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 811-08416
Touchstone Variable Series Trust
(Exact name of registrant as specified in charter)
303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203
(Address of principal executive offices) (Zip code)
E. Blake Moore, Jr.
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: December 31
Date of reporting period: December 31, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
| (a) | The Report to Shareholders is attached herewith. |
December 31, 2020
Annual Report
| Touchstone Variable Series Trust |
| Touchstone Balanced Fund |
| Touchstone Bond Fund |
| Touchstone Common Stock Fund |
| Touchstone Small Company Fund |
| Touchstone Aggressive ETF Fund |
| Touchstone Conservative ETF Fund |
| Touchstone Moderate ETF Fund |
Table of Contents
This report identifies the Funds' investments on December 31, 2020. These holdings are subject to change. Not all investments in each Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not occur.
2
Dear Shareholder:
We are pleased to provide you with the Touchstone Variable Series Trust Annual Report. Inside you will find key financial information, as well as manager commentaries for the Funds, for the 12 months ended December 31, 2020.
A tumultuous calendar year 2020 ended on a high. Third quarter U.S. GDP data released in October reported the largest quarterly growth rate ever recorded while U.S. unemployment continued to decline. This represented a significant rebound in GDP growth from the second quarter; however, the year was expected to end in negative territory. Despite a hotly contested presidential election and a spike in COVID-19 cases leading to a re-imposition of economic restrictions, U.S. capital markets continued to climb following massive stimulus that was enacted in March to combat the widening pandemic. Capital markets received a boost late in the year as vaccine trial results provided reason for optimism. Outside the U.S., economic growth was relatively benign as GDP growth rates in the European Union (EU), Japan and the U.K. rebounded in the third quarter, but not as strongly as in the U.S. Garnering less attention was the official British exit from the EU, also known as Brexit, which occurred at midnight on December 31, 2020, concluding a long saga of negotiation breakdowns and changes in U.K. political leadership.
U.S. equity markets posted strong returns for 2020. The S&P 500® Index was driven by growth equities, which far outpaced value equities due to growth equities’ lower exposure to pandemic-sensitive cyclicals, financials and energy segments of the U.S. economy. Non-U.S. equities posted solid-to-strong returns relative to those in the U.S. International Developed Markets (MSCI EAFE Index) were led by “safe haven” countries such as Japan, Switzerland and France, and Emerging Markets (MSCI EM Index) were led by South Korea, China, Taiwan and India for the year.
The U.S. Federal Reserve Board (Fed) continued near zero overnight rates and substantial direct purchases of an unprecedented breadth of various fixed income securities leading to overall low yields. Higher quality fixed income, which outperformed below investment grade corporate credit, benefited from a “flight to quality” early in the year followed by the aforementioned aggressive Fed monetary policy actions in response to the growing pandemic in March. Cutting overnight rates to zero and reinstituting Global Financial Crisis era policies, such as direct bond issue purchases, precipitated a significant downward shift across the yield curve. Conversely, below investment grade credit illustrated the strong, risk-on sentiment in response to Fed actions and fiscal stimulus efforts beginning in March throughout the remainder of 2020. However, both investment grade and below investment grade corporate credit spreads tightened following the November presidential election, providing a performance tailwind for corporate bonds.
Markets such as these reaffirm our belief in the importance of the steady hands of financial professionals, trust in one’s investment strategy and understanding of the risks of trying to time the market. We believe that environments that are more volatile create opportunity for active managers to add value, especially those that are Distinctively Active.
We greatly value your continued support. Thank you for including Touchstone as part of your investment plan.
Sincerely,
E. Blake Moore Jr.
President
Touchstone Variable Series Trust
3
Management's Discussion of Fund Performance (Unaudited)
Touchstone Balanced Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Balanced Fund (the “Fund”) seeks to achieve its investment goal of providing investors with capital appreciation and current income by generally investing in a diversified portfolio comprising approximately 60 percent equity securities and 40 percent fixed-income securities.
With respect to equities, the Fund invests primarily in issuers having a market capitalization, at the time of purchase, above $5 billion. Equity securities include common stock and preferred stock. With respect to fixed-income, the Fund invests primarily in bonds, including mortgage-related securities, asset-backed securities, government securities (both U.S. government securities and foreign sovereign debt), and corporate debt securities.
Fund Performance
The Fund (Class I Shares) outperformed the S&P 500® Index and the Bloomberg Barclays U.S. Aggregate Bond Index, for the 12-month period ended December 31, 2020. The Fund’s total return was 19.16 percent while the total return of the S&P 500® Index was 18.40 percent and the total return of the Bloomberg Barclays U.S. Aggregate Bond Index was 7.51 percent. The Fund’s benchmark indices were changed to the 60% S&P 500® Index, 40% Bloomberg Barclays U.S. Aggregate Bond Index effective January 1, 2021 to better reflect the strategy of the Fund. The Fund also outperformed that index which had a total return of 14.73 percent.
Market Environment
The Fund’s overweight spread risk versus the benchmark contributed to returns as spreads retraced a significant amount of the widening that took place in March. The Fund increased spread risk relative to the benchmark in late March and again in mid-April to take advantage of attractive valuations as a result of the sell-off in risk assets, specifically allocating to High Yield and increasing spread risk within Investment Grade Credit. After the sell-off in March, markets continued to react to the solid rebound in economic activity aided by the massive stimulus enacted by the U.S. Federal Reserve Board (Fed) and Congress.
Strong selection from Investment Grade Credit and Securitized Assets contributed to returns for the year. Within Investment Grade Credit, the Fund was positioned with overweights to non-defensive sectors, which contributed to performance. Within Securitized Assets, outperformance was largely driven by spread effects in out-of-index sectors including commercial mortgage-backed securities, agency mortgage-backed securities and collateralized loan obligations.
Lastly, interest rate management contributed to performance as well, as the team made a number of short term trades to position the Fund to be short and long duration versus the benchmark. The Fund was also positioned to be both over and underweight the long end of the curve throughout the one-year period, which also contributed to returns.
In late March of this year, we believed spread levels adequately compensated investors for the uncertainty present in markets and the economy. As a result, we increased the risk budget target, making additional allocations to credit sectors such as Investment Grade and High Yield corporate bonds. At the end of the year, the Fund was positioned to be neutral duration relative to the Bloomberg Barclays U.S. Aggregate Bond Index and was positioned to be neutral relative to the yield curve with a bias to be overweight to the long end of the curve.
Portfolio Review
The Fund’s equity sleeve outperformed its respective benchmark while the fixed income portion of the Fund outperformed the secondary benchmark. Absolute results benefited from the Fund’s slightly above average tilt to the equity sleeve and risk within fixed income during the year.
The equity sleeve performance was driven by sector allocation and security selection. In terms of stock selection, relative performing sectors included Consumer Discretionary, Financials, and Industrials while positions in Energy, Materials and Real Estate fared less well. Individual contributors included Apple Inc., Microsoft Corp. (both Information Technology sector), and Amazon.com Inc. (Consumer Discretionary sector). As previously stated, the Consumer Discretionary sector was a top contributor; however Carnival
4
Management's Discussion of Fund Performance (Unaudited) (Continued)
Corp. an individual Fund holding in that sector was a notable detractor to Fund performance. Other detractors included Raytheon Technologies Corp. (Industrials sector) and Exxon Mobil Corp. (Energy sector).
Despite underlying tactical changes there were no significant changes made to the Fund’s allocation for the year as the Fund maintained a slight overweight to equities versus fixed income. In late March of 2020 we believed valuations adequately compensated for the uncertainty present in markets and the economy. As a result, we made additional allocations to credit sectors such as Investment Grade and High Yield corporate bonds. Because of the COVID-19 economic shutdowns, spreads widened out beyond levels seen in a typical recession. Another adjustment took place at the beginning of October as we increased the Fund’s target to equities. And, at the end of the year, the Fund maintained an overweight to spread risk with a 5 percent target to Emerging Markets Debt and an overweight risk to Investment Grade Credit.
Outlook
We believe the greatest opportunities for the Fund will be driven by the durability of economic growth, stable inflation, accommodative central bank policy both domestically and abroad, and successful widespread distribution of the COVID-19 vaccine. The risk of lingering cases of COVID-19, especially throughout the remaining winter months, creates some near term uncertainty given the possibility of disrupting the momentum and progress made thus far in economic growth. Markets are aware of these uncertainties and, in our view, still offer value in certain sectors. We believe the Fed will continue to do its part and provide as much support as needed in order to maintain accommodative financial conditions. Additional fiscal stimulus will likely be needed in order to bridge the gap between now and when a widespread distribution of a vaccine is put into place. Even with these near term hurdles, we think current economic activity provides a solid foundation coming into 2021. The groundwork has been laid for longer-term prospects that the U.S. economy has the durability to remain on pace and return to pre-COVID-19 levels of activity around the second half of 2021.
Our belief in the Fund’s continued overweight of equities over fixed income is driven by both valuations and an overweight to risk given the economic environment. Within equities, we view the market as fairly valued with size and value factor exposures becoming more important. Within fixed income, we believe valuations of rates across the curve generally reflect the improving economic outlook and will remain low for some time given statements issued and policies enacted by the Fed. Risks to lower interest rates come from increased concerns over the global impact of COVID-19 and resulting impact on economic data. Risks to higher interest rates include higher than expected inflation, a shift in Fed policy and expansionary fiscal policy. We think solid fundamentals and accommodative policy support current levels.
We believe the Fund is well positioned based on our top-down management of interest rates, sector allocation and security selection from our fixed income and equity teams.
5
Management's Discussion of Fund Performance (Unaudited) (Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Balanced Fund, the Bloomberg Barclays U.S. Aggregate Bond Index and the S&P 500® Index
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
The inception date of the Fund was August 1, 2003.
Notes to Chart
S&P 500® Index is a group of 500 widely held stocks and is commonly regarded to be representative of the large capitalization stock universe.
The Bloomberg 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.
6
Management's Discussion of Fund Performance (Unaudited)
Touchstone Bond Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Bond Fund (the “Fund”) seeks to provide as high a level of current income as is consistent with the preservation of capital. Capital appreciation is a secondary goal. Under normal circumstances, the Fund invests at least 80 percent of its assets in bonds. Bonds include mortgage-related securities, asset-backed securities, government securities and corporate debt securities. The Fund primarily invests in investment-grade debt securities, but may invest up to 30 percent of total assets in non-investment-grade debt securities rated as low as B by a Nationally Recognized Statistical Rating Organization (NRSRO).
Fund Performance
The Fund (Class I Shares) outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the 12-month period ended December 31, 2020. The Fund’s total return was 9.71 percent, while the total return of the benchmark was 7.51 percent.
Market Environment
The year will be remembered as a lost year in some respects, but not necessarily for financial markets as prices whiplashed from the historic decline to a record-breaking rally. In fact, the recovery in risk assets was the fastest ever recorded. Even with the sell-off in late March, which saw the S&P 500 Index drop and Investment Grade Credit suffer a record-worst month relative to U.S. Treasuries, the majority of risk assets ended the year with positive annual returns.
The COVID-19 pandemic wreaked havoc on the global economy as governments at all levels took extreme measures to shut down local economies in order to prevent the spread of the virus. As these lockdown measures were put in place, economic activity came to a grinding halt and U.S. production as measured by GDP for the second quarter posted a staggering decline of -31.4 percent. Both the U.S. Federal Reserve Board (Fed) and U.S. Congress moved swiftly to help support the economy and credit markets, enacting monetary and fiscal policies totaling more than $5 trillion combined. The Fed provided multiple credit facilities to different areas of the market to provide financing and liquidity in order to keep markets functioning and capital accessible. Congress then implemented the CARES Act, aimed at establishing support for both consumers and businesses alike with extensions of unemployment insurance and the creation of the Paycheck Protection Program (PPP) that targeted small businesses through SBA loans in order for them to make payroll for employees and pay rent and utilities.
The support offered through these programs to limit the fallout was well received. An added boost occurred as businesses began to reopen in late April and when the unemployment rate fell unexpectedly in May. It was followed by another encouraging report in June, which showed U.S. jobs gains had accelerated to 4.8 million while the unemployment rate fell to 11.1 percent. The two-month cumulative increase in nonfarm payrolls recouped one third of the 22.2 million jobs lost in March and April.
In terms of financial markets, the rally in risk came back as swiftly as the correction and kept pace with little pause, fueled by the resiliency of the recovery in economic fundamentals, approval of the COVID-19 vaccines, and the recent outcome of the November U.S. election. The latter was central to the idea that with a Democrat in the White House and Democratic control of both the house and senate, passage of additional fiscal stimulus would go through with little obstruction. As a result, credit and equity markets ended the year strongly as equities reached all-time highs and credit spreads returned to pre-COVID-19 levels.
Portfolio Review
The Fund’s overweight spread risk versus the benchmark contributed to returns as spreads retraced a significant amount of the widening that took place in March. The Fund increased spread risk relative to the benchmark in late March and again in mid-April to take advantage of attractive valuations as a result of the sell-off in risk assets, specifically allocating to High Yield and increasing spread risk within Investment Grade Credit. After the sell-off in March, markets continued to react to the solid rebound in economic activity aided by the massive stimulus enacted by the Fed and Congress.
Strong selection from Investment Grade Credit and Securitized Assets contributed to returns for the year. Within Investment Grade Credit, the Fund was positioned with overweights to non-defensive sectors, which contributed to performance. Within Securitized
7
Management's Discussion of Fund Performance (Unaudited) (Continued)
Assets, outperformance was largely driven by spread effects in out-of-index sectors such as commercial mortgage-backed securities (CMBS), agency mortgage-backed securities and collateralized loan obligations.
Lastly, interest rate management contributed to performance as well, as the team made a number of short term trades to position the Fund to be short and long duration versus the benchmark. The Fund curve positioning also contributed to returns.
In late March of 2020 we believed spread levels adequately compensated for the uncertainty present in markets and the economy. As a result, we made additional allocations to credit sectors such as Investment Grade and High Yield corporate bonds. At the end of the year, the Fund was positioned to be neutral duration relative to the Bloomberg Barclays U.S. Aggregate Bond Index and was positioned to be neutral relative to the yield curve with a bias to be overweight to the long end of the curve.
Outlook
The greatest opportunities for the Fund will be driven by the durability of economic growth, stable inflation, accommodative central bank policy both domestically and abroad, and successful widespread distribution of the vaccine. The risk of lingering cases of COVID-19, especially throughout the remaining winter months, creates some near term uncertainty given the possibility of disrupting the momentum and progress made thus far in economic growth. Markets are aware of these uncertainties and, in our view, still offer value in certain sectors. We believe the Fed will continue to do its part and provide as much support as needed in order to maintain accommodative financial conditions. Additional fiscal stimulus will likely be needed in order to bridge the gap between now and when a widespread distribution of a vaccine is put into place. Even with these near term hurdles, current economic activity provides a solid foundation coming into 2021. The groundwork has been laid for longer-term prospects that the U.S. economy has the durability to remain on pace and return to pre-COVID-19 levels of activity around the second half of 2021.
We believe valuations of rates across the curve generally reflect the improving economic outlook and will remain low for some time given statements issued and policies enacted by the Fed. Risks to lower interest rates come from increased concerns over the global impact of COVID-19, and resulting impact on economic data. Risks to higher interest rates include higher than expected inflation, a shift in Fed policy, and expansionary fiscal policy.
Our preference within the securitized sector remains in high-quality, non-government securities: asset-backed securities (ABS), CMBS, and non-agency residential mortgage-backed securities. The recovery in spreads has been broad-based with the exception of hospitality-related CMBS (low occupancy rates) and certain Whole Business ABS credits (low foot traffic), which have lagged. Within Investment Grade Credit, we are generally favoring non-cyclical sectors such as utilities, while selectively adding higher quality names in cyclical sectors such as manufacturing and consumer. We are reducing exposure to High Yield; while we are positive on risk assets given the long-term economic outlook and expected policy support, we think it is appropriate to slightly reduce exposure at these levels. The Fund continues to have a modest allocation to U.S. dollar denominated Emerging Markets debt, but we will continue to monitor the impact of COVID-19 and how emerging economies are able to contain the virus and maintain sustainable economic growth. We believe the Fund is well-positioned based on our top-down management of interest rates, sector allocation and security selection.
8
Management's Discussion of Fund Performance (Unaudited) (Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Bond Fund and the Bloomberg Barclays U.S. Aggregate Bond Index
*The chart above represents performance of Class I Shares only, which will vary from the performance of Class SC shares based on the differences in fees paid by shareholders in the different classes. The inception date of Class I Shares and Class SC Shares was August 1, 2003 and July 10, 2019, respectively. Class SC shares performance was calculated using the historical performance of Class I Shares for the periods prior to July 10, 2019. The returns have been restated for fees applicable to Class SC shares.
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
Note to Chart
The Bloomberg 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.
9
Management's Discussion of Fund Performance (Unaudited)
Touchstone Common Stock Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Common Stock Fund (the “Fund” )seeks to provide investors with capital appreciation. The Fund seeks to invest at least 80 percent of its assets in large capitalization equity securities. The Fund’s sub-advisor, Fort Washington Investment Advisors, Inc., seeks to invest in companies that are trading below what is believed to be the estimate of the companies’ intrinsic value and have a sustainable competitive advantage or a high barrier to entry in place. The barrier(s) to entry can be created through a cost advantage, economies of scale, high customer loyalty or a government barrier (e.g. license or subsidy). Fort Washington believes that the strongest barrier to entry is the combination of economies of scale and high customer loyalty.
Fund Performance
The Fund (Class I Shares) outperformed its benchmark, the S&P 500® Index, for the 12-month period ended December 31, 2020. The Fund’s total return was 23.68 percent while the benchmark’s total return was 18.40 percent.
Market Environment
Despite a global pandemic, many U.S. equity market indexes ended the year at or near all-time highs on positive vaccine news along with accommodative fiscal and monetary policy. The Information Technology sector led the market higher during the year. The Energy sector was the worst performer for the period.
Portfolio Review
Fund sectors that outperformed relative to the benchmark included Consumer Discretionary, Industrials, Consumer Staples, Health Care, and Communication Services. Sectors where performance lagged relative to the benchmark included Materials, Financials, Information Technology, Energy and Real Estate. Stock selection was positive for the period. The Fund’s outperformance was primarily driven by stock selection and secondarily by sector allocation. Positive sector allocation for the period was primarily due to no weight in Utilities and an overweight to Communication Services.
At the holding level, among the largest contributors were Amazon.com Inc. (Consumer Discretionary sector), JD.com Inc. (Consumer Discretionary sector) and Deere & Company (Industrials sector). As previously stated, the Consumer Discretionary sector was a top contributor, however Carnival Corp. an individual Fund holding in that sector was a notable detractor to Fund performance. Other notable detractors included Berkshire Hathaway, Inc. Class B Shares (Financials sector), and Jones Lang LaSalle Inc. (Real Estate sector).
Outlook
U.S. equity markets ended the year at or near all-time highs as investors continued to price in a recovery from the pandemic taking hold sometime in 2021. Accommodative fiscal and monetary policy combined with vaccine deployment has provided optimism that GDP growth and profit growth will see meaningful improvement in the near future. Many are now considering how much of this is reflected in valuations and how to position portfolios as the impact of the pandemic wanes. We believe there are pockets of the market where valuations are stretched, but in aggregate, the market is marginally undervalued. Market breadth is healthy, inflation is tame, and we believe the economy is likely to accelerate in 2021 due to higher savings driving pent up demand.
We believe we have taken advantage of the volatility in 2020 to gradually shift Fund positioning while keeping the general focus on higher return on capital businesses that we believe are mispriced. We have continued to methodically deploy or redeploy capital since March 2020 in an effort to upgrade the Fund’s portfolio. Since earlier in the year, we have been consistently reducing position sizes in stocks that we view as more expensive or that are less compelling to free up capital for more attractive business models that have become reasonably priced in our view. We have trimmed more fully valued Information Technology sector-related holdings, while opportunistically adding mid-cap exposure to the Fund’s portfolio. We have marginally built more cyclical positions in attractive business models that have been and will continue to be affected by COVID-19 in the near term. We believe these shifts combined with our continued emphasis on businesses with higher barriers to entry and strong balance sheets position the Fund’s portfolio well going forward.
10
Management's Discussion of Fund Performance (Unaudited) (Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Common Stock Fund and the S&P 500® Index
*The chart above represents performance of Class I Shares only, which will vary from the performance of Class SC shares based on the differences in fees paid by shareholders in the different classes. The inception date of Class I Shares and Class SC Shares was November 30, 2000 and July 10, 2019, respectively. Class SC shares performance was calculated using the historical performance of Class I Shares for the periods prior to July 10, 2019. The returns have been restated for fees applicable to Class SC shares.
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
Note to Chart
S&P 500® Index is a group of 500 widely held stocks and is commonly regarded to be representative of the large capitalization stock universe.
11
Management's Discussion of Fund Performance (Unaudited)
Touchstone Small Company Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Small Company Fund (the “Fund”) seeks to provide investors with growth of capital by investing primarily in common stocks of small companies that the sub-advisor believes are high quality, have superior business models, solid management teams, sustainable growth potential and are attractively valued.
Fund Performance
The Fund underperformed its benchmark, the Russell 2000® Index, for the 12-month period ended December 31, 2020. The Fund’s total return was 18.70 percent while the return of the benchmark was 19.96 percent.
Market Environment
The Russell 2000® Index returned nearly 20 percent for the 2020 calendar year. The strong performance for the year belies the volatile path taken by most major economies and equities markets during the year due to the onset of the COVID-19 pandemic. In the U.S., unprecedented fiscal and monetary policy actions and stimulus were implemented to support the economy while restrictions on economic activity were imposed to slow the spread of the virus. The year ended on more positive footing driven by improving economic growth, and most importantly, FDA approval of two COVID-19 vaccines for emergency use.
From a sector perspective in 2020, Health Care, Information Technology, Consumer Discretionary, Consumer Staples, and Industrials outperformed the overall small-cap market. Energy notably underperformed, declining more than 34 percent while Real Estate, Financials and Utilities posted low, single-digit losses. Materials and Communication Services sectors also underperformed the overall small-cap market, albeit with positive returns for the year.
Portfolio Review
The sectors that contributed to the Fund’s relative performance were Financials, Information Technology, and Energy. Stock selection was positive in all three sectors. Also, the Fund was overweight to the outperforming Information Technology sector, and underweight to the underperforming Energy and Financials sectors which positively impacted performance. The sectors that detracted most from performance were Consumer Staples, Industrials, and Health Care due to negative stock selection.
Among the top performing stocks in 2020 were Cerence Inc. and Nuance Communications Inc. (both Information Technology sector), and Quanta Services Inc. (Industrials sector). Cerence is a provider of software to the automotive industry that powers voice interactions between automobiles, drivers, and the connected digital world. We believe the stock appreciated due to increasing investor understanding of its dominant market share and visibility into long-term secular growth above auto industry sales. This was highlighted by the announcement of the largest contracts in the company’s history with major global auto manufacturers. Nuance Communications is a provider of software to the Health Care industry and corporations that power voice interactions between people, computers, and technology. Quanta Services is a provider of engineering and construction services to electric power, communication, and oil and gas markets. These are essential services, and electric power in particular has experienced and is expected to continue to drive strong demand for its services. Additionally, we believe the company is well positioned to benefit from infrastructure stimulus.
Skywest Inc. (Industrials sector) and The Chef’s Warehouse Inc. (Consumer Staples sector) were two of the Fund’s bottom performing stocks. Skywest, a regional airline operator, and Chef’s Warehouse, a high-end specialty food distribution company to upscale restaurants and resorts, both are in industries that were most impacted by the COVID-19 pandemic.
At the end of the year, the Fund was overweight to Information Technology, Industrials, Consumer Discretionary, Health Care and Communication Services. The Fund was underweight to Financials and Real Estate. The Fund had no exposure to Materials, Consumer Staples, Energy and Utilities.
Outlook
We remain focused on executing our fundamental stock selection and portfolio management process. We believe that stocks experience a four-stage investment cycle and our research process is focused on the dynamics that apply to each stage of the investment cycle.
12
Management's Discussion of Fund Performance (Unaudited) (Continued)
We believe success is driven by the ability to effectively identify a stock’s current stage and the potential for it to transition to a different stage of its investment cycle.
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Small Company Fund and the Russell 2000® Index
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
The inception date of the Fund was November 30, 2000.
Notes to Chart
Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe.
The Frank Russell Company (FRC) is the source and owner of the Russell 2000® Index data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.
13
Management's Discussion of Fund Performance (Unaudited)
Touchstone ETF Funds
Sub-Advised by Wilshire Associates Incorporated
Touchstone Aggressive ETF Fund
Touchstone Conservative ETF Fund
Touchstone Moderate ETF Fund
Investment Philosophy
Three funds which invest in Exchanged-Traded Funds (ETFs) are available for investors seeking “lifestyle” products for their annuity holdings. The three strategic options include: the Conservative, Moderate, and Aggressive ETF Funds (the “ETF Funds”). The Touchstone Aggressive ETF Fund (the “Aggressive ETF Fund”) seeks capital appreciation. The Touchstone Conservative ETF Fund (the “Conservative ETF Fund”) seeks primarily income and secondarily capital appreciation. The Touchstone Moderate ETF Fund (the “Moderate ETF Fund”) seeks primarily capital appreciation and secondarily income. These funds allocate their assets among a diversified portfolio of underlying equity and fixed-income ETFs. These funds’ ETF selections generally do not change dramatically over time. The Conservative ETF Fund has a higher bond weighting, while the Aggressive ETF Fund has a lower bond weighting.
Fund Performance
The Aggressive ETF Fund underperformed its benchmark, the S&P Target Risk® Aggressive Index, for the 12-month period ended December 31, 2020. The Aggressive ETF Fund’s total return was 11.84 percent while the total return of the benchmark was 13.09 percent. The Conservative ETF Fund underperformed its benchmark, the S&P Target Risk® Moderate Index, for the 12-month period ended December 31, 2020. The Conservative ETF Fund’s total return was 9.90 percent while the total return of the benchmark was 10.42 percent. The Moderate ETF Fund underperformed its benchmark, the S&P Target Risk® Growth Index, for the 12-month period ended December 31, 2020. The Moderate ETF Fund’s total return was 11.07 percent while the total return of the benchmark was 11.83 percent.
Market Environment
The U.S. stock market posted gains for the year. Although COVID-19 infections continued to accelerate through the end of the year and many cities re-imposed restrictions, both consumer and business surveys moderated at encouraging levels. After massive job losses in April, the U.S. recovered 7.5 million jobs over the next two months. However, job growth slowed dramatically in the fourth quarter. Growth then trended downward with only 245,000 jobs added in November, and unemployment ended the year at 6.7 percent. Equities may appear to be “priced for perfection” but are not necessarily expensive given very low government bond yields and a rebound in economic growth and earnings which may be supportive of strong equity returns in 2021.
From both societal and investment perspectives, 2020 will be defined by COVID-19 and its impact due to severe economic restrictions and unprecedented government responses. As the virus spread to the U.S., the market quickly sold-off. In turn, the U.S. Federal Reserve Board (Fed) slashed its overnight rate from 1.5 percent to zero and the U.S. federal government passed a $2.2 trillion stimulus bill. In April alone, the economy shed more than 20 million jobs while first quarter real GDP declined by 5 percent and by 31 percent in the second quarter. However, the 2020 bear market was historically brief, bouncing off the lows of March 23 and rallying to a new high by August 12. During the second half of the year, equities dipped below their previous high as confirmed COVID-19 cases reaccelerated. Although the COVID-19 pandemic and its consequences will likely continue through much of 2021,the commencement of vaccine distribution is encouraging.
Equity markets outside of the U.S. enjoyed a strong end to the year as well, with emerging markets outperforming all developed markets. The U.K. was on a path to recovery, with third quarter 2020 GDP up a record 16 percent, but concerns about a new variant of the COVID-19 virus led to renewed restrictions and the withdrawal of social accommodations granted for holiday gatherings. A second wave of infections hindered other European countries as well, and the European Central Bank (ECB) responded by expanding its money-printing program by hundreds of billions of euros. Among the largest countries within emerging markets, South Korea, China and Taiwan generated the strongest returns during the year. The Chinese economy is poised for growth in 2021, unlike most other countries; its economy is driven by exports while domestic demand remains weak.
14
Management's Discussion of Fund Performance (Unaudited) (Continued)
The U.S. Treasury yield curve was up across most maturities during the fourth quarter after a dramatic drop earlier this year perpetuated by the Fed’s aforementioned monetary stimulus. Although the yield curve is down meaningfully since the beginning of the year, the long-end of the curve managed to rise above 1.50 percent by year-end. The U.S. Federal Open Market Committee (FOMC) met twice during the fourth quarter, with no change to its overnight rate, which it expects will be near zero through at least 2023. The FOMC reiterated its pledge to support the economic recovery, including an increase in its bond-buying activities. Credit spreads continued to tighten during the fourth quarter of 2020, boosting investment grade and high yield bond returns.
Portfolio Review
The ETF Funds’ large cap domestic and non-U.S. equity allocations generally lagged the broader domestic equity and global equity markets, primarily contributing to the aforementioned underperformance to the benchmarks. The ETF Funds’ equity allocation to developed market equities and underweight to strong-performing emerging market equity ETFs resulted in the relative underperformance. However, the ETF Funds’ fixed income allocations provided positive relative contributions to performance. Large allocations to investment grade bonds and intermediate-term corporate bonds provided solid results for the ETF Funds’ fixed income exposure.
Throughout the course of the year, we trimmed risk asset positions during the pandemic-triggered capital market sell-off in February and March. During the first and second quarters of 2020, the Funds exited the iShares iBoxx High Yield Corporate Bond ETF, VanEck Vectors JPM EM Local Currency Bond ETF and the Vanguard Extended Market ETF. By reducing exposure to non-investment grade corporate credit, emerging markets bonds and smaller cap domestic equities, the ETF Funds reduced credit and equity risk at a time when there was great uncertainty of the damage the pandemic would do to the global economy.
As the central banks and governments across the globe enacted monetary and fiscal stimulus not seen since the 2007-2009 Great Financial Crisis, capital markets rebounded in the second and third quarters. With this backdrop, we added more credit and equity risk exposure to the Funds by the third quarter. We accomplished adding risk by establishing positions in the iShares Broad USD High Yield ETF and the iShares Core S&P Midcap ETF to the ETF Funds’ fixed income and equity allocations, respectively.
Outlook
Although much remains uncertain at the start of 2021, we remain optimistic about risk assets and believe the ETF Funds are well positioned for the year ahead. Although we believe that volatility may be elevated over the coming year, we do not necessarily foresee a material selloff in either equities or fixed income. Global economic fundamentals have potential for improvement in 2021, particularly if central banks remain accommodative and material progress is accomplished in fighting the pandemic.
