Alternative Loan Trust, | | | | |
| | | | | Ser 2004-30CB, Class 3A1, | | | | |
| | | | | 5.000%, 2/25/20 | | | 800,672 | |
| | 16,121 | | | Merrill Lynch Mortgage Investors, Inc., | | | | |
| | | | | Ser 2003-A1, Class 2A, | | | | |
| | | | | 2.402%, 12/25/32(A) | | | 16,615 | |
| | 556,374 | | | RALI Trust, Series 2004-QS6 Class A1, | | | | |
| | | | | 5.000%, 5/25/19 | | | 563,766 | |
| | 557,531 | | | Wells Fargo Mortgage Backed | | | | |
| | | | | Securities Trust, Ser 2004-X Class | | | | |
| | | | | 1A5, 2.665%, 11/25/34(A) | | | 563,872 | |
Touchstone Strategic Income Fund
March 31, 2013 (Continued)
| Principal | | | | | Market | |
| Amount | | | | | Value | |
| | | | | Non-Agency Collateralized Mortgage | | | | |
| | | | | Obligations — 0.9% (Continued) | | | | |
| $ | 186,776 | | | Wells Fargo Mortgage Backed | | | | |
| | | | | Securities Trust, Ser 2006-3 Class A1, | | | | |
| | | | | 5.500%, 3/25/36 | | $ | 187,821 | |
| | | | | Total Non-Agency Collateralized | | | | |
| | | | | Mortgage Obligations | | $ | 2,405,107 | |
| | | | | | | | | |
| | Shares | | | | | | | |
| | | | | Preferred Stocks— 31.0% | | | | |
| | | | | | | | | |
| | | | | Financials — 21.5% | | | | |
| | 54,000 | | | Alexandria Real Estate Equities, Inc., | | | | |
| | | | | Ser E, 6.45% | | | 1,425,600 | |
| | 116,000 | | | Allianz Se, 8.38% | | | 2,947,131 | |
| | 46,000 | | | American Financial Group, Inc., 7.00% | | | 1,232,340 | |
| | 8,575 | | | Ameriprise Financial, Inc., 7.75% | | | 234,355 | |
| | 107,000 | | | Arch Capital Group Ltd., Ser C, 6.75% | | | 2,979,950 | |
| | 86,750 | | | Aviva PLC, 8.25% | | | 2,467,170 | |
| | 30,000 | | | Citigroup Capital XIII, 7.88%(A) | | | 857,700 | |
| | 60,000 | | | Corporate-Backed Trust Certificates, | | | | |
| | | | | Ser AIG, 6.13% | | | 1,518,000 | |
| | 20,500 | | | Corporate-Backed Trust Certificates, | | | | |
| | | | | Ser HSBC, 6.25% | | | 517,830 | |
| | 11,321 | | | Countrywide Capital IV, 6.75% | | | 286,761 | |
| | 95,000 | | | Digital Realty Trust, Inc., Ser E, 7.00% | | | 2,571,650 | |
| | 36,000 | | | Duke Realty Corp., 8.38% | | | 911,880 | |
| | 147,505 | | | Endurance Specialty Holdings Ltd., Ser | | | | |
| | | | | B, 7.50% | | | 3,991,485 | |
| | 34,855 | | | First Niagara Financial Group, Inc., Ser | | | | |
| | | | | B, 8.63%(A) | | | 1,024,040 | |
| | 1,000 | | | First Tennessee Bank NA, 144a, | | | | |
| | | | | 3.75%(A) | | | 741,562 | |
| | 31,800 | | | Harris Preferred Capital Corp., Ser A, | | | | |
| | | | | 7.38% | | | 826,482 | |
| | 20,000 | | | Health Care REIT, Inc., Ser I, 6.50% | | | 1,242,200 | |
| | 47,300 | | | JPMorgan Chase Capital XXIX, 6.70% | | | 1,222,705 | |
| | 66,880 | | | Kimco Realty Corp., Ser H, 6.90% | | | 1,789,040 | |
| | 92,526 | | | Kimco Realty Corp., Ser I, 6.00% | | | 2,407,527 | |
| | 87,000 | | | Lloyds Banking Group PLC, 7.75% | | | 2,401,200 | |
| | 24,800 | | | Merrill Lynch Preferred Capital Trust III, | | | | |
| | | | | 7.00% | | | 632,152 | |
| | 58,240 | | | Metlife, Inc., 5.00% | | | 2,877,056 | |
| | 9,171 | | | Morgan Stanley Capital Trust VIII, | | | | |
| | | | | 6.45% | | | 230,376 | |
| | 76,000 | | | PNC Financial Services Group, Inc., Ser | | | | |
| | | | | P, 6.13%(A) | | | 2,102,920 | |
| | 46,000 | | | PS Business Parks, Inc., Ser S, 6.45% | | | 1,214,400 | |
| | 67,000 | | | PS Business Parks, Inc., Ser U, 6.75% | | | 1,685,720 | |
| | 92,000 | | | Public Storage, 5.90% | | | 2,415,000 | |
| | 62,925 | | | Public Storage, 6.35% | | | 1,683,244 | |
| | 30,000 | | | Public Storage, Ser P, 6.50% | | | 803,700 | |
| | 82,800 | | | Realty Income Corp., Ser F, 6.63% | | | 2,208,276 | |
| | 88,000 | | | Regency Centers Corp., Ser 6, 6.63% | | | 2,329,360 | |
| | 90,100 | | | Renaissancere Holdings Ltd., Ser C, | | | | |
| | | | | 6.08% | | | 2,281,332 | |
| | 28,500 | | | Stifel Financial Corp., 6.70% | | | 761,520 | |
| | 73,200 | | | US Bancorp, Ser F, 6.50%(A)† | | | 2,185,752 | |
| | | | | | | | | |
| | 70,000 | | | US Bancorp, Ser G, 6.00%(A) | | | 1,948,800 | |
| | 73,775 | | | Vornado Realty LP, 7.88% | | | 2,000,778 | |
| | 26,000 | | | Vornado Realty Trust, Ser J, 6.88% | | | 710,320 | |
| | | | | | | | 61,667,314 | |
| | | | | | | | | |
| | | | | Utilities — 2.9% | | | | |
| | 35,000 | | | Alabama Power Co., 6.45% | | | 966,875 | |
| | 23,000 | | | Constellation Energy Group, Inc., Ser | | | | |
| | | | | A, 8.63% | | | 583,970 | |
| | 51,000 | | | DTE Energy Co., 6.50% | | | 1,405,050 | |
| | 20,000 | | | Entergy Louisiana LLC, 5.88% | | | 538,600 | |
| | 30,000 | | | Entergy Mississippi, Inc., 6.00% | | | 813,600 | |
| | 20,000 | | | Georgia Power Co., Ser 07-A, 6.50% | | | 2,220,000 | |
| | 17,184 | | | Southern California Edison Co., | | | | |
| | | | | 4.63%(A) | | | 1,736,658 | |
| | | | | | | | 8,264,753 | |
| | | | | | | | | |
| | | | | Industrials — 2.7% | | | | |
| | 110,600 | | | Seaspan Corp., 9.50% | | | 3,072,468 | |
| | 68,000 | | | Stanley Black & Decker, Inc., 5.75% | | | 1,795,200 | |
| | 48,350 | | | United Technologies Corp., 7.50% | | | 2,893,748 | |
| | | | | | | | 7,761,416 | |
| | | | | | | | | |
| | | | | Consumer Discretionary — 2.5% | | | | |
| | 60,000 | | | Comcast Corp., 5.00% | | | 1,531,200 | |
| | 73,650 | | | General Motors Co., Ser B, 4.75% | | | 3,162,531 | |
| | 65,009 | | | Telephone & Data Systems, Inc., 6.88% | | | 1,696,085 | |
| | 30,000 | | | Telephone & Data Systems, Inc., 5.88% | | | 757,500 | |
| | | | | | | | 7,147,316 | |
| | | | | | | | | |
| | | | | Materials — 0.8% | | | | |
| | 81,950 | | | AngloGold Ashanti Holdings Finance | | | | |
| | | | | PLC, 6.00% | | | 2,333,936 | |
| | | | | | | | | |
| | | | | Energy — 0.6% | | | | |
| | 39,500 | | | Apache Corp., Ser D, 6.00% | | | 1,759,330 | |
| | | | | Total Preferred Stocks | | $ | 88,934,065 | |
| | | | | | | | | |
| | | | | Common Stocks— 14.7% | | | | |
| | | | | | | | | |
| | | | | Financials — 4.3% | | | | |
| | 75,600 | | | American Capital Agency Corp. REIT | | | 2,478,168 | |
| | 183,700 | | | CYS Investments, Inc. REIT | | | 2,156,638 | |
| | 85,132 | | | Hospitality Properties Trust REIT | | | 2,336,022 | |
| | 12,706 | | | Silver Bay Realty Trust Corp. REIT | | | 263,009 | |
| | 65,750 | | | Starwood Property Trust, Inc. REIT | | | 1,825,220 | |
| | 259,300 | | | Two Harbors Investment Corp. REIT | | | 3,269,773 | |
| | | | | | | | 12,328,830 | |
| | | | | | | | | |
| | | | | Health Care — 2.4% | | | | |
| | 33,076 | | | Covidien PLC (Iran) | | | 2,243,876 | |
| | 19,342 | | | Johnson & Johnson | | | 1,576,953 | |
| | 48,618 | | | Pfizer, Inc. | | | 1,403,115 | |
| | 29,689 | | | Roche Holding AG ADR | | | 1,739,775 | |
| | | | | | | | 6,963,719 | |
Touchstone Strategic Income Fund
March 31, 2013 (Continued)
| | | | | | Market | |
| Shares | | | | | Value | |
| | | | | | | |
| | | | | Common Stocks — 14.7% (Continued) | | | | |
| | | | | | | | | |
| | | | | Energy — 2.3% | | | | |
| | 52,000 | | | BP PLC ADR | | $ | 2,202,200 | |
| | 13,500 | | | Marathon Petroleum Corp. | | | 1,209,600 | |
| | 14,333 | | | Occidental Petroleum Corp. | | | 1,123,277 | |
| | 25,000 | | | Valero Energy Corp. | | | 1,137,250 | |
| | 21,115 | | | Williams Cos., Inc. (The) | | | 790,968 | |
| | | | | | | | 6,463,295 | |
| | | | | | | | | |
| | | | | Utilities — 2.1% | | | | |
| | 19,730 | | | NextEra Energy, Inc. | | | 1,532,626 | |
| | 65,470 | | | PPL Corp. | | | 3,649,952 | |
| | 21,440 | | | Wisconsin Energy Corp. | | | 919,562 | |
| | | | | | | | 6,102,140 | |
| | | | | | | | | |
| | | | | Industrials — 1.4% | | | | |
| | 25,000 | | | Eaton Corp. PLC | | | 1,531,250 | |
| | 15,900 | | | Fluor Corp. | | | 1,054,647 | |
| | 25,850 | | | Ryder System, Inc. | | | 1,544,538 | |
| | | | | | | | 4,130,435 | |
| | | | | | | | | |
| | | | | Information Technology — 0.8% | | | | |
| | 32,101 | | | Analog Devices, Inc. | | | 1,492,375 | |
| | 13,469 | | | QUALCOMM, Inc. | | | 901,750 | |
| | | | | | | | 2,394,125 | |
| | | | | | | | | |
| | | | | Telecommunication Services — 0.6% | | | | |
| | 33,728 | | | BCE, Inc. (Canada) | | | 1,574,760 | |
| | | | | | | | | |
| | | | | Consumer Staples — 0.5% | | | | |
| | 15,995 | | | Philip Morris International, Inc. | | | 1,482,896 | |
| | | | | | | | | |
| | | | | Consumer Discretionary — 0.3% | | | | |
| | 14,013 | | | Time Warner, Inc. | | | 807,429 | |
| | | | | Total Common Stocks | | $ | 42,247,629 | |
| | | | | | | | | |
| | | | | Investment Funds— 1.8% | | | | |
| | 135,400 | | | American Income Fund, Inc. | | | 1,126,528 | |
| | 23,600 | | | Eaton Vance Tax-Advantaged | | | | |
| | | | | Dividend Income Fund | | | 440,376 | |
| | 36,600 | | | Invesco Government & Agency | | | | |
| | | | | Portfolio, Institutional Class** | | | 36,600 | |
| | 3,418,157 | | | Touchstone Institutional Money | | | | |
| | | | | Market Fund^ | | | 3,418,157 | |
| | | | | Total Investment Funds | | $ | 5,021,661 | |
| | | | | | | | | |
| Total Investment Securities —98.9% | | | | |
| (Cost $269,876,538) | | $ | 283,991,849 | |
| | | | | |
| Other Assets in Excess of Liabilities — 1.1% | | | 3,277,875 | |
| | | | | |
| Net Assets — 100.0% | | $ | 287,269,724 | |
| (A) | Variable rate security - the rate reflected is the rate in effect as of March 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 March 31, 2013. |
| (C) | This security has not settled. Full contract rates do not take effect until settlement date. |
** Represents collateral for securities loaned.
^ Affiliated Fund. See Note 4 in Notes to Financial Statements.
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of March 31, 2013 was $35,832. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
BRL - Brazilian Real
CAD - Canadian Dollar
FHLMC - Federal Home Loan Mortgage Association
FNMA - Federal National Mortgage Association
GBP - British Pound
GNMA - Government National Mortgage Association
JPY - Japanese Yen
MXN - Mexican Peso
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
SEK - Swedish Krona
USD - United States Dollar
Touchstone Strategic Income Fund
March 31, 2013 (Continued)
144a - This is a restricted security that was sold in a transaction qualifying for the exemption under Rule 144a of the Securities Act of 1933. This security may be sold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2013 these securities were valued at $9,387,709 or 3.3% 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 | | $ | — | | | $ | 86,557,173 | | | $ | — | | | $ | 86,557,173 | |
| Sovereign Government Obligations | | | — | | | | 24,684,551 | | | | — | | | | 24,684,551 | |
| Agency Collateralized Mortgage Obligations | | | — | | | | 13,380,013 | | | | — | | | | 13,380,013 | |
| Commercial Mortgage-Backed Securities | | | — | | | | 8,428,614 | | | | — | | | | 8,428,614 | |
| Asset-Backed Securities | | | — | | | | 5,251,303 | | | | — | | | | 5,251,303 | |
| U.S. Government Mortgage-Backed Obligations | | | — | | | | 4,404,470 | | | | — | | | | 4,404,470 | |
| Term Loan | | | — | | | | 2,677,263 | | | | — | | | | 2,677,263 | |
| Non-Agency Collateralized Mortgage Obligations | | | — | | | | 2,405,107 | | | | — | | | | 2,405,107 | |
| Preferred Stocks | | | 88,934,065 | | | | — | | | | — | | | | 88,934,065 | |
| Common Stocks | | | 42,247,629 | | | | — | | | | — | | | | 42,247,629 | |
| Investment Funds | | | 5,021,661 | | | | — | | | | — | | | | 5,021,661 | |
| | | | | | | | | | | | | | | $ | 283,991,849 | |
| Valuation inputs at Reporting Date: |
| Description | | Level 1 | | Level 2 | | Level 3 | | Total |
| Other Financial Instruments*** | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | | | | |
| Forward Currency Contracts | | $ | — | | | $ | 55,142 | | | $ | — | | | $ | 55,142 | |
| | | | | | | | | | | | | | | $ | 55,142 | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Forward Currency Contracts | | $ | — | | | $ | (52,894 | ) | | $ | — | | | $ | (52,894 | ) |
| Interest Rate Contracts - Futures | | | (137,150 | ) | | | — | | | | — | | | | (137,150 | ) |
| | | | | | | | | | | | | | | $ | (190,044 | ) |
*** Other Financial Instruments are derivative instruments not reflected in total investments. Amounts shown represent unrealized appreciation (depreciation).
