0001144204-13-048351.txt : 20130829 0001144204-13-048351.hdr.sgml : 20130829 20130829102132 ACCESSION NUMBER: 0001144204-13-048351 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20130630 FILED AS OF DATE: 20130829 DATE AS OF CHANGE: 20130829 EFFECTIVENESS DATE: 20130829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOUCHSTONE STRATEGIC TRUST CENTRAL INDEX KEY: 0000711080 IRS NUMBER: 311276717 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03651 FILM NUMBER: 131067593 BUSINESS ADDRESS: STREET 1: 303 BROADWAY STREET 2: SUITE 1100 CITY: CINCINNATI STATE: OH ZIP: 45202-4203 BUSINESS PHONE: 5133628000 MAIL ADDRESS: STREET 1: 303 BROADWAY STREET 2: SUITE 1100 CITY: CINCINNATI STATE: OH ZIP: 45202-4203 FORMER COMPANY: FORMER CONFORMED NAME: COUNTRYWIDE STRATEGIC TRUST DATE OF NAME CHANGE: 19970303 FORMER COMPANY: FORMER CONFORMED NAME: MIDWEST STRATEGIC TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FINANCIAL INDEPENDENCE TRUST DATE OF NAME CHANGE: 19900604 0000711080 S000035678 Touchstone Dynamic Equity Fund C000109234 A TDEAX C000109235 C TDECX C000109236 Institutional TDELX C000109237 Y TDEYX 0000711080 S000035686 Touchstone Conservative Allocation Fund C000109266 A TSAAX C000109267 C TSACX C000109268 Institutional TVAIX C000109269 Y TSAYX 0000711080 S000035687 Touchstone Balanced Allocation Fund C000109270 A TBAAX C000109271 C TBACX C000109272 Institutional TBAIX C000109273 Y TBAYX 0000711080 S000035688 Touchstone Moderate Growth Allocation Fund C000109274 A TSMAX C000109275 C TSMCX C000109276 Institutional TSMIX C000109277 Y TSMYX 0000711080 S000035689 Touchstone Growth Allocation Fund C000109278 A TGQAX C000109279 C TGQCX C000109280 Institutional TGQIX C000109281 Y TGQYX N-CSRS 1 v353785_ncsrs.htm SEMI-ANNUAL REPORT

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number 811-03651

 

Touchstone Strategic Trust – December Funds

 

(Exact name of registrant as specified in charter)

 

303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203

(Address of principal executive offices) (Zip code)

 

Jill T. McGruder
303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 800-638-8194

 

Date of fiscal year end: December 31

 

Date of reporting period: June 30, 2013

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 
 

 

 

Item 1. Reports to Stockholders.

 

The Report to Shareholders is attached herewith.

 

 

 

June 30, 2013

(Unaudited)

 

Semi-Annual Report

 

Touchstone Strategic Trust

 

Touchstone Dynamic Equity Fund

 

Touchstone Balanced Allocation Fund

 

Touchstone Conservative Allocation Fund

 

Touchstone Growth Allocation Fund

 

Touchstone Moderate Growth Allocation Fund

 

 

 
 

 

Table of Contents  

 

  Page
Tabular Presentation of Portfolios of Investments 3 - 4
Portfolios of Investments:  
Touchstone Dynamic Equity Fund 5
Touchstone Balanced Allocation Fund 8
Touchstone Conservative Allocation Fund 9
Touchstone Growth Allocation Fund 10
Touchstone Moderate Growth Allocation Fund 11
Statements of Assets and Liabilities 12 - 15
Statements of Operations 16 - 17
Statements of Changes in Net Assets 18 - 21
Statements of Changes in Net Assets - Capital Stock Activity 22 - 26
Statement of Cash Flows 27
Financial Highlights 28 - 47
Notes to Financial Statements 48 - 70
Other Items 71 - 75
Privacy Protection Policy 79

 

2
 

 

Tabular Presentation of Portfolios of Investments (Unaudited) 

June 30, 2013

 

The tables below provide each Fund’s sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments. 

 

Touchstone Dynamic Equity Fund

Sector Allocation*  (% of Net Assets) 
Long Positions     
Information Technology   22.4%
Consumer Discretionary   15.2 
Health Care   14.9 
Financials   14.7 
Energy   13.9 
Consumer Staples   11.9 
Industrials   10.6 
Materials   5.6 
Telecommunication Services   4.8 
Utilities   2.3 
Investment Fund   3.6 
Other Assets/Liabilities (Net)   0.0 
    119.9%
Short Positions and Written Options     
Information Technology   (4.9)
Energy   (3.6)
Consumer Discretionary   (3.1)
Health Care   (2.9)
Materials   (2.2)
Telecommunication Services   (2.2)
Call and Put Options   (0.6)
Consumer Staples   (0.4)
Industrials   0.0 
    (19.9)
Total   100.0%

 

Touchstone Balanced Allocation Fund

Sector Allocation  (% of Net Assets) 
Government/Corporate   23.5%
International Equity   13.8 
Value   11.9 
Growth   9.1 
Equity Income   6.1 
Balanced   5.0 
International Debt   5.0 
Blue Chip   4.1 
Emerging Market -Equity   3.8 
Various Assets   3.1 
Taxable -Money Market   3.1 
Value Small-Cap   3.0 
Corporate/Preferred -High Yield   3.0 
Sector Fund Real -Estate   2.9 
Growth Mid-Cap   2.0 
Growth Small- Cap   1.0 
Other Assets/Liabilities (Net)   (0.4)
Total   100.0%

 

* Sector classifications are based upon the Global Industry Classification Standard (GICS®).

 

3
 

 

Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)

 

Touchstone Conservative Allocation Fund

Sector Allocation  (% of Net Assets) 
Government/Corporate   44.8%
International Debt   8.1 
Balanced   7.1 
International Equity   6.0 
Equity Income   5.1 
Taxable-Money Market   5.1 
Growth   5.1 
Various Assets   5.1 
Value   5.1 
Blue Chip   3.0 
Corporate/Preferred-High Yield   3.0 
Sector Fund Real-Estate   2.0 
Value Small-Cap   1.0 
Emerging Market-Equity   1.0 
Other Assets/Liabilities (Net)   (1.5)
Total   100.0%


 

Touchstone Growth Allocation Fund

Sector Allocation  (% of Net Assets) 
International Equity   23.1%
Value   16.3 
Growth   11.2 
Emerging Market-Equity   8.6 
Government/Corporate   6.2 
Equity Income   6.1 
Value Small-Cap   6.1 
Sector Fund Real-Estate   5.8 
Growth Mid-Cap   5.1 
Blue Chip   4.1 
Value Mid-Cap   3.1 
Growth Small-Cap   3.1 
Various Assets   2.1 
Other Assets/Liabilities (Net)   (0.9)
Total   100.0%

 

Touchstone Moderate Growth Allocation Fund

Sector Allocation  (% of Net Assets) 
International Equity   16.9%
Government/Corporate   15.2 
Value   14.2 
Growth   10.1 
Emerging Market-Equity   6.6 
Equity Income   6.1 
Value Small-Cap   5.1 
Blue Chip   4.1 
Growth Mid-Cap   4.1 
Balanced   4.0 
Sector Fund Real-Estate   3.8 
Various Assets   2.1 
Value Mid-Cap   2.0 
Growth Small-Cap   2.0 
Corporate/Preferred-High Yield   2.0 
International Debt   2.0 
Other Assets/Liabilities (Net)   (0.3)
Total   100.0%

 

4
 

 

Portfolio of Investments 

Touchstone Dynamic Equity Fund – June 30, 2013 (Unaudited)

 

       Market 
   Shares   Value 
         
Common Stocks†— 116.3%          
           
Information Technology — 22.4%          
AOL, Inc.   7,177   $261,817 
Apple, Inc.   1,134    449,155 
Arrow Electronics, Inc.*   1,256    50,052 
Avnet, Inc.*   12,918    434,045 
Booz Allen Hamilton Holding Corp.   25,121    436,604 
Cisco Systems, Inc.   45,851    1,114,638 
Computer Sciences Corp.   27,065    1,184,635 
Dell, Inc.   4,456    59,488 
Harris Corp.   24,099    1,186,876 
Hewlett-Packard Co.   16,340    405,232 
Ingram Micro, Inc. - Class A*   30,732    583,601 
International Business Machines Corp.   13,774    2,632,349 
Microsoft Corp.   33,012    1,139,904 
Oracle Corp.   63,346    1,945,989 
SAIC, Inc.   53,256    741,856 
Seagate Technology PLC (Ireland)   6,242    279,829 
Symantec Corp.   25,221    566,716 
Western Digital Corp.   15,239    946,189 
         14,418,975 
           
Consumer Discretionary — 15.2%          
AutoNation, Inc.*   1,368    59,358 
Best Buy Co., Inc.   3,201    87,483 
Brinker International, Inc.   23,608    930,863 
Cablevision Systems Corp. - Class A   18,009    302,911 
Charter Communications, Inc.*   2,480    307,148 
CST Brands, Inc.*   2    62 
Delphi Automotive PLC (Channel Islands)   33,040    1,674,798 
Ford Motor Co.   32,893    508,855 
Goodyear Tire & Rubber Co. (The)*   78,359    1,198,109 
Home Depot, Inc. (The)   27,084    2,098,197 
Kohl's Corp.   1,119    56,521 
Liberty Global PLC (United Kingdom)*   1,650    122,232 
Macy's, Inc.   16,937    812,976 
Regal Entertainment Group   33,971    608,081 
Sears Holdings Corp.*   2,759    116,099 
Staples, Inc.   1,744    27,660 
Target Corp.   12,532    862,953 
         9,774,306 
           
Health Care — 14.9%          
AbbVie, Inc.   45,775    1,892,338 
Amgen, Inc.   21,012    2,073,044 
Cardinal Health, Inc.   35,255    1,664,036 
Covance, Inc.*   1,979    150,681 
Eli Lilly & Co.   23,401    1,149,457 
HCA Holdings, Inc.   15,724    567,007 
Life Technologies Corp.*   323    23,905 
Mylan, Inc.*   48,208    1,495,894 
Pfizer, Inc.   19,231    538,660 
         9,555,022 
           
Financials — 14.7%          
Allstate Corp. (The)   41,476    1,995,825 
American Express Co.   4,948    369,912 
Bank of America Corp.   55,526    714,064 
CBRE Group, Inc. - Class A*   2,503    58,470 
Citigroup, Inc.   28,101    1,348,005 
Fidelity National Financial, Inc.   7,474    177,956 
Jones Lang LaSalle, Inc.   4,117    375,223 
Legg Mason, Inc.   2,687    83,324 
Morgan Stanley   32,998    806,141 
NYSE Euronext   247    10,226 
Popular, Inc. (Puerto Rico)*   33,109    1,004,197 
Realogy Holdings Corp.*   5,928    284,781 
US Bancorp   60,451    2,185,304 
         9,413,428 
           
Energy — 13.9%          
Anadarko Petroleum Corp.   327    28,099 
Chevron Corp.   21,020    2,487,507 
ConocoPhillips   35,750    2,162,875 
Marathon Petroleum Corp.   9,986    709,605 
Murphy Oil Corp.   9,130    555,926 
PBF Energy, Inc.   10,380    268,842 
Phillips 66   10,587    623,680 
Tesoro Corp.   19,074    997,952 
Valero Energy Corp.   31,932    1,110,276 
         8,944,762 
           
Consumer Staples — 11.9%          
Altria Group, Inc.   9,693    339,158 
Archer-Daniels-Midland Co.   24,105    817,401 
Bunge Ltd. (Bermuda)   16,263    1,150,933 
Coca-Cola Enterprises, Inc.   18,204    640,053 
Herbalife Ltd. (Cayman Islands)   204    9,209 
Kroger Co. (The)   12,494    431,543 
Philip Morris International, Inc.   13,195    1,142,951 
Procter & Gamble Co. (The)   996    76,682 
Safeway, Inc.   31,744    751,063 
Wal-Mart Stores, Inc.   30,384    2,263,304 
WhiteWave Foods Co.*   1    16 
         7,622,313 
           
Industrials — 10.6%          
3M Co.   16,809    1,838,064 
Boeing Co. (The)   6,795    696,080 
CNH Global N.V.   13,806    575,158 
Delta Air Lines, Inc.*   30,501    570,674 
Emerson Electric Co.   3,260    177,800 
FedEx Corp.   4,907    483,732 
General Electric Co.   7,961    184,616 
Lockheed Martin Corp.   5,514    598,048 
Masco Corp.   4,354    84,859 
Northrop Grumman Corp.   2,657    220,000 
Pitney Bowes, Inc.   87,352    1,282,327 
RR Donnelley & Sons Co.   3,115    43,641 
Terex Corp.*   1,271    33,427 
         6,788,426 
           
Materials — 5.6%          
Freeport-McMoRan Copper & Gold, Inc.   31,179    860,852 

 

5
 

 

Touchstone Dynamic Equity Fund (Unaudited) (Continued) 

 

       Market 
   Shares   Value 
         
Common Stocks† — 116.3% (Continued)             
              
Materials — (Continued)          
Huntsman Corp.   18,525   $306,774 
Lyondellbasell Industries N.V.   23,194    1,536,834 
Newmont Mining Corp.   23,993    718,590 
Southern Copper Corp.   5,783    159,726 
         3,582,776 
           
Telecommunication Services — 4.8%          
Sprint Nextel Corp.*   111,541    783,018 
Verizon Communications, Inc.   45,466    2,288,758 
         3,071,776 
           
Utilities — 2.3%          
Edison International   28,901    1,391,872 
Exelon Corp.   2,614    80,720 
         1,472,592 
Total Common Stocks       $74,644,376 
           
Investment Fund — 3.6%          
Touchstone Institutional Money Market Fund^   2,301,056    2,301,056 
           
Total Long Positions          
(Cost $69,390,129)       $76,945,432 
           
Securities Sold Short— (19.3%)          
           
Common Stocks— (19.3%)          
           
Information Technology — (4.9%)          
F5 Networks, Inc.*   (4,201)   (289,029)
Fortinet, Inc.*   (549)   (9,608)
Fusion-io, Inc.*   (17,015)   (242,294)
Informatica Corp.*   (2,921)   (102,177)
IPG Photonics Corp.   (12,549)   (762,101)
JDS Uniphase Corp.*   (1,624)   (23,353)
Nuance Communications, Inc.*   (23,563)   (433,088)
Palo Alto Networks, Inc.*   (2,364)   (99,666)
Rackspace Hosting, Inc.*   (9,286)   (351,846)
Splunk, Inc.*   (4,506)   (208,898)
Stratasys Ltd. (Ireland)*   (4,889)   (409,405)
VeriFone Systems, Inc.*   (3,137)   (52,732)
Workday, Inc.*   (2,473)   (158,495)
Zynga, Inc.*   (5,106)   (14,195)
         (3,156,887)
           
Energy — (3.6%)          
Alpha Natural Resources, Inc.*   (53,309)   (279,339)
Cheniere Energy, Inc.*   (25,834)   (717,152)
EXCO Resources, Inc.   (7,569)   (57,827)
Golar LNG Ltd.   (22,510)   (717,844)
Peabody Energy Corp.   (22,070)   (323,105)
Pioneer Natural Resources Co.   (1,343)   (194,399)
         (2,289,666)
           
Consumer Discretionary — (3.1%)          
DreamWorks Animation SKG, Inc. - Class A*   (7,042)   (180,698)
DSW, Inc.   (5,468)   (401,733)
Gentex Corp.   (32,258)   (743,547)
JC Penney Co., Inc.*   (20,710)   (353,727)
Liberty Media Corp.*   (1,792)   (227,154)
Toll Brothers, Inc.*   (2,311)   (75,408)
         (1,982,267)
           
Health Care — (2.9%)          
Ariad Pharmaceuticals, Inc.*   (9,238)   (161,573)
Catamaran Corp. (Canada)*   (10,662)   (519,453)
Incyte Corp. Ltd.*   (30,231)   (665,082)
Salix Pharmaceuticals Ltd.*   (1,531)   (101,276)
Vertex Pharmaceuticals, Inc.*   (5,516)   (440,563)
         (1,887,947)
           
Materials — (2.2%)          
Cliffs Natural Resources, Inc.   (7,302)   (118,657)
Tahoe Resources, Inc. (Canada)*   (7,693)   (108,856)
United States Steel Corp.   (47,081)   (825,330)
Walter Energy, Inc.   (34,596)   (359,798)
         (1,412,641)
           
Telecommunication Services — (2.2%)          
Crown Castle International Corp.*   (13,407)   (970,533)
NII Holdings, Inc.*   (51,490)   (343,438)
SBA Communications Corp.*   (987)   (73,156)
         (1,387,127)
           
Consumer Staples — (0.4%)          
Fresh Market, Inc. (The)*   (5,286)   (262,820)
           
Industrials — 0.0%          
GrafTech International Ltd.*   (1,690)   (12,303)
Total Common Stocks       $(12,391,658)
Total Securities Sold Short          
(Proceeds $(13,605,418))       $(12,391,658)
           
    Number      
    of      
    Contracts      
           
Written Options Contracts†— (0.6%)          
           
Call Options — (0.5%)          
SPDR S&P 500 ETF Trust          
July 2013          
Strike Price $161   (3,285)   (312,075)
SPDR S&P 500 ETF Trust          
July 2013          
Strike Price $162   (765)   (39,780)
Total Call Options        (351,855)

 

6
 

 

Touchstone Dynamic Equity Fund (Unaudited) (Continued) 

 

   Number     
   of   Market 
   Contracts   Value 
         
Put Options — (0.1%)          
S&P 500 Index          
July 2013          
Strike Price $1,590   (30)  $(52,200)
           
Total Written Options Contracts          
(Proceeds $(488,538))       $(404,055)
           
Total Investment Securities —100.0%          
(Cost $55,296,173)       $64,149,719 
           
Other Assets in Excess of Liabilities — 0.0%        28,300 
           
Net Assets — 100.0%       $64,178,019 

 

*Non-income producing security.

 

^Affiliated Fund. See Note 4 in Notes to Financial Statements.

 

†All or a portion of these securities are held as collateral for securities sold short and written options. The total value of the securities held as collateral as of June 30, 2013 was $74,644,376.

 

Portfolio Abbreviations:

 

ETF - Exchange Traded Fund

 

PLC - Public Limited Company

 

Other Information:

 

The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.

