As Filed With The Securities And Exchange Commission On June 18, 2003
File No. 811-3651
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. __
TOUCHSTONE STRATEGIC TRUST
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(Exact Name of Registrant as Specified in Charter)
221 East Fourth Street, Suite 300, Cincinnati, Ohio 45202
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(Address of Principal Executive Offices) (Zip Code)
(800) 543-0407
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(Registrant's Telephone Number, Including Area Code)
Patrick T. Bannigan
221 East Fourth Street, Suite 300
Cincinnati, Ohio 45202
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(Name and Address of Agent for Service of Process)
Copies to:
Samuel Kornhauser, Esq.
155 Jackson Street, Suite 1807
San Francisco, California 94111
Approximate Date of Proposed Public Offering: It is proposed that this filing
will become effective on July 18, 2003 and will be offered as soon as
practicable after this Registration Statement becomes effective.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940; accordingly, no fee is payable herewith. The Registrant has
undertaken to file on May 31, 2004, a Rule 24f-2 Notice for its most recent
fiscal year ended March 31, 2004.
TOUCHSTONE STRATEGIC TRUST
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following
pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letters to Shareholders
Notice of Special Meeting
PART A
Combined Prospectus/Proxy Statement
PART B
Statement of Additional Information
PART C
Other Information
Signatures
Exhibits
TOUCHSTONE STRATEGIC TRUST
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
N-14 LOCATION IN
ITEM NO. REGISTRATION STATEMENT
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PART A. INFORMATION REQUIRED IN PROSPECTUS/PROXY STATEMENT
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1. Beginning of Registration Cover Page; Cross Reference Sheet
Statement and Outside Front
Cover Page of Prospectus
2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
3. Synopsis and Risk Factors Synopsis; Principal Risk Factors
4. Information About the Synopsis; The Proposed Transactions;
Transaction Appendix A
5. Information About the Synopsis; Comparison of Investment
Registrant Objectives and Policies; Principal Risk
Factors; Additional Information About the
Acquiring Fund and the Acquiring Fund
Shares; Miscellaneous; Current Prospectus
of the Large Cap Growth Fund
6. Information About the Synopsis; Comparison of Investment
Companies Being Acquired Objectives and Policies; Principal Risk
Factors; Additional Information About the
Portfolios and the Portfolios' Shares;
Current Prospectuses of The Navellier
Large Cap Growth Portfolio of The
Navellier Performance Funds and of The
Navellier Large Cap Growth Portfolio of
The Navellier Millennium Funds
7. Voting Information Introduction and Voting Information;
Synopsis
8. Interest of Certain Persons Introduction and Voting Information; The
and Experts Proposed Transactions; Miscellaneous
9. Additional Information Not Applicable
Required for Reoffering by
Persons Deemed to be
Underwriters
N-14 LOCATION IN
ITEM NO. REGISTRATION STATEMENT
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PART A. INFORMATION REQUIRED IN PROSPECTUS/PROXY STATEMENT
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information About Current Statement of Additional
the Registrant Information of The Large Cap Growth Fund
of the Touchstone Strategic Trust
13. Additional Information About Current Statements of Additional
the Companies Being Acquired Information of The Navellier Performance Funds
and of The Navellier Millennium Funds
14. Financial Statements Current Annual Report of the Large Cap Growth Fund
of the Touchstone Strategic Trust (March 31, 2003);
The Navellier Large Cap Growth Portfolio of the
Navellier Performance Funds (December 21, 2002);
The Navellier Large Cap Growth Portfolio of The
Navellier Millennium Funds (December 31, 2002);
"PRO FORMA FINANCIAL STATEMENTS" (December 31,
2002)
PART C: OTHER INFORMATION
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15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
THE NAVELLIER PERFORMANCE FUNDS
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
1-800-887-8671
July 18, 2003
TO THE SHAREHOLDERS OF
THE NAVELLIER LARGE CAP GROWTH PORTFOLIO
Dear Shareholder:
A special meeting of the shareholders of The Navellier Large Cap Growth
Portfolio (the "Portfolio"), a series of The Navellier Performance Funds will be
held at 10:00 A.M., Pacific Standard Time, on August 22, 2003, or a date shortly
thereafter, at the offices of The Navellier Performance Funds, One East Liberty
Street Third Floor, Reno, Nevada 89501 (the "Meeting"). The shareholders of the
Portfolio (the "Shareholders") will vote on a proposed Agreement and Plan of
Reorganization (the "Plan"). Under the Plan, the Navellier Large Cap Growth
Portfolio of The Navellier Performance Funds and The Navellier Large Cap Growth
Portfolio of The Navellier Millennium Funds will merge into the Touchstone Large
Cap Growth Fund (the "Acquiring Fund"), a separate portfolio of the Touchstone
Strategic Trust (the "Reorganization"). Upon completion of the proposed
reorganization, the investment objective and investment strategies of the
Touchstone Large Cap Growth Fund will be changed to those of Navellier Large Cap
Growth Portfolios. Touchstone Large Cap Growth's investment objective therefore
would be identical to the investment objective of Navellier Large Cap Growth and
Touchstone Large Cap Growth's investment policies would be substantially
identical to those of Navellier Large Cap Growth. In addition, the investment
manager of Touchstone Large Cap Growth will change the investment sub-advisor of
Touchstone Large Cap Growth to the manager of the Navellier Large Cap Growth,
Navellier Management, Inc. The Acquiring Fund has three classes of shares. The
Class 'A' shares charge an initial sales charge of 5.75%, the Class 'B' shares
charge a contingent deferred sales charge which is incrementally reduced over
time from 5% on redemptions within a year of purchase down to 0% on redemptions
after six years. The Class 'C' shares charge a 1% contingent deferred sales
charge on redemptions within one year of purchase. However, this will not affect
you since you will be a Class 'A' shareholder of the Acquiring Fund and will not
be charged a sales load. You may continue to purchase Class 'A' shares of the
Acquiring Fund after the reorganization without a sales load for as long as you
maintain an open account in the Acquiring Fund. Like the Portfolio, the Class
'A' Shares of the Acquiring Fund are charged an annual 12b-1 fee of 0.25%.
The Acquiring Fund charges an annual management fee of 0.75% of assets
under management which is less than the annual 0.84% you are charged now.
The total annual net operating expenses of the Class 'A' shares of the
Acquiring Fund for 2002 were 1.37% which is less than the total annual net
operating expenses of the Portfolio for 2002 which were 1.49%.
If the Plan is approved and implemented by the Portfolio, the
Shareholders of the Portfolio will become shareholders of the Acquiring Fund and
will receive shares of the Acquiring Fund having an aggregate value equal to the
aggregate value of his or her investment in the Portfolio. No sales charge will
be imposed as a result of the Reorganization. The Acquiring Fund and the
Portfolio have received an opinion of counsel indicating that the Reorganization
will qualify as a tax-free reorganization for Federal income tax purposes.
I and the Trustees of the Portfolio by a unanimous vote have voted in
FAVOR of the proposed merger and are urging you and the other Portfolio
shareholders to vote FOR a merger of the Portfolio into the Acquiring Fund. I
and the other Portfolio Trustees ("Management") are soliciting your proxy (vote)
because we believe that the proposed merger should benefit Shareholders by
reducing portfolio operating costs.
We believe that this Reorganization is in the best interest of the
Portfolio and the Shareholders and, therefore, recommend that the Shareholders
vote FOR approving the Plan.
WE STRONGLY URGE YOU TO REVIEW, COMPLETE, AND RETURN YOUR GOLD PROXY
CARD AS SOON AS POSSIBLE. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU
OWN. VOTING YOUR SHARES EARLY WILL HELP TO AVOID COSTLY FOLLOW-UP MAIL AND
TELEPHONE SOLICITATION. LOUIS NAVELLIER AND NAVELLIER MANAGEMENT, INC. ARE
PAYING FOR THIS PROXY SOLICITATION AND WILL NOT SEEK REIMBURSEMENT FROM THE
PORTFOLIO OR YOU. AFTER REVIEWING THE ENCLOSED MATERIALS, PLEASE EXERCISE YOUR
RIGHT TO VOTE TODAY AND VOTE FOR THE MERGER BY COMPLETING, DATING, AND SIGNING
EACH PROXY CARD YOU RECEIVE AND MAILING THE PROXY IN THE SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE TO THE NAVELLIER PERFORMANCE FUNDS AT ONE EAST LIBERTY
ST., THIRD FLOOR, RENO, NEVADA 89501. IT IS VERY IMPORTANT THAT YOU VOTE AND
THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER THAN August 18, 2003 OR A
DATE SHORTLY THEREAFTER.
Please note that you may receive more than one proxy package if you
hold shares of the Portfolio in more than one account. You should return
separate proxy cards for each such account. If you have any questions, please
call Navellier Management, Inc. at 1-800-887-8671.
Sincerely,
Louis G. Navellier
______________________________________
Trustee of The Navellier Large
Cap Growth Portfolio of The
Navellier Performance Funds
THE TRUSTEES OF
THE NAVELLIER PERFORMANCE FUNDS
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
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THE NAVELLIER LARGE CAP GROWTH PORTFOLIO
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD August 22, 2003 OR A DATE SHORTLY THEREAFTER
To: The Shareholders of the Navellier Large Cap Growth Portfolio of The
Navellier Performance Funds
You are hereby notified that a Special Meeting of the Shareholders of
The Navellier Large Cap Growth Portfolio of The Navellier Performance Funds will
be held at the offices of The Navellier Performance Funds, One East Liberty
Street, Third Floor, Reno, Nevada 89501 on August 22, 2003 or a date shortly
thereafter at 10:00 a.m. (Pacific Standard Time), for the purpose of considering
and voting upon the following matter:
PROPOSAL 1.
To approve a proposed Agreement and Plan of Reorganization (the
"Plan"), whereby The Navellier Large Cap Growth Portfolio ("Portfolio")
would transfer all of its assets to the Large Cap Growth Fund, a
portfolio of the Touchstone Strategic Trust (the "Acquiring Fund") in a
tax-free exchange for shares of beneficial interest in the Acquiring
Fund that would be distributed to the shareholders of the Portfolio.
Also, as part of the Plan, the Acquiring Fund would assume all valid
liabilities of the Portfolio. Also, as part of the Plan, the Acquiring
Fund would acquire all of the assets and liabilities of the Navellier
Large Cap Growth Portfolio of the Navellier Millennium Funds.
The transactions contemplated by the proposed Plan of Reorganization
and related matters are described in the attached Combined Prospectus/Proxy
Statement. A copy of the form of the proposed Plan is attached as Appendix A
thereto. A copy of the Investment Advisory Fee Agreement between the Acquiring
Fund and Touchstone Advisors, Inc. and a copy of the sub-advisory agreement
between Touchstone Advisors, Inc. and Navellier Management, Inc., reducing the
total annual management fee that will be charged to you after the merger to
0.75% of the Acquiring Fund's net asset value per annum are attached thereto as
Appendix B and Appendix C respectively. A copy of the Acquiring Fund's 12b-1
Plan is attached thereto as Appendix D.
You are entitled to vote at the Meeting, and any adjournment(s)
thereof, if you owned shares of the Portfolio at the close of business on June
30, 2003. If you attend the Meeting, you may vote your shares in person. If you
do not expect to attend the meeting, please complete, date, sign, and return the
enclosed proxy card marked FOR in the enclosed self-addressed, postage-paid
return envelope.
Louis G. Navellier
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Trustee of The Navellier Large
Cap Growth Portfolio of The
Navellier Performance Funds
July 18, 2003
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE VOTE "FOR" PROPOSAL 1 ON THE ENCLOSED GOLD PROXY CARD, THEN
PLEASE DATE AND SIGN THE CARD AND RETURN THE PROXY CARD IN THE ENVELOPE
PROVIDED. IF YOU SIGN, DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING
INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSAL NOTICED ABOVE. IN
ORDER TO AVOID THE ADDITIONAL EXPENSE AND DELAY OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN MAILING IN YOUR GOLD PROXY CARD PROMPTLY SO THAT A QUORUM
MAY BE ENSURED. A VOTE OF 67% OF THE SHARES OF THE PORTFOLIO WHICH ARE PRESENT
IN PERSON OR BY PROXY AND ENTITLED TO VOTE (IF MORE THAN 50% OF THE OUTSTANDING
SHARES OF RECORD ARE PRESENT IN PERSON OR BY PROXY) OR MORE THAN 50% OF THE
OUTSTANDING SHARES ENTITLED TO VOTE, WHICHEVER IS LESS, IS REQUIRED TO PASS ANY
PROPOSAL, SO RETURN OF YOUR PROXY IS IMPORTANT. UNLESS PROXY CARDS SUBMITTED BY
CORPORATIONS AND PARTNERSHIPS ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED
IN THE VOTING INSTRUCTIONS ON THE PROXY CARD, SUCH PROXY CARDS CANNOT BE VOTED.
Louis G. Navellier
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Trustee of The Navellier Large
Cap Growth Portfolio of The
Navellier Performance Funds
PROXY SOLICITATION
BY
THE TRUSTEES OF
THE NAVELLIER LARGE CAP GROWTH PORTFOLIO OF
THE NAVELLIER PERFORMANCE FUNDS
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ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
1-800-887-8671
COMBINED PROSPECTUS/PROXY STATEMENT
This combined prospectus/proxy statement is being furnished in
connection with the solicitation of proxies by the Trustees of The Navellier
Large Cap Growth Portfolio ("Portfolio") of The Navellier Performance Funds
("Fund"), for use at a special meeting of shareholders ("Shareholders") of the
"Portfolio" to be held at 10:00 a.m., Pacific Standard Time, on August 22, 2003,
or a date shortly thereafter at the offices of The Navellier Performance Funds,
One East Liberty Street, Third Floor, Reno, Nevada 89501, and at any
adjournment(s) thereof (the "Meeting"). The Meeting is being held so that
shareholders can vote on the following proposal made by the Trustees of the
Portfolio:
PROPOSAL 1.
To approve a proposed Agreement and Plan of Reorganization
(the "Plan"), whereby the Portfolio would transfer all of its assets to
the Large Cap Growth Fund, a portfolio of the Touchstone Strategic
Trust (the "Acquiring Fund"), in a tax-free exchange for shares of
beneficial interest in the Acquiring Fund that would be distributed to
the shareholders of The Portfolio. Also, as part of the Plan, the
Acquiring Fund would assume all valid liabilities of The Portfolio.
Also, as part of the Plan, the Navellier Large Cap growth Portfolio of
the Navellier Millennium Funds ("Millennium Portfolio") would transfer
all of its assets and valid liabilities to the Acquiring Fund.
The Portfolio is a series investment company organized by Louis
Navellier as a Business Trust in the State of Delaware with one class of common
stock outstanding, with such class representing an interest in a separate series
of the Fund. Only shareholders of the Portfolio are being solicited in
connection with the Meeting.
The purpose of the Meeting is to consider a proposed Plan of
Reorganization (the "Plan"), which would effect a merger of the Portfolio and
also the merger of the Millennium Portfolio into the Acquiring Fund, and the
transactions contemplated thereby, as described below (collectively, the
"Reorganization"). The Acquiring Fund is a series open-end investment company
which seeks capital appreciation by investing in large cap growth securities.
The Plan has been approved unanimously by the Board of Trustees of the
Portfolio, by the Board of Trustees of the Millennium Portfolio and by the Board
of Trustees of the Acquiring Fund. Pursuant to the proposed Plan, all of the
assets of the Portfolio and all of the assets of the Millennium Portfolio would
be acquired by the Acquiring Fund (which has investment policies the same as
those of the Portfolio), in a tax-free exchange for shares of beneficial
interest in the Acquiring Fund ("Acquiring Fund Shares") and the assumption by
the Acquiring Fund of all valid liabilities of the Portfolio and of the
Millennium Portfolio. Specifically, it is proposed that the assets of the
Portfolio and the assets of the Millennium Portfolio be transferred to the
Acquiring Fund in a tax-free exchange for Acquiring Fund Shares of value equal
to the assets transferred from the Portfolio and from the Millennium Portfolio.
Following such transfer, the Acquiring Fund Shares received by the Portfolio
would then be distributed pro rata to the shareholders of the Portfolio, and
then the Portfolio would be liquidated. As a result of the proposed
transactions, each shareholder of the Portfolio
would receive a number of full and fractional Acquiring Fund Shares having a
total net asset value equal, on the effective date of the Reorganization, to the
net asset value of the Shareholder's shares of beneficial interest in the
Portfolio. In order to have a merger, the Trustees of the Portfolio and the
Trustees of the Millennium Portfolio and the Trustees of the Acquiring Fund must
approve the proposed merger. The Trustees of the Portfolio and of the Millennium
Portfolio and the Trustees of the Acquiring Fund have already approved the
proposed merger.
This combined prospectus/proxy statement, which should be retained for
future reference, sets forth concisely the information about the Portfolio and
the Acquiring Fund, and the transactions contemplated by the proposed
Reorganization, that an investor should know before voting on the proposed
Reorganization. A copy of the current Prospectus of the Touchstone Strategic
Trust dated August 1, 2002 is included with this combined prospectus/proxy
statement for each Shareholder of the Portfolio, and is incorporated by
reference herein.
A Statement of Additional Information regarding Touchstone Strategic
Trust dated August 1, 2002 has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated by reference herein. Copies of
such Statement of Additional Information also may be obtained without charge by
contacting Touchstone Investments at 221 East Fourth Street, Suite 300,
Cincinnati, Ohio 45202, or by telephoning toll-free at 1-800-543-0407 or at
http://www.touchstoneinvestments.com.
A Prospectus and a Statement of Additional Information regarding the
Portfolio each dated May 1, 2003 also have been filed with the Commission and
each is incorporated by reference herein.
Copies of these Portfolio documents also may be obtained without charge
by contacting Navellier Management, Inc., at One East Liberty Street, Third
Floor, Reno, Nevada 89501, or by telephoning Navellier Management, Inc.,
toll-free at 1-800-887-8671.
A Statement of Additional Information dated July 18, 2003, relating to
the proposed transactions described in this combined prospectus/proxy statement,
including historical financial statements, has been filed with the Commission
and is incorporated by reference herein. Copies of this Statement of Additional
Information may be obtained without charge by contacting Navellier Management,
Inc., at One East Liberty Street, Third Floor, Reno, Nevada 89501, or by
telephoning Navellier Management, Inc., toll-free at 1-800-887-8671.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Combined Prospectus/Proxy Statement is July 18, 2003.
12
COMBINED PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
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Introduction and Voting Information
Special Meeting; Voting of Proxies; Adjournment Proxy Solicitation.
Revocation of Proxies
No Dissenters' Rights of Appraisal.
Additional Voting Information
Synopsis
The Proposed Reorganization
Investment Objectives and Policies
Operations of the Touchstone Strategic Trust and the Acquiring Fund following
the Reorganization
Management Fees, Administrative Fees, and Other Operating Expenses
Purchases and Exchanges
Redemption Procedures and Fees
Dividends and Distributions; Automatic Reinvestment
Federal Tax Consequences of the Proposed Reorganization
Costs and Expenses of the Reorganization
Continuation of Shareholder Accounts; Share Certificates
Form of Organization of the Touchstone Strategic Trust
Comparison of Investment Objectives and Policies
Investment Objectives and Policies
Investment Objective of the Acquiring Fund
Investment Objective of the Portfolio
Certain Investment Restrictions and Limitations
Principal Risk Factors
The Proposed Transactions
Proposed Agreement and Plan of Reorganization
Reasons for the Proposed Transactions
Description of Securities to Be Issued
Federal Income Tax Consequences
13
Pro Forma Capitalization and Ratios
Dissolution of the Portfolios
Navellier Group Recommendation
Required Vote
Additional Information About the Acquiring Fund and the Acquiring Fund Shares
Additional Information About the Portfolio and the Portfolio Shares
Miscellaneous
Available Information
Legal Matters
Financial Statements and Experts
Other Business
Appendix A: Form of Agreement and Plan of Reorganization
Appendix B: Investment Advisory Agreement Between Acquiring Fund and Touchstone
Advisors, Inc.
Appendix C: Sub-advisory Agreement between Touchstone Advisors, Inc. and
Navellier Management, Inc
Appendix D: Acquiring Fund Distribution Agreement
14
PART A
15
SOLICITATION BY THE TRUSTEES OF
THE NAVELLIER PERFORMANCE FUNDS
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
1-800-887-8671
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THE NAVELLIER PERFORMANCE FUNDS
(THE NAVELLIER LARGE CAP GROWTH PORTFOLIO)
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COMBINED PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
August 22, 2003 OR A DATE SHORTLY THEREAFTER
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INTRODUCTION AND VOTING INFORMATION
SPECIAL MEETING; VOTING OF PROXIES; ADJOURNMENT
This combined prospectus/proxy statement is being furnished to the
shareholders of The Navellier Performance Funds' Navellier Large Cap Growth
Portfolio ("Portfolio") in connection with the solicitation by the Trustees of
the Portfolio, (collectively "your Trustees") of proxies to be used at a special
meeting of the shareholders of this Portfolio to be held on August 22, 2003 or a
date shortly thereafter at 10:00 a.m. Pacific Standard Time at the offices of
The Navellier Performance Funds, One East Liberty Street, Third Floor, Reno,
Nevada 89501 and at any adjournment(s) thereof (the "Meeting"). The purpose of
the Meeting is to vote on the proposed tax-free Reorganization (the "Plan") to
merge the Portfolio into the Large Cap Growth Fund (the "Acquiring Fund"), which
is a series of the Touchstone Strategic Trust, pursuant to the terms and
conditions of the Plan, as described below in greater detail. A vote on the
approval or disapproval of the Plan will be conducted at the Meeting by the
shareholders of the Portfolio.
Shareholders of record of the Portfolio at the close of business on
June 30, 2003 (the "Record Date") will be entitled to vote at the Meeting. Such
holders of shares of beneficial interest in the Portfolio ("Portfolio Shares")
are entitled to one vote for each Portfolio Share held and to fractional votes
for fractional Portfolio Shares held. A quorum for the Portfolio must be present
in person or represented by Proxy for the transaction of business at the
Meeting. The holders of record of one-third of the Portfolio Shares outstanding
at the close of business on that Record Date present in person or represented by
proxy will constitute a quorum for the Meeting of the Shareholders of the
Portfolio. A quorum being present, the approval at the Meeting by the
shareholders of the Portfolio for the proposed Reorganization requires the
affirmative vote of at least 67% of the outstanding shares of the Portfolio
present in person or represented by proxy at the Meeting if more than 50% of the
outstanding shares of the Portfolio are present in person or represented by
proxy or more than 50% of the outstanding shares entitled to vote, whichever is
less.
If either (i) a quorum is not present at the Meeting or (ii) a quorum
is present but sufficient votes in favor of a matter proposed at the Meeting (a
"Proposal"), as set forth in the Notice of this Meeting, are not received by
August 22, 2003, or a date shortly thereafter, then the persons named as
attorneys and proxies in the enclosed proxy
16
("Proxies") may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of at least one-third of the shares present in person or by
proxy. The persons named as Proxies will vote those proxies that such persons
are required to vote FOR such Proposal in favor of such an adjournment and will
vote those proxies required to be voted AGAINST such Proposal against such an
adjournment. A Shareholder vote may be taken on a Proposal in this combined
prospectus/proxy statement prior to any such adjournment if sufficient votes
have been received and it is otherwise appropriate.
The individuals named as Proxies on the enclosed GOLD proxy card will
vote in accordance with your direction, as indicated thereon, if your proxy card
is received and is properly executed. If you properly execute your GOLD proxy
and give no voting instructions with respect to a Proposal, your shares will be
voted in favor of the Proposal. The duly-appointed Proxies, in their discretion,
may vote upon such other matters as may properly come before the Meeting. Your
Trustees are not aware of any other matters to come before the Meeting.
If a broker returns a "non-vote" proxy, indicating a lack of authority
to vote on the Plan, then the Portfolio Shares covered by such broker non-vote
shall be deemed present at the Meeting for the purposes of determining a quorum,
but shall not be deemed to be represented at the Meeting for the purposes of
calculating the number of Portfolio Shares present in person or represented by
proxy at the Meeting with respect to the Plan or any other Proposal.
PROXY SOLICITATION
Proxies will be solicited by mail and, if necessary to obtain the
requisite representation of Shareholders, your Trustees also may solicit proxies
by telephone, telegraph, facsimile and/or personal interview by representatives
of the Portfolio, Mr. Navellier, Navellier Management, Inc., employees of
Navellier Management, Inc., or their affiliates, and by representatives of any
independent proxy solicitation service retained for the Meeting. Louis Navellier
and Navellier Management, Inc., whose principal location is One East Liberty
Street, Third Floor, Reno, Nevada 89501, will bear the costs of its
solicitation, including the costs such as the preparation and mailing of the
notice, the combined prospectus/proxy statement, and the proxy, and the
solicitation of proxies, including reimbursement to persons who forward proxy
materials to their clients, and the expenses connected with the solicitation of
these proxies in person, by telephone, or by telegraph. Banks, brokers, and
other persons holding Portfolio Shares registered in their names or in the names
of their nominees will be reimbursed for their expenses incurred in sending
proxy materials to and obtaining proxies from the beneficial owners of such
Portfolio Shares.
Mr. Navellier, as sole owner of Navellier Management, Inc., has a
financial interest in the outcome of the vote because Navellier Management, Inc.
would be investment sub-advisor to the merged Portfolio, for which it would
receive investment advisory fees.
REVOCATION OF PROXIES
You may revoke your proxy: (i) at any time prior to the proxy's
exercise by written notice to The Navellier Performance Funds, One East Liberty
Street, Third Floor, Reno, Nevada 89501 prior to the Meeting; (ii) by the
subsequent execution and return of another proxy prior to the Meeting; or (iii)
by being present and voting in person at the Meeting and giving oral notice of
revocation to the Chairman of the Meeting.