Touchstone Strategic Income Fund
March 31, 2013 (Continued)
Futures Contracts
At March 31, 2013, $662,226 was segregated with the broker as collateral for futures contracts. The Fund had the following futures contracts, brokered by Morgan Stanley, open at March 31, 2013:
| | | | | | | | | | | | Unrealized | |
| | | Expiration | | | Number of | | | Notional | | | Appreciation/ | |
| Description | | Date | | | Contracts | | | Value | | | (Depreciation) | |
| Long Futures: | | | | | | | | | | | | | | | | |
| 90 Day Euro Futures | | | December 2013 | | | | 250 | | | | 62,250,000 | | | $ | (20,550 | ) |
| CBOE VIX Futures | | | June 2013 | | | | 100 | | | | 1,660,000 | | | | (90,000 | ) |
| | | | | | | | | | | | | | | | (110,550 | ) |
| Short Futures: | | | | | | | | | | | | | | | | |
| 90 Day Euro Futures | | | March 2015 | | | | 250 | | | | 62,118,750 | | | | (26,600 | ) |
| | | | | | | | | | | | | | | $ | (137,150 | ) |
Forward Foreign Currency Exchange Contracts
| | | | | | | | Unrealized | |
| | | | | | Contract to | | Appreciation/ | |
| Counterparty | | Value Date | | | Receive | | Deliver | | | (Depreciation) | |
| Brown Brothers Harriman | | | 05/22/2013 | | | USD | | | 2,315,815 | | | | PLN | | | | 7,500,000 | | | $ | 23,333 | |
| Brown Brothers Harriman | | | 06/06/2013 | | | USD | | | 1,882,177 | | | | BRL | | | | 3,770,000 | | | | 31,809 | |
| Brown Brothers Harriman | | | 06/12/2013 | | | SEK | | | 9,523,283 | | | | USD | | | | 1,486,352 | | | | (27,331 | ) |
| Brown Brothers Harriman | | | 06/12/2013 | | | USD | | | 1,486,352 | | | | JPY | | | | 142,247,370 | | | | (25,563 | ) |
| | | | | | | | | | | | | | | | | | | | | $ | 2,248 | |
See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities
March 31, 2013
| | | Touchstone | | | Touchstone | | | Touchstone | | | Touchstone | |
| | | International | | | Small Cap | | | Small Company | | | Strategic | |
| | | Value | | | Growth | | | Value | | | Income | |
| | | Fund | | | Fund | | | Fund | | | Fund | |
| Assets | | | | | | | | | | | | | | | | |
| Investments, at cost | | $ | 147,078,306 | | | $ | 28,288,116 | | | $ | 41,575,924 | | | $ | 269,876,538 | |
| Affiliated securities, at market value | | $ | 21,291,834 | | | $ | 689,381 | | | $ | 3,323,029 | | | $ | 3,418,157 | |
| Non-affiliated securities, at market value | | | 126,498,993 | | | | 35,165,488 | | | | 40,529,317 | | | | 280,573,692 | |
| Investments, at value (A) | | $ | 147,790,827 | | | $ | 35,854,869 | | | $ | 43,852,346 | | | $ | 283,991,849 | |
| Cash | | | — | | | | 5,156 | | | | 31,946 | | | | 1,841,694 | |
| Cash deposits held at prime broker* | | | — | | | | — | | | | — | | | | 662,226 | |
| Foreign Currency (B) | | | 143,508 | | | | — | | | | — | | | | 252,286 | |
| Unrealized appreciation on forward foreign currency contracts | | | — | | | | — | | | | — | | | | 55,142 | |
| Dividends and interest receivable | | | 185,246 | | | | 43,821 | | | | 47,788 | | | | 2,659,230 | |
| Receivable for capital shares sold | | | 34,607 | | | | 83,575 | | | | 4,932 | | | | 914,347 | |
| Receivable for investments sold | | | — | | | | — | | | | 98,220 | | | | 3,162,561 | |
| Receivable for securities lending income | | | 511 | | | | — | | | | 5,036 | | | | 2,022 | |
| Receivable from other affiliates | | | — | | | | 5,783 | | | | 1,329 | | | | — | |
| Receivable from Investment Advisor | | | — | | | | — | | | | 4,846 | | | | — | |
| Tax reclaim receivable | | | 118,942 | | | | — | | | | — | | | | — | |
| Other assets | | | 13,096 | | | | 16,191 | | | | 13,751 | | | | 19,033 | |
| Total Assets | | | 148,286,737 | | | | 36,009,395 | | | | 44,060,194 | | | | 293,560,390 | |
| | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | |
| Unrealized depreciation on forward foreign currency contracts | | | — | | | | — | | | | — | | | | 52,894 | |
| Payable for return of collateral for securities on loan | | | 2,451,274 | | | | — | | | | 2,941,216 | | | | 36,600 | |
| Payable for capital shares redeemed | | | 87,649 | | | | 53,577 | | | | 56,848 | | | | 418,643 | |
| Payable for variation margin for futures contracts | | | — | | | | — | | | | — | | | | 137,150 | |
| Payable for investments purchased | | | 18,503,171 | | | | — | | | | 2,418,081 | | | | 5,377,955 | |
| Payable to Investment Advisor | | | 88,890 | | | | 5,950 | | | | — | | | | 147,136 | |
| Payable to other affiliates | | | 328 | | | | — | | | | — | | | | 18,091 | |
| Payable to Trustees | | | 2,988 | | | | 2,977 | | | | 2,977 | | | | 3,018 | |
| Payable for professional services | | | 29,669 | | | | 25,952 | | | | 25,994 | | | | 31,586 | |
| Payable for reports to shareholders | | | 27,938 | | | | 21,418 | | | | 24,006 | | | | 21,998 | |
| Payable to Transfer Agent | | | 8,859 | | | | 17,260 | | | | 4,802 | | | | 31,626 | |
| Other accrued expenses and liabilities | | | 17,942 | | | | 3,619 | | | | 4,508 | | | | 13,969 | |
| Total Liabilities | | | 21,218,708 | | | | 130,753 | | | | 5,478,432 | | | | 6,290,666 | |
| | | | | | | | | | | | | | | | | |
| Net Assets | | $ | 127,068,029 | | | $ | 35,878,642 | | | $ | 38,581,762 | | | $ | 287,269,724 | |
| | | | | | | | | | | | | | | | | |
| Net assets consist of: | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 250,868,392 | | | $ | 28,077,822 | | | $ | 34,811,905 | | | $ | 289,182,144 | |
| Accumulated net investment income (loss) | | | 1,169,304 | | | | (28,681 | ) | | | 2,567 | | | | (404,037 | ) |
| Accumulated net realized gains (losses) on investments, futures contracts, foreign currency and credit default swaps | | | (125,633,023 | ) | | | 262,748 | | | | 1,490,868 | | | | (15,479,491 | ) |
| Net unrealized appreciation on investments, future contracts and foreign currency transactions | | | 663,356 | | | | 7,566,753 | | | | 2,276,422 | | | | 13,971,108 | |
| Net Assets | | $ | 127,068,029 | | | $ | 35,878,642 | | | $ | 38,581,762 | | | $ | 287,269,724 | |
| (A) Includes market value of securities on loan of: | | $ | 2,379,203 | | | $ | — | | | $ | 2,864,696 | | | $ | 35,832 | |
| (B) Cost of foreign currency: | | $ | 143,508 | | | $ | — | | | $ | — | | | $ | 251,204 | |
| * Represents segregated cash for futures contracts. | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities
March 31, 2013 (Continued)
| | | Touchstone | | | Touchstone | | | Touchstone | | | Touchstone | |
| | | International | | | Small Cap | | | Small Company | | | Strategic | |
| | | Value | | | Growth | | | Value | | | Income | |
| | | Fund | | | Fund | | | Fund | | | Fund | |
| | | | | | | | | | | | | |
| Pricing of Class A Shares | | | | | | | | | | | | | | | | |
| Net assets applicable to Class A shares | | $ | 6,393,571 | | | $ | 14,243,332 | | | $ | 2,676,187 | | | $ | 41,301,255 | |
| Shares of beneficial interest outstanding | | | | | | | | | | | | | | | | |
| (unlimited number of shares authorized, no par value) | | | 839,389 | | | | 2,943,555 | | | | 151,277 | | | | 3,774,883 | |
| Net asset value price per share* | | $ | 7.62 | | | $ | 4.84 | | | $ | 17.69 | | | $ | 10.94 | |
| Maximum offering price per share | | $ | 8.08 | | | $ | 5.14 | | | $ | 18.77 | | | $ | 11.61 | |
| | | | | | | | | | | | | | | | | |
| Pricing of Class C Shares | | | | | | | | | | | | | | | | |
| Net assets applicable to Class C shares | | $ | 216,754 | | | $ | 3,508,976 | | | $ | 1,314,867 | | | $ | 26,086,940 | |
| Shares of beneficial interest outstanding | | | | | | | | | | | | | | | | |
| (unlimited number of shares authorized, no par value) | | | 30,514 | | | | 831,213 | | | | 79,731 | | | | 2,411,214 | |
| Net asset value, offering price per share** | | $ | 7.10 | | | $ | 4.22 | | | $ | 16.49 | | | $ | 10.82 | |
| | | | | | | | | | | | | | | | | |
| Pricing of Class Y Shares | | | | | | | | | | | | | | | | |
| Net assets applicable to Class Y shares | | $ | 31,526,701 | | | $ | 18,123,498 | | | $ | 5,953,365 | | | $ | 199,292,570 | |
| Shares of beneficial interest outstanding | | | | | | | | | | | | | | | | |
| (unlimited number of shares authorized, no par value) | | | 4,139,860 | | | | 3,438,201 | | | | 331,249 | | | | 18,170,759 | |
| Net asset value, offering price and redemption price per share | | $ | 7.62 | | | $ | 5.27 | | | $ | 17.97 | | | $ | 10.97 | |
| | | | | | | | | | | | | | | | | |
| Pricing of Institutional Class Shares | | | | | | | | | | | | | | | | |
| Net assets applicable to Institutional Class Shares | | $ | 88,931,003 | | | $ | 2,836 | | | $ | 28,637,343 | | | $ | 20,588,959 | |
| Shares of beneficial interest outstanding | | | | | | | | | | | | | | | | |
| (unlimited number of shares authorized, no par value) | | | 11,671,107 | | | | 538 | | | | 1,594,744 | | | | 1,877,790 | |
| Net asset value, offering price and redemption price per share | | $ | 7.62 | | | $ | 5.28 | | | $ | 17.96 | | | $ | 10.96 | |
* There is no sales load on subscriptions of $1 million or more. Redemptions that were part of a no-load $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.
Statements of Operations
For the Period Ended March 31, 2013 and the Year Ended July 31, 2012
| | | Touchstone | |
| | | International | |
| | | Value Fund | |
| | | For the Eight | | | | |
| | | Months Ended | | | For the | |
| | | March 31, | | | Year Ended | |
| | | 2013(B) | | | July 31, 2012(C) | |
| Investment Income | | | | | | | | |
| Dividends from affiliated funds | | $ | 1,445 | | | $ | 6,760 | |
| Dividends from non-affiliated securities(A) | | | 1,927,081 | | | | 5,207,065 | |
| Interest | | | — | | | | — | |
| Income from securities loaned | | | 11,386 | | | | 11,035 | |
| Total Investment Income | | | 1,939,912 | | | | 5,224,860 | |
| Expenses | | | | | | | | |
| Investment advisory fees | | | 754,523 | | | | 1,526,446 | |
| Administration fees | | | 131,451 | | | | 265,928 | |
| Compliance fees and expenses | | | 1,047 | | | | — | |
| Custody fees | | | 46,100 | | | | 73,512 | |
| Accounting fees | | | — | | | | 85,165 | |
| Professional fees | | | 37,298 | | | | 27,924 | |
| Transfer Agent fees, Fund Level | | | 4,057 | | | | 64,017 | |
| Transfer Agent fees, Class A | | | 8,327 | | | | — | |
| Transfer Agent fees, Class C | | | 462 | | | | — | |
| Transfer Agent fees, Class Y | | | 3,999 | | | | — | |
| Transfer Agent fees, Institutional Class | | | 52 | | | | — | |
| Registration Fees, Fund Level | | | 26,997 | | | | 52,023 | |
| Registration Fees, Class A | | | 2,063 | | | | — | |
| Registration Fees, Class C | | | 1,376 | | | | — | |
| Registration Fees, Class Y | | | 1,387 | | | | — | |
| Registration Fees, Institutional Class | | | 1,709 | | | | — | |
| Interest Expense on Futures | | | 1,645 | | | | 37,988 | |
| Reports to Shareholders, Fund Level | | | 1,138 | | | | 19,044 | |
| Reports to Shareholders, Class A | | | 17,152 | | | | — | |
| Reports to Shareholders, Class C | | | 7,092 | | | | — | |
| Reports to Shareholders, Class Y | | | 10,586 | | | | — | |
| Reports to Shareholders, Institutional Class | | | 8,845 | | | | — | |
| Distribution expenses, Class A | | | 11,760 | | | | 20,934 | |
| Distribution expenses, Class B | | | — | | | | 2,147 | |
| Distribution and shareholder servicing expenses, Class C | | | 1,284 | | | | 2,017 | |
| Trustee fees | | | 5,590 | | | | 12,036 | |
| Other expenses | | | 36,143 | | | | 19,374 | |
| Total Expenses | | | 1,122,083 | | | | 2,208,555 | |
| Fees waived and/or reimbursed by the Advisor and/or Affiliates(D) | | | (340,002 | ) | | | (426,456 | ) |
| Net Expenses | | | 782,081 | | | | 1,782,099 | |
| Net Investment Income (Loss) | | | 1,157,831 | | | | 3,442,761 | |
| Realized and Unrealized Gain (Loss) on Investments | | | | | | | | |
| Net realized gain (loss) on investments from non affiliated securities(E) | | | 11,837,785 | | | | (15,904,697 | ) |
| Net realized gain (loss) on futures contracts | | | 1,731,179 | | | | (2,094,898 | ) |
| Net realized gain (loss) on foreign currency | | | 22,238 | | | | 46,212 | |
| Net realized gain (loss) on credit default swaps | | | — | | | | — | |
| Net change in unrealized appreciation (depreciation) on investments | | | (1,903,645 | ) | | | (11,713,580 | ) |
| Net change in unrealized appreciation (depreciation) on futures contracts | | | (616,795 | ) | | | 641,625 | |
| Net change in unrealized appreciation (depreciation) on credit default swaps | | | — | | | | — | |
| Net change in unrealized appreciation (depreciation) on foreign currency transactions | | | (57,054 | ) | | | (66,403 | ) |
| Net Realized and Unrealized Gain (Loss) on Investments | | | 11,013,708 | | | | (29,091,741 | ) |
| Change in Net Assets Resulting from Operations | | $ | 12,171,539 | | | $ | (25,648,980 | ) |
| (A) Net of foreign tax withholding of: | | $ | 144,279 | | | $ | 496,392 | |
(B)The Fund changed its fiscal year from July 31 to March 31. See Note 10 in the Notes to Financial Statements.
(C)Certain prior year amounts have been reclassified to conform with current year presentation.
(D)See Note 4 in Notes to Financial Statements.
(E)On August 28, 2012, Small Cap Growth 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.
Statements of Operations
For the Period Ended March 31, 2013 and the Year Ended July 31, 2012 (Continued)
| Touchstone | | | Touchstone | | | Touchstone | |
| Small Cap | | | Small Company | | | Strategic | |
| Growth Fund | | | Value Fund | | | Income Fund | |
| For the Eight | | | | | | For the Eight | | | | | | For the Eight | | | | |
| Months Ended | | | For the | | | Months Ended | | | For the | | | Months Ended | | | For the | |
| March 31, | | | Year Ended | | | March 31, | | | Year Ended | | | March 31, | | | Year Ended | |
| 2013(B) | | | July 31, 2012(C) | | | 2013(B) | | | July 31, 2012(C) | | | 2013(B) | | | July 31, 2012(C) | |
| $ | 1,402 | | | $ | 2,979 | | | $ | 426 | | | $ | 2,223 | | | $ | 3,275 | | | $ | 5,685 | |
| | 430,657 | | | | 701,355 | | | | 597,106 | | | | 1,084,837 | | | | 5,935,402 | | | | 6,624,882 | |
| | — | | | | — | | | | — | | | | — | | | | 4,968,680 | | | | 5,013,445 | |
| | — | | | | — | | | | 37,406 | | | | — | | | | 10,236 | | | | 1,235 | |
| | 432,059 | | | | 704,334 | | | | 634,938 | | | | 1,087,060 | | | | 10,917,593 | | | | 11,645,247 | |
| | 246,621 | | | | 462,017 | | | | 228,001 | | | | 521,203 | | | | 1,433,075 | | | | 2,106,283 | |
| | 43,109 | | | | 80,508 | | | | 44,292 | | | | 100,913 | | | | 334,836 | | | | 368,475 | |
| | 1,047 | | | | — | | | | 1,047 | | | | — | | | | 1,047 | | | | — | |
| | 4,277 | | | | 13,688 | | | | 6,156 | | | | 9,784 | | | | 14,401 | | | | 17,008 | |
| | — | | | | 65,191 | | | | — | | | | 64,317 | | | | — | | | | 83,134 | |
| | 18,788 | | | | 19,914 | | | | 28,788 | | | | 22,966 | | | | 43,825 | | | | 54,915 | |
| | 6,905 | | | | 94,810 | | | | 1,889 | | | | 21,048 | | | | 11,949 | | | | 117,174 | |
| | 14,069 | | | | — | | | | 3,737 | | | | — | | | | 22,170 | | | | — | |
| | 2,930 | | | | — | | | | 1,775 | | | | — | | | | 11,573 | | | | — | |
| | 14,096 | | | | — | | | | 3,492 | | | | — | | | | 26,792 | | | | — | |
| | 8 | | | | — | | | | 29 | | | | — | | | | 48 | | | | — | |
| | 22,402 | | | | 47,336 | | | | 21,304 | | | | 52,547 | | | | 24,186 | | | | 54,876 | |
| | 5,136 | | | | — | | | | 2,293 | | | | — | | | | 3,760 | | | | — | |
| | 1,859 | | | | — | | | | 2,016 | | | | — | | | | 3,617 | | | | — | |
| | 1,910 | | | | — | | | | 1,704 | | | | — | | | | 2,183 | | | | — | |
| | 4,355 | | | | — | | | | 2,572 | | | | — | | | | 4,651 | | | | — | |
| | — | | | | — | | | | — | | | | — | | | | — | | | | 257 | |
| | 2,430 | | | | 16,042 | | | | 442 | | | | 13,147 | | | | 3,759 | | | | 21,510 | |
| | 18,055 | | | | — | | | | 12,156 | | | | — | | | | 11,837 | | | | — | |
| | 11,240 | | | | — | | | | 8,351 | | | | — | | | | 8,513 | | | | — | |
| | 12,100 | | | | — | | | | 10,648 | | | | — | | | | 9,558 | | | | — | |
| | 9,136 | | | | — | | | | 8,882 | | | | — | | | | 4,911 | | | | — | |
| | 24,864 | | | | 40,280 | | | | 4,199 | | | | 4,919 | | | | 86,309 | | | | 94,013 | |
| | — | | | | 2,367 | | | | — | | | | 4,387 | | | | — | | | | 4,401 | |
| | 24,782 | | | | 45,659 | | | | 9,757 | | | | 15,814 | | | | 167,313 | | | | 210,661 | |
| | 5,449 | | | | 3,217 | | | | 5,465 | | | | 4,180 | | | | 5,826 | | | | 12,268 | |
| | 24,509 | | | | 6,744 | | | | 18,332 | | | | 8,249 | | | | 67,907 | | | | 18,594 | |
| | 520,077 | | | | 897,773 | | | | 427,327 | | | | 843,474 | | | | 2,304,046 | | | | 3,163,569 | |
| | (137,639 | ) | | | (185,744 | ) | | | (186,893 | ) | | | (245,752 | ) | | | (808,268 | ) | | | (1,374,235 | ) |
| | 382,438 | | | | 712,029 | | | | 240,434 | | | | 597,722 | | | | 1,495,778 | | | | 1,789,334 | |
| | 49,621 | | | | (7,695 | ) | | | 394,504 | | | | 489,338 | | | | 9,421,815 | | | | 9,855,913 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 1,691,134 | | | | 3,937,528 | | | | 8,178,544 | | | | (424,944 | ) | | | 4,818,111 | | | | 806,137 | |
| | — | | | | — | | | | — | | | | — | | | | (752,881 | ) | | | 956,966 | |
| | — | | | | — | | | | — | | | | — | | | | (500,867 | ) | | | (302,858 | ) |
| | — | | | | — | | | | — | | | | — | | | | (734,589 | ) | | | 111,933 | |
| | 5,365,978 | | | | (3,692,332 | ) | | | (908,978 | ) | | | (1,948,627 | ) | | | 1,478,089 | | | | 6,063,430 | |
| | — | | | | — | | | | — | | | | — | | | | (92,929 | ) | | | (181,880 | ) |
| | — | | | | — | | | | — | | | | — | | | | 393,648 | | | | 17,361 | |
| | — | | | | — | | | | — | | | | — | | | | (390,594 | ) | | | 532,273 | |
| | 7,057,112 | | | | 245,196 | | | | 7,269,566 | | | | (2,373,571 | ) | | | 4,217,988 | | | | 8,003,362 | |
| $ | 7,106,733 | | | $ | 237,501 | | | $ | 7,664,070 | | | $ | (1,884,233 | ) | | $ | 13,639,803 | | | $ | 17,859,275 | |
| $ | 39 | | | $ | — | | | $ | 1,046 | | | $ | — | | | $ | 13,092 | | | $ | 20,260 | |
Statements of Changes in Net Assets
| | | Touchstone | |
| | | International Value | |
| | | Fund | |
| | | For the | | | | | | | |
| | | Eight Months | | | For the | | | For the | |
| | | Ended | | | Year | | | Year | |
| | | March 31, | | | Ended | | | Ended | |
| | | 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| From Operations | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 1,157,831 | | | $ | 3,442,761 | | | $ | 4,930,476 | |
| Net realized gain (loss) on investments, futures contracts and foreign currency | | | 13,591,202 | | | | (17,953,383 | ) | | | 37,876,137 | |
| Net change in unrealized appreciation (depreciation) on investments, futures | | | | | | | | | | | | |
| contracts and foreign currency transactions | | | (2,577,494 | ) | | | (11,138,358 | ) | | | (2,770,813 | ) |
| Change in Net Assets from Operations | | | 12,171,539 | | | | (25,648,980 | ) | | | 40,035,800 | |
| | | | | | | | | | | | | |
| Distributions to Shareholders from: | | | | | | | | | | | | |
| Net investment income, Class A | | | (200,165 | ) | | | (235,511 | ) | | | (218,090 | ) |
| Net investment income, Class B(B) | | | — | | | | (2,271 | ) | | | (3,391 | ) |
| Net investment income, Class C | | | (5,583 | ) | | | (4,001 | ) | | | (3,960 | ) |
| Net investment income, Class Y(B) | | | (1,045,091 | ) | | | (4,485,965 | ) | | | (5,185,878 | ) |
| Net investment income, Institutional Class | | | (2,282,278 | ) | | | — | | | | — | |
| Net realized gains, Class A | | | — | | | | — | | | | — | |
| Net realized gains, Class C | | | — | | | | — | | | | — | |
| Net realized gains, Class Y(B) | | | — | | | | — | | | | — | |
| Net realized gains, Institutional Class | | | — | | | | — | | | | — | |
| Total Distributions | | | (3,533,117 | ) | | | (4,727,748 | ) | | | (5,411,319 | ) |
| | | | | | | | | | | | | |
| Net Increase (Decrease) from Share Transactions(C) | | | (12,774,869 | ) | | | (25,818,561 | ) | | | (88,203,527 | ) |
| | | | | | | | | | | | | |
| Total Increase (Decrease) in Net Assets | | | (4,136,447 | ) | | | (56,195,289 | ) | | | (53,579,046 | ) |
| | | | | | | | | | | | | |
| Net Assets | | | | | | | | | | | | |
| Beginning of period | | | 131,204,476 | | | | 187,399,765 | | | | 240,978,811 | |
| End of period | | $ | 127,068,029 | | | $ | 131,204,476 | | | $ | 187,399,765 | |
| Accumulated Net Investment Income (Loss) | | $ | 1,169,304 | | | $ | 3,519,170 | | | $ | 4,726,770 | |
| (A) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
(B) Effective September 10, 2012, Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares. Amounts prior to September 10, 2012 of Class Y shares represent the former Fifth Third Institutional Class shares. See Note 10 in the Notes to Financial Statements.