  

Valuation inputs at Reporting Date:

 

Description  Level 1   Level 2   Level 3   Total 
Assets:                    
Long Positions                    
Common Stocks  $74,644,376   $—   $—   $74,644,376 
Investment Fund   2,301,056    —    —    2,301,056 
                  $76,945,432 
Liabilities:                    
Securities Sold Short                    
Common Stocks  $(12,391,658)  $—   $—   $(12,391,658)
Other Financial Instruments                    
Liabilities:                    
Written Option Equity Contracts   (404,055)   —    —    (404,055)
                  $(12,795,713)

 

Transactions in written options for the period ended June 30, 2013

 

   Number of    
   Contracts   Premium 
Beginning of Period, December 31, 2012   930   $1,799,847 
Call Options Written   9,350    9,034,134 
Put Options Written   148    365,083 
Call Options Closed   (5,018)   (10,271,877)
Put Options Closed   (70)   (150,545)
Call Options Expired   (1,182)   (111,065)
Put Options Expired   (78)   (177,039)
Call Options Exercised   —    — 
June 30, 2013   4,080   $488,538 

 

See accompanying Notes to Financial Statements.

 

7
 

 

Portfolio of Investments 

Touchstone Balanced Allocation Fund – June 30, 2013 (Unaudited)

 

       Market 
   Shares   Value 
         
Affiliated Mutual Funds^— 100.4%          
           
Government/Corporate—23.5%          
Touchstone Core Bond Fund   370,203   $3,816,791 
Touchstone Total Return Bond Fund   1,282,699    13,032,222 
Touchstone Ultra Short Duration Fixed Income Fund   1,359,615    12,861,959 
         29,710,972 
           
International Equity — 13.8%          
Touchstone International Small Cap Fund   294,605    3,803,348 
Touchstone International Value Fund   1,797,390    13,696,109 
         17,499,457 
           
Value — 11.9%          
Touchstone Focused Fund   179,451    5,141,274 
Touchstone Value Fund   1,235,083    9,917,716 
         15,058,990 
           
Growth — 9.1%          
Touchstone Growth Opportunities Fund   91,672    2,547,555 
Touchstone Sands Capital Institutional Growth Fund   479,286    8,909,932 
         11,457,487 
           
Equity Income — 6.1%          
Touchstone Premium Yield Equity Fund, Class Y   886,564    7,695,373 
           
Balanced — 5.0%          
Touchstone Flexible Income Fund   603,948    6,341,451 
           
International Debt — 5.0%          
Touchstone International Fixed Income Fund   621,684    6,316,308 
           
Blue Chip — 4.1%          
Touchstone Dynamic Equity Fund*   415,028    5,150,503 
           
Emerging Market-Equity — 3.8%          
Touchstone Emerging Markets Equity Fund   423,503    4,861,816 
           
Various Assets — 3.1%          
Touchstone Merger Arbitrage Fund   351,532    3,870,366 
           
Taxable-Money Market — 3.1%          
Touchstone Institutional Money Market Fund   3,869,553    3,869,553 
           
Value Small-Cap — 3.0%          
Touchstone Small Cap Core Fund   134,143    2,547,371 
Touchstone Small Company Value Fund   70,683    1,298,439 
         3,845,810 
           
Corporate/Preferred-High Yield — 3.0%          
Touchstone High Yield Fund   421,555    3,789,779 
           
Sector Fund Real-Estate — 2.9%          
Touchstone Global Real Estate Fund   297,533    3,665,605 
           
Growth Mid-Cap — 2.0%          
Touchstone Mid Cap Fund   125,627    2,553,997 
           
Growth Small-Cap — 1.0%          
Touchstone Small Cap Growth Fund   236,749    1,290,280 
Total Affiliated Mutual Funds       $126,977,747 
           
Total Investment Securities —100.4%          
(Cost $122,143,048)       $126,977,747 
           
Liabilities in Excess of Other Assets — (0.4%)        (472,022)
           
Net Assets — 100.0%       $126,505,725 

 

*Non-income producing security.

 

^All affiliated fund investments are in Institutional Class shares, unless otherwise indicated. The financial statements of the underlying funds can be found on the SEC website. See Note 4 in Notes to Financial Statements.

 

Other Information:

 

The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.

 

Valuation inputs at Reporting Date:

 

Description  Level 1   Level 2   Level 3   Total 
                 
Affiliated Mutual Funds  $126,977,747   $—   $—   $126,977,747 

 

See accompanying Notes to Financial Statements.

 

8
 

 

Portfolio of Investments 

Touchstone Conservative Allocation Fund – June 30, 2013 (Unaudited)

 

       Market 
   Shares   Value 
         
Affiliated Mutual Funds^— 101.5%          
           
Government/Corporate—44.8%          
Touchstone Core Bond Fund   346,928   $3,576,823 
Touchstone Total Return Bond Fund   1,336,710    13,580,971 
Touchstone Ultra Short Duration Fixed Income Fund   1,507,500    14,260,954 
         31,418,748 
           
International Debt — 8.1%          
Touchstone International Fixed Income Fund   560,190    5,691,528 
           
Balanced — 7.1%          
Touchstone Flexible Income Fund   477,317    5,011,829 
           
International Equity — 6.0%          
Touchstone International Small Cap Fund   55,061    710,842 
Touchstone International Value Fund   459,687    3,502,813 
         4,213,655 
           
Equity Income — 5.1%          
Touchstone Premium Yield Equity Fund, Class Y   411,985    3,576,034 
           
Taxable-Money Market — 5.1%          
Touchstone Institutional Money Market Fund   3,568,896    3,568,896 
           
Growth — 5.1%          
Touchstone Growth Opportunities Fund   25,623    712,062 
Touchstone Sands Capital Institutional Growth Fund   153,440    2,852,448 
         3,564,510 
           
Various Assets — 5.1%          
Touchstone Merger Arbitrage Fund   323,614    3,562,987 
           
Value — 5.1%          
Touchstone Value Fund   442,200    3,550,864 
           
Blue Chip — 3.0%          
Touchstone Dynamic Equity Fund*   172,278    2,137,973 
           
Corporate/Preferred-High Yield — 3.0%          
Touchstone High Yield Fund   237,465    2,134,813 
           
Sector Fund Real-Estate — 2.0%          
Touchstone Global Real Estate Fund   111,927    1,378,947 
           
Value Small-Cap — 1.0%          
Touchstone Small Cap Core Fund   37,435    710,887 
           
Emerging Market-Equity — 1.0%          
Touchstone Emerging Markets Equity Fund   59,987    688,655 
Total Affiliated Mutual Funds       $71,210,326 
           
Total Investment Securities —101.5%          
(Cost $69,714,199)       $71,210,326 
           
Liabilities in Excess of Other Assets — (1.5%)        (1,065,204)
           
Net Assets — 100.0%       $70,145,122 

 

*Non-income producing security.

 

^All affiliated fund investments are in Institutional Class shares, unless otherwise indicated. The financial statements of the underlying funds can be found on the SEC website. See Note 4 in Notes to Financial Statements.

 

Other Information:

 

The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.

 

Valuation inputs at Reporting Date:

 

Description  Level 1   Level 2   Level 3   Total 
                 
Affiliated Mutual Funds  $71,210,326   $—   $—   $71,210,326 

 

See accompanying Notes to Financial Statements.

 

9
 

 

Portfolio of Investments 

Touchstone Growth Allocation Fund – June 30, 2013 (Unaudited) 

 

       Market 
   Shares   Value 
         
Affiliated Mutual Funds^— 100.9%          
           
International Equity — 23.1%          
Touchstone International Small Cap Fund   432,225   $5,580,023 
Touchstone International Value Fund   1,646,724    12,548,038 
         18,128,061 
           
Value — 16.3%          
Touchstone Focused Fund   224,628    6,435,599 
Touchstone Value Fund   796,223    6,393,668 
         12,829,267 
           
Growth — 11.2%          
Touchstone Growth Opportunities Fund   57,609    1,600,970 
Touchstone Sands Capital Institutional Growth Fund   388,174    7,216,152 
         8,817,122 
           
Emerging Market-Equity — 8.6%          
Touchstone Emerging Markets Equity Fund   587,730    6,747,143 
           
Government/Corporate—6.2%          
Touchstone Ultra Short Duration Fixed Income Fund   511,136    4,835,349 
           
Equity Income — 6.1%          
Touchstone Premium Yield Equity Fund, Class Y   556,902    4,833,912 
           
Value Small-Cap — 6.1%          
Touchstone Small Cap Core Fund   168,315    3,196,299 
Touchstone Small Company Value Fund   88,155    1,619,407 
         4,815,706 
           
Sector Fund Real-Estate — 5.8%          
Touchstone Global Real Estate Fund   367,171    4,523,542 
           
Growth Mid-Cap — 5.1%          
Touchstone Mid Cap Fund   78,898    1,603,987 
Touchstone Mid Cap Growth Fund   99,093    2,399,039 
         4,003,026 
           
Blue Chip — 4.1%          
Touchstone Dynamic Equity Fund*   259,690    3,222,752 
           
Value Mid-Cap — 3.1%          
Touchstone Mid Cap Value Fund   157,854    2,424,639 
           
Growth Small-Cap — 3.1%          
Touchstone Small Cap Growth Fund   442,360    2,410,861 
           
Various Assets — 2.1%          
Touchstone Merger Arbitrage Fund   146,896    1,617,325 
           
Total Affiliated Mutual Funds       $79,208,705 
           
Total Investment Securities —100.9%          
(Cost $74,391,234)       $79,208,705 
           
Liabilities in Excess of Other Assets — (0.9%)        (674,039)
           
Net Assets — 100.0%       $78,534,666 

 

*Non-income producing security.

 

^All affiliated fund investments are in Institutional Class shares, unless otherwise indicated. The financial statements of the underlying funds can be found on the SEC website. See Note 4 in Notes to Financial Statements.

 

Other Information:

 

The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.

 

Valuation inputs at Reporting Date:

 

Description  Level 1   Level 2   Level 3   Total 
                 
Affiliated Mutual Funds  $79,208,705   $—   $—   $79,208,705 

 

See accompanying Notes to Financial Statements.

 

10
 

 

Portfolio of Investments 

Touchstone Moderate Growth Allocation Fund – June 30, 2013 (Unaudited) 

 

       Market 
   Shares   Value 
         
Affiliated Mutual Funds^— 100.3%          
           
International Equity — 16.9%          
Touchstone International Small Cap Fund   474,820   $6,129,921 
Touchstone International Value Fund   2,572,650    19,603,594 
         25,733,515 
           
Government/Corporate—15.2%          
Touchstone Total Return Bond Fund   1,478,133    15,017,829 
Touchstone Ultra Short Duration Fixed Income Fund   863,478    8,168,502 
         23,186,331 
           
Value — 14.2%          
Touchstone Focused Fund   324,645    9,301,092 
Touchstone Value Fund   1,536,818    12,340,651 
         21,641,743 
           
Growth — 10.1%          
Touchstone Growth Opportunities Fund   110,817    3,079,618 
Touchstone Sands Capital Institutional Growth Fund   664,140    12,346,359 
         15,425,977 
           
Emerging Market-Equity — 6.6%          
Touchstone Emerging Markets Equity Fund   869,571    9,982,675 
           
Equity Income — 6.1%          
Touchstone Premium Yield Equity Fund, Class Y   1,072,872    9,312,533 
           
Value Small-Cap — 5.1%          
Touchstone Small Cap Core Fund   243,718    4,628,210 
Touchstone Small Company Value Fund   170,027    3,123,389 
         7,751,599 
           
Blue Chip — 4.1%          
Touchstone Dynamic Equity Fund*   500,882    6,215,946 
           
Growth Mid-Cap — 4.1%          
Touchstone Mid Cap Fund   151,932    3,088,779 
Touchstone Mid Cap Growth Fund   127,272    3,081,258 
         6,170,037 
           
Balanced — 4.0%          
Touchstone Flexible Income Fund   586,363    6,156,811 
           
Sector Fund Real-Estate — 3.8%          
Touchstone Global Real Estate Fund   463,326    5,708,171 
           
Various Assets — 2.1%          
Touchstone Merger Arbitrage Fund   283,073    3,116,634 
           
Value Mid-Cap — 2.0%          
Touchstone Mid Cap Value Fund   202,711    3,113,642 
           
Growth Small-Cap — 2.0%          
Touchstone Small Cap Growth Fund   568,819    3,100,065 
           
Corporate/Preferred-High Yield — 2.0%          
Touchstone High Yield Fund   341,134    3,066,792 
           
International Debt — 2.0%          
Touchstone International Fixed Income Fund   301,452    3,062,749 
           
Total Affiliated Mutual Funds       $152,745,220 
           
Total Investment Securities —100.3%          
(Cost $143,766,011)       $152,745,220 
           
Liabilities in Excess of Other Assets — (0.3%)        (468,173)
           
Net Assets — 100.0%       $152,277,047 

 

*Non-income producing security.

 

^All affiliated fund investments are in Institutional Class shares, unless otherwise indicated. The financial statements of the underlying funds can be found on the SEC website. See Note 4 in Notes to Financial Statements.

 

Other Information:

 

The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.

 

Valuation inputs at Reporting Date:

 

Description  Level 1   Level 2   Level 3   Total 
                 
Affiliated Mutual Funds  $152,745,220   $—   $—   $152,745,220 

 

See accompanying Notes to Financial Statements.

 

11
 

 

Statements of Assets and Liabilities

June 30, 2013 (Unaudited)

 

   Touchstone   Touchstone   Touchstone 
   Dynamic   Balanced   Conservative 
   Equity   Allocation   Allocation 
   Fund   Fund   Fund 
Assets               
Investments, at cost  $69,390,129   $122,143,048   $69,714,199 
Affiliated securities, at market value  $2,301,056   $126,977,747   $71,210,326 
Non-affiliated securities, at market value   74,644,376    —    — 
Investments, at market value  $76,945,432   $126,977,747   $71,210,326 
Cash deposits held at prime broker   125,527    —    — 
Dividends and interest receivable   87,004    22,077    24,621 
Receivable for capital shares sold   42,418    65,842    48,839 
Receivable from Investment Advisor   —    11,803    4,857 
Other assets   46,559    11,524    12,049 
Total Assets   77,246,940    127,088,993    71,300,692 
Liabilities               
Written options, at market value (A)   404,055    —    — 
Securities sold short (B)   12,391,658    —    — 
Dividends for securities sold short payable   4,278    —    — 
Dividends payable   —    —    — 
Payable to Transfer Agent   25,197    30,300    26,016 
Payable for capital shares redeemed   134,235    499,614    1,097,279 
Payable to Investment Advisor   55,412    —    — 
Payable to other affiliates   13,793    30,070    12,530 
Payable to Trustees   1,502    1,262    1,253 
Payable for professional services   6,491    8,097    7,037 
Other accrued expenses and liabilities   32,300    13,925    11,455 
Total Liabilities   13,068,921    583,268    1,155,570 
                
Net Assets  $64,178,019   $126,505,725   $70,145,122 
                
Net assets consist of:               
Paid-in capital  $200,570,784   $161,801,994   $72,773,594 
Accumulated net investment income (loss)   225,444    (236)   (210)
Accumulated net realized losses on investments, written options, foreign currency transactions and short positions   (145,471,755)   (40,130,732)   (4,124,389)
Net unrealized appreciation on investments, written options, foreign currency transactions and short positions   8,853,546    4,834,699    1,496,127 
Net Assets  $64,178,019   $126,505,725   $70,145,122 
(A) Proceeds received for written options:  $488,538   $—   $— 
(B) Proceeds received for securities sold short:  $13,605,418   $—   $— 

 

See accompanying Notes to Financial Statements.

 

12
 

 

Statements of Assets and Liabilities (Unaudited) (Continued)

 

    Touchstone 
Touchstone   Moderate 
Growth   Growth 
Allocation   Allocation 
Fund   Fund 
      
$74,391,234   $143,766,011 
$79,208,705   $152,745,220 
 —    — 
$79,208,705   $152,745,220 
 —    — 
 8,272    13,945 
 10,401    63,335 
 6,132    239 
 9,783    16,326 
 79,243,293    152,839,065 
        
 —    — 
 —    — 
 —    — 
 —    65 
 43,837    80,249 
 623,555    429,938 
 —    — 
 15,337    33,066 
 807    1,567 
 6,160    7,031 
 18,931    10,102 
 708,627    562,018 
        
$78,534,666   $152,277,047 
        
        
$116,402,572   $185,275,388 
 (126)   (197)
 

 

(42,685,251

)   (41,977,353)
 

 

4,817,471

    8,979,209 
$78,534,666   $152,277,047 
$—   $— 
$—   $— 

 

13
 

 

Statements of Assets and Liabilities (Unaudited) (Continued) 

 

   Touchstone   Touchstone   Touchstone 
   Dynamic   Balanced   Conservative 
   Equity   Allocation   Allocation 
   Fund   Fund   Fund 
             
Pricing of Class A Shares               
Net assets applicable to Class A shares  $15,532,979   $47,071,093   $24,442,236 
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)   1,273,536    4,082,249    2,309,110 
Net asset value price per share*  $12.20   $11.53   $10.59 
Maximum offering price per share  $12.94   $12.23   $11.24 
                
Pricing of Class C Shares               
Net assets applicable to Class C shares  $10,196,116   $36,856,792   $17,190,114 
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)   886,859    3,199,820    1,631,872 
Net asset value, offering price per share**  $11.50   $11.52   $10.53 
                
Pricing of Class Y Shares               
Net assets applicable to Class Y shares  $21,704,084   $42,545,497   $27,877,834 
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)   1,751,415    3,683,860    2,632,987 
Net asset value, offering price and redemption price per share  $12.39   $11.55   $10.59 
                
Pricing of Institutional Class Shares               
Net assets applicable to Institutional Class Shares  $16,744,840   $32,343   $634,938 
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)   1,348,876    2,813    59,940 
Net asset value, offering price and redemption price per share  $12.41   $11.50   $10.59 

 

* There is no sales load on subscriptions of $ 1 million or more. Redemptions that were part of a $ 1 million or more subscription may be subject to a contingent deferred sales load if redeemed within a one-year period from the date of purchase.

 

** Redemption price per share varies by length of time shares are held.

 

See accompanying Notes to Financial Statements.