Each ETF Funds’ current positioning aligns with its long-term strategic risk targets. We remain slightly overweight credit, relative to government. In domestic equities, we favor value and blend style over growth equities, and within foreign equities, we favor developed markets over emerging markets.
15
Management's Discussion of Fund Performance (Unaudited) (Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Aggressive ETF Fund and the S&P Target Risk® Aggressive Index
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Conservative ETF Fund and the S&P Target Risk® Moderate Index
16
Management's Discussion of Fund Performance (Unaudited) (Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Moderate ETF Fund and the S&P Target Risk® Growth Index
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
The inception date of the ETF Funds was July 16, 2004.
Note to Charts
The S&P Target Risk® Aggressive Index is one of four multi-asset class indices that compose the S&P Target Risk Series. The S&P Target Risk® Aggressive Index emphasizes exposure to equities, maximizing opportunities for long-term capital accumulation. It may include small allocations to fixed income to enhance portfolio efficiency.
The S&P Target Risk® Moderate Index is one of four multi-asset class indices that compose the S&P Target Risk Series. The S&P Target Risk® Moderate Index offers significant exposure to fixed income, while also increasing opportunities for higher returns through equities.
The S&P Target Risk® Growth Index is one of four multi-asset class indices that compose the S&P Target Risk Series. The S&P Target Risk® Growth Index increases exposure to equities, while also providing limited fixed income exposure to diversify risk.
17
Tabular Presentation of Portfolios of Investments (Unaudited)
December 31, 2020
The illustrations below provide each Fund’s credit quality and/or sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.
| Touchstone Balanced Fund | ||||
| Credit Quality* | (% of Fixed Income Securities) | |||
| AAA/Aaa | 44.8 | % | ||
| AA/Aa | 5.1 | |||
| A/A | 15.2 | |||
| BBB/Baa | 29.2 | |||
| BB/Ba | 0.5 | |||
| Not Rated | 5.2 | |||
| 100.0 | % |
| Sector Allocation** | (% of Net Assets) | |||
| Common Stocks | ||||
| Information Technology | 17.1 | % | ||
| Communication Services | 12.2 | |||
| Consumer Discretionary | 9.0 | |||
| Financials | 7.9 | |||
| Health Care | 7.1 | |||
| Industrials | 5.6 | |||
| Consumer Staples | 2.5 | |||
| Real Estate | 1.5 | |||
| Energy | 1.0 | |||
| Materials | 0.9 | |||
| Corporate Bonds | 16.8 | |||
| U.S. Treasury Obligations | 9.2 | |||
| U.S. Government Mortgage-Backed Obligations | 4.8 | |||
| Exchange-Traded Fund | 1.7 | |||
| Sovereign Government Obligations | 0.1 | |||
| Short-Term Investment Fund | 2.9 | |||
| Other Assets/Liabilities (Net) | (0.3 | ) | ||
| Total | 100.0 | % | ||
| Touchstone Bond Fund | ||||
| Credit Quality* | (% of Investment Securities) | |||
| AAA/Aaa | 29.2 | % | ||
| AA/Aa | 7.0 | |||
| A/A | 10.8 | |||
| BBB/Baa | 25.8 | |||
| BB/Ba | 10.3 | |||
| B/B | 4.8 | |||
| CC | 0.1 | |||
| Not Rated | 8.7 | |||
| Cash Equivalents | 3.3 | |||
| Total | 100.0 | % |
| Touchstone Common Stock Fund | ||||
| Sector Allocation** | (% of Net Assets) | |||
| Information Technology | 26.3 | % | ||
| Communication Services | 20.9 | |||
| Consumer Discretionary | 14.0 | |||
| Financials | 11.3 | |||
| Health Care | 10.9 | |||
| Industrials | 8.4 | |||
| Consumer Staples | 3.6 | |||
| Real Estate | 2.1 | |||
| Energy | 1.5 | |||
| Materials | 1.4 | |||
| Short-Term Investment Fund | 0.3 | |||
| Other Assets/Liabilities (Net) | (0.7 | ) | ||
| Total | 100.0 | % |
| * | Credit quality ratings are from Standard & Poor's (“S&P”) and Moody's Investors Service (“Moody's”). If agency ratings differ, the higher rating will be used. Where no rating has been assigned, it may be for reasons unrelated to the creditworthiness of the issuer. |
| ** | Sector Classifications are based upon the Global Industry Classification Standard (GICS®). |
18
Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)
| Touchstone Small Company Fund | ||||
| Sector Allocation* | (% of Net Assets) | |||
| Health Care | 22.5 | % | ||
| Industrials | 21.5 | |||
| Information Technology | 21.1 | |||
| Consumer Discretionary | 15.8 | |||
| Financials | 10.0 | |||
| Real Estate | 5.6 | |||
| Communication Services | 3.3 | |||
| Short-Term Investment Fund | 0.9 | |||
| Other Assets/Liabilities (Net) | (0.7 | ) | ||
| Total | 100.0 | % | ||
| Touchstone Conservative ETF Fund | ||||
| Sector Allocation | (% of Net Assets) | |||
| Exchange-Traded Funds | ||||
| Fixed Income Funds | 57.0 | % | ||
| Equity Funds | 40.4 | |||
| Short-Term Investment Fund | 22.2 | |||
| Other Assets/Liabilities (Net) | (19.6 | ) | ||
| Total | 100.0 | % | ||
| Touchstone Aggressive ETF Fund | ||||
| Sector Allocation | (% of Net Assets) | |||
| Exchange-Traded Funds | ||||
| Equity Funds | 80.3 | % | ||
| Fixed Income Funds | 16.9 | |||
| Short-Term Investment Funds | 12.5 | |||
| Other Assets/Liabilities (Net) | (9.7 | ) | ||
| Total | 100.0 | % | ||
| Touchstone Moderate ETF Fund | ||||
| Sector Allocation | (% of Net Assets) | |||
| Exchange-Traded Funds | ||||
| Equity Funds | 60.2 | % | ||
| Fixed Income Funds | 36.8 | |||
| Short-Term Investment Funds | 15.8 | |||
| Other Assets/Liabilities (Net) | (12.8 | ) | ||
| Total | 100.0 | % | ||
| * | Sector Classifications are based upon the Global Industry Classification Standard (GICS®). |
19
Touchstone Balanced Fund – December 31, 2020
| Market | ||||||||
| Shares | Value | |||||||
| Common Stocks — 64.8% | ||||||||
| Information Technology — 17.1% | ||||||||
| 6,364 | Apple, Inc. | $ | 844,439 | |||||
| 3,214 | Avnet, Inc. | 112,844 | ||||||
| 1,250 | International Business Machines Corp. | 157,350 | ||||||
| 3,845 | Microsoft Corp. | 855,205 | ||||||
| 4,155 | Oracle Corp. | 268,787 | ||||||
| 1,544 | salesforce.com, Inc.* | 343,586 | ||||||
| 2,300 | SS&C Technologies Holdings, Inc. | 167,325 | ||||||
| 1,466 | Texas Instruments, Inc. | 240,615 | ||||||
| 786 | Workday, Inc. - Class A* | 188,333 | ||||||
| 3,178,484 | ||||||||
| Communication Services — 12.2% | ||||||||
| 433 | Alphabet, Inc. - Class C* | 758,564 | ||||||
| 2,825 | AT&T, Inc. | 81,247 | ||||||
| 5,878 | Comcast Corp. - Class A | 308,007 | ||||||
| 2,225 | Facebook, Inc. - Class A* | 607,781 | ||||||
| 3,262 | Fox Corp. - Class A | 94,990 | ||||||
| 398 | Netflix, Inc.* | 215,211 | ||||||
| 1,157 | Walt Disney Co. (The)* | 209,625 | ||||||
| 2,275,425 | ||||||||
| Consumer Discretionary — 9.0% | ||||||||
| 781 | Alibaba Group Holding Ltd. (China) ADR* | 181,762 | ||||||
| 196 | Amazon.com, Inc.* | 638,358 | ||||||
| 2,078 | Hilton Worldwide Holdings, Inc. | 231,198 | ||||||
| 2,689 | JD.com, Inc. (China) ADR* | 236,363 | ||||||
| 1,955 | Starbucks Corp. | 209,146 | ||||||
| 5,338 | Trip.com Group Ltd. (China) ADR* | 180,051 | ||||||
| 1,676,878 | ||||||||
| Financials — 7.9% | ||||||||
| 9,312 | Bank of America Corp. | 282,247 | ||||||
| 2,453 | Berkshire Hathaway, Inc. - Class B* | 568,777 | ||||||
| 1,401 | Goldman Sachs Group, Inc. (The) | 369,458 | ||||||
| 1,904 | Signature Bank/NewYork NY | 257,592 | ||||||
| 1,478,074 | ||||||||
| Health Care — 7.1% | ||||||||
| 1,339 | AmerisourceBergen Corp. | 130,901 | ||||||
| 3,773 | Bristol-Myers Squibb Co. | 234,039 | ||||||
| 1,790 | HCA Healthcare, Inc. | 294,383 | ||||||
| 2,327 | Johnson & Johnson | 366,223 | ||||||
| 845 | UnitedHealth Group, Inc. | 296,325 | ||||||
| 1,321,871 | ||||||||
| Industrials — 5.6% | ||||||||
| 853 | Deere & Co. | 229,500 | ||||||
| 431 | FedEx Corp. | 111,896 | ||||||
| 1,446 | Hubbell, Inc. | 226,718 | ||||||
| 667 | Parker-Hannifin Corp. | 181,698 | ||||||
| 3,971 | Raytheon Technologies Corp. | 283,966 | ||||||
| 1,033,778 | ||||||||
| Consumer Staples — 2.5% | ||||||||
| 2,761 | Monster Beverage Corp.* | 255,337 | ||||||
| 2,449 | Philip Morris International, Inc. | 202,753 | ||||||
| 458,090 | ||||||||
| Real Estate — 1.5% | ||||||||
| 1,839 | Jones Lang LaSalle, Inc.* | 272,852 | ||||||
| Energy — 1.0% | ||||||||
| 3,001 | Exxon Mobil Corp. | 123,701 | ||||||
| 3,317 | Schlumberger Ltd. | 72,410 | ||||||
| 196,111 | ||||||||
| Materials — 0.9% | ||||||||
| 2,473 | DuPont de Nemours, Inc. | 175,855 | ||||||
| Total Common Stocks | $ | 12,067,418 | ||||||
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 16.8% | ||||||||
| Financials — 3.7% | ||||||||
| $ | 34,000 | Allstate Corp. (The), 1.450%, 12/15/30 | $ | 33,936 | ||||
| 18,000 | American Financial Group, Inc., 5.250%, 4/2/30 | 22,274 | ||||||
| 24,000 | Ares Capital Corp., 3.250%, 7/15/25 | 25,435 | ||||||
| 50,000 | Bank of America Corp. MTN, 4.000%, 1/22/25 | 56,184 | ||||||
| 24,000 | Bank of Montreal (Canada), 3.803%, 12/15/32 | 27,204 | ||||||
| 14,000 | Berkshire Hathaway Finance Corp., 4.250%, 1/15/49 | 18,598 | ||||||
| 18,000 | Citigroup, Inc., 3.200%, 10/21/26 | 20,118 | ||||||
| 11,000 | Citigroup, Inc., 4.750%, 5/18/46 | 14,696 | ||||||
| 24,000 | Corestates Capital III, 144a, (3M LIBOR +0.570%), 0.791%, 2/15/27(A) | 22,419 | ||||||
| 20,000 | Goldman Sachs Group, Inc. (The), (3M LIBOR +1.000%), 1.215%, 7/24/23(A) | 20,179 | ||||||
| 32,000 | Goldman Sachs Group, Inc. (The), 3.691%, 6/5/28 | 36,865 | ||||||
| 31,000 | Huntington Bancshares, Inc., 2.550%, 2/4/30 | 33,246 | ||||||
| 16,000 | JPMorgan Chase & Co., 2.956%, 5/13/31 | 17,545 | ||||||
| 25,000 | JPMorgan Chase & Co., 3.509%, 1/23/29 | 28,432 | ||||||
| 44,000 | Mastercard, Inc., 3.300%, 3/26/27 | 50,199 | ||||||
| 45,000 | Morgan Stanley, 3.950%, 4/23/27 | 52,027 | ||||||
| 25,000 | New York Life Global Funding, 144a, 3.000%, 1/10/28 | 27,903 | ||||||
| 18,000 | Northwestern Mutual Life Insurance Co. (The), 144a, 3.850%, 9/30/47 | 21,199 | ||||||
| 31,000 | NTC Capital I, Ser A, (3M LIBOR +0.520%), 0.757%, 1/15/27(A) | 29,490 | ||||||
| 26,000 | PNC Capital Trust, (3M LIBOR +0.570%), 0.795%, 6/1/28(A) | 24,665 | ||||||
| 10,000 | State Street Corp., 2.825%, 3/30/23 | 10,321 | ||||||
| 20,000 | Toronto-Dominion Bank (The) (Canada) MTN, 1.150%, 6/12/25 | 20,422 | ||||||
| 55,000 | Truist Bank, Ser A, (3M LIBOR +0.670%), 0.890%, 5/15/27(A) | 52,944 | ||||||
| 22,000 | Truist Financial Corp. MTN, 2.850%, 10/26/24 | 23,807 | ||||||
| 690,108 | ||||||||
| Consumer Staples — 1.9% | ||||||||
| 28,000 | Anheuser-Busch Cos, LLC / Anheuser-Busch InBev Worldwide, Inc., (Belgium), 4.900%, 2/1/46 | 36,406 | ||||||
| 17,000 | BAT International Finance PLC (United Kingdom), 1.668%, 3/25/26 | 17,402 | ||||||
| 58,000 | Costco Wholesale Corp., 1.375%, 6/20/27 | 59,757 | ||||||
| 50,000 | General Mills, Inc., (3M LIBOR +1.010%), 1.228%, 10/17/23(A) | 50,814 | ||||||
| 16,000 | Kroger Co. (The), 5.000%, 4/15/42 | 21,192 | ||||||
| 42,000 | Mars, Inc., 144a, 3.875%, 4/1/39 | 51,442 | ||||||
| 55,000 | PepsiCo, Inc., 1.625%, 5/1/30 | 56,449 | ||||||
| 20,000 | Reynolds American, Inc. (United Kingdom), 4.450%, 6/12/25 | 22,780 | ||||||
| 13,000 | Starbucks Corp., 3.350%, 3/12/50 | 14,532 | ||||||
| 14,000 | Sysco Corp., 5.950%, 4/1/30 | 18,397 | ||||||
| 349,171 | ||||||||
| Health Care — 1.9% | ||||||||
| 7,000 | Abbott Laboratories, 3.750%, 11/30/26 | 8,200 | ||||||
| 15,000 | AbbVie, Inc., 3.800%, 3/15/25 | 16,728 | ||||||
| 20,000 | AbbVie, Inc., 4.450%, 5/14/46 | 25,444 | ||||||
20
Touchstone Balanced Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 16.8% (Continued) | ||||||||
| Health Care — (Continued) | ||||||||
| $ | 18,000 | AbbVie, Inc., 5.000%, 12/15/21 | $ | 18,582 | ||||
| 5,000 | Becton Dickinson and Co., (3M LIBOR +1.030%), 1.255%, 6/6/22(A) | 5,041 | ||||||
| 9,000 | Becton Dickinson and Co., 4.685%, 12/15/44 | 11,617 | ||||||
| 17,000 | Bristol-Myers Squibb Co., 5.000%, 8/15/45 | 24,589 | ||||||
| 36,000 | Cigna Corp., 4.375%, 10/15/28 | 43,513 | ||||||
| 7,000 | CommonSpirit Health, 4.187%, 10/1/49 | 8,148 | ||||||
| 13,000 | CVS Health Corp., 4.300%, 3/25/28 | 15,469 | ||||||
| 13,000 | CVS Health Corp., 5.125%, 7/20/45 | 17,503 | ||||||
| 35,000 | DH Europe Finance II Sarl, 3.250%, 11/15/39 | 39,863 | ||||||
| 45,000 | Johnson & Johnson, 2.900%, 1/15/28 | 50,773 | ||||||
| 36,000 | Mylan, Inc., 4.550%, 4/15/28 | 42,797 | ||||||
| 16,000 | UnitedHealth Group, Inc., 3.500%, 8/15/39 | 19,034 | ||||||
| 347,301 | ||||||||
| Industrials — 1.8% | ||||||||
| 18,000 | Bemis Co., Inc., 2.630%, 6/19/30 | 19,493 | ||||||
| 5,000 | Boeing Co. (The), 5.040%, 5/1/27 | 5,845 | ||||||
| 8,000 | Boeing Co. (The), 5.805%, 5/1/50 | 11,025 | ||||||
| 25,000 | Burlington Northern Santa Fe LLC, 5.750%, 5/1/40 | 37,068 | ||||||
| 24,000 | Carrier Global Corp., 3.577%, 4/5/50 | 26,857 | ||||||
| 15,000 | Eagle Materials, Inc., 4.500%, 8/1/26 | 15,582 | ||||||
| 12,000 | Embraer Netherlands Finance BV (Brazil), 5.050%, 6/15/25 | 12,720 | ||||||
| 7,000 | Embraer Netherlands Finance BV (Brazil), 5.400%, 2/1/27 | 7,438 | ||||||
| 21,000 | FedEx Corp., 5.100%, 1/15/44 | 28,323 | ||||||
| 12,000 | General Electric Co., 4.125%, 10/9/42 | 14,067 | ||||||
| 46,000 | John Deere Capital Corp. MTN, 2.450%, 1/9/30 | 50,451 | ||||||
| 20,000 | Norfolk Southern Corp., 4.837%, 10/1/41 | 27,298 | ||||||
| 32,000 | Otis Worldwide Corp., 3.112%, 2/15/40 | 34,750 | ||||||
| 19,000 | Roper Technologies, Inc., 2.950%, 9/15/29 | 20,874 | ||||||
| 12,000 | Waste Management, Inc., 2.500%, 11/15/50 | 12,124 | ||||||
| 17,000 | Xylem, Inc., 1.950%, 1/30/28 | 17,925 | ||||||
| 341,840 | ||||||||
| Information Technology — 1.7% | ||||||||
| 75,000 | Apple, Inc., 2.750%, 1/13/25 | 81,373 | ||||||
| 24,000 | Apple, Inc., 4.650%, 2/23/46 | 34,115 | ||||||
| 18,000 | Fiserv, Inc., 3.500%, 7/1/29 | 20,553 | ||||||
| 22,000 | Hewlett Packard Enterprise Co., 4.650%, 10/1/24 | 24,972 | ||||||
| 12,000 | Micron Technology, Inc., 5.327%, 2/6/29 | 15,011 | ||||||
| 34,000 | Microsoft Corp., 3.500%, 2/12/35 | 41,878 | ||||||
| 20,000 | NXP BV / NXP Funding LLC (Netherlands), 144a, 5.350%, 3/1/26 | 24,095 | ||||||
| 46,000 | Oracle Corp., 2.650%, 7/15/26 | 50,551 | ||||||
| 17,000 | Visa, Inc., 4.150%, 12/14/35 | 22,096 | ||||||
| 314,644 | ||||||||
| Utilities — 1.3% | ||||||||
| 14,000 | American Water Capital Corp., 6.593%, 10/15/37 | 21,872 | ||||||
| 26,000 | DTE Energy Co. Ser D, 3.700%, 8/1/23 | 28,078 | ||||||
| 15,000 | Duke Energy Progress LLC, 4.150%, 12/1/44 | 19,035 | ||||||
| 13,000 | Edison International, 4.125%, 3/15/28 | 14,496 | ||||||
| 30,000 | Fortis, Inc. (Canada), 3.055%, 10/4/26 | 33,020 | ||||||
| 16,000 | Oncor Electric Delivery Co. LLC, 3.800%, 9/30/47 | 19,647 | ||||||
| 28,000 | Pacific Gas and Electric Co., 3.500%, 8/1/50 | 27,830 | ||||||
| 27,000 | PacifiCorp., 5.750%, 4/1/37 | 38,443 | ||||||
| 13,000 | Virginia Electric & Power Co., 3.300%, 12/1/49 | 15,339 | ||||||
| 34,000 | WEC Energy Group, Inc., (3M LIBOR +2.113%), 2.334%, 5/15/67(A) | 29,154 | ||||||
| 246,914 | ||||||||
| Communication Services — 1.2% | ||||||||
| 7,000 | Alphabet, Inc., 1.900%, 8/15/40 | 6,870 | ||||||
| 10,000 | AT&T, Inc., 4.500%, 5/15/35 | 12,134 | ||||||
| 24,000 | Booking Holdings, Inc., 3.600%, 6/1/26 | 27,277 | ||||||
| 25,000 | Charter Communications Operating LLC / Charter Communications Operating Capital, 6.484%, 10/23/45 | 35,362 | ||||||
| 14,000 | Comcast Corp., 4.000%, 3/1/48 | 17,637 | ||||||
| 15,000 | Comcast Corp., 4.150%, 10/15/28 | 18,057 | ||||||
| 14,000 | Cox Communications, Inc., 144a, 3.350%, 9/15/26 | 15,731 | ||||||
| 8,000 | Deutsche Telekom International Finance BV (Germany), 8.750%, 6/15/30 | 12,658 | ||||||
| 22,000 | T-Mobile USA, Inc., 144a, 3.875%, 4/15/30 | 25,480 | ||||||
| 25,000 | Verizon Communications, Inc., 144a, 2.987%, 10/30/56 | 25,165 | ||||||
| 13,000 | ViacomCBS, Inc., 4.950%, 5/19/50 | 16,839 | ||||||
| 213,210 | ||||||||
| Energy — 1.0% | ||||||||
| 21,000 | Boardwalk Pipelines LP, 4.450%, 7/15/27 | 23,506 | ||||||
| 14,000 | Canadian Natural Resources Ltd. (Canada), 6.250%, 3/15/38 | 18,800 | ||||||
| 14,000 | Cenovus Energy, Inc. (Canada), 5.250%, 6/15/37 | 15,849 | ||||||
| 18,000 | Diamondback Energy, Inc., 2.875%, 12/1/24 | 18,921 | ||||||
| 21,000 | Energy Transfer Partners LP, 4.950%, 6/15/28 | 24,205 | ||||||
| 28,000 | NGPL PipeCo LLC, 144a, 7.768%, 12/15/37 | 37,855 | ||||||
| 22,000 | Phillips 66 Partners LP, 3.150%, 12/15/29 | 22,888 | ||||||
| 8,000 | Phillips 66 Partners LP, 3.750%, 3/1/28 | 8,679 | ||||||
| 20,000 | Sabine Pass Liquefaction LLC, 5.000%, 3/15/27 | 23,581 | ||||||
| 194,284 | ||||||||
| Real Estate — 1.0% | ||||||||
| 14,000 | American Homes 4 Rent LP REIT, 4.250%, 2/15/28 | 16,098 | ||||||
| 23,000 | Crown Castle International Corp. REIT, 3.650%, 9/1/27 | 25,967 | ||||||
| 30,000 | Equinix, Inc. REIT, 2.900%, 11/18/26 | 32,810 | ||||||
| 22,000 | Healthcare Realty Trust, Inc. REIT, 2.400%, 3/15/30 | 22,945 | ||||||
| 15,000 | Mid-America Apartments LP REIT, 3.750%, 6/15/24 | 16,340 | ||||||
| 16,000 | Realty Income Corp. REIT, 3.250%, 1/15/31 | 18,138 | ||||||
| 17,000 | Sabra Health Care LP REIT, 5.125%, 8/15/26 | 18,954 | ||||||
| 5,000 | STORE Capital Corp. REIT, 4.500%, 3/15/28 | 5,692 | ||||||
| 16,000 | STORE Capital Corp. REIT, 4.625%, 3/15/29 | 18,561 | ||||||
| 17,000 | VEREIT Operating Partnership LP REIT, 4.600%, 2/6/24 | 18,696 | ||||||
| 194,201 | ||||||||
| Consumer Discretionary — 0.9% | ||||||||
| 8,000 | Ford Motor Credit Co. LLC, 4.542%, 8/1/26 | 8,540 | ||||||
| 12,000 | General Motors Financial Co., Inc., 3.950%, 4/13/24 | 13,071 | ||||||
| 4,000 | General Motors Financial Co., Inc., 5.650%, 1/17/29 | 4,956 | ||||||
| 20,000 | Home Depot, Inc. (The), 5.950%, 4/1/41 | 30,902 | ||||||
| 24,000 | Hyundai Capital America, 144a, 2.650%, 2/10/25 | 25,217 | ||||||
| 24,000 | Lowe's Cos, Inc., 4.500%, 4/15/30 | 29,874 | ||||||
| 21,000 | Toyota Motor Credit Corp. MTN, 0.500%, 8/14/23 | 21,107 | ||||||
| 22,000 | Walmart, Inc., 2.850%, 7/8/24 | 23,801 | ||||||
| 157,468 | ||||||||
| Materials — 0.4% | ||||||||
| 37,000 | Ecolab, Inc., 4.800%, 3/24/30 | 47,212 | ||||||
| 19,000 | Sherwin-Williams Co. (The), 4.500%, 6/1/47 | 25,415 | ||||||
| 72,627 | ||||||||
| Total Corporate Bonds | $ | 3,121,768 | ||||||
| U.S. Treasury Obligations — 9.2% | ||||||||
| 155,000 | U.S. Treasury Bond, 1.375%, 8/15/50 | 145,167 |
21
Touchstone Balanced Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| U.S. Treasury Obligations — 9.2% (Continued) | ||||||||
| $ | 440,000 | U.S. Treasury Note, 0.375%, 3/31/22 | $ | 441,392 | ||||
| 150,000 | U.S. Treasury Note, 1.375%, 1/31/22 | 152,016 | ||||||
| 575,000 | U.S. Treasury Note, 1.500%, 9/30/21 | 580,930 | ||||||
| 375,000 | U.S. Treasury Note, 1.500%, 11/30/24 | 393,237 | ||||||
| Total U.S. Treasury Obligations | $ | 1,712,742 | ||||||
| U.S. Government Mortgage-Backed Obligations — 4.8% | ||||||||
| 185,118 | FHLMC, Pool #G05624, 4.500%, 9/1/39 | 207,915 | ||||||
| 126,982 | FHLMC, Pool #Q29260, 4.000%, 10/1/44 | 139,908 | ||||||
| 73,052 | FNMA, Pool #725423, 5.500%, 5/1/34 | 85,203 | ||||||
| 66,554 | FNMA, Pool #725610, 5.500%, 7/1/34 | 77,744 | ||||||
| 16,204 | FNMA, Pool #890310, 4.500%, 12/1/40 | 18,096 | ||||||
| 60,902 | FNMA, Pool #AD9193, 5.000%, 9/1/40 | 70,474 | ||||||
| 264,336 | FNMA, Pool #AL5718, 3.500%, 9/1/44 | 288,976 | ||||||
| Total U.S. Government Mortgage-Backed Obligations | $ | 888,316 | ||||||
| Shares | ||||||||
| Exchange-Traded Fund — 1.7% | ||||||||
| 2,738 | iShares JP Morgan USD Emerging Markets Bond ETF | $ | 317,362 | |||||
| Principal | ||||||||
| Amount | ||||||||
| Sovereign Government Obligations — 0.1% | ||||||||
| $ | 20,000 | Peruvian Government International Bond, 2.780%, 12/1/60 | $ | 20,180 | ||||
| Short-Term Investment Fund — 2.9% | ||||||||
| 545,238 | Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | $ | 545,238 | |||||
| Total Investment Securities —100.3% | ||||||||
| (Cost $13,408,458) | $ | 18,673,024 | ||||||
| Liabilities in Excess of Other Assets — (0.3)% | (64,517 | ) | ||||||
| Net Assets — 100.0% | $ | 18,608,507 | ||||||
| (A) | Variable rate security - Rate reflected is the rate in effect as of December 31, 2020. |
| * | Non-income producing security. |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
ETF - Exchange-Traded Fund
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
LIBOR - London Interbank Offered Rate
LLC - Limited Liability Company
LP - Limited Partnership
MTN - Medium Term Note
PLC - Public Limited Company
REIT - Real Estate Investment Trust
USD - United States Dollar
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 December 31, 2020, these securities were valued at $276,506 or 1.5% 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: | ||||||||||||||||
| Common Stocks | $ | 12,067,418 | $ | — | $ | — | $ | 12,067,418 | ||||||||
| Corporate Bonds | — | 3,121,768 | — | 3,121,768 | ||||||||||||
| U.S. Treasury Obligations | — | 1,712,742 | — | 1,712,742 | ||||||||||||
| U.S. Government Mortgage-Backed Obligations | — | 888,316 | — | 888,316 | ||||||||||||
| Exchange-Traded Fund | 317,362 | — | — | 317,362 | ||||||||||||
| Sovereign Government | ||||||||||||||||
| Obligation | — | 20,180 | — | 20,180 | ||||||||||||
| Short-Term Investment Fund | 545,238 | — | — | 545,238 | ||||||||||||
| Total | $ | 12,930,018 | $ | 5,743,006 | $ | — | $ | 18,673,024 | ||||||||
See accompanying Notes to Financial Statements.