| (C) | For details on share transaction by class, see Statements of Changes in Net Assets - Capital Stock Activity on pages 44 and 45. |
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
(Continued)
Touchstone
Small Cap Growth
Fund
| For the | | | | | | | |
| Eight Months | | | For the | | | For the | |
| Ended | | | Year | | | Year | |
| March 31, | | | Ended | | | Ended | |
| 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| $ | 49,621 | | | $ | (7,695 | ) | | $ | (136,840 | ) |
| | 1,691,134 | | | | 3,937,528 | | | | 3,700,771 | |
| | 5,365,978 | | | | (3,692,332 | ) | | | 2,272,879 | |
| | 7,106,733 | | | | 237,501 | | | | 5,836,810 | |
| | | | | | | | | | | |
| | (70,758 | ) | | | — | | | | — | |
| | — | | | | — | | | | — | |
| | (9,054 | ) | | | — | | | | — | |
| | (92,350 | ) | | | — | | | | — | |
| | (14 | ) | | | — | | | | — | |
| | (809,691 | ) | | | — | | | | — | |
| | (224,449 | ) | | | — | | | | — | |
| | (872,692 | ) | | | — | | | | — | |
| | (123 | ) | | | — | | | | — | |
| | (2,079,131 | ) | | | — | | | | — | |
| | | | | | | | | | | |
| | (11,363,965 | ) | | | (8,557,753 | ) | | | 7,980,317 | |
| | | | | | | | | | | |
| | (6,336,363 | ) | | | (8,320,252 | ) | | | 13,817,127 | |
| | | | | | | | | | | |
| | 42,215,005 | | | | 50,535,257 | | | | 36,718,130 | |
| $ | 35,878,642 | | | $ | 42,215,005 | | | $ | 50,535,257 | |
| $ | (28,681 | ) | | $ | 43,435 | | | $ | 77,205 | |
Statements of Changes in Net Assets
(Continued)
| | | Touchstone | |
| | | Small Company | |
| | | Value Fund | |
| | | For the | | | | | | | |
| | | Eight Months | | | For the | | | For the | |
| | | Ended | | | Year | | | Year | |
| | | March 31, | | | Ended | | | Ended | |
| | | 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| From Operations | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 394,504 | | | $ | 489,338 | | | $ | 458,814 | |
| Net realized gain (loss) on investments, futures contracts, credit default swaps and | | | | | | | | | | | | |
| foreign currency transactions | | | 8,178,544 | | | | (424,944 | ) | | | 13,003,838 | |
| Net change in unrealized appreciation (depreciation) on investments, futures | | | | | | | | | | | | |
| contracts, credit default swaps and foreign currency transactions | | | (908,978 | ) | | | (1,948,627 | ) | | | 629,283 | |
| Change in Net Assets from Operations | | | 7,664,070 | | | | (1,884,233 | ) | | | 14,091,935 | |
| | | | | | | | | | | | | |
| Distributions to Shareholders from: | | | | | | | | | | | | |
| Net investment income, Class A | | | (53,729 | ) | | | (2,318 | ) | | | (4,844 | ) |
| Net investment income, Class B(B) | | | — | | | | — | | | | — | |
| Net investment income, Class C | | | (15,394 | ) | | | — | | | | — | |
| Net investment income, Class Y(B) | | | (155,761 | ) | | | (178,879 | ) | | | (259,540 | ) |
| Net investment income, Institutional Class | | | (616,804 | ) | | | — | | | | — | |
| Net realized gains, Class A | | | (405,557 | ) | | | (105,551 | ) | | | — | |
| Net realized gains, Class B | | | — | | | | (28,722 | ) | | | — | |
| Net realized gains, Class C | | | (244,214 | ) | | | (95,427 | ) | | | — | |
| Net realized gains, Class Y(B) | | | (1,038,414 | ) | | | (3,097,507 | ) | | | — | |
| Net realized gains, Institutional Class | | | (3,726,864 | ) | | | — | | | | — | |
| Total Distributions | | | (6,256,737 | ) | | | (3,508,404 | ) | | | (264,384 | ) |
| | | | | | | | | | | | | |
| Net Increase (Decrease) from Share Transactions(C) | | | (15,483,785 | ) | | | (6,484,815 | ) | | | (12,514,243 | ) |
| | | | | | | | | | | | | |
| Total Increase (Decrease) in Net Assets | | | (14,076,452 | ) | | | (11,877,452 | ) | | | 1,313,308 | |
| | | | | | | | | | | | | |
| Net Assets | | | | | | | | | | | | |
| Beginning of period | | | 52,658,214 | | | | 64,535,666 | | | | 63,222,358 | |
| End of period | | $ | 38,581,762 | | | $ | 52,658,214 | | | $ | 64,535,666 | |
| Accumulated Net Investment Income (Loss) | | $ | 2,567 | | | $ | 449,890 | | | $ | 213,016 | |
(A)The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements.
(B)Effective September 10, 2012, Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares. Amounts prior to September 10, 2012 of Class Y shares represent the former Fifth Third Institutional Class shares. See Note 10 in the Notes to Financial Statements.
(C) For details on share transaction by class, see Statements of Changes in Net Assets - Capital Stock Activity on pages 46 and 47.
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
(Continued)
Touchstone
Strategic Income
Fund
| For the | | | | | | | |
| Eight Months | | | For the | | | For the | |
| Ended | | | Year | | | Year | |
| March 31, | | | Ended | | | Ended | |
| 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| | | | | | | | | | | |
| $ | 9,421,815 | | | $ | 9,855,913 | | | $ | 6,913,076 | |
| | 2,829,774 | | | | 1,572,178 | | | | (11,172 | ) |
| | 1,388,214 | | | | 6,431,184 | | | | 5,237,406 | |
| | 13,639,803 | | | | 17,859,275 | | | | 12,139,310 | |
| | | | | | | | | | | |
| | (1,539,970 | ) | | | (1,802,345 | ) | | | (1,061,504 | ) |
| | (682 | ) | | | (18,189 | ) | | | (27,929 | ) |
| | (637,497 | ) | | | (872,785 | ) | | | (586,912 | ) |
| | (6,227,808 | ) | | | (7,695,009 | ) | | | (4,916,023 | ) |
| | (525,064 | ) | | | — | | | | — | |
| | — | | | | — | | | | — | |
| | — | | | | — | | | | — | |
| | — | | | | — | | | | — | |
| | — | | | | — | | | | — | |
| | — | | | | — | | | | — | |
| | (8,931,021 | ) | | | (10,388,328 | ) | | | (6,592,368 | ) |
| | | | | | | | | | | |
| | 7,310,988 | | | | 102,918,716 | | | | 45,812,777 | |
| | | | | | | | | | | |
| | 12,019,770 | | | | 110,389,663 | | | | 51,359,719 | |
| | | | | | | | | | | |
| | 275,249,954 | | | | 164,860,291 | | | | 113,500,572 | |
| $ | 287,269,724 | | | $ | 275,249,954 | | | $ | 164,860,291 | |
| $ | (404,037 | ) | | $ | (662,710 | ) | | $ | (122,295 | ) |
Statements of Changes in Net Assets - Capital Stock Activity
| | | | | | | | | Touchstone International | | | | | | | |
| | | | | | | | | Value Fund | | | | | | | |
| | | For the Eight Months | | | For the Year | | | For the Year | |
| | | Ended | | | Ended | | | Ended | |
| | | March 31, 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| | | Shares | | | Dollars | | | Shares | | | Dollars | | | Shares | | | Dollars | |
| Class A(B) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 26,590 | | | $ | 200,145 | | | | 58,685 | | | $ | 425,756 | | | | 98,542 | | | $ | 814,534 | |
| Proceeds from Shares issued in connection with | | | | | | | | | | | | | | | | | | | | | | | | |
| merger(C) | | | 20,734 | | | | 154,261 | | | | — | | | | — | | | | — | | | | — | |
| Reinvestment of distributions | | | 24,523 | | | | 185,642 | | | | 32,566 | | | | 220,471 | | | | 24,652 | | | | 203,874 | |
| Cost of Shares redeemed | | | (261,494 | ) | | | (1,966,252 | ) | | | (279,814 | ) | | | (1,978,776 | ) | | | (298,404 | ) | | | (2,471,936 | ) |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Share Transactions | | | (189,647 | ) | | | (1,426,204 | ) | | | (188,563 | ) | | | (1,332,549 | ) | | | (175,210 | ) | | | (1,453,528 | ) |
| Class B(B) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | — | | | | — | | | | 760 | | | | 5,040 | | | | 1,885 | | | | 15,389 | |
| Reinvestment of distributions | | | — | | | | — | | | | 249 | | | | 1,675 | | | | 295 | | | | 2,404 | |
| Cost of Shares redeemed | | | (2,292 | ) | | | (16,594 | ) | | | (19,681 | ) | | | (140,313 | ) | | | (39,354 | ) | | | (317,523 | ) |
| Cost of Shares redeemed in connection with | | | | | | | | | | | | | | | | | | | | | | | | |
| merger(C) | | | (20,936 | ) | | | (154,261 | ) | | | — | | | | — | | | | — | | | | — | |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class B Share Transactions | | | (23,228 | ) | | | (170,855 | ) | | | (18,672 | ) | | | (133,598 | ) | | | (37,174 | ) | | | (299,730 | ) |
| Class C | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 7,598 | | | | 53,916 | | | | 80 | | | | 577 | | | | 508 | | | | 3,918 | |
| Reinvestment of distributions | | | 760 | | | | 5,380 | | | | 592 | | | | 3,764 | | | | 457 | | | | 3,538 | |
| Cost of Shares redeemed | | | (3,522 | ) | | | (24,767 | ) | | | (10,005 | ) | | | (68,022 | ) | | | (11,306 | ) | | | (87,692 | ) |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class C Share Transactions | | | 4,836 | | | | 34,529 | | | | (9,333 | ) | | | (63,681 | ) | | | (10,341 | ) | | | (80,236 | ) |
| Class Y(B) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 197,996 | | | | 1,450,615 | | | | 1,674,072 | | | | 11,922,066 | | | | 1,606,141 | | | | 13,473,708 | |
| Reinvestment of distributions | | | 96,638 | | | | 731,549 | | | | 563,720 | | | | 3,810,747 | | | | 529,628 | | | | 4,380,017 | |
| Cost of Shares redeemed | | | (13,645,820 | ) | | | (101,181,970 | ) | | | (5,663,691 | ) | | | (40,021,546 | ) | | | (12,504,750 | ) | | | (104,223,758 | ) |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class Y Share Transactions | | | (13,351,186 | ) | | | (98,999,806 | ) | | | (3,425,899 | ) | | | (24,288,733 | ) | | | (10,368,981 | ) | | | (86,370,033 | ) |
| Institutional Class(D) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 13,290,532 | | | | 100,202,828 | | | | — | | | | — | | | | — | | | | — | |
| Reinvestment of distributions | | | 301,490 | | | | 2,282,278 | | | | — | | | | — | | | | — | | | | — | |
| Cost of Shares redeemed | | | (1,920,915 | ) | | | (14,697,639 | ) | | | — | | | | — | | | | — | | | | — | |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Institutional Class Share Transactions | | | 11,671,107 | | | | 87,787,467 | | | | — | | | | — | | | | — | | | | — | |
| Change from Share Transactions | | | (1,888,118 | ) | | $ | (12,774,869 | ) | | | (3,642,467 | ) | | $ | (25,818,561 | ) | | | (10,591,706 | ) | | $ | (88,203,527 | ) |
(A)The Fund changed its fiscal year from July 31 to March 31. See Note 10 in the Notes to Financial Statements.
(B)Effective September 10, 2012, Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares. Amounts prior to September 10, 2012 of Class Y shares represent the former Fifth Third Institutional Class shares. See Note 10 in the Notes to Financial Statements.
(C)See Note 10 in the Notes to Financial Statements.
(D)The Fund began issuing Institutional Class shares on September 10, 2012.