 

14
 

 

Statements of Assets and Liabilities (Unaudited) (Continued) 

 

    Touchstone 
Touchstone   Moderate 
Growth   Growth 
Allocation   Allocation 
Fund   Fund 
        
        
$29,368,068   $66,682,229 
 2,348,153    5,616,075 
$12.51   $11.87 
$13.27   $12.59 
        
        
$23,957,784   $48,503,898 
 1,992,488    4,149,553 
$12.02   $11.69 
        
        
$25,190,831   $37,081,801 
 1,994,999    3,100,569 
$12.63   $11.96 
        
        
$17,983   $9,119 
 1,562    766 
$11.51   $11.91 

 

15
 

 

Statements of Operations

For the Six Months Ended June 30, 2013 (Unaudited) 

 

   Touchstone   Touchstone   Touchstone 
   Dynamic   Balanced   Conservative 
   Equity   Allocation   Allocation 
   Fund   Fund   Fund 
Investment Income               
Dividends from affiliated funds  $519   $932,028   $716,437 
Dividends from non-affiliated securities(A)   801,514    —    — 
Total Investment Income   802,033    932,028    716,437 
Expenses               
Investment advisory fees   273,623    131,370    75,975 
Administration fees   54,752    111,743    64,637 
Compliance fees and expenses   477    644    1,153 
Custody fees   3,634    3,503    1,891 
Professional fees   8,167    8,304    8,207 
Transfer Agent fees, Class A   13,183    33,989    21,028 
Transfer Agent fees, Class C   5,989    11,833    5,734 
Transfer Agent fees, Class Y   10,041    21,576    13,660 
Transfer Agent fees, Institutional Class   43    13    35 
Registration Fees, Class A   5,942    11,691    11,609 
Registration Fees, Class C   7,546    11,925    9,940 
Registration Fees, Class Y   6,472    8,627    9,736 
Registration Fees, Institutional Class   9,059    10,440    10,394 
Dividend expense on securities sold short   106,623    —    — 
Reports to Shareholders, Class A   9,141    3,971    2,985 
Reports to Shareholders, Class C   5,293    5,856    3,617 
Reports to Shareholders, Class Y   5,952    2,235    2,486 
Reports to Shareholders, Institutional Class   3,058    3,260    3,201 
Distribution expenses, Class A   20,057    60,585    34,295 
Distribution and shareholder servicing expenses, Class C   51,505    189,604    89,445 
Trustee fees   5,630    5,334    5,309 
Other expenses   12,654    15,808    8,662 
Total Expenses   618,841    652,311    383,999 
Fees waived and/or reimbursed by the Advisor and/or Affiliates(B)   (26,349)   (349,554)   (229,871)
Net Expenses   592,492    302,757    154,128 
Net Investment Income   209,541    629,271    562,309 
Realized and Unrealized Gain (Loss) on Investments               
Net realized gain on investments from non-affiliated securities   10,538,844    —    — 
Net realized gain on investments from affiliated securities   —    4,299,137    1,007,429 
Net realized loss on written options   (2,513,889)   —    — 
Net realized loss on securities sold short   (2,891,807)   —    — 
Net change in unrealized appreciation (depreciation) on investments   (416,297)   564,436    (202,289)
Net change in unrealized appreciation on written options   59,616    —    — 
Net change in unrealized appreciation on securities sold short   1,420,963    —    — 
Net Realized and Unrealized Gain on Investments   6,197,430    4,863,573    805,140 
Change in Net Assets Resulting from Operations  $6,406,971   $5,492,844   $1,367,449 
(A) Net of foreign tax withholding of:  $1,897   $—   $— 
(B) See Note 4 in Notes to Financial Statements.               

 

See accompanying Notes to Financial Statements.

 

16
 

 

Statements of Operations (Unaudited) (Continued)

 

    Touchstone 
Touchstone   Moderate 
Growth   Growth 
Allocation   Allocation 
Fund   Fund 
      
$276,385   $930,211 
 —    — 
 276,385    930,211 
        
 103,130    199,031 
 70,167    135,425 
 477    993 
 2,292    3,265 
 7,045    9,233 
 39,369    75,966 
 12,898    18,656 
 9,908    10,163 
 74    12 
 11,929    12,199 
 11,939    9,746 
 9,197    6,192 
 10,358    10,379 
 —    — 
 4,208    4,391 
 6,468    9,422 
 2,300    2,038 
 3,480    3,271 
 38,972    87,971 
 123,000    248,361 
 4,944    5,642 
 14,953    23,772 
 487,108    876,128 
 (292,078)   (476,026)
 195,030    400,102 
 81,355    530,109 
        
 —    — 
 4,089,152    6,508,840 
 —    — 
 —    — 
 1,204,910    1,696,874 
 —    — 
 —    — 
 5,294,062    8,205,714 
$5,375,417   $8,735,823 
$—   $— 
        

 

17
 

 

Statements of Changes in Net Assets

 

   Touchstone 
   Dynamic Equity 
   Fund 
   For the   For the     
   Six Months   Five Months   For the 
   Ended   Ended   Year 
   June 30, 2013   December 31,   Ended 
   (Unaudited)   2012(B)   July 31, 2012 
From Operations               
Net investment income (loss)  $209,541   $259,349   $(409,958)
Net realized gain (loss) on investments, written options, foreign currency transactions and securities sold short   5,133,148    (307,770)   3,827,422 
Net change in unrealized appreciation (depreciation) on investments, written options, foreign currency transactions and securities sold short   1,064,282    (1,019,180)   2,431,040 
Change in Net Assets from Operations   6,406,971    (1,067,601)   5,848,504 
                
Distributions to Shareholders from:               
Net investment income, Class A   —    —    (151,828)
Net investment income, Class C   —    —    (59,199)
Net investment income, Class Y   —    —    — 
Net investment income, Class Z   —    —    (303,846)
Net investment income, Institutional Class   —    —    (17)
Net realized gains, Class A   —    —    — 
Net realized gains, Class C   —    —    — 
Net realized gains, Class Y   —    —    — 
Net realized gains, Institutional Class   —    —    — 
Total Distributions   —    —    (514,890)
                
Net Increase (Decrease) from Share Transactions(A)   (9,288,076)   8,301,265    (13,768,800)
                
Total Increase (Decrease) in Net Assets   (2,881,105)   7,233,664    (8,435,186)
                
Net Assets               
Beginning of period   67,059,124    59,825,460    68,260,646 
End of period  $64,178,019   $67,059,124   $59,825,460 
Accumulated Net Investment Income (Loss)  $225,444   $15,903   $(386,369)

 

(A)For details on share transaction by class, see statements of changes in net assets - capital stock activity on pages 22 to 24.

(B)The Fund changed its fiscal year from July 31 to December 31. See Note 8 in the Notes to Financial Statements.

 

See accompanying Notes to Financial Statements.

 

18
 

 

Statements of Changes in Net Assets (Continued) 

 

Touchstone   Touchstone 
Balanced Allocation   Conservative Allocation 
Fund   Fund 
For the   For the       For the   For the     
Six Months   Five Months   For the   Six Months   Five Months   For the 
Ended   Ended   Year   Ended   Ended   Year 
June 30, 2013   December 31,   Ended   June 30, 2013   December 31,   Ended 
(Unaudited)   2012(B)   July 31, 2012   (Unaudited)   2012(B)   July 31, 2012 
                      
$629,271   $1,417,962   $567,559   $562,309   $693,271   $535,072 
 

 

4,299,137

    5,632,070    5,462,607    1,007,429    3,844,351    3,112,528 
 

 

564,436

    (3,322,821)   (5,042,105)   (202,289)   (3,335,699)   (2,902,390)
 5,492,844    3,727,211    988,061    1,367,449    1,201,923    745,210 
                            
                            
 (264,910)   (751,006)   (164,728)   (206,573)   (479,405)   (135,704)
 (70,103)   (585,993)   (414,996)   (76,590)   (376,396)   (266,757)
 (294,273)   (998,571)   —    (272,955)   (456,004)   (7,041)
 —    —    (27,150)   —    —    (43,132)
 (221)   (707)   (477)   (6,401)   (34,395)   (136,455)
 —    (1,250,595)   —    —    (1,422,514)   — 
 —    (989,596)   —    —    (773,349)   — 
 —    (1,701,479)   —    —    (1,620,816)   — 
 —    (783)   —    —    (52,524)   — 
 (629,507)   (6,278,730)   (607,351)   (562,519)   (5,215,403)   (589,089)
                            
 (12,824,687)   87,474,773    (15,492,104)   (16,122,576)   60,408,531    (10,055,229)
                            
 (7,961,350)   84,923,254    (15,111,394)   (15,317,646)   56,395,051    (9,899,108)
                            
                            
 134,467,075    49,543,821    64,655,215    85,462,768    29,067,717    38,966,825 
$126,505,725   $134,467,075   $49,543,821   $70,145,122   $85,462,768   $29,067,717 
$(236)  $—   $271,112   $(210)  $—   $359,301 

 

19
 

 

Statements of Changes in Net Assets (Continued) 

 

   Touchstone 
   Growth Allocation 
   Fund 
   For the   For the Five     
   Six Months   Months   For the 
   Ended   Ended   Year 
   June 30, 2013   December 31,   Ended 
   (Unaudited)   2012(B)   July 31, 2012 
From Operations               
Net investment income  $81,355   $850,224   $269,656 
Net realized gain on investments   4,089,152    4,772,422    2,532,790 
Net change in unrealized appreciation (depreciation) on investments   1,204,910    (1,824,714)   (3,917,579)
Change in Net Assets from Operations   5,375,417    3,797,932    (1,115,133)
                
Distributions to Shareholders from:               
Net investment income, Class A   (25,695)   (646,035)   (114,772)
Net investment income, Class C   —    (450,497)   (44,632)
Net investment income, Class Y   (55,743)   (503,325)   — 
Net investment income, Class Z   —    —    (20,102)
Net investment income, Institutional Class   (43)   (901)   (983)
Net realized gains, Class A   —    —    — 
Net realized gains, Class C   —    —    — 
Net realized gains, Class Y   —    —    — 
Net realized gains, Institutional Class   —    —    — 
Total Distributions   (81,481)   (1,600,758)   (180,489)
                
Net Increase (Decrease) from Share Transactions(A)   (10,158,185)   46,019,976    (14,968,001)
                
Total Increase (Decrease) in Net Assets   (4,864,249)   48,217,150    (16,263,623)
                
Net Assets               
Beginning of period   83,398,915    35,181,765    51,445,388 
End of period  $78,534,666   $83,398,915   $35,181,765 
Accumulated Net Investment Income (Loss)  $(126)  $—   $269,645 

 

(A)For details on share transaction by class, see statements of changes in net assets - capital stock activity on pages 25 and 26.

(B)The Fund changed its fiscal year from July 31 to December 31. See Note 8 in the Notes to Financial Statements.

 

See accompanying Notes to Financial Statements.

 

20
 

 

Statements of Changes in Net Assets (Continued) 

 

Touchstone 
Moderate Growth Allocation 
Fund 
For the   For the Five     
Six Months   Months   For the 
Ended   Ended   Year 
June 30, 2013   December 31,   Ended 
(Unaudited)   2012(B)   July 31, 2012 
          
$530,109   $1,697,720   $569,460 
 6,508,840    13,038,497    4,106,912 
 1,696,874    (8,653,626)   (4,637,598)
 8,735,823    6,082,591    38,774 
             
             
 (265,530)   (1,238,170)   (237,914)
 (69,669)   (772,314)   (314,758)
 (195,060)   (880,957)   — 
 —    —    (20,136)
 (47)   (254)   (127)
 —    (1,119,959)   — 
 —    (769,189)   — 
 —    (855,859)   — 
 —    (131)   — 
 (530,306)   (5,636,833)   (572,935)
             
 (19,741,440)   99,907,478    (17,225,588)
             
 (11,535,923)   100,353,236    (17,759,749)
             
             
 163,812,970    63,459,734    81,219,483 
$152,277,047   $163,812,970   $63,459,734 
$(197)  $—   $392,606 

 

21
 

 

Statements of Changes in Net Assets - Capital Stock Activity 

 

   Touchstone Dynamic 
   Equity Fund 
   For the Six Months                 
   Ended   For the Five Months   For the Year 
   June 30, 2013   Ended   Ended 
   (Unaudited)   December 31, 2012(B)   July 31, 2012 
   Shares   Dollars   Shares   Dollars   Shares   Dollars 
Class A                              
Proceeds from Shares sold   306,549   $3,635,060    113,667   $1,270,554    97,187   $1,023,913 
Cost of Shares redeemed in connection with merger(A)   —    —    —    —    —    — 
Reinvestment of distributions   —    —    —    —    12,141    127,964 
Redemption fees   —    —    —    —    —    22 
Cost of Shares redeemed   (494,686)   (5,838,237)   (252,268)   (2,812,907)   (799,021)   (8,368,813)
Change in Net Assets from Class A Share Transactions   (188,137)   (2,203,177)   (138,601)   (1,542,353)   (689,693)   (7,216,914)
Class C                              
Proceeds from Shares sold   24,168    274,815    11,073    118,005    38,462    411,299 
Cost of Shares redeemed in connection with merger(A)   —    —    —    —    —    — 
Reinvestment of distributions   —    —    —    —    2,418    24,273 
Redemption fees   —    —    —    —    —    14 
Cost of Shares redeemed   (133,729)   (1,484,420)   (113,949)   (1,211,134)   (396,981)   (3,980,527)
Change in Net Assets from Class C Share Transactions   (109,561)   (1,209,605)   (102,876)   (1,093,129)   (356,101)   (3,544,941)
Class Y                              
Proceeds from Shares sold   605,917    7,408,150    17,727    201,695    115,845    1,254,036 
Proceeds from Shares issued in connection with merger(A)   —    —    —    —    2,239,679    21,354,181 
Reinvestment of distributions   —    —    —    —    —    — 
Cost of Shares redeemed   (673,011)   (8,096,901)   (318,203)   (3,604,761)   (236,539)   (2,604,497)
Change in Net Assets from Class Y Share Transactions   (67,094)   (688,751)   (300,476)   (3,403,066)   2,118,985    20,003,720 
Class Z                              
Proceeds from Shares sold   —    —    —    —    685,868    7,058,978 
Reinvestment of distributions   —    —    —    —    26,540    283,182 
Redemption fees   —    —    —    —    —    30 
Cost of Shares redeemed   —    —    —    —    (1,407,539)   (14,954,589)
Cost of Shares redeemed in connection with merger(A)   —    —    —    —    (2,239,679)   (21,354,181)
Change in Net Assets from Class Z Share Transactions   —    —    —    —    (2,934,810)   (28,966,580)
Institutional Class                              
Proceeds from Shares sold   18,812    227,597    1,329,419    15,304,513    623,310    6,847,071 
Reinvestment of distributions   —    —    —    —    1    17 
Redemption fees   —    —    —    —    —    8 
Cost of Shares redeemed   (457,938)   (5,414,140)   (84,149)   (964,700)   (80,747)   (891,181)
Change in Net Assets from Institutional Class Share Transactions   (439,126)   (5,186,543)   1,245,270    14,339,813    542,564    5,955,915 
Net Increase (Decrease) from Share Transactions   (803,918)  $(9,288,076)   703,317   $8,301,265    (1,319,055)  $(13,768,800)

 

(A) See Note 8 in the Notes to Financial Statements.

(B) The Fund changed its fiscal year from July 31 to December 31. See Note 8 in the Notes to Financial Statements.

 

See accompanying Notes to Financial Statements.

 

22
 

 

Statements of Changes in Net Assets - Capital Stock Activity (Continued)

 

Touchstone Balanced 
Allocation Fund 
For the Six Months             
Ended   For the Five Months   For the Year 
June 30, 2013   Ended   Ended 
(Unaudited)   December 31, 2012(B)   July 31, 2012 
Shares   Dollars   Shares   Dollars   Shares   Dollars 
                      
 183,869    2,141,121    133,156    1,512,715    51,372    555,561 
 

 

—

    —    3,650,589    41,600,137    —    — 
 20,861    241,005    160,880    1,794,307    11,764    124,335 
 —    —    —    —    —    — 
 (535,172)   (6,195,996)   (411,962)   (4,677,019)   (329,730)   (3,549,105)
 

 

(330,442

)   (3,813,870)   3,532,663    40,230,140    (266,594)   (2,869,209)
                            
 70,185    812,343    93,366    1,049,120    111,052    1,192,025 
 

 

—

    —    191,231    2,174,823    —    — 
 3,983    45,926    91,476    1,018,509    24,035    254,301 
 —    —    —    —    —    9 
 (312,037)   (3,606,647)   (385,238)   (4,344,101)   (1,239,184)   (13,462,919)
 

 

(237,869

)   (2,748,378)   (9,165)   (101,649)   (1,104,097)   (12,016,584)
                            
 290,705    3,374,748    301,709    3,426,829    4,552    49,425 
 

 

—

    —    6,276,974    71,649,327    114,668    1,301,456 
 24,048    278,174    234,665    2,620,777    —    — 
 (854,683)   (9,915,582)   (2,704,435)   (30,352,141)   (4,343)   (47,913)
 

 

(539,930

)   (6,262,660)   4,108,913    47,344,792    114,877    1,302,968 
                            
 —    —    —    —    8,853    96,418 
 —    —    —    —    1,293    13,562 
 —    —    —    —    —    — 
 —    —    —    —    (64,331)   (716,348)
 

 

—

    —    —    —    (114,668)   (1,301,456)
 

 

—

    —    —    —    (168,853)   (1,907,824)
                            
 —    —    —    —    35    372 
 19    221    134    1,490    19    205 
 —    —    —    —    —    — 
 —    —    —    —    (197)   (2,032)
 

 

19

    221    134    1,490    (143)   (1,455)
 

 

(1,108,222

)  $(12,824,687)   7,632,545   $87,474,773    (1,424,810)  $(15,492,104)

 

23
 

 

Statements of Changes in Net Assets - Capital Stock Activity (Continued) 

 

   Touchstone Conservative 
   Allocation Fund 
   For the Six Months                 
   Ended   For the Five Months   For the Year 
   June 30, 2013   Ended   Ended 
   (Unaudited)   December 31, 2012(B)   July 31, 2012 
   Shares   Dollars   Shares   Dollars   Shares   Dollars 
Class A                              
Proceeds from Shares sold   109,028   $1,166,319    182,352   $1,984,226    435,959   $4,679,336 
Proceeds from Shares issued in connection with merger(A)   —    —    2,370,245    26,062,498    —    — 
Reinvestment of distributions   17,458    185,696    140,042    1,482,044    8,431    89,062 
Redemption fees   —    —    —    —    —    — 
Cost of Shares redeemed   (956,186)   (10,223,737)   (324,849)   (3,545,483)   (698,325)   (7,410,892)
Change in Net Assets from Class A Share Transactions   (829,700)   (8,871,722)   2,367,790    25,983,285    (253,935)   (2,642,494)
Class C                              
Proceeds from Shares sold   75,794    807,285    87,113    933,883    120,414    1,289,950 
Proceeds from Shares issued in connection with merger(A)   —    —    161,697    1,770,015    —    — 
Reinvestment of distributions   5,149    54,460    75,779    801,084    15,629    163,870 
Cost of Shares redeemed   (168,392)   (1,799,004)   (170,909)   (1,856,950)   (419,692)   (4,493,992)
Change in Net Assets from Class C Share Transactions   (87,449)   (937,259)   153,680    1,648,032    (283,649)   (3,040,172)
Class Y                              
Proceeds from Shares sold   395,817    4,257,452    170,254    1,861,753    6,373    68,638 
Proceeds from Shares issued in connection with merger(A)   —    —    3,465,392    38,120,235    197,512    2,081,642 
Reinvestment of distributions   23,868    253,950    191,804    2,030,304    527    5,686 
Cost of Shares redeemed   (958,802)   (10,247,663)   (851,598)   (9,144,512)   (8,160)   (88,920)
Change in Net Assets from Class Y Share Transactions   (539,117)   (5,736,261)   2,975,852    32,867,780    196,252    2,067,046 
Class Z                              
Proceeds from Shares sold   —    —    —    —    169,193    1,789,083 
Reinvestment of distributions   —    —    —    —    3,396    35,873 
Cost of Shares redeemed   —    —    —    —    (101,097)   (1,080,371)
Cost of Shares redeemed in connection with merger(A)   —    —    —    —    (197,512)   (2,081,642)
Change in Net Assets from Class Z Share Transactions   —    —    —    —    (126,020)   (1,337,057)
Institutional Class                              
Proceeds from Shares sold   —    —    —    —    12,061    130,383 
Reinvestment of distributions   557    5,937    8,105    86,416    12,914    136,455 
Cost of Shares redeemed   (54,526)   (583,271)   (16,235)   (176,982)   (496,227)   (5,369,390)
Change in Net Assets from Institutional Class Share Transactions   (53,969)   (577,334)   (8,130)   (90,566)   (471,252)   (5,102,552)
Net Increase (Decrease) from Share Transactions   (1,510,235)  $(16,122,576)   5,489,192   $60,408,531    (938,604)  $(10,055,229)

 

(A) See Note 8 in the Notes to Financial Statements.