NO DISSENTERS' RIGHTS OF APPRAISAL
The purpose of the Meeting is to vote on the proposed tax-free
Reorganization of the Portfolio into the Acquiring Fund, as described below in
greater detail. The Portfolio is a separate series of the Navellier Performance
Funds. The Declaration of Trust of the Navellier Performance Funds (the
"Declaration of Trust") does not entitle shareholders to appraisal rights (i.e.,
to demand the fair value of their shares) in the event of a
17
reorganization or proposed merger. Consequently, the shareholders will be bound
by the terms of the Plan, if the Plan is approved at the Meeting. Any
Shareholder, however, may redeem his or her Portfolio Shares at net asset value
prior to the closing date of the proposed Reorganization.
ADDITIONAL VOTING INFORMATION
As of the Record Date, there were outstanding and entitled to be voted
_____ Portfolio Shares. As of the Record Date __________, each held for the
benefit of others more than 5% of the Portfolio. Trustees and officers of The
Navellier Performance Funds own in the aggregate less than 1% of the shares of
the Portfolio. To the knowledge of Mr. Navellier, no other person then owned
more than 5% of the outstanding shares of the Portfolio.
As more fully described in this combined prospectus/proxy statement,
the Meeting has been called for the following purpose:
PROPOSAL 1.
To approve a proposed Agreement and proposed Plan of Reorganization
(the "Plan"), whereby the Portfolio would transfer all of its assets to
the Large Cap Growth Fund (the "Acquiring Fund") of the Touchstone
Strategic Trust in a tax-free exchange for shares of beneficial
interest in the Acquiring Fund that would then be distributed to the
shareholders of the Portfolio. Also, as part of the Plan, the Navellier
Large Cap Growth Portfolio of The Navellier Millennium Funds
("Millennium Portfolio") would transfer all of its assets to the
Acquiring Fund in a tax-free exchange for shares of beneficial interest
in the Acquiring Fund that would then be distributed to the
Shareholders of the Millennium Portfolio. Also, as part of the Plan,
the Acquiring Fund would assume all valid liabilities of the Portfolio
and of the Millennium Portfolio.
As described below, if holders of more than 50% of the outstanding
shares of record are present in person or by proxy, the approval by the
Portfolio of Proposal 1 at the Meeting requires the affirmative vote of at least
67% of the Portfolio Shares present in person or represented by proxy at the
Meeting or the vote of more than 50% of the outstanding shares entitled to vote,
whichever is less.
MR. NAVELLIER AND THE OTHER TRUSTEES OF THE PORTFOLIO UNANIMOUSLY
RECOMMEND THAT THE PROPOSED REORGANIZATION DESCRIBED HEREIN BE "APPROVED."
SYNOPSIS
The following is a summary of certain information contained elsewhere
in this combined prospectus/ proxy statement, including the prospectuses of the
Portfolio and the Acquiring Fund and the proposed Agreement and Plan of
Reorganization. Shareholders should read this entire combined prospectus/proxy
statement carefully.
THE PROPOSED REORGANIZATION
Shareholders of the Portfolio will be asked at the Meeting to vote upon
and approve the proposed Plan, which provides for the Reorganization of the
Portfolio. A copy of the form of the Plan is set forth in Appendix A to this
combined prospectus/proxy statement. Pursuant to the Plan, the Portfolio, which
is a series of The Navellier Series Fund, a non-diversified, open-end management
investment company organized as a business trust under the laws of the State of
Delaware, would be merged tax-free into the Acquiring Fund of the Touchstone
Strategic Trust. Touchstone Large Cap Growth is currently a separate diversified
series of the Trust, a Massachusetts business trust, which as also an open-end
management investment company registered under the 1940 Act. However, if the
shareholders of the Touchstone Large Cap Growth approve a proposal in a proxy
statement to be filed with the Securities and Exchange Commission ('SEC') and
scheduled for a vote of such shareholders in a special meeting on August 22,
2003, upon completion of the
18
Reorganization Touchstone Large Cap Growth will change to a non-diversified
series of the Trust. A non-diversified fund may invest up to 25% of its total
assets in the securities of a single company and 50% of its total assets could
consist of the securities of only two issuers. With respect to the remainder of
the Fund's assets, no more than 5% could be invested in any one security, and
the Fund may not own more than 10% of the outstanding voting securities of any
issuer. The Millennium Portfolio would also be merged into the Acquiring Fund.
The Acquiring Fund is a loaded series of the TOUCHSTONE STRATEGIC TRUST, an
open-end management investment company organized under the laws of the State of
Massachusetts as a business trust. The Plan sets forth the terms and conditions
under which the proposed Reorganization may be consummated. Approval by the
present Trustees of the Portfolio is required in order to merge the Portfolio
into the Acquiring Fund. The present Trustees of the Portfolio have approved the
proposed merger.
If the Reorganization is completed, the investment objective and investment
strategies of Touchstone Large Cap Growth will be changed to those of Navellier
Large Cap Growth (subject to the approval of the shareholders of Touchstone
Large Cap Growth to change that Fund to a non-diversified fund upon completion
of the Reorganization), and the investment manager of the Touchstone Large Cap
Growth will change the investment sub-advisor of the Touchstone Large Cap Growth
to the investment manager of Navellier Large Cap Growth, Navellier Management,
Inc. This Prospectus/Proxy statement has been prepared assuming that such
changes will take place.
YOUR TRUSTEES BELIEVE THE PROPOSED REORGANIZATION PLAN SHOULD BE
APPROVED. The consummation of the proposed transactions contemplated by the
Reorganization is subject to a number of conditions set forth in the Plan, some
of which conditions may be waived by the Trustees. See "The Proposed
Transactions--Agreement and proposed Plan of Reorganization." Among the
significant conditions (which may not be waived) for the Reorganization are (i)
the receipt by each of the Funds of an opinion of counsel (or a revenue ruling
of the U.S. Internal Revenue Service) as to certain Federal income tax aspects
of the Reorganization (see "The Proposed Transactions--Federal Income Tax
Consequences") (that opinion of counsel has been received) and (ii) the approval
of the Plan by the affirmative vote of at least 67% of the Portfolio Shares and
at least 67% of the Millennium Portfolio Shares present in person or by proxy if
a quorum of shareholders is present or the holders of at least a majority of the
outstanding voting Shares of the Portfolio and of the Shares of the Millennium
Portfolio, whichever amount is less and (iii) approval of the proposed merger by
the Trustees of the Portfolio and of the Trustees of the Millennium Portfolio
(these conditions have also been satisfied). The Plan provides, with respect to
the Reorganization, for the acquisition of all the assets of the Portfolio and
all the assets of the Millennium Portfolio by the Acquiring Fund in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of all valid
liabilities of the Portfolio and of the Millennium Portfolio. The Acquiring Fund
Shares received by the Portfolio and the Acquiring Fund shares received by the
Millennium Portfolio then would be distributed pro rata to the Shareholders of
the Portfolio and to the Shareholders of the Millennium Portfolio respectively.
The outstanding Shares of the Portfolio would be cancelled and the Portfolio
would be liquidated. The outstanding Shares of the Millennium Portfolio would be
cancelled and the Millennium Portfolio would be liquidated. The Reorganization
is anticipated to occur on August 22, 2003, or such later date as the parties
may agree upon (the "Closing Date"). As a result of the proposed transactions
contemplated by the Reorganization, each portfolio shareholder would receive a
number of full and fractional shares of the corresponding Acquiring Fund having
a total net asset value equal in value to the net asset value of his or her
Shares in the Portfolio and/or the Millennium Portfolio as of the Closing Date
of the Reorganization.
The following sets forth the Portfolio and the corresponding Acquiring
Fund:
PORTFOLIO OF ACQUIRING FUND OF
THE NAVELLIER PERFORMANCE FUNDS TOUCHSTONE STRATEGIC TRUST
- ------------------------------------------ -------------------------------------
The Navellier Large Cap Growth Portfolio The Touchstone Large Cap Growth Fund
19
For the reasons set forth below under "The Proposed
Transactions--Reasons for the Proposed Transactions", the Trustees of the
Portfolio have unanimously concluded that the Reorganization would be in the
best interests of the Portfolio and its shareholders and that the interests of
existing shareholders will not be diluted as a result of the transactions
contemplated by the Reorganization. The Portfolio Trustees, therefore, have
submitted the proposed Plan effecting the proposed Reorganization for approval
by the shareholders of the Portfolio at the Meeting and recommend a vote FOR the
proposed Plan.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment objective of Navellier Large Cap Growth will be
identical to that of Touchstone Large Cap Growth and the investment strategies
of each Portfolio will be substantially identical (assuming that Touchstone
Large Cap Growth becomes a non-diversified fund). Navellier Management, Inc.,
the investment adviser to the Portfolio and sub-advisor in charge of managing
the day to day investments of the Acquiring Fund will use the same modern
portfolio theory style of stock selection for the Acquiring Fund that is used in
the Portfolio.
The investment objective of the Portfolio is a fundamental policy which
may not be changed without the approval of a vote of at least a "majority" (as
that term is defined in the 1940 Act) of the outstanding shares, respectively,
of the Portfolio or the Acquiring Fund. All other investment policies of the
Portfolio that are not specified as fundamental are not fundamental policies and
may be changed by the Acquiring Fund Board of Trustees and the Portfolio Board
of Trustees, respectively, without shareholder approval. The investment
objective of the Acquiring Fund is non-fundamental, which means that it may be
changed by vote of the Trustees without shareholder approval.
THE PORTFOLIO. The investment objective of the Portfolio is to seek to
achieve long term growth of capital primarily through investments in securities
of large cap companies (companies with market capitalization of more than $5
Billion) with appreciation potential by employing a modern portfolio theory to
select securities.
The investment objective of the Acquiring Fund will be to seek to
achieve long term growth of capital primarily through investments in securities
of large cap companies (companies with market capitalization of more than $5
Billion) with appreciation potential by employing a modern portfolio theory to
select securities.
The Acquiring Fund will have after the merger the same investment
sub-advisor (Navellier Management, Inc.) managing the day to day investments
which the Portfolio has and will employ the same modern portfolio investment
style which is used by the Portfolio.
For further discussion of the comparisons in the investment policies of
the Acquiring Fund and of the Portfolio, see "Comparison of Investment
Objectives and Policies" in this combined prospectus/proxy statement.
OPERATIONS OF TOUCHSTONE STRATEGIC TRUST AND THE ACQUIRING FUND FOLLOWING THE
REORGANIZATION
Touchstone Strategic Trust and the Acquiring Fund will continue to
operate in substantially the same way as each did prior to the Reorganization.
The responsibilities, powers and fiduciary duties of the Trustees of the
Acquiring Fund are essentially the same as those of the Trustees of the
Portfolio. Subject to the provisions of the Touchstone Strategic Trust
Declaration of Trust, dated November 18, 1982 (the "Trust Declaration"), the
business of Touchstone Strategic Trust and the Acquiring Fund is managed by the
Touchstone Strategic Trust Board of Trustees (the "Board"), which has all powers
necessary and appropriate to carry out that business responsibility. The Board
supervises the business affairs and investments of the Acquiring Fund. The
Acquiring Fund receives investment advisory services from Touchstone Advisors,
Inc. and will receive
20
sub-advisory investment services from Navellier Management, Inc. if the
Reorganization is approved by the Portfolio shareholders and by the Millennium
Portfolio shareholders. The Acquiring Fund receives distribution, marketing and
customer services from Touchstone Securities, Inc. pursuant to a Distributor
Agreement (12b-1 Plan).
MANAGEMENT, FEES, ADMINISTRATIVE FEES, AND OTHER OPERATING EXPENSES
MANAGEMENT AND FEES. Navellier Management, Inc., is the investment
advisor to the Portfolio pursuant to an investment management agreement between
the Portfolio and Navellier Management, Inc. (the "Portfolio Management
Contract"). Touchstone Advisors, Inc. (the 'Manager') is the investment manager
for the Touchstone Large Cap Growth. The Manager selects and pays the fees of
the sub-advisor and monitors the sub-advisor's program. Navellier Management,
Inc. will manage the investment and reinvestment of the assets of the Acquiring
Fund, as sub-advisor after the merger, subject to the supervision of Touchstone
Advisors, Inc. and of the officers and Trustees of the Acquiring Fund. The
Portfolio pays Navellier Management, Inc. an investment advisory fee at an
annual rate of 0.84% of the aggregate average daily net asset value of the
Portfolio. The Acquiring Fund will pay to Touchstone Advisors, Inc. an
investment advisory fee at an annual rate of 0.75% of the aggregate average
daily net asset value of the Acquiring Fund. Under the terms of the Sub-Advisory
Agreement, Navellier Management, Inc. will be paid a fee of 0.45% of average
daily net assets by the Manager, Touchstone Advisors, Inc. The Acquiring Fund
does not pay a fee to the sub-advisor.
The Trust and the Manager have received an order from the SEC whereby under
certain circumstances, the Manager may select or change sub-advisors, enter into
new-sub-advisory agreements or amend existing sub-advisory agreements without
first obtaining shareholder approval. Pursuant to this order, upon completion of
the Reorganization, the Manager will change the sub-advisor of the Touchstone
Large Cap Growth to the Advisor of Navellier Performance Large Cap Growth.
ADMINISTRATIVE FEES AND OTHER OPERATING EXPENSES. The Portfolio pays
its own operating costs. Pursuant to an Administrative Services Agreement, the
Portfolio pays Navellier Management, Inc. an annual fee, pro rata monthly, of
0.25% of the aggregate average daily net asset value of the Portfolio to provide
administrative services including shareholder servicing services to the
Portfolio. Its net operating expenses in 2002 were 1.49%. The Acquiring Fund
pays it own operating expenses. Its net operating expenses after partial waiver
of reimbursement for the period ending December 31, 2002 were 1.37%
12b-1 PLAN FEES. The Portfolio has a 12b-1 plan which charges 12b-1
fees of 0.25% annually. The Acquiring Fund has a 12b-1 plan for Class 'A' shares
which pays an annual fee of 0.25% of the aggregate average daily net asset value
of the Acquiring Fund for marketing, distribution and client services.
The following sets forth the fund operating expenses (as a percentage
of the average daily net assets) for the Portfolio for the twelve-month period
ended December 31, 2002. Adjacent to the column for Portfolio expenses is
presented the expected fund operating expenses (as a percentage of the average
daily net assets) of the Acquiring Fund into which the Portfolio would merge
under the Plan.
21
TABLE
- -------------------------------------------------------------------------------
Touchstone Navellier Touchstone
Large Cap Growth Performance Large Combined Pro
Expense (A) Cap Growth (1) Forma (2)
- -------------------------------------------------------------------------------
Management Fees 0.75% 0.84% 0.75%
- -------------------------------------------------------------------------------
Distribution 0.25% 0.25% 0.25%
- -------------------------------------------------------------------------------
Other Expenses 0.40% 1.11% 0.50%
- -------------------------------------------------------------------------------
Total Fund Expense 1.40% 2.22% 1.50%
- -------------------------------------------------------------------------------
Waiver - -0.71% -0.20%
- -------------------------------------------------------------------------------
Net Expense - 1.49% 1.30%
- -------------------------------------------------------------------------------
(1) Reflects Navellier's contractual waiver of reimbursement of a portion
of the Portfolio's operating expense. The Investment Advisor has also
agreed to this partial waiver of reimbursement for the fiscal year
ended December 31, 2003.
(2) Touchstone Advisors, Inc. and the Trust have entered into an Expense
Limitation Agreement whereby the Total Annual Portfolio Operating
Expenses for the Class A shares of the Touchstone Large Cap Growth will
not exceed 1.30% for the period ending upon consummation of the
Reorganization and will not exceed 1.30% for a two year period after
consummation of the Reorganization. Prior to the Reorganization, the
limitation is voluntary and can be terminated upon 30 days prior
written notice at the end of any calendar quarter. After
reimbursements, the Total Annual Fund Operating Expenses of Touchstone
Large Cap Growth for the period ended December 31, 2002 were 1.37%.
As reflected above, it is expected that the Acquiring Fund will have
lower total operating expenses than those historically incurred by Portfolio.
Mr. Navellier believes that the lower management fee charged to the Acquiring
Fund and avoiding or reducing costs by merging the Portfolio into the Acquiring
Fund will save the Portfolio in excess of $50,000 per year by reducing the fees
paid to trustees, outside counsel to the independent trustees, reducing printing
and mailing and reduced management fees, and that the Reorganization would be
advantageous to and in the best interests of the Shareholders. See "The Proposed
Transactions--Reasons for the Proposed Transactions".
FEE EXAMPLE
The tables below show examples of the total expenses you would pay on a
$10,000 investment over one-, three-, five- and ten-year periods. The examples
are intended to help you compare the cost of investing in Navellier Large Cap
Growth versus Touchstone Large Cap Growth and Touchstone Large Cap Growth (Pro
Forma), assuming the Reorganization takes place. The examples assume a 5%
average annual return, that you redeem all of your shares at the end of each
time period and that you reinvest all of your dividends. The following tables
also assume that total annual operating expenses remain the same throughout all
periods, and for Touchstone Large Cap Growth, are limited for the first two
years following consummation of the Reorganization and thereafter, are not
limited. The examples are for illustration only, and your actual costs may be
higher or lower.
TOUCHSTONE LARGE CAP GROWTH
- ---------------------------------------------------------------------
One Year Three Years Five Years Ten Years
- ---------------------------------------------------------------------
$719 $1,021 $1,345 $2,260
- ---------------------------------------------------------------------
22
NAVELLIER PERFORMANCE LARGE CAP GROWTH
- --------------------------------------------------------------
One Year Three Years Five Years Ten Years
- --------------------------------------------------------------
$152 $620 $1,115 $2,478
- --------------------------------------------------------------
TOUCHSTONE LARGE CAP GROWTH COMBINED PRO FORMA
- ---------------------------------------------------------------
One Year Three Years Five Years Ten Years
- ---------------------------------------------------------------
$700 $984 $1,309 $2,227
- ---------------------------------------------------------------
PERFORMANCE
The following charts show how the shares of Navellier Performance Large
Cap Growth and the shares of Touchstone Large Cap Growth have performed in the
past. Past performance is not an indication of future results.
YEAR-BY-YEAR TOTAL RETURN
The charts below show the percentage gain or loss for the shares of
Navellier Large Cap Growth and Touchstone Large Cap Growth in each full calendar
year since the inception of each Portfolio on December 19, 1997 and August 2,
1993, respectively. The charts should give you a general idea of the risks of
investing in the Portfolios by showing how a portfolio's return has varied from
year-to-year. The charts include the effects of Portfolio expenses. Total return
amounts are based on the inception date of the Portfolio which may have occurred
before your investment began; accordingly, your investment results may differ.
The Portfolios can also experience short-term performance swings as indicated in
the high and low quarter information at the bottom of each chart.
Navellier Performance Large Cap Growth
- --------------------------------------------------------------------
1998 1999 2000 2001 2002
- --------------------------------------------------------------------
41.17% 63.03% -7.66% -23.47% -26.70%
- --------------------------------------------------------------------
Highest Quarter: 4th Quarter 1999, up 40.00%
Lowest Quarter: 1st Quarter 2001, down 27.98%
Touchstone Large Cap Growth
- ------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------
- -1.67% 32.07% 14.25% 29.34% 21.90% 18.53% -19.50% -23.20% -36.16%
- ------------------------------------------------------------------------------------------------
Highest Quarter: 4th Quarter 1998, up 20.28%
Lowest Quarter: 1st Quarter 2001, down 22.72%
The following table shows the after-tax returns calculated using the highest
historical individual federal marginal income tax rates and do not reflect the
impact of state and local taxes. Actual after-tax returns depend on an
investor's tax situation and may differ from those shown. The loss (if any) in
the "Return after taxes on distributions and sale of fund shares" column above
may be less than that shown in the "Return after taxes on distributions only"
column because it is assumed that the shareholder is subject to the highest
federal marginal tax rates. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts. The index's returns reflect no
deduction for
23
fees, expenses, or taxes. The Fund's past performance, before and after taxes,
is not necessarily an indication of how the Fund will perform in the future.
- -------------------------------------------------------------------------------------------------------------
Return after taxes
Return after taxes on distributions
Return on distributions and sale of fund Russell 100 Growth
before taxes only shares Index
- -------------------------------------------------------------------------------------------------------------
Navellier Large Cap Growth
(Portfolio) -26.70% -26.70% -16.13% -27.89%
One Year 3.58% 3.56% 2.90% -3.84%
Five Year 4.07% 4.05% 3.31% *-3.24%
Since Inception
- -------------------------------------------------------------------------------------------------------------
Touchstone Large Cap Growth
One Year -36.16% -39.84% -24.46% -27.89%
Five Year -10.63% -12.39% -8.11% -3.84%
Since Inception 0.97% -0.50% 0.57% **7.62%
- -------------------------------------------------------------------------------------------------------------
* Date of Index performance is from 12/19/1997.
** Date of Index performance is from 08/01/1993.
The next table lists the average annual total return of the shares of
the Portfolio and of Touchstone Large Cap Growth for the past one and five years
and since inception (through December 31, 2002). This table includes the effects
of Portfolio expenses and is intended to provide you with some indication of the
risks of investing in each by comparing its performance with an appropriate
widely recognized index of securities, a description of which can be found
following the tables. An index does not reflect fees or expenses. It is not
possible to invest directly in an index.
Average Annual Total Return (for the period ended 12/31/2002)(1)
- ----------------------------------------------------------------------------------------------------------
From
1 Year 5 Years 10 Years Inception
Ended Ended Ended to Inception
12/31/02 12/31/02 12/31/02 12/31/02 Date
- ----------------------------------------------------------------------------------------------------------
Navellier Performance Large -26.70% 3.58% - 4.07% 12/19/1997
Cap Growth
- ----------------------------------------------------------------------------------------------------------
Touchstone Large -36.16% -10.63% - 0.97% 08/02/1993
Cap Growth
- ----------------------------------------------------------------------------------------------------------
S&P 500 Index -22.10% -0.59% 9.34% *-0.59%
**9.38%
- ----------------------------------------------------------------------------------------------------------
Russell 1000 Growth Index -27.89% -3.84% 6.71% ***-3.24%
**9.62%
- ----------------------------------------------------------------------------------------------------------
(1) Reflects waiver of advisory fees and reimbursements and/or
waivers of expenses for certain periods. Without such reimbursements and/or
waivers, the average annual total returns during the periods would have been
lower.
* Date of Index performance is from 01/01/1998.
** Date of Index performance is from 08/01/1993.
*** Date of Index performance is from 12/19/1997.
24
The S&P 500 Index is a widely recognized unmanaged index that measures
the stock performance of 500 large- and medium-sized companies and is often used
to indicate the performance of the overall stock market.
The Russell 1000 Growth Index is a widely recognized unmanaged index
that measures the stock performance of the Russell 1000 companies with higher
price-to-book ratios and higher forecasted growth values.
For a detailed discussion of the manner of calculating total return,
please see the Portfolios' Statements of Additional Information. Generally, the
calculations of total return assume the reinvestment of all dividends and
capital gain distributions on the reinvestment date and the deduction of all
recurring expenses that were charged to shareholders' accounts.
Important information about Touchstone Large Cap Growth is also
contained in management's discussion of Touchstone Large Cap Growth's
performance. This information also appears in the most recent Annual Report of
the Trust relating to Touchstone Large Cap Growth.
Upon consummation of the Reorganization, Touchstone Large Cap Growth
will assume and publish the performance history of Navellier Performance Large
Cap Growth.
PURCHASES AND EXCHANGES
Acquiring Fund Shares are sold in a continuous offering and are offered
to the public, and may be purchased through securities dealers or directly from
the Acquiring Fund's underwriter, Touchstone Securities, Inc., at the net asset
value next computed after the receipt of a purchase order. A one time 5.75%
sales charge is imposed by the Acquiring Fund on purchases of Acquiring Fund
Class 'A' Shares; However, Navellier Performance Large Cap Growth shareholders
as of the consummation of the Reorganization may continue to purchase Class 'A'
shares without a sales charge for as long as an open account with a share
balance is maintained in the Acquiring Fund. The Acquiring Fund charges an
annual 0.25% 12b-1 fee and securities dealers may charge a processing fee for
orders transmitted by such dealers to the Acquiring Fund. The Portfolio charges
an annual 0.25% 12b-1 fee.
The Acquiring Fund currently offers an exchange privilege, including
telephone exchange privileges, which, subject to certain restrictions, permit
shares of any of the other portfolios of the Touchstone Strategic Trust to be
exchanged for shares of the Acquiring Fund. These exchanges are based upon each
portfolio's net asset value per share next computed following receipt of a
properly-executed exchange request without any sales charge. These exchanges
also may be made only between identically-registered accounts, and these
exchange privileges also are available only in states where the shares to be
acquired may be legally sold. If the proposed merger does not occur, Portfolio
shareholders will not be able to exchange their Portfolio shares for shares of
any series of the Touchstone Strategic Trust. Except for the foregoing, there
would be no material differences between the exchange privileges which
shareholders of the Portfolio currently have and the exchange privileges which
such shareholders will have as shareholders of the Acquiring Fund upon
effectiveness of the Reorganization.
The Acquiring Fund has reserved the right to reject or refuse, at
Acquiring Fund's discretion, any order for the purchase of its shares in whole
or in part.
REDEMPTION PROCEDURES AND FEES
Acquiring Fund Shares may be redeemed at a redemption price equal to
the net asset value of the shares as next computed following the receipt of a
request for redemption in proper form. Payment of redemption proceeds for
redeemed Acquiring Fund Shares ordinarily
25
are made within seven days after receipt of a redemption request in proper form
and documentation. Shares of the Acquiring Fund may be redeemed without charge.
DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC REINVESTMENT
The Acquiring Fund and the Portfolio each declares and pays dividends
from the net investment income and short-term capital gains, if any, to
shareholders. The Portfolio pays dividends annually during December of each year
and distributes long-term capital gains, if any, to shareholders on an annual
basis in December. The Acquiring Fund pays dividends quarterly and pays capital
gains, if any, at least annually.