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets - Capital Stock Activity
(Continued)
Touchstone Small Cap
Growth Fund
| For the Eight Months | | | For the Year | | | For the Year | |
| Ended | | | Ended | | | Ended | |
| March 31, 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| Shares | | | Dollars | | | Shares | | | Dollars | | | Shares | | | Dollars | |
| | 349,757 | | | $ | 1,570,570 | | | | 1,111,506 | | | $ | 4,596,130 | | | | 4,166,699 | | | | 17,701,153 | |
| | 31,683 | | | | 143,842 | | | | — | | | | — | | | | — | | | | — | |
| | 156,038 | | | | 662,719 | | | | — | | | | — | | | | — | | | | — | |
| | (1,122,269 | ) | | | (5,095,473 | ) | | | (1,855,492 | ) | | | (7,747,734 | ) | | | (3,101,380 | ) | | | (13,195,011 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (584,791 | ) | | | (2,718,342 | ) | | | (743,986 | ) | | | (3,151,604 | ) | | | 1,065,319 | | | | 4,506,142 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | — | | | | — | | | | 1,027 | | | | 3,419 | | | | 15,261 | | | | 47,215 | |
| | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | (2,255 | ) | | | (8,898 | ) | | | (105,845 | ) | | | (370,269 | ) | | | (179,725 | ) | | | (638,383 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (36,022 | ) | | | (143,842 | ) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (38,277 | ) | | | (152,740 | ) | | | (104,818 | ) | | | (366,850 | ) | | | (164,464 | ) | | | (591,168 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 61,800 | | | | 234,905 | | | | 157,093 | | | | 581,866 | | | | 830,828 | | | | 3,123,538 | |
| | 29,506 | | | | 109,265 | | | | — | | | | — | | | | — | | | | — | |
| | (281,272 | ) | | | (1,113,971 | ) | | | (613,063 | ) | | | (2,258,494 | ) | | | (238,352 | ) | | | (906,616 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (189,966 | ) | | | (769,801 | ) | | | (455,970 | ) | | | (1,676,628 | ) | | | 592,476 | | | | 2,216,922 | |
| | 642,908 | | | | 3,133,798 | | | | 1,583,163 | | | | 7,015,294 | | | | 2,412,778 | | | | 11,073,408 | |
| | 184,691 | | | | 854,583 | | | | — | | | | — | | | | — | | | | — | |
| | (2,428,927 | ) | | | (11,714,100 | ) | | | (2,285,257 | ) | | | (10,377,965 | ) | | | (2,083,181 | ) | | | (9,224,987 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (1,601,328 | ) | | | (7,725,719 | ) | | | (702,094 | ) | | | (3,362,671 | ) | | | 329,597 | | | | 1,848,421 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 508 | | | | 2,500 | | | | — | | | | — | | | | — | | | | — | |
| | 30 | | | | 137 | | | | — | | | | — | | | | — | | | | — | |
| | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 538 | | | | 2,637 | | | | — | | | | — | | | | — | | | | — | |
| | (2,413,824 | ) | | $ | (11,363,965 | ) | | | (2,006,868 | ) | | $ | (8,557,753 | ) | | | 1,822,928 | | | $ | 7,980,317 | |
Statements of Changes in Net Assets - Capital Stock Activity
(Continued)
| | | | | | | | | Touchstone Small Company | | | | | | | |
| | | | | | | | | Value Fund | | | | | | | |
| | | For the Eight Months | | | For the Year | | | For the Year | |
| | | Ended | | | Ended | | | Ended | |
| | | March 31, 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| | | Shares | | | Dollars | | | Shares | | | Dollars | | | Shares | | | Dollars | |
| Class A(B) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 22,209 | | | $ | 394,510 | | | | 42,004 | | | $ | 764,162 | | | | 50,007 | | | $ | 890,213 | |
| Proceeds from Shares issued in connection with | | | | | | | | | | | | | | | | | | | | | | | | |
| merger(C) | | | 13,540 | | | | 257,661 | | | | — | | | | — | | | | — | | | | — | |
| Reinvestment of distributions | | | 22,487 | | | | 358,322 | | | | 4,197 | | | | 72,924 | | | | 206 | | | | 3,864 | |
| Cost of Shares redeemed | | | (25,759 | ) | | | (450,311 | ) | | | (29,328 | ) | | | (520,810 | ) | | | (87,065 | ) | | | (1,610,129 | ) |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Share Transactions | | | 32,477 | | | | 560,182 | | | | 16,873 | | | | 316,276 | | | | (36,852 | ) | | | (716,052 | ) |
| Class B(B) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | — | | | | — | | | | 73 | | | | 1,292 | | | | 473 | | | | 8,527 | |
| Reinvestment of distributions | | | — | | | | — | | | | 1,596 | | | | 26,161 | | | | — | | | | — | |
| Cost of Shares redeemed | | | (4,092 | ) | | | (70,261 | ) | | | (14,812 | ) | | | (251,299 | ) | | | (6,500 | ) | | | (109,295 | ) |
| Cost of Shares redeemed in connection with | | | | | | | | | | | | | | | | | | | | | | | | |
| merger(C) | | | (14,403 | ) | | | (257,661 | ) | | | — | | | | — | | | | — | | | | — | |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class B Share Transactions | | | (18,495 | ) | | | (327,922 | ) | | | (13,143 | ) | | | (223,846 | ) | | | (6,027 | ) | | | (100,768 | ) |
| Class C | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 11,987 | | | | 181,605 | | | | 19,501 | | | | 328,598 | | | | 67,574 | | | | 1,154,879 | |
| Reinvestment of distributions | | | 5,681 | | | | 83,853 | | | | 1,654 | | | | 27,004 | | | | — | | | | — | |
| Cost of Shares redeemed | | | (31,341 | ) | | | (525,772 | ) | | | (25,789 | ) | | | (429,175 | ) | | | (23,384 | ) | | | (435,936 | ) |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class C Share Transactions | | | (13,673 | ) | | | (260,314 | ) | | | (4,634 | ) | | | (73,573 | ) | | | 44,190 | | | | 718,943 | |
| Class Y(B) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 43,116 | | | | 778,766 | | | | 323,005 | | | | 5,919,691 | | | | 752,656 | | | | 13,152,538 | |
| Reinvestment of distributions | | | 61,952 | | | | 998,238 | | | | 180,666 | | | | 3,182,398 | | | | 10,987 | | | | 208,977 | |
| Cost of Shares redeemed | | | (2,471,693 | ) | | | (47,116,632 | ) | | | (864,713 | ) | | | (15,605,761 | ) | | | (1,350,992 | ) | | | (25,777,881 | ) |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Class Y Share Transactions | | | (2,366,625 | ) | | | (45,339,628 | ) | | | (361,042 | ) | | | (6,503,672 | ) | | | (587,349 | ) | | | (12,416,366 | ) |
| Institutional Class(D) | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds from Shares issued | | | 1,965,807 | | | | 37,589,273 | | | | — | | | | — | | | | — | | | | — | |
| Reinvestment of distributions | | | 267,383 | | | | 4,343,668 | | | | — | | | | — | | | | — | | | | — | |
| Cost of Shares redeemed | | | (638,446 | ) | | | (12,049,044 | ) | | | — | | | | — | | | | — | | | | — | |
| Change in Net Assets from | | | | | | | | | | | | | | | | | | | | | | | | |
| Institutional Class Share Transactions | | | 1,594,744 | | | | 29,883,897 | | | | — | | | | — | | | | — | | | | — | |
| Change from Share Transactions | | | (771,572 | ) | | $ | (15,483,785 | ) | | | (361,946 | ) | | $ | (6,484,815 | ) | | | (586,038 | ) | | $ | (12,514,243 | ) |
(A)The Fund changed its fiscal year from July 31 to March 31. See Note 10 in the Notes to Financial Statements.
(B)Effective September 10, 2012, Class B shares were exchanged for Class A shares and Institutional Class shares became Class Y shares. Amounts prior to September 10, 2012 of Class Y shares represent the former Fifth Third Institutional Class shares. See Note 10 in the Notes to Financial Statements.
(C)See Note 10 in the Notes to Financial Statements.
(D)The Fund began issuing Institutional Class shares on September 10, 2012.
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets - Capital Stock Activity
(Continued)
Touchstone Strategic
Income Fund
| For the Eight Months | | | For the Year | | | For the Year | |
| Ended | | | Ended | | | Ended | |
| March 31, 2013(A) | | | July 31, 2012 | | | July 31, 2011 | |
| Shares | | | Dollars | | | Shares | | | Dollars | | | Shares | | | Dollars | |
| | | | | | | | | | | | | | | | | |
| | 1,349,724 | | | $ | 14,643,752 | | | | 3,151,163 | | | $ | 32,993,481 | | | | 1,046,607 | | | $ | 10,836,097 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 32,891 | | | | 356,537 | | | | — | | | | — | | | | — | | | | — | |
| | 110,758 | | | | 1,199,074 | | | | 108,355 | | | | 1,138,265 | | | | 65,513 | | | | 680,398 | |
| | (2,314,002 | ) | | | (25,179,450 | ) | | | (1,090,958 | ) | | | (11,399,562 | ) | | | (631,699 | ) | | | (6,543,751 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (820,629 | ) | | | (8,980,087 | ) | | | 2,168,560 | | | | 22,732,184 | | | | 480,421 | | | | 4,972,744 | |
| | 2,142 | | | | 23,134 | | | | 10,853 | | | | 112,457 | | | | 6,908 | | | | 71,671 | |
| | 49 | | | | 524 | | | | 1,224 | | | | 12,788 | | | | 1,381 | | | | 14,332 | |
| | (1,976 | ) | | | (22,352 | ) | | | (28,737 | ) | | | (299,913 | ) | | | (31,848 | ) | | | (331,767 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (32,946 | ) | | | (356,537 | ) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (32,731 | ) | | | (355,231 | ) | | | (16,660 | ) | | | (174,668 | ) | | | (23,559 | ) | | | (245,764 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 448,682 | | | | 4,810,637 | | | | 995,418 | | | | 10,267,593 | | | | 590,737 | | | | 6,073,962 | |
| | 39,465 | | | | 422,591 | | | | 52,091 | | | | 540,105 | | | | 38,443 | | | | 395,265 | |
| | (436,212 | ) | | | (4,674,418 | ) | | | (311,646 | ) | | | (3,227,988 | ) | | | (268,525 | ) | | | (2,747,838 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 51,935 | | | | 558,810 | | | | 735,863 | | | | 7,579,710 | | | | 360,655 | | | | 3,721,389 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 5,371,767 | | | | 58,425,257 | | | | 9,153,874 | | | | 96,044,311 | | | | 6,226,704 | | | | 64,778,528 | |
| | 197,464 | | | | 2,142,709 | | | | 242,894 | | | | 2,554,364 | | | | 115,044 | | | | 1,204,529 | |
| | (5,969,106 | ) | | | (64,914,120 | ) | | | (2,467,026 | ) | | | (25,817,185 | ) | | | (2,764,055 | ) | | | (28,618,649 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | (399,875 | ) | | | (4,346,154 | ) | | | 6,929,742 | | | | 72,781,490 | | | | 3,577,693 | | | | 37,364,408 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2,297,269 | | | | 24,996,202 | | | | — | | | | — | | | | — | | | | — | |
| | 47,620 | | | | 516,651 | | | | — | | | | — | | | | — | | | | — | |
| | (467,099 | ) | | | (5,079,203 | ) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 1,877,790 | | | | 20,433,650 | | | | — | | | | — | | | | — | | | | — | |
| | 676,490 | | | $ | 7,310,988 | | | | 9,817,505 | | | $ | 102,918,716 | | | | 4,395,210 | | | $ | 45,812,777 | |
Financial Highlights
| Touchstone International Value Fund—Class A |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | |
| | | Ended | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | |
| | | 2013(A) | | | 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(B) | | | 0.06 | | | | 0.14 | | | | 0.17 | | | | 0.14 | | | | 0.20 | | | | 0.40 | |
| Net realized and unrealized gains (losses) on investments | | | 0.73 | | | | (1.30 | ) | | | 1.09 | | | | 0.19 | | | | (3.59 | ) | | | (2.28 | ) |
| Total from investment operations | | | 0.79 | | | | (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 | | $ | 7.62 | | | $ | 7.06 | | | $ | 8.42 | | | $ | 7.33 | | | $ | 7.24 | | | $ | 12.23 | |
| Total return(C) | | | 11.15 | %(D) | | | (13.67 | %) | | | 17.17 | % | | | 4.34 | % | | | (24.64 | %) | | | (13.81 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 6,394 | | | $ | 7,266 | | | $ | 10,258 | | | $ | 10,216 | | | $ | 11,754 | | | $ | 20,160 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 1.36 | %(E)(F) | | | 1.40 | %(F) | | | 1.42 | %(F) | | | 1.43 | %(F) | | | 1.47 | %(F) | | | 1.50 | % |
| Gross expenses | | | 2.22 | %(E) | | | 1.68 | % | | | 1.61 | % | | | 1.59 | % | | | 1.59 | % | | | 1.60 | % |
| Net investment income | | | 1.21 | %(E) | | | 2.00 | % | | | 2.10 | % | | | 1.87 | % | | | 2.74 | % | | | 2.80 | % |
| Portfolio turnover rate | | | 133 | %(D) | | | 121 | % | | | 131 | % | | | 137 | % | | | 104 | % | | | 155 | % |
| Touchstone International Value Fund—Class C |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | |
| | | Ended | | | | |
| | | March 31, | | | Year Ended July 31, | |
| | | 2013(A) | | | 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(B) | | | 0.02 | | | | 0.08 | | | | 0.10 | | | | 0.08 | | | | 0.14 | | | | 0.30 | |
| Net realized and unrealized gains (losses) on investments | | | 0.67 | | | | (1.21 | ) | | | 1.01 | | | | 0.18 | | | | (3.42 | ) | | | (2.18 | ) |
| Total from investment operations | | | 0.69 | | | | (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 | | $ | 7.10 | | | $ | 6.59 | | | $ | 7.85 | | | $ | 6.84 | | | $ | 6.79 | | | $ | 11.61 | |
| Total return(C) | | | 10.53 | %(D) | | | (14.37 | %) | | | 16.23 | % | | | 3.59 | % | | | (25.18 | %) | | | (14.43 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 217 | | | $ | 169 | | | $ | 275 | | | $ | 310 | | | $ | 378 | | | $ | 721 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 2.11 | %(E)(F) | | | 2.15 | %(F) | | | 2.17 | %(F) | | | 2.18 | %(F) | | | 2.22 | %(F) | | | 2.26 | % |
| Gross expenses | | | 9.33 | %(E) | | | 2.43 | % | | | 2.36 | % | | | 2.34 | % | | | 2.34 | % | | | 2.36 | % |
| Net investment income | | | 0.46 | %(E) | | | 1.24 | % | | | 1.28 | % | | | 1.11 | % | | | 2.01 | % | | | 2.19 | % |
| Portfolio turnover rate | | | 133 | %(D) | | | 121 | % | | | 131 | % | | | 137 | % | | | 104 | % | | | 155 | % |
| (A) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (B) | The net investment income per share is based on average shares outstanding for the period. |
| (C) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
| (F) | Includes interest expense relating to settlement of foreign futures. Interest expense was less than 0.005% for the eight months ended March 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.
Financial Highlights
(Continued)
| Touchstone International Value Fund—Class Y |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | |
| | | Ended | | | | |
| | | March 31, | | | Year Ended July 31, | |
| | | 2013(A)(B) | | | 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(C) | | | 0.07 | | | | 0.16 | | | | 0.18 | | | | 0.16 | | | | 0.22 | | | | 0.45 | |
| Net realized and unrealized gains (losses) on investments | | | 0.73 | | | | (1.31 | ) | | | 1.10 | | | | 0.19 | | | | (3.59 | ) | | | (2.30 | ) |
| Total from investment operations | | | 0.80 | | | | (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 | | $ | 7.62 | | | $ | 7.07 | | | $ | 8.44 | | | $ | 7.35 | | | $ | 7.25 | | | $ | 12.24 | |
| Total return | | | 11.33 | %(D) | | | (13.47 | %) | | | 17.42 | % | | | 4.61 | % | | | (24.36 | %) | | | (13.56 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 31,527 | | | $ | 123,607 | | | $ | 176,521 | | | $ | 229,888 | | | $ | 233,968 | | | $ | 420,993 | |
| Ratio to average net assets: | | | 1.08 | %(E)(F) | | | 1.15 | %(F) | | | 1.17 | %(F) | | | 1.18 | %(F) | | | 1.22 | %(F) | | | 1.26 | % |
| Net expenses | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross expenses | | | 1.51 | %(E) | | | 1.43 | % | | | 1.36 | % | | | 1.34 | % | | | 1.34 | % | | | 1.36 | % |
| Net investment income | | | 1.49 | %(E) | | | 2.27 | % | | | 2.22 | % | | | 2.18 | % | | | 3.01 | % | | | 3.13 | % |
| Portfolio turnover rate | | | 133 | %(D) | | | 121 | % | | | 131 | % | | | 137 | % | | | 104 | % | | | 155 | % |
| Touchstone International Value Fund—Institutional Class |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Period Ended | |
| | | March 31, | |
| | | 2013(B)(G) | |
| Net asset value at beginning of period | | $ | 7.43 | |
| Income from investment operations: | | | | |
| Net investment income(C) | | | 0.08 | |
| Net realized and unrealized gains on investments | | | 0.36 | |
| Total from investment operations | | | 0.44 | |
| Distributions from: | | | | |
| Net investment income | | | (0.25 | ) |
| Net asset value at end of period | | $ | 7.62 | |
| Total return | | | 5.94 | %(D) |
| Ratios and supplemental data: | | | | |
| Net assets at end of period (000's) | | $ | 88,931 | |
| Ratio to average net assets: | | | | |
| Net expenses | | | 0.96 | %(E)(F) |
| Gross expenses | | | 1.36 | %(E) |
| Net investment income | | | 1.61 | %(E) |
| Portfolio turnover rate | | | 133 | %(D) |
| (A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 10 in the Notes to Financial Statements. |
| (B) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (C) | The net investment income per share is based on average shares outstanding for the period. |
| (F) | Includes interest expense relating to settlement of foreign futures. Interest expense was less than 0.005% for the period ended March 31, 2013 and 0.02%, 0.01%, 0.01% and 0.02% for the years ended July 31, 2012, 2011, 2010 and 2009, respectively. |
| (G) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying Notes to Financial Statements.
Financial Highlights
(Continued)
| Touchstone Small Cap Growth Fund—Class A |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | |
| | | Ended | | | | |
| | | March 31, | | | Year Ended July 31, | |
| | | 2013(A) | | | 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)(B) | | | — | (C) | | | — | (C) | | | (0.01 | ) | | | (0.01 | ) | | | 0.01 | | | | 0.01 | |
| Net realized and unrealized gains (losses) on investments | | | 0.85 | | | | 0.01 | | | | 0.62 | | | | 0.63 | | | | (0.47 | ) | | | (0.75 | ) |
| Total from investment operations | | | 0.85 | | | | 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 | | $ | 4.84 | | | $ | 4.25 | | | $ | 4.24 | | | $ | 3.63 | | | $ | 3.01 | | | $ | 3.49 | |
| Total return(D) | | | 20.93 | %(E) | | | 0.24 | % | | | 16.80 | % | | | 20.60 | % | | | (13.18 | %) | | | (12.41 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 14,243 | | | $ | 15,010 | | | $ | 18,117 | | | $ | 11,649 | | | $ | 7,497 | | | $ | 10,552 | |
| Ratio to average net assets: | | | 1.60 | %(F) | | | 1.60 | % | | | 1.60 | % | | | 1.60 | % | | | 1.60 | % | | | 1.60 | % |
| Net expenses | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross expenses | | | 2.13 | %(F) | | | 2.01 | % | | | 1.96 | % | | | 2.07 | % | | | 2.14 | % | | | 2.06 | % |
| Net investment income (loss) | | | 0.15 | %(F) | | | (0.07 | %) | | | (0.33 | %) | | | (0.41 | %) | | | 0.40 | % | | | 0.16 | % |
| Portfolio turnover rate | | | 45 | %(E)(G) | | | 48 | % | | | 59 | % | | | 56 | % | | | 46 | % | | | 49 | % |
| Touchstone Small Cap Growth Fund—Class C |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | |
| | | Ended | | | | |
| | | March 31, | | | Year Ended July 31, | |
| | | 2013(A) | | | 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 loss(B) | | | (0.02 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.04 | ) | | | (0.01 | ) | | | (0.02 | ) |
| Net realized and unrealized gains (losses) on investments | | | 0.74 | | | | 0.01 | | | | 0.56 | | | | 0.57 | | | | (0.43 | ) | | | (0.70 | ) |
| Total from investment operations | | | 0.72 | | | | (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 | | $ | 4.22 | | | $ | 3.75 | | | $ | 3.77 | | | $ | 3.25 | | | $ | 2.72 | | | $ | 3.17 | |
| Total return(D) | | | 20.17 | %(E) | | | (0.53 | %) | | | 16.00 | % | | | 19.49 | % | | | (13.75 | %) | | | (12.95 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 3,509 | | | $ | 3,830 | | | $ | 5,563 | | | $ | 2,876 | | | $ | 1,446 | | | $ | 1,749 | |
| Ratio to average net assets: | | | 2.35 | %(F) | | | 2.35 | % | | | 2.35 | % | | | 2.35 | % | | | 2.35 | % | | | 2.35 | % |
| Net expenses | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross expenses | | | 3.16 | %(F) | | | 2.76 | % | | | 2.71 | % | | | 2.82 | % | | | 2.88 | % | | | 2.81 | % |
| Net investment loss | | | (0.60 | %)(F) | | | (0.82 | %) | | | (1.10 | %) | | | (1.17 | %) | | | (0.35 | %) | | | (0.62 | %) |
| Portfolio turnover rate | | | 45 | %(E)(G) | | | 48 | % | | | 59 | % | | | 56 | % | | | 46 | % | | | 49 | % |
| (A) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 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) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
| (G) | Portfolio turnover rate excludes securities delivered from processing a redemption-in-kind. |
See accompanying Notes to Financial Statements.