(B) The Fund changed its fiscal year from July 31 to December 31. See Note 8 in the Notes to Financial Statements.

 

See accompanying Notes to Financial Statements.

 

24
 

 

Statements of Changes in Net Assets - Capital Stock Activity (Continued) 

 

Touchstone Growth 
Allocation Fund 
For the Six Months             
Ended   For the Five Months   For the Year 
June 30, 2013   Ended   Ended 
(Unaudited)   December 31, 2012(B)   July 31, 2012 
Shares   Dollars   Shares   Dollars   Shares   Dollars 
                      
 77,725   $963,580    83,538   $975,036    55,210   $587,614 
 

 

—

    —    1,982,555    23,010,705    —    — 
 1,866    23,341    50,396    581,838    9,788    101,796 
 —    —    —    —    —    2 
 (407,380)   (5,091,333)   (355,247)   (4,130,048)   (344,708)   (3,716,622)
 

 

(327,789

)   (4,104,412)   1,761,242    20,437,531    (279,710)   (3,027,210)
                            
 80,808    968,363    25,816    286,872    66,499    633,936 
 

 

—

    —    86,836    971,379    —    — 
 —    —    29,133    323,605    3,080    30,774 
 (213,262)   (2,556,154)   (236,712)   (2,642,774)   (920,431)   (9,388,471)
 

 

(132,454

)   (1,587,791)   (94,927)   (1,060,918)   (850,852)   (8,723,761)
                            
 263,339    3,345,580    92,145    1,085,271    9,691    107,236 
 

 

—

    —    2,547,823    29,855,473    68,967    732,300 
 4,257    53,766    40,877    478,642    —    — 
 (622,929)   (7,852,615)   (407,565)   (4,791,580)   (1,606)   (17,612)
 

 

(355,333

)   (4,453,269)   2,273,280    26,627,806    77,052    821,924 
                            
 —    —    —    —    7,102    75,977 
 —    —    —    —    1,071    11,260 
 —    —    —    —    (246,979)   (2,681,751)
 

 

—

    —    —    —    (68,967)   (732,300)
 

 

—

    —    —    —    (307,773)   (3,326,814)
                            
 329    3,690    1,400    15,008    623    6,895 
 4    43    85    901    100    983 
 (1,454)   (16,446)   (32)   (352)   (67,704)   (720,018)
 

 

(1,121

)   (12,713)   1,453    15,557    (66,981)   (712,140)
 

 

(816,697

)  $(10,158,185)   3,941,048   $46,019,976    (1,428,264)  $(14,968,001)

 

25
 

 

 

Statements of Changes in Net Assets - Capital Stock Activity (Continued)

 

   Touchstone Moderate Growth 
   Allocation Fund 
   For the Six Months             
   Ended   For the Five Months   For the Year 
   June 30, 2013   Ended   Ended 
   (Unaudited)   December 31, 2012(B)   July 31, 2012 
   Shares   Dollars   Shares   Dollars   Shares   Dollars 
Class A                              
Proceeds from Shares sold   127,788   $1,518,828    129,646   $1,475,971    97,822   $1,064,952 
Proceeds from Shares issued in connection with merger(A)   —    —    5,396,673    61,461,849    —    — 
Reinvestment of distributions   20,049    238,251    187,033    2,104,863    19,053    196,629 
Redemption fees   —    —    —    —    —    2 
Cost of Shares redeemed   (838,121)   (9,975,028)   (771,111)   (8,774,777)   (448,546)   (4,814,500)
Change in Net Assets from Class A Share Transactions   (690,284)   (8,217,949)   4,942,241    56,267,906    (331,671)   (3,552,917)
Class C                              
Proceeds from Shares sold   52,583    614,473    106,912    1,194,059    133,586    1,407,737 
Proceeds from Shares issued in connection with merger(A)   —    —    221,281    2,482,569    —    — 
Reinvestment of distributions   3,883    45,392    88,949    985,199    18,947    192,127 
Redemption fees   —    —    —    —    —    1 
Cost of Shares redeemed   (306,646)   (3,590,845)   (381,823)   (4,268,695)   (1,411,866)   (14,742,597)
Change in Net Assets from Class C Share Transactions   (250,180)   (2,930,980)   35,319    393,132    (1,259,333)   (13,142,732)
Class Y                              
Proceeds from Shares sold   316,497    3,805,501    214,196    2,459,768    14,400    155,956 
Proceeds from Shares issued in connection with merger(A)   —    —    4,909,444    56,310,746    59,133    690,081 
Reinvestment of distributions   15,167    181,470    146,774    1,665,234    —    — 
Cost of Shares redeemed   (1,061,800)   (12,579,529)   (1,507,596)   (17,189,693)   (5,646)   (61,748)
Change in Net Assets from Class Y Share Transactions   (730,136)   (8,592,558)   3,762,818    43,246,055    67,887    784,289 
Class Z                              
Proceeds from Shares sold   —    —    —    —    5,102    56,108 
Reinvestment of distributions   —    —    —    —    1,101    11,461 
Cost of Shares redeemed   —    —    —    —    (61,849)   (691,938)
Cost of Shares redeemed in connection with merger(A)   —    —    —    —    (59,133)   (690,081)
Change in Net Assets from Class Z Share Transactions   —    —    —    —    (114,779)   (1,314,450)
Institutional Class                              
Proceeds from Shares sold   —    —    —    —    9    100 
Reinvestment of distributions   4    47    34    385    12    127 
Cost of Shares redeemed   —    —    —    —    —    (5)
Change in Net Assets from Institutional Class Share Transactions   4    47    34    385    21    222 
                               
Net Increase (Decrease) from Share Transactions   (1,670,596)  $(19,741,440)   8,740,412   $99,907,478    (1,637,875)  $(17,225,588)

 

(A)See Note 8 in the Notes to Financial Statements.

(B)The Fund changed its fiscal year from July 31 to December 31. See Note 8 in the Notes to Financial Statements.

 

See accompanying Notes to Financial Statements.

 

26
 

 

Statement of Cash Flows

For the Six Months Ended June 30, 2013 (Unaudited)

 

   Touchstone 
   Dynamic 
   Equity 
   Fund 
   For the 
   Six Months 
   Ended 
   June 30, 2013 
Cash Flows Provided by Operating Activities     
      
Change in net assets resulting from operations  $6,406,971 
      
Adjustments to reconcile net increase (decrease) in net assets derived from operations to net cash (used in) provided by operating activities:     
Purchases of investments   (79,882,640)
Proceeds from disposition of investments   94,829,812 
Net purchases from purchased options   (601,980)
Premiums on call and put options written   9,399,217 
Costs to cover written options   (13,224,414)
Proceeds from securities sold short   19,331,256 
Covers of securities sold short   (21,662,164)
Net sales of short term securities   684,493 
Decrease in deposits with Prime Broker   33,626 
(Increase) decrease in dividends and interest receivable   (14,338)
Increase (decrease) in dividends for securities sold short payable   162 
Increase (decrease) in payable to Trustees   606 
Increase (decrease) in payable to Investment Advisor   17,561 
Increase (decrease) in payable to other affiliates   (9,451)
Increase (decrease) in other accrued expenses and liabilities   (2,656)
(Increase) decrease in other assets   (13,251)
Net realized (gain) from investments and warrants   (10,538,844)
Net realized (gain) loss from written options   2,513,889 
Net realized loss from securities sold short   2,891,807 
Net change in unrealized (appreciation) depreciation on investments and warrants   416,297 
Net change in unrealized (appreciation) depreciation on written options   (59,616)
Net change in unrealized (appreciation) depreciation on securities sold short   (1,420,963)
Net cash provided by operating activities   9,095,380 
      
Cash Flows from Financing Activities     
Proceeds from shares sold   11,648,574 
Payment of shares redeemed   (20,743,954)
Net cash used in financing activities   (9,095,380)
Net change in cash   — 
      
Cash - beginning of the period   — 
Cash - end of period  $— 

 

See accompanying Notes to Financial Statements.

 

27
 

 

Financial Highlights

 

Touchstone Dynamic Equity Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.05   $11.20   $10.26   $9.02   $8.68   $11.88   $14.51 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.04    0.04(B)   (0.07)(B)   0.06(B)   0.05(B)   0.02(B)   0.05(B)
Net realized and unrealized gains (losses) on investments   1.11    (0.19)   1.09    1.18    0.29    (3.22)   (1.80)
Total from investment operations   1.15    (0.15)   1.02    1.24    0.34    (3.20)   (1.75)
Distributions from:                                   
Net investment income   —    —    (0.08)   —    —    —    (0.18)
Realized capital gains   —    —    —    —    —    —    (0.70)
Total distributions   —    —    (0.08)   —    —    —    (0.88)
Net asset value at end of period  $12.20   $11.05   $11.20   $10.26   $9.02   $8.68   $11.88 
Total return(C)   10.41%(D)   (1.34%)(D)   10.00%   13.75%   3.92%   (26.94%)   (12.60%)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $15,533   $16,156   $17,919   $23,505   $38,274   $83,169   $285,305 
Ratio to average net assets:                                   
Net expenses (including dividend expense on securities sold short)(E)   1.88%(F)   2.46%(F)   2.80%   1.82%   1.78%   2.07%   1.92%
Gross expenses (including dividend expense on securities sold short)(G)   2.05%(F)   2.65%(F)   3.08%   2.16%   2.27%   2.41%   2.13%
Net investment income (loss)   0.61%(F)   0.88%(F)   (0.63%)   0.66%   0.52%   0.24%   0.40%
Portfolio turnover rate   103%(D)   105%(D)   234%   231%   168%   195%   172%

 

(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(D)Not annualized.

(E)The ratio of net expenses to average net assets excluding dividend expense on securities sold short is 1.55%, 1.55%, 1.55%, 1.66%, 1.65%, 1.71% and 1.53% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

(F)Annualized.

(G)The ratio of gross expenses to average net assets excluding dividend expense on securities sold short is 1.72%, 1.74%, 1.82%, 2.00%, 2.14%, 2.05% and 1.74% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

 

See accompanying Notes to Financial Statements.

 

28
 

 

Financial Highlights (Continued)

 

Touchstone Dynamic Equity Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $10.46   $10.63   $9.79   $8.67   $8.40   $11.59   $14.32 
Income (loss) from investment operations:                                   
Net investment income (loss)   (0.01)   0.01(B)   (0.14)(B)   (0.01)(B)   (0.02)(B)   (0.05)(B)   (0.04)(B)
Net realized and unrealized gains (losses) on investments   1.05    (0.18)   1.03    1.13    0.29    (3.14)   (1.77)
Total from investment operations   1.04    (0.17)   0.89    1.12    0.27    (3.19)   (1.81)
Distributions from:                                   
Net investment income   —    —    (0.05)   —    —    —    (0.22)
Realized capital gains   —    —    —    —    —    —    (0.70)
Total distributions   —    —    (0.05)   —    —    —    (0.92)
Net asset value at end of period  $11.50   $10.46   $10.63   $9.79   $8.67   $8.40   $11.59 
Total return(C)   9.94%(D)   (1.60%)(D)   9.09%   12.92%   3.21%   (27.52%)   (13.23%)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $10,196   $10,420   $11,684   $14,243   $20,558   $51,879   $158,508 
Ratio to average net assets:                                   
Net expenses (including dividend expense on securities sold short)(E)   2.63%(F)   3.21%(F)   3.55%   2.57%   2.53%   2.82%   2.65%
Gross expenses (including dividend expense on securities sold short)(G)   2.81%(F)   3.48%(F)   3.75%   2.78%   2.91%   2.97%   2.85%
Net investment income (loss)   (0.14%)(F)   0.13%(F)   (1.38%)   (0.10%)   (0.23%)   (0.52%)   (0.34%)
Portfolio turnover rate   103%(D)   105%(D)   234%   231%   168%   195%   172%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(D)Not annualized.

(E)The ratio of net expenses to average net assets excluding dividend expense on securities sold short is 2.30%, 2.30%, 2.30%, 2.41%, 2.40%, 2.46% and 2.26% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

(F)Annualized.

(G)The ratio of gross expenses to average net assets excluding dividend expense on securities sold short is 2.48%, 2.57%, 2.50%, 2.62%, 2.78%, 2.61% and 2.46% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

 

See accompanying Notes to Financial Statements.

 

29
 

 

Financial Highlights (Continued)

 

Touchstone Dynamic Equity Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.22   $11.35   $10.40   $9.11   $8.75   $11.94   $14.54 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.05    0.05(B)   (0.04)(B)   0.08(B)   0.07(B)   0.04(B)   0.09(B)
Net realized and unrealized gains (losses) on investments   1.12    (0.18)   1.09    1.21    0.29    (3.23)   (1.82)
Total from investment operations   1.17    (0.13)   1.05    1.29    0.36    (3.19)   (1.73)
Distributions from:                                   
Net investment income   —    —    (0.10)   —    —    —    (0.17)
Realized capital gains   —    —    —    —    —    —    (0.70)
Total distributions   —    —    (0.10)   —    —    —    (0.87)
Net asset value at end of period  $12.39   $11.22   $11.35   $10.40   $9.11   $8.75   $11.94 
Total return   10.43%(C)   (1.15%)(C)   10.14%   14.16%   4.11%   (26.72%)   (12.46%)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $21,704   $20,397   $24,054   $30,511   $22,347   $29,734   $58,107 
Ratio to average net assets:                                   
Net expenses (including dividend expense on securities sold short)(D)   1.63%(E)   2.21%(E)   2.56%   1.59%   1.52%   1.81%   1.64%
Gross expenses (including dividend expense on securities sold short)(F)   1.67%(E)   2.31%(E)   2.60%   1.68%   1.68%   1.97%   1.86%
Net investment income (loss)   0.86%(E)   1.13%(E)   (0.38%)   0.77%   0.81%   0.45%   0.68%
Portfolio turnover rate   103%(C)   105%(C)   234%   231%   168%   195%   172%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Not annualized.

(D)The ratio of net expenses to average net assets excluding dividend expense on securities sold short is 1.30%, 1.30%, 1.30%, 1.42%, 1.40%, 1.46% and 1.25% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

(E)Annualized.

(F)The ratio of gross expenses to average net assets excluding dividend expense on securities sold short is 1.34%, 1.40%, 1.35%, 1.51%, 1.56%, 1.62% and 1.47% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

 

See accompanying Notes to Financial Statements.

 

30
 

 

Financial Highlights (Continued)

 

Touchstone Dynamic Equity Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.23   $11.36   $10.40   $9.12   $8.76   $11.96   $14.54 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.06    0.06(B)   (0.04)(B)   0.09(B)   0.11(B)   0.05(B)   0.09(B)
Net realized and unrealized gains (losses) on investments   1.12    (0.19)   1.10    1.19    0.25    (3.25)   (1.81)
Total from investment operations   1.18    (0.13)   1.06    1.28    0.36    (3.20)   (1.72)
Distributions from:                                   
Net investment income   —    —    (0.10)   —    —    —    (0.16)
Realized capital gains   —    —    —    —    —    —    (0.70)
Total distributions   —    —    (0.10)   —    —    —    (0.86)
Net asset value at end of period  $12.41   $11.23   $11.36   $10.40   $9.12   $8.76   $11.96 
Total return   10.51%(C)   (1.15%)(C)   10.27%   14.04%   4.11%   (26.76%)   (12.33%)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $16,745   $20,085   $6,168   $2   $2   $12,547   $29,025 
Ratio to average net assets:                                   
Net expenses (including dividend expense on securities sold short)(D)   1.58%(E)   2.16%(E)   2.50%   1.52%   1.41%   1.77%   1.63%
Gross expenses (including dividend expense on securities sold short)(F)   1.58%(E)   2.18%(E)   2.95%   816.82%   2.84%   1.87%   1.89%
Net investment income (loss)   0.91%(E)   1.18%(E)   (0.33%)   0.92%   1.31%   0.55%   0.70%
Portfolio turnover rate   103%(C)   105%(C)   234%   231%   168%   195%   172%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Not annualized.

(D)The ratio of net expenses to average net assets excluding dividend expense on securities sold short is 1.25%, 1.25%, 1.25%, 1.35%, 1.36%, 1.41% and 1.21% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

(E)Annualized.

(F)The ratio of gross expenses to average net assets excluding dividend expense on securities sold short is 1.25%, 1.27%, 1.70%, 816.65%, 2.79%, 1.51% and 1.47% for the periods ended June 30, 2013 and December 31, 2012 and years ended July 2012, 2011, 2010, 2009 and 2008, respectively.

 

See accompanying Notes to Financial Statements.

 

31
 

 

Financial Highlights (Continued)

 

Touchstone Balanced Allocation Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.13   $11.18   $11.03   $9.99   $9.28   $11.27   $12.68 
Income (loss) from investment operations:                                   
Net investment income   0.06    0.13(B)   0.17(B)   0.18(B)   0.22(B)   0.29(B)   0.21(B)
Net realized and unrealized gains (losses) on investments   0.40    0.35    0.14    1.13    0.80    (1.46)   (0.74)(C)
Total from investment operations   0.46    0.48    0.31    1.31    1.02    (1.17)   (0.53)
Distributions from:                                   
Net investment income   (0.06)   (0.24)   (0.16)   (0.27)   (0.31)   (0.36)   (0.26)
Realized capital gains   —    (0.29)   —    —    —    (0.46)   (0.62)
Total distributions   (0.06)   (0.53)   (0.16)   (0.27)   (0.31)   (0.82)   (0.88)
Net asset value at end of period  $11.53   $11.13   $11.18   $11.03   $9.99   $9.28   $11.27 
Total return(D)   4.17%(E)   4.37%(E)   2.89%   13.21%   10.99%   (9.30%)   (4.59%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $47,071   $49,118   $9,839   $12,650   $21,312   $25,356   $44,959 
Ratio to average net assets:                                   
Net expenses(F)   0.33%(G)   0.41%(G)   0.64%   0.64%   0.64%   0.65%   0.94%
Gross expenses(F)   0.88%(G)   0.83%(G)   0.97%   0.94%   0.93%   0.79%   1.13%
Net investment income(F)   1.09%(G)   2.75%(G)   1.58%   1.71%   2.26%   3.30%   1.71%
Portfolio turnover rate   21%(E)   74%(E)(H)   76%   6%   33%   30%   52%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(E)Not annualized.