22
Touchstone Bond Fund – December 31, 2020
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 50.7% | ||||||||
| Financials — 10.6% | ||||||||
| $ | 368,000 | Allstate Corp. (The), 1.450%, 12/15/30 | $ | 367,305 | ||||
| 162,000 | Ally Financial, Inc., 5.750%, 11/20/25 | 188,607 | ||||||
| 215,000 | American Financial Group, Inc., 5.250%, 4/2/30 | 266,051 | ||||||
| 276,000 | Ares Capital Corp., 3.250%, 7/15/25 | 292,504 | ||||||
| 57,000 | Avolon Holdings Funding Ltd. (Ireland), 144a, 4.250%, 4/15/26 | 61,410 | ||||||
| 244,000 | Bank of America Corp., 3.705%, 4/24/28 | 277,784 | ||||||
| 390,000 | Bank of America Corp. MTN, 4.000%, 1/22/25 | 438,236 | ||||||
| 326,000 | Bank of Montreal (Canada), 3.803%, 12/15/32 | 369,518 | ||||||
| 230,000 | Bank of Nova Scotia (The), (Canada), (3M LIBOR+0.620%), 0.859%, 9/19/22(A) | 231,809 | ||||||
| 316,000 | Barclays PLC (United Kingdom), 4.610%, 2/15/23 | 329,883 | ||||||
| 172,000 | Berkshire Hathaway Finance Corp., 4.250%, 1/15/49 | 228,485 | ||||||
| 320,000 | Citigroup, Inc., (3M LIBOR +1.430%), 1.655%, 9/1/23(A) | 325,475 | ||||||
| 219,000 | Citigroup, Inc., 3.200%, 10/21/26 | 244,769 | ||||||
| 138,000 | Citigroup, Inc., 4.750%, 5/18/46 | 184,370 | ||||||
| 217,000 | Cooke Omega Investments, Inc. / Alpha VesselCo Holdings, Inc. (Canada), 144a, 8.500%, 12/15/22 | 222,967 | ||||||
| 355,000 | Corestates Capital III, 144a, (3M LIBOR +0.570%), 0.791%, 2/15/27(A) | 331,621 | ||||||
| 126,000 | Credit Acceptance Corp., 6.625%, 3/15/26 | 134,190 | ||||||
| 171,000 | GE Capital International Funding Co. Unlimited Co., 4.418%, 11/15/35 | 204,096 | ||||||
| 69,000 | goeasy Ltd. (Canada), 144a, 5.375%, 12/1/24 | 71,760 | ||||||
| 398,000 | Goldman Sachs Group, Inc. (The), (3M LIBOR +1.000%), 1.215%, 7/24/23(A) | 401,560 | ||||||
| 177,000 | Goldman Sachs Group, Inc. (The), 3.691%, 6/5/28 | 203,908 | ||||||
| 262,000 | Goldman Sachs Group, Inc. (The), 5.250%, 7/27/21 | 269,357 | ||||||
| 200,000 | HSBC Holdings PLC (United Kingdom), 3.900%, 5/25/26 | 228,289 | ||||||
| 340,000 | Huntington Bancshares, Inc., 2.550%, 2/4/30 | 364,632 | ||||||
| 249,000 | JPMorgan Chase & Co., 2.956%, 5/13/31 | 273,051 | ||||||
| 327,000 | JPMorgan Chase & Co., 3.509%, 1/23/29 | 371,892 | ||||||
| 334,000 | Lloyds Banking Group PLC (United Kingdom), 3.574%, 11/7/28 | 377,167 | ||||||
| 200,000 | Mastercard, Inc., 3.300%, 3/26/27 | 228,177 | ||||||
| 46,000 | MGIC Investment Corp., 5.250%, 8/15/28 | 49,220 | ||||||
| 303,000 | Morgan Stanley, 3.950%, 4/23/27 | 350,313 | ||||||
| 89,000 | Navient Corp., 5.500%, 1/25/23 | 93,005 | ||||||
| 82,000 | Navient Corp., 5.875%, 10/25/24 | 87,125 | ||||||
| 89,000 | Navient Corp., 7.250%, 9/25/23 | 97,542 | ||||||
| 369,000 | New York Life Global Funding, 144a, 3.000%, 1/10/28 | 411,845 | ||||||
| 235,000 | Northwestern Mutual Life Insurance Co. (The), 144a, 3.850%, 9/30/47 | 276,762 | ||||||
| 347,000 | NTC Capital I, Ser A, (3M LIBOR +0.520%), 0.757%, 1/15/27(A) | 330,103 | ||||||
| 30,000 | OneMain Finance Corp., 4.000%, 9/15/30 | 31,128 | ||||||
| 35,000 | PennyMac Financial Services, Inc., 144a, 5.375%, 10/15/25 | 37,013 | ||||||
| 356,000 | PNC Capital Trust, (3M LIBOR +0.570%), 0.795%, 6/1/28(A) | 337,727 | ||||||
| 25,000 | Prime Security Services Borrower LLC / Prime Finance, Inc., 144a, 3.375%, 8/31/27 | 24,813 | ||||||
| 112,000 | Prime Security Services Borrower LLC / Prime Finance, Inc., 144a, 5.750%, 4/15/26 | 122,640 | ||||||
| 42,000 | Quicken Loans LLC / Quicken Loans Co.-Issuer, Inc., 144a, 3.875%, 3/1/31 | 43,575 | ||||||
| 116,000 | Quicken Loans, Inc., 144a, 5.250%, 1/15/28 | 123,830 | ||||||
| 54,000 | Springleaf Finance Corp., 8.875%, 6/1/25 | 61,088 | ||||||
| 117,000 | State Street Corp., 2.825%, 3/30/23 | 120,752 | ||||||
| 296,000 | Toronto-Dominion Bank (The) (Canada) MTN, 1.150%, 6/12/25 | 302,248 | ||||||
| 551,000 | Truist Bank, Ser A, (3M LIBOR +0.670%), 0.890%, 5/15/27(A) | 530,405 | ||||||
| 210,000 | Truist Financial Corp. MTN, 2.850%, 10/26/24 | 227,249 | ||||||
| 11,147,256 | ||||||||
| Industrials — 5.6% | ||||||||
| 128,000 | Amsted Industries, Inc., 144a, 5.625%, 7/1/27 | 136,000 | ||||||
| 244,000 | Bemis Co., Inc., 2.630%, 6/19/30 | 264,238 | ||||||
| 55,000 | Boeing Co. (The), 3.600%, 5/1/34 | 57,912 | ||||||
| 77,000 | Boeing Co. (The), 5.040%, 5/1/27 | 90,018 | ||||||
| 89,000 | Boeing Co. (The), 5.805%, 5/1/50 | 122,655 | ||||||
| 265,000 | Burlington Northern Santa Fe LLC, 5.750%, 5/1/40 | 392,923 | ||||||
| 74,000 | BWX Technologies, Inc., 144a, 4.125%, 6/30/28 | 77,053 | ||||||
| 143,000 | Carrier Global Corp., 3.577%, 4/5/50 | 160,020 | ||||||
| 167,000 | Cascades, Inc./Cascades USA, Inc. (Canada), 144a, 5.375%, 1/15/28 | 177,490 | ||||||
| 147,000 | CoreCivic, Inc., 5.000%, 10/15/22 | 147,000 | ||||||
| 370,000 | CRH America Finance, Inc. (Ireland), 144a, 4.500%, 4/4/48 | 466,309 | ||||||
| 262,000 | Eagle Materials, Inc., 4.500%, 8/1/26 | 272,162 | ||||||
| 138,000 | Embraer Netherlands Finance BV (Brazil), 5.050%, 6/15/25 | 146,281 | ||||||
| 140,000 | Embraer Netherlands Finance BV (Brazil), 5.400%, 2/1/27 | 148,751 | ||||||
| 331,000 | FedEx Corp., 5.100%, 1/15/44 | 446,419 | ||||||
| 11,000 | Fortress Transportation & Infrastructure Investors LLC, 144a, 6.500%, 10/1/25 | 11,496 | ||||||
| 45,000 | Fortress Transportation & Infrastructure Investors LLC, 144a, 6.750%, 3/15/22 | 45,113 | ||||||
| 37,000 | Fortress Transportation & Infrastructure Investors LLC, 144a, 9.750%, 8/1/27 | 42,411 | ||||||
| 45,000 | GFL Environmental, Inc. (Canada), 144a, 3.500%, 9/1/28 | 45,816 | ||||||
| 10,000 | Howmet Aerospace, Inc., 5.950%, 2/1/37 | 12,050 | ||||||
| 16,000 | Howmet Aerospace, Inc., 6.750%, 1/15/28 | 19,565 | ||||||
| 290,000 | John Deere Capital Corp. MTN, 2.450%, 1/9/30 | 318,063 | ||||||
| 87,000 | Moog, Inc., 144a, 4.250%, 12/15/27 | 90,263 | ||||||
| 49,000 | New Enterprise Stone & Lime Co., Inc., 144a, 6.250%, 3/15/26 | 50,225 | ||||||
| 237,000 | Norfolk Southern Corp., 4.837%, 10/1/41 | 323,479 | ||||||
| 170,000 | Otis Worldwide Corp., 3.112%, 2/15/40 | 184,610 | ||||||
| 52,000 | Owens-Brockway Glass Container, Inc., 144a, 6.625%, 5/13/27 | 56,290 | ||||||
| 59,000 | Plastipak Holdings, Inc., 144a, 6.250%, 10/15/25 | 60,770 | ||||||
| 28,000 | Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC / Reynolds Group Issuer Lu, 144a, 4.000%, 10/15/27 | 28,700 | ||||||
| 278,000 | Roper Technologies, Inc., 2.950%, 9/15/29 | 305,423 | ||||||
| 60,000 | Signature Aviation US Holdings, Inc., 144a, 4.000%, 3/1/28 | 60,399 | ||||||
| 29,000 | Spirit AeroSystems, Inc., 144a, 7.500%, 4/15/25 | 31,103 | ||||||
| 49,000 | Standard Industries, Inc., 144a, 3.375%, 1/15/31 | 49,245 | ||||||
| 14,000 | Standard Industries, Inc., 144a, 5.000%, 2/15/27 | 14,630 | ||||||
| 11,000 | Stericycle, Inc., 144a, 3.875%, 1/15/29 | 11,303 | ||||||
| 15,000 | Summit Materials LLC / Summit Materials Finance Corp., 144a, 5.250%, 1/15/29 | 15,750 | ||||||
| 34,000 | TransDigm, Inc., 6.375%, 6/15/26 | 35,190 | ||||||
| 12,000 | TransDigm, Inc., 6.500%, 5/15/25 | 12,330 | ||||||
| 92,000 | TransDigm, Inc., 144a, 6.250%, 3/15/26 | 97,980 | ||||||
23
Touchstone Bond Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 50.7% (Continued) | ||||||||
| Industrials — (Continued) | ||||||||
| $ | 11,000 | TransDigm, Inc., 144a, 8.000%, 12/15/25 | $ | 12,158 | ||||
| 36,000 | Trivium Packaging Finance BV (Netherlands), 144a, 5.500%, 8/15/26 | 38,070 | ||||||
| 1,606 | United Airlines 2014-2 Class B Pass Through Trust, 4.625%, 9/3/22 | 1,616 | ||||||
| 24,000 | US Concrete, Inc., 144a, 5.125%, 3/1/29 | 24,720 | ||||||
| 238,000 | Vulcan Materials Co., 4.500%, 4/1/25 | 272,241 | ||||||
| 140,000 | Waste Management, Inc., 2.500%, 11/15/50 | 141,450 | ||||||
| 49,000 | WESCO Distribution, Inc., 144a, 7.250%, 6/15/28 | 55,727 | ||||||
| 36,000 | XPO Logistics, Inc., 144a, 6.250%, 5/1/25 | 38,741 | ||||||
| 67,000 | XPO Logistics, Inc., 144a, 6.750%, 8/15/24 | 71,188 | ||||||
| 227,000 | Xylem, Inc., 1.950%, 1/30/28 | 239,355 | ||||||
| 5,922,701 | ||||||||
| Communication Services — 5.5% | ||||||||
| 102,000 | Alphabet, Inc., 1.900%, 8/15/40 | 100,109 | ||||||
| 71,000 | Altice France SA (France), 144a, 7.375%, 5/1/26 | 74,728 | ||||||
| 36,000 | ANGI Group LLC, 144a, 3.875%, 8/15/28 | 36,630 | ||||||
| 87,000 | Arches Buyer, Inc., 144a, 4.250%, 6/1/28 | 88,105 | ||||||
| 232,000 | AT&T, Inc., 4.500%, 5/15/35 | 281,517 | ||||||
| 14,000 | Cable One, Inc., 144a, 4.000%, 11/15/30 | 14,543 | ||||||
| 45,000 | Cars.com, Inc., 144a, 6.375%, 11/1/28 | 47,766 | ||||||
| 33,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 144a, 4.250%, 2/1/31 | 34,777 | ||||||
| 32,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 144a, 4.500%, 8/15/30 | 33,960 | ||||||
| 45,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 144a, 4.500%, 5/1/32 | 48,047 | ||||||
| 118,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 144a, 4.750%, 3/1/30 | 127,322 | ||||||
| 21,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 144a, 5.125%, 5/1/27 | 22,285 | ||||||
| 239,000 | CCO Holdings LLC / CCO Holdings Capital Corp., 144a, 5.375%, 6/1/29 | 262,004 | ||||||
| 23,000 | CenturyLink, Inc., 144a, 4.000%, 2/15/27 | 23,748 | ||||||
| 265,000 | Charter Communications Operating LLC / Charter Communications Operating Capital, 6.484%, 10/23/45 | 374,832 | ||||||
| 203,000 | Comcast Corp., 4.000%, 3/1/48 | 255,740 | ||||||
| 248,000 | Comcast Corp., 4.150%, 10/15/28 | 298,536 | ||||||
| 107,000 | CommScope, Inc., 144a, 5.500%, 3/1/24 | 110,317 | ||||||
| 17,000 | CommScope, Inc., 144a, 7.125%, 7/1/28 | 18,105 | ||||||
| 222,000 | Cox Communications, Inc., 144a, 3.350%, 9/15/26 | 249,447 | ||||||
| 121,000 | Deutsche Telekom International Finance BV (Germany), 8.750%, 6/15/30 | 191,443 | ||||||
| 81,000 | Diamond Sports Group LLC / Diamond Sports Finance Co., 144a, 5.375%, 8/15/26 | 65,813 | ||||||
| 8,000 | EW Scripps Co. (The), 144a, 5.125%, 5/15/25 | 8,166 | ||||||
| 181,000 | Front Range BidCo, Inc., 144a, 4.000%, 3/1/27 | 181,453 | ||||||
| 69,000 | Frontier Communications Corp., 144a, 5.000%, 5/1/28 | 71,933 | ||||||
| 29,000 | Frontier Communications Corp., 144a, 5.875%, 10/15/27 | 31,356 | ||||||
| 35,000 | GCI LLC, 144a, 4.750%, 10/15/28 | 37,329 | ||||||
| 23,000 | Gray Television, Inc., 144a, 4.750%, 10/15/30 | 23,431 | ||||||
| 144,000 | GrubHub Holdings, Inc., 144a, 5.500%, 7/1/27 | 151,020 | ||||||
| 35,000 | Lamar Media Corp., 4.875%, 1/15/29 | 37,188 | ||||||
| 70,000 | Level 3 Financing, Inc., 144a, 3.625%, 1/15/29 | 69,825 | ||||||
| 41,000 | Level 3 Financing, Inc., 144a, 4.625%, 9/15/27 | 42,822 | ||||||
| 80,000 | MDC Partners, Inc., 144a, 6.500%, 5/1/24 | 81,100 | ||||||
| 56,000 | Meredith Corp., 144a, 6.500%, 7/1/25 | 59,360 | ||||||
| 145,000 | Netflix, Inc., 4.875%, 4/15/28 | 163,517 | ||||||
| 40,000 | Netflix, Inc., 144a, 5.375%, 11/15/29 | 47,150 | ||||||
| 37,000 | Nexstar Broadcasting, Inc., 144a, 4.750%, 11/1/28 | 38,711 | ||||||
| 72,000 | Outfront Media Capital LLC / Outfront Media Capital Corp., 144a, 6.250%, 6/15/25 | 75,960 | ||||||
| 196,000 | Photo Holdings Merger Sub, Inc., 144a, 8.500%, 10/1/26 | 207,576 | ||||||
| 40,000 | QualityTech LP / QTS Finance Corp., 144a, 3.875%, 10/1/28 | 40,800 | ||||||
| 15,000 | Scripps Escrow II, Inc., 144a, 3.875%, 1/15/29 | 15,589 | ||||||
| 105,000 | Sinclair Television Group, Inc., 144a, 4.125%, 12/1/30 | 107,439 | ||||||
| 14,000 | Sinclair Television Group, Inc., 144a, 5.125%, 2/15/27 | 14,296 | ||||||
| 82,000 | Sirius XM Radio, Inc., 144a, 5.500%, 7/1/29 | 90,226 | ||||||
| 129,000 | TEGNA, Inc., 5.000%, 9/15/29 | 136,278 | ||||||
| 98,000 | Telecom Italia Capital SA (Italy), 6.000%, 9/30/34 | 119,373 | ||||||
| 55,000 | Telecom Italia Capital SA (Italy), 6.375%, 11/15/33 | 67,650 | ||||||
| 326,000 | T-Mobile USA, Inc., 144a, 3.875%, 4/15/30 | 377,573 | ||||||
| 57,000 | VeriSign, Inc., 5.250%, 4/1/25 | 64,766 | ||||||
| 427,000 | Verizon Communications, Inc., 144a, 2.987%, 10/30/56 | 429,824 | ||||||
| 185,000 | ViacomCBS, Inc., 4.950%, 5/19/50 | 239,634 | ||||||
| 5,791,119 | ||||||||
| Consumer Staples — 5.3% | ||||||||
| 24,000 | Albertsons Cos, Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC, 144a, 3.500%, 3/15/29 | 24,285 | ||||||
| 105,000 | Albertsons Cos, Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC, 144a, 4.625%, 1/15/27 | 111,694 | ||||||
| 137,000 | American Builders & Contractors Supply Co., Inc., 144a, 4.000%, 1/15/28 | 141,795 | ||||||
| 12,000 | American Builders & Contractors Supply Co., Inc., 144a, 5.875%, 5/15/26 | 12,435 | ||||||
| 427,000 | Anheuser-Busch Cos, LLC / Anheuser-Busch InBev Worldwide, Inc., (Belgium), 4.900%, 2/1/46 | 555,198 | ||||||
| 173,000 | BAT International Finance PLC (United Kingdom), 1.668%, 3/25/26 | 177,086 | ||||||
| 137,000 | Cardtronics, Inc. / Cardtronics USA, Inc., 144a, 5.500%, 5/1/25 | 141,624 | ||||||
| 131,000 | Carriage Services, Inc., 144a, 6.625%, 6/1/26 | 140,006 | ||||||
| 13,000 | Central Garden & Pet Co., 4.125%, 10/15/30 | 13,553 | ||||||
| 64,000 | Chobani LLC / Chobani Finance Corp., Inc., 144a, 4.625%, 11/15/28 | 64,960 | ||||||
| 294,000 | Cimpress PLC (Ireland), 144a, 7.000%, 6/15/26 | 309,067 | ||||||
| 311,000 | Grupo Bimbo SAB de CV (Mexico), 144a, 4.500%, 1/25/22 | 323,188 | ||||||
| 65,000 | H&E Equipment Services, Inc., 144a, 3.875%, 12/15/28 | 65,696 | ||||||
| 422,000 | Imperial Brands Finance PLC (United Kingdom), 144a, 4.250%, 7/21/25 | 475,265 | ||||||
| 58,000 | JBS USA LUX SA / JBS USA Finance, Inc., 144a, 6.750%, 2/15/28 | 65,163 | ||||||
| 131,000 | JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance, Inc., 144a, 5.500%, 1/15/30 | 150,487 | ||||||
| 66,000 | Kraft Heinz Foods Co., 144a, 3.875%, 5/15/27 | 71,106 | ||||||
| 213,000 | Kroger Co. (The), 5.000%, 4/15/42 | 282,117 | ||||||
| 327,000 | Mars, Inc., 144a, 3.875%, 4/1/39 | 400,516 | ||||||
| 39,000 | Michaels Stores, Inc., 144a, 4.750%, 10/1/27 | 39,975 | ||||||
| 400,000 | Mondelez International Holdings Netherlands BV, 144a, 2.125%, 9/19/22 | 411,459 | ||||||
| 145,000 | Performance Food Group, Inc., 144a, 5.500%, 6/1/24 | 145,725 | ||||||
| 19,000 | Performance Food Group, Inc., 144a, 6.875%, 5/1/25 | 20,330 | ||||||
| 155,000 | Pilgrim's Pride Corp., 144a, 5.750%, 3/15/25 | 159,123 | ||||||
24
Touchstone Bond Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 50.7% (Continued) | ||||||||
| Consumer Staples — (Continued) | ||||||||
| $ | 20,000 | Post Holdings, Inc., 144a, 4.625%, 4/15/30 | $ | 21,039 | ||||
| 17,000 | Post Holdings, Inc., 144a, 5.000%, 8/15/26 | 17,553 | ||||||
| 53,000 | QVC, Inc., 4.375%, 9/1/28 | 54,916 | ||||||
| 86,000 | QVC, Inc., 4.750%, 2/15/27 | 92,235 | ||||||
| 286,000 | Reynolds American, Inc. (United Kingdom), 4.450%, 6/12/25 | 325,752 | ||||||
| 84,000 | SEG Holding LLC / SEG Finance Corp., 144a, 5.625%, 10/15/28 | 88,620 | ||||||
| 157,000 | Staples, Inc., 144a, 7.500%, 4/15/26 | 163,950 | ||||||
| 160,000 | Starbucks Corp., 3.350%, 3/12/50 | 178,857 | ||||||
| 75,000 | Superior Plus LP / Superior General Partner, Inc. (Canada), 144a, 7.000%, 7/15/26 | 80,156 | ||||||
| 154,000 | Sysco Corp., 5.950%, 4/1/30 | 202,363 | ||||||
| 60,000 | US Foods, Inc., 144a, 6.250%, 4/15/25 | 64,125 | ||||||
| 5,591,419 | ||||||||
| Health Care — 5.0% | ||||||||
| 58,000 | Abbott Laboratories, 3.750%, 11/30/26 | 67,944 | ||||||
| 163,000 | AbbVie, Inc., 3.800%, 3/15/25 | 181,774 | ||||||
| 276,000 | AbbVie, Inc., 4.450%, 5/14/46 | 351,124 | ||||||
| 289,000 | AbbVie, Inc., 5.000%, 12/15/21 | 298,352 | ||||||
| 38,000 | Acadia Healthcare Co., Inc., 144a, 5.000%, 4/15/29 | 40,565 | ||||||
| 49,000 | AdaptHealth LLC, 144a, 4.625%, 8/1/29 | 50,348 | ||||||
| 226,000 | Alcon Finance Corp. (Switzerland), 144a, 3.800%, 9/23/49 | 266,623 | ||||||
| 24,000 | AMN Healthcare, Inc., 144a, 4.625%, 10/1/27 | 25,142 | ||||||
| 33,000 | Bausch Health Cos, Inc., 144a, 5.250%, 2/15/31 | 34,476 | ||||||
| 102,000 | Bausch Health Cos, Inc., 144a, 6.125%, 4/15/25 | 105,127 | ||||||
| 70,000 | Bausch Health Cos, Inc., 144a, 6.250%, 2/15/29 | 76,038 | ||||||
| 73,000 | Becton Dickinson and Co., (3M LIBOR +1.030%), 1.255%, 6/6/22(A) | 73,591 | ||||||
| 145,000 | Becton Dickinson and Co., 4.685%, 12/15/44 | 187,168 | ||||||
| 223,000 | Bristol-Myers Squibb Co., 5.000%, 8/15/45 | 322,543 | ||||||
| 249,000 | Cigna Corp., 4.375%, 10/15/28 | 300,963 | ||||||
| 117,000 | CommonSpirit Health, 4.187%, 10/1/49 | 136,191 | ||||||
| 185,000 | CommonSpirit Health, 4.200%, 8/1/23 | 199,922 | ||||||
| 181,000 | CVS Health Corp., 4.300%, 3/25/28 | 215,383 | ||||||
| 191,000 | CVS Health Corp., 5.125%, 7/20/45 | 257,155 | ||||||
| 52,000 | DaVita, Inc., 144a, 3.750%, 2/15/31 | 52,799 | ||||||
| 49,000 | DaVita, Inc., 144a, 4.625%, 6/1/30 | 52,001 | ||||||
| 285,000 | DH Europe Finance II Sarl, 3.250%, 11/15/39 | 324,600 | ||||||
| 35,000 | Encompass Health Corp., 4.500%, 2/1/28 | 36,575 | ||||||
| 20,000 | Encompass Health Corp., 4.625%, 4/1/31 | 21,400 | ||||||
| 200,000 | HCA, Inc., 3.500%, 9/1/30 | 212,515 | ||||||
| 21,000 | Herbalife Nutrition Ltd. / HLF Financing, Inc., 144a, 7.875%, 9/1/25 | 22,943 | ||||||
| 112,000 | HLF Financing Sarl LLC / Herbalife International, Inc., 144a, 7.250%, 8/15/26 | 118,825 | ||||||
| 16,000 | LifePoint Health, Inc., 144a, 6.750%, 4/15/25 | 17,181 | ||||||
| 215,000 | MEDNAX, Inc., 144a, 5.250%, 12/1/23 | 217,644 | ||||||
| 39,000 | Medtronic Global Holdings SCA, 3.350%, 4/1/27 | 43,846 | ||||||
| 228,000 | Mylan, Inc., 4.550%, 4/15/28 | 271,047 | ||||||
| 68,000 | Providence Service Corp. (The), 144a, 5.875%, 11/15/25 | 71,910 | ||||||
| 122,000 | Select Medical Corp., 144a, 6.250%, 8/15/26 | 131,384 | ||||||
| 87,000 | Tenet Healthcare Corp., 5.125%, 5/1/25 | 88,696 | ||||||
| 49,000 | Tenet Healthcare Corp., 144a, 7.500%, 4/1/25 | 53,533 | ||||||
| 31,000 | Teva Pharmaceutical Finance Netherlands III BV (Israel), 3.150%, 10/1/26 | 29,799 | ||||||
| 304,000 | UnitedHealth Group, Inc., 3.500%, 8/15/39 | 361,645 | ||||||
| 5,318,772 | ||||||||
| Energy — 4.2% | ||||||||
| 270,000 | Aker BP ASA (Norway), 144a, 3.000%, 1/15/25 | 283,362 | ||||||
| 106,000 | Apache Corp., 4.875%, 11/15/27 | 112,360 | ||||||
| 62,000 | Blue Racer Midstream LLC / Blue Racer Finance Corp., 144a, 7.625%, 12/15/25 | 66,030 | ||||||
| 321,000 | Boardwalk Pipelines LP, 4.450%, 7/15/27 | 359,307 | ||||||
| 221,000 | Canadian Natural Resources Ltd. (Canada), 6.250%, 3/15/38 | 296,769 | ||||||
| 202,000 | Cenovus Energy, Inc. (Canada), 5.250%, 6/15/37 | 228,682 | ||||||
| 40,000 | Cenovus Energy, Inc. (Canada), 5.375%, 7/15/25 | 45,098 | ||||||
| 297,000 | Cheniere Corpus Christi Holdings LLC, 7.000%, 6/30/24 | 346,829 | ||||||
| 36,000 | Cheniere Energy Partners LP, 5.250%, 10/1/25 | 36,945 | ||||||
| 70,000 | Cheniere Energy, Inc., 144a, 4.625%, 10/15/28 | 73,500 | ||||||
| 7,000 | CNX Resources Corp., 144a, 6.000%, 1/15/29 | 7,171 | ||||||
| 22,000 | Continental Resources, Inc., 4.900%, 6/1/44 | 21,758 | ||||||
| 22,000 | Continental Resources, Inc., 144a, 5.750%, 1/15/31 | 24,419 | ||||||
| 83,000 | Delek Logistics Partners LP / Delek Logistics Finance Corp., 6.750%, 5/15/25 | 80,510 | ||||||
| 7,000 | Endeavor Energy Resources LP / EER Finance, Inc., 144a, 6.625%, 7/15/25 | 7,490 | ||||||
| 328,000 | Energy Transfer Partners LP, 4.950%, 6/15/28 | 378,057 | ||||||
| 26,000 | Genesis Energy LP / Genesis Energy Finance Corp., 8.000%, 1/15/27 | 25,745 | ||||||
| 13,000 | Global Partners LP / GLP Finance Corp., 144a, 6.875%, 1/15/29 | 14,073 | ||||||
| 19,000 | MEG Energy Corp. (Canada), 144a, 6.500%, 1/15/25 | 19,571 | ||||||
| 52,000 | MEG Energy Corp. (Canada), 144a, 7.125%, 2/1/27 | 53,690 | ||||||
| 88,000 | Murphy Oil Corp., 6.375%, 12/1/42 | 77,550 | ||||||
| 238,000 | NGPL PipeCo LLC, 144a, 7.768%, 12/15/37 | 321,771 | ||||||
| 196,000 | NuStar Logistics LP, 5.625%, 4/28/27 | 208,740 | ||||||
| 7,000 | Occidental Petroleum Corp., 4.100%, 2/15/47 | 5,722 | ||||||
| 72,000 | Occidental Petroleum Corp., 4.200%, 3/15/48 | 58,680 | ||||||
| 37,000 | Occidental Petroleum Corp., 6.125%, 1/1/31 | 39,597 | ||||||
| 57,000 | Occidental Petroleum Corp., 6.375%, 9/1/28 | 60,135 | ||||||
| 71,000 | Occidental Petroleum Corp., 6.625%, 9/1/30 | 77,088 | ||||||
| 56,000 | Occidental Petroleum Corp., 8.500%, 7/15/27 | 64,627 | ||||||
| 147,000 | PDC Energy, Inc., 5.750%, 5/15/26 | 151,778 | ||||||
| 65,000 | PDC Energy, Inc., 6.125%, 9/15/24 | 66,795 | ||||||
| 243,000 | Phillips 66 Partners LP, 3.150%, 12/15/29 | 252,803 | ||||||
| 90,000 | Phillips 66 Partners LP, 3.750%, 3/1/28 | 97,641 | ||||||
| 28,000 | Range Resources Corp., 9.250%, 2/1/26 | 29,260 | ||||||
| 14,000 | Rattler Midstream LP, 144a, 5.625%, 7/15/25 | 14,788 | ||||||
| 7,545 | Ruby Pipeline LLC, 144a, 7.750%, 4/1/22 | 7,469 | ||||||
| 16,000 | Southwestern Energy Co., 8.375%, 9/15/28 | 17,360 | ||||||
| 50,000 | Sunoco LP / Sunoco Finance Corp., 6.000%, 4/15/27 | 53,151 | ||||||
| 29,000 | Sunoco LP / Sunoco Finance Corp., 144a, 4.500%, 5/15/29 | 30,160 | ||||||
| 126,000 | Tallgrass Energy Partners LP / Tallgrass Energy Finance Corp., 144a, 5.500%, 9/15/24 | 128,205 | ||||||
| 37,000 | Tallgrass Energy Partners LP / Tallgrass Energy Finance Corp., 144a, 6.000%, 12/31/30 | 38,075 | ||||||
| 119,000 | TerraForm Power Operating LLC, 144a, 4.750%, 1/15/30 | 127,330 | ||||||
| 4,410,091 | ||||||||
| Consumer Discretionary — 3.9% | ||||||||
| 42,000 | 1011778 BC ULC / New Red Finance, Inc. (Canada), 144a, 3.500%, 2/15/29 | 41,948 | ||||||
| 75,000 | 1011778 BC ULC / New Red Finance, Inc. (Canada), 144a, 4.000%, 10/15/30 | 76,007 | ||||||
| 29,000 | Adient US LLC, 144a, 7.000%, 5/15/26 | 31,544 | ||||||
25
Touchstone Bond Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 50.7% (Continued) | ||||||||
| Consumer Discretionary — (Continued) | ||||||||
| $ | 97,000 | Avis Budget Car Rental LLC / Avis Budget Finance, Inc., 144a, 5.250%, 3/15/25 | $ | 97,485 | ||||