Financial Highlights
(Continued)
| Touchstone Small Cap Growth Fund—Class Y |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A)(B) | | | 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)(C) | | | 0.01 | | | | 0.01 | | | | — | (D) | | | (0.01 | ) | | | 0.02 | | | | 0.02 | |
| Net realized and unrealized gains (losses) on investments | | | 0.92 | | | | 0.02 | | | | 0.66 | | | | 0.69 | | | | (0.51 | ) | | | (0.78 | ) |
| Total from investment operations | | | 0.93 | | | | 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 | | $ | 5.27 | | | $ | 4.61 | | | $ | 4.58 | | | $ | 3.92 | | | $ | 3.24 | | | $ | 3.75 | |
| Total return | | | 20.94 | %(E) | | | 0.66 | % | | | 16.84 | % | | | 20.99 | % | | | (12.86 | %) | | | (12.23 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 18,123 | | | $ | 23,232 | | | $ | 26,317 | | | $ | 21,195 | | | $ | 17,394 | | | $ | 22,662 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 1.35 | %(F) | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % |
| Gross expenses | | | 1.77 | %(F) | | | 1.76 | % | | | 1.71 | % | | | 1.82 | % | | | 1.89 | % | | | 1.82 | % |
| Net investment income (loss) | | | 0.40 | %(F) | | | 0.17 | % | | | (0.08 | %) | | | (0.16 | %) | | | 0.64 | % | | | 0.37 | % |
| Portfolio turnover rate | | | 45 | %(E)(G) | | | 48 | % | | | 59 | % | | | 56 | % | | | 46 | % | | | 49 | % |
| Touchstone Small Cap Growth Fund—Institutional Class |
| Selected Data for a Share Outstanding Throughout Each Period | |
| | | Period Ended | |
| | | March 31, | |
| | | 2013(B)(H) | |
| Net asset value at beginning of period | | $ | 4.92 | |
| Income (loss) from investment operations: | | | | |
| Net investment income(C) | | | 0.02 | |
| Net realized and unrealized gains on investments | | | 0.61 | |
| Total from investment operations | | | 0.63 | |
| Distributions from: | | | | |
| Net investment income | | | (0.03 | ) |
| Realized capital gains | | | (0.24 | ) |
| Total distributions | | | (0.27 | ) |
| Net asset value at end of period | | $ | 5.28 | |
| Total return | | | 13.56 | %(E) |
| Ratios and supplemental data: | | | | |
| Net assets at end of period (000's) | | $ | 3 | |
| Ratio to average net assets: | | | | |
| Net expenses | | | 1.25 | %(F) |
| Gross expenses | | | 945.43 | %(F) |
| Net investment income | | | 0.50 | %(F) |
| Portfolio turnover rate | | | 45 | %(E)(G) |
| (A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 10 in the Notes to Financial Statements. |
| (B) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (C) | The net investment income/(loss) per share is based on average shares outstanding for the period. |
| (D) | Less than $0.005 per share. |
| (G) | Portfolio turnover rate excludes securities delivered from processing a redemption-in-kind. |
| (H) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying Notes to Financial Statements.
Financial Highlights
(Continued)
| Touchstone Small Company Value Fund—Class A |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A) | | | 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(B) | | | 0.15 | | | | 0.11 | | | | 0.08 | | | | 0.06 | | | | 0.18 | | | | 0.14 | |
| Net realized and unrealized gains (losses) on investments | | | 3.11 | | | | (0.66 | ) | | | 3.23 | | | | 2.83 | | | | (3.51 | ) | | | (0.90 | ) |
| Total from investment operations | | | 3.26 | | | | (0.55 | ) | | | 3.31 | | | | 2.89 | | | | (3.33 | ) | | | (0.76 | ) |
| Distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.38 | ) | | | (0.02 | ) | | | (0.03 | ) | | | (0.07 | ) | | | (0.18 | ) | | | (0.12 | ) |
| Realized capital gains | | | (2.99 | ) | | | (1.06 | ) | | | — | | | | — | | | | — | | | | (2.37 | ) |
| Total distributions | | | (3.37 | ) | | | (1.08 | ) | | | (0.03 | ) | | | (0.07 | ) | | | (0.18 | ) | | | (2.49 | ) |
| Net asset value at end of period | | $ | 17.69 | | | $ | 17.80 | | | $ | 19.43 | | | $ | 16.15 | | | $ | 13.33 | | | $ | 16.84 | |
| Total return(C) | | | 20.74 | %(D) | | | (2.65 | %) | | | 20.52 | % | | | 21.69 | % | | | (19.56 | %) | | | (3.95 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 2,676 | | | $ | 2,114 | | | $ | 1,980 | | | $ | 2,241 | | | $ | 1,275 | | | $ | 1,682 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 1.20 | %(E) | | | 1.24 | % | | | 1.36 | % | | | 1.41 | % | | | 1.45 | % | | | 1.45 | % |
| Gross expenses | | | 2.72 | %(E) | | | 1.66 | % | | | 1.60 | % | | | 1.56 | % | | | 1.55 | % | | | 1.50 | % |
| Net investment income | | | 1.30 | %(E) | | | 0.63 | % | | | 0.43 | % | | | 0.39 | % | | | 1.42 | % | | | 0.77 | % |
| Portfolio turnover rate | | | 155 | %(D) | | | 62 | % | | | 93 | % | | | 65 | % | | | 68 | % | | | 60 | % |
| Touchstone Small Company Value Fund—Class C |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A) | | | 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)(B) | | | 0.06 | | | | (0.02 | ) | | | (0.07 | ) | | | (0.06 | ) | | | 0.08 | | | | — | (F) |
| Net realized and unrealized gains (losses) on investments | | | 2.91 | | | | (0.63 | ) | | | 3.08 | | | | 2.70 | | | | (3.33 | ) | | | (0.87 | ) |
| Total from investment operations | | | 2.97 | | | | (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 | | $ | 16.49 | | | $ | 16.67 | | | $ | 18.38 | | | $ | 15.37 | | | $ | 12.73 | | | $ | 16.07 | |
| Total return(C) | | | 20.26 | %(D) | | | (3.39 | %) | | | 19.58 | % | | | 20.83 | % | | | (20.17 | %) | | | (4.74 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 1,315 | | | $ | 1,557 | | | $ | 1,802 | | | $ | 828 | | | $ | 399 | | | $ | 384 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 1.95 | %(E) | | | 1.99 | % | | | 2.11 | % | | | 2.16 | % | | | 2.20 | % | | | 2.20 | % |
| Gross expenses | | | 3.63 | %(E) | | | 2.41 | % | | | 2.35 | % | | | 2.31 | % | | | 2.30 | % | | | 2.25 | % |
| Net investment income (loss) | | | 0.55 | %(E) | | | (0.11 | %) | | | (0.39 | %) | | | (0.37 | %) | | | 0.68 | % | | | 0.01 | % |
| Portfolio turnover rate | | | 155 | %(D) | | | 62 | % | | | 93 | % | | | 65 | % | | | 68 | % | | | 60 | % |
| (A) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (B) | The net investment income/(loss) per share is based on average shares outstanding for the period. |
| (C) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
| (F) | Less than $0.005 per share. |
See accompanying Notes to Financial Statements.
Financial Highlights
(Continued)
| Touchstone Small Company Value Fund—Class Y |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A)(B) | | | 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(C) | | | 0.19 | | | | 0.16 | | | | 0.13 | | | | 0.11 | | | | 0.21 | | | | 0.19 | |
| Net realized and unrealized gains (losses) on investments | | | 3.15 | | | | (0.67 | ) | | | 3.27 | | | | 2.85 | | | | (3.55 | ) | | | (0.91 | ) |
| Total from investment operations | | | 3.34 | | | | (0.51 | ) | | | 3.40 | | | | 2.96 | | | | (3.34 | ) | | | (0.72 | ) |
| Distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.42 | ) | | | (0.06 | ) | | | (0.07 | ) | | | (0.10 | ) | | | (0.22 | ) | | | (0.16 | ) |
| Realized capital gains | | | (2.99 | ) | | | (1.06 | ) | | | — | | | | — | | | | — | | | | (2.37 | ) |
| Total distributions | | | (3.41 | ) | | | (1.12 | ) | | | (0.07 | ) | | | (0.10 | ) | | | (0.22 | ) | | | (2.53 | ) |
| Net asset value at end of period | | $ | 17.97 | | | $ | 18.04 | | | $ | 19.67 | | | $ | 16.34 | | | $ | 13.48 | | | $ | 17.04 | |
| Total return | | | 20.99 | %(D) | | | (2.42 | %) | | | 20.80 | % | | | 22.00 | % | | | (19.32 | %) | | | (3.68 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 5,953 | | | $ | 48,677 | | | $ | 60,170 | | | $ | 59,572 | | | $ | 65,235 | | | $ | 86,463 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 0.95 | %(E) | | | 0.99 | % | | | 1.11 | % | | | 1.16 | % | | | 1.20 | % | | | 1.19 | % |
| Gross expenses | | | 1.76 | %(E) | | | 1.41 | % | | | 1.35 | % | | | 1.31 | % | | | 1.30 | % | | | 1.24 | % |
| Net investment income | | | 1.55 | %(E) | | | 0.89 | % | | | 0.68 | % | | | 0.67 | % | | | 1.68 | % | | | 1.05 | % |
| Portfolio turnover rate | | | 155 | %(D) | | | 62 | % | | | 93 | % | | | 65 | % | | | 68 | % | | | 60 | % |
| Touchstone Small Company Value Fund—Institutional Class |
| Selected Data for a Share Outstanding Throughout Each Period | |
| | | Period Ended | |
| | | March 31, | |
| | | 2013(B)(F) | |
| Net asset value at beginning of period | | $ | 19.26 | |
| Income (loss) from investment operations: | | | | |
| Net investment income(C) | | | 0.19 | |
| Net realized and unrealized gains on investments | | | 1.95 | |
| Total from investment operations | | | 2.14 | |
| Distributions from: | | | | |
| Net investment income | | | (0.45 | ) |
| Realized capital gains | | | (2.99 | ) |
| Total distributions | | | (3.44 | ) |
| Net asset value at end of period | | $ | 17.96 | |
| Total return | | | 13.43 | %(D) |
| Ratios and supplemental data: | | | | |
| Net assets at end of period (000's) | | $ | 28,637 | |
| Ratio to average net assets: | | | | |
| Net expenses | | | 0.85 | %(E) |
| Gross expenses | | | 1.39 | %(E) |
| Net investment income | | | 1.65 | %(E) |
| Portfolio turnover rate | | | 155 | %(D) |
| (A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 10 in the Notes to Financial Statements. |
| (B) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (C) | The net investment income per share is based on average shares outstanding for the period. |
| (F) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying Notes to Financial Statements.
Financial Highlights
(Continued)
| Touchstone Strategic Income Fund—Class A |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A) | | | 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 | | | 0.35 | (B) | | | 0.49 | (C) | | | 0.52 | (C) | | | 0.51 | (C) | | | 0.56 | (C) | | | 0.53 | (C) |
| Net realized and unrealized gains (losses) on investments | | | 0.16 | | | | 0.31 | | | | 0.44 | | | | 1.26 | | | | (0.39 | ) | | | (1.41 | ) |
| Total from investment operations | | | 0.51 | | | | 0.80 | | | | 0.96 | | | | 1.77 | | | | 0.17 | | | | (0.88 | ) |
| Distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.33 | ) | | | (0.51 | ) | | | (0.49 | ) | | | (0.70 | ) | | | (0.59 | ) | | | (0.58 | ) |
| Realized capital gains | | | — | | | | — | | | | — | | | | — | | | | (0.01 | ) | | | (0.33 | ) |
| Total distributions | | | (0.33 | ) | | | (0.51 | ) | | | (0.49 | ) | | | (0.70 | ) | | | (0.60 | ) | | | (0.91 | ) |
| Net asset value at end of period | | $ | 10.94 | | | $ | 10.76 | | | $ | 10.47 | | | $ | 10.00 | | | $ | 8.93 | | | $ | 9.36 | |
| Total return(D) | | | 4.77 | %(E) | | | 7.86 | % | | | 9.90 | % | | | 20.27 | % | | | 3.02 | % | | | (8.46 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 41,301 | | | $ | 49,458 | | | $ | 25,400 | | | $ | 19,461 | | | $ | 13,406 | | | $ | 14,768 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 0.94 | %(F) | | | 0.95 | % | | | 1.02 | % | | | 1.12 | % | | | 1.18 | % | | | 1.21 | % |
| Gross expenses | | | 1.37 | %(F) | | | 1.60 | % | | | 1.61 | % | | | 1.65 | % | | | 1.65 | % | | | 1.60 | % |
| Net investment income | | | 4.76 | %(B)(F) | | | 4.65 | % | | | 4.99 | % | | | 5.27 | % | | | 7.05 | % | | | 5.21 | % |
| Portfolio turnover rate | | | 41 | %(E) | | | 47 | % | | | 42 | % | | | 31 | % | | | 32 | % | | | 32 | % |
| Touchstone Strategic Income Fund-Class C |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A) | | | 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 | | | 0.29 | (B) | | | 0.40 | (C) | | | 0.44 | (C) | | | 0.43 | (C) | | | 0.49 | (C) | | | 0.45 | (C) |
| Net realized and unrealized gains (losses) on investments | | | 0.15 | | | | 0.32 | | | | 0.44 | | | | 1.25 | | | | (0.38 | ) | | | (1.40 | ) |
| Total from investment operations | | | 0.44 | | | | 0.72 | | | | 0.88 | | | | 1.68 | | | | 0.11 | | | | (0.95 | ) |
| Distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.27 | ) | | | (0.43 | ) | | | (0.42 | ) | | | (0.63 | ) | | | (0.54 | ) | | | (0.50 | ) |
| Realized capital gains | | | — | | | | — | | | | — | | | | — | | | | (0.01 | ) | | | (0.33 | ) |
| Total distributions | | | (0.27 | ) | | | (0.43 | ) | | | (0.42 | ) | | | (0.63 | ) | | | (0.55 | ) | | | (0.83 | ) |
| Net asset value at end of period | | $ | 10.82 | | | $ | 10.65 | | | $ | 10.36 | | | $ | 9.90 | | | $ | 8.85 | | | $ | 9.29 | |
| Total return(D) | | | 4.20 | %(E) | | | 7.16 | % | | | 9.09 | % | | | 19.20 | % | | | 2.29 | % | | | (9.12 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 26,087 | | | $ | 25,115 | | | $ | 16,818 | | | $ | 12,504 | | | $ | 8,468 | | | $ | 9,780 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 1.69 | %(F) | | | 1.70 | % | | | 1.77 | % | | | 1.87 | % | | | 1.93 | % | | | 1.96 | % |
| Gross expenses | | | 2.16 | %(F) | | | 2.35 | % | | | 2.36 | % | | | 2.40 | % | | | 2.40 | % | | | 2.35 | % |
| Net investment income | | | 4.01 | %(B)(F) | | | 3.82 | % | | | 4.25 | % | | | 4.53 | % | | | 6.32 | % | | | 4.26 | % |
| Portfolio turnover rate | | | 41 | %(E) | | | 47 | % | | | 42 | % | | | 31 | % | | | 32 | % | | | 32 | % |
| (A) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (B) | Reflects the impact of a corporate action event that resulted in a one-time increase to net investment income. If the corporate action event had not occurred, the Class A and Class C net investment income per share and ratio of net income to average net assets would have been lower by $0.01 and 0.13%, respectively. |
| (C) | The net investment income per share is based on average shares outstanding for the period. |
| (D) | Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower. |
See accompanying Notes to Financial Statements.