(F)Ratio does not include income and expenses of the underlying funds.

(G)Annualized.

(H)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

32
 

 

Financial Highlights (Continued)

 

Touchstone Balanced Allocation Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.12   $11.14   $11.01   $9.97   $9.26   $11.17   $12.64 
Income (loss) from investment operations:                                   
Net investment income   0.02    0.09(B)   0.09(B)   0.10(B)   0.15(B)   0.22(B)   0.11(B)
Net realized and unrealized gains (losses) on investments   0.40    0.35    0.14    1.13    0.79    (1.44)   (0.73)(C)
Total from investment operations   0.42    0.44    0.23    1.23    0.94    (1.22)   (0.62)
Distributions from:                                   
Net investment income   (0.02)   (0.17)   (0.10)   (0.19)   (0.23)   (0.23)   (0.23)
Realized capital gains   —    (0.29)   —    —    —    (0.46)   (0.62)
Total distributions   (0.02)   (0.46)   (0.10)   (0.19)   (0.23)   (0.69)   (0.85)
Net asset value at end of period  $11.52   $11.12   $11.14   $11.01   $9.97   $9.26   $11.17 
Total return(D)   3.79%(E)   4.03%(E)   2.13%   12.41%   10.19%   (10.00%)   (5.34%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $36,857   $38,226   $38,388   $50,108   $59,480   $77,330   $120,085 
Ratio to average net assets:                                   
Net expenses(F)   1.08%(G)   1.16%(G)   1.39%   1.39%   1.39%   1.40%   1.67.%
Gross expenses(F)   1.58%(G)   1.60%(G)   1.59%   1.59%   1.62%   1.51%   1.85%
Net investment income(F)   0.34%(G)   2.00%(G)   0.84%   0.98%   1.51%   2.46%   0.92%
Portfolio turnover rate   21%(E)   74%(E)(H)   76%   6%   33%   30%   52%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(E)Not annualized.

(F)Ratio does not include income and expenses of the underlying funds.

(G)Annualized.

(H)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

33
 

 

Financial Highlights (Continued)

 

Touchstone Balanced Allocation Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.15   $11.21   $11.05   $10.01   $9.30   $11.31   $12.70 
Income (loss) from investment operations:                                   
Net investment income   0.08    0.14(B)   0.20(B)   0.23(B)   0.24(B)   0.31(B)   0.23(B)
Net realized and unrealized gains (losses) on investments   0.40    0.35    0.14    1.11    0.80    (1.46)   (0.74)(C)
Total from investment operations   0.48    0.49    0.34    1.34    1.04    (1.15)   (0.51)
Distributions from:                                   
Net investment income   (0.08)   (0.26)   (0.18)   (0.30)   (0.33)   (0.40)   (0.26)
Realized capital gains   —    (0.29)   —    —    —    (0.46)   (0.62)
Total distributions   (0.08)   (0.55)   (0.18)   (0.30)   (0.33)   (0.86)   (0.88)
Net asset value at end of period  $11.55   $11.15   $11.21   $11.05   $10.01   $9.30   $11.31 
Total return   4.30%(D)   4.45%(D)   3.18%   13.49%   11.25%   (9.00%)   (4.40%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $42,545   $47,092   $1,287   $1,866   $929   $672   $732 
Ratio to average net assets:                                   
Net expenses(E)   0.08%(F)   0.16%(F)   0.39%   0.39%   0.39%   0.40%   0.65%
Gross expenses(E)   0.57%(F)   0.52%(F)   1.40%   1.41%   2.28%   1.41%   5.13%
Net investment income(E)   1.34%(F)   3.00%(F)   1.84%   2.11%   2.46%   3.53%   1.91%
Portfolio turnover rate   21%(D)   74%(D)(G)   76%   6%   33%   30%   52%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Not annualized.

(E)Ratio does not include income and expenses of the underlying funds.

(F)Annualized.

(G)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

34
 

 

Financial Highlights (Continued)

 

Touchstone Balanced Allocation Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.10   $11.16   $11.00   $9.97   $9.26   $11.28    12.71 
Income (loss) from investment operations:                                   
Net investment income   0.08    0.14(B)   0.20(B)   0.21(B)   0.35(B)   0.30(B)   0.27(B)
Net realized and unrealized gains (losses) on investments   0.40    0.35    0.14    1.12    0.69    (1.46)   (0.78)(C)
Total from investment operations   0.48    0.49    0.34    1.33    1.04    (1.16)   (0.51)
Distributions from:                                   
Net investment income   (0.08)   (0.26)   (0.18)   (0.30)   (0.33)   (0.40)   (0.30)
Realized capital gains   —    (0.29)   —    —    —    (0.46)   (0.62)
Total distributions   (0.08)   (0.55)   (0.18)   (0.30)   (0.33)   (0.86)   (0.92)
Net asset value at end of period  $11.50   $11.10   $11.16   $11.00   $9.97   $9.26    11.28 
Total return   4.32%(D)   4.47%(D)   3.19%   13.44%   11.29%   (9.13%)   (4.46%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $32   $31   $30   $31   $27   $2,011   $6,196 
Ratio to average net assets:                                   
Net expenses(E)   0.08%(F)   0.16%(F)   0.39%   0.39%   0.39%   0.40%   0.85%
Gross expenses(E)   85.94%(F)   56.07%(F)   28.86%   46.94%   2.29%   0.58%   1.41%
Net investment income(E)   1.34%(F)   3.00%(F)   1.85%   1.97%   3.55%   3.35%   2.24%
Portfolio turnover rate   21%(D)   74%(D)(G)   76%   6%   33%   30%   52%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Not annualized.

(E)Ratio does not include income and expenses of the underlying funds.

(F)Annualized.

(G)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

35
 

 

Financial Highlights (Continued)

 

Touchstone Conservative Allocation Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $10.50   $10.98   $10.87   $10.38   $9.84   $10.76   $11.30 
Income (loss) from investment operations:                                   
Net investment income   0.09    0.10(B)   0.21(B)   0.26(B)   0.34(B)   0.48(B)   0.29(B)
Net realized and unrealized gains (losses) on investments   0.09    0.17    0.13    0.64    0.66    (0.61)   (0.25)
Total from investment operations   0.18    0.27    0.34    0.90    1.00    (0.13)   0.04 
Distributions from:                                   
Net investment income   (0.09)   (0.28)   (0.23)   (0.41)   (0.46)   (0.57)   (0.31)
Realized capital gains   —    (0.47)   —    —    —    (0.22)   (0.27)
Total distributions   (0.09)   (0.75)   (0.23)   (0.41)   (0.46)   (0.79)   (0.58)
Net asset value at end of period  $10.59   $10.50   $10.98   $10.87   $10.38   $9.84   $10.76 
Total return(C)   1.68%(D)   2.47%(D)   3.23%   8.81%   10.27%   (0.49%)   0.24%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $24,442   $32,965   $8,466   $11,138   $12,141   $13,632   $15,858 
Ratio to average net assets:                                   
Net expenses(E)   0.33%(F)   0.40%(F)   0.61%   0.61%   0.61%   0.65%   0.93%
Gross expenses(E)   0.95%(F)   0.85%(F)   1.02%   0.91%   0.94%   0.86%   1.31%
Net investment income(E)   1.56%(F)   2.28%(F)   1.95%   2.43%   3.36%   5.09%   2.62%
Portfolio turnover rate   14%(D)   79%(D)(G)   89%   13%   33%   40%   49%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(D)Not annualized.

(E)Ratio does not include income and expenses of the underlying funds.

(F)Annualized.

(G)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

36
 

 

Financial Highlights (Continued)

 

Touchstone Conservative Allocation Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $10.45   $10.92   $10.81   $10.33   $9.80   $10.66   $11.25 
Income (loss) from investment operations:                                   
Net investment income   0.05    0.07(B)   0.13(B)   0.18(B)   0.27(B)   0.39(B)   0.21(B)
Net realized and unrealized gains (losses) on investments   0.08    0.17    0.13    0.63    0.64    (0.58)   (0.25)
Total from investment operations   0.13    0.24    0.26    0.81    0.91    (0.19)   (0.04)
Distributions from:                                   
Net investment income   (0.05)   (0.24)   (0.15)   (0.33)   (0.38)   (0.45)   (0.28)
Realized capital gains   —    (0.47)   —    —    —    (0.22)   (0.27)
Total distributions   (0.05)   (0.71)   (0.15)   (0.33)   (0.38)   (0.67)   (0.55)
Net asset value at end of period  $10.53   $10.45   $10.92   $10.81   $10.33   $9.80   $10.66 
Total return(C)   1.21%(D)   2.18%(D)   2.50%   7.93%   9.37%   (1.20%)   (0.47%)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $17,190   $17,972   $17,104   $20,000   $23,985   $31,465   $34,242 
Ratio to average net assets:                                   
Net expenses(E)   1.08%(F)   1.15%(F)   1.36%   1.36%   1.36%   1.41%   1.67%
Gross expenses(E)   1.65%(F)   1.67%(F)   1.70%   1.61%   1.65%   1.54%   1.95%
Net investment income(E)   0.81%(F)   1.53%(F)   1.20%   1.72%   2.61%   4.23%   1.86%
Portfolio turnover rate   14%(D)   79%(D)(G)   89%   13%   33%   40%   49%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(D)Not annualized.

(E)Ratio does not include income and expenses of the underlying funds.

(F)Annualized.

(G)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

37
 

 

Financial Highlights (Continued)

 

Touchstone Conservative Allocation Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $10.51   $10.99   $10.87   $10.39   $9.85   $10.78   $11.30 
Income (loss) from investment operations:                                   
Net investment income   0.10    0.12(B)   0.24(B)   0.29(B)   0.35(B)   0.44(B)   0.32(B)
Net realized and unrealized gains (losses) on investments   0.08    0.16    0.14    0.62    0.67    (0.54)   (0.25)
Total from investment operations   0.18    0.28    0.38    0.91    1.02    (0.10)   0.07 
Distributions from:                                   
Net investment income   (0.10)   (0.29)   (0.26)   (0.43)   (0.48)   (0.61)   (0.32)
Realized capital gains   —    (0.47)   —    —    —    (0.22)   (0.27)
Total distributions   (0.10)   (0.76)   (0.26)   (0.43)   (0.48)   (0.83)   (0.59)
Net asset value at end of period  $10.59   $10.51   $10.99   $10.87   $10.39   $9.85   $10.78 
Total return   1.71%(C)   2.60%(C)   3.60%   8.97%   10.54%   (0.17%)   0.54%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $27,878   $33,329   $2,156   $1,370   $1,129   $234   $640 
Ratio to average net assets:                                   
Net expenses(D)   0.08%(E)   0.15%(E)   0.36%   0.36%   0.34%   0.40%   0.67%
Gross expenses(D)   0.61%(E)   0.57%(E)   1.38%   1.65%   1.65%   7.77%   4.34%
Net investment income(D)   1.81%(E)   2.53%(E)   2.20%   2.72%   3.40%   4.56%   2.86%
Portfolio turnover rate   14%(C)   79%(C)(F)   89%   13%   33%   40%   49%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Not annualized.

(D)Ratio does not include income and expenses of the underlying funds.

(E)Annualized.

(F)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

38
 

 

Financial Highlights (Continued)

 

Touchstone Conservative Allocation Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $10.51   $10.99   $10.89   $10.40   $9.86   $10.79   $11.32 
Income (loss) from investment operations:                                   
Net investment income   0.11    0.12(B)   0.24(B)   0.29(B)   0.37(B)   0.47(B)   0.32(B)
Net realized and unrealized gains (losses) on investments   0.07    0.16    0.12    0.63    0.65    (0.58)   (0.26)
Total from investment operations   0.18    0.28    0.36    0.92    1.02    (0.11)   0.06 
Distributions from:                                   
Net investment income   (0.10)   (0.29)   (0.26)   (0.43)   (0.48)   (0.60)   (0.32)
Realized capital gains   —    (0.47)   —    —    —    (0.22)   (0.27)
Total distributions   (0.10)   (0.76)   (0.26)   (0.43)   (0.48)   (0.82)   (0.59)
Net asset value at end of period  $10.59   $10.51   $10.99   $10.89   $10.40   $9.86   $10.79 
Total return   1.71%(C)   2.50%(C)   3.52%   9.06%   10.52%   (0.19%)   0.41%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $635   $1,198   $1,342   $6,459   $6,158   $6,017   $6,816 
Ratio to average net assets:                                   
Net expenses(D)   0.08%(E)   0.15%(E)   0.36%   0.36%   0.36%   0.40%   0.69%
Gross expenses(D)   3.92%(E)   1.93%(E)   0.66%   0.63%   0.56%   1.43%   1.05%
Net investment income(D)   1.81%(E)   2.53%(E)   2.20%   2.70%   3.62%   4.85%   2.87%
Portfolio turnover rate   14%(C)   79%(C)(F)   89%   13%   33%   40%   49%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Not annualized.

(D)Ratio does not include income and expenses of the underlying funds.

(E)Annualized.

(F)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

39
 

 

Financial Highlights (Continued)

 

Touchstone Growth Allocation Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.75   $11.28   $11.40   $9.58   $8.66   $12.33   $14.82 
Income (loss) from investment operations:                                   
Net investment income   0.02    0.14(B)   0.13(B)   0.08(B)   0.12(B)   0.10(B)   0.07(B)
Net realized and unrealized gains (losses) on investments   0.75    0.67    (0.14)   1.80    0.99    (3.12)   (1.67)(C)
Total from investment operations   0.77    0.81    (0.01)   1.88    1.11    (3.02)   (1.60)
Distributions from:                                   
Net investment income   (0.01)   (0.34)   (0.11)   (0.06)   (0.19)   —    (0.20)
Realized capital gains   —    —    —    —    —    (0.65)   (0.69)
Total distributions   (0.01)   (0.34)   (0.11)   (0.06)   (0.19)   (0.65)   (0.89)
Net asset value at end of period  $12.51   $11.75   $11.28   $11.40   $9.58   $8.66   $12.33 
Total return(D)   6.56%(E)   7.29%(E)   (0.04%)   19.65%   12.78%   (23.55%)   (11.45%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $29,368   $31,432   $10,320   $13,619   $16,721   $20,556   $43,129 
Ratio to average net assets:                                   
Net expenses(F)   0.33%(G)   0.39%(G)   0.57%   0.57%   0.57%   0.56%   0.91%
Gross expenses(F)   1.10%(G)   1.04%(G)   1.21%   1.13%   1.18%   1.03%   1.26%
Net investment income(F)   0.34%(G)   2.95%(G)   1.17%   0.77%   1.26%   1.14%   0.48%
Portfolio turnover rate   34%(E)   65%(E)(H)   77%   8%   41%   27%   46%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(E)Not annualized.

(F)Ratio does not include income and expenses of the underlying funds.

(G)Annualized.

(H)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

40
 

 

Financial Highlights (Continued)

 

Touchstone Growth Allocation Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.32   $10.80   $10.90   $9.18   $8.30   $11.95   $14.53 
Income (loss) from investment operations:                                   
Net investment income (loss)   (0.03)   0.10(B)   0.04(B)   —(B)(C)   0.04(B)   0.03(B)   (0.04)(B)
Net realized and unrealized gains (losses) on investments   0.73    0.63    (0.12)   1.72    0.96    (3.03)   (1.61)(D)
Total from investment operations   0.70    0.73    (0.08)   1.72    1.00    (3.00)   (1.65)
Distributions from:                                   
Net investment income   —    (0.21)   (0.02)   —    (0.12)   —    (0.24)
Realized capital gains   —    —    —    —    —    (0.65)   (0.69)
Total distributions   —    (0.21)   (0.02)   —    (0.12)   (0.65)   (0.93)
Net asset value at end of period  $12.02   $11.32   $10.80   $10.90   $9.18   $8.30   $11.95 
Total return(E)   6.18%(F)   6.82%(F)   (0.75%)   18.74%   12.03%   (24.16%)   (12.08%)(D)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $23,958   $24,065   $23,968   $33,477   $36,655   $48,126   $83,127 
Ratio to average net assets:                                   
Net expenses(G)   1.08%(H)   1.14%(H)   1.32%   1.32%   1.32%   1.31%   1.66%
Gross expenses(G)   1.75%(H)   1.81%(H)   1.87%   1.75%   1.84%   1.75%   2.01%
Net investment income (loss)(G)   (0.41%)(H)   2.20%(H)   0.42%   0.02%   0.47%   0.42%   (0.29%)
Portfolio turnover rate   34%(F)   65%(F)(I)   77%   8%   41%   27%   46%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Less than $0.005 per share.

(D)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(E)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(F)Not annualized.

(G)Ratio does not include income and expenses of the underlying funds.

(H)Annualized.

(I)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

41
 

 

Financial Highlights (Continued)

 

Touchstone Growth Allocation Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.86   $11.43   $11.57   $9.72   $8.77   $12.45   $14.91 
Income (loss) from investment operations:                                   
Net investment income   0.04    0.16(B)   0.15(B)   0.12(B)   0.05(B)   0.12(B)   0.09(B)
Net realized and unrealized gains (losses) on investments   0.76    0.67    (0.14)   1.81    1.11    (3.15)   (1.67)(C)
Total from investment operations   0.80    0.83    0.01    1.93    1.16    (3.03)   (1.58)
Distributions from:                                   
Net investment income   (0.03)   (0.40)   (0.15)   (0.08)   (0.21)   —    (0.19)
Realized capital gains   —    —    —    —    —    (0.65)   (0.69)
Total distributions   (0.03)   (0.40)   (0.15)   (0.08)   (0.21)   (0.65)   (0.88)
Net asset value at end of period  $12.63   $11.86   $11.43   $11.57   $9.72   $8.77   $12.45 
Total return   6.73%(D)   7.35%(D)   0.22%   19.94%   13.22%   (23.40%)   (11.25%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $25,191   $27,873   $881   $3,561   $2,322   $667   $750 
Ratio to average net assets:                                   
Net expenses(E)   0.08%(F)   0.14%(F)   0.32%   0.32%   0.32%   0.32%   0.61%
Gross expenses(E)   0.65%(F)   0.65%(F)   1.62%   1.13%   1.33%   3.50%   5.47%
Net investment income(E)   0.59%(F)   3.20%(F)   1.42%   1.11%   0.56%   1.46%   0.68%
Portfolio turnover rate   34%(D)   65%(D)(G)   77%   8%   41%   27%   46%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Not annualized.

(E)Ratio does not include income and expenses of the underlying funds.