The income dividends and capital gains distributions for investors in
the Acquiring Fund and in the Portfolio are each automatically reinvested,
without sales charge, in additional shares of the Acquiring Fund and of the
Portfolio respectively at the applicable net asset value of such shares
calculated on the ex-dividend date unless such an investor has requested
otherwise in writing.
FEDERAL TAX CONSEQUENCES OF THE PROPOSED REORGANIZATION
The Acquiring Fund and the Portfolio have received, as a condition to
the Reorganization, opinions of legal counsel, to the effect, for Federal income
tax purposes, that the proposed Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, it is believed that
no gain or loss generally will be recognized by Touchstone Strategic Trust or by
the Acquiring Fund, by the Navellier Performance Funds or by the Portfolio, or
by their respective shareholders (see "The Proposed Transactions--Federal Income
Tax Consequences").
COSTS AND EXPENSES OF THE REORGANIZATION
Navellier Management, Inc. will pay the costs, expenses, and
professional fees incurred in the preparation and mailing of this notice and
this combined prospectus/proxy statement and the proxy, and in the solicitation
of proxies, which may include reimbursement to broker-dealers and others who
forward proxy materials to their clients and the costs of a professional
solicitation firm. See "Introduction and Voting Information--Proxy
Solicitation".
CONTINUATION OF SHAREHOLDER ACCOUNTS; SHARE CERTIFICATES
As a result of the proposed transactions contemplated by the
Reorganization of the Portfolio into the Acquiring Fund, Shareholders would
cease to be shareholders of the Portfolio and would receive on the books of the
Acquiring Fund, that number of full and fractional Acquiring Fund Shares having
an aggregate net asset value equal to the aggregate net asset value of his or
her Portfolio Shares as of the close of business on the Closing Date.
The Acquiring Fund will establish accounts on the Closing Date for
Shareholders which will contain the appropriate number of Acquiring Fund Shares.
Acceptance of Acquiring Fund Shares by a Shareholder will be deemed to be
authorization of the Acquiring Fund and its agents to establish, with respect to
the Acquiring Fund, all of the account options, including telephone redemptions,
if any, and dividend and distribution options, as have been established for the
Shareholder's Portfolio account. Shareholders who are receiving payments under
an Automatic Investment Plan, with respect to Portfolio Shares, will retain the
same rights and privileges as to Acquiring Fund Shares under such an Automatic
Investment Plan after the Reorganization. Similarly, no further action will be
necessary in order to continue, with respect to Acquiring Fund Shares, any
retirement plan currently maintained by a Shareholder with respect to Portfolio
Shares.
As a series of a Massachusetts business trust, the Acquiring Fund will
not issue certificates evidencing ownership of Acquiring Fund Shares.
Shareholders of Portfolio will have their beneficial interests in Portfolio
cancelled on the books of Portfolio in
26
order to receive Acquiring Fund Shares on the books of Acquiring Fund as a
result of the Reorganization.
No sales or other charges will be imposed in connection with the
issuance of Acquiring Fund Shares to Portfolio Shareholders pursuant to the
Reorganization.
FORM OF ORGANIZATION OF TOUCHSTONE STRATEGIC TRUST
Touchstone Strategic Trust is an unincorporated voluntary association
organized under the laws of the State of Massachusetts as a business trust
pursuant to the Declaration of Trust. The operations of Touchstone Strategic
Trust and the Acquiring Fund (a Portfolio of Touchstone Strategic Trust) are
governed by this Declaration of Trust, by Touchstone Strategic Trust's By-Laws,
and by Massachusetts Law, as applicable. The Navellier Performance Funds is an
unincorporated voluntary association organized under the laws of the State of
Delaware as a business trust. The operations of The Navellier Performance Funds
and the Portfolio are governed by The Navellier Performance Funds' Declaration
of Trust dated October 17, 1995, and by Delaware law, as applicable. Both
Touchstone Strategic Trust and The Navellier Performance Funds, as well as their
series investment portfolios, are subject to the provisions of the 1940 Act and
to the rules and regulations of the Commission thereunder. Touchstone Strategic
Trust is authorized to issue an unlimited number of shares of beneficial
interest in one or more series investment portfolios or funds. Currently,
Touchstone Strategic Trust is composed of seven (7) separate investment
portfolios: the International Equity Fund, the Emerging Growth Fund, the Growth
Opportunities Fund, the Large Cap Growth Fund, the Enhanced 30 Fund, the Value
Plus Fund, and the Small Cap Growth Fund ("the Portfolios"). See "The Proposed
Transactions--Description of Securities to Be Issued".
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
As discussed below, the investment objective and policies of the
Acquiring Fund and the Portfolio are essentially the same (subject to the
approval of the shareholders of Touchstone Large Cap Growth to change the Fund
to a non-diversified fund upon completion of the Reorganization). The Comparison
of Investment Objectives and Policies has been prepared assuming such change
takes place.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL. The Acquiring Fund and the Portfolio each invest in the common
stocks of large cap companies (companies with market capitalization of more than
$5 Billion).
INVESTMENT OBJECTIVE OF THE ACQUIRING FUND
The Investment Objective of the Acquiring Fund is and will be to
achieve long-term growth of capital primarily through investment in large cap
companies with appreciation potential. The Acquiring Fund invests in securities
traded in the United States securities markets of domestic issuers and of
foreign issuers. After the Reorganization, the sole objective of the Acquiring
Fund is to seek to achieve long term growth of capital primarily through
investments in securities of large cap companies (companies with market
capitalization of more than $5 Billion) with appreciation potential by applying
the proprietary modern portfolio theory techniques of Navellier Management, Inc.
There can be no assurance that the Acquiring Fund will achieve its investment
objectives. The Acquiring Fund's investment objectives may be changed without
shareholder approval subject to 60 days notice to shareholders. The Acquiring
Fund should not be considered suitable for investors seeking current income.
INVESTMENT OBJECTIVE OF THE PORTFOLIO
The investment objective of the Portfolio is the same as the investment
objective of the Acquiring Fund. The Portfolio's investment objective is to
achieve long-term growth of capital primarily through investment in large cap
companies with appreciation potential. The Portfolio invests in securities
traded in the United States securities
27
markets of domestic issuers and of foreign issuers. The sole objective of the
Portfolio is to seek to achieve long term growth of capital primarily through
investments in securities of large cap companies (companies with market
capitalization of more than $5 Billion) with appreciation potential. There can
be no assurance that the Portfolio will achieve its investment objectives. The
Portfolio's investment objectives may not be changed without shareholder
approval. The Portfolio should not be considered suitable for investors seeking
current income.
OTHER INVESTMENTS. Both the Acquiring Fund and the Portfolio may, for
temporary defensive purposes or to maintain cash or cash equivalents to meet
anticipated redemptions, also invest in debt securities and money market funds
if, in the opinion of the investment advisor, such investment will further their
cash needs or temporary defensive needs. In addition, when the investment
advisor feels that market or other conditions warrant it, for temporary
defensive purposes, both the Acquiring Fund and the Portfolio may retain cash or
invest all or any portion of their assets in cash equivalents, including money
market mutual funds. Under normal conditions, both the Acquiring Fund's and
Portfolio's holdings in such non-equity securities should not exceed 20% of the
total assets of such fund.
CERTAIN INVESTMENT RESTRICTIONS AND LIMITATIONS
The investment restrictions and limitations of Acquiring Fund and those
of the Portfolio are and will be substantially the same (subject to the approval
of the shareholders of Touchstone Large Cap Growth to change that Fund to a
non-diversified fund upon completion of the Reorganization). Unless otherwise
specified, the investment restrictions and limitations are considered to be
"fundamental" policies, and, as such, may not be changed without approval of the
holders of a "majority" (as that term is defined in the 1940 Act) of Acquiring
Fund's or Portfolio's respective outstanding shares.
The Portfolio may not:
1. Purchase securities of any issuer, other than
obligations issued or guaranteed as to principal and interest
by the United States government or its agencies or
instrumentalities, if immediately thereafter (i) more than 5%
of the Portfolio's total assets (taken at market value) would
be invested in the securities of such issuer, or (ii) more
than 10% of the voting securities of any class of such issuer
would be held by the Portfolio.
2. Concentrate the Portfolio investments in any one
industry. To comply with this restriction, no security may be
purchased for the Acquiring Fund or the Portfolio if such
purchase would cause the value of the aggregate investment of
the Portfolio in any one industry to be 25% or more of the
Portfolio's total assets (taken at market value).
3. Purchase any securities or other property on
margin, or engage in short sales of securities (unless it
owns, or by virtue of its ownership of other securities has
the right to obtain without payment of any additional
consideration securities equivalent in kind and amount to the
securities sold); PROVIDED, HOWEVER, that the Portfolio may
obtain short-term credit as may be necessary for the clearance
of purchases and sales of securities.
4. Make cash loans, except that the Portfolio may
purchase bonds, notes, debentures, or similar obligations
which are customarily purchased by institutional investors
whether publicly distributed or not.
5. Make securities loans, except that the Portfolio
may make loans of the securities of the Portfolio, provided
that the market value of the securities subject to any such
loans does not exceed 33 1/3% of the value of the total assets
(taken at market value) of the Portfolio.
28
6. Make investments in real estate or commodities or
commodity contracts, including futures contracts, although the
Portfolio may purchase securities of issuers which deal in
real estate or commodities even though this is not a primary
objective of the Portfolio but only if such securities are
large cap equity securities or constitute less than 20% of the
Portfolio's total assets.
7. Invest in oil, gas, or other mineral exploration
or development programs, although the Portfolio may purchase
securities of issuers which engage in whole or in part of such
activities, but only if such securities are large cap equity
securities or constitute less than 20% of the Portfolio's
total assets.
8. Invest in or sell puts, calls, straddles, and any
combination thereof.
9. Purchase securities of companies for the purpose
of exercising management or control.
10. Participate in a joint or joint and several
trading account in securities.
11. Purchase the securities of (i) other open-end
investment companies, or (ii) closed-end investment companies.
12. Issue senior securities or borrow money, except
that Acquiring Fund and Portfolio may (i) borrow money only
from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests, that
might otherwise require the untimely disposition of
securities, provided that any such borrowing does not exceed
10% of the value of the total assets (taken at market value)
of the Portfolio, and (ii) borrow money only from banks for
investment purposes, provided that (a) after each such
borrowing, when added to any borrowing described in clause (i)
of this paragraph, there is an asset coverage of at least 300%
as defined in the Investment Company Act of 1940, and (b) is
subject to an agreement by the lender that any recourse is
limited to the assets of the Portfolio with respect to which
the borrowing has been made. The Portfolio may not invest in
securities while the amount of its borrowing exceeds 5% of its
total assets.
13. Pledge, mortgage, or hypothecate its assets to an
extent greater than 10% of its total assets to secure
borrowings made pursuant to the provisions of Item 12 above.
The following investment restrictions are "fundamental
policies" of the Acquiring Fund and may not be changed with respect to the
Acquiring Fund without the approval of a "majority of the outstanding voting
securities" of the Acquiring Fund. "Majority of the outstanding voting
securities" under the 1940 Act, and as used in the Statement of Additional
Information and the Prospectus, means, the lesser of (i) 67% or more of the
outstanding voting securities of a Fund present at a meeting if the holders of
more than 50% of the outstanding voting securities of a Fund are present or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Acquiring Fund.
THE FUNDAMENTAL LIMITATIONS APPLICABLE TO THE ACQUIRIING FUND ARE:
1. BORROWING MONEY. The Acquiring Fund may not engage in
borrowing except as permitted by the Investment Company Act of
1940, any rule, regulation or order under the 1940 Act or any
SEC staff interpretation of the 1940 ACT.
2. UNDERWRITING. The Acquiring Fund may not underwrite
securities issued by other persons, except to the extent that,
in connection with the sale or disposition of portfolio
securities, the Acquiring Fund may be deemed to be an
underwriter under certain federal securities laws or in
connection with investments in other investment companies.
29
3. LOANS. The Acquiring Fund may not make loans to other
persons except that the Acquiring Fund may (1) engage in
repurchase agreements, (2) lend portfolio securities, (3)
purchase debt securities, (4) purchase commercial paper, and
(5) enter into any other lending arrangement permitted by the
Investment Company Act of 1940, any rule, regulation or order
under the Act or any SEC staff interpretation of the Act.
4. REAL ESTATE. The Acquiring Fund may not purchase or sell
real estate except that the Acquiring Fund may (1) hold and
sell real estate acquired as a result of the Acquiring Fund's
ownership of securities or other instruments (2) purchase or
sell securities or other instruments backed by real estate or
interests in real estate and (3) purchase or sell securities
or entities or investment vehicles, including real estate
investment trusts that invest, deal or otherwise engage in
transactions in real estate or interests in real estate.
5. COMMODITIES. The Acquiring Fund will not purchase or sell
physical commodities except that the Acquiring Fund may (1)
hold and sell physical commodities acquired as a result of the
Acquiring Fund's ownership of securities or other instruments,
(2) purchase or sell securities or other instruments backed by
physical commodities, (3) purchase or sell options, and (4)
purchase or sell futures contracts.
6. CONCENTRATION OF INVESTMENTS. The Acquiring Fund
may not purchase the securities of an issuer (other than
securities issued or guaranteed by the United States
Government, its agencies or its instrumentalities) if, as a
result, more than 25% of the Acquiring Fund's total assets
would be invested in the securities of companies whose
principal business activities are in the same industry.
[Conflict with the non-diversified status of Navellier
Performance Large Cap Growth?]
7. SENIOR SECURITIES. The Acquiring Fund my not issue senior
securities except as permitted by the Investment Company Act
of 1940, any rule, regulation or order under the Act or any
SEC staff interpretation of the Act.
PRINCIPAL RISK FACTORS
The principal risks associated with an investment in the Portfolio and
an investment in the Acquiring Fund are:
An investment in shares of the Acquiring Fund involves certain
speculative considerations. There can be no assurance that any of the Acquiring
Fund's objectives will be achieved or that the value of the investment will
increase. An investment in shares of the Portfolio also involves the same risks.
All securities in which the Acquiring Fund may invest are inherently
subject to market risk, and the market value of the Acquiring Fund's investments
will fluctuate. The Portfolio is subject to the same risks.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of
non-governmental issuers, involve considerations which are not ordinarily
associated with investing in domestic issuers. These considerations include,
among others, changes in currency rates, currency exchange control regulations,
the possibility of expropriation, the unavailability of financial information,
the difficulty of interpreting financial information prepared under laws
applicable to foreign securities markets, the impact of political, social, or
diplomatic developments, difficulties in invoking legal process abroad, and the
difficulty of assessing economic trends in foreign countries. Navellier
Management, Inc. will use the same basic selection criteria for investing in
foreign securities as it uses in selecting domestic securities.
30
While, to some extent, the risks to the Acquiring Fund of investing in
foreign securities may be limited, since it may not invest more than 25% of its
net asset value in such securities and since it may only invest in foreign
securities which are traded in the United States securities markets, the risks
nonetheless exist. The same risks apply to the Portfolio's investments in
foreign securities.
PORTFOLIO TURNOVER
While the future annual rate of portfolio turnover is unknown,
Navellier Management, Inc. estimates but cannot guarantee that the annual
portfolio turnover rate will not exceed 200%. Navellier Management, Inc., which
is also the investment advisor to the Portfolio, will employ the same investment
style for the Acquiring Fund as it employed in managing the Portfolio, which had
an annual portfolio turnover rate in 2002 of 115%. However, these are NOT
restrictions on Navellier Management, Inc. and if, in Navellier Management
Inc.'s judgment, a higher annual portfolio turnover rate is required in order to
attempt to achieve a higher overall performance, then Navellier Management, Inc.
is permitted to do so. However, high portfolio turnover (100% or more) will
result in increased brokerage commissions, dealer mark-ups, and other
transaction costs on the sale of securities and on reinvestment in other
securities and could therefore adversely affect performance.
The risks associated with portfolio turnover for Acquiring Fund are
essentially the same for the Portfolio.
NON-DIVERSIFICATION RISK
Both the Portfolio and the Acquiring Fund are non-diversified investment
companies (assuming the approval of the shareholders of Touchstone Large Cap
Growth to change the Fund to a non-diversified fund upon completion of the
Reorganization) and as such, may invest up to 25% of its assets in a single
issuer and up to 50% of its assets may consist of securities of only two
issuers. A higher percentage of investments among fewer issuers may result in
greater fluctuation in the total market value of the Portfolio's investments
than in the investments of a Portfolio which invests in numerous issuers.
THE PROPOSED TRANSACTIONS
PROPOSED AGREEMENT AND PLAN OF REORGANIZATION
The terms and conditions of the proposed merger, as contemplated by the
Reorganization, are set forth in the Plan. Significant provisions of the Plan,
with respect to the proposed Reorganization of the Portfolio into the Acquiring
Fund, are summarized immediately below. This summary, however, is qualified in
its entirety by reference to the Plan, a form of which is attached to this
combined prospectus/ proxy statement as Appendix A.
With respect to the proposed Reorganization, the Plan contemplates (i) the
Acquiring Fund, on the closing date of the Reorganization, acquiring all of the
assets of the Portfolio and all the assets of the Millennium Portfolio in
exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of
all valid liabilities of the Portfolio and of the Millennium Portfolio and (ii)
the constructive distribution of Acquiring Fund Shares to the Shareholders of
the Portfolio and to the shareholders of the Millennium Portfolio in exchange
for the Portfolio Shares and the Millennium Portfolio Shares of such
Shareholders, all as provided for by the Plan.
The assets of the Portfolio and the assets of the Millennium Portfolio to be
acquired by the Acquiring Fund include all property, including without
limitation, all cash, securities, commodities and futures interests and
dividends or interest receivables which are owned by the Portfolio and those
owned by the Millennium Portfolio and any deferred
31
or prepaid expenses shown as an asset on the books of the Portfolio and on the
books of the Millennium Portfolio on the closing date of the Reorganization. The
Acquiring Fund will assume from the Portfolio and from the Millennium Portfolio
all valid liabilities, expenses, costs, charges and reserves reflected on
unaudited statements of assets and liabilities of the Portfolio and of the
Millennium Portfolio. The Acquiring Fund also will deliver Acquiring Fund Shares
to the Portfolio and to the Millennium Portfolio, which Acquiring Fund Shares
the Portfolio and the Millennium Portfolio shall then distribute to their
respective Shareholders in exchange for such Shareholders' Portfolio Shares or
Millennium Portfolio Shares. The exchange of the Portfolio's assets and the
Millennium Portfolio's assets for the Acquiring Fund Shares is anticipated to
occur on August 22, 2003, or such later date as the parties may agree upon (the
"Closing Date").
The value of the Portfolio's assets and the Millennium Portfolio's
assets to be acquired by the Acquiring Fund and the value of the Portfolio's
valid liabilities and the Millennium Portfolio's valid liabilities to be assumed
by the Acquiring Fund and the net asset value of a share of the Acquiring Fund
will be determined as of immediately after the close of regular trading on the
NYSE on the Closing Date, using the valuation procedures set forth in the
Acquiring Fund's then-current Prospectus and Statement of Additional
Information.
Upon the Closing Date, the Portfolio and the Millennium Portfolio will
liquidate and distribute pro rata to their Shareholders of record (as evidenced
by such Shareholders' Portfolio and Millennium Portfolio Shares) the Acquiring
Fund Shares received by the Portfolio and the Millennium Portfolio in exchange
for such Shareholders' interests in the Portfolio and the Millennium Portfolio.
These liquidations and distributions will be accomplished by opening accounts on
the books of the Acquiring Fund in the name of each shareholder of record in the
Portfolio and in the Millennium Portfolio and by crediting thereon the shares
previously credited to the Portfolio and to the Millennium Portfolio account of
the shareholder on those books, as described above (see "Synopsis--Continuation
of Shareholder Accounts; Share Certificates"). Each such Acquiring Fund
shareholder account shall represent the respective pro-rata number of the
Acquiring Fund Shares due to such Shareholder.
Accordingly, every Shareholder will own Acquiring Fund Shares
immediately after the Reorganization, the total value of which Acquiring Fund
Shares will be equal to the total value of his or her Portfolio Shares or
Millennium Portfolio Shares immediately prior to the Reorganization. Moreover,
because the Acquiring Fund Shares will be issued at net asset value in exchange
for the net assets transferred from the Portfolio or from the Millennium
Portfolio, the total net asset value of the Acquiring Fund Shares received by
Portfolio Shareholders or Millennium Portfolio Shareholders after the transfer
of assets will be equal to the net asset value of the Portfolio Shares or
Millennium Portfolio Shares at the Closing Date. Thus, the Reorganization will
not result in a dilution in value of any Shareholder account.
The consummation of the proposed transaction contemplated by the
Reorganization is subject to a number of conditions set forth in the Plan, some
of which conditions may be waived by the Touchstone Strategic Trust Board or by
the Performance Funds Board, or by an authorized officer of the Touchstone
Strategic Trust or The Navellier Performance Funds, as appropriate. Among the
significant conditions (which may not be waived) for the Reorganization are: (i)
the receipt by the Portfolio and by the Millennium Portfolio and by the
Acquiring Fund of an opinion of counsel as to certain Federal income tax aspects
of the Reorganization (see "The Proposed Transactions--Federal Income Tax
Consequences") (which opinion of counsel has already been received); (ii) the
approval of the Plan by the affirmative vote of the holders of at least 67% of
the Portfolio shares and of the Millennium Portfolio Shares present in person or
by proxy entitled to vote at the Portfolio shareholders' meeting and at the
Millennium Portfolio Shareholder's meeting if a quorum is present or a majority
of the Portfolio's and of the Millennium Portfolio's outstanding voting shares,
whichever percentage is less and (iii) approval of the Plan by the Portfolio's
Board of Trustees and by the Millennium Portfolio's Board of Trustees (which
approvals have also already been obtained). The Plan may be terminated and the
32
Reorganization abandoned at any time, before or after approval by the
Shareholders, prior to the applicable Closing Date or by mutual consent of the
Portfolio or the Millennium Portfolio and the Acquiring Fund. In addition, the
Plan may be amended in any mutually-agreeable manner, except that no amendment
may be made to the Plan subsequent to the Meeting that would be materially
detrimental to the Shareholders.
The Investment Sub-Advisor to the Acquiring Fund (Navellier Management,
Inc.) contemplates that the Portfolio's and the Millennium Portfolio's assets at
the date of the transactions of the Reorganization will be invested in a manner
consistent with the investment objectives and policies of both the Portfolio and
the Millennium Portfolio and the Acquiring Fund.
REASONS FOR THE PROPOSED TRANSACTIONS
As described below in greater detail, the Portfolio's Trustees and the
Millennium Portfolio's Trustees believe the Reorganization would benefit
Shareholders of the Portfolio and of the Millennium Portfolio by substantially
reducing existing operating costs and expenses of the Portfolio and of the
Millennium Portfolio by an estimated $50,000 per year or more thereby promoting
more efficient operations. It is estimated that a proposed merger of the
Portfolio and of the Millennium Portfolio into the Acquiring Fund would
substantially reduce the annual operating expenses of the Portfolio and of the
Millennium Portfolio by reducing the Portfolio's and the Millennium Portfolio's
annual Independent Trustee's fees, expenses, independent counsel's fees and; by
reducing liability insurance, costs of printing separate prospectuses, annual
and semi-annual shareholder reports, quarterly reports and mailings for the
Portfolio and for the Millennium Portfolio; by reducing the management fee
charged by the Investment Advisor; and that a proposed merger would generally
increase the efficiency of operations and would not result in any change in the
way the assets were managed, since the Investment Sub-Advisor, Navellier
Management, Inc., would remain the same and would operate pursuant to the same
investment objectives and restrictions. For these reasons, the Trustees believe
that the Reorganization of the Portfolio and of the Millennium Portfolio into
the Acquiring Fund is in the best interests of the Shareholders of the Portfolio
and of the Millennium Portfolio and that the interests of the Shareholders of
the Portfolio and of the Millennium Portfolio would not be diluted by the
Reorganization.
The Portfolio Trustees and the Millennium Portfolio Trustees recommend
that the Shareholders of the Portfolio and of the Millennium Portfolio vote FOR
Proposal 1 (the Reorganization) based on a number of factors, first and foremost
of which is that the Reorganization should result in substantial savings. The
Portfolio Trustees and the Millennium Portfolio Trustees also believe that the
Reorganization, if effected, would enable the resulting larger fund complex,
with its larger asset base, to achieve enhanced distribution capability. It is
also believed that the anticipated reduction in costs should increase the
performance of the Portfolio and of the Millennium Portfolio.
It is estimated that the proposed merger should permit the reduction or
elimination of certain costs and expenses presently incurred for services that
are separately performed for the Portfolio, the Millennium Portfolio and the
Acquiring Fund. For example, the projected Independent Trustees fees and
expenses expected to be paid to the Independent Trustees of the Portfolio and of
the Millennium Portfolio would be reduced, as would the liability insurance and
the attorney's fees and costs of outside counsel for the Independent Trustees.
These costs should be eliminated or greatly reduced. Printing and mailing costs
should be reduced as a result of a single prospectus, annual report, and
semi-annual report. As a general rule, economies can be expected to be realized
primarily with respect to fixed expenses, such as costs of printing and fees for
professional services. Expenses that are based on the value of assets or the
number of shareholder accounts, such as custody and transfer agent fees,
however, would be largely unaffected by the Reorganization. Achievement of these
goals, of course, cannot be assured.