Financial Highlights
(Continued)
| Touchstone Strategic Income Fund - Class Y |
| Selected Data for a Share Outstanding Throughout Each Period |
| | | Eight Months | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | |
| | | March 31, | | | | | | Year Ended July 31, | | | | |
| | | 2013(A)(B) | | | 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 | | | 0.37 | (C) | | | 0.50 | (D) | | | 0.54 | (D) | | | 0.53 | (D) | | | 0.57 | (D) | | | 0.55 | (D) |
| Net realized and unrealized gains (losses) on investments | | | 0.16 | | | | 0.33 | | | | 0.45 | | | | 1.26 | | | | (0.38 | ) | | | (1.41 | ) |
| Total from investment operations | | | 0.53 | | | | 0.83 | | | | 0.99 | | | | 1.79 | | | | 0.19 | | | | (0.85 | ) |
| Distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.35 | ) | | | (0.53 | ) | | | (0.52 | ) | | | (0.72 | ) | | | (0.61 | ) | | | (0.61 | ) |
| Realized capital gains | | | — | | | | — | | | | — | | | | — | | | | (0.01 | ) | | | (0.33 | ) |
| Total distributions | | | (0.35 | ) | | | (0.53 | ) | | | (0.52 | ) | | | (0.72 | ) | | | (0.62 | ) | | | (0.94 | ) |
| Net asset value at end of period | | $ | 10.97 | | | $ | 10.79 | | | $ | 10.49 | | | $ | 10.02 | | | $ | 8.95 | | | $ | 9.38 | |
| Total return | | | 4.96 | %(E) | | | 8.21 | % | | | 10.15 | % | | | 20.39 | % | | | 3.38 | % | | | (8.30 | %) |
| Ratios and supplemental data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets at end of period (000's) | | $ | 199,293 | | | $ | 200,325 | | | $ | 122,125 | | | $ | 80,807 | | | $ | 59,493 | | | $ | 90,639 | |
| Ratio to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net expenses | | | 0.64 | %(F) | | | 0.70 | % | | | 0.77 | % | | | 0.87 | % | | | 0.93 | % | | | 0.96 | % |
| Gross expenses | | | 1.05 | %(F) | | | 1.35 | % | | | 1.36 | % | | | 1.40 | % | | | 1.40 | % | | | 1.35 | % |
| Net investment income | | | 5.06 | %(C)(F) | | | 4.80 | % | | | 5.22 | % | | | 5.51 | % | | | 7.29 | % | | | 5.28 | % |
| Portfolio turnover rate | | | 41 | %(E) | | | 47 | % | | | 42 | % | | | 31 | % | | | 32 | % | | | 32 | % |
| Touchstone Strategic Income Fund—Institutional Class |
| Selected Data for a Share Outstanding Throughout Each Period | |
| | | Period Ended | |
| | | March 31, | |
| | | 2013(B)(G) | |
| Net asset value at beginning of period | | $ | 10.86 | |
| Income (loss) from investment operations: | | | | |
| Net investment income | | | 0.30 | (C) |
| Net realized and unrealized gains on investments | | | 0.12 | |
| Total from investment operations | | | 0.42 | |
| Distributions from: | | | | |
| Net investment income | | | (0.32 | ) |
| Net asset value at end of period | | $ | 10.96 | |
| Total return | | | 3.93 | %(E) |
| Ratios and supplemental data: | | | | |
| Net assets at end of period (000's) | | $ | 20,589 | |
| Ratio to average net assets: | | | | |
| Net expenses | | | 0.59 | %(F) |
| Gross expenses | | | 1.03 | %(F) |
| Net investment income | | | 5.11 | %(C)(F) |
| Portfolio turnover rate | | | 41 | %(E) |
| (A) | Effective September 10, 2012, Institutional Class shares were renamed Class Y shares. See footnote 10 in the Notes to Financial Statements. |
| (B) | The Fund changed its fiscal year end from July 31 to March 31. See Note 10 in the Notes to Financial Statements. |
| (C) | Reflects the impact of a corporate action event that resulted in a one-time increase to net investment income. If the corporate action event had not occurred, the Class Y and Institutional Class net investment income per share and ratio of net income to average net assets would have been lower by $0.01 and 0.13%, respectively. |
| (D) | The net investment income per share is based on average shares outstanding for the period. |
| (G) | The Fund began issuing Institutional Class shares on September 10, 2012. |
See accompanying Notes to Financial Statements.
Notes to Financial Statements
March 31, 2013
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 nineteen funds including the following four funds, individually, a “Fund”, and collectively, the “Funds”:
Touchstone International Value Fund (“International Value Fund”)
Touchstone Small Cap Growth Fund (“Small Cap Growth Fund”) (formerly known as Touchstone 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 objectives, 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 March 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 sector allocation or credit quality. There were no Level 3 securities for the Funds during the eight months ended March 31, 2013.
All transfers in and out of the levels are recognized at the value at the end of the period. During the eight months ended March 31, 2013, there were no transfers between Levels 1, 2 and 3 for all Funds.
Notes to Financial Statements
March 31, 2013 (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 fair valued 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 (“NAV”) 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 Funds to be significantly different from the closing value on the non-U.S. exchange and may affect the calculation of the NAV of the Funds. Any debt securities held by the Funds 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 Funds 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. The Funds 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 Funds’ 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 Funds’ 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 typically 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. When the Fund invests in another investment company, shareholders of the Fund indirectly bear their proportionate
Notes to Financial Statements
March 31, 2013 (Continued)
share of the other investment company’s fees and expenses, including operating, registration, trustee, licensing and marketing, as well as their share of the Funds’ 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. In January 2013, the FASB issued ASU No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This update limits the scope of ASU No. 2011-11 to derivatives, repurchase agreements, reverse repurchase agreements, securities borrowing and securities lending transactions that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. New disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is currently evaluating the impact these updates may have on the Funds’ financial statements.
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 exchange-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 March 31, 2013, the Funds 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
Notes to Financial Statements
March 31, 2013 (Continued)
rules of the Securities and Exchange Commission (the “SEC”) 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 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 March 31, 2013, the Strategic Income Fund held futures contracts as shown on the Portfolio of Investments and had cash in the amount of $662,226 held as collateral for futures 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, indexes, 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 counterparty’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
Notes to Financial Statements
March 31, 2013 (Continued)
Trading Commission (“CFTC”). None of the Touchstone 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.
A 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. Consistent with SEC staff guidance, if a Fund sells a credit default swap it will segregate assets equal to the full notional amount of the swap in order to cover its obligations under the instrument.
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).
As of March 31, 2013, the Funds did not hold any swap contracts.
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
Notes to Financial Statements
March 31, 2013 (Continued)
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 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 eight months ended March 31, 2013, the Strategic Income Fund 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 March 31, 2013:
Fair Value of Derivative Investments
As of March 31, 2013
| | | | | Asset | | | Liability | |
| | | | | Derivatives | | | Derivatives | |
| | | Derivatives not accounted for as hedging | | Unrealized | | | Unrealized | |
| Fund | | instruments under ASC 815 | | Appreciation | | | Depreciation | |
| Strategic Income Fund | | Forward-Foreign Currency Exchange Contracts* | | $ | 55,142 | | | $ | (52,894 | ) |
| | | Futures- Interest Rate Contracts** | | | — | | | | (137,150 | ) |
* 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: Payable for variation margin for futures contracts. Only current day’s variation margin is reported within the payables 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 Eight Months Ended March 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** | | | (154,337) | | | | — | |
| | | Forward - Foreign Currency Exchange | | | | | | | | |
| | | Contracts*** | | | (532,537) | | | | (385,887 | ) |
| | | Futures - Interest Rate Contracts* | | | (752,881) | | | | (92,929 | ) |
| | | Swaps - Credit Contracts**** | | | (734,589) | | | | 393,648 | |
* Statements of Operations Location: Net realized gain (loss) on futures contracts and net change in unrealized appreciation (depreciation) on futures contracts, respectively.
** Statements of Operations Location: Net realized gain (loss) on investments from non affiliated securities.
*** Statements of Operations Location: Net realized gain (loss) on foreign currency and net change in unrealized appreciation (depreciation) on foreign currency transactions, respectively.
**** Statements of Operations Location: Net realized loss on credit default swaps and net change in unrealized appreciation (depreciation) on credit default swaps, respectively.
Notes to Financial Statements
March 31, 2013 (Continued)
The Effect of Derivative Investments on the Statement of Operations
for the Year Ended July 31, 2012
| | | | | | | | | 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* | | $ | (2,094,898) | | | $ | 641,625 | |
| | | Forward - Foreign Currency Exchange | | | | | | | | |
| | | Contracts** | | | (136,260) | | | | (176,361 | ) |
| Small Company Value Fund | | Purchased Options- Equity Contracts*** | | | 13,100 | | | | — | |
| Strategic Income Fund | | Purchased Options- Interest Rate Contract*** | | | (330,458) | | | | — | |
| | | Forward - Foreign Currency Exchange | | | | | | | | |
| | | Contracts** | | | (192,651) | | | | 538,851 | |
| | | Futures - Equity Contracts* | | | 1,155,919 | | | | (181,880 | ) |
| | | Futures - Interest Rate Contracts* | | | (198,953) | | | | — | |
| | | Swaps - Credit Contracts**** | | | 111,933 | | | | 17,361 | |
* Statements of Operations Location: Net realized gain (loss) on futures contracts and net change in unrealized appreciation (depreciation) on futures contracts, respectively.
** Statements of Operations Location: Net realized gain (loss) on foreign currency and net change in unrealized appreciation (depreciation) on foreign currency transactions, respectively.
*** Statements of Operations Location: Net realized gain (loss) on investments from non affiliated securities.
**** Statements of Operations Location: Net realized loss on credit default swaps and net change in unrealized appreciation (depreciation) on credit default swaps, respectively.
For the eight months ended March 31, 2013, the average quarterly balance of outstanding derivative financial instruments were as follows:
| | | International | | | Strategic | |
| | | Value | | | Income | |
| | | Fund | | | Fund | |
| Equity contracts: | | | | | | | | |
| Purchased Options - Average number of contracts | | | — | | | | 475 | |
| Futures - Average number of contracts | | | 78 | | | | — | |
| Interest rate contracts: | | | | | | | | |
| Futures - Average number of contracts | | | — | | | | 340 | |
| Credit contracts: | | | | | | | | |
| Credit Default Swaps - Average number of contracts | | | — | | | | — | * |
| Forward foreign currency exchange contracts: | | | | | | | | |
| Average number of contracts | | | — | | | | 5 | |
| Average U.S. dollar amount purchased | | | — | | | $ | 12,450,702 | |
| Average U.S. dollar amount sold | | | — | | | $ | 2,547,991 | |
* 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 Funds 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.
Notes to Financial Statements
March 31, 2013 (Continued)
As of March 31, 2013, the following Funds loaned securities and received collateral as follows:
| | | Market Value of | | | Market Value of | |
| | | Securities | | | Collateral | |
| Fund | | Loaned | | | Received | |
| International Value Fund | | $ | 2,379,203 | | | $ | 2,451,274 | |
| Small Company Value Fund | | | 2,864,696 | | | | 2,941,216 | |
| Strategic Income Fund | | | 35,832 | | | | 36,600 | |
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 $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 a no-load $1 million subscription 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. Realized gains and losses resulting from principal paydowns on mortgage-backed and asset-backed securities are included in interest income. Market discounts, original issues discount (“OID”) and market premiums on debt securities are accreted/amortized to interest income over the life of the security with a corresponding adjustment in the cost basis of that security.
Distributions to shareholders — Each Fund intends to distribute to its shareholders substantially all of its income and capital gains. The International Value Fund and Small Cap Growth 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
Notes to Financial Statements
March 31, 2013 (Continued)
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 the Funds in The Trust, and/or Touchstone Investment Trust, Touchstone Institutional Funds Trust, Touchstone Variable Series Trust, Touchstone Funds Group Trust, and Touchstone Tax-Free Trust (“Touchstone Fund Complex”), 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 eight months ended March 31, 2013:
| | | | | | | | | Small | | | | |
| | | International | | | Small Cap | | | Company | | | Strategic | |
| | | Value Fund | | | Growth Fund* | | | Value Fund | | | Income Fund | |
| Purchases of investment securities | | $ | 143,458,666 | | | $ | 15,584,077 | | | $ | 57,602,562 | | | $ | 104,357,037 | |
| Proceeds from sales and maturities | | $ | 157,090,248 | | | $ | 23,755,549 | | | $ | 83,192,139 | | | $ | 100,399,373 | |
| * | Small Cap Growth 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. |
For the eight months ended March 31, 2013, purchases and proceeds from sales and maturities in U.S. Government Securities for Strategic Income Fund were $9,539,908, and $100,064,562, 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. Such officers receive no compensation from The Trust. 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 (“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.
| International Value Fund | | | 1.00 | % |
| Small Cap Growth Fund | | | 1.00 | % |
| Small Company Value Fund | | | 0.90 | % |
| Strategic Income Fund | | | 0.70 | % |
Notes to Financial Statements
March 31, 2013 (Continued)
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, except for International Value Fund, which paid, at an annual rate based on average daily net assets, 1.00% on the first $750 million of net assets and 0.85% on such assets in excess of $750 million, and the Strategic Income Fund which paid 1.00%.
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 | Small Cap Growth Fund* |
| * | Effective January 16, 2013, Russell Implementation Services, Inc. became the interim sub-adviser of the Small Cap Growth Fund. Prior to January 16, 2013, Fifth Third Asset Management, Inc. was the sub-adviser. |
The Advisor, not the Funds, pays 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 on short sales, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with U.S. GAAP, 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 | |
| International Value Fund | | | 1.36 | % | | | 2.11 | % | | | 1.11 | % | | | 0.96 | % |
| Small Cap Growth Fund | | | 1.60 | % | | | 2.35 | % | | | 1.35 | % | | | 1.25 | % |
| Small Company Value Fund | | | 1.20 | % | | | 1.95 | % | | | 0.95 | % | | | 0.85 | % |
| 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 except for Small Cap Growth Fund. The expense limitation for Small Cap Growth Fund will remain in effect until at least April 27, 2014.
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** | |
| International Value Fund | | | 1.37 | % | | | 2.12 | % | | | 2.12 | % | | | 1.12 | % |
| Small Cap Growth Fund | | | 1.60 | % | | | 2.35 | % | | | 2.35 | % | | | 1.35 | % |
| Small Company Value Fund | | | 1.20 | % | | | 1.95 | % | | | 1.95 | % | | | 0.95 | % |
| Strategic Income Fund | | | 0.94 | % | | | 1.69 | % | | | 1.69 | % | | | 0.69 | % |
| * | The Funds had Class B shares outstanding immediately prior to the reorganization, which were exchanged for Class A Shares of the corresponding Touchstone Fund. |
| ** | The Funds had Institutional Class shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund. |
For the period September 10, 2012 through March 31, 2013, the Advisor and/or affiliates waived investment advisory fees and administration fees or reimbursed expenses, including 12b-1 fees of the Funds as follows:
Notes to Financial Statements
March 31, 2013 (Continued)
| | | Investment | | | | | | Other | |
| | | Advisory | | | Administration | | | Operating | |
| | | Fees | | | Fees | | | Expenses | |
| Fund | | Waived | | | Waived | | | Reimbursed | |
| International Value Fund | | $ | 121,470 | | | $ | 106,633 | | | $ | 40,816 | |
| Small Cap Growth Fund | | | — | | | | 16,318 | | | | 74,785 | |
| Small Company Value Fund | | | 55,346 | | | | 34,409 | | | | 51,512 | |
| Strategic Income Fund | | | 269,626 | | | | 281,457 | | | | 27,967 | |
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 | |
| Fund | | Fees Accrued | | | Fees Waived | |
| International Value Fund | | $ | 141,519 | | | $ | 46,265 | |
| Small Cap Growth Fund | | | 44,902 | | | | 38,662 | |
| Small Company Value Fund | | | 50,718 | | | | 35,743 | |
| 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 the Funds. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount. As of March 31, 2013, the Advisor may seek recoupment of previously waived and reimbursed fees as follows:
| | | Expiration | |
| | | March 31, | |
| Fund | | 2016 | |
| International Value Fund | | $ | 258,059 | |
| Small Cap Growth Fund | | | 56,376 | |
| Small Company Value Fund | | | 129,064 | |
| Strategic Income Fund | | | 560,678 | |
The Advisor did not recover any recoupment for the period September 10, 2012 through March 31, 2013.
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.
For the period August 1, 2011 to July 31, 2012, the Former Advisor waived investment advisory fees of the Funds as follows:
| | | Investment | |
| | | Advisory | |
| | | Fees | |
| Fund | | Waived | |
| International Value Fund | | $ | 341,689 | |
| Small Company Value Fund | | | 69,602 | |
| Strategic Income Fund | | | 1,026,474 | |
Notes to Financial Statements
March 31, 2013 (Continued)
ADMINISTRATION AGREEMENT
Effective September 10, 2012, the Funds became a part of the Trust’s Administration Agreement, 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 SEC and state securities authorities, as well as materials for meetings of the Board of Trustees; calculating the daily NAV 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 Touchstone Fund Complex (excluding Touchstone Institutional Money Market Fund, the Touchstone Institutional Funds Trust and the Touchstone Variable Series 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 of the Touchstone Fund Complex (excluding Touchstone Institutional Money Market Fund, the Touchstone Institutional Funds Trust and the Touchstone Variable Series Trust) on the basis of relative daily net assets.
The Advisor has engaged BNY Mellon as the Sub-Administrator to The Trust. 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 | |
| Small Cap Growth Fund | | | 7,874 | | | | 7,874 | |
| Small Company Value Fund | | | 9,883 | | | | 9,883 | |
| Strategic Income Fund | | | 53,379 | | | | 53,379 | |
For the period August 1, 2011 to July 31, 2012, the Former Administrator waived administration fees of the Funds as follows:
| | | Administration | |
| | | Fees | |
| Fund | | Waived | |
| International Value Fund | | $ | 84,767 | |
| Small Cap Growth Fund | | | 185,744 | |
| Small Company Value Fund | | | 176,150 | |
| Strategic Income Fund | | | 347,761 | |
Notes to Financial Statements
March 31, 2013 (Continued)
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 incurred by BNY Mellon, including, but not limited to, postage and supplies. Prior to September 10, 2012, FTAM provided certain 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 March 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 | | $ | 10,169 | | | $ | 1,038 | |
| Small Cap Growth Fund | | | 21,628 | | | | 21,431 | |
| Small Company Value Fund | | | 3,672 | | | | 8,242 | |
| Strategic Income Fund | | | 75,691 | | | | 146,038 | |
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 following fees, which are included in the distribution and shareholder servicing expenses on the Statement of Operations.