| 115,000 | Beacon Roofing Supply, Inc., 144a, 4.875%, 11/1/25 | 117,731 | ||||||
| 11,000 | Carnival Corp., 144a, 7.625%, 3/1/26 | 11,984 | ||||||
| 77,000 | Carnival Corp., 144a, 11.500%, 4/1/23 | 89,067 | ||||||
| 59,000 | Churchill Downs, Inc., 144a, 4.750%, 1/15/28 | 62,098 | ||||||
| 21,000 | Dana, Inc., 5.625%, 6/15/28 | 22,611 | ||||||
| 24,000 | Delta Air Lines, Inc., 3.750%, 10/28/29 | 23,262 | ||||||
| 28,000 | Delta Air Lines, Inc. / SkyMiles IP Ltd., 144a, 4.750%, 10/20/28 | 30,562 | ||||||
| 45,000 | FirstCash, Inc., 144a, 4.625%, 9/1/28 | 46,406 | ||||||
| 24,000 | Ford Motor Co., 4.750%, 1/15/43 | 24,480 | ||||||
| 45,000 | Ford Motor Co., 9.000%, 4/22/25 | 55,170 | ||||||
| 138,000 | Ford Motor Credit Co. LLC, 4.542%, 8/1/26 | 147,315 | ||||||
| 200,000 | Ford Motor Credit Co. LLC MTN, 4.389%, 1/8/26 | 209,936 | ||||||
| 90,000 | General Motors Financial Co., Inc., 3.950%, 4/13/24 | 98,029 | ||||||
| 165,000 | General Motors Financial Co., Inc., 5.650%, 1/17/29 | 204,450 | ||||||
| 32,000 | Group 1 Automotive, Inc., 144a, 4.000%, 8/15/28 | 32,985 | ||||||
| 221,000 | Home Depot, Inc. (The), 5.950%, 4/1/41 | 341,465 | ||||||
| 316,000 | Hyundai Capital America, 144a, 2.650%, 2/10/25 | 332,030 | ||||||
| 133,000 | JB Poindexter & Co., Inc., 144a, 7.125%, 4/15/26 | 140,648 | ||||||
| 20,000 | Lithia Motors, Inc., 144a, 4.375%, 1/15/31 | 21,450 | ||||||
| 300,000 | Lowe's Cos, Inc., 4.500%, 4/15/30 | 373,430 | ||||||
| 17,000 | Marriott International, Inc., 4.625%, 6/15/30 | 19,949 | ||||||
| 22,000 | MDC Holdings, Inc., 3.850%, 1/15/30 | 24,463 | ||||||
| 23,000 | Meritor, Inc., 144a, 4.500%, 12/15/28 | 23,575 | ||||||
| 36,000 | Meritor, Inc., 144a, 6.250%, 6/1/25 | 38,880 | ||||||
| 107,000 | Quad/Graphics, Inc., 7.000%, 5/1/22 | 96,300 | ||||||
| 14,000 | Royal Caribbean Cruises Ltd., 7.500%, 10/15/27† | 15,260 | ||||||
| 37,000 | Royal Caribbean Cruises Ltd., 144a, 11.500%, 6/1/25 | 43,255 | ||||||
| 53,000 | Sonic Automotive, Inc., 6.125%, 3/15/27 | 55,849 | ||||||
| 70,000 | Speedway Motorsports LLC / Speedway Funding II, Inc., 144a, 4.875%, 11/1/27 | 69,300 | ||||||
| 45,000 | Taylor Morrison Communities, Inc., 144a, 5.875%, 6/15/27 | 50,999 | ||||||
| 120,000 | Taylor Morrison Communities, Inc. / Taylor Morrison Holdings II, Inc., 144a, 5.625%, 3/1/24 | 128,850 | ||||||
| 306,000 | Toyota Motor Credit Corp. MTN, 0.500%, 8/14/23 | 307,563 | ||||||
| 16,000 | TRI Pointe Group, Inc., 5.700%, 6/15/28 | 18,064 | ||||||
| 24,000 | United Rentals North America, Inc., 3.875%, 11/15/27 | 25,140 | ||||||
| 157,000 | United Rentals North America, Inc., 5.875%, 9/15/26 | 166,216 | ||||||
| 13,000 | Vail Resorts, Inc., 144a, 6.250%, 5/15/25 | 13,878 | ||||||
| 324,000 | Walmart, Inc., 2.850%, 7/8/24 | 350,520 | ||||||
| 16,000 | Wyndham Hotels & Resorts, Inc., 144a, 4.375%, 8/15/28 | 16,625 | ||||||
| 49,000 | Wyndham Hotels & Resorts, Inc., 144a, 5.375%, 4/15/26 | 50,715 | ||||||
| 4,147,494 | ||||||||
| Information Technology — 3.2% | ||||||||
| 335,000 | Apple, Inc., 2.750%, 1/13/25 | 363,464 | ||||||
| 228,000 | Apple, Inc., 4.650%, 2/23/46 | 324,092 | ||||||
| 29,000 | Black Knight InfoServ LLC, 144a, 3.625%, 9/1/28 | 29,689 | ||||||
| 53,000 | Booz Allen Hamilton, Inc., 144a, 3.875%, 9/1/28 | 54,590 | ||||||
| 25,000 | Boxer Parent Co., Inc., 144a, 7.125%, 10/2/25 | 27,136 | ||||||
| 94,000 | Camelot Finance SA, 144a, 4.500%, 11/1/26 | 98,113 | ||||||
| 108,000 | CDK Global, Inc., 4.875%, 6/1/27 | 113,940 | ||||||
| 282,000 | Fiserv, Inc., 3.500%, 7/1/29 | 322,003 | ||||||
| 300,000 | Hewlett Packard Enterprise Co., 4.650%, 10/1/24 | 340,530 | ||||||
| 47,000 | J2 Global, Inc., 144a, 4.625%, 10/15/30 | 49,585 | ||||||
| 52,000 | Logan Merger Sub, Inc., 144a, 5.500%, 9/1/27 | 54,470 | ||||||
| 35,000 | Microchip Technology, Inc., 144a, 4.250%, 9/1/25 | 37,028 | ||||||
| 157,000 | Micron Technology, Inc., 5.327%, 2/6/29 | 196,389 | ||||||
| 144,000 | Microsoft Corp., 3.500%, 2/12/35 | 177,364 | ||||||
| 6,000 | NCR Corp., 144a, 8.125%, 4/15/25 | 6,682 | ||||||
| 319,000 | NXP BV / NXP Funding LLC (Netherlands), 144a, 5.350%, 3/1/26 | 384,319 | ||||||
| 60,000 | Open Text Corp. (Canada), 144a, 3.875%, 2/15/28 | 62,400 | ||||||
| 170,000 | Oracle Corp., 2.650%, 7/15/26 | 186,819 | ||||||
| 110,000 | SS&C Technologies, Inc., 144a, 5.500%, 9/30/27 | 117,482 | ||||||
| 214,000 | Visa, Inc., 4.150%, 12/14/35 | 278,156 | ||||||
| 41,000 | Western Digital Corp., 4.750%, 2/15/26 | 45,305 | ||||||
| 74,000 | Xerox Holdings Corp., 144a, 5.000%, 8/15/25 | 78,756 | ||||||
| 3,348,312 | ||||||||
| Utilities — 3.2% | ||||||||
| 213,000 | American Water Capital Corp., 6.593%, 10/15/37 | 332,767 | ||||||
| 28,000 | Calpine Corp., 144a, 5.000%, 2/1/31 | 29,260 | ||||||
| 14,000 | Clearway Energy Operating LLC, 144a, 4.750%, 3/15/28 | 15,015 | ||||||
| 354,000 | DTE Energy Co. Ser D Series D, 3.700%, 8/1/23 | 382,295 | ||||||
| 91,000 | Duke Energy Progress LLC, 4.150%, 12/1/44 | 115,479 | ||||||
| 202,000 | Edison International, 4.125%, 3/15/28 | 225,238 | ||||||
| 218,000 | Electricite de France SA (France), 144a, 4.500%, 9/21/28 | 260,037 | ||||||
| 47,000 | FirstEnergy Transmission LLC, 144a, 4.550%, 4/1/49 | 54,888 | ||||||
| 22,000 | FirstEnergy Transmission LLC, 144a, 5.450%, 7/15/44 | 27,915 | ||||||
| 85,000 | Fortis, Inc. (Canada), 3.055%, 10/4/26 | 93,558 | ||||||
| 234,000 | Oncor Electric Delivery Co. LLC, 3.800%, 9/30/47 | 287,331 | ||||||
| 362,000 | Pacific Gas and Electric Co., 3.500%, 8/1/50 | 359,796 | ||||||
| 124,000 | PacifiCorp., 5.750%, 4/1/37 | 176,552 | ||||||
| 38,000 | Pattern Energy Operations LP / Pattern Energy Operations, Inc., 144a, 4.500%, 8/15/28 | 40,090 | ||||||
| 75,000 | PG&E Corp., 5.000%, 7/1/28 | 79,875 | ||||||
| 14,000 | PG&E Corp., 5.250%, 7/1/30 | 15,400 | ||||||
| 46,000 | Rockpoint Gas Storage Canada Ltd. (Canada), 144a, 7.000%, 3/31/23 | 45,540 | ||||||
| 134,000 | Talen Energy Supply LLC, 144a, 7.625%, 6/1/28 | 144,385 | ||||||
| 198,000 | Virginia Electric & Power Co., 3.300%, 12/1/49 | 233,632 | ||||||
| 492,000 | WEC Energy Group, Inc., (3M LIBOR +2.113%), 2.334%, 5/15/67(A) | 421,880 | ||||||
| 3,340,933 | ||||||||
| Real Estate — 2.9% | ||||||||
| 166,000 | American Homes 4 Rent LP REIT, 4.250%, 2/15/28 | 190,870 | ||||||
| 351,000 | Crown Castle International Corp. REIT, 3.650%, 9/1/27 | 396,274 | ||||||
| 11,000 | Diversified Healthcare Trust REIT, 4.750%, 5/1/24 | 11,298 | ||||||
| 8,000 | Diversified Healthcare Trust REIT, 4.750%, 2/15/28 | 7,960 | ||||||
| 48,000 | Diversified Healthcare Trust REIT, 9.750%, 6/15/25 | 54,535 | ||||||
| 230,000 | Equinix, Inc. REIT, 2.900%, 11/18/26 | 251,543 | ||||||
| 77,000 | GEO Group, Inc. (The) REIT, 5.875%, 1/15/22 | 76,382 | ||||||
| 77,000 | GLP Capital LP / GLP Financing II, Inc. REIT, 5.375%, 4/15/26 | 88,371 | ||||||
| 278,000 | Healthcare Realty Trust, Inc. REIT, 2.400%, 3/15/30 | 289,940 | ||||||
| 52,000 | Iron Mountain, Inc. REIT, 144a, 4.875%, 9/15/29 | 54,860 | ||||||
| 72,000 | Iron Mountain, Inc. REIT, 144a, 5.250%, 7/15/30 | 77,760 | ||||||
| 73,000 | MGM Growth Properties Operating Partnership LP / MGP Finance Co.-Issuer, Inc. REIT, 5.625%, 5/1/24 | 79,289 | ||||||
| 181,000 | Mid-America Apartments LP REIT, 3.750%, 6/15/24 | 197,173 | ||||||
| 100,000 | MPT Operating Partnership LP / MPT Finance Corp. REIT, 5.250%, 8/1/26 | 104,700 | ||||||
| 204,000 | Realty Income Corp. REIT, 3.250%, 1/15/31 | 231,259 | ||||||
| 282,000 | Sabra Health Care LP REIT, 5.125%, 8/15/26 | 314,406 | ||||||
26
Touchstone Bond Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| Corporate Bonds — 50.7% (Continued) | ||||||||
| Real Estate — (Continued) | ||||||||
| $ | 21,000 | SBA Communications Corp. REIT, 144a, 3.875%, 2/15/27 | $ | 22,056 | ||||
| 96,000 | STORE Capital Corp. REIT, 4.500%, 3/15/28 | 109,287 | ||||||
| 180,000 | STORE Capital Corp. REIT, 4.625%, 3/15/29 | 208,813 | ||||||
| 244,000 | VEREIT Operating Partnership LP REIT, 4.600%, 2/6/24 | 268,346 | ||||||
| 3,035,122 | ||||||||
| Materials — 1.3% | ||||||||
| 40,000 | Alcoa Nederland Holding BV, 144a, 6.750%, 9/30/24 | 41,662 | ||||||
| 9,000 | Arconic Corp., 144a, 6.000%, 5/15/25 | 9,608 | ||||||
| 83,000 | Braskem America Finance Co. (Brazil), 144a, 7.125%, 7/22/41 | 95,658 | ||||||
| 7,000 | Clearwater Paper Corp., 144a, 4.750%, 8/15/28 | 7,245 | ||||||
| 40,000 | CVR Partners LP / CVR Nitrogen Finance Corp., 144a, 9.250%, 6/15/23 | 40,042 | ||||||
| 196,000 | Ecolab, Inc., 4.800%, 3/24/30 | 250,094 | ||||||
| 54,000 | FMG Resources August 2006 Pty Ltd. (Australia), 144a, 4.750%, 5/15/22 | 55,553 | ||||||
| 128,000 | Freeport-McMoRan, Inc., 5.000%, 9/1/27 | 135,680 | ||||||
| 6,000 | Hudbay Minerals, Inc. (Peru), 144a, 6.125%, 4/1/29 | 6,465 | ||||||
| 72,000 | Hudbay Minerals, Inc. (Peru), 144a, 7.625%, 1/15/25 | 74,790 | ||||||
| 22,000 | Kaiser Aluminum Corp., 144a, 4.625%, 3/1/28 | 22,825 | ||||||
| 29,000 | Mineral Resources Ltd. (Australia), 144a, 8.125%, 5/1/27 | 32,081 | ||||||
| 16,000 | Minerals Technologies, Inc., 144a, 5.000%, 7/1/28 | 16,742 | ||||||
| 75,000 | Novelis Corp., 144a, 5.875%, 9/30/26 | 78,375 | ||||||
| 80,000 | Nufarm Australia Ltd. / Nufarm Americas, Inc. (Australia), 144a, 5.750%, 4/30/26 | 82,200 | ||||||
| 293,000 | Sherwin-Williams Co. (The), 4.500%, 6/1/47 | 391,924 | ||||||
| 10,000 | WR Grace & Co., 144a, 4.875%, 6/15/27 | 10,605 | ||||||
| 1,351,549 | ||||||||
| Total Corporate Bonds | $ | 53,404,768 | ||||||
| U.S. Treasury Obligations — 16.8% | ||||||||
| 2,740,000 | U.S. Treasury Bond, 1.375%, 8/15/50 | 2,566,181 | ||||||
| 2,065,000 | U.S. Treasury Note, 0.250%, 10/31/25 | 2,056,127 | ||||||
| 3,280,000 | U.S. Treasury Note, 0.375%, 3/31/22 | 3,290,378 | ||||||
| 3,633,000 | U.S. Treasury Note, 0.625%, 5/15/30 | 3,551,825 | ||||||
| 3,085,000 | U.S. Treasury Note, 1.125%, 8/15/40 | 2,920,627 | ||||||
| 2,790,000 | U.S. Treasury Note, 1.500%, 9/30/21 | 2,818,772 | ||||||
| 515,000 | U.S. Treasury Note, 1.500%, 11/30/24 | 540,046 | ||||||
| Total U.S. Treasury Obligations | $ | 17,743,956 | ||||||
| Asset-Backed Securities — 8.8% | ||||||||
| 375,000 | Apidos CLO XVIII (Cayman Islands), Ser 2015-23A, Class AR, 144a, (3M LIBOR +1.220%), 1.457%, 4/15/33(A) | 375,000 | ||||||
| 265,000 | Apidos CLO XVIII (Cayman Islands), Ser 2018-18A, Class A1, 144a, (3M LIBOR +1.140%), 1.356%, 10/22/30(A) | 264,893 | ||||||
| 400,000 | Benefit Street Partners CLO XIX Ltd. (Cayman Islands), Ser 2019-19A, Class B, 144a, (3M LIBOR +2.000%), 2.237%, 1/15/33(A) | 400,838 | ||||||
| 238,595 | CF Hippolyta LLC, Ser 2020-1, Class A1, 144a, 1.690%, 7/15/60 | 243,036 | ||||||
| 275,000 | CIFC Funding Ltd. (Cayman Islands), Ser 2016-1A, Class A1R, 144a, (3M LIBOR +1.350%), 1.559%, 10/21/31(A) | 275,334 | ||||||
| 143,560 | Domino's Pizza Master Issuer LLC, Ser 2017-1A, Class A2II, 144a, 3.082%, 7/25/47 | 144,327 | ||||||
| 712,313 | Driven Brands Funding LLC, Ser 2019-1A, Class A2, 144a, 4.641%, 4/20/49 | 757,238 | ||||||
| 504,195 | Elara HGV Timeshare Issuer LLC, Ser 2019-A, Class B, 144a, 2.910%, 1/25/34 | 516,861 | ||||||
| 221,614 | GLS Auto Receivables Issuer Trust, Ser 2019-3A, Class A, 144a, 2.580%, 7/17/23 | 223,509 | ||||||
| 114,745 | Hertz Vehicle Financing II LP, Ser 2016-4A, Class A, 144a, 2.650%, 7/25/22 | 114,987 | ||||||
| 57,180 | Hertz Vehicle Financing II LP, Ser 2019-1A, Class A, 144a, 3.710%, 3/25/23 | 57,252 | ||||||
| 297,750 | Jack In The Box Funding LLC, Ser 2019-1A, Class A2I, 144a, 3.982%, 8/25/49 | 305,081 | ||||||
| 268,000 | Jersey Mike's Funding, Ser 2019-1A, Class A2, 144a, 4.433%, 2/15/50 | 286,261 | ||||||
| 241,875 | Jimmy Johns Funding LLC, Ser 2017-1A, Class A2II, 144a, 4.846%, 7/30/47 | 249,371 | ||||||
| 700,000 | Madison Park Funding XXXV Ltd. (Cayman Islands), Ser 2015-18A, Class BR, 144a, (3M LIBOR +1.600%), 1.809%, 10/21/30(A) | 697,904 | ||||||
| 275,000 | Madison Park Funding XXXV Ltd. (Cayman Islands), Ser 2019-35A, Class A2A, 144a, (3M LIBOR +1.650%), 1.868%, 4/20/31(A) | 275,191 | ||||||
| 350,000 | New Mountain CLO 1 Ltd. (Cayman Islands), Ser CLO-1A, Class A1, 144a, (3M LIBOR +1.550%), 1.791%, 10/15/32(A) | 350,732 | ||||||
| 400,000 | OHA Loan Funding Ltd. (Cayman Islands), Ser 2015-1A, Class B1R2, 144a, (3M LIBOR +1.900%), 2.121%, 11/15/32(A) | 400,277 | ||||||
| 750,000 | STWD Ltd. (Cayman Islands), Ser 2019-FL1, Class A, 144a, (1M LIBOR +1.080%), 1.239%, 7/15/38(A) | 746,512 | ||||||
| 321,338 | TAL Advantage VII LLC, Ser 2020-1A, Class A, 144a, 2.050%, 9/20/45 | 324,226 | ||||||
| 325,000 | Towd Point Mortgage Trust, Ser 2015-3, Class A2, 144a, 4.000%, 3/25/54(A)(B) | 334,772 | ||||||
| 358,495 | Towd Point Mortgage Trust, Ser 2019-1, Class A1, 144a, 3.750%, 3/25/58(A)(B) | 385,188 | ||||||
| 380,000 | Voya CLO Ltd. (Cayman Islands), Ser 2017-4A, Class A1, 144a, (3M LIBOR +1.130%), 1.367%, 10/15/30(A) | 380,007 | ||||||
| 275,000 | Voya CLO Ltd. (Cayman Islands), Ser 2019-2A, Class A, 144a, (3M LIBOR +1.270%), 1.488%, 7/20/32(A) | 275,076 | ||||||
| 897,250 | Wendys Funding LLC, Ser 2018-1A, Class A2I, 144a, 3.573%, 3/15/48 | 924,921 | ||||||
| Total Asset-Backed Securities | $ | 9,308,794 | ||||||
| U.S. Government Mortgage-Backed Obligations — 5.8% | ||||||||
| 71,692 | FHLMC, Pool #A95946, 4.000%, 1/1/41 | 78,666 | ||||||
| 61,360 | FHLMC, Pool #A96485, 4.500%, 1/1/41 | 68,915 | ||||||
| 13,525 | FHLMC, Pool #G03217, 5.500%, 9/1/37 | 15,155 | ||||||
| 9,400 | FHLMC, Pool #G03781, 6.000%, 1/1/38 | 11,087 | ||||||
| 347,095 | FHLMC, Pool #G05624, 4.500%, 9/1/39 | 389,841 | ||||||
| 463,544 | FHLMC, Pool #Q29056, 4.000%, 10/1/44 | 510,800 | ||||||
| 208,109 | FHLMC, Pool #Q29260, 4.000%, 10/1/44 | 229,293 | ||||||
| 4,438 | FNMA, Pool #561741, 7.500%, 1/1/31 | 5,123 | ||||||
| 274,904 | FNMA, Pool #725423, 5.500%, 5/1/34 | 320,634 | ||||||
| 246,495 | FNMA, Pool #725610, 5.500%, 7/1/34 | 287,940 | ||||||
| 6,111 | FNMA, Pool #889734, 5.500%, 6/1/37 | 7,180 | ||||||
| 39,539 | FNMA, Pool #AB1149, 5.000%, 6/1/40 | 45,954 | ||||||
| 39,954 | FNMA, Pool #AB1800, 4.000%, 11/1/40 | 44,153 | ||||||
| 69,152 | FNMA, Pool #AD3795, 4.500%, 4/1/40 | 77,646 | ||||||
| 101,487 | FNMA, Pool #AD9150, 5.000%, 8/1/40 | 118,012 | ||||||
| 203,005 | FNMA, Pool #AD9193, 5.000%, 9/1/40 | 234,914 | ||||||
| 130,177 | FNMA, Pool #AE0548, 4.500%, 11/1/40 | 146,169 | ||||||
27
Touchstone Bond Fund (Continued)
| Principal | Market | |||||||
| Amount | Value | |||||||
| U.S. Government Mortgage-Backed Obligations — 5.8% (Continued) | ||||||||
| $ | 95,468 | FNMA, Pool #AE4429, 4.000%, 10/1/40 | $ | 105,220 | ||||
| 5,773 | FNMA, Pool #AH2666, 4.000%, 1/1/26 | 6,145 | ||||||
| 10,059 | FNMA, Pool #AH3493, 4.000%, 2/1/26 | 10,692 | ||||||
| 149,294 | FNMA, Pool #AJ5457, 4.000%, 11/1/41 | 162,763 | ||||||
| 156,870 | FNMA, Pool #AL0054, 4.500%, 2/1/41 | 176,092 | ||||||
| 327,461 | FNMA, Pool #AL5718, 3.500%, 9/1/44 | 357,984 | ||||||
| 369,618 | FNMA, Pool #AR9195, 3.000%, 3/1/43 | 401,176 | ||||||
| 149,701 | FNMA, Pool #AS7813, 4.000%, 8/1/46 | 163,095 | ||||||
| 363,207 | FNMA, Pool #AT2016, 3.000%, 4/1/43 | 388,290 | ||||||
| 350,816 | FNMA, Pool #BC1158, 3.500%, 2/1/46 | 375,950 | ||||||
| 180,148 | FNMA, Pool #MA1175, 3.000%, 9/1/42 | 191,102 | ||||||
| 103,650 | FNMA, Pool #MA2177, 4.000%, 2/1/35 | 113,129 | ||||||
| 133,519 | GNMA, Pool #4853, 4.000%, 11/20/40 | 147,680 | ||||||
| 94,950 | GNMA, Pool #4883, 4.500%, 12/20/40 | 105,781 | ||||||
| 369,396 | GNMA, Pool #5175, 4.500%, 9/20/41 | 411,539 | ||||||
| 13,122 | GNMA, Pool #679437, 6.000%, 11/15/22 | 13,234 | ||||||
| 40,362 | GNMA, Pool #736696, 4.500%, 5/15/40 | 45,141 | ||||||
| 187,964 | GNMA, Pool #AD1745, 3.000%, 2/20/43 | 206,103 | ||||||
| 144,871 | GNMA, Pool #MA1157, 3.500%, 7/20/43 | 157,783 | ||||||
| Total U.S. Government Mortgage-Backed Obligations | $ | 6,130,381 | ||||||
| Shares | ||||||||
| Exchange-Traded Fund — 5.0% | ||||||||
| 45,431 | iShares JP Morgan USD Emerging Markets Bond ETF | $ | 5,265,907 | |||||
| Principal | Market | |||||||
| Amount | Value | |||||||
| Non-Agency Collateralized Mortgage Obligations — 3.9% | ||||||||
| $ | 185,774 | Agate Bay Mortgage Trust, Ser 2013-1, Class B3, 144a, 3.598%, 7/25/43(A)(B) | 188,905 | |||||
| 580,127 | Agate Bay Mortgage Trust, Ser 2015-4, Class B2, 144a, 3.565%, 6/25/45(A)(B) | 599,168 | ||||||
| 455,579 | Agate Bay Mortgage Trust, Ser 2015-7, Class B1, 144a, 3.748%, 10/25/45(A)(B) | 474,760 | ||||||
| 472,886 | CSMC Trust, Ser 2013-IVR3, Class B2, 144a, 3.396%, 5/25/43(A)(B) | 483,157 | ||||||
| 397,922 | CSMC Trust, Ser 2015-1, Class B3, 144a, 3.942%, 1/25/45(A)(B) | 412,785 | ||||||
| 268,494 | CSMC Trust, Ser 2015-WIN1, Class B3, 144a, 3.833%, 12/25/44(A)(B) | 271,778 | ||||||
| 171,072 | CSMC Trust, Ser 2018-RPL9, Class A, 144a, 3.850%, 9/25/57(A)(B) | 184,523 | ||||||
| 1,141 | Deutsche ALT-A Securities, Inc. Alternate Loan Trust, Ser 2003-2XS, Class A6, 5.470%, 9/25/33(A)(B) | 1,154 | ||||||
| 272,167 | EverBank Mortgage Loan Trust, Ser 2013-1, Class B1, 144a, 3.491%, 3/25/43(A)(B) | 278,201 | ||||||
| 524,475 | JP Morgan Mortgage Trust, Ser 2017-1, Class B2, 144a, 3.511%, 1/25/47(A)(B) | 543,958 | ||||||
| 88,238 | Residential Asset Securitization Trust, Ser 2006-A1, Class 1A3, 6.000%, 4/25/36 | 62,671 | ||||||
| 157,386 | Sequoia Mortgage Trust, Ser 2013-1, Class B1, 3.612%, 2/25/43(A)(B) | 161,986 | ||||||
| 157,925 | Sequoia Mortgage Trust, Ser 2013-10, Class B2, 144a, 3.550%, 8/25/43(A)(B) | 161,612 | ||||||
| 205,728 | Sequoia Mortgage Trust, Ser 2013-5, Class B1, 144a, 3.500%, 5/25/43(A)(B) | 211,965 | ||||||
| 31,288 | Washington Mutual Alternative Mortgage Pass-Through Certificates, Ser 2005-9, Class 2A4, 5.500%, 11/25/35 | 31,968 | ||||||
| Total Non-Agency Collateralized Mortgage Obligations | $ | 4,068,591 | ||||||
| Commercial Mortgage-Backed Securities — 3.5% | ||||||||
| 675,000 | BANK, Ser 2018-BN14, Class A3, 3.966%, 9/15/60 | 787,831 | ||||||
| 750,000 | BHMS, Ser 2018-ATLS, Class A, 144a, (1M LIBOR +1.250%), 1.409%, 7/15/35(A) | 729,317 | ||||||
| 360,000 | DBUBS Mortgage Trust, Ser 2017-BRBK, Class B, 144a, 3.530%, 10/10/34(A)(B) | 387,153 | ||||||
| 375,000 | GS Mortgage Securities Corp. II, Ser 2017-SLP, Class B, 144a, 3.772%, 10/10/32 | 380,562 | ||||||
| 250,000 | GS Mortgage Securities Trust, Ser 2017-FARM, Class B, 144a, 3.541%, 1/10/43(A)(B) | 266,339 | ||||||
| 350,000 | JP Morgan Chase Commercial Mortgage Securities Trust, Ser 2018-MINN, Class A, 144a, (1M LIBOR +1.020%), 2.020%, 11/15/35(A) | 338,079 | ||||||
| 675,000 | SG Commercial Mortgage Securities Trust, Ser 2019-787E, Class A, 144a, 4.163%, 2/15/41 | 777,513 | ||||||
| Total Commercial Mortgage-Backed Securities | $ | 3,666,794 | ||||||
| Agency Collateralized Mortgage Obligations — 1.3% | ||||||||
| 790,298 | FHLMC REMIC, Ser 3859, Class JB, 5.000%, 5/15/41 | 885,918 | ||||||
| 43,511 | FNMA REMIC, Ser 2015-51, Class KC, 3.000%, 6/25/45 | 46,124 | ||||||
| 385,568 | FNMA REMIC, Ser 2017-90, Class KA, 3.000%, 11/25/47 | 412,841 | ||||||
| Total Agency Collateralized Mortgage Obligations | $ | 1,344,883 | ||||||
| Municipal Bond — 0.3% | ||||||||
| New York — 0.3% | ||||||||
| 320,000 | NY Housing Development Corp., Ref 8 Spruce Street Class B, 3.864%, 2/15/48 | $ | 339,453 | |||||
| Sovereign Government Obligations — 0.2% | ||||||||
| 218,000 | Peruvian Government International Bond, 2.780%, 12/1/60 | $ | 219,962 | |||||
| Shares | ||||||||
| Short-Term Investment Funds — 3.4% | ||||||||
| 3,506,758 | Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | 3,506,758 | ||||||
| 15,696 | Invesco Government & Agency Portfolio, Institutional Class, 0.03%**∞Ω | 15,696 | ||||||
| Total Short-Term Investment Funds | $ | 3,522,454 | ||||||
| Total Investment Securities — 99.7% | ||||||||
| (Cost $98,196,761) | $ | 105,015,943 | ||||||
| Other Assets in Excess of Liabilities — 0.3% | 342,248 | |||||||
| Net Assets — 100.0% | $ | 105,358,191 | ||||||
28
Touchstone Bond Fund (Continued)
| (A) | Variable rate security - Rate reflected is the rate in effect as of December 31, 2020. |
| (B) | Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. |
These securities do not indicate a reference rate and spread in their description.
| ** | Represents collateral for securities loaned. |
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2020 was $15,107. |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
CLO - Collateralized Loan Obligation
ETF - Exchange-Traded Fund
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
LIBOR - London Interbank Offered Rate
LLC - Limited Liability Company
LP - Limited Partnership
MTN - Medium Term Note
PLC - Public Limited Company
REIT - Real Estate Investment Trust
REMIC - Real Estate Mortgage Investment Conduit
USD - United States Dollar
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 December 31, 2020, these securities were valued at $33,173,205 or 31.5% 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 | $ | — | $ | 53,404,768 | $ | — | $ | 53,404,768 | ||||||||
| U.S. Treasury Obligations | — | 17,743,956 | — | 17,743,956 | ||||||||||||
| Asset-Backed Securities | — | 9,308,794 | — | 9,308,794 | ||||||||||||
| U.S. Government Mortgage-Backed Obligations | — | 6,130,381 | — | 6,130,381 | ||||||||||||
| Exchange-Traded Fund | 5,265,907 | — | — | 5,265,907 | ||||||||||||
| Non-Agency Collateralized Mortgage Obligations | — | 4,068,591 | — | 4,068,591 | ||||||||||||
| Commercial Mortgage-Backed Securities | — | 3,666,794 | — | 3,666,794 | ||||||||||||
| Agency Collateralized Mortgage Obligations | — | 1,344,883 | — | 1,344,883 | ||||||||||||
| Municipal Bond | — | 339,453 | — | 339,453 | ||||||||||||
| Sovereign Government Obligation | — | 219,962 | — | 219,962 | ||||||||||||
| Short-Term Investment Funds | 3,522,454 | — | — | 3,522,454 | ||||||||||||
| Total Assets | $ | 8,788,361 | $ | 96,227,582 | $ | — | $ | 105,015,943 | ||||||||
See accompanying Notes to Financial Statements.