33
The Portfolio Trustees and the Millennium Portfolio Trustees recommend
the proposed Reorganization, and the transactions contemplated thereby, to the
Shareholders for the reasons set forth above as well as on a number of other
factors, including the following:
1. the terms and conditions of the Reorganization and the fact that the
Reorganization would not result in dilution of Shareholder interests;
2. the fact that the investment objectives, policies, Navellier investment
style and restrictions of the Portfolio, the Millennium Portfolio and
the Acquiring Fund would remain essentially the same;
3. similar service features available to shareholders in the Portfolio,
the Millennium Portfolio and the Acquiring Fund;
4. the anticipated benefits to the Shareholders of the Portfolio and of
the Millennium Portfolio by being part of the Touchstone Investments;
5. the tax-free nature and consequences of the Reorganization;
6. the expense ratios, fees, and expenses of Touchstone Large Cap Growth
including the fact that the investment advisory fee rate paid by
Touchstone Large Cap Growth is lower than that paid by Navellier Large
Cap Growth;
7. the fact that the Manager has contractually agreed to limit the total
annual operating of the Acquiring Fund for at least two years and that
such expenses would be lower than the current operating expenses of the
Portfolio;
8. the fact that Navellier Management, Inc. and Touchstone Advisors, Inc.
will bear the expenses incurred by the Portfolio and the Acquiring Fund
in connection with the Reorganization;
The Trustees of the Trust have also approved the Plan on behalf of Touchstone
Large Cap Growth.
DESCRIPTION OF SECURITIES TO BE ISSUED
GENERAL. The Acquiring Fund Shares to be issued pursuant to the
proposed Reorganization represent shares of beneficial interest in the Large Cap
Growth Fund of the Touchstone Strategic Trust, which is a diversified, open-end
management investment company. Touchstone Strategic Trust is an unincorporated
voluntary association organized under the laws of the State of Massachusetts as
a business trust, pursuant to Touchstone Strategic Trust's Declaration of Trust,
dated November 18, 1982 (the "Declaration of Trust"). The Declaration of Trust
authorizes Touchstone Strategic Trust to issue an unlimited number of shares of
beneficial interest in one or more series. Currently, Touchstone Strategic Trust
has authorized six series: the International Equity Fund, the Emerging Growth
Fund, the Growth Opportunities Fund, the Large Cap Growth Fund, the Enhanced 30
Fund and the Value Plus Fund. Other series in the Touchstone Strategic Trust,
however, may be added in the future. Each Acquiring Fund Share represents an
equal proportionate interest with each other Acquiring Fund Share and each such
Acquiring Fund Share is entitled to equal voting, dividend, liquidation and
redemption rights. Acquiring Fund Shares entitle their holders to one vote per
full share held and to fractional votes for fractional shares held. The
Acquiring Fund Shares do not have cumulative voting rights, preemptive rights or
subscription rights and are fully paid, nonassessable, redeemable and freely
transferable.
Currently, each shareholder of the Acquiring Fund is permitted to
inspect the records, accounts and books of the Touchstone Strategic Trust for
any legitimate business purpose.
34
MEETINGS. As a Massachusetts business trust, Touchstone Strategic Trust
is not required to hold an annual shareholders' meeting if the 1940 Act does not
require such a meeting. The Declaration of Trust provides that a special meeting
of Touchstone Strategic Trust shareholders of any series of Touchstone Strategic
Trust may be called by the Trustees of Touchstone Strategic Trust and shall be
called by the Trustees upon the written request of shareholders owning at least
10% of the outstanding shares of a series of the Touchstone Strategic Trust
entitled to vote. Touchstone Strategic Trust will hold special shareholder
meetings as required or deemed desirable by the Board for such purposes as
electing Trustees, changing fundamental policies or approving an investment
advisory or shareholder services agreement. Any Trustee may be removed from
office with or without cause at any time either by written instrument, signed by
at least two-thirds (2/3) of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become effective, or by a vote
of Touchstone Strategic Trust shareholders owning at least two-thirds (2/3) of
the outstanding shares of a series of the Touchstone Strategic Trust. If
requested by shareholders of at least 10% of the outstanding shares of a series
of the Touchstone Strategic Trust, Touchstone Strategic Trust will call a
shareholder meeting for the purpose of voting upon the question of the removal
of a Trustee and will assist in communications with other Touchstone Strategic
Trust shareholders as required by Section 16(c) of the 1940 Act.
SHAREHOLDER LIABILITY. Beneficial owners of a Massachusetts business
trust, such as Touchstone Strategic Trust,may under some circumstances be liable
for obligations of the Fund. Touchstone Strategic Trust's governing instrument,
the Trust Declaration, however, specifically disclaims shareholder liability for
acts or obligations of Touchstone Strategic Trust and provides that Touchstone
Strategic Trust's shareholders shall not be subject to any personal liability
for the acts or obligations of Touchstone Strategic Trust. The Trust Declaration
further provides for indemnification, out of the property of the series of
Touchstone Strategic Trust with respect to which such shareholder's shares are
issued, for all losses and expenses of any shareholder held personally liable
solely by reason of his or her being or having been a shareholder of such series
and not because of his or her acts or omissions or for some other reason. Thus,
the risk of a shareholder of Touchstone Strategic Trust incurring financial loss
on account of shareholder liability is considered remote since such liability is
limited to circumstances in which a disclaimer is inoperative and Touchstone
Strategic Trust would be unable to meet its obligations.
LIABILITY OF TRUSTEES. Under the Declaration of Trust, a Trustee will
be held personally liable only for the Trustee's own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of a Trustee. Under said Declaration of Trust and separate
indemnity agreements, Trustees and officers of Touchstone Strategic Trust
("Trust Officers") will be indemnified for the expenses of litigation against
them unless it is determined that the person did not act in good faith in the
reasonable belief that the person's action was in or not opposed to the best
interest of Touchstone Strategic Trust or if the person's conduct is determined
to constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of that person's duties. Touchstone Strategic Trust also may advance
money for these expenses provided that the Trustee or the Trust Officer
undertakes to repay Touchstone Strategic Trust if that person's conduct later is
determined to preclude indemnification. The Navellier Performance Funds'
Declaration of Trust and separate indemnity agreements currently set forth
comparable provisions.
The foregoing is only a summary of certain characteristics of (i) the
shares of beneficial interest of Touchstone Strategic Trust to be issued
pursuant to the proposed Reorganization, (ii) the operations of Touchstone
Strategic Trust's Declaration of Trust and By-Laws, and (iii) Massachusetts law.
The foregoing is not a complete description of the shares of beneficial interest
of Touchstone Strategic Trust nor of the documents or laws cited. Shareholders
should refer to the provisions of Massachusetts's law directly for a more
thorough description.
FEDERAL INCOME TAX CONSEQUENCES
35
Touchstone Strategic Trust and The Navellier Performance Funds have
received, as a condition to the Reorganization, an opinion from counsel to the
effect, for Federal income tax purposes and with respect to the Reorganization,
that:
1. the proposed Reorganization and the transactions contemplated thereby,
as described herein, will constitute a tax-free "reorganization" within
the meaning of Section 368(a)(1)(C) of the Internal Revenue Code (the
"Code");
2. no gain or loss generally will be recognized to the Portfolio or to the
Millennium Portfolio upon the transfer of all of the Portfolio's and
all of the Millennium Portfolio's assets to the Acquiring Fund in
exchange solely for Acquiring Fund Shares and the assumption by the
Acquiring Fund of all valid liabilities of the Portfolio and of the
Millennium Portfolio and the subsequent distribution of those Acquiring
Fund Shares to the Portfolio's Shareholders and to the Millennium
Portfolio's Shareholders of record in liquidation thereof;
3. no gain or loss will be recognized to the Acquiring Fund upon the
receipt of those Portfolio and Millennium Portfolio assets in exchange
solely for Acquiring Fund Shares and the assumption by the Acquiring
Fund of those valid Portfolio and Millennium Portfolio liabilities;
4. the Acquiring Fund's basis for those Portfolio assets and Millennium
Portfolio assets transferred by the Portfolio and by the Millennium
Portfolio to the Acquiring Fund will be the same as the basis thereof
in the Portfolio's and Millennium Portfolio's hands immediately before
the Reorganization and the Acquiring Fund's holding period for those
assets will include the Portfolio's and Millennium Portfolio's holding
periods therefore;
5. each Shareholder of record will recognize no gain or loss upon the
constructive exchange of all of his or her Portfolio and Millennium
Portfolio Shares solely for Acquiring Fund Shares pursuant to the
Reorganization;
6. each Shareholder's basis for the Acquiring Fund Shares to be received
by the Shareholder pursuant to the Reorganization will be the same as
the Shareholder's basis in the Portfolio Shares or Millennium Portfolio
Shares to be constructively surrendered in exchange therefore; and
7. each such Shareholder's holding period for those Acquiring Fund Shares
will include the period during which the Portfolio Shares or Millennium
Portfolio Shares to be constructively surrendered in exchange for
Acquiring Fund Shares were held, provided the Portfolio Shares or
Millennium Portfolio Shares were held as capital assets by that
Shareholder on the date of the Reorganization.
A revenue ruling of the Internal Revenue Service as to the
Reorganization is not expected to be obtained.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL FEDERAL
INCOME TAX CONSEQUENCES OF THE REORGANIZATION AND SHOULD NOT BE CONSIDERED TO BE
TAX ADVICE. THERE CAN BE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL
CONCUR ON ALL OR ANY OF THE ISSUES DISCUSSED ABOVE. SHAREHOLDERS OF THE
PORTFOLIO AND OF THE MILLENNIUM PORTFOLIO ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES WITH RESPECT TO
THE FOREGOING MATTERS AND ANY OTHER CONSIDERATIONS WHICH MAY BE APPLICABLE TO
THE SHAREHOLDERS.
PRO FORMA CAPITALIZATION AND RATIOS
The following table shows the capitalization of the Portfolio, the
Millennium Portfolio, , and the Acquiring Fund shares as of December 31, 2002,
and combined in the aggregate on a pro forma basis, as of December 31, 2002
giving effect to the Reorganization:
36
- --------------------------------------------------------------------------------------------------------
Touchstone Large
Navellier Navellier Cap Growth
Class A Touchstone Large Millennium Large Performance Combined Pro
Information Growth Cap Cap Growth Large Cap Growth Forma
- --------------------------------------------------------------------------------------------------------
Net Assets
Class A $33,843,198 $ 355,316 $13,831,464 48,029,978
Class B 54,017 423,950 477,967
Class C 1,092,490 215,949 1,308,439
Total Net Assets 34,989,705 995,215 13,831,464 49,816,384
- --------------------------------------------------------------------------------------------------------
Net Asset Value
Per Share
Class A $ 8.05 $ 4.63 $ 12.19 $ 12.19
Class B 7.62 4.56 12.19
Class C 7.59 4.55 12.19
- --------------------------------------------------------------------------------------------------------
Shares Outstanding
Class A 4,202,127 76,781 1,134,468 3,939,924
Class B 7,090 92,912 39,210
Class C 143,907 47,449 107,337
Total Shares Outstanding 4,353,124 217,142 1,134,468 4,086,471
- --------------------------------------------------------------------------------------------------------
DISSOLUTION OF THE PORTFOLIOS
If the Plan is approved by the Shareholders of the Portfolio and of the
Millennium Portfolio and the Reorganization is completed, the Portfolio and the
Millennium Portfolio will be dissolved as soon as practicable in accordance with
the provisions of Delaware law and the Plan. See "The Proposed
Transactions--Agreement and Proposed Plan of Reorganization".
NAVELLIER GROUP RECOMMENDATION
The Portfolio Trustees and Millennium Portfolio Trustees have solicited
this shareholder vote to approve the Reorganization and recommend that the
Portfolio Shareholders and Millennium Portfolio Shareholders vote FOR the
Reorganization on the enclosed GOLD proxy card. The Portfolio Trustees and
Millennium Portfolio Trustees, for the reasons mentioned herein (See "Reasons
For Proposed Transactions"), believe the Reorganization of the Portfolio and
Millennium Portfolio into the Acquiring Fund would result in cost savings, would
be in the best interests of the Portfolio Shareholders and Millennium Portfolio
Shareholders and that their interests would not be diluted.
The Portfolio Trustees and Millennium Portfolio Trustees therefore
recommend that the Shareholders of the Portfolio vote FOR Proposal No. 1 (the
proposal to merge the Portfolio and Millennium Portfolio into the Acquiring Fund
and the transactions contemplated thereby).
ADDITIONAL INFORMATION ABOUT
THE ACQUIRING FUND AND THE ACQUIRING FUND SHARES
Additional information about the Acquiring Fund is included in the
current Prospectus of the Touchstone Strategic Trust, dated August 1, 2002. A
copy of that prospectus has been filed with the Commission and is incorporated
by reference herein. A Shareholder of the Portfolio or the Millennium Portfolio
will receive with this combined prospectus/proxy statement, a copy of the
prospectus for Touchstone Strategic Trust. Further information about the
Acquiring Fund is included in the Statement of Additional Information for
Touchstone Strategic Trust, dated August 1, 2002. The Statement of Additional
Information has been filed with the Commission and is incorporated by
37
reference herein. Copies of that Statement of Additional Information for
Touchstone Strategic Trust may be obtained without charge by contacting
Touchstone Investments toll-free at 1-800-543-0407.
ADDITIONAL INFORMATION ABOUT
THE PORTFOLIO AND THE PORTFOLIO SHARES
Additional information about the Portfolio is included in the current
Prospectus of the Navellier Performance Funds, dated May 1, 2003. A copy of that
prospectus has been filed with the Commission and is incorporated by reference
herein. A Shareholder will receive with this combined prospectus/proxy statement
a copy of the prospectus for The Navellier Performance Funds. Further
information about the Portfolio is included in the Statement of Additional
Information for The Navellier Performance Funds, dated May 1, 2003, which also
has been filed with the Commission and is incorporated by reference herein. A
copy of the Statement of Additional Information for The Navellier Performance
Funds may be obtained without charge by contacting Navellier Management, Inc. at
One East Liberty Street, Third Floor, Reno, Nevada 89501, or by telephoning
Navellier Management, Inc. toll-free at 1-800-887-8671.
ADDITIONAL INFORMATION ABOUT THE MILLENNIUM PORTFOLIO AND THE
MILLENNIUM PORTFOLIO SHARES
Additional information about the Millennium Portfolio is included in
the current Prospectus of the Navellier Millennium Funds, dated May 1, 2003. A
copy of that prospectus has been filed with the Commission and is incorporated
by reference herein. A Shareholder will receive with this combined
prospectus/proxy statement a copy of the prospectus for The Navellier Millennium
Funds. Further information about the Millennium Portfolio is included in the
Statement of Additional Information for The Navellier Millennium Funds, dated
May 1, 2003, which also has been filed with the Commission and is incorporated
by reference herein. A copy of the Statement of Additional Information for The
Navellier Millennium Funds may be obtained without charge by contacting
Navellier Management, Inc. at One East Liberty Street, Third Floor, Reno, Nevada
89501, or by telephoning Navellier Management, Inc. toll-free at 1-800-887-8671.
MISCELLANEOUS
AVAILABLE INFORMATION
Touchstone Strategic Trust is registered under the 1940 Act and is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and the 1940 Act and, in accordance therewith, files reports,
proxy materials and other information with the Commission. The Navellier
Performance Funds and the Navellier Millennium Funds are registered under the
1940 Act and are required to file reports under the 1940 Act. Such reports,
proxy materials and other information can be inspected at the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, DC 20549. Copies of
such material can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
450 Fifth Street, N.W., Washington, DC 20539, at prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Acquiring
Fund Shares will be passed upon by Samuel Kornhauser, 155 Jackson Street, Suite
1807, San Francisco, California 94111 ("Counsel"). Counsel has rendered an
opinion as to certain Federal income tax consequences of the Reorganization.
38
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of the Touchstone Large Cap Growth Fund at March 31,
2003, and for the periods indicated therein, included in the Company's Annual
Report and incorporated by reference herein and in the Registration Statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report appearing therein, and are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing. The financial statements of Navellier Large Cap
Portfolio, a series of Navellier Performance Funds, and Navellier Large Cap
Portfolio, a series of Navellier Millennium Funds, at December 31, 2002, and for
the periods indicated therein, included in the (Trusts') Annual Report and
incorporated by reference herein and in the Registration Statement, have been
audited by Tait, Weller & Baker, independent auditors, as set forth in their
report appearing therein, and are incorporated herein by reference in reliance
upon such report given on the authority of such firm as experts in accounting
and auditing. Copies of these financial statements, as included in the SAI, may
be obtained without charge by contacting Touchstone Securities, Inc. at 221 East
Fourth Street, Suite 300, Cincinnati, Ohio 45202, or by telephoning toll-free at
1-800-543-0407, for the Touchstone audited financial statements and by
contacting Navellier Management, Inc., at One East Liberty Street, Third Floor,
Reno, Nevada 89501, or by telephoning Navellier Management, Inc. toll-free at
1-800-887-8671, for the Portfolio and or Millennium Portfolio financial
statements.
OTHER BUSINESS
The Portfolio Trustees know of no business to be brought before the
Meeting other than the matters set forth in this combined prospectus/proxy
statement. Should any other matter requiring a vote of Shareholders arise,
however, the Proxies will vote thereon according to their best judgment in the
interests of the Portfolio and of the Shareholders.
By Louis G. Navellier
----------------------
Trustee, The Navellier
Performance Funds
One East Liberty Street, Third Floor
Reno, Nevada 89501
July 18, 2003
39
APPENDIX A:
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this _____ day of June, 2003, by and between THE NAVELLIER MILLENNIUM FUNDS
(the "Millennium Fund"), a Delaware business trust with its principal place of
business at One East Liberty Street, Third Floor, Reno, Nevada 89501, THE
NAVELLIER PERFORMANCE FUNDS (the "Performance Funds"), a Delaware business trust
with its principal place of business at One East Liberty Street, Third Floor,
Reno, Nevada 89501 and TOUCHSTONE STRATEGIC TRUST, a Massachusetts business
trust with its principal place of business at 221 East Fourth Street, Suite 300,
Cincinnati, Ohio 45202.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), with
respect to the proposed reorganizations of the NAVELLIER LARGE CAP GROWTH
PORTFOLIO (the "Portfolio"), which portfolio is a series of the Navellier
Performance Funds and the NAVELLIER LARGE CAP GROWTH PORTFOLIO (the "Millennium
Portfolio") which portfolio is a series of the Navellier Millennium Funds),
pursuant to which the Portfolio and the Millennium Portfolio will be merged into
and become part of the Large Cap Growth Fund (the "Acquiring Fund") of the
Touchstone Strategic Trust (the "Reorganization"). Specifically, this Agreement
is intended to be and is adopted for the purpose of providing for the
Reorganization of the Portfolio and the Millennium Portfolio into the Acquiring
Fund. The Reorganization will consist of the transfer of all of the assets of
the Portfolio and the Millennium Portfolio to the Acquiring Fund in exchange
solely for (i) shares of beneficial interest in the Acquiring Fund (the
"Acquiring Fund Shares") and (ii) the assumption by the Acquiring Fund of all
valid liabilities of the Portfolio and of the Millennium Portfolio and the
distribution of the Acquiring Fund Shares to the Shareholders of the Portfolio
and the of Millennium Portfolio in complete liquidation of the Portfolio and the
Millennium Portfolio, as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Performance Funds and the Millennium Funds and the
Touchstone Strategic Trust are each open-end, registered investment companies of
the management type and the Portfolio and the Millennium Portfolio own
securities which are assets of the character in which the Acquiring Fund is
permitted to invest;
WHEREAS, the Trustees of the Portfolio and the Trustees of the
Millennium Portfolio have each determined, with respect to such Reorganization,
that the exchange of all of the assets of the Portfolio and all the assets of
the Millennium Portfolio for Acquiring Fund shares and the assumption of all
valid liabilities of the Portfolio and of the Millennium Portfolio by the
Acquiring Fund is in the best interests of the Portfolio and the Millennium
Portfolio and their Shareholders and that the interests of the existing
Shareholders of the Portfolio and the Millennium Portfolio would not be diluted
as a result of this transaction; and
WHEREAS, the purpose of the Reorganization is to combine the assets of
the Acquiring Fund with those of the Portfolio and the Millennium Portfolio in
an attempt to achieve greater operating economies and to retain Navellier
Management, Inc. as the investment sub-advisor to manage the assets of the
Acquiring Fund after the Reorganization;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree,
with respect to the Reorganization, as follows:
40
1. THE TRANSFER OF THE ASSETS OF THE PORTFOLIO AND THE ASSETS OF THE
MILLENNIUM PORTFOLIO TO THE ACQUIRING FUND IN EXCHANGE FOR ACQUIRING
FUND SHARES, THE ASSUMPTION OF ALL VALID LIABILITIES OF THE PORTFOLIO
AND OF THE MILLENNIUM PORTFOLIO BY THE ACQUIRING FUND AND THE
LIQUIDATION OF THE PORTFOLIO AND THE MILLENNIUM PORTFOLIO
1.1 For the Reorganization, the closing shall take
place as provided for in paragraph 3.1 ("Closing") and the
provisions of paragraphs 1 through 8 of this Agreement shall
apply. At the Closing, the Portfolio and the Millennium
Portfolio agree to transfer all of their assets, as set forth
in paragraph 1.2, to the Acquiring Fund, and the Acquiring
Fund agrees in exchange therefore: (1) to deliver to the
Portfolio and to the Millennium Portfolio the number of
Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined by dividing the value of the Portfolio's
net assets and the value of the Millennium Portfolio's net
assts each computed in the manner and as of the time and date
set forth in paragraph 2.1 by the net asset value of one
Acquiring Fund Share computed in the manner and as of the time
and date set forth in paragraph 2.2; and (ii) to assume all
valid liabilities of the Portfolio and of the Millennium
Portfolio, as set forth in paragraph 1.3.
1.2 The assets of the Portfolio and the assets of the
Millennium Portfolio to be acquired by the Acquiring Fund
shall consist of all property, including, without limitation,
all cash, securities, interests, and dividends or interest
receivable which are owned by the Portfolio and owned by the
Millennium Portfolio and any deferred or prepaid expenses
shown as assets on the books of the Portfolio or on the books
of the Millennium Portfolio on the closing date provided in
paragraph 3.1 (the "Closing Date").
1.3 The Portfolio and the Millennium Portfolio will
each endeavor to discharge all of their known valid
liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume all valid liabilities, expenses,
costs, charges and reserves reflected on unaudited statements
of assets and liabilities of the Portfolio and of the
Millennium Portfolio prepared by the administrators of the
Acquiring Fund and the Portfolio and the Millennium Portfolio,
as of the Valuation Date (as defined in paragraph 2.1), in
accordance with generally accepted accounting principles
consistently applied from the prior audited period.
1.4 Immediately after the transfer of assets provided
for in paragraph 1.1, the Portfolio and the Millennium
Portfolio will each distribute pro rata to their Shareholders
of record, determined as of immediately after the close of
business on the Closing Date (the "Portfolio Shareholders")
and (the "Millennium Shareholders"), the Acquiring Fund Shares
received by the Portfolio and by the Millennium Portfolio
pursuant to paragraph 1.1 and will each completely liquidate.
Such distributions and liquidations will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the
account of the Portfolio and to the account of the Millennium
Portfolio on the books of the Acquiring Fund to the share
records of the Acquiring Fund in the names of the Portfolio
Shareholders and in the names of the Millennium Portfolio
Shareholders and representing the respective pro rata number
of the Acquiring Fund Shares due such Shareholders. All issued
and outstanding shares of the Portfolio and of the Millennium
Portfolio will simultaneously be canceled on the books of the
Portfolio and of the Millennium Portfolio. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange. Ownership of
Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent.
2. VALUATION
2.1 The value of the Portfolio's assets and the value
of the Millennium Portfolio's assets to be acquired by the
Acquiring Fund hereunder shall be the net asset value of such
assets computed as of immediately after the close of business
of the New York Stock Exchange on the Closing Date (such time
and date being hereinafter called the "Valuation Date"), using
the valuation procedures for
41
computing net asset value set forth in the Portfolio's and in
the Millennium Portfolio's then-current prospectus or
statement of additional information.
2.2 The net asset value of an Acquiring Fund Share
shall be the net asset value per share computed as of
immediately after the close of business of the New York Stock
Exchange on the Valuation Date, using the valuation procedures
for computing net asset value set forth in the Touchstone
Strategic Trust's then-current prospectus or statement of
additional information.
2.3 The number of the Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for
the Portfolio's assets and the Millennium Portfolio's assets
shall be determined by dividing the value of the net assets of
the Portfolio and the net assets of the Acquiring Fund
determined using the same valuation procedures referred to in
paragraph 2.1 by the net asset value of Performance Large Cap
Growthdetermined in accordance with paragraph 2.2.
2.4 All computations of value for the Acquiring Fund
shall be made by Integrated Fund Services, Inc.; all
computations of value for the Portfolio and for the Millennium
Portfolio shall be made by FBR National Bank & Trust.
3. CLOSING AND CLOSING DATE
3.1 The Closing for the Reorganization shall be
August 22, 2003 or such other date as the parties may agree to
in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of immediately after
the close of business on the Closing Date unless otherwise
agreed to by the parties. The close of business on the Closing
Date shall be as of 4:00 p.m., New York Time. The Closing
shall be held at the offices of the Acquiring Fund, 221 East
Fourth Street, Suite 300, Cincinnati, Ohio 45202, or at such
other time and/or place as the parties may agree.
3.2 FBR National Bank & Trust, Bethesda, Maryland, as
custodian for the Portfolio and for the Millennium Portfolio
(the "Custodian"), shall deliver at the Closing a certificate
of an authorized officer stating that each of: (i) the
Portfolio's and the Millennium Portfolio's portfolio
securities, cash, and any other assets shall have been
delivered in proper form to the Acquiring Fund within two
business days prior to or on the Closing Date; and (ii) all
necessary taxes, including all applicable Federal and state
stock transfer stamps, if any, shall have been paid, or
provision for payment shall have been made, in conjunction
with the delivery of the Portfolio's and the Millennium
Portfolio's portfolio securities.