Notes to Financial Statements
March 31, 2013 (Continued)
| | | Distribution | | | Distribution | | | Shareholder | |
| | | Expense | | | Expense | | | Servicing Expense | |
| | | Accrued | | | Accrued | | | Accrued | |
| Fund | | Class A | | | Class C | | | Class C | |
| International Value Fund | | $ | 1,591 | | | $ | 210 | | | $ | 36 | |
| Small Cap Growth Fund | | | 3,236 | | | | 2,536 | | | | 815 | |
| Small Company Value Fund | | | 527 | | | | 1,178 | | | | 337 | |
| Strategic Income Fund | | | 10,618 | | | | 16,012 | | | | 5,263 | |
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 Class A shares of the following Funds for the period September 10, 2012 through March 31, 2013:
| Fund | | Amount | |
| International Value Fund | | $ | 1,937 | |
| Small Cap Growth Fund | | | 7,849 | |
| Small Company Value Fund | | | 3,118 | |
| Strategic Income Fund | | | 220,410 | |
In addition, the Underwriter collected CDSC on the redemption of Class C shares of the following Funds for the period September 10, 2012 through March 31, 2013:
| Fund | | Amount | |
| Small Cap Growth Fund | | $ | 313 | |
| Small Company Value Fund | | | 310 | |
| Strategic Income Fund | | | 2,729 | |
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 | | | $ | — | |
| Small Cap Growth 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 the Touchstone Institutional Money Market Fund, the Advisor and Administrator will be paid additional fees from the Touchstone Institutional Money Market Fund that will not be waived or reimbursed.
A summary of each Fund’s investment, as applicable, in the Fifth Third Institutional Money Market Fund (an affiliate of the Former Advisor) and the Touchstone Institutional Money Market Fund for the eight months ended March 31, 2013, is as follows:
Notes to Financial Statements
March 31, 2013 (Continued)
| | | Share Activity | | | | | | | |
| | | Balance | | | | | | | | | Balance | | | | | | Value | |
| Fund | | 07/31/12 | | | Purchases | | | Sales | | | 03/31/13 | | | Dividends | | | 03/31/13 | |
| International Value Fund | | | 19,659,316 | | | | 79,793,829 | | | | (78,161,311 | ) | | | 21,291,834 | | | $ | 1,445 | | | $ | 21,291,834 | |
| Small Cap Growth Fund | | | 3,917,629 | | | | 13,199,922 | | | | (16,428,170 | ) | | | 689,381 | | | | 1,402 | | | | 689,381 | |
| Small Company Value Fund | | | 2,236,290 | | | | 36,952,251 | | | | (35,865,512 | ) | | | 3,323,029 | | | | 426 | | | | 3,323,029 | |
| Strategic Income Fund | | | 9,388,244 | | | | 94,681,980 | | | | (100,652,067 | ) | | | 3,418,157 | | | | 3,275 | | | | 3,418,157 | |
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 the shareholders) will be relieved of federal income tax on the income distributed. It is the Fund’s policy to distribute all of its taxable income and 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 eight months ended March 31, 2013 and the years ended July 31, 2012 and July 31, 2011 was as follows:
| | | | | | International | | | | | | | | | Small Cap | | | | |
| | | | | | Value Fund | | | | | | | | | Growth Fund | | | | |
| | | For the Eight | | | | | | | | | For the Eight | | | | | | | |
| | | Months Ended | | | Year Ended | | | Year Ended | | | Months Ended | | | Year Ended | | | Year Ended | |
| | | March 31, | | | July 31, | | | July 31, | | | March 31, | | | July 31, | | | July 31, | |
| | | 2013 | | | 2012 | | | 2011 | | | 2013 | | | 2012 | | | 2011 | |
| From ordinary income | | $ | 3,533,117 | | | $ | 4,727,748 | | | $ | 5,411,319 | | | $ | 172,176 | | | $ | — | | | $ | — | |
| From long-term capital gains | | | — | | | | — | | | | — | | | | 1,906,955 | | | | — | | | | — | |
| | | $ | 3,533,117 | | | $ | 4,727,748 | | | $ | 5,411,319 | | | $ | 2,079,131 | | | $ | — | | | $ | — | |
| | | | | | Small Company | | | | | | | | | Strategic | | | | |
| | | | | | Value Fund | | | | | | | | | Income Fund | | | | |
| | | For the Eight | | | | | | | | | For the Eight | | | | | | | |
| | | Months Ended | | | Year Ended | | | Year Ended | | | Months Ended | | | Year Ended | | | Year Ended | |
| | | March 31, | | | July 31, | | | July 31, | | | March 31, | | | July 31, | | | July 31, | |
| | | 2013 | | | 2012 | | | 2011 | | | 2013 | | | 2012 | | | 2011 | |
| From ordinary income | | $ | 2,931,010 | | | $ | 167,449 | | | $ | 264,384 | | | $ | 8,931,021 | | | $ | 10,351,922 | | | $ | 6,592,368 | |
| From long-term capital gains | | | 3,325,727 | | | | 3,340,955 | | | | — | | | | — | | | | — | | | | — | |
| | | $ | 6,256,737 | | | $ | 3,508,404 | | | $ | 264,384 | | | $ | 8,931,021 | | | $ | 10,351,922 | | | $ | 6,592,368 | |
Notes to Financial Statements
March 31, 2013 (Continued)
The following information is computed on a tax basis for each item as of March 31, 2013:
| | | International | | | Small Cap | |
| | | Value Fund | | | Growth Fund | |
| Tax cost of portfolio investments | | $ | 147,469,016 | | | $ | 29,319,764 | |
| Gross unrealized appreciation | | | 6,240,043 | | | | 8,644,514 | |
| Gross unrealized depreciation | | | (5,918,232 | ) | | | (2,109,409 | ) |
| Net unrealized appreciation (depreciation) | | | 321,811 | | | | 6,535,105 | |
| Net unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currency | | | (49,165 | ) | | | — | |
| Accumulated capital and other losses | | | (125,606,111 | ) | | | — | |
| Post-October and Qualified Late-Year Losses | | | — | | | | (28,987 | ) |
| Undistributed ordinary income | | | 1,533,102 | | | | 543,955 | |
| Undistributed capital gains | | | — | | | | 750,747 | |
| Accumulated earnings (deficit) | | $ | (123,800,363 | ) | | $ | 7,800,820 | |
| | | Small | | | | |
| | | Company | | | Strategic | |
| | | Value Fund | | | Income Fund | |
| Tax cost of portfolio investments | | $ | 41,826,755 | | | $ | 270,087,391 | |
| Gross unrealized appreciation | | | 3,117,493 | | | | 18,080,110 | |
| Gross unrealized depreciation | | | (1,091,902 | ) | | | (4,175,652 | ) |
| Net unrealized appreciation (depreciation) | | | 2,025,591 | | | | 13,904,458 | |
| Net unrealized appreciation (depreciation) on future contracts, foreign currency contracts and translation of other assets and liabilities denominated in foreign currency | | | — | | | | (144,203 | ) |
| Accumulated capital and other losses | | | — | | | | (15,615,512 | ) |
| Other temporary differences | | | — | | | | (57,163 | ) |
| Undistributed ordinary income | | | 1,591,307 | | | | — | |
| Undistributed capital gains | | | 152,959 | | | | — | |
| Accumulated earnings (deficit) | | $ | 3,769,857 | | | $ | (1,912,420 | ) |
The difference between the tax cost of portfolio investments and the financial statement cost is primarily due to wash sale loss deferrals, investments in passive foreign investment companies, preferred securities and other investment companies.
As of March 31, 2013, the Funds had the following capital loss carryforwards for federal income tax purposes:
| | | Short Term Expiring On | | | No
Expiration | | | No
Expiration | | | | |
| Fund | | 2017 | | | 2018 | | | 2019 | | | Short Term * | | | Long Term * | | | Total | |
| International Value Fund | | $ | 49,777,567 | | | $ | 70,912,135 | | | $ | — | | | $ | 4,916,409 | | | $ | — | | | $ | 125,606,111 | |
| Strategic Income Fund | | | — | | | | 5,414,300 | | | | 10,201,212 | | | | — | | | | — | | | | 15,615,512 | |
* 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. The provisions of the Act are effective for the Funds’ fiscal year ending March 31, 2013. 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.
Notes to Financial Statements
March 31, 2013 (Continued)
During the eight months ended March 31,2013 the following Funds utilized capital loss carryforwards:
| Fund | | Amount | |
| International Value Fund | | $ | 12,619,704 | |
| Small Company Value Fund | | | 122,727 | |
| Strategic Income Fund | | | 2,776,233 | |
Under current laws, certain capital losses realized after October 31 may be deferred (and certain ordinary losses after October and/or December 31 may be deferred ) and treated as occurring on the first day of the following fiscal year. For the fiscal period ended March 31, 2013, the following Fund elected to defer the following losses:
| | | Realized | | | Realized | | | | |
| | | Short-Term | | | Long-Term | | | Ordinary | |
| Fund | | Capital Losses | | | Capital Losses | | | Losses | |
| Small Cap Growth Fund | | $ | — | | | $ | — | | | $ | 28,987 | |
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 March 31, 2013) and have concluded that no provision for income tax is required in their financial statements.
Certain reclassifications, the result of permanent differences between financial statement and income tax reporting requirements, have been made to the components of capital. These reclassifications have no impact on the net assets or NAV per share of the Funds and are designed to present the Funds’ capital accounts on a tax basis. The following reclassifications, which are primarily attributed to the tax treatment of reclassifications of currency from capital gains to ordinary income, paydown gains/losses on pooled investments, investments in passive foreign investment companies, redesignation of dividends paid, adjustments for redemptions in kind, adjustments for preferred securities and swap investments have been made to the following Funds for the eight months ended March 31, 2013:
| | | | | | Accumulated | | | Accumulated | |
| | | Paid-In | | | Net Investment | | | Net Realized | |
| Fund | | Capital | | | Income(Loss) | | | Gains(Losses) | |
| International Value Fund | | $ | 297 | | | $ | 25,420 | | | $ | (25,717 | ) |
| Small Cap Growth Fund | | | (262,003 | ) | | | 50,439 | | | | 211,564 | |
| Small Company Value Fund | | | 105 | | | | (139 | ) | | | 34 | |
| Strategic Income Fund | | | 23,461 | | | | (232,121 | ) | | | 208,660 | |
6. Commitments and Contingencies
The Funds indemnify The Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. 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
Notes to Financial Statements
March 31, 2013 (Continued)
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. Risks Associated with Credit
An issuer may be unable to make timely payments of either principal or interest. This may cause the issuer’s securities to decline in value. Credit risk is particularly relevant to those portfolios that invest a significant amount of their assets in junk bonds or lower-rated securities.
9. Risks Associated with Interest Rate
As interest rates rise, the value of fixed-income securities the Funds owns will be likely to decrease. Longer-term securities are generally more volatile, so the longer the average maturity or duration of these securities the greater their price risk. Duration is a measure of the expected life, taking into account any prepayment or call features of the security, of a fixed-income security that is used to determine the price sensitivity of the security for a given change in interest rates. Specifically, duration is the change in the value of a fixed-income security that will result from a 1% change in interest rates, and generally is stated in years. Maturity, on the other hand, is the date on which a fixed-income security becomes due for payment of principal.
10. Fund Mergers
On September 5, 2012, the Shareholders of the Fifth Third Funds (the “Reorganizing Funds”) approved an Agreement and Plan of Reorganization providing for the transfer of all assets and liabilities of each Reorganizing Fund to the corresponding Touchstone shell Fund as noted below, effectively acting as a shell organization. In a shell reorganization, the surviving shell fund assumes the financial and performance history of the acquired fund. The merger took place on September 10, 2012. The Funds’ fiscal year end was changed to 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 | | Small Cap Growth 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 | |
| * | The 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 new Institutional Class shares. |
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 A 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 | |
| | | | | | | | | | | | | | | | | |
Notes to Financial Statements
March 31, 2013 (Continued)
| | | Before Reorganization | | | Class A Shares Issued | | | After Reorganization | |
| | | Class A | | | Class B | | | | | | Class A | |
| Small Cap Growth 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 | |
| | | | | | | | | | | | | | | | | |
| 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. |
11. 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.
Effective April 26, 2013, the Touchstone Micro Cap Value Fund was renamed the Touchstone Small Cap Growth Fund and seeks 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 of Trustees also approved the selection of Apex Capital Management, Inc., as sub-advisor to the Small Cap Growth Fund and the termination of Russell Implementation Services, Inc., the Small Cap Growth Fund’s interim sub-advisor. Additionally, the Board of Trustees approved breakpoints in both the Small Cap Growth Fund’s advisory and sub-advisory fees, which will lower the management fee for shareholders as the Small Cap Growth Fund grows. Finally, the Board of Trustees approved lowering the Small Cap Growth Fund’s total operating expense limitation, which will reduce total shareholder expenses.
At a meeting of the Board of Trustees (the “Board”) held on May 23, 2013, the Board approved a reorganization providing for the transfer of all assets and liabilities of the Touchstone Diversified Small Cap Growth Fund into the Touchstone Small Cap Growth Fund, pursuant to an agreement and plan of reorganization. Both Funds are series of the Touchstone Strategic Trust. The shareholders of the Touchstone Diversified Small Cap Growth Fund will receive shares of the Touchstone Small Cap Growth Fund. The Touchstone Diversified Small Cap Growth Fund will be subsequently liquidated. The reorganization is expected to occur on or about August 23, 2013.
There were no other subsequent events that necessitated recognition or disclosure on the Funds’ financial statement.
Report of Independent Registered Public Accounting Firm
To the members of the Board of Trustees and Shareholders of Touchstone Strategic Trust
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Touchstone International Value Fund (formerly Fifth Third International Equity Fund),Touchstone Small Cap Growth Fund (formerly Touchstone Micro Cap Value Fund, formerly Fifth Third Micro Cap Value Fund), Touchstone Small Company Value Fund (formerly Fifth Third Small Cap Value Fund), and Touchstone Strategic Income Fund (formerly Fifth Third Strategic Income Fund) (four of the funds constituting the Touchstone Strategic Trust, hereafter referred to as the “Funds”) at March 31, 2013 and the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2013 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Denver, Colorado
May 23, 2013
Other Items (Unaudited)
Qualified Dividend Income
Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “Act”), the following percentages of ordinary dividends paid during the fiscal year ended March 31, 2013 are designated as “qualified dividend income,” as defined in the Act, and are subject to reduced tax rates in 2013. The Funds intend to pass through the maximum allowable percentage for 1099s.
| International Value Fund | | | 100.00 | % |
| Small Cap Growth Fund | | | 72.09 | % |
| Small Company Value Fund | | | 25.47 | % |
| Strategic Income Fund | | | 29.58 | % |
Dividend Received Deduction
For corporate shareholders, the following ordinary distributions paid during the current fiscal period ended March 31, 2013 qualify for the corporate dividends received deduction. The Funds intend to pass through the maximum allowable percentage for 1099s.
| International Value Fund | | | 0.16 | % |
| Small Cap Growth Fund | | | 78.00 | % |
| Small Company Value Fund | | | 26.41 | % |
| Strategic Income Fund | | | 30.20 | % |
For the fiscal year ended March 31, 2013, the Small Cap Growth Fund and Small Company Value Fund designates $1,906,955 and $3,478,686 respectively as long-term capital gains.
Foreign Tax Income & Foreign Tax Credit
International Value Fund intends to pass through a foreign tax credit to their respective shareholders. For the period ended March 31, 2013, the total amount of foreign source income is $2,007,234 or $0.12 per share. The total amount of foreign taxes to be paid is $115,898 or $0.007 per share. Shareholders’ allocable share of the foreign tax credit will be reported on Form 1099 Div.
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.