29
Touchstone Common Stock Fund – December 31, 2020
| Market | ||||||||
| Shares | Value | |||||||
| Common Stocks — 100.4% | ||||||||
| Information Technology — 26.3% | ||||||||
| Apple, Inc. | 121,115 | $ | 16,070,749 | |||||
| Avnet, Inc. | 62,054 | 2,178,716 | ||||||
| International Business Machines Corp. | 22,843 | 2,875,477 | ||||||
| Microsoft Corp. | 76,893 | 17,102,541 | ||||||
| Oracle Corp. | 82,852 | 5,359,696 | ||||||
| salesforce.com, Inc.* | 32,289 | 7,185,271 | ||||||
| SS&C Technologies Holdings, Inc. | 40,739 | 2,963,762 | ||||||
| Texas Instruments, Inc. | 25,987 | 4,265,246 | ||||||
| Workday, Inc. - Class A* | 15,533 | 3,721,862 | ||||||
| 61,723,320 | ||||||||
| Communication Services — 20.9% | ||||||||
| Alphabet, Inc. - Class C* | 8,896 | 15,584,724 | ||||||
| AT&T, Inc. | 88,597 | 2,548,050 | ||||||
| Baidu, Inc. (China) ADR* | 7,462 | 1,613,583 | ||||||
| Comcast Corp. - Class A | 122,454 | 6,416,590 | ||||||
| Facebook, Inc. - Class A* | 45,692 | 12,481,227 | ||||||
| Fox Corp. - Class A | 67,213 | 1,957,243 | ||||||
| Netflix, Inc.* | 7,955 | 4,301,507 | ||||||
| Walt Disney Co. (The)* | 22,639 | 4,101,734 | ||||||
| 49,004,658 | ||||||||
| Consumer Discretionary — 14.0% | ||||||||
| Alibaba Group Holding Ltd. (China) ADR* | 16,143 | 3,756,960 | ||||||
| Amazon.com, Inc.* | 3,978 | 12,956,068 | ||||||
| Hilton Worldwide Holdings, Inc. | 39,510 | 4,395,883 | ||||||
| JD.com, Inc. (China) ADR* | 53,709 | 4,721,021 | ||||||
| Starbucks Corp. | 34,030 | 3,640,529 | ||||||
| Trip.com Group Ltd. (China) ADR* | 102,611 | 3,461,069 | ||||||
| 32,931,530 | ||||||||
| Financials — 11.3% | ||||||||
| Bank of America Corp. | 181,281 | 5,494,627 | ||||||
| Berkshire Hathaway, Inc. - Class B* | 40,614 | 9,417,168 | ||||||
| Goldman Sachs Group, Inc. (The) | 26,580 | 7,009,412 | ||||||
| Signature Bank/NewYork NY | 34,361 | 4,648,700 | ||||||
| 26,569,907 | ||||||||
| Health Care — 10.9% | ||||||||
| AmerisourceBergen Corp. | 24,224 | 2,368,138 | ||||||
| Bristol-Myers Squibb Co. | 77,056 | 4,779,784 | ||||||
| HCA Healthcare, Inc. | 33,593 | 5,524,705 | ||||||
| Johnson & Johnson | 43,542 | 6,852,640 | ||||||
| UnitedHealth Group, Inc. | 16,842 | 5,906,153 | ||||||
| 25,431,420 | ||||||||
| Industrials — 8.4% | ||||||||
| Deere & Co. | 16,431 | 4,420,761 | ||||||
| FedEx Corp. | 7,914 | 2,054,633 | ||||||
| Hubbell, Inc. | 27,193 | 4,263,590 | ||||||
| Parker-Hannifin Corp. | 12,785 | 3,482,762 | ||||||
| Raytheon Technologies Corp. | 77,901 | 5,570,700 | ||||||
| 19,792,446 | ||||||||
| Consumer Staples — 3.6% | ||||||||
| Monster Beverage Corp.* | 48,551 | 4,489,996 | ||||||
| Philip Morris International, Inc. | 46,964 | 3,888,150 | ||||||
| 8,378,146 | ||||||||
| Real Estate — 2.1% | ||||||||
| Jones Lang LaSalle, Inc.* | 32,714 | $ | 4,853,776 | |||||
| Energy — 1.5% | ||||||||
| Exxon Mobil Corp. | 50,133 | 2,066,482 | ||||||
| Schlumberger Ltd. | 67,838 | 1,480,903 | ||||||
| 3,547,385 | ||||||||
| Materials — 1.4% | ||||||||
| DuPont de Nemours, Inc. | 45,483 | 3,234,296 | ||||||
| Total Common Stocks | $ | 235,466,884 | ||||||
| Short-Term Investment Fund — 0.3% | ||||||||
| Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | 640,078 | $ | 640,078 | |||||
| Total Investment Securities —100.7% | ||||||||
| (Cost $138,176,089) | $ | 236,106,962 | ||||||
| Liabilities in Excess of Other Assets — (0.7%) | (1,538,185 | ) | ||||||
| Net Assets — 100.0% | $ | 234,568,777 |
| * | Non-income producing security. |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
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 Investments.
Valuation inputs at Reporting Date:
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks | $ | 235,466,884 | $ | — | $ | — | $ | 235,466,884 | ||||||||
| Short-Term Investment Fund | 640,078 | — | — | 640,078 | ||||||||||||
| Total | $ | 236,106,962 | $ | — | $ | — | $ | 236,106,962 | ||||||||
See accompanying Notes to Financial Investments.
30
Touchstone Small Company Fund – December 31, 2020
| Market | ||||||||
| Shares | Value | |||||||
| Common Stocks — 99.8% | ||||||||
| Health Care — 22.5% | ||||||||
| Addus HomeCare Corp.* | 6,900 | $ | 807,921 | |||||
| Allscripts Healthcare Solutions, Inc.* | 58,000 | 837,520 | ||||||
| Bio-Rad Laboratories, Inc. - Class A* | 1,096 | 638,902 | ||||||
| Bio-Techne Corp. | 2,236 | 710,042 | ||||||
| Chemed Corp. | 1,560 | 830,872 | ||||||
| Encompass Health Corp. | 10,383 | 858,570 | ||||||
| Ensign Group, Inc. (The) | 10,600 | 772,952 | ||||||
| Globus Medical, Inc. - Class A* | 11,868 | 774,031 | ||||||
| Haemonetics Corp.* | 6,440 | 764,750 | ||||||
| HMS Holdings Corp.* | 24,500 | 900,375 | ||||||
| Integra LifeSciences Holdings Corp.* | 13,592 | 882,393 | ||||||
| Magellan Health, Inc.* | 9,800 | 811,832 | ||||||
| NuVasive, Inc.* | 16,697 | 940,542 | ||||||
| Omnicell, Inc.* | 6,731 | 807,855 | ||||||
| Premier, Inc. - Class A | 24,118 | 846,542 | ||||||
| Progyny, Inc.* | 19,300 | 818,127 | ||||||
| Providence Service Corp. (The)* | 5,231 | 725,174 | ||||||
| Tactile Systems Technology, Inc.* | 17,300 | 777,462 | ||||||
| Vericel Corp.* | 28,000 | 864,640 | ||||||
| Vocera Communications, Inc.* | 18,500 | 768,305 | ||||||
| 16,138,807 | ||||||||
| Industrials — 21.5% | ||||||||
| Aerojet Rocketdyne Holdings, Inc.* | 15,500 | 819,175 | ||||||
| Arcosa, Inc. | 14,600 | 801,978 | ||||||
| ASGN, Inc.* | 8,617 | 719,778 | ||||||
| Clean Harbors, Inc.* | 14,900 | 1,133,890 | ||||||
| Crane Co. | 9,682 | 751,904 | ||||||
| Curtiss-Wright Corp. | 7,200 | 837,720 | ||||||
| Dycom Industries, Inc.* | 10,600 | 800,512 | ||||||
| Forward Air Corp. | 10,300 | 791,452 | ||||||
| Great Lakes Dredge & Dock Corp.* | 70,400 | 927,168 | ||||||
| ITT, Inc. | 10,148 | 781,599 | ||||||
| JELD-WEN Holding, Inc.* | 29,600 | 750,656 | ||||||
| John Bean Technologies Corp. | 6,100 | 694,607 | ||||||
| Parsons Corp.* | 32,000 | 1,165,120 | ||||||
| Quanta Services, Inc. | 10,333 | 744,183 | ||||||
| RBC Bearings, Inc.* | 3,800 | 680,352 | ||||||
| Rexnord Corp. | 19,780 | 781,112 | ||||||
| SkyWest, Inc. | 19,800 | 798,138 | ||||||
| Watts Water Technologies, Inc. - Class A | 5,605 | 682,128 | ||||||
| Woodward, Inc. | 6,061 | 736,593 | ||||||
| 15,398,065 | ||||||||
| Information Technology — 21.1% | ||||||||
| 8x8, Inc.* | 23,900 | 823,833 | ||||||
| Aspen Technology, Inc.* | 6,058 | 789,054 | ||||||
| Cerence, Inc.* | 7,299 | 733,404 | ||||||
| Envestnet, Inc.* | 9,700 | 798,213 | ||||||
| ExlService Holdings, Inc.* | 8,887 | 756,550 | ||||||
| J2 Global, Inc.* | 8,185 | 799,593 | ||||||
| KBR, Inc. | 26,370 | 815,624 | ||||||
| MAXIMUS, Inc. | 11,287 | 826,096 | ||||||
| Nice Ltd. (Israel) ADR* | 2,568 | 728,131 | ||||||
| Nuance Communications, Inc.* | 16,298 | 718,579 | ||||||
| Onto Innovation, Inc.* | 34,708 | 1,650,365 | ||||||
| Qualys, Inc.* | 6,828 | 832,128 | ||||||
| SPS Commerce, Inc.* | 7,100 | 770,989 | ||||||
| Tower Semiconductor Ltd. (Israel)* | 55,200 | 1,425,264 | ||||||
| Verint Systems, Inc.* | 27,231 | 1,829,379 | ||||||
| WNS Holdings Ltd. (India) ADR* | 11,100 | 799,755 | ||||||
| 15,096,957 | ||||||||
| Consumer Discretionary — 15.8% | ||||||||
| American Eagle Outfitters, Inc. | 72,200 | $ | 1,449,054 | |||||
| Aritzia, Inc. (Canada)* | 39,992 | 810,271 | ||||||
| Fox Factory Holding Corp.* | 7,800 | 824,538 | ||||||
| frontdoor, Inc.* | 28,296 | 1,420,742 | ||||||
| Grand Canyon Education, Inc.* | 8,100 | 754,191 | ||||||
| Malibu Boats, Inc. - Class A* | 12,700 | 792,988 | ||||||
| Oxford Industries, Inc. | 11,700 | 766,467 | ||||||
| Skyline Champion Corp.* | 26,800 | 829,192 | ||||||
| Steven Madden Ltd. | 23,664 | 835,812 | ||||||
| Strategic Education, Inc. | 7,700 | 734,041 | ||||||
| Texas Roadhouse, Inc. | 8,278 | 647,008 | ||||||
| TopBuild Corp.* | 3,500 | 644,280 | ||||||
| Zumiez, Inc.* | 22,900 | 842,262 | ||||||
| 11,350,846 | ||||||||
| Financials — 10.0% | ||||||||
| Evercore, Inc. - Class A | 7,400 | 811,336 | ||||||
| FNB Corp. | 84,900 | 806,550 | ||||||
| Glacier Bancorp, Inc. | 17,192 | 791,004 | ||||||
| Old National Bancorp | 47,800 | 791,568 | ||||||
| Pacific Premier Bancorp, Inc. | 25,600 | 802,048 | ||||||
| PROG Holdings, Inc. | 14,000 | 754,180 | ||||||
| TCF Financial Corp. | 20,900 | 773,718 | ||||||
| Webster Financial Corp. | 18,073 | 761,777 | ||||||
| Western Alliance Bancorp | 14,077 | 843,916 | ||||||
| 7,136,097 | ||||||||
| Real Estate — 5.6% | ||||||||
| Corporate Office Properties Trust REIT | 66,245 | 1,727,670 | ||||||
| Healthcare Realty Trust, Inc. REIT | 38,300 | 1,133,680 | ||||||
| STAG Industrial, Inc. REIT | 36,800 | 1,152,576 | ||||||
| 4,013,926 | ||||||||
| Communication Services — 3.3% | ||||||||
| Cargurus, Inc.* | 24,500 | 777,385 | ||||||
| Cogent Communications Holdings, Inc. | 12,761 | 764,001 | ||||||
| QuinStreet, Inc.* | 36,680 | 786,419 | ||||||
| 2,327,805 | ||||||||
| Total Common Stocks | $ | 71,462,503 | ||||||
| Short-Term Investment Fund — 0.9% | ||||||||
| Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | 654,350 | $ | 654,350 | |||||
| Total Investment Securities —100.7% | ||||||||
| (Cost $47,174,614) | $ | 72,116,853 | ||||||
| Liabilities in Excess of Other Assets — (0.7%) | (484,457 | ) | ||||||
| Net Assets — 100.0% | $ | 71,632,396 |
| * | Non-income producing security. |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
31
Touchstone Small Company Fund (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 | $ | 71,462,503 | $ | — | $ | — | $ | 71,462,503 | ||||||||
| Short-Term Investment Fund | 654,350 | — | — | 654,350 | ||||||||||||
| Total | $ | 72,116,853 | $ | — | $ | — | $ | 72,116,853 | ||||||||
See accompanying Notes to Financial Statements.
32
Touchstone Aggressive ETF Fund – December 31, 2020
| Market | ||||||||
| Shares | Value | |||||||
| Exchange-Traded Funds ~ — 97.2% | ||||||||
| Equity Funds — 80.3% | ||||||||
| iShares Core S&P Mid-Cap ETF | 6,734 | $ | 1,547,675 | |||||
| iShares Core S&P Small-Cap ETF† | 4,506 | 414,101 | ||||||
| Vanguard FTSE Developed Markets ETF | 78,603 | 3,710,848 | ||||||
| Vanguard FTSE Emerging Markets ETF | 22,609 | 1,132,937 | ||||||
| Vanguard S&P 500 ETF | 25,220 | 8,667,862 | ||||||
| Vanguard Value ETF† | 8,656 | 1,029,718 | ||||||
| 16,503,141 | ||||||||
| Fixed Income Funds — 16.9% | ||||||||
| iShares Broad USD High Yield Corporate Bond ETF | 7,510 | 309,863 | ||||||
| iShares Core Total USD Bond Market ETF† | 14,959 | 816,462 | ||||||
| iShares Core US Aggregate Bond ETF | 12,080 | 1,427,735 | ||||||
| Vanguard Intermediate-Term Corporate Bond ETF | 6,303 | 612,273 | ||||||
| Vanguard Total International Bond ETF | 5,207 | 304,870 | ||||||
| 3,471,203 | ||||||||
| Total Exchange-Traded Funds | $ | 19,974,344 | ||||||
| Short-Term Investment Funds — 12.5% | ||||||||
| Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | 654,902 | 654,902 | ||||||
| Invesco Government & Agency Portfolio, Institutional Class, 0.03%**∞Ω | 1,924,292 | 1,924,292 | ||||||
| Total Short-Term Investment Funds | $ | 2,579,194 | ||||||
| Total Investment Securities —109.7% | ||||||||
| (Cost $17,630,659) | $ | 22,553,538 | ||||||
| Liabilities in Excess of Other Assets — (9.7%) | (2,003,553 | ) | ||||||
| Net Assets — 100.0% | $ | 20,549,985 | ||||||
| ** | Represents collateral for securities loaned. |
| ~ | The financial statements of the underlying funds can be found on the SEC website. |
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2020 was $1,890,707. |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
ETF - Exchange-Traded Fund
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 | ||||||||||||
| Exchange-Traded Funds | $ | 19,974,344 | $ | — | $ | — | $ | 19,974,344 | ||||||||
| Short-Term Investment Funds | 2,579,194 | — | — | 2,579,194 | ||||||||||||
| Total | $ | 22,553,538 | $ | — | $ | — | $ | 22,553,538 | ||||||||
See accompanying Notes to Financial Statements.
33
Touchstone Conservative ETF Fund – December 31, 2020
| Market | ||||||||
| Shares | Value | |||||||
| Exchange-Traded Funds ~ — 97.4% | ||||||||
| Fixed Income Funds — 57.0% | ||||||||
| iShares Broad USD High Yield Corporate Bond ETF | 19,705 | $ | 813,028 | |||||
| iShares Core Total USD Bond Market ETF† | 44,266 | 2,416,038 | ||||||
| iShares Core US Aggregate Bond ETF | 22,690 | 2,681,731 | ||||||
| Vanguard Intermediate-Term Corporate Bond ETF | 13,782 | 1,338,784 | ||||||
| Vanguard Total International Bond ETF | 6,854 | 401,302 | ||||||
| 7,650,883 | ||||||||
| Equity Funds — 40.4% | ||||||||
| iShares Core S&P Mid-Cap ETF | 2,068 | 475,288 | ||||||
| iShares Core S&P Small-Cap ETF† | 1,490 | 136,931 | ||||||
| Vanguard FTSE Developed Markets ETF | 22,974 | 1,084,603 | ||||||
| Vanguard FTSE Emerging Markets ETF | 6,756 | 338,543 | ||||||
| Vanguard S&P 500 ETF | 8,883 | 3,052,998 | ||||||
| Vanguard Value ETF | 2,838 | 337,609 | ||||||
| 5,425,972 | ||||||||
| Total Exchange-Traded Funds | $ | 13,076,855 | ||||||
| Short-Term Investment Funds — 22.2% | ||||||||
| Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | 402,869 | 402,869 | ||||||
| Invesco Government & Agency Portfolio, Institutional Class, 0.03%**∞Ω | 2,574,005 | 2,574,005 | ||||||
| Total Short-Term Investment Funds | $ | 2,976,874 | ||||||
| Total Investment Securities —119.6% | ||||||||
| (Cost $13,435,891) | $ | 16,053,729 | ||||||
| Liabilities in Excess of Other Assets — (19.6%) | (2,626,330 | ) | ||||||
| Net Assets — 100.0% | $ | 13,427,399 | ||||||
| ** | Represents collateral for securities loaned. |
| ~ | The financial statements of the underlying funds can be found on the SEC website. |
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2020 was $2,520,355 . |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
ETF - Exchange-Traded Fund
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 | ||||||||||||
| Exchange-Traded Funds | $ | 13,076,855 | $ | — | $ | — | $ | 13,076,855 | ||||||||
| Short-Term Investment Funds | 2,976,874 | — | — | 2,976,874 | ||||||||||||
| Total | $ | 16,053,729 | $ | — | $ | — | $ | 16,053,729 | ||||||||
See accompanying Notes to Financial Statements.
34
Touchstone Moderate ETF Fund – December 31, 2020
| Market | ||||||||
| Shares | Value | |||||||
| Exchange-Traded Funds~ — 97.0% | ||||||||
| Equity Funds — 60.2% | ||||||||
| iShares Core S&P Mid-Cap ETF | 4,309 | $ | 990,338 | |||||
| iShares Core S&P Small-Cap ETF† | 2,951 | 271,197 | ||||||
| Vanguard FTSE Developed Markets ETF | 47,630 | 2,248,612 | ||||||
| Vanguard FTSE Emerging Markets ETF | 14,340 | 718,577 | ||||||
| Vanguard S&P 500 ETF | 17,030 | 5,853,041 | ||||||
| Vanguard Value ETF | 6,035 | 717,924 | ||||||
| 10,799,689 | ||||||||
| Fixed Income Funds — 36.8% | ||||||||
| iShares Broad USD High Yield Corporate Bond ETF | 13,115 | 541,125 | ||||||
| iShares Core Total USD Bond Market ETF† | 35,830 | 1,955,601 | ||||||
| iShares Core US Aggregate Bond ETF | 19,560 | 2,311,796 | ||||||
| Vanguard Intermediate-Term Corporate Bond ETF | 13,760 | 1,336,646 | ||||||
| Vanguard Total International Bond ETF | 7,603 | 445,156 | ||||||
| 6,590,324 | ||||||||
| Total Exchange-Traded Funds | $ | 17,390,013 | ||||||
| Short-Term Investment Funds — 15.8% | ||||||||
| Dreyfus Government Cash Management, Institutional Shares, 0.03%∞Ω | 587,843 | 587,843 | ||||||
| Invesco Government & Agency Portfolio, Institutional Class, 0.03%**∞Ω | 2,248,948 | 2,248,948 | ||||||
| Total Short-Term Investment Funds | $ | 2,836,791 | ||||||
| Total Investment Securities —112.8% | ||||||||
| (Cost $16,672,578) | $ | 20,226,804 | ||||||
| Liabilities in Excess of Other Assets — (12.8%) | (2,295,579 | ) | ||||||
| Net Assets — 100.0% | $ | 17,931,225 | ||||||
| ~ | The financial statements of the underlying funds can be found on the SEC website. |
| ** | Represents collateral for securities loaned. |
| † | All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2020 was $2,202,517. |
| ∞ | Open-End Fund. |
| Ω | Represents the 7-day SEC yield as of December 31, 2020. |
Portfolio Abbreviations:
ETF - Exchange-Traded Fund
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 | ||||||||||||
| Exchange-Traded Funds | $ | 17,390,013 | $ | — | $ | — | $ | 17,390,013 | ||||||||
| Short-Term Investment Funds | 2,836,791 | — | — | 2,836,791 | ||||||||||||
| Total | $ | 20,226,804 | $ | — | $ | — | $ | 20,226,804 | ||||||||
See accompanying Notes to Financial Statements.
35
Statements of Assets and Liabilities
December 31, 2020
| Touchstone Balanced | Touchstone Bond | Touchstone Common Stock | Touchstone Small Company | Touchstone Aggressive ETF | Touchstone Conservative | |||||||||||||||||||
| Fund | Fund | Fund | Fund | Fund | ETF Fund | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Investments, at cost | $ | 13,408,458 | $ | 98,196,761 | $ | 138,176,089 | $ | 47,174,614 | $ | 17,630,659 | $ | 13,435,891 | ||||||||||||
| Investments, at market value(A) | $ | 18,673,024 | $ | 105,015,943 | $ | 236,106,962 | $ | 72,116,853 | $ | 22,553,538 | $ | 16,053,729 | ||||||||||||
| Foreign currency (B) | — | — | 1,117 | — | — | — | ||||||||||||||||||
| Dividends and interest receivable | 39,207 | 662,397 | 124,152 | 29,354 | — | — | ||||||||||||||||||
| Receivable for capital shares sold | 2,181 | 89 | 13,762 | 403 | — | — | ||||||||||||||||||
| Securities lending income receivable | — | 23 | — | 5 | 40 | 48 | ||||||||||||||||||
| Receivable from Investment Advisor | — | — | — | — | — | 2,906 | ||||||||||||||||||
| Tax reclaim receivable | — | — | 41,908 | — | — | — | ||||||||||||||||||
| Total Assets | 18,714,412 | 105,678,452 | 236,287,901 | 72,146,615 | 22,553,578 | 16,056,683 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Payable for return of collateral for securities on loan | — | 15,696 | — | — | 1,924,292 | 2,574,005 | ||||||||||||||||||
| Payable for capital shares redeemed | 414 | 98,468 | 1,340,408 | 116,469 | 12,273 | 14,155 | ||||||||||||||||||
| Payable for investments purchased | 52,531 | 49,600 | 12,075 | 295,547 | — | — | ||||||||||||||||||
| Payable to Investment Advisor | 436 | 34,418 | 91,990 | 29,986 | 24,266 | — | ||||||||||||||||||
| Payable to other affiliates | 3,117 | 39,421 | 107,248 | 9,097 | 3,954 | 2,515 | ||||||||||||||||||
| Payable to Trustees | 9,746 | 9,746 | 9,746 | 9,746 | 9,746 | 9,746 | ||||||||||||||||||
| Payable for professional services | 24,069 | 26,894 | 31,723 | 23,921 | 22,063 | 21,882 | ||||||||||||||||||
| Payable for reports to shareholders | 1,715 | 7,961 | 9,056 | 7,399 | 1,499 | 1,499 | ||||||||||||||||||
| Payable for transfer agent services | 2,953 | 32,270 | 92,088 | 16,028 | 30 | 30 | ||||||||||||||||||
| Other accrued expenses and liabilities | 10,924 | 5,787 | 24,790 | 6,026 | 5,470 | 5,452 | ||||||||||||||||||
| Total Liabilities | 105,905 | 320,261 | 1,719,124 | 514,219 | 2,003,593 | 2,629,284 | ||||||||||||||||||
| Net Assets | $ | 18,608,507 | $ | 105,358,191 | $ | 234,568,777 | $ | 71,632,396 | $ | 20,549,985 | $ | 13,427,399 | ||||||||||||
| Net assets consist of: | ||||||||||||||||||||||||
| Paid-in capital | $ | 12,386,286 | $ | 97,194,002 | $ | 127,824,639 | $ | 46,763,046 | $ | 15,036,341 | $ | 10,169,271 | ||||||||||||
| Distributable earnings (deficit) | 6,222,221 | 8,164,189 | 106,744,138 | 24,869,350 | 5,513,644 | 3,258,128 | ||||||||||||||||||
| Net Assets | $ | 18,608,507 | $ | 105,358,191 | $ | 234,568,777 | $ | 71,632,396 | $ | 20,549,985 | $ | 13,427,399 | ||||||||||||
| Pricing of Class SC Shares | ||||||||||||||||||||||||
| Net assets applicable to Class SC Shares | $ | — | $ | 66,042,361 | $ | 85,232,479 | $ | — | $ | 20,549,985 | $ | 13,427,399 | ||||||||||||
| Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | — | 6,120,120 | 7,765,609 | — | 1,132,245 | 1,060,267 | ||||||||||||||||||
| Net asset value, offering price and redemption price per share | $ | — | $ | 10.79 | $ | 10.98 | $ | — | $ | 18.15 | $ | 12.66 | ||||||||||||
| Pricing of Class I Shares | ||||||||||||||||||||||||
| Net assets applicable to Class I Shares | $ | 18,608,507 | $ | 39,315,830 | $ | 149,336,298 | $ | 71,632,396 | $ | — | $ | — | ||||||||||||
| Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 1,368,916 | 3,638,307 | 13,568,566 | 4,559,059 | — | — | ||||||||||||||||||
| Net asset value, offering price and redemption price per share | $ | 13.59 | $ | 10.81 | $ | 11.01 | $ | 15.71 | $ | — | $ | — | ||||||||||||
| (A) Includes market value of securities on loan of: | $ | — | $ | 15,107 | $ | — | $ | — | $ | 1,890,707 | $ | 2,520,355 | ||||||||||||
| (B) Cost of foreign currency: | $ | — | $ | — | $ | 1,080 | $ | — | $ | — | $ | — | ||||||||||||
See accompanying Notes to Financial Statements.