3.3 FBR National Bank & Trust, (the "Transfer
Agent"), on behalf of the Portfolio and on behalf of the
Millennium Portfolio, shall deliver at the Closing a
certificate of an authorized officer stating that their
records contain the names and addresses of the Portfolio
Shareholders and of the Millennium Portfolio Shareholders and
the number and percentage ownership of outstanding shares
owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund by an authorized officer of
Integrated Fund Services, Inc. shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of the Portfolio
and to the Secretary of the Millennium Portfolio or provide
evidence satisfactory to the Portfolio and to the Millennium
Portfolio that such Acquiring Fund Shares have been credited
to the Portfolio's account and to the Millennium Portfolio's
account on the books of the Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sales,
checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES
42
4.1 The Performance Funds, on its own and on behalf
of the Portfolio, and the Millennium Funds on its own and on
behalf of the Millennium Portfolio each represents and
warrants to the Touchstone Strategic Trust and the Acquiring
Fund as follows:
(a) The Performance Funds and the Millennium Funds
are each a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware;
(b) The Performance Funds and the Millennium Funds
are each a registered investment company classified as a
management company of the open-end type, and their
registrations with the Securities and Exchange Commission (the
"Commission"), as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the
registration of their shares, under the Securities Act of
1933, as amended (the "1933 Act") are in full force and
effect;
(c) Neither the Performance Funds nor the Portfolio
nor the Millennium Funds nor the Millennium Portfolio is in,
and the execution, delivery and performance of this Agreement
will not result in, a material violation of the Performance
Funds' or the Millennium Funds' Declarations of Trust or
By-Laws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Performance Funds or
the Portfolio or the Millennium Funds or the Millennium
Portfolio is a party or by which any of them are bound;
(d) Neither the Performance Funds nor the Portfolio
nor the Millennium Funds nor the Millennium Portfolio has any
material contracts or other commitments (other than this
Agreement) which will be terminated with liability to them
prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and
accepted by the Touchstone Strategic Trust or the Acquiring
Fund, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to their knowledge threatened against the
Performance Funds or the Portfolio or the Millennium Funds or
the Millennium Portfolio or any of their properties or assets
which, if adversely determined, would materially and adversely
affect their financial condition or the conduct of their
business. Neither the Portfolio or the Millennium Portfolio
knows of any facts which might form the basis for the
institution of such proceedings and neither the Portfolio nor
the Millennium Portfolio is a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the
business or the ability of the Portfolio or the Millennium
Portfolio to consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the
Portfolio and the Statement of Assets and Liabilities of the
Millennium Portfolio each at December 31, 2002 have been
audited by Tait, Weller & Baker, independent accountants, and
are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies
of which have been furnished to the Acquiring Fund) fairly
reflect the financial conditions of the Portfolio and of the
Millennium Portfolio as of such date, and there are no
contingent liabilities of the Portfolio or of the Millennium
Portfolio as of such date not disclosed therein;
(g) Since December 31, 2002, there have not been any
material adverse changes in the Portfolio's or in the
Millennium Portfolio's financial condition, assets,
liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the
Portfolio or by the Millennium Portfolio of indebtedness
maturing more than one year from the date such indebtedness
was incurred, except as otherwise disclosed to and accepted by
the Acquiring Fund. For the purposes of this subparagraph (g),
a decline in net asset value per share of the Portfolio or of
the Millennium Portfolio, the discharge of Portfolio or of the
Millennium Portfolio liabilities, or the redemption of
Portfolio or Millennium Portfolio shares by Portfolio or
Millennium Portfolio Shareholders shall not constitute a
material adverse change;
(h) At the Closing Date, all material Federal and
other tax returns and reports of the Millennium Portfolio and
the Portfolio required by law to have been filed by such date
or due after request for extension, if any, shall have been
filed and are or will be correct, and all Federal and other
taxes shown as due or
43
required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the
payment thereof, and to the best knowledge of the Millennium
Portfolio and the Portfolio, no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation, the
Portfolio and the Millennium Portfolio has met the
requirements of Subchapter M of the Code for qualification as
a regulated investment company and each has elected to be
treated as such;
(j) All issued and outstanding shares of the
Portfolio and of the Millennium Portfolio are, and at the
Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable by the Portfolio and by the
Millennium Portfolio. All of the issued and outstanding shares
of the Portfolio and of the Millennium Portfolio will, at the
time of Closing, be held by the persons and in the amounts set
forth in the records of the Transfer Agent, on behalf of the
Portfolio and on behalf of the Millennium Portfolio as
provided in paragraph 3.3. Neither the Portfolio nor the
Millennium Portfolio have outstanding any options, warrants or
other rights to subscribe for or to purchase any of their
shares, nor is there outstanding any security convertible into
any of their shares;
(k) At the Closing Date, both the Portfolio and the
Millennium Portfolio will each have good and marketable title
to their assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power and authority
to sell, assign, transfer and deliver such assets hereunder
and, upon delivery and payment for such assets, the Acquiring
Fund will acquire good and marketable title thereto, subject
to any restrictions as might arise under the 1933 Act, other
than as disclosed to the Acquiring Fund;
(l) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action on the part of the Performance
Funds' and the Millennium Funds' Trustees and, subject to the
approval of the Portfolio's Shareholders and of the Millennium
Portfolio's Shareholders, this Agreement will constitute a
valid and binding obligation of the Performance Funds and of
the Portfolio and of the Millennium Funds and of the
Millennium Portfolio, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(m) The information to be furnished by the
Performance Funds and the Portfolio and by the Millennium
Funds and the Millennium Portfolio for use in registration
statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects
and shall comply in all material respects with Federal
securities and other laws and regulations thereunder
applicable thereto; and
(n) The proxy statements of the Performance Funds and
of the Millennium Funds (the "Proxy Statement") to be included
in the Registration Statement referred to in paragraph 5.6
(other than information therein that relates to the Touchstone
Strategic Trust and the Acquiring Fund) will, on the effective
date of the Registration Statement and on the Closing Date,
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which such statements were made, not
materially misleading.
4.2 Touchstone Strategic Trust, on its own behalf and
on behalf of the Acquiring Fund, represents and warrants to
the Performance Funds and the Portfolio and to the Millennium
Funds and the Millennium Portfolio as follows:
(a) Touchstone Strategic Trust is a business trust
duly organized, validly existing and in good standing under
the laws of the State of Massachusetts;
(b) Touchstone Strategic Trust is a registered
investment company classified as a management company of the
open-end type, and its registration with the Commission, as an
investment company under the 1940 Act, and the registration of
its shares, under the 1933 Act, are in full force and effect;
(c) The current prospectus and statement of
additional information of Touchstone Strategic Trust conform
in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of the
Commission thereunder and do not include any untrue statement
of a material fact or
44
omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially
misleading;
(d) At the Closing Date, the Acquiring Fund will have
good and marketable title to the Acquiring Fund's assets;
(e) Neither Touchstone Strategic Trust nor the
Acquiring Fund is in, and the execution, delivery and
performance of this Agreement will not result in, a material
violation of Touchstone Strategic Trust's Declaration of Trust
or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which Touchstone
Strategic Trust or the Acquiring Fund is a party or by which
Touchstone Strategic Trust or the Acquiring Fund are bound;
(f) No material litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Touchstone Strategic Trust or the Acquiring Fund or any of
their properties or assets, except as previously disclosed in
writing to the Portfolio or the Millennium Portfolio. Neither
Touchstone Strategic Trust nor the Acquiring Fund knows of any
facts which might form the basis for the institution of such
proceedings and neither Touchstone Strategic Trust nor the
Acquiring Fund is a party to or subject to the provisions of
any order, decree or judgment of any court or governmental
body which materially and adversely affects the business or
the ability of Touchstone Strategic Trust or the Acquiring
Fund to consummate the transactions contemplated herein;
(g) The Statement of Assets and Liabilities of the
Acquiring Fund at March 31, 2003, audited by Ernst & Young
LLP, independentauditors, and a copy of which has been
furnished to the Portfolio and to the Millennium Portfolio,
fairly and accurately reflects the financial condition of the
Acquiring Fund as of such date in accordance with generally
accepted accounting principles consistently applied;
(h) Since March 31, 2003, there has not been any
material adverse change in the Acquiring Fund's financial
condition, assets, liabilities or business other than changes
occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more
than one year from the date such indebtedness was incurred.
For the purposes of this subparagraph (h), a decline in net
asset value per share of the Acquiring Fund shares, the
discharge of Acquiring Fund liabilities or the redemption of
Acquiring Fund shares by Acquiring Fund Shareholders, shall
not constitute a material adverse change;
(i) At the Closing Date all material Federal and
other tax returns and reports of Touchstone Strategic Trust
and the Acquiring Fund required by law to have been filed by
such date or due after request for extension, if any, shall
have been filed and are or will be correct, and all Federal
and other taxes shown as due or required to be shown as due on
said returns and reports shall have been paid or provision
shall have been made for the payment thereof, and, to the best
knowledge of Touchstone Strategic Trust and the Acquiring
Fund, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) For each taxable year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of the
Code for qualification as a regulated investment company and
has elected to be treated as such;
(k) All issued and outstanding Acquiring Fund Shares
are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable by the
Acquiring Fund. The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or to
purchase any Acquiring Fund Shares, nor is there outstanding
any security convertible into any Acquiring Fund Shares;
(l) The execution, delivery and performance of this
Agreement will have been fully authorized prior to the Closing
Date by all necessary action, if any, on the part of the
Trustees of Touchstone Strategic Trust and this Agreement will
constitute a valid and binding obligation of the Acquiring
Fund enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors'
rights, and to general equity principles;
(m) The Acquiring Fund Shares to be issued and
delivered (transferred on the Acquiring Fund's books) to the
Portfolio and to the Millennium Portfolio for the
45
accounts of the Portfolio Shareholders and for the accounts of
the Millennium Portfolio Shareholders, pursuant to the terms
of this Agreement, will, at the Closing Date, have been duly
authorized and, when so issued and delivered, will be duly and
validly issued Acquiring Fund Shares, and will be fully paid
and non-assessable by the Acquiring Fund;
(n) The information to be furnished by the Acquiring
Fund for use in registration statements, proxy materials and
other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all
material respects with Federal securities and other laws and
regulations applicable thereto;
(o) The Proxy Statement to be included in the
Registration Statement (only insofar as it relates to
Touchstone Strategic Trust and the Acquiring Fund) will, on
the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein, in light
of the circumstances under which such statements were made,
not materially misleading; and
(p) Touchstone Strategic Trust and the Acquiring Fund
each agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the
1940 Act and such of the state blue sky or securities laws as
may be necessary in order to continue their operations after
the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND, THE PORTFOLIO AND THE MILLENNIUM
PORTFOLIO
The following covenants of the Acquiring Fund and of the Portfolio and
of the Millennium Portfolio, as applicable, are made respectively by Touchstone
Strategic Trust and by the Performance Funds and by the Millennium Funds:
5.1 The Acquiring Fund and the Portfolio and the Millennium
Portfolio each will operate its business in the ordinary course between
the date hereof and the Closing Date, it being understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions and any other distribution that
may be advisable.
5.2 The Portfolio and the Millennium Portfolio will each call
a meeting of their Shareholders to consider and act upon this Agreement
and to take all other action necessary to obtain approval of the
transactions contemplated herein.
5.3 The Portfolio and the Millennium Portfolio each covenant
that the Acquiring Fund Shares to be issued hereunder are not being
acquired for the purpose of making any distribution thereof other than
in accordance with the terms of this Agreement.
5.4 The Portfolio and the Millennium Portfolio will each
assist the Acquiring Fund in obtaining such information as the
Acquiring Fund reasonably requests concerning the beneficial ownership
of the shares of the Portfolio and of the Millennium Portfolio.
5.5 Subject to the provisions of this Agreement, the Acquiring
Fund and the Portfolio and the Millennium Portfolio will each take, or
cause to be taken, all actions and do, or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
5.6 The Portfolio and the Millennium Portfolio will each
provide the Acquiring Fund with information reasonably necessary for
the preparation of a prospectus (the "Prospectus") which will include
the Proxy Statement referred to in paragraph 4.1(n), all to be included
in a Registration Statement on Form N-14 of the Touchstone Strategic
Trust (the "Registration Statement"), in compliance with the 1933 Act,
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the 1940 Act, in connection with the meetings of the Portfolio
Shareholders and the
46
Millennium Portfolio Shareholders to consider approval of this
Agreement and the transactions contemplated herein (the "Meeting").
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PERFORMANCE FUNDS AND THE
PORTFOLIO AND THE MILLENNIUM FUNDS AND THE MILLENNIUM PORTFOLIO
The obligations of the Performance Funds and the Portfolio and the
Millennium Funds and the Millennium Portfolio to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
Touchstone Strategic Trust and the Acquiring Fund of all the obligations to be
performed by Touchstone Strategic Trust and the Acquiring Fund hereunder on or
before the Closing Date and, in addition thereto, to the following further
conditions:
6.1 All representations and warranties of Touchstone Strategic
Trust and the Acquiring Fund contained in this Agreement shall be true
and correct in all material respects as of the date hereof and, except
as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date; and
6.2 Touchstone Strategic Trust shall have delivered to the
Performance Funds and to the Millennium Funds, on the Closing Date, a
certificate executed in the name of Touchstone Strategic Trust by
Touchstone Strategic Trust's President and Treasurer, in a form
reasonably satisfactory to the Performance Funds and to the Millennium
Funds and dated as of the Closing Date, to the effect that the
representations and warranties of the Touchstone Strategic Trust and
the Acquiring Fund made in this Agreement are true and correct at and
as of the Closing Date, except as these representations and warranties
may be affected by the transactions contemplated by this Agreement and
as to such other matters as Touchstone Strategic Trust shall reasonably
request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TOUCHSTONE STRATEGIC TRUST
AND THE ACQUIRING FUND
The obligations of Touchstone Strategic Trust and the Acquiring Fund to
complete the transactions provided for herein shall be subject, at their
election, to the performance by the Performance Funds and the Millennium Funds
and the Portfolio and the Millennium Portfolio of all of the obligations to be
performed by them hereunder on or before the Closing Date and, in addition
thereto, to the following conditions:
7.1 All representations and warranties of the Performance
Funds and the Millennium Funds and the Portfolio and the Millennium
Portfolio contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as these
representations and warranties may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date;
7.2 The Performance Funds and the Millennium Funds shall each
have delivered to Touchstone Strategic Trust statements of the
Portfolio's and of the Millennium Portfolio's assets and liabilities,
as of the Closing Date, each certified by the Treasurer of the
Performance Funds and the Millennium Funds; and
7.3 The Performance Funds and the Millennium Funds shall each
have delivered to Touchstone Strategic Trust, on the Closing Date,
certificates executed in their respective names and in the Portfolio's
and Millennium Portfolio's names by the Performance Funds' President
and Treasurer and by the Millennium Funds' President and Treasurer, in
form and substance satisfactory to Touchstone Strategic Trust and dated
as of the Closing Date, to the effect that the representations and
warranties of the Performance Funds and the Millennium Funds and the
Portfolio and the Millennium Portfolio, with respect to the Performance
Funds and the Millennium Funds and the Portfolio and the Millennium
Portfolio made in this Agreement are
47
true are correct at and as of the Closing Date, except as these
representations and warranties may be affected by the transactions
contemplated by this Agreement.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
AND THE PORTFOLIO AND THE MILLENNIUM PORTFOLIO
If any of the conditions set forth below do not exist on or before the
Closing Date, with respect to the Portfolio or the Millennium Portfolio or the
Acquiring Fund, then the other party to this Agreement shall, at its option, not
be required to consummate the transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of beneficial interest of the Portfolio and of the
Millennium Portfolio in accordance with the provisions of each of the
Performance Funds' and the Millennium Funds' Declaration of Trust and
By-Laws and copies of the resolutions evidencing such approvals shall
have been delivered to the Acquiring Fund. Notwithstanding anything
herein to the contrary, neither Touchstone Strategic Trust nor the
Acquiring Fund nor the Performance Funds nor the Portfolio nor the
Millennium Funds nor the Millennium Portfolio may waive the conditions
set forth in this paragraph 8.1;
8.2 All consents of other parties and all other consents,
orders and permits of Federal, state and local regulatory authorities
deemed necessary by Touchstone Strategic Trust or the Performance Funds
or the Millennium Funds to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the
assets or properties of the Touchstone Strategic Trust or the Acquiring
Fund or the Performance Funds or the Millennium Funds or the Portfolio
or the Millennium Portfolio, provided that any party hereto may, for
itself, waive any of such conditions;
8.3 The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effectiveness
thereof shall have been issued; and
8.4 The Selling Fund shall have declared a dividend or
dividends which, together with all previous such dividends shall have
the effect of distributing to the Selling Fund Shareholders all of the
Selling Fund's investment company taxable income for all taxable
periods ending on the Closing Date (computed without regard to any
deduction for dividends paid) and all of the net capital gains realized
in all taxable periods ending on the Closing Date (after reduction for
any capital loss carryforward).
8.5 The Company and the Trust shall have received a favorable
opinion of Sullivan & Worcester LLP substantially to the effect that,
for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
solely for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of the liabilities of the Selling Fund followed by the
distribution of the Acquiring Fund Shares to the Selling Fund
Shareholders in dissolution and liquidation of the Selling Fund will
constitute a "reorganization" within the meaning of Section
368(a)(1)(D) of the Code, and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of the liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of the liabilities of the Selling
48
Fund or upon the distribution (whether actual or constructive) of the
Acquiring Fund Shares to Selling Fund Shareholders in exchange for
their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the
Acquiring Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis of the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the
Reorganization will be the same as the aggregate tax basis of the
Selling Fund shares held by such Selling Fund Shareholder immediately
prior to the Closing, and the holding period of the Acquiring Fund
Shares received by each Selling Fund Shareholder will include the
period during which the Selling Fund shares exchanged therefor were
held by such Selling Fund Shareholder (provided the Selling Fund shares
were held as capital assets on the date of the Closing).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Selling Fund immediately prior to the Closing, and the holding period
of the assets of the Selling Fund in the hands of the Acquiring Fund
will include the period during which those assets were held by the
Selling Fund.
8.6 The Acquiring Fund shall have received from Ernst & Young
LLP a letter addressed to the Acquiring Fund, in form and substance
satisfactory to the Acquiring Fund, to the effect that:
(a) they are independent auditors with respect to the Selling
Fund within the meaning of the 1933 Act and the applicable published
rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the
Capitalization Table appearing in the Registration Statement and
Prospectus/Proxy Statement has been obtained from and is consistent
with the accounting records of the Selling Fund;
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the pro forma
financial statements that are included in the Registration Statement
and Prospectus/Proxy Statement agree to the underlying accounting
records of the Acquiring Fund and the Selling Fund or with written
estimates provided by each Fund's management, and were found to be
mathematically correct; and
(d) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data
utilized in the calculations of the pro forma expense ratios appearing
in the Registration Statement and Prospectus/Proxy Statement agree with
underlying accounting records of the Selling Fund or with written
estimates by the Selling Fund's management and were found to be
mathematically correct.
In addition, unless waived by the Acquiring Fund, the Acquiring Fund
shall have received from Ernst & Young LLP a letter addressed to the
Acquiring Fund dated on the Closing Date, in form and substance
satisfactory to the Acquiring Fund, to the effect that on the basis of
limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards),
the net asset value per share of the Selling Fund as of the Valuation
Date was
49
computed and the valuation of the portfolio was consistent in
the valuation practices of the Acquiring Fund.
8.7 The Selling Fund shall have received from Tait
Weller & Baker LLP a letter addressed to the Selling Fund, in
form and substance satisfactory to the Selling Fund, to the
effect that:
(a) they are independent auditors with respect to the
Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) they had performed limited procedures agreed upon
by the Selling Fund and described in such letter (but not an
examination in accordance with generally accepted auditing
standards) which consisted of a reading of any unaudited pro
forma financial statements included in the Registration
Statement and Prospectus/Proxy Statement, and making inquiries
of appropriate officials of the Trust responsible for
financial and accounting matters whether such unaudited pro
forma financial statements comply as to form in all material
respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder;
(c) on the basis of limited procedures agreed upon by
the Selling Fund and described in such letter (but not an
examination in accordance with generally accepted auditing
standards), the Capitalization Table appearing in the
Registration Statement and Prospectus/Proxy Statement has been
obtained from and is consistent with the accounting records of
the Acquiring Fund; and
(d) on the basis of limited procedures agreed upon by
the Selling Fund (but not an examination in accordance with
generally accepted auditing standards), the data utilized in
the calculations of the pro forma expense ratios appearing in
the Registration Statement and Prospectus/Proxy Statement
agree with underlying accounting records of the Acquiring Fund
or with written estimates by the Acquiring Fund's management
and were found to be mathematically correct.
8.8 The change of the Acquiring Fund from a
diversified series of the Trust to a non-diversified series of
the Trust upon completion of the Reorganization shall have
been approved by the requisite vote of the holders of the
outstanding shares of the Acquiring Fund in accordance with
the provisions of the Trust's Agreement and Declaration of
Trust and Bylaws.
9. BROKERAGE FEES AND EXPENSES
9.1 Touchstone Strategic Trust and the Performance
Funds and the Millennium Funds each represents and warrants to
the others that there are no brokers or finders entitled to
receive any payments in connection with the transactions
provided for herein.
9.2 Navellier Management Inc. will bear the aggregate
expenses and costs of its solicitation of this Proxy
Solicitation regarding the Reorganization.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 Touchstone Strategic Trust and the Performance
Funds and the Millennium Funds agree that no party to this
Agreement has made any representation, warranty or covenant
not set forth herein and that this Agreement constitutes the
entire agreement between the parties.
10.2 The representations, warranties and covenants
contained in this Agreement, or in any document delivered
pursuant hereto or in connection herewith, shall survive the
consummation of the transactions contemplated hereunder.
50
11. TERMINATION
This Agreement and the transactions contemplated hereby may be
terminated and abandoned by any party by resolution of the party's Board of
Trustees or Board of Trustees and resolution passed by the requisite number of
Shareholders of that party at any time prior to the Closing Date if
circumstances should develop that make proceeding with the Agreement
inadvisable.
12. WAIVER
Touchstone Strategic Trust and the Performance Funds and the Millennium
Funds, by mutual consent of their respective Boards of Trustees, may waive in
writing any condition to their respective obligations hereunder, except as
provided herein.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of
Touchstone Strategic Trust and the Performance Funds and the Millennium Funds;
provided, however, that following the meetings of the Portfolio Shareholders and
of the Millennium Portfolio Shareholders called pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number of Acquiring Fund Shares to be issued to the
Portfolio Shareholders or to the Millennium Portfolio Shareholders under this
Agreement to the detriment of such Shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to Touchstone Strategic Trust at
221 East Fourth Street, Suite 300, Cincinnati, Ohio 45202, or to the Performance
Funds or the Millennium Funds at One East Liberty Street, Third Floor, Reno,
Nevada 89501.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
15.1 The Article and paragraph headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
15.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
15.3 This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15.4 This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors
and assigns, but no assignment or transfer hereof or of any
rights or obligations hereunder shall be made by any party
without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to
confer upon or to give any person, firm or corporation, other
than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this
Agreement.
15.5 It is expressly agreed that the obligations of
the Performance Funds and of the Millennium Funds and of the
Portfolio and of the Millennium Portfolio hereunder shall not
be binding upon any of the Trustees, Shareholders, nominees,
officers, agents or employees of the Performance Funds and of
the Millennium Funds personally, but shall bind only the Trust
property of the Performance Funds and the Millennium Funds and
the Portfolio and the Millennium Portfolio, as provided in the
Declarations of Trust of the Performance Funds and of the
Millennium Funds. The execution and delivery by such officers
of the Performance Funds and of the
51
Millennium Funds shall not be deemed to have been made by any
of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the
Performance Funds and of the Millennium Funds and the
Portfolio and the Millennium Portfolio as provided in the
Declarations of Trust of the Performance Funds and of the
Millennium Funds.
15.6 It is expressly agreed that the obligations of
the Touchstone Strategic Trust and the Acquiring Fund
hereunder shall not be binding upon any of the Trustees,
Shareholders, nominees, officers, agents or employees of
Touchstone Strategic Trust personally, but shall bind only the
trust property of the Touchstone Strategic Trust and the
Acquiring Fund, as provided in Touchstone Strategic Trust's
Declaration of Trust. The execution and delivery by such
officers of Touchstone Strategic Trust shall not be deemed to
have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the
trust property of the Touchstone Strategic Trust and the
Acquiring Fund, as provided in the Touchstone Strategic
Trust's Declaration of Trust.
52
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President and attested by its Secretary.
Attest: TOUCHSTONE STRATEGIC TRUST
By:___________________________________ By: _______________________________
Secretary President
Attest: THE NAVELLIER MILLENNIUM FUNDS
By: __________________________________ By: _______________________________
Secretary President
Attest: THE NAVELLIER PERFORMANCE FUNDS
BY: __________________________________ By: _______________________________
Secretary President
53
PROXY THE NAVELLIER LARGE CAP GROWTH PORTFOLIO
OF
THE NAVELLIER PERFORMANCE FUNDS
One East Liberty Street, Third Floor
Reno, Nevada 89501
--------------------
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS August 22, 2003
(or another date shortly thereafter)
THIS PROXY IS SOLICITED BY THE TRUSTEES OF THE NAVELLIER PERFORMANCE
FUNDS, for use at a special meeting of the shareholders of The Navellier Large
Cap Growth Portfolio (the "Portfolio"), an investment portfolio offered by The
Navellier Performance Funds (the "Performance Funds") which meeting will be held
at 10:00 a.m., Pacific Standard Time, on August 22, 2003 OR ANOTHER DATE SHORTLY
THEREAFTER, at the offices of The Navellier Performance Funds, One East Liberty
Street, Third Floor, Reno, Nevada 89501 (the "Meeting").
The undersigned shareholder of the Portfolio, revoking any and all
previous proxies heretofore given for shares of the Portfolio held by the
undersigned("Shares"), does hereby appoint Louis Navellier and Samuel
Kornhauser, and each and any of them, with full power to substitution to each to
be the attorneys and proxies of the undersigned (the "Proxies"), to attend the
Meeting of the shareholders of the Portfolio, and to represent and direct the
voting interests represented by the undersigned as of the record date for said
Meeting for the Proposal specified below.