Other Items (Unaudited)
(Continued)
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2012 through March 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 March 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect on any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second line of the table below is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | Expenses | |
| | | | | Net Expense | | | Beginning | | | Ending | | | Paid During | |
| | | | | Ratio | | | Account | | | Account | | | the Period | |
| | | | | Annualized | | | Value | | | Value | | | Ended | |
| | | | | March 31, | | | October 1, | | | March 31, | | | March 31, | |
| | | | | 2013 | | | 2012 | | | 2013 | | | 2013* | |
| Touchstone International Value Fund | | | | | | | | | | | | | | | | | | |
| Class A | | Actual | | | 1.36 | % | | $ | 1,000.00 | | | $ | 1,066.10 | | | $ | 7.01 | |
| Class A | | Hypothetical | | | 1.36 | % | | $ | 1,000.00 | | | $ | 1,018.15 | | | $ | 6.84 | |
| | | | | | | | | | | | | | | | | | | |
| Class C | | Actual | | | 2.11 | % | | $ | 1,000.00 | | | $ | 1,061.80 | | | $ | 10.85 | |
| Class C | | Hypothetical | | | 2.11 | % | | $ | 1,000.00 | | | $ | 1,014.41 | | | $ | 10.60 | |
| | | | | | | | | | | | | | | | | | | |
| Class Y | | Actual | | | 1.05 | % | | $ | 1,000.00 | | | $ | 1,068.00 | | | $ | 5.41 | |
| Class Y | | Hypothetical | | | 1.05 | % | | $ | 1,000.00 | | | $ | 1,019.70 | | | $ | 5.29 | |
| | | | | | | | | | | | | | | | | | | |
| Institutional Class | | Actual | | | 0.96 | % | | $ | 1,000.00 | | | $ | 1,068.00 | | | $ | 4.95 | |
| Institutional Class | | Hypothetical | | | 0.96 | % | | $ | 1,000.00 | | | $ | 1,020.14 | | | $ | 4.84 | |
| | | | | | | | | | | | | | | | | | | |
| Touchstone Small Cap Growth Fund | | | | | | | | | | | | | | | | | | |
| Class A | | Actual | | | 1.60 | % | | $ | 1,000.00 | | | $ | 1,117.30 | | | $ | 8.45 | |
| Class A | | Hypothetical | | | 1.60 | % | | $ | 1,000.00 | | | $ | 1,016.95 | | | $ | 8.05 | |
| | | | | | | | | | | | | | | | | | | |
| Class C | | Actual | | | 2.35 | % | | $ | 1,000.00 | | | $ | 1,112.70 | | | $ | 12.38 | |
| Class C | | Hypothetical | | | 2.35 | % | | $ | 1,000.00 | | | $ | 1,013.21 | | | $ | 11.80 | |
| | | | | | | | | | | | | | | | | | | |
| Class Y | | Actual | | | 1.35 | % | | $ | 1,000.00 | | | $ | 1,119.50 | | | $ | 7.13 | |
| Class Y | | Hypothetical | | | 1.35 | % | | $ | 1,000.00 | | | $ | 1,018.20 | | | $ | 6.79 | |
| | | | | | | | | | | | | | | | | | | |
| Institutional Class | | Actual | | | 1.25 | % | | $ | 1,000.00 | | | $ | 1,121.90 | | | $ | 6.61 | |
| Institutional Class | | Hypothetical | | | 1.25 | % | | $ | 1,000.00 | | | $ | 1,018.70 | | | $ | 6.29 | |
Other Items (Unaudited)
(Continued)
| | | | | | | | | | | | | | Expenses | |
| | | | | Net Expense | | | Beginning | | | Ending | | | Paid During | |
| | | | | Ratio | | | Account | | | Account | | | the Period | |
| | | | | Annualized | | | Value | | | Value | | | Ended | |
| | | | | March 31, | | | October 1, | | | March 31, | | | March 31, | |
| | | | | 2013 | | | 2012 | | | 2013 | | | 2013* | |
| Touchstone Small Company Value Fund | | | | | | | | | | | | | | | | | | |
| Class A | | Actual | | | 1.20 | % | | $ | 1,000.00 | | | $ | 1,153.70 | | | $ | 6.44 | |
| Class A | | Hypothetical | | | 1.20 | % | | $ | 1,000.00 | | | $ | 1,018.95 | | | $ | 6.04 | |
| | | | | | | | | | | | | | | | | | | |
| Class C | | Actual | | | 1.95 | % | | $ | 1,000.00 | | | $ | 1,149.40 | | | $ | 10.45 | |
| Class C | | Hypothetical | | | 1.95 | % | | $ | 1,000.00 | | | $ | 1,015.21 | | | $ | 9.80 | |
| | | | | | | | | | | | | | | | | | | |
| Class Y | | Actual | | | 0.95 | % | | $ | 1,000.00 | | | $ | 1,154.90 | | | $ | 5.10 | |
| Class Y | | Hypothetical | | | 0.95 | % | | $ | 1,000.00 | | | $ | 1,020.19 | | | $ | 4.78 | |
| | | | | | | | | | | | | | | | | | | |
| Institutional Class | | Actual | | | 0.85 | % | | $ | 1,000.00 | | | $ | 1,155.80 | | | $ | 4.57 | |
| Institutional Class | | Hypothetical | | | 0.85 | % | | $ | 1,000.00 | | | $ | 1,020.69 | | | $ | 4.28 | |
| | | | | | | | | | | | | | | | | | | |
| Touchstone Strategic Income Fund | | | | | | | | | | | | | | | | | | |
| Class A | | Actual | | | 0.94 | % | | $ | 1,000.00 | | | $ | 1,032.60 | | | $ | 4.76 | |
| Class A | | Hypothetical | | | 0.94 | % | | $ | 1,000.00 | | | $ | 1,020.24 | | | $ | 4.73 | |
| | | | | | | | | | | | | | | | | | | |
| Class C | | Actual | | | 1.69 | % | | $ | 1,000.00 | | | $ | 1,029.10 | | | $ | 8.55 | |
| Class C | | Hypothetical | | | 1.69 | % | | $ | 1,000.00 | | | $ | 1,016.50 | | | $ | 8.50 | |
| | | | | | | | | | | | | | | | | | | |
| Class Y | | Actual | | | 0.63 | % | | $ | 1,000.00 | | | $ | 1,035.10 | | | $ | 3.20 | |
| Class Y | | Hypothetical | | | 0.63 | % | | $ | 1,000.00 | | | $ | 1,021.79 | | | $ | 3.18 | |
| | | | | | | | | | | | | | | | | | | |
| Institutional Class | | Actual | | | 0.59 | % | | $ | 1,000.00 | | | $ | 1,034.30 | | | $ | 2.99 | |
| Institutional Class | | Hypothetical | | | 0.59 | % | | $ | 1,000.00 | | | $ | 1,021.99 | | | $ | 2.97 | |
| * | Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect one-half year period). |
Basis for Board's Approval of Sub-Advisory Agreements
At a meeting held on January 15, 2013, the Board of Trustees (the “Board” or “Trustees”) of the Touchstone Strategic Trust (the “Trust”), and by a separate vote, the Independent Trustees of the Trust, approved an interim Sub-Advisory Agreement (the “Interim Sub-Advisory Agreement”) with respect to Touchstone Micro Cap Value Fund (the “Fund”) between Touchstone Advisors, Inc. (the “Advisor”) and Russell Implementation Services, Inc. (the “Interim Sub-Advisor”). At the January meeting, management proposed that the Interim Sub-Advisor manage the Fund until a permanent sub-advisor was chosen. Also at that meeting, the Board approved changes to the Fund’s principal investment strategies. At a meeting held on February 21, 2013, the Board of the Trust, and by a separate vote, the Independent Trustees of the Trust, approved a Sub-Advisory Agreement (the “New Sub-Advisory Agreement”) with respect to the Fund between the Advisor and Apex Capital Management, Inc. (the “New Sub-Advisor”). At the February meeting, the Board also approved the Amended and Restated Schedule 1 to the Advisory Agreement between the Trust and the Advisor that added breakpoints to the advisory fee, the termination of the Interim Sub-Advisory Agreement, a change in the principal investment strategies of the Fund, and the change in the name of the Fund to Touchstone Small Cap Growth Fund. The aforementioned changes were to become effective on April 26, 2013.
In determining whether to approve the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement, the Advisor furnished information necessary for a majority of the Independent Trustees to make the determination that approvals of the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement were in the best interest of the Fund and its shareholders. The Board took into account certain information and materials relating to the Fund, the Advisor, the Interim Sub-Advisor, and the New Sub-Advisor that the Board had received prior
Other Items (Unaudited)
(Continued)
to the meetings. The information provided to the Board included: (1) a comparison of the Fund’s proposed sub-advisory fee to be paid to the New Sub-Advisor and other fees and anticipated expense ratios with those of a comparable fund; (2) performance information of a comparable fund managed by the New Sub-Advisor; and (3) information about the Advisor’s, the Interim Sub-Advisor’s, and the New Sub-Advisor’s personnel. Prior to voting, the Independent Trustees reviewed the proposed Interim Sub-Advisory Agreement and New Sub-Advisory Agreement with management and with experienced independent legal counsel and received materials from such counsel discussing the legal standards for their consideration of the Sub-Advisory Agreements with respect to the Fund.
In approving the Fund’s Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement, the Board considered various factors with respect to the Fund, the Interim Sub-Advisory Agreement, and the New 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 Interim Sub-Advisor’s and the New Sub-Advisor’s proposed compensation; (3) a comparison of the proposed sub-advisory fee to be paid to the New Sub-Advisor and the performance of a comparable fund managed by the New Sub-Advisor; and (4) the terms of the Interim Sub-Advisory Agreement and the New 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 levels of knowledge and investment styles. The Board reviewed the experience and credentials of the applicable investment personnel who would be responsible for managing the investment of portfolio securities with respect to the Fund. The Board noted the Interim Sub-Advisor’s established track record and experience in transition management. The Board noted that the Interim Sub-Advisory Agreement would be terminated once the Board approved a permanent sub-advisor for the Fund.
Sub-Advisor’s Compensation. The Board took into consideration the financial condition of each Sub-Advisor and any indirect benefits to be derived by them and their affiliates from their relationship with the Fund. In considering the anticipated profitability to the Interim Sub-Advisor and the New Sub-Advisor of their relationship with the Fund, the Board noted the undertaking of the Advisor to maintain expense limitations for the Fund and also noted that the sub-advisory fees under the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement 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 the Interim Sub-Advisor and the New Sub-Advisor of their relationship with the 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 Fund to be a substantial factor in its consideration.
Sub-Advisory Fees and Fund Performance. The Board considered that the Fund will pay an advisory fee to the Advisor and that the Advisor will pay a sub-advisory fee to the Interim Sub-Advisor and the New Sub-Advisor, as applicable, out of the advisory fee it receives from the 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, the Interim Sub-Advisor, and the New Sub-Advisor. The Board also noted that the Advisor negotiated the sub-advisory fee with the Interim Sub-Advisor and the New Sub-Advisor at arm’s-length. The Board noted that the Interim Sub-Advisor’s proposed sub-advisory fee was lower than the fee paid to the prior sub-advisor. The Board also noted that the New Sub-Advisor’s proposed sub-advisory fee schedule contained breakpoints that would reduce the sub-advisory fee rate on assets above specified levels as the Fund’s assets increased. The Board considered the proposed sub-advisory fee for the Fund with respect to each Sub-Advisor and concluded that the Fund’s proposed sub-advisory fee was reasonable in light of the services to be received by the Fund and the other factors considered.
The Board noted that in its search for a permanent sub-advisor to the Fund, the Advisor had been unable to find a suitable sub-advisor that utilized a micro cap strategy. The Board also noted that the Advisor had selected the small cap growth strategy managed by the New Sub-Advisor as a suitable replacement for the micro cap
Other Items (Unaudited)
(Continued)
strategy of the Fund from among a number of strategies the Advisor had considered. The Board considered the performance of a fund managed by the New Sub-Advisor that utilized the small cap growth strategy that the New Sub-Advisor proposed to use in managing the Fund.
As noted above, the Board considered each Sub-Advisor’s performance record. 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, where appropriate.
Conclusion. In considering the approval of the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement with respect to the 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) each Sub-Advisor is qualified to manage the Fund’s assets in accordance with the Fund’s investment goals and policies; (b) each Sub-Advisor maintains an appropriate compliance program; (c) the 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-Advisors; and (e) each Sub-Advisor’s proposed investment strategies are appropriate for pursuing the investment goals of the Fund. Based on its conclusions, the Board determined that approval of the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement with respect to the Fund was in the best interests of the Fund and its shareholders.
Management of the Trust (Unaudited)
Listed below is basic information regarding The Trustees and principal officers of The Trust. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling 1.800.543.0407.
Interested Trustees1:
| | | | | | | | | Number | | |
| | | | | | | | | of Funds | | |
| | | | | | | | | Overseen | | |
| | | | | Term of | | | | in the | | Other |
| Name | | Position(s) | | Office2 And | | | | Touchstone | | Directorships |
| Address | | Held with | | Length of | | Principal Occupation(s) | | Fund | | Held During the Past |
| Age | | Trust | | Time Served | | During the Past 5 Years | | Complex3 | | 5 Years4 |
Jill T. McGruder
Touchstone Advisors, Inc
303 Broadway
Cincinnati, OH
Year of Birth: 1955 | | Trustee and President | | Until retirement at age 75 or until she resigns or is removed Trustee since 1999 | | President and CEO of IFS Financial Services, Inc. (a holding company). | | 52 | | Director of LaRosa’s (a restaurant chain), Capital Analysts Incorporated (an investment advisor and broker- dealer), IFS Financial Services, Inc. (a holding company), Integrity and National Integrity Life Insurance Co., Touchstone Securities (the Trust’s distributor), Touchstone Advisors (the Trust’s investment advisor and administrator) and W&S Brokerage Services (a brokerage company) and W&S Financial Group Distributors (a distribution company). |
| Independent Trustees: | | | | | | | | | | |
Phillip R. Cox
105 East Fourth Street
Cincinnati, OH
Year of Birth: 1947 | | Trustee | | Until retirement at age 75 or until he resigns or is removed Trustee since 1999 | | President and Chief Executive Officer of Cox Financial Corp. (a financial services company). | | 52 | | Director of Cincinnati Bell (a communications company), Bethesda Inc. (a hospital), Timken Co. (a manufacturing company), Diebold (a technology solutions company), and Ohio Business Alliance for Higher Education. Director of Duke Energy from 1994-2008. |
H. Jerome Lerner
c/o Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1938 | | Trustee | | Until retirement at age 75 or until he resigns or is removed Trustee since 1989 | | None | | 52 | | BASCO Shower Enclosures (a design and manufacturing company) from 2000 to present; Hebrew Union College - Jewish Institute of Religion from 1990 to present. |
Management of the Trust (Unaudited)
(Continued)
Independent Trustees (Continued):
| | | | | | | | | Number | | |
| | | | | | | | | of Funds | | |
| | | | | | | | | Overseen | | |
| | | | | Term of | | | | in the | | Other |
| Name | | Position(s) | | Office2 And | | | | Touchstone | | Directorships |
| Address | | Held with | | Length of | | Principal Occupation(s) | | Fund | | Held During the |
| Age | | Trust | | Time Served | | During the Past 5 Years | | Complex3 | | Past 5 Years4 |
Donald C. Siekmann
c/o Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1938 | | Trustee | | Until retirement at age 75 or until he resigns or is removed Trustee since 2005 | | Executive for Duro Bag Manufacturing Co. (a bag manufacturer) from 2003-2008. | | 52 | | Riverfront Mutual Funds (until 2008). |
Susan J. Hickenlooper
c/o Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1946 | | Trustee | | Until retirement at age 75 or until she resigns or is removed Trustee since 2009 | | Financial Analyst for Impact 100 (Charitable Organization) from 11/2012 to present. | | 52 | | Trustee of Gateway Trust (a mutual fund) from 2006-2009, Trustee of Cincinnati Parks Foundation (a charitable organization) from 2000 to present; Trustee of Episcopal Retirement Homes Foundation from 1998-2011. |
| 1 | Ms. McGruder, as a director of the Advisor and the Distributor, and an officer of affiliates of the Advisor and Distributor, is an “interested person” of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. |
2 Each Trustee is elected to serve until the age of 75 or until he or she sooner resigns or is removed.
| 3 | The Touchstone Fund Complex consists of 19 series of the Trust, 3 series of Touchstone Tax-Free Trust, 14 series of Touchstone Funds Group Trust, 4 series of Touchstone Investment Trust, 1 series of Touchstone Institutional Funds Trust, and 11 variable annuity series of Touchstone Variable Series Trust. |
| 4 | Each Trustee is also a Trustee of Touchstone Funds Group Trust, Touchstone Tax-Free Trust, Touchstone Investment Trust, Touchstone Institutional Funds Trust, and Touchstone Variable Series Trust. |
Management of the Trust (Unaudited)
(Continued)
Principal Officers':
| | | | | Term of | | |
| Name | | Position(s) | | Office And | | |
| Address | | Held with | | Length of | | Principal Occupation(s) |
| Age | | Trust | | Time Served | | During the Past 5 Years |
Jill T. McGruder
Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1955 | | President | | Until resignation, removal or disqualification President since 2004; President from 2000- 2002 | | See biography above. |
Steven M. Graziano
Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1954 | | Vice President | | Until resignation, removal or disqualification Vice President since 2009 | | President of Touchstone Advisors, Inc.; Executive Vice President of Pioneer Investment Management, Head of Retail Distribution and Strategic Marketing 2007- 2008; Executive Vice President of Pioneer Investment Management, Chief Marketing Officer 2002-2007. |
Timothy D. Paulin
Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1963 | | Vice President | | Until resignation, removal or disqualification Vice President since 2010 | | Senior Vice President of Investment Research and Product Management of Touchstone Advisors, Inc.; Director of Product Design of Klein Decisions, Inc. 2003-2010. |
Michael Moser
Western & Southern Financial Group
303 Broadway
Cincinnati, OH
Year of Birth: 1968 | | Chief Compliance Officer | | Until resignation, removal or disqualification Chief Compliance Officer since 2012 | | Vice President and Chief Compliance Officer of the Western & Southern Financial Group and Chief Compliance Officer of Touchstone Advisors. |
Terrie A. Wiedenheft
Touchstone Advisors, Inc.
303 Broadway
Cincinnati, OH
Year of Birth: 1962 | | Controller and Treasurer | | Until resignation, removal or disqualification Controller since 2000 Treasurer since 2003 | | Senior Vice President, Chief Financial Officer and Chief Operations Officer of IFS Financial Services, Inc. |
Elizabeth R. Freeman
BNY Mellon Investment
Servicing (US) Inc.
201 Washington Street, 34th Floor
Boston, MA
Year of Birth: 1962 | | Secretary | | Until resignation, removal or disqualification. Secretary since 2011 | | Managing Director and Senior Counsel at BNY Mellon Investment Servicing (US) Inc. |
| 1 | Each officer also holds the same office with Touchstone Funds Group Trust, Touchstone Institutional Funds Trust, Touchstone Investment Trust, Touchstone Tax-Free Trust and Touchstone Variable Series Trust. |
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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 Annual Report.
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
Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has determined that the registrant has at least one audit committee financial expert serving on its audit committee. Mr. Donald Siekmann is the registrant’s audit committee financial expert and is an independent trustee within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).
Item 4. Principal Accountant Fees and Services.
Audit Fees
| (a) | The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year are $88,350 for 2013. The Funds were acquired by the Touchstone Strategic Trust on September 10, 2012. |
Audit-Related Fees
| (b) | The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $5,000 for 2013. The Funds were acquired by the Touchstone Strategic Trust on September 10, 2012. |
Tax Fees
| (c) | The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $19,200 for 2013. The Funds were acquired by the Touchstone Strategic Trust on September 10, 2012. |
All Other Fees
| (d) | There were no fees for all other services to Touchstone Strategic Trust not included above. |
| (e)(1) | Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
The Audit Committee’s pre-approval policies describe the types of audit, audit-related, tax and other services that have the general pre-approval of the Audit Committee. The pre-approval policies provide that annual audit service fees, tax services not specifically granted pre-approval, services exceeding pre-approved cost levels and other services that have not received general pre-approval will be subject to specific pre-approval by the Audit Committee. The pre-approval policies further provide that the Committee may grant general pre-approval to other audit services (statutory audits and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings), audit-related services (accounting consultations related to accounting, financial reporting or disclosure matters not classified as “audit services,” assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities, agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters and assistance with internal control reporting requirements under Form N-SAR and Form N-CSR), tax services that have historically been provided by the auditor that the Committee believes would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence and permissible non-audit services classified as “all other services” that are routine and recurring services.
| (e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: |
| (f) | The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. |
| (g) | The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant was $19,200 for 2013. The Funds were acquired by the Touchstone Strategic Trust on September 10, 2012. |
| (h) | The registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. |
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. |
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) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
| (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. |
| (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. |
| (12.other) | Not applicable. |
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) | |
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) | |
| By (Signature and Title)* | /s/ Terrie A. Wiedenheft | |
| | Terrie A. Wiedenheft, Controller and Treasurer | |
| | (principal financial officer) | |
* Print the name and title of each signing officer under his or her signature.