(F)Annualized.

(G)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

  

42
 

 

Financial Highlights (Continued)

 

Touchstone Growth Allocation Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $10.82   $10.58   $11.56   $9.71   $8.77   $12.44   $14.91 
Income (loss) from investment operations:                                   
Net investment income   0.04    0.14(B)   0.15(B)   0.11(B)   0.32(B)   0.12(B)   0.09(B)
Net realized and unrealized gains (losses) on investments   0.68    0.61    (0.25)   1.83    0.83    (3.14)   (1.68)(C)
Total from investment operations   0.72    0.75    (0.10)   1.94    1.15    (3.02)   (1.59)
Distributions from:                                   
Net investment income   (0.03)   (0.51)   (0.88)   (0.09)   (0.21)   —    (0.19)
Realized capital gains   —    —    —    —    —    (0.65)   (0.69)
Total distributions   (0.03)   (0.51)   (0.88)   (0.09)   (0.21)   (0.65)   (0.88)
Net asset value at end of period  $11.51   $10.82   $10.58   $11.56   $9.71   $8.77   $12.44 
Total return   6.63%(D)   7.30%(D)   (0.26%)   20.01%   13.10%   (23.34%)   (11.32%)(C)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $18   $29   $13   $788   $674   $17,845   $24,509 
Ratio to average net assets:                                   
Net expenses(E)   0.08%(F)   0.14%(F)   0.32%   0.32%   0.32%   0.31%   0.64%
Gross expenses(E)   129.61%(F)   94.73%(F)   7.68%   2.29%   0.67%   0.50%   0.84%
Net investment income(E)   0.59%(F)   3.20%(F)   1.42%   0.96%   3.37%   1.39%   0.67%
Portfolio turnover rate   34%(D)   65%(D)(G)   77%   8%   41%   27%   46%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(D)Not annualized.

(E)Ratio does not include income and expenses of the underlying funds.

(F)Annualized.

(G)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

43
 

 

Financial Highlights (Continued)

 

Touchstone Moderate Growth Allocation Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.30   $11.13   $11.11   $9.66   $8.87   $11.91   $13.76 
Income (loss) from investment operations:                                   
Net investment income   0.06    0.14(B)   0.15(B)   0.12(B)   0.15(B)   0.17(B)   0.10(B)
Net realized and unrealized gains (losses) on investments   0.56    0.51    0.02(C)   1.47    0.87    (2.37)   (1.11)(D)
Total from investment operations   0.62    0.65    0.17    1.59    1.02    (2.20)   (1.01)
Distributions from:                                   
Net investment income   (0.05)   (0.30)   (0.15)   (0.14)   (0.23)   (0.16)   (0.15)
Realized capital gains   —    (0.18)   —    —    —    (0.68)   (0.69)
Total distributions   (0.05)   (0.48)   (0.15)   (0.14)   (0.23)   (0.84)   (0.84)
Net asset value at end of period  $11.87   $11.30   $11.13   $11.11   $9.66   $8.87   $11.91 
Total return(E)   5.46%(F)   5.96%(F)   1.65%   16.56%   11.52%(D)   (17.27%)   (7.86%)(D)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $66,682   $71,235   $15,181   $18,848   $22,740   $25,782   $52,854 
Ratio to average net assets:                                   
Net expenses(G)   0.33%(H)   0.39%(H)   0.57%   0.57%   0.57%   0.57%   0.89%
Gross expenses(G)   0.99%(H)   0.90%(H)   1.03%   1.01%   1.08%   0.99%   1.26%
Net investment income(G)   0.84%(H)   2.90%(H)   1.38%   1.17%   1.53%   2.00%   0.74%
Portfolio turnover rate   25%(F)   73%(F)(I)   77%   9%   38%   32%   43%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)The amounts shown for a share outstanding throughout the period does not accord with the change in net realized and unrealized gains (losses) on investments for the period due to the timing of purchases and sales of fund shares in relation to fluctuating market values during the period.

(D)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(E)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(F)Not annualized.

(G)Ratio does not include income and expenses of the underlying funds.

(H)Annualized.

(I)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

44
 

 

Financial Highlights (Continued)

 

Touchstone Moderate Growth Allocation Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.13   $10.89   $10.86   $9.44   $8.67   $11.63   $13.59 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.01    0.10(B)   0.07(B)   0.05(B)   0.07(B)   0.11(B)   (—)(B)(C)
Net realized and unrealized gains (losses) on investments   0.57    0.50    0.02(D)   1.43    0.86    (2.31)   (1.08)(E)
Total from investment operations   0.58    0.60    0.09    1.48    0.93    (2.20)   (1.08)
Distributions from:                                   
Net investment income   (0.02)   (0.18)   (0.06)   (0.06)   (0.16)   (0.08)   (0.19)
Realized capital gains   —    (0.18)   —    —    —    (0.68)   (0.69)
Total distributions   (0.02)   (0.36)   (0.06)   (0.06)   (0.16)   (0.76)   (0.88)
Net asset value at end of period  $11.69   $11.13   $10.89   $10.86   $9.44   $8.67   $11.63 
Total return(F)   5.18%(G)   5.52%(G)   0.89%   15.70%   10.71%   (17.90%)   (8.55%)(E)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $48,504   $48,985   $47,508   $61,074   $70,934   $92,373   $154,281 
Ratio to average net assets:                                   
Net expenses(H)   1.08%(I)   1.14%(I)   1.32%   1.32%   1.32%   1.32%   1.63%
Gross expenses(H)   1.63%(I)   1.68%(I)   1.74%   1.69%   1.74%   1.69%   1.88%
Net investment income (loss)(H)   0.09%(I)   2.15%(I)   0.63%   0.46%   0.78%   1.33%   (0.02%)
Portfolio turnover rate   25%(G)   73%(G)(J)   77%   9%   38%   32%   43%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)Less than $0.005 per share.

(D)The amounts shown for a share outstanding throughout the period does not accord with the change in net realized and unrealized gains (losses) on investments for the period due to the timing of purchases and sales of fund shares in relation to fluctuating market values during the period.

(E)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(F)Total returns shown exclude the effect of applicable sales loads. If these charges were included, the returns would be lower.

(G)Not annualized.

(H)Ratio does not include income and expenses of the underlying funds.

(I)Annualized.

(J)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

45
 

 

Financial Highlights (Continued)

 

Touchstone Moderate Growth Allocation Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.38   $11.24   $11.23   $9.75   $8.95   $12.02   $13.84 
Income (loss) from investment operations:                                   
Net investment income   0.07    0.15(B)   0.18(B)   0.18(B)   0.17(B)   0.20(B)   0.13(B)
Net realized and unrealized gains (losses) on investments   0.57    0.52    0.01(C)   1.46    0.88    (2.40)   (1.11)(D)
Total from investment operations   0.64    0.67    0.19    1.64    1.05    (2.20)   (0.98)
Distributions from:                                   
Net investment income   (0.06)   (0.35)   (0.18)   (0.16)   (0.25)   (0.19)   (0.15)
Realized capital gains   —    (0.18)   —    —    —    (0.68)   (0.69)
Total distributions   (0.06)   (0.53)   (0.18)   (0.16)   (0.25)   (0.87)   (0.84)
Net asset value at end of period  $11.96   $11.38   $11.24   $11.23   $9.75   $8.95   $12.02 
Total return   5.64%(E)   6.04%(E)   1.84%   16.93%   11.77%(D)   (17.07%)   (7.64%)(D)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $37,082   $43,585   $763   $1,289   $635   $508   $600 
Ratio to average net assets:                                   
Net expenses(F)   0.08%(G)   0.14%(G)   0.32%   0.32%   0.32%   0.32%   0.61%
Gross expenses(F)   0.57%(G)   0.54%(G)   1.89%   1.65%   2.59%   2.64%   4.40%
Net investment income(F)   1.09%(G)   3.15%(G)   1.63%   1.63%   1.72%   2.34%   0.97%
Portfolio turnover rate   25%(E)   73%(E)(H)   77%   9%   38%   32%   43%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)The amounts shown for a share outstanding throughout the period does not accord with the change in net realized and unrealized gains (losses) on investments for the period due to the timing of purchases and sales of fund shares in relation to fluctuating market values during the period.

(D)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(E)Not annualized.

(F)Ratio does not include income and expenses of the underlying funds.

(G)Annualized.

(H)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

46
 

 

Financial Highlights (Continued)

 

Touchstone Moderate Growth Allocation Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

   Six                         
   Months   Five                     
   Ended   Months                     
   June 30,   Ended                     
   2013   December 31,   Year Ended July 31, 
   (Unaudited)   2012(A)   2012   2011   2010   2009   2008 
Net asset value at beginning of period  $11.33   $11.18   $11.16   $9.75   $8.95   $12.01   $13.82 
Income (loss) from investment operations:                                   
Net investment income   0.06    0.15(B)   0.18(B)   0.15(B)   0.28(B)   0.19(B)   0.13(B)
Net realized and unrealized gains (losses) on investments   0.58    0.52    0.02(C)   1.48    0.78    (2.38)   (1.11)(D)
Total from investment operations   0.64    0.67    0.20    1.63    1.06    (2.19)   (0.98)
Distributions from:                                   
Net investment income   (0.06)   (0.34)   (0.18)   (0.22)   (0.26)   (0.19)   (0.14)
Realized capital gains   —    (0.18)   —    —    —    (0.68)   (0.69)
Total distributions   (0.06)   (0.52)   (0.18)   (0.22)   (0.26)   (0.87)   (0.83)
Net asset value at end of period  $11.91   $11.33   $11.18   $11.16   $9.75   $8.95   $12.01 
Total return   5.66%(E)   6.11%(E)   1.92%   16.88%   11.79%(D)   (16.99%)   (7.59%)(D)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $9   $9   $8   $8   $7   $7,948   $8,836 
Ratio to average net assets:                                   
Net expenses(F)   0.08%(G)   0.14%(G)   0.32%   0.32%   0.32%   0.32%   0.70%
Gross expenses(F)   303.36%(G)   230.25%(G)   111.34%   183.59%   0.99%   0.61%   0.99%
Net investment income(F)   1.09%(G)   3.15%(G)   1.63%   1.43%   2.99%   2.21%   0.98%
Portfolio turnover rate   25%(E)   73%(E)(H)   77%   9%   38%   32%   43%
(A)The Fund changed its fiscal year end from July 31 to December 31. See Note 8 in Notes to Financial Statements.

(B)The net investment income per share is based on average shares outstanding for the period.

(C)The amounts shown for a share outstanding throughout the period does not accord with the change in net realized and unrealized gains (losses) on investments for the period due to the timing of purchases and sales of fund shares in relation to fluctuating market values during the period.

(D)Impact of payment from affiliate was less than $0.01 per share and 0.01%, respectively.

(E)Not annualized.

(F)Ratio does not include income and expenses of the underlying funds.

(G)Annualized.

(H)Portfolio turnover excludes the purchases and sales of the Acquired Funds (see Note 8). If these transactions were included, portfolio turnover would have been higher.

See accompanying Notes to Financial Statements.

 

47
 

 

Notes to Financial Statements

June 30, 2013 (Unaudited)

 

1. Organization

 

The Touchstone Strategic Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was established as a Massachusetts business trust pursuant to a Declaration of Trust dated November 18, 1982. The Trust consists of nineteen funds, including the following five funds (individually, a “Fund”, and collectively, the “Funds”):

 

Touchstone Dynamic Equity Fund (“Dynamic Equity Fund”)

Touchstone Balanced Allocation Fund (“Balanced Allocation Fund”)

Touchstone Conservative Allocation Fund (“Conservative Allocation Fund”)

Touchstone Growth Allocation Fund (“Growth Allocation Fund”)

Touchstone Moderate Growth Allocation Fund (“Moderate Growth Allocation Fund”)

 

Each Fund is an open-end, diversified, management investment company. Additionally, the Balanced Allocation Fund, Conservative Allocation Fund, Growth Allocation Fund and Moderate Growth Allocation Fund (collectively, the “Allocation Funds”) are “Funds of Funds”, which seek to achieve their investment objective by primarily investing in a diversified portfolio of affiliated underlying equity and fixed income funds that are sub-advised by Ibbotson Associates, Inc. These underlying funds, in turn, invest in a variety of U.S. and foreign equity and fixed income securities. Under normal circumstances, the Allocation Funds expect to invest their assets among equity and fixed income funds in the following ranges:

 

    Equity    Fixed Income 
    Allocation Fund    Allocation Fund 
Balanced Allocation Fund   50-70%    30-50% 
Conservative Allocation Fund   20-40%    60-80% 
Growth Allocation Fund   90-100%    0-10% 
Moderate Growth Allocation Fund   70-90%    10-30% 

 

The investment goal of each of the underlying funds that the Allocation Funds invest in is as follows:

 

Fund   Investment Goal
Touchstone Core Bond Fund   Seeks to provide as high level of current income as is consistent with the preservation of capital. Capital appreciation is a secondary objective.
Touchstone Dynamic Equity Fund   Seeks to obtain long-term capital appreciation from hedged equity investments with less risk than a fully invested, unhedged equity portfolio.
Touchstone Emerging Markets Equity Fund   Seeks capital appreciation by primarily investing in equity securities of companies in emerging markets.
Touchstone Flexible Income Fund   Seeks a high level of income consistent with reasonable risk by investing primarily in income producing securities. Capital appreciation is a secondary goal.
Touchstone Focused Fund   Seeks capital appreciation by primarily investing in equity securities.
Touchstone Global Real Estate Fund   Seeks capital appreciation by primarily investing in common stocks and other equity securities of U.S. and foreign real estate companies without regard to market capitalization.
Touchstone Growth Opportunities Fund   Seeks long-term growth of capital by investing primarily in stocks of U.S. companies of any size.
Touchstone High Yield Fund   Seeks to achieve a high level of income by primarily investing in non-investment grade debt securities. Capital appreciation is a secondary consideration.
Touchstone Institutional Money Market Fund   Seeks high current income, consistent with liquidity and stability of principal. It invests in U.S. government securities and high quality money market instruments rated in one of the top two short-term rating categories or determined to be of comparable quality.
Touchstone International Fixed Income Fund   Seeks total return by investing primarily in fixed income securities of issuers located outside the United States.
Touchstone International Small Cap Fund   Seeks capital appreciation by primarily investing in equity securities of non-U.S. small capitalization companies, including companies located in countries with emerging markets.

 

48
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Fund   Investment Goal
Touchstone International Value Fund   Seeks long-term capital growth by primarily investing in equity securities of non-U.S. companies.
Touchstone Merger Arbitrage Fund   Seeks to achieve positive absolute returns regardless of market conditions over the long-term. It primarily invests in equity securities of U.S. and foreign issuers.
Touchstone Mid Cap Fund   Seeks long-term capital growth by investing primarily in common stocks of mid-cap U.S. listed companies.
Touchstone Mid Cap Growth Fund   Seeks to increase the value of its shares as a primary goal and to earn income as a secondary goal by primarily investing in common stocks of mid capitalization U.S. companies.
Touchstone Mid Cap Value Fund   Seeks capital appreciation by primarily investing in common stocks of medium capitalization companies.
Touchstone Premium Yield Equity Fund   Seeks long-term growth of capital and high current income by investing primarily in equity securities of any size.
Touchstone Sands Capital Institutional Growth Fund   Seeks long-term capital appreciation by primarily investing in common stocks of U.S. companies believed to have above-average potential for earnings or revenue growth.
Touchstone Small Cap Core Fund   Seeks capital appreciation by primarily investing in common stocks of small capitalization U.S. companies.
Touchstone Small Cap Growth Fund   Seeks long-term capital growth by investing primarily in stocks of small-cap companies.
Touchstone Small Company Value Fund   Seeks long-term capital growth by investing primarily in stocks of small-cap companies.
Touchstone Total Return Bond Fund   Seeks to provide current income, by primarily investing in fixed-income securities. Capital appreciation is a secondary goal.
Touchstone Ultra Short Duration Fixed Income Fund   Seeks maximum total return consistent with the preservation of capital by investing primarily in fixed income securities.
Touchstone Value Fund   Seeks long-term capital growth by primarily investing in equity securities of large- and mid-capitalization companies believed to be undervalued.

 

The Declaration of Trust permits the Trust to issue an unlimited number of shares of beneficial interest of each Fund. The Funds are registered to offer the following classes of shares: Class A shares, Class C shares, Class Y shares, and Institutional Class shares. The assets of each Fund are segregated, and a shareholder’s interest is limited to the Fund in which shares are held. The Funds’ prospectus provides a description of each Fund’s investment goals, policies, and strategies along with information on the classes of shares currently being offered.

 

2. Significant Accounting Policies

 

The following is a summary of the Funds’ significant accounting policies:

 

Security valuation and fair value measurements — All investments in securities are recorded at their estimated fair value. The Funds define the term “market value”, as used throughout this report, as the estimated fair value. The Funds use various methods to measure fair value of their portfolio securities on a recurring basis. Generally accepted accounting principles in the United States (“U.S. GAAP”) establish a hierarchy that prioritizes inputs to valuation methods. These inputs are summarized in the three broad levels listed below:

 

• Level 1 – quoted prices in active markets for identical securities

 

• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

 

• Level 3 – significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments)

 

49
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market instruments are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.

 

The aggregate value by input level, as of June 30, 2013, for each Fund’s investments, as well as a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining value, if applicable, is included in each Fund’s Portfolio of Investments or Tabular Presentation, which also includes a breakdown of the Fund’s investments by sector allocation. There were no Level 3 securities for the Funds during the six months ended June 30, 2013.

 

All transfers in and out of the levels are recognized at the value at the end of the period. During the six months ended June 30, 2013, there were no transfers between Levels 1, 2 and 3 for all Funds.

 

The Funds’ portfolio securities are valued as of the close of the regular session of trading on the New York Stock Exchange (“NYSE”) (currently 4:00 p.m., Eastern time). Portfolio securities traded on stock exchanges are valued at the last sale price, and to the extent these securities are actively traded, they are categorized in Level 1 of the fair value hierarchy. Portfolio securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Securities not traded on a particular day, or for which the last sale price is not readily available, are valued at their last broker-quoted bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service and are categorized in Level 2. Debt securities for which market quotations are readily available are valued at their most recent bid prices as obtained from one or more of the major market makers for such securities by an independent pricing service and are categorized in Level 2. Money market instruments and other debt securities with a remaining maturity of less than 60 days are valued at amortized cost, which approximates market value and are categorized in Level 2. While this method provides consistency in valuation (and may only be used if it approximates market value), it may result in periods during which value, as determined by amortized cost, is higher or lower than the price that would be received if the Fund sold the investment. Securities for which market quotations or the NOCP are not readily available are fair valued as determined by or under the direction of the Board of Trustees and are categorized in Level 3. Shares of open-end mutual funds in which the Funds invest are valued at their respective net asset values (“NAV”) as reported by the underlying funds and are categorized in Level 1. The prices for foreign securities are reported in local currency and translated into U.S. dollars using currency exchange rates.