36
Statements of Assets and Liabilities (Continued)
| Touchstone Moderate ETF Fund | ||
| $ | 16,672,578 | |
| $ | 20,226,804 | |
| — | ||
| — | ||
| 3,528 | ||
| 55 | ||
| — | ||
| — | ||
| 20,230,387 | ||
| 2,248,948 | ||
| 6,574 | ||
| — | ||
| 3,756 | ||
| 1,084 | ||
| 9,746 | ||
| 22,048 | ||
| 1,499 | ||
| 40 | ||
| 5,467 | ||
| 2,299,162 | ||
| $ | 17,931,225 | |
| $ | 13,589,788 | |
| 4,341,437 | ||
| $ | 17,931,225 | |
| $ | 17,931,225 | |
1,410,117 | ||
| $ |
12.72 | |
| $ | — | |
— | ||
| $ |
— | |
| $ |
2,202,517 | |
| $ | — | |
37
For the Year Ended December 31, 2020
| Touchstone Balanced | Touchstone Bond | Touchstone Common Stock | Touchstone Small Company | Touchstone Aggressive ETF | Touchstone Conservative ETF | |||||||||||||||||||
| Fund | Fund | Fund | Fund | Fund | Fund | |||||||||||||||||||
| Investment Income | ||||||||||||||||||||||||
| Dividends(A) | $ | 156,715 | $ | 204,269 | $ | 2,868,392 | $ | 464,120 | $ | 366,523 | $ | 316,777 | ||||||||||||
| Interest | 132,639 | 2,962,264 | — | — | — | — | ||||||||||||||||||
| Income from securities loaned | 48 | 1,249 | 3 | 866 | 3,088 | 1,550 | ||||||||||||||||||
| Total Investment Income | 289,402 | 3,167,782 | 2,868,395 | 464,986 | 369,611 | 318,327 | ||||||||||||||||||
| Expenses | ||||||||||||||||||||||||
| Investment advisory fees | 93,723 | 401,084 | 1,042,593 | 282,455 | 45,311 | 33,897 | ||||||||||||||||||
| Administration fees | 24,568 | 144,593 | 302,647 | 81,397 | 26,127 | 19,558 | ||||||||||||||||||
| Compliance fees and expenses | 2,631 | 2,631 | 2,631 | 2,631 | 2,631 | 2,631 | ||||||||||||||||||
| Custody fees | 37,613 | 47,036 | 21,803 | 8,831 | 2,944 | 2,968 | ||||||||||||||||||
| Professional fees | 25,975 | 30,713 | 38,461 | 25,853 | 22,778 | 22,497 | ||||||||||||||||||
| Transfer Agent fees, Class SC | — | 3,042 | 9,004 | — | 47 | 47 | ||||||||||||||||||
| Transfer Agent fees, Class I | 5,172 | 38,590 | 129,417 | 27,780 | — | — | ||||||||||||||||||
| Reports to Shareholders, Class SC | — | 5,090 | 5,041 | — | 4,811 | 4,767 | ||||||||||||||||||
| Reports to Shareholders, Class I | 5,739 | 13,364 | 13,895 | 27,988 | — | — | ||||||||||||||||||
| Shareholder servicing fees, Class SC | — | 43,524 | 146,876 | — | 45,311 | 33,897 | ||||||||||||||||||
| Trustee fees | 20,818 | 20,818 | 20,818 | 20,818 | 20,818 | 20,818 | ||||||||||||||||||
| Other expenses | 19,227 | 37,004 | 19,924 | 16,209 | 13,377 | 13,270 | ||||||||||||||||||
| Total Expenses | 235,466 | 787,489 | 1,753,110 | 493,962 | 184,155 | 154,350 | ||||||||||||||||||
| Fees waived and/or reimbursed by the Advisor and/or Affiliates(B) | (90,621 | ) | (56,535 | ) | (90,446 | ) | (64,631 | ) | (48,223 | ) | (52,660 | ) | ||||||||||||
| Net Expenses | 144,845 | 730,954 | 1,662,664 | 429,331 | 135,932 | 101,690 | ||||||||||||||||||
| Net Investment Income | 144,557 | 2,436,828 | 1,205,731 | 35,655 | 233,679 | 216,637 | ||||||||||||||||||
| Realized and Unrealized Gains (Losses) on Investments | ||||||||||||||||||||||||
| Net realized gains on investments | 829,246 | 2,529,282 | 8,742,461 | 377,985 | 350,087 | 439,824 | ||||||||||||||||||
| Net realized gains on foreign currency transactions | — | — | — | 16,755 | — | — | ||||||||||||||||||
| Net realized losses on futures contracts | — | (62,538 | ) | — | — | — | — | |||||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments | 2,066,136 | 4,279,852 | 35,894,468 | 10,708,779 | 1,571,791 | 580,659 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) on foreign currency transactions | — | — | 488 | — | — | — | ||||||||||||||||||
| Net Realized and Unrealized Gains (Losses) on Investments | 2,895,382 | 6,746,596 | 44,637,417 | 11,103,519 | 1,921,878 | 1,020,483 | ||||||||||||||||||
| Change in Net Assets Resulting from Operations | $ | 3,039,939 | $ | 9,183,424 | $ | 45,843,148 | $ | 11,139,174 | $ | 2,155,557 | $ | 1,237,120 | ||||||||||||
| (A) Net of foreign tax withholding of: | $ | 804 | $ | — | $ | 19,454 | $ | — | $ | — | $ | — | ||||||||||||
| (B) See Note 4 in Notes to Financial Statements. | ||||||||||||||||||||||||
See accompanying Notes to Financial Statements.
38
Statements of Operations (Continued)
| Touchstone Moderate ETF Fund | ||
| $ | 372,373 | |
| — | ||
| 3,117 | ||
| 375,490 | ||
| 43,190 | ||
| 24,914 | ||
| 2,631 | ||
| 2,932 | ||
| 22,755 | ||
| 90 | ||
| — | ||
| 4,809 | ||
| — | ||
| 43,190 | ||
| 20,818 | ||
| 13,367 | ||
| 178,696 | ||
| (49,126 | ) | |
| 129,570 | ||
| 245,920 | ||
| 530,533 | ||
| — | ||
| — | ||
| 979,978 | ||
| — | ||
| 1,510,511 | ||
| $ | 1,756,431 | |
| $ | — | |
39
Statements of Changes in Net Assets
| Touchstone Balanced Fund | Touchstone Bond Fund | Touchstone Common Stock Fund | ||||||||||||||||||||||
| For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | |||||||||||||||||||
| From Operations | ||||||||||||||||||||||||
| Net investment income | $ | 144,557 | $ | 209,828 | $ | 2,436,828 | $ | 1,650,309 | $ | 1,205,731 | $ | 1,271,108 | ||||||||||||
| Net realized gain on investments, foreign currency transactions and futures contracts | 829,246 | 628,730 | 2,466,744 | 1,899,240 | 8,742,461 | 5,513,992 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments, foreign currency transactions and futures contracts | 2,066,136 | 2,681,306 | 4,279,852 | 1,967,154 | 35,894,956 | 32,941,965 | ||||||||||||||||||
| Change in Net Assets from Operations | 3,039,939 | 3,519,864 | 9,183,424 | 5,516,703 | 45,843,148 | 39,727,065 | ||||||||||||||||||
| Distributions to Shareholders: | ||||||||||||||||||||||||
| Distributed earnings, Class SC | — | — | (1,095,780 | ) | (767,223 | ) | (2,849,400 | ) | (1,318,378 | ) | ||||||||||||||
| Distributed earnings, Class I | (853,726 | ) | (231,543 | ) | (654,859 | ) | (489,579 | ) | (4,937,726 | ) | (2,230,391 | ) | ||||||||||||
| Total Distributions | (853,726 | ) | (231,543 | ) | (1,750,639 | ) | (1,256,802 | ) | (7,787,126 | ) | (3,548,769 | ) | ||||||||||||
| Share Transactions Class SC | ||||||||||||||||||||||||
| Proceeds from Shares issued | — | — | 3,519,318 | 1,313,684 | 592,608 | 335,211 | ||||||||||||||||||
| Proceeds from Shares issued in connection with merger(A) | — | — | — | 57,995,899 | — | 82,115,805 | ||||||||||||||||||
| Reinvestment of distributions | — | — | 1,095,780 | 767,223 | 2,849,400 | 1,318,378 | ||||||||||||||||||
| Cost of Shares redeemed | — | — | (2,617,540 | ) | (1,406,111 | ) | (14,588,347 | ) | (6,076,930 | ) | ||||||||||||||
| Change in Net Assets from Class SC Share Transactions | — | — | 1,997,558 | 58,670,695 | (11,146,339 | ) | 77,692,464 | |||||||||||||||||
| Share Transactions Class I | ||||||||||||||||||||||||
| Proceeds from Shares issued | 941,388 | 1,925,174 | 2,996,827 | 1,816,262 | 2,019,265 | 1,674,840 | ||||||||||||||||||
| Reinvestment of distributions | 853,726 | 231,543 | 654,859 | 489,580 | 4,937,726 | 2,230,391 | ||||||||||||||||||
| Cost of Shares redeemed | (3,001,190 | ) | (3,787,355 | ) | (5,004,840 | ) | (9,763,576 | ) | (21,380,209 | ) | (20,490,003 | ) | ||||||||||||
| Change in Net Assets from Class I Share Transactions | (1,206,076 | ) | (1,630,638 | ) | (1,353,154 | ) | (7,457,734 | ) | (14,423,218 | ) | (16,584,772 | ) | ||||||||||||
| Change in Net Assets from Share Transactions | (1,206,076 | ) | (1,630,638 | ) | 644,404 | 51,212,961 | (25,569,557 | ) | 61,107,692 | |||||||||||||||
| Total Increase (Decrease) in Net Assets | 980,137 | 1,657,683 | 8,077,189 | 55,472,862 | 12,486,465 | 97,285,988 | ||||||||||||||||||
| Net Assets | ||||||||||||||||||||||||
| Beginning of period | 17,628,370 | 15,970,687 | 97,281,002 | 41,808,140 | 222,082,312 | 124,796,324 | ||||||||||||||||||
| End of period | $ | 18,608,507 | $ | 17,628,370 | $ | 105,358,191 | $ | 97,281,002 | $ | 234,568,777 | $ | 222,082,312 | ||||||||||||
| Share Transactions Class SC | ||||||||||||||||||||||||
| Shares issued | — | — | 335,573 | 130,862 | 68,312 | 39,241 | ||||||||||||||||||
| Shares issued in connection with merger(A) | — | — | — | 5,871,411 | — | 9,491,942 | ||||||||||||||||||
| Shares reinvested | — | — | 101,744 | 76,493 | 264,595 | 145,357 | ||||||||||||||||||
| Shares redeemed | — | — | (256,378 | ) | (139,585 | ) | (1,536,646 | ) | (707,192 | ) | ||||||||||||||
| Change in Class SC Shares Outstanding | — | — | 180,939 | 5,939,181 | (1,203,739 | ) | 8,969,348 | |||||||||||||||||
| Share Transactions Class I | ||||||||||||||||||||||||
| Shares issued | 75,076 | 172,316 | 286,624 | 185,612 | 211,775 | 202,192 | ||||||||||||||||||
| Shares reinvested | 63,156 | 19,313 | 60,748 | 48,811 | 457,240 | 245,641 | ||||||||||||||||||
| Shares redeemed | (243,950 | ) | (336,096 | ) | (484,927 | ) | (1,006,129 | ) | (2,247,613 | ) | (2,434,115 | ) | ||||||||||||
| Change in Class I Shares Outstanding | (105,718 | ) | (144,467 | ) | (137,555 | ) | (771,706 | ) | (1,578,598 | ) | (1,986,282 | ) | ||||||||||||
| Change in Shares Outstanding | (105,718 | ) | (144,467 | ) | 43,384 | 5,167,475 | (2,782,337 | ) | 6,983,066 | |||||||||||||||
(A) On July 12, 2019 the Touchstone Active Bond Fund, a series of the Trust, reorganized into the Touchstone Bond Fund, and the Touchstone Focused Fund and the Touchstone Large Cap Core Equity Fund, each a series of the Trust, reorganized into the Touchstone Common Stock Fund.
See accompanying Notes to Financial Statements.
40
Statements of Changes in Net Assets (Continued)
| Touchstone Small Company Fund | Touchstone Aggressive ETF Fund | Touchstone Conservative ETF Fund | Touchstone Moderate ETF Fund | |||||||||||||||||||||||||||
| For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | For the Year Ended December 31, 2020 | For the Year Ended December 31, 2019 | |||||||||||||||||||||||
| $ | 35,655 | $ | 81,322 | $ | 233,679 | $ | 339,571 | $ | 216,637 | $ | 354,008 | $ | 245,920 | $ | 381,212 | |||||||||||||||
| 394,740 | 1,955,778 | 350,087 | 354,418 | 439,824 | 354,795 | 530,533 | 523,989 | |||||||||||||||||||||||
| 10,708,779 | 9,991,232 | 1,571,791 | 2,947,260 | 580,659 | 1,638,991 | 979,978 | 2,404,610 | |||||||||||||||||||||||
| 11,139,174 | 12,028,332 | 2,155,557 | 3,641,249 | 1,237,120 | 2,347,794 | 1,756,431 | 3,309,811 | |||||||||||||||||||||||
| — | — | (686,870 | ) | (1,325,771 | ) | (704,173 | ) | (469,710 | ) | (894,370 | ) | (1,344,643 | ) | |||||||||||||||||
| (2,307,257 | ) | (7,015,447 | ) | — | — | — | — | — | — | |||||||||||||||||||||
| (2,307,257 | ) | (7,015,447 | ) | (686,870 | ) | (1,325,771 | ) | (704,173 | ) | (469,710 | ) | (894,370 | ) | (1,344,643 | ) | |||||||||||||||
| — | — | 832,452 | 577,513 | 250,068 | 965,644 | 239,550 | 666,117 | |||||||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| — | — | 686,870 | 1,325,771 | 704,173 | 469,710 | 894,370 | 1,344,643 | |||||||||||||||||||||||
| — | — | (1,427,715 | ) | (2,122,628 | ) | (2,650,901 | ) | (5,765,849 | ) | (2,743,634 | ) | (3,955,748 | ) | |||||||||||||||||
| — | — | 91,607 | (219,344 | ) | (1,696,660 | ) | (4,330,495 | ) | (1,609,714 | ) | (1,944,988 | ) | ||||||||||||||||||
| 3,874,376 | 1,969,190 | — | — | — | — | — | — | |||||||||||||||||||||||
| 2,307,256 | 7,015,447 | — | — | — | — | — | — | |||||||||||||||||||||||
| (8,011,200 | ) | (7,251,673 | ) | — | — | — | — | — | — | |||||||||||||||||||||
| (1,829,568 | ) | 1,732,964 | — | — | — | — | — | — | ||||||||||||||||||||||
| (1,829,568 | ) | 1,732,964 | 91,607 | (219,344 | ) | (1,696,660 | ) | (4,330,495 | ) | (1,609,714 | ) | (1,944,988 | ) | |||||||||||||||||
| 7,002,349 | 6,745,849 | 1,560,294 | 2,096,134 | (1,163,713 | ) | (2,452,411 | ) | (747,653 | ) | 20,180 | ||||||||||||||||||||
| 64,630,047 | 57,884,198 | 18,989,691 | 16,893,557 | 14,591,112 | 17,043,523 | 18,678,878 | 18,658,698 | |||||||||||||||||||||||
| $ | 71,632,396 | $ | 64,630,047 | $ | 20,549,985 | $ | 18,989,691 | $ | 13,427,399 | $ | 14,591,112 | $ | 17,931,225 | $ | 18,678,878 | |||||||||||||||
| — | — | 50,753 | 34,721 | 20,626 | 82,313 | 19,941 | 56,082 | |||||||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| — | — | 37,957 | 79,281 | 55,305 | 38,511 | 70,202 | 111,209 | |||||||||||||||||||||||
| — | — | (87,177 | ) | (128,448 | ) | (216,909 | ) | (487,349 | ) | (229,760 | ) | (328,117 | ) | |||||||||||||||||
| — | — | 1,533 | (14,446 | ) | (140,978 | ) | (366,525 | ) | (139,617 | ) | (160,826 | ) | ||||||||||||||||||
| 320,869 | 138,160 | — | — | — | — | — | — | |||||||||||||||||||||||
| 153,118 | 527,445 | — | — | — | — | — | — | |||||||||||||||||||||||
| (635,071 | ) | (506,338 | ) | — | — | — | — | — | — | |||||||||||||||||||||
| (161,084 | ) | 159,267 | — | — | — | — | — | — | ||||||||||||||||||||||
| (161,084 | ) | 159,267 | 1,533 | (14,446 | ) | (140,978 | ) | (366,525 | ) | (139,617 | ) | (160,826 | ) | |||||||||||||||||
41
Touchstone Balanced Fund — Class I
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 11.95 | $ | 9.86 | $ | 14.85 | $ | 13.02 | $ | 12.49 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income | 0.12 | (A) | 0.14 | (A) | 0.18 | (A) | 0.14 | 0.15 | (A) | |||||||||||
| Net realized and unrealized gains (losses) on investments | 2.16 | 2.11 | (0.92 | ) | 1.69 | 0.78 | ||||||||||||||
| Total from investment operations | 2.28 | 2.25 | (0.74 | ) | 1.83 | 0.93 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.16 | ) | (0.16 | ) | (0.12 | ) | — | (0.18 | ) | |||||||||||
| Realized capital gains | (0.48 | ) | — | (B) | (4.13 | ) | — | (0.20 | ) | |||||||||||
| Return of capital | — | — | — | — | (0.02 | ) | ||||||||||||||
| Total distributions | (0.64 | ) | (0.16 | ) | (4.25 | ) | — | (0.40 | ) | |||||||||||
| Net asset value at end of period | $ | 13.59 | $ | 11.95 | $ | 9.86 | $ | 14.85 | $ | 13.02 | ||||||||||
| Total return(C) | 19.16 | % | 22.80 | % | (6.07 | %) | 14.06 | % | 7.42 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 18,609 | $ | 17,628 | $ | 15,971 | $ | 17,964 | $ | 15,988 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | ||||||||||
| Gross expenses | 1.38 | % | 1.48 | % | 1.15 | % | 0.97 | % | 0.88 | % | ||||||||||
| Net investment income | 0.85 | % | 1.22 | % | 1.22 | % | 1.01 | % | 1.16 | % | ||||||||||
| Portfolio turnover rate | 71 | % | 129 | % | 140 | % | 142 | % | 30 | % | ||||||||||
| (A) | The net investment income per share was based on average shares outstanding for the period. |
| (B) | Less than $0.005 per share. |
| (C) | Total returns do not include any insurance, sales or administrative charges of variable annuity or life insurance contracts. If these charges were included, the returns would be lower. |
See accompanying Notes to Financial Statements.
42
Financial Highlights (Continued)
Touchstone Bond Fund — Class SC
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended | Period Ended | |||||||
| December 31, | December 31, | |||||||
| 2020 | 2019(A) | |||||||
| Net asset value at beginning of period | $ | 10.01 | $ | 9.90 | ||||
| Income (loss) from investment operations: | ||||||||
| Net investment income | 0.24 | 0.11 | ||||||
| Net realized and unrealized gains (losses) on investments | 0.72 | 0.13 | ||||||
| Total from investment operations | 0.96 | 0.24 | ||||||
| Distributions from: | ||||||||
| Net investment income | (0.18 | ) | (0.13 | ) | ||||
| Net asset value at end of period | $ | 10.79 | $ | 10.01 | ||||
| Total return(B) | 9.62 | % | 2.43 | %(C) | ||||
| Ratios and supplemental data: | ||||||||
| Net assets at end of period (000's) | $ | 66,042 | $ | 59,462 | ||||
| Ratio to average net assets: | ||||||||
| Net expenses | 0.77 | % | 0.78 | %(D) | ||||
| Gross expenses | 0.77 | % | 0.84 | %(D) | ||||
| Net investment income | 2.39 | % | 2.29 | %(D) | ||||
| Portfolio turnover rate | 168 | % | 335 | %(C)(E) | ||||
Touchstone Bond Fund — Class I
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 10.02 | $ | 9.19 | $ | 9.60 | $ | 9.26 | $ | 9.38 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income | 0.28 | 0.33 | 0.28 | 0.18 | 0.14 | (F) | ||||||||||||||
| Net realized and unrealized gains (losses) on investments | 0.69 | 0.63 | (0.46 | ) | 0.16 | (0.06 | ) | |||||||||||||
| Total from investment operations | 0.97 | 0.96 | (0.18 | ) | 0.34 | 0.08 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.18 | ) | (0.13 | ) | (0.23 | ) | — | (0.20 | ) | |||||||||||
| Net asset value at end of period | $ | 10.81 | $ | 10.02 | $ | 9.19 | $ | 9.60 | $ | 9.26 | ||||||||||
| Total return(B) | 9.71 | % | 10.46 | % | (1.88 | %) | 3.67 | % | 0.81 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 39,316 | $ | 37,819 | $ | 41,808 | $ | 46,922 | $ | 48,680 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses | 0.67 | % | 0.67 | % | 0.67 | % | 0.68 | % | 0.67 | % | ||||||||||
| Gross expenses | 0.82 | % | 0.94 | % | 0.87 | % | 0.71 | % | 0.67 | % | ||||||||||
| Net investment income | 2.49 | % | 2.58 | % | 2.62 | % | 1.83 | % | 1.46 | % | ||||||||||
| Portfolio turnover rate | 168 | % | 335 | %(E) | 431 | % | 168 | % | 197 | % | ||||||||||
| (A) | Represents the period from commencement of operations (July 12, 2019) through December 31, 2019. |
| (B) | Total returns do not include any insurance, sales or administrative charges of variable annuity or life insurance contracts. If these charges were included, the returns would be lower. |
| (C) | Not annualized. |
| (D) | Annualized. |
| (E) | Portfolio turnover excludes the purchases and sales of securities of the Touchstone Active Bond Fund acquired on July 12, 2019. If these transactions were included, portfolio turnover would have been higher. |
| (F) | The net investment income per share was based on average shares outstanding for the period. |
See accompanying Notes to Financial Statements.
43
Financial Highlights (Continued)
Touchstone Common Stock Fund — Class SC
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, 2020 | Period Ended December 31, 2019 (A) | |||||||
| Net asset value at beginning of period | $ | 9.20 | $ | 8.61 | ||||
| Income (loss) from investment operations: | ||||||||
| Net investment income | 0.04 | 0.02 | ||||||
| Net realized and unrealized gains (losses) on investments | 2.11 | 0.72 | ||||||
| Total from investment operations | 2.15 | 0.74 | ||||||
| Distributions from: | ||||||||
| Net investment income | (0.06 | ) | (0.05 | ) | ||||
| Realized capital gains | (0.31 | ) | (0.10 | ) | ||||
| Total distributions | (0.37 | ) | (0.15 | ) | ||||
| Net asset value at end of period | $ | 10.98 | $ | 9.20 | ||||
| Total return(B) | 23.48 | % | 8.60 | %(C) | ||||
| Ratios and supplemental data: | ||||||||
| Net assets at end of period (000's) | $ | 85,232 | $ | 82,546 | ||||
| Ratio to average net assets: | ||||||||
| Net expenses | 0.90 | % | 0.94 | %(D) | ||||
| Gross expenses | 0.90 | % | 0.94 | %(D) | ||||
| Net investment income | 0.47 | % | 0.46 | %(D) | ||||
| Portfolio turnover rate | 15 | % | 18 | %(C)(E) | ||||
Touchstone Common Stock Fund—Class I
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 9.21 | $ | 7.28 | $ | 18.74 | $ | 15.52 | $ | 15.46 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income | 0.07 | 0.08 | 0.14 | (F) | 0.22 | 0.25 | (F) | |||||||||||||
| Net realized and unrealized gains (losses) on investments | 2.10 | 2.00 | (1.00 | ) | 3.11 | 1.49 | ||||||||||||||
| Total from investment operations | 2.17 | 2.08 | (0.86 | ) | 3.33 | 1.74 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.06 | ) | (0.05 | ) | (0.11 | ) | (—) | (G) | (0.27 | ) | ||||||||||
| Realized capital gains | (0.31 | ) | (0.10 | ) | (10.49 | ) | (0.11 | ) | (1.41 | ) | ||||||||||
| Total distributions | (0.37 | ) | (0.15 | ) | (10.60 | ) | (0.11 | ) | (1.68 | ) | ||||||||||
| Net asset value at end of period | $ | 11.01 | $ | 9.21 | $ | 7.28 | $ | 18.74 | $ | 15.52 | ||||||||||
| Total return(B) | 23.68 | % | 28.58 | % | (8.05 | %) | 21.50 | % | 11.26 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 149,336 | $ | 139,536 | $ | 124,796 | $ | 158,438 | $ | 149,238 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses | 0.73 | % | 0.73 | % | 0.73 | % | 0.71 | % | 0.73 | % | ||||||||||
| Gross expenses | 0.80 | % | 0.82 | % | 0.83 | % | 0.71 | % | 0.73 | % | ||||||||||
| Net investment income | 0.64 | % | 0.82 | % | 0.77 | % | 1.21 | % | 1.58 | % | ||||||||||
| Portfolio turnover rate | 15 | % | 18 | %(E) | 10 | % | 84 | % | 6 | % | ||||||||||
| (A) | Represents the period from commencement of operations (July 12, 2019) through December 31, 2019. |
| (B) | Total returns do not include any insurance, sales or administrative charges of variable annuity or life insurance contracts. If these charges were included, the returns would be lower. |
| (C) | Not annualized. |
| (D) | Annualized. |
| (E) | Portfolio turnover excludes the purchases and sales of securities of the Touchstone Focused Fund and the Touchstone Large Cap Core Equity Fund acquired on July 12, 2019. If these transactions were included, portfolio turnover would have been higher. |
| (F) | The net investment income per share was based on average shares outstanding for the period. |
| (G) | Less than $0.005 per share. |
See accompanying Notes to Financial Statements.
44
Financial Highlights (Continued)
Touchstone Small Company Fund—Class I
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 13.69 | $ | 12.69 | $ | 15.73 | $ | 13.58 | $ | 12.14 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss) | 0.01 | 0.02 | 0.01 | (0.01 | ) | 0.01 | (A) | |||||||||||||
| Net realized and unrealized gains (losses) on investments | 2.53 | 2.64 | (1.11 | ) | 2.57 | 2.44 | ||||||||||||||
| Total from investment operations | 2.54 | 2.66 | (1.10 | ) | 2.56 | 2.45 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.02 | ) | — | (B) | — | (0.01 | ) | (0.01 | ) | |||||||||||
| Realized capital gains | (0.50 | ) | (1.66 | ) | (1.94 | ) | (0.40 | ) | (1.00 | ) | ||||||||||
| Total distributions | (0.52 | ) | (1.66 | ) | (1.94 | ) | (0.41 | ) | (1.01 | ) | ||||||||||
| Net asset value at end of period | $ | 15.71 | $ | 13.69 | $ | 12.69 | $ | 15.73 | $ | 13.58 | ||||||||||
| Total return(C) | 18.70 | % | 21.40 | % | (7.98 | %) | 19.12 | % | 20.23 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 71,632 | $ | 64,630 | $ | 57,884 | $ | 70,339 | $ | 67,102 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses | 0.76 | % | 0.76 | % | 0.76 | % | 0.76 | % | 0.76 | % | ||||||||||
| Gross expenses | 0.87 | % | 0.85 | % | 0.84 | % | 0.76 | % | 0.76 | % | ||||||||||
| Net investment income (loss) | 0.06 | % | 0.13 | % | 0.05 | % | (0.06 | %) | 0.08 | % | ||||||||||
| Portfolio turnover rate | 95 | % | 85 | % | 68 | % | 68 | % | 68 | % | ||||||||||
Touchstone Aggressive ETF Fund — Class SC
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 16.79 | $ | 14.75 | $ | 16.83 | $ | 14.60 | $ | 13.73 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income | 0.21 | 0.30 | 0.29 | 0.30 | 0.30 | |||||||||||||||
| Net realized and unrealized gains (losses) on investments | 1.77 | 2.98 | (1.59 | ) | 2.22 | 0.79 | ||||||||||||||
| Total from investment operations | 1.98 | 3.28 | (1.30 | ) | 2.52 | 1.09 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.30 | ) | (0.28 | ) | (0.29 | ) | (0.29 | ) | (0.22 | ) | ||||||||||
| Realized capital gains | (0.32 | ) | (0.96 | ) | (0.49 | ) | — | — | ||||||||||||
| Total distributions | (0.62 | ) | (1.24 | ) | (0.78 | ) | (0.29 | ) | (0.22 | ) | ||||||||||
| Net asset value at end of period | $ | 18.15 | $ | 16.79 | $ | 14.75 | $ | 16.83 | $ | 14.60 | ||||||||||
| Total return(C) | 11.84 | % | 22.38 | % | (7.84 | %) | 17.29 | % | 7.96 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 20,550 | $ | 18,990 | $ | 16,894 | $ | 20,384 | $ | 19,514 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses(D) | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||
| Gross expenses(D) | 1.02 | % | 1.00 | % | 0.92 | % | 0.90 | % | 0.90 | % | ||||||||||
| Net investment income | 1.29 | % | 1.87 | % | 1.60 | % | 1.64 | % | 1.80 | % | ||||||||||
| Portfolio turnover rate | 33 | % | 14 | % | 21 | % | 21 | % | 109 | % | ||||||||||
| (A) | The net investment income (loss) per share was based on average shares outstanding for the period. |
| (B) | Less than $0.005 per share. |
| (C) | Total returns do not include any insurance, sales or administrative charges of variable annuity or life insurance contracts. If these charges were included, the returns would be lower. |
| (D) | Ratio does not include expenses of the underlying funds. |
See accompanying Notes to Financial Statements.
45
Financial Highlights (Continued)
Touchstone Conservative ETF Fund — Class SC
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 12.15 | $ | 10.87 | $ | 11.74 | $ | 12.18 | $ | 11.84 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income | 0.25 | 0.38 | 0.23 | 0.23 | 0.29 | |||||||||||||||
| Net realized and unrealized gains (losses) on investments | 0.95 | 1.30 | (0.70 | ) | 0.99 | 0.37 | ||||||||||||||
| Total from investment operations | 1.20 | 1.68 | (0.47 | ) | 1.22 | 0.66 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.33 | ) | (0.33 | ) | (0.21 | ) | (0.26 | ) | (0.19 | ) | ||||||||||
| Realized capital gains | (0.36 | ) | (0.07 | ) | (0.19 | ) | (1.40 | ) | (0.13 | ) | ||||||||||
| Total distributions | (0.69 | ) | (0.40 | ) | (0.40 | ) | (1.66 | ) | (0.32 | ) | ||||||||||
| Net asset value at end of period | $ | 12.66 | $ | 12.15 | $ | 10.87 | $ | 11.74 | $ | 12.18 | ||||||||||
| Total return(A) | 9.90 | % | 15.47 | % | (4.02 | %) | 10.06 | % | 5.58 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 13,427 | $ | 14,591 | $ | 17,044 | $ | 16,831 | $ | 17,456 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses(B) | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||
| Gross expenses(B) | 1.14 | % | 1.04 | % | 0.92 | % | 0.93 | % | 0.90 | % | ||||||||||
| Net investment income | 1.60 | % | 2.16 | % | 2.05 | % | 1.82 | % | 1.78 | % | ||||||||||
| Portfolio turnover rate | 37 | % | 31 | % | 38 | % | 31 | % | 109 | % | ||||||||||
Touchstone Moderate ETF Fund — Class SC
Selected Data for a Share Outstanding Throughout Each Period
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value at beginning of period | $ | 12.05 | $ | 10.91 | $ | 12.26 | $ | 13.10 | $ | 13.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income | 0.21 | 0.28 | 0.26 | 0.21 | 0.28 | |||||||||||||||
| Net realized and unrealized gains (losses) on investments | 1.12 | 1.78 | (0.99 | ) | 1.56 | 0.64 | ||||||||||||||
| Total from investment operations | 1.33 | 2.06 | (0.73 | ) | 1.77 | 0.92 | ||||||||||||||
| Distributions from: | ||||||||||||||||||||
| Net investment income | (0.27 | ) | (0.26 | ) | (0.24 | ) | (0.25 | ) | (0.22 | ) | ||||||||||
| Realized capital gains | (0.39 | ) | (0.66 | ) | (0.38 | ) | (2.36 | ) | (0.93 | ) | ||||||||||
| Total distributions | (0.66 | ) | (0.92 | ) | (0.62 | ) | (2.61 | ) | (1.15 | ) | ||||||||||
| Net asset value at end of period | $ | 12.72 | $ | 12.05 | $ | 10.91 | $ | 12.26 | $ | 13.10 | ||||||||||
| Total return(A) | 11.07 | % | 18.96 | % | (6.02 | %) | 13.66 | % | 6.85 | % | ||||||||||
| Ratios and supplemental data: | ||||||||||||||||||||
| Net assets at end of period (000's) | $ | 17,931 | $ | 18,679 | $ | 18,659 | $ | 23,454 | $ | 24,641 | ||||||||||
| Ratio to average net assets: | ||||||||||||||||||||
| Net expenses(B) | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||
| Gross expenses(B) | 1.03 | % | 0.98 | % | 0.87 | % | 0.84 | % | 0.82 | % | ||||||||||
| Net investment income | 1.42 | % | 2.00 | % | 1.80 | % | 1.72 | % | 1.83 | % | ||||||||||
| Portfolio turnover rate | 34 | % | 21 | % | 20 | % | 21 | % | 98 | % | ||||||||||
| (A) | Total returns do not include any insurance, sales or administrative charges of variable annuity or life insurance contracts. If these charges were included, the returns would be lower. |
| (B) | Ratio does not include expenses of the underlying funds. |
See accompanying Notes to Financial Statements.