This proxy, if properly executed, will be voted in the manner as
directed herein by the undersigned shareholder. Unless otherwise specified below
in the squares provided, the undersigned's vote will be cast "FOR" each
Proposal. If no direction is made for any Proposal, this proxy will be voted
"FOR" any and all such Proposals. In their discretion, the Proxies are
authorized to transact and vote upon such other matters and business as may come
before the Meeting or any adjournments thereof.
54
Please mark [ ]
your votes as [ X ]
indicated in [ ]
this example
Proposal 1 To approve a proposed Agreement and Plan of
Reorganization (the "Plan"), whereby the Navellier Large
Cap Growth Portfolio of the Navellier Performance Funds
(the "Portfolio") and the Navellier Large Cap Growth
Portfolio of The Navellier Millennium Funds (the
"Millennium Portfolio") would transfer all of their
assets to the Large Cap Growth Fund, a portfolio of the
Touchstone Strategic Trust (the "Acquiring Fund") in
exchange for shares of beneficial interest in the
Acquiring Fund that would then be distributed to the
shareholders of the Portfolio and to the Shareholders of
the Millennium Portfolio pro rata. Also, as part of the
Plan, the Acquiring Fund would assume all valid
liabilities of the Portfolio and of the Millennium
Portfolio.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
To avoid the expense of adjourning the Meeting to a subsequent date,
please return this proxy in the enclosed self-addressed, postage-paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE NAVELLIER PERFORMANCE
FUNDS WHICH RECOMMEND A VOTE FOR PROPOSAL 1.
Dated _______________, 2003
________________________ _________________
Signature of Shareholder Number of shares
________________________ _________________
Signature of Shareholder Number of shares
This proxy may be revoked by the shareholder(s) at any time
prior to the special meeting.
NOTE: Please sign exactly as your name appears hereon. If shares are registered
in more than one name, all registered shareholders should sign this proxy; but
if one shareholder signs, that signature binds the other shareholder. When
signing as an attorney, executor, administrator, agent, trustee, or guardian, or
custodian for a minor, please give full title as such. If a corporation, please
sign in full corporate name by an authorized person. If a partnership, please
sign in partnership name by an authorized person.
55
APPENDIX B
INVESTMENT ADVISORY AGREEMENT
TOUCHSTONE Strategic Trust
INVESTMENT ADVISORY AGREEMENT, dated as of May 1, 2000,
amended December 31, 2002, by and between TOUCHSTONE ADVISORS, INC., an Ohio
corporation (the "Advisor"), and TOUCHSTONE STRATEGIC TRUST, a Massachusetts
business trust created pursuant to an Agreement and Declaration of Trust dated
November 18, 1982, as amended from time to time (the "Trust").
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act"); and
WHEREAS, shares of beneficial interest in the Trust are divided into
separate series (each, along with any series which may in the future be
established, a "Fund"); and
WHEREAS, the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment advisor and to
have an investment advisor perform for it various investment advisory and
research services and other management services; and
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and desires to provide investment
advisory services to the Trust;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADVISOR. The Trust hereby employs the
Advisor to manage the investment and reinvestment of the assets of each Fund
subject to the control and direction of the Trust's Board of Trustees, for the
period on the terms hereinafter set forth. The Advisor hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Advisor shall for all purposes herein be deemed to be independent contractor and
shall, except as expressly provided or authorized (whether herein or otherwise),
have no authority to act for or represent the Trust in any way or otherwise be
deemed an agent of the Trust.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE ADVISOR.
In providing the services and assuming the obligations set forth herein, the
Advisor may, at its expense, employ one or more sub-advisors for any Fund. Any
agreement between the Advisor and a sub-advisor shall be subject to the renewal,
termination and amendment provisions of paragraph 10 hereof. The Advisor
undertakes to provide the following services and to assume the following
obligations:
56
a) The Advisor will manage the investment
and reinvestment of the assets of each Fund, subject
to and in accordance with the respective investment
objectives and policies of each Fund and any
directions which the Trust's Board of Trustees may
issue from time to time. In pursuance of the
foregoing, the Advisor may engage separate investment
advisors ("Sub-Advisor(s)") to make all
determinations with respect to the investment of the
assets of each Fund, to effect the purchase and sale
of portfolio securities and to take such steps as may
be necessary to implement the same. Such
determination and services by each Sub-Advisor shall
also include determining the manner in which voting
rights, rights to consent to corporate action and any
other rights pertaining to the portfolio securities
shall be exercised. The Advisor shall, and shall
cause each Sub-Advisor to, render regular reports to
the Trust's Board of Trustees concerning the Trust's
and each Fund's investment activities.
b) The Advisor shall, or shall cause the respective
Sub-Advisor(s) to place orders for the execution of
all portfolio transactions, in the name of the
respective Fund and in accordance with the policies
with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the
Securities Act of 1933, as such registration
statements may be amended from time to time. In
connection with the placement of orders for the
execution of portfolio transactions, the Advisor
shall create and maintain (or cause the Sub-Advisors
to create and maintain) all necessary brokerage
records for each Fund, which records shall comply
with all applicable laws, rules and regulations,
including but not limited to records required by
Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for
inspection and use by the Securities and Exchange
Commission (the "SEC"), the Trust or any person
retained by the Trust. Where applicable, such records
shall be maintained by the Advisor (or Sub-Advisor)
for the periods and in the places required by Rule
31a-2 under the 1940 Act.
c) In the event of any reorganization or other change in
the Advisor, its investment principals, supervisors
or members of its investment (or comparable)
committee, the Advisor shall give the Trust's Board
of Trustees written notice of such reorganization or
change within a reasonable time (but not later than
30 days) after such reorganization or change.
d) The Advisor shall bear its expenses of providing
services to the Trust pursuant to this Agreement
except such expenses as are undertaken by the Trust.
In addition, the Advisor shall pay the salaries and
fees, if any, of all Trustees, officers and employees
of the Trust who are affiliated persons, as defined
in Section 2(a)(3) of the 1940 Act, of the Advisor.
57
e) The Advisor will manage, or will cause the
Sub-Advisors to manage, the Fund assets and the
investment and reinvestment of such assets so as to
comply with the provisions of the 1940 Act and with
Subchapter M of the Internal Revenue Code of 1986, as
amended.
3. EXPENSES. The Trust shall pay the expenses of its operation,
including but not limited to (i) charges and expenses for Trust accounting,
pricing and appraisal services and related overhead, (ii) the charges and
expenses of the Trust's auditors; (iii) the charges and expenses of any
custodian, transfer agent, plan agent, dividend disbursing agent and registrar
appointed by the Trust with respect to the Funds; (iv) brokers' commissions, and
issue and transfer taxes, chargeable to the Trust in connection with securities
transactions to which the Trust is a party; (v) insurance premiums, interest
charges, dues and fees for Trust membership in trade associations and all taxes
and fees payable by the Trust to federal, state or other governmental agencies;
(vi) fees and expenses involved in registering and maintaining registrations of
the Trust and/or shares of the Trust with the SEC, state or blue sky securities
agencies and foreign countries, including the preparation of Prospectuses and
Statements of Additional Information for filing with the SEC; (vii) all expenses
of meetings of Trustees and of shareholders of the Trust and of preparing,
printing and distributing prospectuses, notices, proxy statements and all
reports to shareholders and to governmental agencies; (viii) charges and
expenses of legal counsel to the Trust; (ix) compensation of Trustees of the
Trust; and (x) interest on borrowed money, if any.
4. COMPENSATION OF THE ADVISOR.
a) As compensation for the services rendered and
obligations assumed hereunder by the Advisor, the
Trust shall pay to the Advisor monthly a fee that is
equal on an annual basis to that percentage of the
average daily net assets of each Fund set forth on
Schedule 1 attached hereto (and with respect to any
future Fund, such percentage as the Trust and the
Advisor may agree to from time to time). Such fee
shall be computed and accrued daily. If the Advisor
serves as investment advisor for less than the whole
of any period specified in this Section 4a, the
compensation to the Advisor shall be prorated. For
purposes of calculating the Advisor's fee, the daily
value of each Fund's net assets shall be computed by
the same method as the Trust uses to compute the net
asset value of that Fund.
b) The Advisor will pay all fees owing to each
Sub-Advisor, and the Trust shall not be obligated to
the Sub-Advisors in any manner with respect to the
compensation of such Sub-Advisors.
c) The Advisor reserves the right to waive all or a part
of its fee.
5. ACTIVITIES OF THE ADVISOR. The services of the Advisor to the Trust
hereunder are not to be deemed exclusive, and the Advisor shall be free to
render similar services to others. It is understood that the Trustees and
officers of the Trust are or may become interested in the Advisor as
stockholders, officers or otherwise, and that stockholders and officers of the
Advisor are or may become similarly interested in the Trust, and that the
Advisor may become interested in the Trust as a shareholder or otherwise.
6. USE OF NAMES. The Trust will not use the name of the Advisor in any
prospectus, sales literature or other material relating to the Trust in any
manner not approved prior thereto by the Advisor; except that the Trust may use
such name in any document which merely refers in accurate terms to its
appointment hereunder or in any situation which is required by the SEC or a
state securities commission; and provided further, that in no event shall such
approval be unreasonably withheld. The Advisor will not use the name of the
Trust in any material relating to the Advisor in any manner not approved prior
thereto by the Trust; except that the Advisor may use such name in any document
which merely refers in accurate terms to the appointment of the Advisor
hereunder or in any situation which is required by the SEC or a state securities
commission. In all other
58
cases, the parties may use such names to the extent that the use is approved by
the party named, it being agreed that in no event shall such approval be
unreasonably withheld.
The Trustees of the Trust acknowledge that the Advisor has
reserved for itself the rights to the name "Touchstone Strategic Trust" (or any
similar names) and that use by the Trust of such name shall continue only with
the continuing consent of the Advisor, which consent may be withdrawn at any
time, effective immediately, upon written notice thereof to the Trust.
7. LIMITATION OF LIABILITY OF THE ADVISOR.
a) Absent willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or
duties hereunder on the part of the Advisor, the
Advisor shall not be subject to liability to the
Trust or to any shareholder in any Fund for any act
or omission in the course of, or connected with,
rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of
any security. As used in this Section 7, the term
"Advisor" shall include Touchstone Advisors, Inc.
and/or any of its affiliates and the directors,
officers and employees of Touchstone Advisors, Inc.
and/or any of its affiliates.
b) The Trust will indemnify the Advisor against, and
hold it harmless from, any and all losses, claims,
damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from
acts or omissions of the Trust. Indemnification shall
be made only after: (i) a final decision on the
merits by a court or other body before whom the
proceeding was brought that the Trust was liable for
the damages claimed or (ii) in the absence of such a
decision, a reasonable determination based upon a
review of the facts, that the Trust was liable for
the damages claimed, which determination shall be
made by either (a) the vote of a majority of a quorum
of Trustees of the Trust who are neither "interested
persons" of the Trust nor parties to the proceeding
("disinterested non-party Trustees") or (b) an
independent legal counsel satisfactory to the parties
hereto, whose determination shall be set forth in a
written opinion. The Advisor shall be entitled to
advances from the Trust for payment of the reasonable
expenses incurred by it in connection with the matter
as to which it is seeking indemnification in the
manner and to the fullest extent that would be
permissible under the applicable provisions of the
General Corporation Law of Ohio. The Advisor shall
provide to the Trust a written affirmation of its
good faith belief that the standard of conduct
necessary for indemnification under such law has been
met and a written undertaking to repay any such
advance if it should ultimately be determined that
the standard of conduct has not been met. In
addition, at least one of the following additional
conditions shall be met: (i) the Advisor shall
provide security in form and amount acceptable to the
Trust for its undertaking; (ii) the Trust is insured
against losses arising by reason of the advance; or
(iii) a majority of a quorum of the Trustees of the
Trust, the members of which majority are
disinterested non-party Trustees, or independent
legal counsel in a written opinion, shall have
determined, based on a review of facts readily
available to the Trust at the time the advance is
proposed to be made, that there is reason to believe
that the Advisor will ultimately be found to be
entitled to indemnification.
8. LIMITATION OF TRUST'S LIABILITY. The Advisor acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder in any case shall be limited to the Trust and to its
assets and that the Advisor shall not seek satisfaction of any such obligation
from the holders of the shares of any Fund nor from any Trustee, officer,
employee or agent of the Trust.
59
9. FORCE MAJEURE. The Advisor shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Advisor shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
10. RENEWAL, TERMINATION AND AMENDMENT.
a) This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of one
year from the date hereof and it shall continue
indefinitely thereafter as to each Fund, provided that
such continuance is specifically approved by the parties
hereto and, in addition, at least annually by (i) the vote
of holders of a majority of the outstanding voting
securities of the affected Fund or by vote of a majority
of the Trust's Board of Trustees and (ii) by the vote of a
majority of the Trustees who are not parties to this
Agreement or interested persons of the Advisor, cast in
person at a meeting called for the purpose of voting on
such approval.
b) This Agreement may be terminated at any time, with respect
to any Fund(s), without payment of any penalty, by the
Trust's Board of Trustees or by a vote of the majority of
the outstanding voting securities of the affected Fund(s)
upon 60 days' prior written notice to the Advisor and by
the Advisor upon 60 days' prior written notice to the
Trust.
c) This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of
Trustees and, if required by applicable SEC rules and
regulations, a vote of the majority of the outstanding
voting securities of any Fund affected by such change.
This Agreement shall terminate automatically in the event
of its assignment.
d) The terms "assignment," "interested persons" and "majority
of the outstanding voting securities" shall have the
meaning set forth for such terms in the 1940 Act.
11. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
Pursuant to the Trust's Agreement and Declaration of Trust, dated as of November
18, 1982, the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of the Trust individually, but bind only the Trust
estate.
TOUCHSTONE STRATEGIC TRUST
By:__________________________
Patrick T. Bannigan
President
60
TOUCHSTONE ADVISORS, INC.
By:__________________________
Michael S. Spangler
Vice President
SCHEDULE 1
LARGE CAP GROWTH FUND
The Fund pays the Advisor a fee equal to the annual rate of 0.75% on the first
$200 million of average daily net assets; 0.70% of the next $300 million of
average daily net assets; and 0.50% of such assets in excess of $500 million.
GROWTH OPPORTUNITIES FUND
The Fund pays the Advisor a fee equal to the annual rate of 1.00% on the first
$50 million of average daily net assets; 0.90% of the next $50 million of
average daily net assets; 0.80% of the next $100 million of average daily net
assets; and 0.75% of such assets in excess of $200 million.
International Equity Fund
The Fund pays the Advisor a fee equal to the annual rate of 0.95% on the first
$100 million of average daily net assets; 0.90% of the next $100 million of
average daily net assets; 0.85% of the next $100 million of average daily net
assets; and 0.80% of such assets in excess of $300 million.
Emerging Growth Fund
The Fund pays the Advisor a fee equal to the annual rate of 0.80% of average
daily net assets.
Enhanced 30 Fund
The Fund pays the Advisor a fee equal to the annual rate of 0.65% on the first
$100 million of average daily net assets; 0.60% of the next $100 million of
average daily net assets; 0.55% of the next $100 million of average daily net
assets; and 0.50% of such assets in excess of $300 million.
Value Plus Fund
The Fund pays the Advisor a fee equal to the annual rate of 0.75% on the first
$100 million of average daily net assets; 0.70% of the next $100 million of
average daily net assets; 0.65% of the next $100 million of average daily net
assets; and 0.60% of such assets in excess of $300 million.
Small Cap Growth Fund
61
The Fund pays the Advisor a fee equal to the annual rate of 1.25% of average
daily net assets.
62
APPENDIX C
SUB-ADVISORY AGREEMENT
GROWTH FUND
TOUCHSTONE STRATEGIC TRUST
This SUB-ADVISORY AGREEMENT is made as of ___________, 2003 by and
between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
NAVELLIER MANAGEMENT, INC., a Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Touchstone
Strategic Trust (the "Trust"), a Massachusetts business trust organized pursuant
to an Agreement and Declaration of Trust dated November 18, 1982 and registered
as an open-end diversified management investment company under the Investment
Company Act of 1940 (the "1940 Act"), to provide investment advisory services to
the Growth Fund (the "Fund"); and
WHEREAS, the Sub-Advisor also is an investment advisor registered under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Sub-Advisor to furnish it
with portfolio management services in connection with the Advisor's investment
advisory activities on behalf of the Fund, and the Sub-Advisor is willing to
furnish such services to the Advisor and the Fund;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE SUB-ADVISOR. In accordance with and subject to the
Investment Advisory Agreement between the Trust and the Advisor, attached hereto
as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Sub-Advisor to manage the investment and reinvestment of those assets of the
Fund allocated to the Sub-Advisor by the Advisor (the "Fund Assets"), subject to
the control and direction of the Advisor and the Trust's Board of Trustees, for
the period and on the terms hereinafter set forth. The Sub-Advisor hereby
accepts such employment and agrees during such period to render the services and
to perform the duties called for by this Agreement for the compensation herein
provided. The Sub-Advisor shall at all times maintain its registration as an
investment advisor under the Investment Advisers Act of 1940 and shall otherwise
comply in all material respects with all applicable laws and regulations, both
state and federal. The Sub-Advisor shall for all purposes herein be deemed an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust or the Fund.
63
2. DUTIES OF THE SUB-ADVISOR. The Sub-Advisor will provide the
following services and undertake the following duties:
a. The Sub-Advisor will manage the investment and
reinvestment of the assets of the Fund, subject to and in
accordance with the investment objectives, policies and
restrictions of the Fund and any directions which the Advisor
or the Trust's Board of Trustees may give from time to time
with respect to the Fund. In furtherance of the foregoing, the
Sub-Advisor will make all determinations with respect to the
investment of the assets of the Fund and the purchase and sale
of portfolio securities and shall take such steps as may be
necessary or advisable to implement the same. The Sub-Advisor
also will determine the manner in which voting rights, rights
to consent to corporate action and any other rights pertaining
to the portfolio securities will be exercised. The Sub-Advisor
will render regular reports to the Trust's Board of Trustees
and to the Advisor (or such other advisor or advisors as the
Advisor shall engage to assist it in the evaluation of the
performance and activities of the Sub-Advisor). Such reports
shall be made in such form and manner and with respect to such
matters regarding the Fund and the Sub-Advisor as the Trust or
the Advisor shall from time to time request.
b. The Sub-Advisor shall provide support to the
Advisor with respect to the marketing of the Fund, including
but not limited to: (i) permission to use the Sub-Advisor's
name as provided in Section 5, (ii) permission to use the past
performance and investment history of the Sub-Advisor as the
same is applicable to the Fund, (iii) access to the
individual(s) responsible for day-to-day management of the
Fund for marketing conferences, teleconferences and other
activities involving the promotion of the Fund, subject to the
reasonable request of the Advisor, (iv) permission to use
biographical and historical data of the Sub-Advisor and
individual manager(s), and (v) permission to use the names of
clients to which the Sub-Advisor provides investment
management services, subject to any restrictions imposed by
clients on the use of such names.
c. The Sub-Advisor will, in the name of the Fund,
place orders for the execution of all portfolio transactions
in accordance with the policies with respect thereto set forth
in the Trust's registration statements under the 1940 Act and
the Securities Act of 1933, as such registration statements
may be in effect from time to time. In connection with the
placement of orders for the execution of portfolio
transactions, the Sub-Advisor will create and maintain all
necessary brokerage records of the Fund in accordance with all
applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act.
All records shall be the property of the Trust and shall be
available for inspection and use by the Securities and
Exchange Commission (the "SEC"), the Trust or any person
retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places
required by Rule 31a-2 under the 1940 Act. When placing orders
with brokers and dealers, the Sub-Advisor's primary objective
shall be to obtain the most favorable price and execution
available for the Fund, and in placing such orders the
Sub-Advisor may consider a number of factors, including,
without limitation, the overall direct net economic result to
the Fund (including commissions, which may not be the lowest
available but ordinarily should not be higher than the
generally prevailing competitive range), the financial
strength and stability of the broker, the efficiency with
which the transaction will be effected, the ability to effect
the transaction at all where a large block is involved and the
availability of the broker or dealer to stand ready to execute
possibly difficult transactions in the future. Consistent with
the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking the most favorable price
and execution, the Sub-Advisor may give consideration to sales
of shares of the Fund as a factor in the selection of brokers
and dealers to execute portfolio transactions of the Fund. The
Sub-Advisor is specifically authorized, to the extent
authorized by law (including, without limitation, Section
28(e) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), to pay a broker or dealer who provides
research services to the Sub-Advisor an amount of commission
for effecting a
64
portfolio transaction in excess of the amount of commission
another broker or dealer would have charged for effecting such
transaction, in recognition of such additional research
services rendered by the broker or dealer, but only if the
Sub-Advisor determines in good faith that the excess
commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer viewed in terms of the particular transaction or the
Sub-Advisor's overall responsibilities with respect to
discretionary accounts that it manages, and that the Fund
derives or will derive a reasonably significant benefit from
such research services. The Sub-Advisor will present a written
report to the Board of Trustees of the Trust, at least
quarterly, indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for
such expenses, broken down by broker-dealer and containing
such information as the Board of Trustees reasonably shall
request.
d. In the event of any reorganization or other change
in the Sub-Advisor, its investment principals, supervisors or
members of its investment (or comparable) committee, the
Sub-Advisor shall give the Advisor and the Trust's Board of
Trustees written notice of such reorganization or change
within a reasonable time (but not later than 30 days) after
such reorganization or change.
e. The Sub-Advisor will bear its expenses of
providing services to the Fund pursuant to this Agreement
except such expenses as are undertaken by the Advisor or the
Trust.
f. The Sub-Advisor will manage the Fund assets and
the investment and reinvestment of such assets so as to comply
with the provisions of the 1940 Act and with Subchapter M of
the Internal Revenue Code of 1986, as amended.
3. COMPENSATION OF THE SUB-ADVISOR.
a. As compensation for the services to be rendered
and duties undertaken hereunder by the Sub-Advisor, the
Advisor will pay to the Sub-Advisor a monthly fee equal on an
annual basis to 0.45% of the average daily net assets of the
Fund. Such fee shall be computed and accrued daily. If the
Sub-Advisor serves in such capacity for less than the whole of
any period specified in this Section 3a, the compensation to
the Sub-Advisor shall be prorated. For purposes of calculating
the Sub-Advisor's fee, the daily value of the Fund's net
assets shall be computed by the same method as the Trust uses
to compute the net asset value of the Fund for purposes of
purchases and redemptions of shares thereof.
b. The Sub-Advisor reserves the right to waive all or
a part of its fees hereunder.
4. ACTIVITIES OF THE SUB-ADVISOR. It is understood that the Sub-Advisor
may perform investment advisory services for various other clients, including
other investment companies. The Sub-Advisor will report to the Board of Trustees
of the Trust (at regular quarterly meetings and at such other times as such
Board of Trustees reasonably shall request) (i) the financial condition and
prospects of the Sub-Advisor, (ii) the nature and amount of transactions
affecting the Fund that involve the Sub-Advisor and affiliates of the
Sub-Advisor, (iii) information regarding any potential conflicts of interest
arising by reason of its continuing provision of advisory services to the Fund
and to its other accounts, and (iv) such other information as the Board of
Trustees shall reasonably request regarding the Fund, the Fund's performance,
the services provided by the Sub-Advisor to the Fund as compared to its other
accounts and the plans of, and the capability of, the Sub-Advisor with respect
to providing future services to the Fund and its other accounts. At least
annually, the Sub-Advisor shall report to the Trustees the total number and type
of such other accounts and the approximate total asset value thereof (but not
the identities of the beneficial owners of such accounts). The Sub-Advisor
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of business among the Fund and its other clients.
65
It is understood that the Sub-Advisor may become interested in the
Trust as a shareholder or otherwise.
The Sub-Advisor has supplied to the Advisor and the Trust copies of its
Form ADV with all exhibits and attachments thereto (including the Sub-Advisor's
statement of financial condition) and will hereafter supply to the Advisor,
promptly upon the preparation thereof, copies of all amendments or restatements
of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Sub-Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Sub-Advisor; provided, however, that the Sub-Advisor will approve all uses
of its name which merely refer in accurate terms to its appointment hereunder or
which are required by the SEC or a state securities commission; and provided
further, that in no event shall such approval be unreasonably withheld. The
Sub-Advisor shall not use the name of the Advisor or the Trust in any material
relating to the Sub-Advisor in any manner not approved in advance by the Advisor
or the Trust, as the case may be; provided, however, that the Advisor and the
Trust shall each approve all uses of their respective names which merely refer
in accurate terms to the appointment of the Sub-Advisor hereunder or which are
required by the SEC or a state securities commission; and, provided further,
that in no event shall such approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE SUB-ADVISOR. Absent willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Trust or to any shareholder in the Fund
for any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security. As used in this Section 6, the term "Sub-Advisor" shall
include the Sub-Advisor and/or any of its affiliates and the directors, officers
and employees of the Sub-Advisor and/or any of its affiliates.
7. LIMITATION OF TRUST'S LIABILITY. The Sub-Advisor acknowledges that
it has received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust. The Sub-Advisor agrees that (i) the
Trust's obligations to the Sub-Advisor under this Agreement (or indirectly under
the Advisory Agreement) shall be limited in any event to the assets of the Fund
and (ii) the Sub-Advisor shall not seek satisfaction of any such obligation from
the holders of shares of the Fund nor from any Trustee, officer, employee or
agent of the Trust.