 

Level 2 Valuation — Securities mainly traded on a non-U.S. exchange are generally valued according to the preceding closing values on that exchange. However, if an event that may change the value of a security occurs after the time that the closing value on the non-U.S. exchange was determined, but before the close of regular trading on the NYSE, the security may be priced based on fair value. This may cause the value of the security on the books of the Funds to be significantly different from the closing value on the non-U.S. exchange and may affect the calculation of the NAV of the Funds. Any debt securities held by the Funds for which market quotations are not readily available are generally priced at their most recent bid prices as obtained from one or more of the major market makers for such securities.

 

Level 3 Valuation — Securities held by the Funds that do not have readily available market quotations, or securities for which the available market quotations are not reliable, are priced at their fair value using procedures approved by the Funds’ Board of Trustees. The Funds may use fair value pricing under the following circumstances, among others:

 

• If the value of a security has been materially affected by events occurring before the Funds’ pricing time but after the close of the primary markets on which the security is traded.

 

•If the exchange on which a portfolio security is principally traded closes early or if trading in a particular

 

50
 

 

 

Notes to Financial Statements (Unaudited) (Continued)

 

portfolio security was halted during the day and did not resume prior to the Funds’ NAV calculation.

•If a security is so thinly traded that reliable market quotations are unavailable due to infrequent trading.

•If the validity of market quotations is not reliable.

 

The Allocation Funds invest in securities of affiliated mutual funds (the “Underlying Funds”). The value of an investment in the Allocation Funds is based on the performance of the Underlying Funds in which they invest and the allocation of their assets among those funds. Because the Allocation Funds invest in mutual funds, shareholders of the Allocation Funds indirectly bear a proportionate share of the expenses charged by the Underlying Funds in which they invest as well as their share of the Allocation Funds’ fees and expenses. The principal risks of an investment in the Allocation Funds include the principal risks of investing in the Underlying Funds. Investments in the Underlying Funds are valued at the NAV per share of each class of the Underlying Funds and are categorized as Level 1.

 

Certain Funds invest in securities of other investment companies, including exchange traded funds (“ETFs”), open-end funds, and closed-end funds. Open-end funds are investment companies that issue new shares continuously and redeem shares daily. Closed-end funds are investment companies that typically issue a fixed number of shares that trade on a securities exchange or over-the-counter. An ETF is an investment company that typically seeks to track the performance of an index by holding in its portfolio shares of all the companies, or a representative sample of the companies, that are components of a particular index. ETFs are traded on a securities exchange based on their market value. The risks of investment in other investment companies typically reflect the risks of the types of securities in which investment companies invest. Investments in ETFs and closed-end funds are subject to the additional risk that their shares may trade at a premium or discount to their NAV. When a Fund invests in another investment company, shareholders of the Fund indirectly bear their proportionate share of the other investment company’s fees and expenses, including operating, registration, trustee, licensing and marketing, as well as their share of the Funds’ fees and expenses.

 

Cash and cash equivalents — The Funds consider liquid assets deposited with a bank, money market funds, and certain short term debt instruments with maturities of 3 months or less to be cash equivalents and are included in the investments on the financial statements. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. The value of cash equivalents denominated in foreign currencies is determined by converting to U.S. dollars on the date of the Statement of Assets and Liabilities.

 

Securities sold short — The Dynamic Equity Fund periodically engages in selling securities short, which obligates the Fund to replace a security borrowed by purchasing the same security at the current market value. The Fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund would realize a gain if the price of the security declines between those dates. As of June 30, 2013, the Dynamic Equity Fund held securities sold short with a fair value of $12,391,658 and had securities with a fair value of $74,644,376 held as collateral for both securities sold short and written options. Additionally, as of June 30, 2013, the Dynamic Equity Fund had cash collateral in the amount of $125,527 for both securities sold short and options written.

 

Options — The Funds may write or purchase financial option contracts primarily to hedge against changes in the value of equity securities (or securities that the Funds intend to purchase), against fluctuations in fair value caused by changes in prevailing market interest rates or foreign currency exchange rates and against changes in overall equity market volatility. In addition, the Funds may utilize options in an attempt to generate gains from option premiums or to reduce overall portfolio risk. The Funds’ option strategy primarily focuses on the use of writing call options on equity indexes. When the Funds write or purchase an option, an amount equal to the premium received or paid by the Funds is recorded as a liability or an asset and is subsequently

 

51
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Funds on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Funds have realized a gain or loss on investment transactions. The Funds, as writers of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bear the market risk of an unfavorable change in the price of the security underlying the written option. The Funds, as purchasers of an option, bear the risk that the counterparties to the option may not have the ability to meet the terms of the option contracts. There is minimal counterparty credit risk involved in entering into option contracts since they are exchange-traded instruments and the exchange’s clearinghouse, as counterparty to all exchange-traded options, guarantees the options against default. Options are valued at the last quoted sales price. If there is no such reported sale on the valuation date, long option positions are valued at the most recent bid price, and short option positions are valued at the most recent ask price. As of June 30, 2013, the Dynamic Equity Fund held written options with a fair value of $404,055 and had securities with a fair value of $74,644,376 held as collateral for both securities sold short and options written. Additionally, as of June 30, 2013, the Dynamic Equity Fund also had cash collateral in the amount of $125,527 for both securities sold short and options written.

 

Derivative instruments and hedging activities — In order to better define its contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement” or “MNA”) or similar agreement with certain counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs over-the-counter (“OTC”) derivates and foreign exchange contracts, and typically contains, among other things, collateral posting terms and master netting provisions in the event of a default or termination. Under an ISDA Master Agreement, a party may, under certain circumstances, offset with the counterparty certain derivative financial instrument’s payables or receivables with collateral held or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out netting). These default events include bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset.

 

When entering into a derivative transaction, a Fund may be required to post and maintain collateral or margin (including both initial and maintenance margin). Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker or clearing house for exchange traded and centrally cleared derivatives (financial futures contracts, options, and centrally cleared swaps). Brokers can ask for margining in excess of the clearing house’s minimum in certain circumstances. Collateral terms are contract specific for OTC derivatives (foreign currency exchange contracts, options, and swaps). For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Portfolio of Investments. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. A Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

 

52
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Certain ISDA Master Agreements allow counterparties to OTC derivatives transactions to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of their ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.

 

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.

 

As of June 30, 2013, the Dynamic Equity Fund’s derivative assets and liabilities (by type) on a gross basis were as follows:

 

   Assets   Liabilities 
Derivative Financial Instruments:          
Written Options  $—   $404,055 
Total gross amount of assets and liabilities subject to MNA  $—   $404,055 

 

The following table presents the Dynamic Equity Fund’s derivative liabilities net of amounts available for offset under a MNA and net of the related collateral pledged by the Fund as of June 30, 2013:

 

       Gross Amounts             
       Offset in             
   Gross Amount of   Statement of   Non-cash       Net Amount of 
   Recognized   Assets and   Collateral   Cash Collateral   Derivative 
   Liabilities(A)   Liabilities   Pledged(B)   Pledged(B)   Liabilities(C) 
Written Options  $404,055   $—   $(400,092)  $(3,963)  $— 
Total  $404,055   $—   $(400,092)  $(3,963)  $— 

 

(A)Gross and net amounts are equal.

 

(B)Pershing is the counterparty.

 

(C)Net amount represents the net amount payable due to the counterparty in the event of default.

 

The following table sets forth the fair value of the Funds’ derivative financial instruments by primary risk exposure as of June 30, 2013:

 

Fair Value of Derivative Investments
As of June 30, 2013

   Derivatives not accounted for as hedging  Asset   Liability 
Fund  instruments under ASC 815  Derivatives*   Derivatives* 
Dynamic Equity Fund  Options - Equity Contracts  $—   $404,055 

 

* Statements of Assets and Liabilities Location: Written options, at market value.

 

53
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

The following table sets forth the operations of the Funds’ derivative financial instruments by primary risk exposure as of June 30, 2013.

 

The Effect of Derivative Investments on the Statement of Operations
for the Six Months Ended June 30, 2013

          Change in 
          Unrealized 
   Derivatives not accounted for as hedging  Realized Loss   Appreciation 
Fund  instruments under ASC 815  on Derivatives   on Derivatives* 
Dynamic Equity Fund  Purchased Options - Equity Contacts  $(720,908)*  $— 
   Written Options - Equity Contacts   (2,513,889)**   59,616 

 

*Statements of Operations Location: Net realized gain on investments from non-affiliated securities.

 

**Statements of Operations Location: Net realized loss on written options and net change in unrealized appreciation on written options.

 

For the six months ended June 30, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:

 

   Dynamic 
   Equity 
   Fund 
Equity contracts:     
Written Options - Average number of contracts   1,866 

 

Share valuation — The NAV per share of each class of shares of each Fund is calculated daily by dividing the total value of a Fund’s assets attributable to that class, less liabilities attributable to that class, by the number of outstanding shares of that class.

 

The maximum offering price per share of Class A shares of the Funds is equal to the NAV per share plus a sales load equal to 6.10% of the NAV (or 5.75% of the offering price). There is no sales load on purchases of $1 million or more of Class A shares. The maximum offering price per share of Class C, Class Y, and Institutional Class shares of the Funds is equal to the NAV per share.

 

The redemption price per share of each class of shares of the Funds is generally equal to the NAV per share. However, Class A redemptions that were part of a no-load $1 million subscription may be subject to a contingent deferred sales charge (“CDSC”) of up to 1% if redeemed within a one-year period from the date of purchase. Additionally, purchases of Class C shares of the Funds are subject to a CDSC of 1.00% of the original purchase price if redeemed within a one-year period from the date of purchase.

 

Investment income — Dividend income from securities is recognized on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Funds, where applicable. Interest income from securities is recorded on the basis of interest accrued, premium amortized and discount accreted.

 

Distributions to shareholders — Each Fund intends to distribute to its shareholders substantially all of its income and capital gains. The Dynamic Equity Fund declares and distributes net investment income, if any, annually as a dividend to shareholders. The Balanced Allocation Fund, Conservative Allocation Fund, Growth Allocation Fund, and Moderate Growth Allocation Fund each declare and distribute net investment income, if any, quarterly as a dividend to shareholders. Each Fund makes distributions of capital gains, if any, at least annually, net of applicable capital loss carryforwards. Income distributions and capital gain distributions are determined in accordance with income tax regulations. Recognition of the Funds’ net investment income that invests in underlying funds is affected by the timing of dividend declarations by investee funds.

 

Allocations — Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for a Fund are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class-specific expenses are charged directly to the class incurring the expense. Common

 

54
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon their proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all Funds in the Trust, and/or in Touchstone Investment Trust, Touchstone Institutional Funds Trust, Touchstone Variable Series Trust, Touchstone Funds Group Trust, and Touchstone Tax-Free Trust (“Touchstone Fund Complex”), daily in relation to net assets of each Fund or another reasonable measure.

 

Security transactions — Security transactions are reflected for financial reporting purposes as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis.

 

Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

Redemption Fees — Prior to April 16, 2012, the Funds imposed a 2% redemption/exchange fee on total redemption proceeds (after applicable deferred sales charges) of any shareholder redeeming shares (including redemptions by exchange) of the Funds within 10 calendar days of their purchase. The Funds charged the redemption/exchange fee to discourage market timing by those shareholders initiating redemptions or exchanges to take advantage of short-term market movements. The redemption fee was imposed to the extent that the number of Fund shares redeemed exceeded the number of the Fund shares that had been held for more than 10 calendar days. In determining how long shares of the Fund had been held, shares held by the shareholder for the longest period of time were sold first. The Funds retained the redemption/exchange fee for the benefit of the remaining shareholders by crediting Paid-in Capital. The redemption fees can be found on the Statements of Changes in Net Assets - Capital Stock Activity. Effective April 16, 2012, the redemption fee plan was terminated.

 

3. Investment Transactions

 

Investment transactions (excluding short-term investments and U.S. Government securities) were as follows for the six months ended June 30, 2013:

 

   Dynamic   Balanced   Conservative 
   Equity   Allocation   Allocation 
   Fund   Fund   Fund 
Purchases of investment securities  $79,882,640   $28,074,479   $10,682,816 
Proceeds from sales and maturities  $94,829,812   $61,011,078   $28,518,398 
                
       Moderate     
   Growth   Growth     
   Allocation   Allocation     
   Fund   Fund     
Purchases of investment securities  $27,900,309   $40,867,931     
Proceeds from sales and maturities  $38,670,441   $73,215,351      

 

There were no purchases or proceeds from sales and maturities of U.S. Government securities by the Funds for the six months ended June 30, 2013.

 

4. Transactions with Affiliates and Other Related Parties

 

Certain officers of the Trust are also officers of Touchstone Advisors, Inc. (the “Advisor”),Touchstone Securities, Inc. (the “Underwriter”) or BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon”), the Sub-Administrator and Transfer Agent to the Funds. Such officers receive no compensation from the Trust. The Advisor and the Underwriter are each wholly-owned, indirect subsidiaries of The Western & Southern Financial Group, Inc.

 

55
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

MANAGEMENT & EXPENSE LIMITATIONS AGREEMENTS

 

The Advisor provides general investment supervisory services for the Funds, under terms of an advisory agreement (the “Advisory Agreement”). Under the Advisory Agreement, each Fund pays the Advisor a fee, which is computed and accrued daily and paid monthly, at an annual rate based on average daily net assets of each Fund as shown in the table below.

 

Dynamic Equity Fund 0.85% on the first $300 million of assets
  0.80% on the next $200 million of assets
  0.75% on the next $250 million of assets
  0.70% on the next $250 million of assets
  0.65% on the next $500 million of assets
  0.60% on the next $500 million of assets
  0.55% on such assets in excess of $2 billion
Balanced Allocation Fund 0.20% on the first $1 billion of assets
  0.175% on the next $1 billion of assets
  0.150% on the next $1 billion of assets
  0.125% of such assets in excess of $3 billion
Conservative Allocation Fund 0.20% on the first $1 billion of assets
  0.175% on the next $1 billion of assets
  0.150% on the next $1 billion of assets
  0.125% of such assets in excess of $3 billion
Growth Allocation Fund 0.25% on the first $1 billion of assets
  0.225% on the next $1 billion of assets
  0.20% on the next $1 billion of assets
  0.175% of such assets in excess of $3 billion
Moderate Growth Allocation Fund 0.25% on the first $1 billion of assets
  0.225% on the next $1 billion of assets
  0.20% on the next $1 billion of assets
  0.175% of such assets in excess of $3 billion

 

The Advisor has entered into investment sub-advisory agreements with the following parties (each, a “Sub-Advisor”):

 

Analytic Investors, LLC Ibbotson Associates, Inc
Dynamic Equity Fund Balanced Allocation Fund
  Conservative Allocation Fund
  Growth Allocation Fund
  Moderate Growth Allocation Fund

 

The Advisor, not the Funds, pays sub-advisory fees to each Sub-Advisor.

 

The Advisor entered into an Expense Limitation Agreement (the “Expense Limitation Agreement”), to contractually limit operating expenses of the Funds excluding: dividend expenses on short sales; interest; taxes; brokerage commissions; other expenditures which are capitalized in accordance with GAAP; the cost of “Acquired Fund Fees and Expenses”, if any; and other extraordinary expenses not incurred in the ordinary course of business. The maximum operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. The Advisor has agreed to separately waive class-level

 

56
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

expenses, advisory fees, administration fees and to reimburse expenses in order to maintain the following expense limitations for the Funds:

 

               Institutional 
Fund  Class A   Class C   Class Y   Class 
Dynamic Equity Fund   1.55%**   2.30%**   1.30%**   1.25%**
Balanced Allocation Fund   0.33%*   1.08%*   0.08%*   0.08%*
Balanced Allocation Fund   0.41%**   1.16%**   0.16%**   0.16%**
Conservative Allocation Fund   0.33%*   1.08%*   0.08%*   0.08%*
Conservative Allocation Fund   0.41%**   1.16%**   0.16%**   0.16%**
Growth Allocation Fund   0.33%*   1.08%*   0.08%*   0.08%*
Growth Allocation Fund   0.41%**   1.16%**   0.16%**   0.16%**
Moderate Growth Allocation Fund   0.33%*   1.08%*   0.08%*   0.08%*
Moderate Growth Allocation Fund   0.41%**   1.16%**   0.16%**   0.16%**

 

*These expense limitations will remain in effect until at least September 10, 2013.

 

**These expense limitations will remain in effect until at least April 29, 2014.

 

Where multiple caps are in effect, the lower of the two amounts will apply.

 

During the six months ended June 30, 2013, the Advisor or affiliates waived investment advisory fees and administration fees or reimbursed expenses, including 12b-1 fees, of the Funds as follows:

 

           Other 
   Investment       Operating 
   Advisory   Administration   Expenses 
   Fees Waived   Fees Waived   Reimbursed 
Dynamic Equity Fund  $—   $—   $26,349 
Balanced Allocation Fund   112,653    111,743    125,158 
Conservative Allocation Fund   71,181    64,637    94,053 
Growth Allocation Fund   99,960    70,167    121,951 
Moderate Growth Allocation Fund   178,567    135,425    162,034 

 

Under the terms of the Expense Limitation Agreement the Advisor is entitled to recover, subject to approval by the Funds’ Board of Trustees, such amounts waived or reimbursed for a period of up to three years from the year in which the Advisor reduced its compensation or assumed expenses for the Funds. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount.

 

As of June 30, 2013, the Advisor may seek recoupment of previously waived and reimbursed fees as follows:

 

   Expiration   Expiration   Expiration 
   July 31,   December   June 
Fund  2015   31, 2015   30, 2016 
Dynamic Equity Fund  $-   $10,969   $3,757 
Balanced Allocation Fund   18,241    172,469    270,433 
Conservative Allocation Fund   24,108    115,995    176,366 
Growth Allocation Fund   32,481    138,241    221,842 
Moderate Growth Allocation Fund   31,679    231,358    350,327 

 

The Advisor did not recoup any amounts it previously waived or reimbursed during the six months ended June 30, 2013.

 

ADMINISTRATION AGREEMENT

 

The Advisor entered into an Administration Agreement with the Trust, whereby the Advisor is responsible for: supplying executive and regulatory compliance services; supervising the preparation of tax returns; coordinating the preparation of reports to shareholders and reports to, and filings with, the Securities and Exchange Commission

 

57
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

(“SEC”) and state securities authorities, as well as materials for meetings of the Board of Trustees; calculating the daily NAV per share; and maintaining the financial books and records of each Fund. For its services, the Advisor receives an annual fee of 0.20% on the first $6 billion of the aggregate average daily net assets of the Touchstone Fund Complex (excluding Touchstone Institutional Money Market Fund,Touchstone Institutional Funds Trust, and Touchstone Variable Series Trust); 0.16% of the next $4 billion of aggregate average daily net assets; and 0.12% of the aggregate average daily net assets over $10 billion. The fee is allocated among the funds of the Touchstone Fund Complex (excluding Touchstone Institutional Money Market Fund, Touchstone Institutional Funds Trust, and Touchstone Variable Series Trust) on the basis of relative daily net assets.