46
Notes to Financial Statements
December 31, 2020
1. Organization
The Touchstone Variable Series 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 pursuant to an Agreement and Declaration of Trust dated February 7, 1994. The Trust consists of the following seven funds (individually, a “Fund”, and collectively, the “Funds”):
Touchstone Balanced Fund (“Balanced Fund”)
Touchstone Bond Fund (“Bond Fund”)
Touchstone Common Stock Fund (“Common Stock Fund”)
Touchstone Small Company Fund (“Small Company Fund”)
Touchstone Aggressive ETF Fund (“Aggressive ETF Fund”)
Touchstone Conservative ETF Fund (“Conservative ETF Fund”)
Touchstone Moderate ETF Fund (“Moderate ETF Fund”)
Each Fund is diversified with the exception of the Common Stock Fund which is non-diversified.
The Agreement and Declaration of Trust permits the Trust to issue an unlimited number of shares of beneficial interest of each Fund. Shares of beneficial interest of each Fund are available as a funding vehicle for the separate accounts of life insurance companies issuing variable annuity and variable life insurance policies. As of December 31, 2020, a majority of the outstanding shares of the Aggressive ETF Fund, Conservative ETF Fund and Moderate ETF Fund were issued to separate accounts of Western-Southern Life Assurance Company, The Western & Southern Life Insurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company, and Columbus Life Insurance Company, which are all part of Western & Southern Financial Group, Inc. (“Western & Southern”), and certain supplemental executive retirement plans sponsored by Western & Southern and its affiliates.
The Bond Fund and Common Stock Fund offer Class SC shares and Class I shares. The Balanced Fund and Small Company Fund offer Class I shares. The Aggressive ETF Fund, Conservative ETF Fund and Moderate ETF Fund offer Class SC 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 goal, 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:
Each Fund is an investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 applicable to investment companies.
Security valuation and fair value measurements — U.S. generally accepted accounting principles (“U.S. GAAP”) define fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. All investments in securities are recorded at their 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. U.S. GAAP fair value measurement standards require disclosure of 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, prepayments speeds, credit risk, etc.) |
| · | Level 3 – significant unobservable inputs (including a 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.
The aggregate value by input level, as of December 31, 2020, for each Fund’s investments, is included in the Funds’ Portfolio of Investments, which also includes a breakdown of the Funds’ investments by portfolio or sector allocation. The Funds did not hold or transfer any Level 3 categorized securities during the year ended December 31, 2020.
Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
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 or at the time as of which the NYSE establishes official closing prices). Portfolio securities traded on stock exchanges are valued at the last reported sale price, official close price, or last bid price if no sales are reported. Portfolio securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”) or from the primary exchange on
47
Notes to Financial Statements (Continued)
which the security trades. To the extent these securities are actively traded, they are categorized in Level 1 of the fair value hierarchy. Options and futures 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 on the valuation date and are categorized in Level 1. Shares of mutual funds in which the Funds invest are valued at their respective net asset value (“NAV”) as reported by the underlying funds and are categorized in Level 1.
Debt securities held by the Funds are valued at their evaluated bid by an independent pricing service or at their last broker-quoted bid prices as obtained from one or more of the major market makers for such securities. Independent pricing services use information provided by market makers or estimates of market values through accepted market modeling conventions. Observable inputs to the models may include prepayment speeds, pricing spread, yield, trade information, dealer quotes, market color, cash flow models, the securities’ terms and conditions, among others, and are generally categorized in Level 2. Investments in asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche, and are generally categorized in Level 2. Debt securities with remaining maturities of 60 days or less may be valued at amortized cost, provided such amount 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 fair value, as determined by amortized cost, is higher or lower than the price that would be received if a Fund sold the investment.
Securities mainly traded on a non-U.S. exchange or denominated in foreign currencies are generally valued according to the preceding closing values on that exchange, translated to U.S. dollars using currency exchange rates as of the close of regular trading on the NYSE, and are generally categorized in Level 1. 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 and is generally categorized in Level 2. This may cause the value of the security, if held on the books of a Fund, to be different from the closing value on the non-U.S. exchange and may affect the calculation of that Fund’s NAV. 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. |
Securities held by the Funds that do not have readily available market quotations, significant observable inputs, or securities for which the available market quotations are not reliable, are priced at their estimated fair value using procedures approved by the Funds’ Board of Trustees and are generally categorized in Level 3.
Investment companies — The Funds may 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 (“OTC”). 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. ETF shares 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 the other investment companies invest. Investments in ETFs and closed-end funds are subject to the additional risk that their shares may trade at a premium or discount to their NAV. When a Fund invests in another investment company, shareholders of the Fund indirectly bear their proportionate share of the other investment company’s fees and expenses, including operating, registration, trustee, licensing, and marketing, as well as their share of the Fund’s fees and expenses.
Collateralized Loan Obligations — The Bond Fund may invest in collateralized loan obligations (“CLOs”). CLOs are types of asset-backed securities. A CLO is an entity that is backed by syndicated bank loans. The cash flows of the CLO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CLO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive higher ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.
Futures Contracts — The Balanced Fund and the Bond Fund may buy and sell futures contracts and related options to manage its exposure to changing interest rates and securities prices. Some strategies reduce the 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
48
Notes to Financial Statements (Continued)
that could negatively impact the Fund’s return. In order to avoid leveraging and related risks, when the Fund purchases futures contracts, it will collateralize its position by depositing an amount of cash or liquid securities, equal to the market value of the futures positions held, less margin deposits, in a segregated account with its custodian or otherwise “cover” its position in a manner consistent with the 1940 Act, or the rules of the Securities and Exchange Commission (the “SEC”) or interpretations thereunder. Collateral equal to the current fair value of the futures position will be determined 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 Fund 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 December 31, 2020, the Funds did not hold any futures 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.
Real Estate Investment Trusts — The Funds may invest in real estate investment trusts (“REITs”) that involve risks not associated with investing in stocks. Risks associated with investments in REITs include declines in the value of real estate, general and economic conditions, changes in the value of the underlying property and defaults by borrowers. The value of assets in the real estate industry may go through cycles of relative underperformance and outperformance in comparison to equity securities markets in general. Dividend income is recorded using management’s estimate of the income included in distributions received from REIT investments. The actual amounts of income, return of capital and capital gains are only determined by each REIT after its fiscal year-end and may differ from the estimated amount. Estimates of income are adjusted in the Funds to the actual amounts when the amounts are determined.
Derivative instruments and hedging activities — The Balanced Fund and Bond Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement” or “MNA”) or similar agreement with certain counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs OTC derivatives and foreign exchange contracts, and typically contains, among other things, collateral posting terms and master netting provisions in the event of a default or termination. Under an ISDA Master Agreement, a party may, under certain circumstances, offset with the counterparty certain derivative financial instrument’s payables or receivables with collateral held or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out netting). These default events include bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset.
When entering into a derivative transaction, a Fund may be required to post and maintain collateral or margin (including both initial and maintenance margin). Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker or clearing house for exchange-traded and centrally cleared derivatives (financial futures contracts, options, and centrally cleared swaps). Brokers can ask for margining in excess of the clearing house’s minimum in certain circumstances. Collateral terms are contract specific for OTC derivatives (forward foreign currency contracts, options, and swaps). For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as cash deposits held at prime broker and due to prime broker, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Portfolio of Investments. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.
49
Notes to Financial Statements (Continued)
Certain ISDA Master Agreements allow counterparties to OTC derivatives transactions to terminate derivative contracts prior to maturity in the event a Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreement, which would cause the Fund (counterparty) to accelerate payment of any net liability owed to the counterparty (Fund).
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
As of December 31, 2020, the Funds did not hold any assets and liabilities that were subject to a MNA.
The following table sets forth the effect of the Bond Fund’s derivative financial instruments by primary risk exposure on the Statements of Operations for the year ended December 31, 2020:
| Fund | Derivatives not accounted for as hedging instruments under ASC 815 | Realized Gain (Loss) on Derivatives | Change in Unrealized Appreciation (Depreciation) on Derivatives | ||||||||
| Bond Fund | Futures - Interest Rate Contracts* | $ | (62,538 | ) | $ | — | |||||
* Statements of Operations Location: Net realized losses on futures contracts.
For the year ended December 31, 2020, the average quarterly notional value of outstanding derivative financial instruments was as follows:
| Bond Fund | ||||
| Interest rate contracts: | ||||
| Futures Contracts - Notional value | $ | 3,187,695 | ||
Portfolio securities loaned — The Funds may lend their portfolio securities. Lending portfolio securities exposes the Funds 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. The loaned securities are secured by collateral valued at least equal, at all times, to the market value of the loaned securities 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 short-term investment vehicle. The approved short-term investment vehicle is subject to market risk.
As of December 31, 2020, the following Funds loaned securities and received collateral as follows:
| Fund | Security Type | Market Value of Securities Loaned* | Market Value of Collateral Received** | Net Amount*** | |||||||||||
| Bond Fund | Corporate Bonds | $ | 15,107 | $ | 15,696 | $ | 589 | ||||||||
| Aggressive ETF Fund | Exchange-Traded Funds | 1,890,707 | 1,924,292 | 33,585 | |||||||||||
| Conservative ETF Fund | Exchange-Traded Funds | 2,520,355 | 2,574,005 | 53,650 | |||||||||||
| Moderate ETF Fund | Exchange-Traded Funds | 2,202,517 | 2,248,948 | 46,431 | |||||||||||
| * | The remaining contractual maturity is overnight for all securities. |
| ** | Gross amount of recognized liabilities for securities lending included in the Statements of Assets and Liabilities. |
| *** | Net amount represents the net amount payable due to the borrower in the event of default. |
All cash collateral is received, held, and administered by the Funds’ custodian for the benefit of the lending Fund in its custody account or other account established for the purpose of holding collateral in cash equivalents.
Funds participating in securities lending receive compensation in the form of fees. Securities lending income is derived from lending long securities from the Funds to creditworthy approved borrowers at rates that are determined based on daily trading volumes, float, short-term interest rates and market liquidity and is shown net of fees on the Statements of Operations. When a Fund lends securities, it retains the interest or dividends on the investment of any cash received as collateral, and the Fund continues to receive interest or dividends on the loaned securities.
Unrealized gain or loss on the market value of the loaned securities that may occur during the term of the loan is recognized by the Fund. The Fund has the right under the lending agreement to recover any loaned securities from the borrower on demand.
When-issued or delayed delivery transactions — Each Fund may purchase or sell securities on a when-issued or delayed delivery basis. These transactions involve a commitment by the Fund to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed delivery purchases are outstanding, the
50
Notes to Financial Statements (Continued)
Fund will set aside liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining NAV. The Fund may dispose of or renegotiate a delayed delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a capital gain or loss. When the Fund has sold a security on a delayed delivery basis, the Fund does not participate in future gains and losses with respect to the security.
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.
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 issue discount and market premiums on debt securities are accreted/amortized to interest income over the life of the security or to the appropriate call date, as applicable, 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. Each Fund declares and distributes net investment income, if any, annually, 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 from investments in underlying funds is affected by the timing of dividend declarations by the underlying funds.
Allocations — Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for a Fund are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class-specific expenses are charged directly to the class incurring the expense. Common expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon their proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all the Funds in the Trust, and, if applicable, Touchstone Institutional Funds Trust,Touchstone Strategic Trust and Touchstone Funds Group Trust (collectively with the 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. 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.
LIBOR Transition — Many debt securities, derivatives and other financial instruments in which the Funds may invest, as well as any borrowings made by the Funds from banks or from other lenders, utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark index for interest rate calculations. LIBOR is a measure of the average interest rate at which major global banks can borrow from one another. Plans are underway to phase out the use of LIBOR by June 30, 2023. The ICE Benchmark Administration Limited, the administrator of LIBOR, is expected to cease publishing most LIBOR maturities, including some US LIBOR maturities, on December 31, 2021, and the remaining and most liquid US LIBOR maturities on June 30, 2023. Before then, it is expected that market participants will transition to the use of different reference or benchmark indices. However, there is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement index. As such, the potential effect of a transition away from LIBOR on the Funds’ investments cannot yet be determined.
3. Investment Transactions
Investment transactions (excluding short-term investments and U.S. Government securities) were as follows for the year ended December 31, 2020:
| Balanced Fund | Bond Fund | Common Stock Fund | Small Company Fund | |||||||||||||
| Purchases of investment securities | $ | 3,425,279 | $ | 36,158,220 | $ | 30,466,738 | $ | 51,489,474 | ||||||||
| Proceeds from sales and maturities | $ | 4,238,512 | $ | 22,749,201 | $ | 61,126,368 | $ | 52,084,760 | ||||||||
| Aggressive ETF Fund | Conservative ETF Fund | Moderate ETF Fund | ||||||||||
| Purchases of investment securities | $ | 5,819,535 | $ | 4,847,092 | $ | 5,672,882 | ||||||
51
Notes to Financial Statements (Continued)
| Aggressive | Conservative | Moderate | ||||||||||
| ETF Fund | ETF Fund | ETF Fund | ||||||||||
| Proceeds from sales and maturities | $ | 6,262,013 | $ | 7,196,423 | $ | 8,005,301 | ||||||
For the year ended December 31, 2020, purchases and proceeds from sales and maturities in U.S. Government Securities were $8,328,931 and $10,408,409, respectively, for the Balanced Fund, and $124,670,900 and $142,756,565, respectively, for the Bond Fund.
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 The Bank of New York Mellon (“BNY Mellon”), the Sub-Administrator to the Funds. Such officers receive no compensation from the Trust. The Advisor and the Underwriter are each wholly-owned subsidiaries of Western & Southern.
On behalf of the Funds, the Advisor pays each Independent Trustee a quarterly retainer plus additional retainers to the Lead Independent Trustee and the chairs of each standing committee. Interested Trustees do not receive compensation from the Funds. Each Independent Trustee also receives compensation for each board meeting and committee meeting attended. Each standing committee chair receives additional compensation for each committee meeting that he or she oversees. The Advisor is reimbursed by the Funds for the Independent Trustees’ compensation and out-of-pocket expenses relating to their services. The Funds accrued Trustee-related expenses of $145,726 for the year ended December 31, 2020.
MANAGEMENT & EXPENSE LIMITATION AGREEMENTS
The Advisor provides general investment supervisory services for the Funds, under the terms of an advisory agreement (the “Advisory Agreement”). Under the Advisory Agreement, each Fund pays the Advisor a fee, which is computed and accrued daily and paid monthly, at an annual rate based on average daily net assets of each Fund as shown in the table below.
| Balanced Fund | 0.55% on all assets |
| Bond Fund | 0.40% on the first $300 million |
| 0.35% on such assets over $300 million | |
| Common Stock Fund | 0.50% on the first $200 million |
| Small Company Fund | 0.45% on the next $300 million |
| 0.40% on such assets over $500 million | |
| Aggressive ETF Fund | 0.25% on the first $50 million |
| Conservative ETF Fund | 0.23% on the next $50 million |
| Moderate ETF Fund | 0.20% on such assets over $100 million |
The Advisor has entered into investment sub-advisory agreements with the following parties (each, a “Sub-Advisor”):
| Fort Washington Investment Advisors, Inc.* | Wilshire Associates Incorporated |
| Balanced Fund | Aggressive ETF Fund |
| Bond Fund | Conservative ETF Fund |
| Common Stock Fund | Moderate ETF Fund |
| Small Company Fund |
* Affiliate of the Advisor and wholly-owned subsidiary of Western & Southern.
The Advisor pays sub-advisory fees to each Sub-Advisor from its advisory fee.
The Advisor entered into an expense limitation agreement (the “Expense Limitation Agreement”) to contractually limit the annual operating expenses of the Funds, excluding: dividend and interest expenses relating to short sales; interest; taxes; brokerage commissions and other transaction costs; portfolio transaction and investment related expenses, including expenses associated with the Funds’ liquidity provider; 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 annual operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. The Advisor has agreed to waive a portion of its fees, and to reimburse certain fund expenses in order to maintain the following expense limitations for the Funds:
| Fund | Class SC | Class I | |||||||
| Balanced Fund | — | 0.85 | % | ||||||
| Bond Fund | 0.97 | % | 0.67 | % | |||||
| Common Stock Fund | 1.06 | % | 0.73 | % | |||||
52
Notes to Financial Statements (Continued)
| Fund | Class SC | Class I | |||||||
| Small Company Fund | — | 0.76 | % | ||||||
| Aggressive ETF Fund | 0.75 | % | — | ||||||
| Conservative ETF Fund | 0.75 | % | — | ||||||
| Moderate ETF Fund | 0.75 | % | — | ||||||
These expense limitations will terminate on April 30, 2021 but can be terminated with respect to a Fund by a vote of the Funds’ Board if it deems the termination to be beneficial to the Fund’s shareholders.
During the year ended December 31, 2020, the Advisor or its affiliates waived investment advisory fees, administration fees or shareholder servicing fees and operating expenses of the Funds as follows:
| Fund | Investment Advisory Fees Waived | Administration Fees Waived | Shareholder Servicing Fees and Operating Expenses Reimbursed/Waived | Total | |||||||||||||
| Balanced Fund | $ | 32,651 | $ | 11,835 | $ | 46,135 | $ | 90,621 | |||||||||
| Bond Fund | — | — | 56,535 | 56,535 | |||||||||||||
| Common Stock Fund | — | — | 90,446 | 90,446 | |||||||||||||
| Small Company Fund | — | 35,269 | 29,362 | 64,631 | |||||||||||||
| Aggressive ETF Fund | — | 12,508 | 35,715 | 48,223 | |||||||||||||
| Conservative ETF Fund | — | 9,797 | 42,863 | 52,660 | |||||||||||||
| Moderate ETF Fund | — | 12,252 | 36,874 | 49,126 | |||||||||||||
Under the terms of the Expense Limitation Agreement, the Advisor is entitled to recover, subject to approval by the Funds’ Board, such amounts waived or reimbursed for a period of up to three years from the date on which the Advisor reduced its compensation or assumed expenses for the Funds. A Fund will make repayments to the Advisor only if such repayment does not cause the Fund’s operating expenses (after the repayment is taken into account) to exceed the Fund’s expense limit in place when such amounts were waived or reimbursed by the Advisor and the Fund’s current expense limitation.
As of December 31, 2020, the Advisor may seek recoupment of previously waived fees and reimbursed expenses as follows:
| Fund | Expires on or before December 31, 2021 | Expires on or before December 31, 2022 | Expires on or before December 31, 2023 | Total | |||||||||||||
| Balanced Fund | $ | 52,697 | $ | 108,321 | $ | 90,621 | $ | 251,639 | |||||||||
| Bond Fund | 90,383 | 125,065 | 56,535 | 271,983 | |||||||||||||
| Common Stock Fund | 142,925 | 124,593 | 90,446 | 357,964 | |||||||||||||
| Small Company Fund | 57,315 | 55,878 | 64,631 | 177,824 | |||||||||||||
| Aggressive ETF Fund | 28,074 | 26,382 | 48,223 | 102,679 | |||||||||||||
| Conservative ETF Fund | 27,608 | 23,723 | 52,660 | 103,991 | |||||||||||||
| Moderate ETF Fund | 25,559 | 27,614 | 49,126 | 102,299 | |||||||||||||
ADMINISTRATION AGREEMENT
The Advisor entered into an Administration Agreement with the Trust, whereby the Advisor is responsible for: supplying executive and regulatory compliance services; supervising the preparation of tax returns; coordinating the preparation of reports to shareholders and reports to and filings with, the SEC and state securities authorities, as well as materials for meetings of the Board; calculating the daily NAV per share; and maintaining the financial books and records of each Fund.
For its services, the Advisor’s annual administrative fee is:
0.145% on the first $20 billion of the aggregate average daily net assets;
0.11% on the next $10 billion of aggregate average daily net assets;
0.09% on the next $10 billion of aggregate average daily net assets; and
0.07% on the aggregate average daily net assets over $40 billion.
The fee is computed and allocated among the Touchstone Fund Complex (excluding Touchstone Institutional Funds Trust) on the basis of relative daily net assets.
53
Notes to Financial Statements (Continued)
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.
TRANSFER AGENT AGREEMENT
Under the terms of the Transfer Agent Agreement between the Trust and BNY Mellon Investment Servicing (U.S.) Inc. (“Transfer Agent”), the Transfer Agent to the Funds, the Transfer Agent 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, the Transfer Agent receives a monthly fee from each Fund. In addition, each Fund pays out-of-pocket expenses incurred by the Transfer Agent, including, but not limited to, postage and supplies.
The Funds may reimburse the Advisor for fees paid to intermediaries such as banks, broker-dealers, financial advisors or other financial institutions for sub-transfer agency, sub-administration and other services provided to investors whose shares of record are held in omnibus, other group accounts, retirement plans or accounts traded through registered securities clearing agents. These fees may vary based on, for example, the nature of services provided, but generally range up to 0.15% of the assets of the class serviced or maintained by the intermediary or up to $22 per sub-account maintained by the intermediary.
PLANS OF DISTRIBUTION
The Trust has adopted a Shareholder Services Plan under which Class SC shares of each Fund may directly or indirectly bear expenses for shareholder services provided. Each Fund offering Class SC shares will incur or reimburse expenses for shareholder services at an annual rate not to exceed 0.25% of the average daily net assets.
UNDERWRITING AGREEMENT
The Underwriter acts as exclusive agent for the distribution of the Funds’ shares. The Underwriter receives no compensation under this agreement.
INTERFUND TRANSACTIONS
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in purchase and sale transactions with funds that have a common investment advisor (or affiliated investment advisors), common Trustees and/or common Officers. During the year ended December 31, 2020, the Funds did not engage in any Rule 17a-7 transactions.
5. Liquidity
Interfund Lending — Pursuant to an Exemptive Order issued by the SEC on March 28, 2017, the Funds, along with certain other funds in the Touchstone Fund Complex, may participate in an interfund lending program. The interfund lending program provides an alternate credit facility that allows the Funds to lend to or borrow from other participating funds in the Touchstone Fund Complex, subject to the conditions of the Exemptive Order. The Funds may not borrow under the facility for leverage purposes and the loans’ duration may be no more than 7 days.
During the year ended December 31, 2020, the program was not utilized.
6. Federal Tax Information
Federal Income Tax — It is each Fund’s policy to continue to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which a Fund so qualifies and distributes at least 90% of its investment company taxable income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed. It is each 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 years ended December 31, 2020 and 2019 is as follows:
54
Notes to Financial Statements (Continued)
| Balanced Fund | Bond Fund | Common Stock Fund | |||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| From ordinary income | $ | 363,954 | $ | 229,313 | $ | 1,750,639 | $ | 1,256,802 | $ | 1,270,647 | $ | 2,959,215 | |||||||
| From long-term capital gains | 489,772 | 2,230 | — | — | 6,516,479 | 589,554 | |||||||||||||
| Total distributions | $ | 853,726 | $ | 231,543 | $ | 1,750,639 | $ | 1,256,802 | $ | 7,787,126 | $ | 3,548,769 | |||||||
| Small Company Fund | Aggressive ETF Fund | Conservative ETF Fund | Moderate ETF Fund | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
| From ordinary income | $ | 90,022 | $ | 749,375 | $ | 338,153 | $ | 310,120 | $ | 376,878 | $ | 407,817 | $ | 382,074 | $ | 395,733 | |||||||||
| From long-term capital gains | 2,217,235 | 6,266,072 | 348,717 | 1,015,651 | 327,295 | 61,893 | 512,296 | 948,910 | |||||||||||||||||
| Total distributions | $ | 2,307,257 | $ | 7,015,447 | $ | 686,870 | $ | 1,325,771 | $ | 704,173 | $ | 469,710 | $ | 894,370 | $ | 1,344,643 | |||||||||
The following information is computed on a tax basis for each item as of December 31, 2020:
| Balanced Fund | Bond Fund | Common Stock Fund | ||||||||
| Tax cost of portfolio investments | $ | 13,411,541 | $ | 98,299,475 | $ | 138,692,337 | ||||
| Gross unrealized appreciation on investments | 5,448,876 | 6,976,626 | 102,587,033 | |||||||
| Gross unrealized depreciation on investments | (187,393 | ) | (260,158 | ) | (5,172,408 | ) | ||||
| Net unrealized appreciation (depreciation) on investments | 5,261,483 | 6,716,468 | 97,414,625 | |||||||
| Gross unrealized appreciation on foreign currency transactions | — | — | 546 | |||||||
| Undistributed ordinary income | 310,998 | 3,142,324 | 1,512,848 | |||||||
| Undistributed long-term capital gains | 649,740 | — | 7,816,119 | |||||||
| Capital loss carryforwards | — | (1,682,533 | ) | — | ||||||
| Other temporary differences | — | (12,070 | ) | — | ||||||
| Distributable earnings (deficit) | $ | 6,222,221 | $ | 8,164,189 | $ | 106,744,138 | ||||
| Small Company Fund | Aggressive ETF Fund | Conservative ETF Fund | Moderate ETF Fund | ||||||||||
| Tax cost of portfolio investments | $ | 48,704,735 | $ | 17,633,346 | $ | 13,483,636 | $ | 16,672,786 | |||||
| Gross unrealized appreciation on investments | 25,142,717 | 4,922,879 | 2,617,838 | 3,554,226 | |||||||||
| Gross unrealized depreciation on investments | (1,730,599 | ) | (2,687 | ) | (47,745 | ) | (208 | ) | |||||
| Net unrealized appreciation (depreciation) on investments | 23,412,118 | 4,920,192 | 2,570,093 | 3,554,018 | |||||||||
| Undistributed ordinary income | 69,653 | 409,819 | 406,426 | 457,326 | |||||||||
| Undistributed long-term capital gains | 1,387,579 | 183,633 | 281,609 | 330,093 | |||||||||
| Distributable earnings (deficit) | $ | 24,869,350 | $ | 5,513,644 | $ | 3,258,128 | $ | 4,341,437 |
The difference between the tax cost of portfolio investments and the financial statement cost is primarily due to wash sale loss deferrals and non-taxable distributions from corporate stock.
As of December 31 2020, the Funds had the following capital loss carryforwards for federal income tax purposes:
| No Expiration Short Term | No Expiration Long Term | Total | ||||||||
| Bond Fund | $ | 170,538 | $ | 1,511,995 | $ | 1,682,533 | ||||
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. Future utilization is subject to limitations under current tax law.
During the year ended December 31, 2020, the following Fund utilized capital loss carryforwards:
| Fund | Utilized | |||
| Bond Fund | $ | 1,681,919 | ||
Under current laws, certain capital losses realized after October 31 and ordinary losses realized after December 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 year ended December 31, 2020, the Funds did not elect to defer any losses.
The Funds have analyzed their tax positions taken or to be taken on federal income tax returns for all open tax years (tax years ended December 31, 2017 through 2020) and have concluded that no provision for income tax is required in their financial statements.
55
Notes to Financial Statements (Continued)
Certain reclassifications, the result of permanent differences between financial statement and income tax reporting requirements, have been made to the components of capital as presented on the Statements of Assets and Liabilities. These reclassifications have no impact on the net assets or NAV per share of the Fund. The following reclassifications, which are primarily attributed to various temporary book/tax differences due to mergers, have been made to the following Fund for the year ended December 31, 2020.
| Fund | Paid-In Capital | Distributable Earnings | |||||
| Bond Fund | $ | 9,227 | $ | (9,227 | ) | ||
7. Commitments and Contingencies
The Funds indemnify the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds.
8. Principal Risks
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 a Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign stock markets, while growing in volume and sophistication, are generally not as developed as those in the U.S., and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker-dealers, and issuers than in the U.S.
Risks Associated with Sector Concentration — Certain Funds may invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, these Funds may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility in the Funds’ NAVs and magnified effect on the total return.
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 Funds that invest a significant amount of their assets in junk bonds or lower-rated securities.
Risks Associated with Interest Rate Changes — The price of debt securities is generally linked to the prevailing market interest rates. In general, when interest rates rise, the prices of debt securities fall, and when interest rates fall, the price of debt securities rises. The price volatility of a debt security also depends on its maturity. 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, 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. For example, as a general rule a 1% rise in interest rates means a 1% fall in value for every year of duration. Maturity, on the other hand, is the date on which a fixed-income security becomes due for payment of principal. The negative impact on fixed income securities if interest rates increase as a result could negatively impact a Fund’s NAV.
Risks Associated with Health Crises — An outbreak of respiratory disease caused by COVID-19 was first detected in China in December 2019 and subsequently spread internationally. As of the date of issuance of these financial statements, COVID-19 has resulted in closing borders, enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of COVID-19 may be short term or may last for an extended period of time and result in a substantial economic downturn. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could negatively affect the worldwide economy, as well as the economies of individual countries, individual companies and the market in general in significant and unforeseen ways. Any such impact could adversely affect a Fund’s performance, the performance of the securities in which a Fund invests and may lead to losses on your investment in a Fund.
Please see the Funds’ prospectus for a complete discussion of these and other risks.
56
Notes to Financial Statements (Continued)
9. Subsequent Events
Subsequent events occurring after the date of this report have been evaluated for potential impact to this report through the date the financial statements were issued.
At a meeting of the Board of Trustees (the “Board”) of the Trust held on November 19, 2020, the Board approved the reorganization of the Aggressive ETF Fund, Conservative ETF Fund and Moderate ETF Fund into the Balanced Fund, a series of the Trust, subject to shareholder approval. The reorganization is expected to be completed on or about April 16, 2021.