8. FORCE MAJEURE. The Sub-Advisor shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Sub-Advisor shall take reasonable steps to minimize
service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless
sooner terminated as hereinafter provided for a period of two
years from the date hereof and it shall continue thereafter
provided that such continuance is specifically approved by the
parties and, in addition, at least annually by (i) the vote of
the holders of a majority of the outstanding voting securities
(as herein defined) of the Fund or by vote of a majority of
the Trust's Board of Trustees and (ii) by the vote of a
majority of the Trustees who are not parties to this Agreement
or interested persons of either the Advisor or the
Sub-Advisor, cast in person at a meeting called for the
purpose of voting on such approval.
b. This Agreement may be terminated at any time,
without payment of any penalty, (i) by the Advisor, by the
Trust's Board of Trustees or by a vote of the majority of the
outstanding voting securities of the Fund, in any such case
upon not less than
66
60 days' prior written notice to the Sub-Advisor and (ii) by
the Sub-Advisor upon not less than 60 days' prior written
notice to the Advisor and the Trust. This Agreement shall
terminate automatically in the event of its assignment.
c. This Agreement may be amended at any time by the
parties hereto, subject to approval by the Trust's Board of
Trustees and, if required by applicable SEC rules and
regulations, a vote of the majority of the outstanding voting
securities of the Fund affected by such change.
d. The terms "assignment," "interested persons" and
"majority of the outstanding voting securities" shall have the
meaning set forth for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 221 East Fourth Street, Suite 300, Cincinnati, Ohio
45202 and that the address of the Sub-Advisor shall be One East Liberty, Third
Floor, Reno, Nevada 89501.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
TOUCHSTONE ADVISORS, INC.
By: ________________________________________________
Name: Patrick Bannigan
Title: President
NAVELLIER MANAGEMENT, INC.
By: ________________________________________________
Name: Louis G. Navellier
Title: President
67
APPENDIX D
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1 FOR
CLASS A SHARES OF MULTIPLE CLASS SERIES
AND FOR SINGLE CLASS SERIES OF
COUNTRYWIDE STRATEGIC TRUST
WHEREAS, Countrywide Strategic Trust (the "Trust"), an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts, is
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which are divided into
separate Series of Shares; and
WHEREAS, the Trust issues shares of certain Series in Sub-Series (one
of which may be designated as Class A Shares), whereas other Series will operate
with a single class of Shares, which Shares will be considered for purposes of
this Plan as Class A Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit each Series and the holders of
its Class A Shares, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the current Rule 12b-1 distribution plan of each Series
is hereby amended as it pertains to the Class A Shares of each Series in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. Distribution Activities. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Class A Shares, which activities may include, but
are not limited to, the following: (a) maintenance fees or other payments to the
Trust's principal underwriter and to securities dealers and others who are
engaged in the sale of Class A Shares and who may be advising shareholders of
the Trust regarding the purchase, sale or retention of Class A Shares; (b)
expenses of maintaining personnel (including personnel of organizations with
which the Trust has entered into agreements related to this Plan) who engage in
or support distribution of Class A Shares or who render shareholder support
services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and providing such
other shareholder services as the Trust may reasonably request; (c) formulating
and implementing of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising; (d) preparing, printing and distributing sales
literature; (e) preparing, printing and distributing prospectuses and statements
of additional information and reports of the Trust for recipients other than
existing shareholders of the Trust; and (f) obtaining such information, analyses
and reports with respect to marketing and promotional activities as the Trust
may, from time to time, deem advisable. The Trust is authorized to engage in the
activities listed above, and in any other activities related to the distribution
of
68
Class A Shares, either directly or through other persons with which the Trust
has entered into agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made pursuant to this
Plan and the basis upon which payment of such expenditures will be made shall be
determined by the Trustees of the Trust, but in no event may such expenditures
exceed in any fiscal year an amount calculated at the rate of .25% of the
average daily net asset value of the Class A Shares of any Series of the Trust.
Such payments for distribution activities may be made directly by the Class A
Shares or the Trust's investment adviser or principal underwriter may incur such
expenses and obtain reimbursement from the Class A Shares.
3. Term and Termination. This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval. This Plan may be terminated with respect
to any Series at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority (as defined in the 1940 Act) of the outstanding Class A
Shares of such Series of the Trust. In the event this Plan is terminated by any
Series in accordance with its terms, the obligations of the Class A Shares of
such Series to make payments to the Trust's principal underwriter pursuant to
this Plan will cease and such Series will not be required to make any payments
for expenses incurred after the date of termination.
69
4. Amendments. This Plan may not be amended with respect to any Series
to increase materially the amount of expenditures provided for in Section 2
hereof unless such amendment is approved by a vote of the majority (as defined
in the 1940 Act) of the outstanding Class A Shares of such Series, and no
material amendment to this Plan shall be made unless approved in the manner
provided for annual renewal of this Plan in Section 3 hereof.
5. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust shall be committed to the discretion of
the Trustees who are not interested persons of the Trust.
6. Quarterly Reports. The Treasurer of the Trust and the principal
underwriter shall provide to the Trustees and the Trustees shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and any related agreement, the purposes for which such expenditures were made
and the allocation of such expenditures as provided for in Section 7.
7. Allocating Expenditures Between Classes. Only distribution
expenditures properly attributable to the sale of a particular class of Shares
may be used to support the distribution fee charged to shareholders of such
class of Shares. Distribution expenses attributable to the sale of more than one
class of Shares of a Series will be allocated at least annually to each class of
Shares based upon the ratio in which the sales of each class of Shares bears to
the sales of all the Shares of such Series. For this purpose, Shares issued upon
reinvestment of dividends or distributions will not be considered sales.
8. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
9. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the date
set forth below.
Dated: October 29, 1999
Attest:
/s/ Tina D. Hosking By: /s/ Robert H. Leshner
- ------------------------ --------------------------
Secretary President
70
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1 FOR
CLASS B SHARES OF TOUCHSTONE STRATEGIC TRUST
WHEREAS, Touchstone Strategic Trust (the "Trust"), an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts, is
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which are divided into
separate Series of Shares; and
WHEREAS, the Trust issues shares of certain Series in Sub-Series (one
of which may be designated as Class B Shares); and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit each Series and the holders of
its Class B Shares, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the current Rule 12b-1 distribution plan of each Series
is hereby amended as it pertains to the Class B Shares of each Series in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. Distribution Activities. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Class B Shares, which activities may include, but
are not limited to, the following: (a) maintenance fees or other payments to the
Trust's principal underwriter and to securities dealers and others who are
engaged in the sale of Class B Shares and who may be advising shareholders of
the Trust regarding the purchase, sale or retention of Class B Shares; (b)
expenses of maintaining personnel (including personnel of organizations with
which the Trust has entered into agreements related to this Plan) who engage in
or support distribution of Class B Shares or who render shareholder support
services not otherwise provided by the Trust's transfer agent, including, but
not limited to, office space and equipment, telephone facilities and expenses,
answering routine inquiries regarding the Trust, processing shareholder
transactions, and providing such other shareholder services as the Trust may
reasonably request; (c) formulating and implementing of marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
preparing, printing and distributing sales literature; (e) preparing, printing
and distributing prospectuses and statements of additional information and
reports of the Trust for recipients other than existing
shareholders of the Trust; and (f) obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable. The Trust is authorized to engage in the
activities listed above, and in any other activities related to the distribution
of Class B Shares, either directly or through other persons with which the Trust
has entered into agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made pursuant to
Section 1 and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed in any fiscal year an amount
71
calculated at the rate of .75% of the average daily net asset value of the Class
B Shares of any Series of the Trust. Such payments for distribution activities
may be made directly by the Class B Shares or the Trust's investment adviser or
principal underwriter may incur such expenses and obtain reimbursement from the
Class B Shares.
3. Maintenance Fee. In addition to the payments of compensation
provided for in Section 2 and in order to further enhance the distribution of
its Class B Shares, the Trust shall pay the principal underwriter a maintenance
fee, accrued daily and paid monthly, in an amount equal to an annual rate of
..25% of the daily net assets of the Class B Shares of the Trust. When requested
by and at the direction of the principal underwriter, the Trust shall pay a
maintenance fee to dealers based on the amount of Class B Shares sold by such
dealers and remaining outstanding for specified periods of time, if any,
determined by the principal underwriter, in amounts up to .25% per annum of the
average daily net assets of the Class B Shares of the Trust. Any maintenance
fees paid to dealers shall reduce the maintenance fees otherwise payable to the
principal underwriter.
4. Term and Termination. This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval. This Plan may be terminated with respect
to any Series at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority (as defined in the 1940 Act) of the outstanding Class B
Shares of such Series of the Trust. In the event this Plan is terminated by any
Series in accordance with its terms, the obligations of the Class B Shares of
such Series to make payments to the Trust's principal underwriter pursuant to
this Plan will cease and such Series will not be required to make any payments
for expenses incurred after the date of termination.
5. Amendments. This Plan may not be amended with respect to any Series
to increase materially the amount of expenditures provided for in Sections 2 and
3 hereof unless such amendment is approved by a vote of the majority (as defined
in the 1940 Act) of the outstanding Class B Shares of such Series, and no
material amendment to this Plan shall be made unless approved in the manner
provided for annual renewal of this Plan in Section 4 hereof.
72
6. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust shall be committed to the discretion of
the Trustees who are not interested persons of the Trust.
7. Quarterly Reports. The principal underwriter and the Treasurer of
the Trust shall provide to the Trustees and the Trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
any related agreement, the purposes for which such expenditures were made and
the allocation of such expenditures as provided for in Section 8.
8. Allocating Expenditures Between Classes. Only distribution
expenditures properly attributable to the sale of a particular class of Shares
may be used to support the distribution fee charged to shareholders of such
class of Shares. Distribution expenses attributable to the sale of more than one
class of Shares of a Series will be allocated at least annually to each class of
Shares based upon the ratio in which the sales of each class of Shares bears to
the sales of all the Shares of such Series. For this purpose, Shares issued upon
reinvestment of dividends or distributions will not be considered sales.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
10. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.
Dated: May 1, 2001
Attest:
/s/Tina D. Hosking By: /s/ Jill McGruder
- ---------------------- ---------------------
Secretary President
73
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1 FOR
CLASS C SHARES OF COUNTRYWIDE STRATEGIC TRUST
WHEREAS, Countrywide Strategic Trust (the "Trust"), an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts, is
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which are divided into
separate Series of Shares; and
WHEREAS, the Trust issues shares of certain Series in Sub-Series (one
of which may be designated as Class C Shares); and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit each Series and the holders of
its Class C Shares, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the current Rule 12b-1 distribution plan of each Series
is hereby amended as it pertains to the Class C Shares of each Series in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. Distribution Activities. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Class C Shares, which activities may include, but
are not limited to, the following: (a) maintenance fees or other payments to the
Trust's principal underwriter and to securities dealers and others who are
engaged in the sale of Class C Shares and who may be advising shareholders of
the Trust regarding the purchase, sale or retention of Class C Shares; (b)
expenses of maintaining personnel (including personnel of organizations with
which the Trust has entered into agreements related to this Plan) who engage in
or support distribution of Class C Shares or who render shareholder support
services not otherwise provided by the Trust's transfer agent, including, but
not limited to, office space and equipment, telephone facilities and expenses,
answering routine inquiries regarding the Trust, processing shareholder
transactions, and providing such other shareholder services as the Trust may
reasonably request; (c) formulating and implementing of marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
preparing, printing and distributing sales literature; (e) preparing, printing
and distributing prospectuses and statements of additional information and
reports of the Trust for recipients other than existing shareholders of the
Trust; and (f) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to time, deem
advisable. The Trust is authorized to engage in the activities listed above, and
in any other activities related to the distribution of Class C Shares, either
directly or through other persons with which the Trust has entered into
agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made pursuant to
Section 1 and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed in any fiscal year an amount calculated at the rate of .75%
of the average daily net asset value of the Class C Shares
74
of any Series of the Trust. Such payments for distribution activities may be
made directly by the Class C Shares or the Trust's investment adviser or
principal underwriter may incur such expenses and obtain reimbursement from the
Class C Shares.
3. Maintenance Fee. In addition to the payments of compensation
provided for in Section 2 and in order to further enhance the distribution of
its Class C Shares, the Trust shall pay the principal underwriter a maintenance
fee, accrued daily and paid monthly, in an amount equal to an annual rate of
..25% of the daily net assets of the Class C Shares of the Trust. When requested
by and at the direction of the principal underwriter, the Trust shall pay a
maintenance fee to dealers based on the amount of Class C Shares sold by such
dealers and remaining outstanding for specified periods of time, if any,
determined by the principal underwriter, in amounts up to .25% per annum of the
average daily net assets of the Class C Shares of the Trust. Any maintenance
fees paid to dealers shall reduce the maintenance fees otherwise payable to the
principal underwriter.
4. Term and Termination. This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval. This Plan may be terminated with respect
to any Series at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority (as defined in the 1940 Act) of the outstanding Class C
Shares of such Series of the Trust. In the event this Plan is terminated by any
Series in accordance with its terms, the obligations of the Class C Shares of
such Series to make payments to the Trust's principal underwriter pursuant to
this Plan will cease and such Series will not be required to make any payments
for expenses incurred after the date of termination.
5. Amendments. This Plan may not be amended with respect to any Series
to increase materially the amount of expenditures provided for in Sections 2 and
3 hereof unless such amendment is approved by a vote of the majority (as defined
in the 1940 Act) of the outstanding Class C Shares of such Series, and no
material amendment to this Plan shall be made unless approved in the manner
provided for annual renewal of this Plan in Section 4 hereof.
6. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust shall be committed to the discretion of
the Trustees who are not interested persons of the Trust.
7. Quarterly Reports. The principal underwriter and the Treasurer of
the Trust shall provide to the Trustees and the Trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
any related agreement, the purposes for which such expenditures were made and
the allocation of such expenditures as provided for in Section 8.
8. Allocating Expenditures Between Classes. Only distribution
expenditures properly attributable to the sale of a particular class of Shares
may be used to support the distribution fee charged to shareholders of such
class of Shares. Distribution expenses attributable to the sale of more than one
class of Shares of a Series will be allocated at least annually to each class of
Shares based upon the ratio in which the sales of each class of Shares bears to
the sales of all the Shares of such Series. For this purpose, Shares issued upon
reinvestment of dividends or distributions will not be considered sales.
75
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
10. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.
Dated: October 29, 1999
Attest:
/s/ Tina D. Hosking By: /s/ Robert H. Leshner
- -------------------------- -------------------------
Secretary President
76
PART B
TOUCHSTONE STRATEGIC TRUST
(THE LARGE CAP GROWTH FUND)
STATEMENT OF ADDITIONAL INFORMATION
DATED July 18, 2003
This Statement of Additional Information, which is not a prospectus,
should be read in conjunction with the Combined Prospectus/Proxy Statement of
Touchstone Strategic Trust (the "Fund"), dated July 18, 2003 for the special
meeting (the "Meeting") of the shareholders of the Navellier Large Cap Growth
Portfolio (the "Portfolio") of the Navellier Performance Funds and for the
special meeting (the "Millennium Meeting") of the Shareholders of the Navellier
Large Cap Growth Portfolio of the Navellier Millennium Funds, a copy of which
Prospectus/ Proxy Statement may be obtained, without charge, by contacting the
Portfolio or the Millennium Portfolio, at their mailing address c/o Navellier
Securities Corp., One East Liberty, Third Floor, Reno, Nevada 89501; Tel:
1-800-887-8671. This Statement of Additional Information contains additional and
more detailed information about the operations and activities of the Large Cap
Growth Fund, a portfolio of the Touchstone Strategic Trust (the "Acquiring
Fund") and the operations and activities of the Portfolio and the Millennium
Portfolio.
The combined Prospectus/Proxy Statement describes certain transactions
contemplated by the proposed merger of the Portfolio and of the Millennium
Portfolio into the Acquiring Fund (the "Reorganization") whereby the Acquiring
Fund would acquire all of the assets of the Portfolio and of the Millennium
Portfolio in exchange solely for shares of beneficial interest in the Acquiring
Fund and the assumption by the Acquiring Fund of all of the valid liabilities of
the Portfolio and of the Millennium Portfolio.
77
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PROSPECTUS OF TOUCHSTONE STRATEGIC TRUST DATED AUGUST 1, 2002 (incorporated
herein by reference to
Registrant's August 1, 2002 N-1A post-effective amendment No. 47 EDGAR
filing)..............................
STATEMENT OF ADDITIONAL INFORMATION FOR TOUCHSTONE STRATEGIC TRUST DATED AUGUST
1, 2002 (incorporated herein by reference to Registrant's August 1, 2002 N-1A
post-effective amendment No. 47 EDGAR filing).......
PROSPECTUS OF THE NAVELLIER PERFORMANCE FUNDS DATED MAY 1, 2003 (incorporated
herein by reference to the April 30, 2003 filing on form N-1A by the Navellier
Performance Funds, post-effective amendment No. 25 EDGAR filing
STATEMENT OF ADDITIONAL INFORMATION FOR THE NAVELLIER PERFORMANCE FUNDS DATED
MAY 1, 2003 (incorporated herein by reference to the April 30, 2003 filing on
form N-1A by the Navellier Performance Funds, post-effective amendment No. 25
EDGAR filing)
PROSPECTUS OF THE NAVELLIER MILLENNIUM FUNDS DATED MAY 1, 2003 (incorporated
herein by reference to the April 30, 2003 filing on form N-1A by The Navellier
Millennium Funds, post-effective amendment No. 9 EDGAR filing)
STATEMENT OF ADDITIONAL INFORMATION FOR THE NAVELLIER MILLENNIUM FUNDS DATED MAY
1, 2003 (incorporated by reference to the April 30, 2003 filing on form N-1A by
The Navellier Millennium Funds post-effective amendment No. 9 EDGAR filing)
CURRENT AUDITED ANNUAL REPORT OF TOUCHSTONE STRATEGIC TRUST AS OF MARCH 31, 2003
(incorporated by reference to the March 31, 2002 filing on form N-1A
post-effective amendment No. 47 EDGAR filing)
CURRENT AUDITED ANNUAL REPORT OF THE NAVELLIER PERFORMANCE FUNDS AS OF DECEMBER
31, 2002 (incorporated herein by reference to the April 30, 2003 filing on form
N-1A post effective amendment No. 25 EDGAR filing).......
CURRENT AUDITED ANNUAL REPORT OF THE NAVELLIER MILLENNIUM FUNDS AS OF DECEMBER
31, 2002 (incorporated herein by reference to the April 30, 2003 filing on form
N-1A post effective amendment No. 9 EDGAR filing)................
Pro Forma Financial
Statements.....................................................................
78
NAVELLIER PERFORMANCE FUNDS' LARGE CAP GROWTH PORTFOLIO
AND
NAVELLIER MILLENNIUM FUNDS' LARGE CAP GROWTH PORTFOLIO
AND
TOUCHSTONE STRATEGIC TRUST'S LARGE CAP GROWTH FUND
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
December 31, 2002
79
PORTFOLIO OF INVESTMENTS
DECEMBER 31,2002
(UNAUDITED)
TST NAVELLIER MILLENNIUM NAVELLIER PERFORMANCE
LARGE CAP GROWTH FUND LARGE CAP VALUE PORTFOLIO LARGE CAP GROWTH PORTFOLIO
SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE
------------------------- ------------------------- --------------------------
COMMON STOCKS AND EQUITY INTERESTS
BASIC MATERIALS
Semiconductors and Related
Applied Materials, Inc. - - 2,830 36,874 37,700 491,231
--------- ------- ----------
ENERGY
Oilfield Equipment
BJ Services Co. 27,100 875,601 - - - -
Weatherford Intl Ltd 10,600 423,258 - - - -
--------- ------- ----------
1,298,859 - - - -
INDUSTRIAL
Industrial Diversified
3M Co. 4,650 573,345 - - - -
--------- ------- ----------
CONSUMER, CYCLICAL
Automotive
Nissan Motor Co. Ltd. - - 1,770 27,223 24,800 381,424
--------- ------- ----------
Entertainment
Fox Entertainment Group, Inc. - - 1,120 29,042 17,125 444,051
--------- ------- ----------
Media Publishing
Viacom Inc. - Class A 22,250 908,023 - - - -
--------- ------- ----------
Other Recreation
Harley-Davidson, Inc. 19,200 887,040 585 27,027 8,500 392,700
--------- ------- ----------
Restaurants
Darden Restaurants Inc. 22,450 459,102 - - - -
--------- ------- ----------
Retailers, Apparel
Nike - - 170 7,560 9,800 137,857
--------- ------- ----------
Retailers, Broadline
Kohls Corp 15,850 886,807 310 17,345 4,050 226,598
Walgreen Co. 20,000 583,800 - - - -
The TJX Companies, Inc. - - 1,580 30,842 19,000 370,880
Wal-Mart Stores, Inc. 22,750 1,149,10 555 28,032 9,500 479,845
--------- ------- ----------
2,619,710 76,219 1,077,323
Retailers, Specialty
Bed Bath & Beyond Inc. 28,050 968,567 510 17,610 7,975 275,377
Lowe's Companies, Inc. 25,000 937,500 500 18,750 6,700 251,250
Staples, Inc. 27,200 497,760 - - - -
--------- ------- ----------
2,403,827 36,360 526,627
CONSUMER, NON-CYCLICAL
Food, Beverage and Tobacco
Sysco Corp. - - 590 17,576 8,775 261,407
Wm. Wrigley Jr. Co. - - 360 19,757 5,500 301,840
Anheuser-Busch Co., Inc. 8,000 387,200 - - - -
Pepsico, Inc. 14,300 603,746 - - - -
--------- ------- ----------
990,946 37,333 563,247
Consumer Products and Services
The Clorox Co. - - 735 30,319 10,000 412,500
eBay, Inc. - - 640 43,405 8,550 579,861
Apollo Group Inc. 13,850 609,400 - - - -
--------- ------- ----------
609,400 73,724 992,361
Food Retailers
Whole Foods Market Inc. 8,000 421,840 - - - -
--------- ------- ----------
PRO FORMA TST
ADJUSTMENTS LARGE CAP GROWTH FUND(A)
SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE
------------------------ ---------------------------
COMMON STOCKS AND EQUITY INTEREST
BASIC MATERIALS
Semiconductors and Related
Applied Materials, Inc. - - 40,530 528,105
---------
ENERGY
Oilfield Equipment
BJ Services Co. - - 27,100 875,601
Weatherford Intl Ltd - - 10,600 423,258
- - ---------
- 1,298,859
INDUSTRIAL
Industrial Diversified
3M Co. - - 4,650 573,345
---------
CONSUMER, CYCLICAL
Automotive
Nissan Motor Co. Ltd. - - 26,570 408,647
---------
Entertainment
Fox Entertainment Group, Inc - - 18,245 473,093
---------
Media Publishing
Viacom Inc. - Class A - - 22,250 908,023
---------
Other Recreation
Harley-Davidson, Inc. - - 28,285 1,306,767
---------
Restaurants
Darden Restaurants Inc. - - 22,450 459,102
---------
Retailers, Apparel
Nike - - 9,970 145,417
---------
Retailers, Broadline
Kohls Corp - - 20,210 1,130,750
Walgreen Co. - - 20,000 583,800
The TJX Companies, Inc. - - 20,580 401,722
Wal-Mart Stores, Inc. - - 32,805 1,656,980
---------
3,773,252
Retailers, Specialty
Bed Bath & Beyond Inc. - - 36,535 1,261,554
Lowe's Companies, Inc. - - 32,200 1,207,500
Staples, Inc. - - 27,200 497,760
---------
- - 2,966,814
CONSUMER, NON-CYCLICAL
Food, Beverage and Tobacco
Sysco Corp. - - 9,365 278,983
Wm. Wrigley Jr. Co. - - 5,860 321,597
Anheuser-Busch Co., Inc. - - 8,000 387,200
Pepsico, Inc. - - 14,300 603,746
---------
1,591,526
Consumer Products and Services
The Clorox Co. - - 10,735 442,819
eBay, Inc. - - 9,190 623,266
Apollo Group Inc. - - 13,850 609,400
---------
1,675,485
Food Retailers
Whole Foods Market Inc. - - 8,000 421,840
---------
NAVELLIER PERFORMANCE LARGE CAP GROWTH PORTFOLIO
PRO FORMA COMBINING
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2002
(UNAUDITED)
TST NAVELLIER MILLENNIUM NAVELLIER PERFORMANCE
LARGE CAP GROWTH FUND LARGE CAP VALUE PORTFOLIO LARGE CAP GROWTH PORTFOLIO
SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE
------------------------ ------------------------- --------------------------
Health Care Providers
Tenet Healthcare Corp. 25,800 423,120 - - - -
--------- ---------- ---------
Healthcare Products and Services
Forest Laboratories, Inc. - - 365 35,850 4,825 473,912
Johnson & Johnson - - 415 22,290 7,200 386,712
--------- ---------- ---------
- 58,140 860,624
Household Products (Non-Durable)
Colgate-Palmolive Co. 18,700 980,441 - - - -
Procter & Gamble Company 6,850 588,689 - - - -
--------- ---------- ---------
1,569,130 - -
Medical Supplies
Stryker Corp. 460 30,875 4,550 305,396
Cardinal Health Inc. 18,300 1,083,177 - - - -
Medtronic Inc. 28,800 1,313,280 - - - -
--------- ---------- ---------
2,396,457 30,875 305,396
Pharmaceuticals
Amgen, Inc. 25,000 1,208,500 - - - -
Caremark Rx Inc. 43,500 706,875 - - - -
Johnson & Johnson 21,250 1,141,337 - - - -
Lilly (Eli) & Co. 8,800 558,800 - - - -
Pfizer, Inc. 40,800 1,247,256 - - - -
--------- ---------- ---------
4,862,768 - -
TECHNOLOGY
Computer Equipment
Cisco Systems, Inc. - - 1,800 23,580 23,875 312,762
Dell Computer Corp. - - 1,690 45,191 28,500 762,090
Emulex Corp. - - 900 16,695 15,100 280,105
Hewlett-Packard Co. - - 1,375 23,870 18,375 318,990
International Business
Machines Corp. - - 575 44,563 7,500 581,250
--------- ---------- ---------
- 153,899 2,255,197
Computers & Information
Dell Computer Corp 29,900 799,526 - - - -
SEI Investments 30,400 826,272 - - - -
The Bisys Group, Inc. 32,150 511,185 - - - -
--------- ---------- ---------
2,136,983 - -
Semiconductor & Related
Intel Corp. 31,100 484,227 - - - -
Qlogic Corporation 18,000 621,180 - - - -
--------- ---------- ---------
1,105,407 - -
PROFORMA TST
ADJUSTMENTS LARGE CAP GROWTH FUND(A)
SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE
------------------------ ------------------------
Health Care Providers
Tenet Healthcare Corp. - - 25,800 $ 423,120
----------
Healthcare Products and Services
Forest Laboratories, Inc. - - 5,190 509,762
Johnson & Johnson - - 7,615 409,002
----------
- - 918,764
Household Products (Non-Durable)
Colgate-Palmolive Co. - - 18,700 980,441
Procter & Gamble Company - - 6,850 588,689
----------
- - 1,569,130
Medical Supplies
Stryker Corp. - - 5,010 336,271
Cardinal Health Inc. - - 18,300 1,083,177
Medtronic Inc. - - 28,800 1,313,280
----------
- - 2,732,728
Pharmaceuticals
Amgen, Inc. - - 25,000 1,208,500
Caremark Rx Inc. - - 43,500 706,875
Johnson & Johnson - - 21,250 1,141,337
Lilly (Eli) & Co. - - 8,800 558,800
Pfizer, Inc. - - 40,800 1,247,256
----------
- - 4,862,768
TECHNOLOGY
Computer Equipment
Cisco Systems, Inc. - - 25,675 336,342
Dell Computer Corp. - - 30,190 807,281
Emulex Corp. - - 16,000 296,800
Hewlett-Packard Co. - - 19,750 342,860
International Business
Machines Corp. - - 8,075 625,813
----------
- - 2,409,096
Computers & Information
Dell Computer Corp - - 29,900 799,526
SEI Investments - - 30,400 826,272
The Bisys Group, Inc. - - 32,150 511,185
----------
- - 2,136,983
Semiconductor & Related
Intel Corp. - - 31,100 484,227
Qlogic Corporation - - 18,000 621,180
----------
- - 1,105,407
81
NAVELLIER PERFORMANCE LARGE CAP GROWTH PORTFOLIO
PRO FORMA COMBINING
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2002
(UNAUDITED)
TST NAVELLIER MILLENNIUM NAVELLIER PERFORMANCE
LARGE CAP GROWTH FUND LARGE CAP VALUE PORTFOLIO LARGE CAP GROWTH PORTFOLIO
SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE
------------------------ ------------------------- --------------------------
Software & Processing
Yahoo! Inc. - 1,450 23,707 19,325 315,964
Affiliated Computer Svcs. 21,100 1,110,915 - - - -
Cisco Systems, Inc. 95,900 1,256,290 - - - -
First Data Corp. 15,000 531,150 820 29,036 12,275 434,658
Intuit Inc. 11,000 516,120 810 38,005 10,875 510,255
Microsoft Corp. 29,350 1,517,395 520 26,884 8,350 431,695
Sungard Data Systems 44,450 1,047,242 - - - -
Veritas Software Corp. 30,250 472,505 - - - -
---------- ----------- ----------
6,451,617 117,632 1,692,572
Telecommunications Equipment and Services
Nextel Communications, Inc. - - 3,150 36,383 42,275 488,276
QUALCOMM, Inc. - - 1,170 42,576 15,900 578,601
---------- ----------- ----------
- 78,959 1,066,877
FINANCIAL SERVICES
Banking, Major
Bank of New York Co., Inc. 29,900 716,404 - - - -
---------- ----------- ----------
716,404 - -
Financial Services, Diversified
Freddie Mac 22,500 1,328,625 - - - -
SLM Corp. 12,150 1,261,899 470 48,814 6,900 716,634
---------- ----------- ----------
2,590,524 48,814 716,634
Insurance
The Allstate Corp. - - - - 10,550 390,244
AFLAC, Inc. - - 660 24,413 - -
The Progressive Corp. - - 525 26,056 8,700 431,781
---------- ----------- ----------
- 50,469 822,025
Regional Banks
Fifth Third Bancorp 15,300 895,815 - - - -
---------- ----------- ----------
895,815 - -
CONGLOMERATES
Conglomerates
General Electric Co. 37,450 911,908 - - -
---------- ----------- ----------
---------- ----------- ----------
TOTAL COMMON STOCKS AND EQUITY INTERESTS 35,232,225 890,150 12,726,146
---------- ----------- ----------
GOVERNMENT AGENCY OBLIGATIONS
FNMA Discount Notes, 1.25%, due 1/2/03 - - 104,000 103,993 - -
---------- ----------- ----------
CASH EQUIVALENTS
Money Market Fund
FBR Fund for Government Investors - - 887 887 1,189,273 1,189,273
---------- ----------- ----------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT MARKET 35,232,225 995,030 13,915,419
---------- ----------- ----------
TOTAL INVESTMENTS AT COST 42,106,795 1,052,830 14,796,893
---------- ----------- ----------
PRO FORMA TST
ADJUSTMENTS LARGE CAP GROWTH FUND(A)
SHARES/PAR MARKET VALUE SHARES/PAR MARKET VALUE
------------------------ ------------------------
Software & Processing
Yahoo! Inc. - - 20,775 $ 339,671
Affiliated Computer Svcs. - - 21,100 1,110,915
Cisco Systems, Inc. - - 95,900 1,256,290
First Data Corp. - - 28,095 994,844
Intuit Inc. - - 22,685 1,064,380
Microsoft Corp. - - 38,220 1,975,974
Sungard Data Systems - - 44,450 1,047,242
Veritas Software Corp. - - 30,250 472,505
------------
- - 8,261,821
Telecommunications Equipment and Services
Nextel Communications, Inc. - - 45,425 524,659
QUALCOMM, Inc. - - 17,070 621,177
------------
- - 1,145,836
FINANCIAL SERVICES
Banking, Major
Bank of New York Co., Inc. - - 29,900 716,404
------------
- - 716,404
Financial Services, Diversified
Freddie Mac - - 22,500 1,328,625
SLM Corp. - - 19,520 2,027,347
------------
- - 3,355,972
Insurance
The Allstate Corp. - - 10,550 390,244
AFLAC, Inc. - - 660 24,413
The Progressive Corp. - - 9,225 457,837
------------
- - 872,494
Regional Banks
Fifth Third Bancorp - - 15,300 895,815
------------
- - 895,815
CONGLOMERATES
Conglomerates
General Electric Co. - - 37,450 911,908
------------
------------
TOTAL COMMON STOCKS AND EQUITY INTERESTS 48,848,521
------------
GOVERNMENT AGENCY OBLIGATIONS
FNMA Discount Notes, 1.25%, due 1/2/03 - - 104,000 103,993
------------
CASH EQUIVALENTS
Money Market Fund
FBR Fund for Government Investors - - 1,190,160 1,190,160
------------
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT MARKET - $ 50,142,674
------- ------------
TOTAL INVESTMENTS AT COST - $ 57,956,518
------- ------------
- ---------------------
(A) Navellier Performance Large Cap Growth Portfolio is the accounting survivor,
however the surviving Fund name is TST Large Cap Growth Fund.
82
NAVELLIER PERFORMANCE LARGE CAP GROWTH PORTFOLIO
PRO FORMA COMBINING
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2002
(UNAUDITED)
PRO FORMA FINANCIAL STATEMENTS
Navellier Navellier
TST Millennium Performance TST
Large Cap Growth Large Cap Growth Large Cap Growth Pro Forma Large Cap Growth
Fund Portfolio Portfolio Adjustments Fund (A)
---------------- --------------- ---------------- ------------ ----------------
ASSETS
Investments, at cost $ 42,106,795 $ 1,052,830 $ 14,796,893 $ - $ 57,956,518
============= ============= ============= ============ =============
Investments, at market value $ 35,232,225 $ 995,030 $ 13,915,419 $ - $ 50,142,674
Receivable for securities sold 329,163 873 - - 330,036
Dividend and interest receivable 19,244 455 7,123 - 26,822
Other Assets 23,575 - 592 - 24,167
------------- ------------- ------------- ------------ -------------
Total Assets 35,604,206 996,358 13,923,134 - 50,523,698
------------- ------------- ------------- ------------ -------------
LIABILITIES
Payable for securities purchased 147,320 - - - 147,320
Bank overdraft 322,221 - - - 322,221
Payable for Fund shares repurchased 44,506 20 76,662 - 121,188
Advisory and distribution fees payable - 870 10,102 - 10,972
Accrued expenses and other liabilities 100,455 253 4,906 - 105,614
------------- ------------- ------------- ------------ -------------
Total Liabilities 614,501 1,143 91,670 - 707,314
------------- ------------- ------------- ------------ -------------
Net Assets $ 34,989,705 $ 995,215 $ 13,831,464 $ - $ 49,816,384
============= ============= ============= ============ =============
ANALYSIS OF NET ASSETS
Accumulated paid in capital $ 75,392,621 $ 1,471,568 $ 35,591,483 $ - 112,455,672
Distributions in excess of net investment
income (321,214) - - - (321,214)
Accumulated net realized loss on investments (33,207,132) (418,553) (20,878,545) - (54,504,230)
Unrealized depreciation of investments (6,874,570) (57,800) (881,474) - (7,813,844)
------------- ------------- ------------- ------------ -------------
Net Assets $ 34,989,705 $ 995,215 $ 13,831,464 $ - $ 49,816,384
============= ============= ============= ============ =============
BY CLASS:
NET ASSETS:
CLASS A $ 33,843,198 $ 355,316 $ 13,831,464 $ - $ 48,029,978
CLASS B 54,017 423,950 - - 477,967
CLASS C 1,092,490 215,949 - - 1,308,439
------------- ------------- ------------- ------------ -------------
$ 34,989,705 $ 995,215 $ 13,831,464 $ - $ 49,816,384
============= ============= ============= ============ =============
OUTSTANDING SHARES:
CLASS A 4,202,127 76,781 1,134,468 (1,473,452) 3,939,924
CLASS B 7,090 92,912 - (60,792) 39,210
CLASS C 143,907 47,449 - (84,019) 107,337
------------- ------------- ------------- ------------ -------------
4,353,124 217,142 1,134,468 (1,618,263) 4,086,471
============= ============= ============= ============ =============
NET ASSET VALUE PER SHARE:
CLASS A $ 8.05 $ 4.63 $ 12.19 $ 12.19
------------- ------------- ============= -------------
CLASS B $ 7.62 $ 4.56 $ 12.19
------------- ------------- -------------
CLASS C $ 7.59 $ 4.55 $ 12.19
------------- ------------- -------------
(A) The Navellier Performance Large Cap Growth Portfolio is the accounting
survivor, however the surviving Fund name and legal survivor is TST Large
Cap Growth.
83
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
(UNAUDITED)
NAVELLIER NAVELLIER
TST MILLENNIUM PERFORMANCE
LARGE CAP GROWTH LARGE CAP VALUE LARGE CAP GROWTH
FUND FUND PORTFOLIO ADJUSTMENTS
---------------- --------------- ---------------- ------------
INVESTMENT INCOME
Dividend Income $ 238,986 $ 4,529 $ 103,515 $ -
Interest Income 20,792 1,574 5,063 -
------------ ------------ ------------ ------------
Total Income 259,778 6,103 108,578 -
------------ ------------ ------------ ------------
EXPENSES
Management fee 398,485 7,883 135,879 (168,624)(A)
Distribution Fees - Class A 129,171 789 40,440 (50,325)(A)
Distribution Fees - Class B 414 2,941 - 1,424 (A)
Distribution Fees - Class C 14,215 1,788 - (2,919)(A)
Administration fees 9,073 - 40,440 (22,114)(A)
Accounting fees 51,492 - - (27,492)(A)
Audit and legal fees 23,362 8,964 16,054 (18,380)(B)
Custodian fee 12,213 60,789 (E) 58,163 (E) (113,165)(B)
Directors/ Trustees fees 6,054 6,750 7,143 (13,893)(C)
Registration fees - 32,275 16,410 (48,685)(B)
Registration fees - Class A 7,890 - - -
Registration fees - Class B 11,404 - - -
Registration fees - Class C 11,611 - - -
Report Printing 29,175 1,729 15,569 (11,473)(B)
Transfer Agent Fees - Class A 32,639 - - 13,361 (A)
Transfer Agent Fees - Class B 12,049 - - (49)(A)
Transfer Agent Fees - Class C 11,983 - - 17 (A)
Other expense 35,462 1,156 24,692 (11,310)(D)
------------ ------------ ------------ ------------
796,692 125,064 354,790 (473,627)
Fees waived (Class A) (10,683) (43,852) (113,766) 73,346 (A)
Fees waived (Class B) (23,324) (40,973) - 42,881 (A)
Fees waived (Class C) (16,837) (24,868) - 19,751 (A)
------------- ------------ ------------ ------------
Total expenses, net of fees waived 745,848 15,371 241,024 (337,649)
-------------
------------ ------------ ------------
NET INVESTMENT INCOME (486,070) (9,268) (132,446) 337,649
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on investments $(17,874,899) $ (126,421) $ (2,363,379) $ -
Change in unrealized appreciation (depreciation) (6,475,548) (100,611) (2,449,986) -
of investments - - - -
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (24,350,447) (227,032) (4,813,365) -
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $(24,836,518) $ (236,300) $ (4,945,811) $ 337,649
============ ============ ============ ============
TST (BASIS POINTS)
LARGE CAP GROWH PRO FORMA
FUND (F) COMBINED
------------------------------------
INVESTMENT INCOME
Dividend Income $ 347,030
Interest Income 27,429
------------
Total Income 374,459
------------
EXPENSES
Management fee 373,623 0.7500%
Distribution Fees - Class A 120,075 0.2410%
Distribution Fees - Class B 4,779 0.0096%
Distribution Fees - Class C 13,084 0.0263%
Administration fees 27,399 0.0550%
Accounting fees 24,000 0.0482%
Audit and legal fees 30,000 0.0602%
Custodian fee 18,000 0.0361%
Directors/ Trustees fees 6,054 0.0122%
Registration fees - 0.0000%
Registration fees - Class A 7,890 0.0158%
Registration fees - Class B 11,404 0.0229%
Registration fees - Class C 11,611 0.0233%
Report Printing 35,000 0.0703%
Transfer Agent Fees - Class A 46,000 0.0923%
Transfer Agent Fees - Class B 12,000 0.0241%
Transfer Agent Fees - Class C 12,000 0.0241%
Other expense 50,000 0.1004%
-------------------------------
802,919 1.6118%
Fees waived (Class A) (94,955) -0.1906%
Fees waived (Class B) (21,416) -0.0430%
Fees waived (Class C) (21,954) -0.0441%
-------------------------------
Total expenses, net of fees waived 664,594 1.3341%
-------------------------------
NET INVESTMENT INCOME (290,135)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on investments $(20,364,699)
Change in unrealized appreciation (depreciation) (9,026,145)
of investments -
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (29,390,844)
------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $(29,680,980)
============
(A) Based on contract in effect for the legal surviving fund. Management Fee is
.75%. Distribution Fee is Class A .25%, Class B 1.00%, Class C 1.00%.
(B) Decrease due to the elimination of duplicative expenses achieved by merging
the funds. (C)Based on director compensation plan for the legal surviving
fund.
(D) Includes pricing, Insurance expense and T/A out-of-pocket fees.
(E) For Navellier funds includes Accounting, Custody and Transfer Agent fees.
(F) Navellier Performance Large Cap Growth Portfolio is the accounting
survivor, however the surviving Fund name is TST Large Cap Growth.
84
NAVELLIER PERFORMANCE FUNDS
LARGE CAP GROWTH PORTFOLIO
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
DESCRIPTION OF THE FUND
The Acquiring Fund, Navellier Performance Funds Large Cap
Growth Portfolio, is registered under the Investment Company Act of 1940, as
amended, as an open-end, non-diversified management company portfolio consisting
of Class A shares. The Target Funds, Navellier Millennium Large Cap Growth
Portfolio and Touchstone Strategic Trust Large Cap Growth Fund are registered
under the Investment Company Act of 1940, as amended, as an open-end, management
investment company. Navellier Millennium Large Cap Growth Portfolio, consisting
of Class A, B and C shares, is a non-diversified open-end management company.
Touchstone Strategic Large Cap Growth Fund, consisting of Class A, B and C
shares is a diversified open-end management company.
BASIS OF COMBINATION
The accompanying unaudited pro forma financial statements are
presented to show the effect of the transfer of assets and liabilities of the
non-surviving funds, the Navellier Millennium Funds Large Cap Value Portfolio
and the Touchstone Strategic Trust Large Cap Growth Fund, in exchange for shares
of the surviving fund (for purposes of maintaining the financial statements and
performance), the Navellier Performance Funds Large Cap Growth Portfolio.
Under the terms of the Plan of Reorganization, the combination
of the surviving and non-surviving funds will be accounted for by the method of
accounting for tax-free mergers of investment companies. The statement of assets
and liabilities and the related statement of operations of the surviving and
non-surviving funds have been combined as of and for the twelve months ended
December 31, 2002. In accordance with accounting principles generally accepted
in the United States, the historical cost of investment securities will be
carried forward to the surviving fund and the results of operations for
pre-combination periods of the surviving fund will not be restated.
At the time of the combination, the combined fund will change
its name to the Touchstone Strategic Trust Large Cap Growth Fund and shares of
the surviving fund will actually represent shares of the Navellier Performance
Funds Large Cap Growth Portfolio. Initially, the new Class B and Class C shares
net asset values will equal the Navellier Performance Funds Large Cap Growth
Portfolio net asset value. Performance history for the Class B and Class C
shares will not be carried forward from either of the existing target Funds
Class B and Class C shares, instead performance history will be initiated upon
consummation of the merger.
The accompanying pro forma financial statements should be read
in conjunction with the historical financial statements of the funds included or
incorporated by reference in the Statement of Additional Information.
PORTFOLIO VALUATION
Equity securities listed on national securities exchanges are valued at
the last sale price as of the close of business on the day the securities are
being valued. Over-the-counter securities are valued at the last sales price.
Debt securities with maturities of 60 days or less are valued at amortized cost.
In the absence of readily available market quotations, securities are valued at
fair value under procedures established by and under the general supervision of
the Board of Trustees.
CAPITAL SHARES
The pro forma net asset value per share assumes the issuance of shares
of Acquiring Fund that would have been issued at December 31, 2002, in
connection with the proposed reorganization. The number of shares assumed to be
issued is equal to the net asset value of shares of each Target Fund, as of
December 31, 2002, divided by the net asset
85
value per share of the shares of Acquiring Fund as of December 31, 2002. The pro
forma number of shares outstanding for the combined fund consists of the
following at December 31, 2002:
- --------------------------------------------------------------------------
SHARES OF ADDITIONAL SHARES TOTAL OUTSTANDING
ACQUIRING FUND ASSUMED ISSUED SHARES
- --------------------------------------------------------------------------
Pre-Combination In Reorganization Post-Combination
- --------------------------------------------------------------------------
1,134,468 2,952,003 4,086,471
- --------------------------------------------------------------------------
ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
FEDERAL INCOME TAXES
Each fund has elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, the Acquiring Fund
intends to continue to qualify as a regulated investment company, if such
qualification is in the best interest of its shareholders, by complying with the
provisions available to certain investment companies, as defined in applicable
sections of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from all, or substantially all, Federal income
taxes.
The identified cost of investments for the funds is substantially the same for
both financial accounting and Federal income tax purposes. The tax cost of
investments will remain unchanged for the combined fund.
86
TOUCHSTONE STRATEGIC TRUST
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION
(a) Article VI of the Restated Agreement and Declaration of Trust
of Touchstone Strategic Trust (the "Registrant") provides for
indemnification of officers and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers, etc.
The Trust shall indemnify each of its Trustees and officers, including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as
a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person") against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by any Covered Person in connection with the
defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative
body, in which such Covered Person may be or may have been involved as
a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having
been such a Trustee or Officer or Director and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office ("disabling conduct"). Anything herein contained to the
contrary notwithstanding, no Covered Person shall be indemnified for
any liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject unless (1) a final decision on the
merits is made by a court or other body before whom the proceeding was
brought that the Covered Person to be indemnified was not liable by
reason of disabling conduct or, (2) in the absence of such a decision,
a reasonable determination is made, based upon a review of the facts,
that the Covered Person was not liable by reason of disabling conduct,
by (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Company as defined in the Investment
Company Act of 1940 nor parties to the proceeding ("disinterested,
non-party Trustees"), or (b) an independent legal counsel in a written
opinion
Section 6.5 Advances of Expenses.
The Trust shall advance attorneys' fees or other expenses incurred by a
Covered Person in defending a proceeding, upon the undertaking by or on
behalf of the Covered Person to repay the advance unless it is
ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is met: (i)
the Covered Person shall provide security for his undertaking, (ii) the
Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the disinterested
non-party Trustees of the Trust, or an independent legal counsel in a
written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there
is reason to believe that the Covered Person ultimately will be found
entitled to indemnification .
Section 6.6 Indemnification Not Exclusive, etc.
The right of indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As
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used in this Article VI, "Covered Person" shall include such person's
heirs, executors and administrators, an "interested Covered Person" is
one against whom the action, suit or other proceeding in question or
another action, suit or other proceeding on the same or similar grounds
is then or has been pending or threatened, and a "disinterested" person
is a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened. Nothing
contained in this article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and
other persons may be entitled by contract or otherwise under law, nor
the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
(b) The Registrant maintains a mutual fund and investment advisory
professional and Trustees and officers liability policy. The policy
provides coverage to the Registrant, its trustees and officers,
Touchstone Advisors, Inc. ("Touchstone") and sub-advisors. Coverage
under the policy includes losses by reason of any act error, omission,
misstatement, misleading statement, neglect or breach of duty. The
Registrant may not pay for insurance which protects the Trustees and
officers against liabilities arising from action involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their offices.
The Advisory Agreement and the Subadvisory Agreements provide that
Touchstone (or a Sub-advisor) shall not be liable for any act or
omission in the course of rendering services, absent willful
misfeasance, bad faith or gross negligence or reckless disregard by
Touchstone (or a Sub-advisor) of its obligations under the Agreement.
ITEM 16. EXHIBITS
(1) Declaration of Trust of Registrant.
(2) By-Laws of Registrant.
(3) Voting Trust Agreement. [Not applicable]
(4) Agreement and proposed Plan of Reorganization. (Filed herewith as
Appendix A to Part A)
(5) Specimen share certificate.
(6) Form of Management Contract between the Large Cap Growth Fund (a
portfolio of the Touchstone Strategic Trust) and Touchstone Advisors,
Inc. (Filed herewith as Appendix B to Part A.)
(6)(a) Form of Investment Sub-advisory Contract between Touchstone Advisors,
Inc. and Navellier Management, Inc. if the merger is approved. (Filed
herewith as Appendix C to Part A.)
(6)(c) Form of management Contract
(7) Form of Underwriting Agreement.
(8) Bonus, Profit Sharing, or Pension Plans. [Not applicable]
(9) Form of Custody Agreement between Registrant and Integrated Fund
Services, Inc.
(10) Form of Rule 12b-1 Distribution Plan. Filed as Appendix D to Part A.
(11) Opinion of legal counsel regarding the legality of securities being
registered.
(12) Opinion of legal counsel regarding certain tax matters and consequences
to shareholders discussed in Part A.
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(13) Form of Administrative Services Agreement between Registrant and
Navellier Management, Inc.
(14) Consent of Tait, Weller & Baker, independent auditors for The Navellier
Performance Funds and for Navellier Millennium Funds.
(14)(a) Consent of Ernst & Young LLP, independent accountants for Registrant.
(14)(c) Consent of Sullivan & Worcester LLP.
(14)(d) Consent of Sullivan & Worcester LLP.
(15) Financial Statements Omitted Pursuant to Item 14(a)(1). [not
applicable]
(16) Powers of Attorney.
(17) Rule 24f-2 Notice. [Not applicable]
- -------------------------------------------------------------------------------
(1) Incorporated by reference to Post-Effective Amendment No. __ to the
Registrant's Registration Statement on Form N-1A previously filed
_____, 19__.
(2) None.
(3) Incorporated by reference to Registrant's 24f-2 Notice filed February
28, 1998.
(4) Incorporated by reference to Pre-effective Amendment No. __ to
Registrant's N-14 EDGAR filing on June __, 2003.
(5) Incorporated by reference to Post-effective Amendment No. __ to
Registrant's Registration Statement on Form N-1A filed _____ __, 19__
(6) Filed herewith.
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ITEM 17 UNDERTAKINGS
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is
part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c)
under the Securities Act of 1933, as amended, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1), above, will be filed as part of an amendment to
this Registration Statement and will not be used until the
amendment is effective, and that, in determining any liability
under the Securities Act of 1933, as amended, each post-effective
amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering
of them.
- -----------------------------
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SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of the Registrant, in the City of Cincinnati
and the State of Ohio, on the ___________th day of June, 2003.
Registrant:
TOUCHSTONE STRATEGIC TRUST
BY: _________________________________________
Patrick T. Bannigan
President
_________________________________________
Terrie A. Wiedenheft
Controller
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
________________________________ Trustee June ______, 2003
Jill T. McGruder
________________________________
Terrie A. Wiedenheft Chief Financial Officer June ______, 2003
________________________________ Trustee June ______, 2003
John F. Barrett
________________________________ Trustee June ______, 2003
J. Leland Brewster II
________________________________ Trustee June ______, 2003
William O. Coleman
________________________________ Trustee June ______, 2003
Phillip R. Cox
________________________________ Trustee June ______, 2003
H. Jerome Lerner
________________________________ Trustee June ______, 2003
Oscar P. Robertson
________________________________ Trustee June ______, 2003
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Robert E. Stautberg
________________________________ Trustee June ______, 2003
John P. Zanotti
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EXHIBITS TO
PART C
(14) Consent of Tait, Weller & Baker, independent auditors for The
Navellier Performance Funds and for Navellier Millennium Funds.
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EXHIBIT 11
OPINION AND CONSENT OF
SULLIVAN & WORCESTER LLP
94