There were no other subsequent events that necessitated recognition or disclosure in the Funds’ financial statements.
57
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of Touchstone Variable Series Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Touchstone Variable Series Trust (the “Trust”) (comprising the Touchstone Balanced Fund, Touchstone Bond Fund, Touchstone Common Stock Fund, Touchstone Small Company Fund, Touchstone Aggressive ETF Fund, Touchstone Conservative ETF Fund and Touchstone Moderate ETF Fund (collectively referred to as the “Funds”)), including the portfolios of investments, as of December 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising Touchstone Variable Series Trust at December 31, 2020, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
| Funds comprising the Touchstone Variable Series Trust | Statement of Operations | Statements of changes in net assets | Financial Highlights |
| Touchstone Aggressive ETF Fund Touchstone Conservative ETF Fund Touchstone Moderate ETF Fund | For the year ended December 31, 2020 | For each of the two years in the period ended December 31, 2020 | For each of the five years in the period ended December 31, 2020 |
| Touchstone Balanced Fund Touchstone Bond Fund Touchstone Common Stock Fund Touchstone Small Company Fund | For the year ended December 31, 2020 | For each of the two years in the period ended December 31,2020 | For each of the four years in the period ended December 31, 2020 |
The financial highlights of Touchstone Balanced Fund, Touchstone Bond Fund, Touchstone Common Stock Fund and Touchstone Small Company Fund for the year ended December 31, 2016 were audited by other auditors, whose report dated February 16, 2017 expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
58
Report of Independent Registered Public Accounting Firm (Continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Touchstone Investments’ investment companies since 1999.
Cincinnati, Ohio
February 19, 2021
59
Dividend Received Deduction
For corporate shareholders, the following ordinary distributions paid during the fiscal year ended December 31, 2020 qualify for the corporate dividends received deduction. The Funds intend to pass through the maximum allowable percentage.
| Balanced Fund | 28.97% |
| Common Stock Fund | 100.00% |
| Small Company Fund | 100.00% |
| Aggressive ETF Fund | 49.15% |
| Conservative ETF Fund | 17.04% |
| Moderate ETF Fund | 31.60% |
For the fiscal year ended December 31, 2020, the Funds designated long-term capital gains as follows:
| Balanced Fund | $649,757 |
| Common Stock Fund | $7,816,280 |
| Small Company Fund | $2,217,235 |
| Aggressive ETF Fund | $348,717 |
| Conservative ETF Fund | $327,295 |
| Moderate ETF Fund | $512,296 |
Proxy Voting Guidelines and Proxy Voting Records
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 is available as an appendix to the most recent Statement of Additional Information, which can be obtained without charge by calling toll free 1.800.543.0407 or by visiting the Touchstone website at Touchstone Investments.com or on the Securities and Exchange Commission’s (the “Commission”) website at sec.gov. Information regarding how those proxies were voted during the most recent twelve-month period ended June 30, which will be filed by August 31 of that year, is also available without charge by calling toll free 1.800.543.0407 or on the Commission’s website at sec.gov.
Quarterly Portfolio Disclosure
Each Fund’s holdings as of the end of the third month of every fiscal quarter will be disclosed on Form N-PORT within 60 days of the end of the fiscal quarter. The complete listing of each Fund’s portfolio holdings is available on the Commission’s website and will be made available to shareholders upon request by calling 1.800.543.0407.
Schedule of Shareholder Expenses
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including investment advisory fees; shareholder servicing fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2020 through December 31, 2020).
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 December 31, 2020” 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.
60
| Other Items (Unaudited) (Continued) |
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table below for each Fund is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Net Expense Ratio Annualized December 31, 2020 | Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During the Six Months Ended December 31, 2020* | ||||||||||
| Touchstone Balanced Fund - Class I | |||||||||||||
| Actual | 0.85 | % | $ | 1,000.00 | $ | 1,178.80 | $ | 4.66 | |||||
| Hypothetical | 0.85 | % | $ | 1,000.00 | $ | 1,020.86 | $ | 4.32 | |||||
| Touchstone Bond Fund | |||||||||||||
| Class SC | |||||||||||||
| Actual | 0.77 | % | $ | 1,000.00 | $ | 1,043.10 | $ | 3.95 | |||||
| Hypothetical | 0.77 | % | $ | 1,000.00 | $ | 1,021.27 | $ | 3.91 | |||||
| Class I | |||||||||||||
| Actual | 0.67 | % | $ | 1,000.00 | $ | 1,044.00 | $ | 3.44 | |||||
| Hypothetical | 0.67 | % | $ | 1,000.00 | $ | 1,021.77 | $ | 3.40 | |||||
| Touchstone Common Stock Fund | |||||||||||||
| Class SC | |||||||||||||
| Actual | 0.88 | % | $ | 1,000.00 | $ | 1,272.20 | $ | 5.03 | |||||
| Hypothetical | 0.88 | % | $ | 1,000.00 | $ | 1,020.71 | $ | 4.47 | |||||
| Class I | |||||||||||||
| Actual | 0.73 | % | $ | 1,000.00 | $ | 1,272.70 | $ | 4.17 | |||||
| Hypothetical | 0.73 | % | $ | 1,000.00 | $ | 1,021.47 | $ | 3.71 | |||||
| Touchstone Small Company Fund - Class I | |||||||||||||
| Actual | 0.76 | % | $ | 1,000.00 | $ | 1,394.80 | $ | 4.57 | |||||
| Hypothetical | 0.76 | % | $ | 1,000.00 | $ | 1,021.32 | $ | 3.86 | |||||
| Touchstone Aggressive ETF Fund - Class SC** | |||||||||||||
| Actual | 0.75 | % | $ | 1,000.00 | $ | 1,189.20 | $ | 4.13 | |||||
| Hypothetical | 0.75 | % | $ | 1,000.00 | $ | 1,021.37 | $ | 3.81 | |||||
| Touchstone Conservative ETF Fund - Class SC** | |||||||||||||
| Actual | 0.75 | % | $ | 1,000.00 | $ | 1,103.60 | $ | 3.97 | |||||
| Hypothetical | 0.75 | % | $ | 1,000.00 | $ | 1,021.37 | $ | 3.81 | |||||
| Touchstone Moderate ETF Fund - Class SC** | |||||||||||||
| Actual | 0.75 | % | $ | 1,000.00 | $ | 1,145.90 | $ | 4.05 | |||||
| Hypothetical | 0.75 | % | $ | 1,000.00 | $ | 1,021.37 | $ | 3.81 | |||||
* Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect one-half year period).
** The annualized expense ratio for the Fund does not include fees and expenses of the underlying funds in which the Fund invests.
Liquidity Risk Management
The Funds have adopted and implemented a written liquidity risk management program (the “LRM Program”) as required by Rule 22e-4 under the Investment Company Act of 1940. Rule 22e-4 requires that each Fund adopt a program that is reasonably designed to assess and manage the Funds’ liquidity risk, which is the risk that a Fund could not meet redemption requests without significant dilution of remaining investors’ interests in a Fund.
Assessment and management of a Fund’s liquidity risk under the LRM Program takes into consideration certain factors, such as a Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions, its short- and long-term cash-flow projections during both normal and reasonably foreseeable stressed conditions, and its cash and cash-equivalent holdings and access to other funding sources. As required by the rule, the LRM Program includes policies and procedures for classification of Fund portfolio holdings in four liquidity categories, maintaining certain levels of highly liquid investments, and limiting holdings of illiquid investments.
The Board of Trustees of the Trust approved the appointment of a LRM Program administrator responsible for administering the LRM Program and for carrying out the specific responsibilities set forth in the LRM Program, including reporting to the Board on at least an annual basis regarding the LRM Program’s operation, its adequacy, and the effectiveness of its implementation for the past year (the “Program Administrator Report”). The Board has reviewed the Program Administrator Report covering the period from May 17, 2019 through May 14, 2020 (the “Review Period”). The Program Administrator Report stated that during the Review Period the Program operated and was implemented effectively to manage the Funds’ liquidity risk.
61
| Other Items (Unaudited) (Continued) |
Advisory and Sub-Advisory Agreement Approval Disclosure
At a meeting held on November 19, 2020, the Board of Trustees (the “Board” or “Trustees”) of the Touchstone Variable Series Trust (the “Trust”), and by a separate vote, the Independent Trustees of the Trust, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor with respect to each Fund of the Trust, and the continuance of the Sub-Advisory Agreement between the Advisor and each Fund’s respective Sub-Advisor.
In determining whether to approve the continuation of the Investment Advisory Agreement and the Sub-Advisory Agreements, the Advisor furnished information necessary for a majority of the Independent Trustees to make the determination that the continuance of the Investment Advisory Agreement and each Sub-Advisory Agreement was in the best interests of the respective Funds and their shareholders. The information provided to the Board included: (1) industry data comparing advisory fees and total expense ratios of comparable funds; (2) comparative performance information; (3) the Advisor’s and its affiliates’ revenues and costs of providing services to the Funds; and (4) information about the Advisor’s and Sub-Advisors’ personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Investment Advisory Agreement and the Sub-Advisory Agreements with management and experienced independent legal counsel and received materials from such counsel discussing the legal standards for their consideration of the proposed continuation of the Investment Advisory Agreement and each Sub-Advisory Agreement. The Independent Trustees also reviewed the proposed continuation of the Investment Advisory Agreement and each Sub-Advisory Agreement with independent legal counsel in private sessions at which no representatives of management were present.
In approving the Funds’ Investment Advisory Agreement, the Board considered various factors, among them: (1) the nature, extent and quality of services provided to the Funds, including the personnel providing such services; (2) the Advisor’s compensation and profitability; (3) a comparison of fees and performance with comparable funds; (4) economies of scale; and (5) the terms of the Investment Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.
Nature, Extent and Quality of Advisor Services. The Board considered the level and depth of knowledge of the Advisor, including the professional experience and qualifications of senior personnel. In evaluating the quality of services provided by the Advisor, the Board took into account its familiarity with the Advisor’s senior management through Board meetings, discussions and reports during the preceding year.The Board also took into account the Advisor’s compliance policies and procedures.The quality of administrative and other services, including the Advisor’s role in coordinating the activities of the Funds’ other service providers, was also considered. The Board also considered the Advisor’s relationship with its affiliates and the resources available to them, as well as any potential conflicts of interest.
The Board discussed the Advisor’s effectiveness in monitoring the performance of each Sub-Advisor, including the one that was an affiliate of the Advisor, and the Advisor’s timeliness in responding to performance issues. The Board considered the Advisor’s process for monitoring each of the Sub-Advisors, which includes an examination of both qualitative and quantitative elements of the Sub-Advisor’s organization, personnel, procedures, investment discipline, infrastructure and performance. The Board considered that the Advisor conducts periodic compliance due diligence of each Sub-Advisor, during which the Advisor examines a wide variety of factors, such as the financial condition of the Sub-Advisor, the quality of the Sub-Advisor’s systems, the effectiveness of the Sub-Advisor’s disaster recovery programs, trade allocation and execution procedures, compliance with the Sub-Advisor’s policies and procedures, results of regulatory examinations and any other factors that might affect the quality of services that the Sub-Advisor provides to the applicable Fund(s). The Board noted that the Advisor’s compliance monitoring processes also include quarterly reviews of compliance certifications, and that any issues arising from such reviews and the Advisor’s compliance visits to the Sub-Advisors are reported to the Board.
The Trustees concluded that they were satisfied with the nature, extent and quality of services provided to each Fund by the Advisor under the Investment Advisory Agreement.
Advisor’s Compensation and Profitability. The Board took into consideration the financial condition and profitability of the Advisor and its affiliates (including the affiliated Sub-Advisor to certain of the Funds) and the direct and indirect benefits derived by the Advisor and its affiliates from the Advisor’s relationship with the Funds. The information considered by the Board included operating profit margin information for the Advisor’s business as a whole. The Board noted that the Advisor had waived a portion of advisory fees and administrative fees and/or reimbursed expenses in order to limit each Fund’s net operating expenses. The Board also noted that the Advisor pays the Sub-Advisors’ sub-advisory fees out of the advisory fees the Advisor receives from the Funds. The Board reviewed the profitability of the Advisor’s relationship with the Funds both before and after tax expenses, and also considered whether the Advisor has the financial wherewithal to continue to provide services to the Funds, noting the ongoing commitment of the Advisor’s parent company with respect to providing support and resources as needed. The Board also noted that the Advisor derives benefits to its reputation and other benefits from its association with the Funds. The Board also considered that affiliates of the Advisor may benefit from certain indirect tax benefits, including those relating to dividend received deductions.
62
| Other Items (Unaudited) (Continued) |
The Board recognized that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to each Fund and the entrepreneurial risk that it assumes as Advisor. Based upon their review, the Trustees concluded that the Advisor’s and its affiliates’ level of profitability, if any, from their relationship with each Fund was reasonable and not excessive.
Expenses and Performance. The Board compared the respective advisory fees and total expense ratios for each of the Funds with various comparative data, including the median and average advisory fees and total expense ratios of each Fund’s respective peer group. The Board also considered, among other data, the Funds’ respective performance results during the six-month, twelve-month and thirty-six-month periods ended September 30, 2020 and noted that the Board reviews on a quarterly basis detailed information about each Fund’s performance results, portfolio composition and investment strategies. The Board also took into account current market conditions and their effect on the Funds’ performance.
The Board also considered the effect of each Fund’s growth and size on its performance and expenses. The Board noted that the Advisor had waived a portion of the fees and/or reimbursed expenses of the Funds in order to reduce those Funds’ respective operating expenses to targeted levels. The Board noted that the sub-advisory fees under the Sub-Advisory Agreement with respect to each Fund were paid by the Advisor out of the advisory fees it receives from the Fund and considered the impact of such sub-advisory fees on the profitability of the Advisor. In reviewing the respective total expense ratios and performance of each of the Funds, the Board also took into account the nature, extent and quality of the services provided to the Funds by the Advisor and its affiliates.
The Board considered, among other data, the specific factors and related conclusions set forth below with respect to each Fund:
Touchstone Aggressive ETF Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were above the median and below the median, respectively, of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six- and thirty-six-month periods ended September 30, 2020 was in the 3rd quintile of its peer group, while the Fund’s performance for the twelve-month period ended September 30, 2020 was in the 2nd quintile of its peer group. The Board noted management’s recommendation that the Fund be merged into another Touchstone Fund. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
Touchstone Balanced Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were each below the median of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six-, twelve- and thirty-six-month periods ended September 30, 2020 was in the 1st quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
Touchstone Bond Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were below the median and above the median, respectively, of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six- and twelve-month periods ended September 30, 2020 was in the 1st quintile of its peer group, while the Fund’s performance for the thirty-six-month period ended September 30, 2020 was in the 2nd quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
Touchstone Common Stock Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were below the median and at the median, respectively, of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six- and twelve-month periods ended September 30, 2020 was in the 1st quintile of its peer group, while the Fund’s performance for the thirty-six-month period ended September 30, 2020 was in the 3rd quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
Touchstone Conservative ETF Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were above the median and below the median, respectively, of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six-, twelve- and thirty-six-month periods ended September 30, 2020 was in the 2nd quintile of its peer group. The Board noted management’s recommendation that the Fund be merged into another Touchstone Fund. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
63
| Other Items (Unaudited) (Continued) |
Touchstone Moderate ETF Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were at the median and below the median, respectively, of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six-, twelve- and thirty-six-month periods ended September 30, 2020 was in the 3rd quintile of its peer group. The Board noted management’s recommendation that the Fund be merged into another Touchstone Fund. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
Touchstone Small Company Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were each below the median of its peer group. The Board noted that the Advisor was currently waiving and/or reimbursing a portion of the Fund’s fees and/or expenses. The Fund’s performance for each of the six- and twelve-month periods ended September 30, 2020 was in the 3rd quintile, while the Fund’s performance for the thirty-six-month period ended September 30, 2020 was in the 2nd quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.
Economies of Scale. The Board considered the effect of each Fund’s current size and potential growth on its performance and expenses. The Board took into account management’s discussion of the Funds’ advisory fee structure. The Board considered the effective advisory fees under the Investment Advisory Agreement as a percentage of assets at different asset levels and possible economies of scale that might be realized if the assets of each Fund increase. The Board noted that the advisory fee schedules for all but one of the Funds contain breakpoints that would reduce the advisory fee rate on assets above specified levels as the respective Fund’s assets increased and considered the necessity of adding breakpoints with respect to the one Fund that currently did not have such breakpoints in its advisory fee schedule. The Board determined that adding breakpoints at specified levels to the advisory fee schedule of the one Fund that currently did not have such breakpoints was not appropriate at that time. The Board also noted that if a Fund’s assets increase over time, the Fund might realize other economies of scale if assets increase proportionally more than certain other expenses. The Board also considered the fact that, under the Investment Advisory Agreement, the advisory fee payable to the Advisor by a Fund was reduced by the total sub-advisory fee paid by the Advisor to the Fund’s Sub-Advisor.
Conclusion. In considering the renewal of the Funds’ Investment Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Trustees evaluated all information available to them on a Fund-by-Fund basis, and their determinations were made separately with respect to each Fund. The Board reached the following conclusions regarding the Funds’ Investment Advisory Agreement with the Advisor, among others: (a) the Advisor demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains an appropriate compliance program; (c) the overall performance of each Fund is satisfactory relative to the performance of funds with similar investment objectives and relevant indices; and (d) each Fund’s advisory fee is reasonable in light of the services received by the Fund from the Advisor and the other factors considered. Based on their conclusions, the Trustees determined with respect to each Fund that continuation of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.
In approving the applicable Funds’ respective Sub-Advisory Agreements, the Board considered various factors with respect to each Fund and the applicable Sub-Advisory Agreement, among them: (1) the nature, extent and quality of services provided to the Fund, including the personnel providing such services; (2) the Sub-Advisor’s compensation; (3) a comparison of the sub-advisory fee and performance with comparable funds; and (4) the terms of the Sub-Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.
Nature, Extent and Quality of Services Provided; Investment Personnel. The Board considered information provided by the Advisor regarding the services provided by each Sub-Advisor, including information presented periodically throughout the previous year. The Board noted the affiliation of the Sub-Advisor to certain of the Funds with the Advisor, noting any potential conflicts of interest. The Board also noted that, on a periodic basis, the Board meets with portfolio managers of the Sub-Advisors to discuss their respective performance and investment processes and strategies. The Board considered each Sub-Advisor’s level of knowledge and investment style. The Board reviewed the experience and credentials of the applicable investment personnel who are responsible for managing the investment of portfolio securities with respect to the Funds. The Board also noted each Sub-Advisor’s brokerage practices.
Sub-Advisor’s Compensation, Profitability and Economies of Scale. The Board also took into consideration the financial condition of each Sub-Advisor and any indirect benefits derived by each Sub-Advisor and its affiliates from the Sub-Advisor’s relationship with the Funds. In considering the profitability to each Sub-Advisor of its relationship with the Funds, the Board noted the undertaking of the Advisor to maintain expense limitations for the Funds and also noted that the sub-advisory fees under the Sub-Advisory Agreements were paid by the Advisor out of the advisory fees that it receives under the Investment Advisory Agreement and in addition, with respect to the unaffiliated Sub-Advisors, are negotiated at arm’s length. As a consequence, the profitability to each Sub-Advisor of its relationship with a Fund was not a substantial factor in the Board’s deliberations. For similar reasons, the Board did not consider the potential economies of scale in each Sub-Advisor’s management of the applicable Fund to be a substantial
64
| Other Items (Unaudited) (Continued) |
factor in its consideration, although the Board noted that the sub-advisory fee schedule for all but two of the Funds contained breakpoints that would reduce the sub-advisory fee rate on assets above specified levels as the applicable Fund’s assets increased.
Sub-Advisory Fees and Fund Performance. The Board considered that each Fund pays an advisory fee to the Advisor and that the Advisor pays the sub-advisory fee to the Sub-Advisor out of the advisory fee it receives from the respective Fund. The Board also compared the sub-advisory fees paid by the Advisor to fees charged by each Sub-Advisor to manage comparable institutional separate accounts, as applicable. The Board considered the amount retained by the Advisor and the sub-advisory fee paid to each Sub-Advisor with respect to the various services provided by the Advisor and the Sub-Advisor. The Board also noted that the Advisor negotiated the sub-advisory fee with each of the unaffiliated Sub-Advisors at arm’s length. The Board reviewed the sub-advisory fee for each Fund in relation to various comparative data, including the median and average sub-advisory fees of each Fund’s peer group, and considered the following information:
Touchstone Aggressive ETF Fund. The Fund’s sub-advisory fee was above the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
Touchstone Balanced Fund. The Fund’s sub-advisory fee was below the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
Touchstone Bond Fund. The Fund’s sub-advisory fee was above the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
Touchstone Common Stock Fund. The Fund’s sub-advisory fee was above the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
Touchstone Conservative ETF Fund. The Fund’s sub-advisory fee was above the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
Touchstone Moderate ETF Fund. The Fund’s sub-advisory fee was above the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
Touchstone Small Company Fund. The Fund’s sub-advisory fee was below the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.
As noted above, the Board considered each Fund’s performance during the six-month, twelve-month and thirty-six-month periods ended September 30, 2020 as compared to each Fund’s peer group and noted that the Board reviews on a quarterly basis detailed information about each Fund’s performance results, portfolio composition and investment strategies. The Board noted the Advisor’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of each Sub-Advisor. The Board was mindful of the Advisor’s ongoing monitoring of each Sub-Advisor’s performance and the measures undertaken by the Advisor to address any underperformance.
Conclusion. In considering the renewal of the Sub-Advisory Agreement with respect to each applicable Fund, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Board reached the following conclusions regarding each Sub-Advisory Agreement, among others: (a) the Sub-Advisor is qualified to manage each Fund’s assets in accordance with the Fund’s investment goals and policies; (b) the Sub-Advisor maintains an appropriate compliance program; (c) the overall performance of each Fund is satisfactory relative to the performance of funds with similar investment objectives and relevant indices; (d) each Fund’s sub-advisory fee is reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered; and (e) the Sub-Advisor’s investment strategies are appropriate for pursuing the investment goals of each Fund. Based on its conclusions, the Board determined that approval of the Sub-Advisory Agreement with respect to each applicable Fund was in the best interests of the Fund and its shareholders.
65
Management of the Trust (Unaudited)
Listed below is required 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 or by visiting the Touchstone website at TouchstoneInvestments.com.
Interested Trustee1:
| Name Address Year of Birth | Position(s) Held with Trust | Term of Office And Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds Overseen in the Touchstone Fund Complex2 | Other Directorships Held During the Past 5 Years3 |
| Jill T. McGruder Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1955 | Trustee | Until retirement at age 75 or until she resigns or is removed Trustee since 1999 | President, Director and CEO of IFS Financial Services, Inc. (a holding company) since 1999; and Senior Vice President and Chief Marketing Officer of Western & Southern Financial Group, Inc. (a financial services company) since 2016. | 37 | Director, Integrity Life Insurance Co. and National Integrity Life Insurance Co. since 2005; Director, Touchstone Securities (the Distributor) since 1999; Director, Touchstone Advisors (the Advisor) since 1999; Director, W&S Brokerage Services, Inc. since 1999; Director, W&S Financial Group Distributors, Inc. since 1999; Director, Insurance Profillment Solutions LLC since 2014; Director, Columbus Life Insurance Co. since 2016; Director, The Lafayette Life Insurance Co. since 2016; Director, Gerber Life Insurance Company since 2019; Director, Western & Southern Agency, Inc. since 2018; and Director, LL Global, Inc. (not-for-profit trade organization with operating divisions LIMRA and LOMA) since 2016. |
| Independent Trustees: | |||||
| Karen Carnahan c/o Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1954 | Trustee | Until retirement at age 75 or until she resigns or is removed Trustee since 2019 | Retired; formerly Chief Operating Officer of Shred-it (a business services company) from 2014 to 2015; formerly President & Chief Operating Officer of the document management division of Cintas Corporation (a business services company) from 2008 to 2014. | 37 | Director, Cintas Corporation since 2019; Director, Boys & Girls Club of West Chester/Liberty since 2016; and Board of Advisors, Best Upon Request since 2020. |
| William C. Gale c/o Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1952 | Trustee | Until retirement at age 75 or until he resigns or is removed Trustee since 2013 | Retired; formerly Senior Vice President and Chief Financial Officer of Cintas Corporation (a business services company) from 1995 to 2015. | 37 | None. |
| Susan J. Hickenlooper, CFA c/o Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, OH 45202 Year of Birth: 1946 | Trustee | Until retirement at age 75 or until she resigns or is removed Trustee since 2009 | Retired from investment management. | 37 | Trustee, Episcopal Diocese of Southern Ohio from 2014 to 2018. |
| Kevin A. Robie c/o Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, OH 45202 Year of Birth: 1956 | Trustee | Until retirement at age 75 or until he resigns or is removed Trustee since 2013 | Retired; formerly Vice President of Portfolio Management at Soin LLC (private multinational holding company and family office) from 2004 to 2020. | 37 | Director, SaverSystems, Inc. since 2015; Director, Buckeye EcoCare, Inc. from 2013 to 2018; Director, Turner Property Services Group, Inc. since 2017; Trustee, Dayton Region New Market Fund, LLC (private fund) since 2010; and Trustee, Entrepreneurs Center, Inc. (business incubator) since 2006. |
66
Management of the Trust (Unaudited) (Continued)
Independent Trustees (Continued):
| Name Address Year of Birth | Position Held with Trust | Term of Office And Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds Overseen in the Touchstone Fund Complex2 | Other Directorships Held During the Past 5 Years3 |
| William H. Zimmer III c/o Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1953 | Trustee | Until retirement at age 75 or until he resigns or is removed Trustee since 2019 | Independent Treasury Consultant since 2014. | 37 | Director, Deaconess Associations, Inc. (healthcare) since 2001; Trustee, Huntington Funds (mutual funds) from 2006 to 2015; and Director, National Association of Corporate Treasurers from 2011 to 2015. |
| 1 | Ms. McGruder, as a director of the Advisor and the Distributor, and an officer of affiliates of the Advisor and the Distributor, is an “interested person” of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. |
| 2 | As of December 31, 2020, the Touchstone Fund Complex consists of 7 variable annuity series of the Trust, 12 series of Touchstone Funds Group Trust and 18 series of Touchstone Strategic Trust. |
| 3 | Each Trustee is also a Trustee of Touchstone Strategic Trust and Touchstone Funds Group Trust. |
Principal Officers:
| Name Address Year of Birth | Position(s) Held with Trust1 | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years |
| E. Blake Moore, Jr. Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1958 | President | Until resignation, removal or disqualification President since January 2021 | Chief Executive Officer of Touchstone Advisors, Inc. and Touchstone Securities Inc. (since 2020); President, Foresters Investment Management Company, Inc. (2018 to 2020); President, North American Asset Management at Foresters Financial (2018 to 2020); Managing Director, Head of Americas at UBS Asset Management (2015 to 2017); and Executive Vice President, Head of Distribution at Mackenzie Investments (2011 to 2014). |
| Timothy D. Paulin Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 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. |
| Timothy S. Stearns Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1963 | Chief Compliance Officer | Until resignation, removal or disqualification Chief Compliance Officer since 2013 | Chief Compliance Officer of Touchstone Advisors, Inc. |
| Terrie A. Wiedenheft Touchstone Advisors, Inc. 303 Broadway Suite 1100 Cincinnati, Ohio 45202 Year of Birth: 1962 | Controller and Treasurer | Until resignation, removal or disqualification Controller and Treasurer since 2006 | Senior Vice President, Chief Financial Officer, and Chief Operations Officer of IFS Financial Services, Inc. (a holding company). |
| Meredyth A. Whitford-Schultz Western & Southern Financial Group 400 Broadway Cincinnati, Ohio 45202 Year of Birth: 1981 | Secretary | Until resignation, removal or disqualification Secretary since 2018 | Counsel - Securities/Mutual Funds of Western & Southern Financial Group (2015 to present); Associate at Morgan Lewis & Bockius LLP (law firm) (2014 to 2015); Associate at Bingham McCutchen LLP (law firm) (2008 to 2014). |
| 1 | Each officer also holds the same office with Touchstone Strategic Trust and Touchstone Funds Group Trust. |
67
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
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 Strategic 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.
TSF-1006-TVST-AR-2012
| (b) | Not applicable. |
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. |
| (e) | Not applicable. |
| (f) | A copy of the code of ethics is attached hereto as Exhibit 13(a)(1). |
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. Ms. Karen Carnahan 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) | Audit fees for Touchstone Variable Series Trust totaled $124,900 and $125,800 for the fiscal years ending December 31, 2020 and December 31, 2019, respectively, including fees associated with the annual audits and filings of Form N-1A and Form N-CEN. |
Audit-Related Fees
| (b) | The aggregate fees billed in each of the last two fiscal years 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 $0 and $10,000 for the fiscal years ended December 31, 2020 and December 31, 2019, respectively. The fees for 2019 are associated with filings of Form N-14. |
Tax Fees
| (c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $29,910 and $34,180 for the fiscal years ended December 31, 2020 and December 31, 2019, respectively. The fees relate to the preparation of federal income and excise tax returns and review of capital gains distribution calculations. |
All Other Fees
| (d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $2,986 and $5,584 for the fiscal years ended December 31, 2020 and December 31, 2019, respectively. The fees relate to the PFIC analyzer and Global Withholding Tax Reporter subscriptions. |
| (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-CSR), tax services that have historically been provided by the auditor that the Committee believes would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence and permissible non-audit services classified as “all other services” that are routine and recurring services.
| (e)(2) | All of the services described in paragraphs (b) through (d) of Item 4 were approved by the Audit Committee. |
| (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 for Touchstone Variable Series Trust and certain entities*, totaled approximately $766,767 and $731,002 for the fiscal years ended December 31, 2020 and December 31, 2019, respectively. |
* These include the advisors (excluding non-affiliated sub-advisors) and any entity controlling, controlled by or under common control with the advisors that provides ongoing services to the registrant (Funds).
| (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(a) of this form. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(1) | Code of ethics, and 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. |
| (a)(3) | Not applicable. |
| (a)(4) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Touchstone Variable Serires Trust |
| By (Signature and Title)* | /s/ E. Blake Moore, Jr. | |
| E. Blake Moore, Jr., President | ||
| (principal executive officer) | ||
| Date | March 3, 2021 |
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/ E. Blake Moore, Jr. | |
| E. Blake Moore, Jr., President | ||
| (principal executive officer) | ||
| Date | March 3, 2021 |
| By (Signature and Title)* | /s/ Terrie A. Wiedenheft | |
| Terrie A. Wiedenheft, Controller and Treasurer | ||
| (principal financial officer) | ||
| Date | March 3, 2021 |
* Print the name and title of each signing officer under his or her signature.