 

The Advisor has engaged BNY Mellon as the Sub-Administrator to the Trust. BNY Mellon provides administrative and accounting services to the Trust and is compensated directly by the Advisor, not the Trust.

 

TRANSFER AGENT AGREEMENT

 

Under the terms of the Transfer Agent Agreement between the Trust and BNY Mellon, BNY Mellon maintains the records of each shareholder’s account, answers shareholders’ inquiries concerning their accounts, processes purchases and redemptions of each Fund’s shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. For these services, BNY Mellon receives a monthly fee per shareholder account from each Fund. In addition, each Fund pays out-of-pocket expenses incurred by BNY Mellon, including, but not limited to, postage and supplies.

 

PLANS OF DISTRIBUTION AND SHAREHOLDER SERVICING FEE ARRANGEMENTS

 

The Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act for each class of shares it offers that are subject to 12b-1 distribution fees. The plans allow each Fund to pay distribution and other fees for the sale and distribution of its shares and for services provided to shareholders. Under the Class A plan, each Fund pays an annual fee of up to 0.25% of average daily net assets that are attributable to Class A shares. Under the Class C plan, each Fund offering Class C shares pays an annual fee of up to 1.00% of average daily net assets that are attributable to Class C shares (of which up to 0.75% is a distribution fee and up to 0.25% is a shareholder servicing fee).

 

UNDERWRITING AGREEMENT

 

The Underwriter is the Funds’ principal underwriter and, as such, acts as exclusive agent for distribution of the Funds’ shares. Under the terms of the Underwriting Agreement between the Trust and the Underwriter, the Underwriter earned the following from underwriting and broker commissions on the sale of Class A shares of the Funds listed below during the six months ended June 30, 2013:

 

Fund  Amount 
Dynamic Equity Fund  $15,581 
Balanced Allocation Fund   50,862 
Conservative Allocation Fund   13,909 
Growth Allocation Fund   13,505 
Moderate Growth Allocation Fund   40,202 

 

58
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

In addition, the Underwriter collected CDSCs on the redemption of Class C shares of the Funds listed below during the six months ended June 30, 2013:

 

Fund  Amount 
Dynamic Equity Fund  $120 
Balanced Allocation Fund   153 
Conservative Allocation Fund   16 
Growth Allocation Fund   138 
Moderate Growth Allocation Fund   690 

 

AFFILIATED INVESTMENTS

 

Each Fund may invest in the Touchstone Institutional Money Market Fund, subject to compliance with several conditions set forth in an exemptive order received by the Trust from the SEC. To the extent that the Funds are invested in the Touchstone Institutional Money Market Fund, the Advisor and Administrator will be paid additional fees from the Touchstone Institutional Money Market Fund that will not be waived or reimbursed.

 

A summary of the Dynamic Equity Fund’s investment in the Touchstone Institutional Money Market Fund for the six months ended June 30, 2013, is as follows:

 

   Share Activity         
                       Market 
   Balance           Balance       Value 
Fund  12/31/12   Purchases   Sales   06/30/13   Dividends   06/30/13 
Dynamic Equity Fund   2,985,549    18,064,713    (18,749,206)   2,301,056   $519   $2,301,056 

 

A summary of each Allocation Fund’s transactions in affiliated underlying funds during the six months ended June 30, 2013 is as follows:

 

Balanced Allocation Fund                    
   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone Core Bond Fund  $186,330   $2,376,139   $3,816,791   $81,947   $(13,380)
Touchstone Total Return Bond Fund   570,894    3,273,499    13,032,222    205,112    3,773 
Touchstone Ultra Short Duration Fixed Income Fund ^   13,889,493    15,898,250    12,861,959    128,222    (8,242)
Touchstone International Small Cap Fund   59,385    1,295,845    3,803,348    —    78,121 
Touchstone International Value Fund   5,332,825    2,691,945    13,696,109    —    (53,607)
Touchstone Focused Fund   7,459,094    5,906,959    5,141,274    19,954    53,421 
Touchstone Value Fund   105,106    5,839,857    9,917,716    102,874    712,102 
Touchstone Growth Opportunities Fund   2,613,531    122,673    2,547,555    —    4,444 
Touchstone Sands Capital Institutional Growth   1,285,981    2,470,219    8,909,932    —    (16,230)
Touchstone Premium Yield Equity Fund   7,964,446    279,087    7,695,373    59,219    3,763 
Touchstone Flexible Income Fund   868,218    1,339,962    6,341,451    153,202    (2,362)
Touchstone International Fixed Income Fund   144,723    1,310,504    6,316,308    —    (30,049)
Touchstone Dynamic Equity Fund   3,477    1,558,939    5,150,503    —    23,735 

 

59
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Balanced Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone Emerging Markets Equity Fund  $364,468   $1,193,485   $4,861,816   $—   $76,426 
Touchstone Merger Arbitrage Fund   65,949    968,184    3,870,366    —    5,494 
Touchstone Institutional Money Market Fund   87,815    843,143    3,869,553    1,219    — 
Touchstone Small Cap Core Fund   25,072    1,030,614    2,547,371    —    62,663 
Touchstone Small Company Value Fund   1,319,360    54,245    1,298,439    7,678    1,516 
Touchstone High Yield Fund   791,384    789,853    3,789,779    106,101    8,515 
Touchstone Global Real Estate Fund   235,624    1,301,411    3,665,605    60,547    48,888 
Touchstone Mid Cap Fund   14,994    1,061,362    2,553,997    —    86,776 
Touchstone Small Cap Growth Fund   1,365,438    65,874    1,290,280    —    187 
Touchstone Mid Cap Growth Fund   2,588    3,463,460    —    —    183,933 
Touchstone Large Cap Relative Value Fund +   3,462    5,849,641    —    —    213,433 
Touchstone Mid Cap Value Fund   2,335    3,480,220    —    5,953    371,207 
Touchstone Global Equity Fund +   4,481    3,300,698    —    —    243,051 
Touchstone Large Cap Growth Fund, Class Y   —    3,289,584    —    —    916,661 
Touchstone International Equity Fund +   3,977    6,623,697    —    —    1,297,198 
Touchstone Small Cap Growth Fund   1,356,551    1,384,251    —         27,700 
Total:  $46,127,001   $79,063,600   $126,977,747   $932,028   $4,299,137 

 

Conservative Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone Core Bond Fund  $181,731   $1,733,061   $3,576,823   $74,862   $48,437 
Touchstone Total Return Bond Fund   617,443    3,281,799    13,580,971    217,578    (2,046)
Touchstone Ultra Short Duration Fixed Income Fund ^   15,597,333    18,805,128    14,260,954    149,954    (16,162)
Touchstone International Fixed Income Fund   253,482    1,372,459    5,691,528    —    (33,166)
Touchstone Flexible Income Fund   1,345,488    1,049,877    5,011,829    116,905    79 
Touchstone International Small Cap Fund   23,451    265,692    710,842    —    18,025 
Touchstone International Value Fund   996,673    1,075,526    3,502,813    —    (7,015)
Touchstone Premium Yield Equity Fund   3,917,988    373,308    3,576,034    29,141    6,517 
Touchstone Institutional Money Market Fund   84,348    914,600    3,568,896    1,202    — 

 

60
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

Conservative Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone Growth Opportunities Fund  $781,620   $86,379   $712,062   $—   $2,192 
Touchstone Sands Capital Institutional Growth Fund   293,445    2,221,779    2,852,448    —    5,292 
Touchstone Merger Arbitrage Fund   823,242    894,409    3,562,987    —    5,848 
Touchstone Value Fund   208,388    2,579,090    3,550,864    36,995    453,377 
Touchstone Dynamic Equity Fund   118,231    1,811,749    2,137,973    —    48,207 
Touchstone High Yield Fund   124,305    590,244    2,134,813    66,926    8,758 
Touchstone Global Real Estate Fund   150,622    547,556    1,378,947    22,874    22,175 
Touchstone Small Cap Core Fund   83,081    1,394,768    710,887    —    129,683 
Touchstone Emerging Markets Equity Fund   75,370    193,109    688,655    —    9,846 
Touchstone Large Cap Relative Value Fund +   25,310    2,404,253    —    —    94,292 
Touchstone Global Equity Fund +   8,500    946,568    —    —    73,625 
Touchstone Mid Cap Fund   14,181    1,018,460    —    —    139,465 
Total:  $25,724,232   $43,559,814   $71,210,326   $716,437   $1,007,429 

 

Growth Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone International Small Cap Fund  $1,703,928   $705,267   $5,580,023   $—   $17,056 
Touchstone International Value Fund   6,148,715    1,386,409    12,548,038    —    (35,142)
Touchstone Focused Fund   8,643,990    7,129,306    6,435,599    25,543    46,165 
Touchstone Value Fund   129,182    2,434,404    6,393,668    66,212    337,483 
Touchstone Growth Opportunities Fund   2,519,876    988,585    1,600,970    —    36,841 
Touchstone Sands Capital Institutional Growth Fund   816,801    1,017,976    7,216,152    —    7,563 
Touchstone Emerging Markets Equity Fund   516,115    1,514,694    6,747,143    —    78,162 
Touchstone Ultra Short Duration Fixed Income Fund ^   6,212,993    5,458,158    4,835,349    34,415    (2,523)
Touchstone Premium Yield Equity Fund, Class Y   5,106,283    277,916    4,833,912    37,461    613 
Touchstone Small Cap Core Fund   47,297    805,257    3,196,299    —    72,218 
Touchstone Small Company Value Fund   78,156    384,229    1,619,407    11,830    32,338 
Touchstone Global Real Estate Fund   182,312    827,201    4,523,542    75,159    43,169 
Touchstone Mid Cap Fund   32,010    1,460,331    1,603,987    —    223,459 
Touchstone Mid Cap Growth Fund   1,710,042    1,270,409    2,399,039    —    36,198 
Touchstone Dynamic Equity Fund   54,801    531,283    3,222,752    —    20,737 

 

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Notes to Financial Statements (Unaudited) (Continued)

 

Growth Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone Mid Cap Value Fund  $25,532   $1,514,470   $2,424,639   $14,185   $140,045 
Touchstone Small Cap Growth Fund   2,576,479    148,445    2,410,861    —    521 
Touchstone Merger Arbitrage Fund   60,930    170,357    1,617,325    —    2,519 
Touchstone International Equity Fund +   —    5,469,091    —    —    1,241,131 
Touchstone Emerging Growth Fund +   —    2,841,554    —    —    437,022 
Touchstone Global Equity Fund +   —    4,535,697    —    —    306,397 
Touchstone Large Cap Relative Value Fund +   —    3,680,357    —    —    176,932 
Touchstone Large Cap Growth Fund   —    2,732,356    —    —    818,427 
Touchstone Small Cap Growth Fund   2,532,668    2,584,490    —    —    51,821 
Touchstone Total Return Bond Fund   —    —    —    11,580    — 
Total:  $39,098,110   $49,868,242   $79,208,705   $276,385   $4,089,152 

 

Moderate Growth Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone International Small Cap Fund  $1,555,785   $1,215,331   $6,129,921   $—   $32,159 
Touchstone International Value Fund   9,851,554    2,963,640    19,603,594    —    (39,309)
Touchstone Total Return Bond Fund   832,670    3,287,772    15,017,829    240,578    2,808 
Touchstone Ultra Short Duration Fixed Income Fund ^   10,433,642    9,692,336    8,168,502    76,224    (5,021)
Touchstone Focused Fund   10,074,604    10,876,575    9,301,092    36,585    100,680 
Touchstone Value Fund   155,035    5,817,817    12,340,651    128,079    1,081,657 
Touchstone Growth Opportunities Fund   4,851,277    1,904,285    3,079,618    —    69,460 
Touchstone Sands Capital Institutional Growth Fund   41,348    3,114,471    12,346,359    —    (11,251)
Touchstone Emerging Markets Equity Fund   514,909    1,925,110    9,982,675    —    114,603 
Touchstone Premium Yield Equity Fund, Class Y   9,800,373    500,289    9,312,533    72,006    3,235 
Touchstone Small Cap Core Fund   12,648    1,527,581    4,628,210    —    107,550 
Touchstone Small Company Value Fund   1,704,007    627,991    3,123,389    20,704    29,388 
Touchstone Dynamic Equity Fund   51,088    1,512,059    6,215,946    —    35,196 
Touchstone Mid Cap Fund   8,986    3,192,982    3,088,779    —    441,721 
Touchstone Mid Cap Growth Fund   5,990    909,547    3,081,258    —    3,186 
Touchstone Flexible Income Fund   1,016,423    865,301    6,156,811    147,235    (3,636)

 

62
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Moderate Growth Allocation Fund 

   Purchases at   Proceeds   Market Value   Dividend   Net Realized 
Underlying Fund  cost   from sale   06/30/13   Income   Gain/Loss 
Touchstone Global Real Estate Fund  $115,670   $1,663,657   $5,708,171   $95,217   $70,992 
Touchstone Merger Arbitrage Fund   101,890    626,214    3,116,634    —    5,346 
Touchstone Mid Cap Value Fund   25,649    3,011,571    3,113,642    19,659    247,609 
Touchstone Small Cap Growth Fund   3,273,801    151,589    3,100,065    —    606 
Touchstone High Yield Fund   153,049    568,866    3,066,792    93,924    7,341 
Touchstone International Fixed Income Fund   84,605    428,628    3,062,749    —    (10,820)
Touchstone International Equity Fund +   —    9,544,929    —    —    1,774,821 
Touchstone Emerging Growth Fund +   —    1,977,570    —    —    258,849 
Touchstone Large Cap Relative Value Fund +   —    7,716,921    —    —    315,137 
Touchstone Global Equity Fund +   —    7,564,889    —    —    437,063 
Touchstone Large Cap Growth Fund   —    3,758,535    —    —    1,373,503 
Touchstone Small Cap Growth Fund   3,223,959    3,289,925    —    —    65,967 
Total:  $57,888,962   $90,236,381   $152,745,220   $930,211   $6,508,840 

 

^Includes activity of the Touchstone Short Duration Fixed Income Fund prior to merging into the Touchstone Ultra Short Duration Fixed Income Fund on May 17, 2013.

 

+The Fund ceased operations on March 27, 2013.

 

5. Federal Tax Information

 

Federal income tax — It is each Fund’s policy to continue to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which a Fund so qualifies and distributes at least 90% of its investment company taxable income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed. It is each Fund’s policy to distribute all of its taxable income and accordingly, no provision for income taxes has been made.

 

In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also each Fund’s intention to declare and pay as dividends in each calendar year at least 98% of its investment company taxable income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ending October 31) plus undistributed amounts from prior years.

 

63
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

The tax character of distributions paid for the five months ended December 31, 2012 and fiscal years ended July 31, 2012 and July 31, 2011 was as follows:

 

       Dynamic           Balanced     
       Equity Fund           Allocation Fund     
   Five Months           Five Months         
   Ended   Year Ended   Year Ended   Ended   Year Ended   Year Ended 
   December 31,   July 31,   July 31,   December 31,   July 31,   July 31, 
   2012   2012   2011   2012   2012   2011 
From ordinary income  $—   $514,890   $—   $6,140,882   $607,351   $1,392,283 
From long-term capital gains   —    —    —    137,848    —    — 
Total distributions  $—   $514,890   $—   $6,278,730   $607,351   $1,392,283 

 

       Conservative           Growth     
       Allocation Fund           Allocation Fund     
   Five Months           Five Months         
   Ended   Year Ended   Year Ended   Ended   Year Ended   Year Ended 
   December 31,   July 31,   July 31,   December 31,   July 31,   July 31, 
   2012   2012   2011   2012   2012   2011 
From ordinary income  $5,215,403   $589,089   $1,437,898   $1,600,296   $180,489   $118,434 
From long-term capital gains   —    —    —    462    —    — 
Total distributions  $5,215,403   $589,089   $1,437,898   $1,600,758   $180,489   $118,434 

 

       Moderate Growth                 
       Allocation Fund                 
   Five Months                     
   Ended   Year Ended   Year Ended             
   December 31,   July 31,   July 31,             
   2012   2012   2011             
From ordinary income  $3,961,419   $572,935   $706,859             
From long-term capital gains   1,675,414    —    —                
Total distributions  $5,636,833   $572,935   $706,859                

 

The following information is computed on a tax basis for each item as of December 31, 2012:

 

   Dynamic   Balanced   Conservative 
   Equity Fund   Allocation Fund   Allocation Fund 
Tax cost of portfolio investments  $74,694,953   $152,721,699   $88,036,474 
Gross unrealized appreciation   8,882,208    5,437,347    2,033,192 
Gross unrealized depreciation   (1,724,591)   (3,107,835)   (1,828,856)
Net unrealized appreciation (depreciation)   7,157,617    2,329,512    204,336 
Net unrealized appreciation (depreciation) on written options and short sales   (182,336)   —    — 
Accumulated capital and other losses   (148,826,198)   (42,487,158)   (3,634,373)
Post-October and qualified late-year losses   (933,316)   (1,960)   (3,365)
Undistributed ordinary income   15,903    —    — 
Undistributed capital gains   —    —    — 
Other temporary differences   (31,406)   —    — 
Accumulated earnings (deficit)  $(142,799,736)  $(40,159,606)  $(3,433,402)

 

64
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

       Moderate 
   Growth   Growth 
   Allocation Fund   Allocation Fund 
Tax cost of portfolio investments  $83,860,637   $173,227,179 
Gross unrealized appreciation   4,381,174    8,377,699 
Gross unrealized depreciation   (3,556,478)   (4,717,190)
Net unrealized appreciation (depreciation)   824,696    3,660,509 
Accumulated capital and other losses   (44,481,926)   (44,872,260)
Post-October and qualified late-year losses   (2,937)   (31,574)
Undistributed ordinary income   —    — 
Undistributed capital gains   498,325    — 
Other temporary differences   —    39,467 
Accumulated earnings (deficit)  $(43,161,842)  $(41,203,858)

 

The difference between the tax cost of portfolio investments and the financial statement cost is primarily due to wash sale loss deferrals and passive foreign investment company adjustment.

 

As of December 31, 2012, the Funds had the following capital loss carryforwards for federal income tax purposes:

 

                       No         
               Expiration   No     
   Short Term Expiring On   Short   Expiration     
   2015   2016   2017   2018   2019   Term*   Long Term*   Total 
Dynamic Equity Fund  $39,657,235   $31,726,954   $77,442,009   $—   $—   $—   $—   $148,826,198 
Balanced Allocation Fund   —    13,311,819    24,373,973**   4,801,366**   —    —    —    42,487,158 
Conservative Allocation Fund   —    —    3,611,052**   23,321    —    —    —    3,634,373 
Growth Allocation Fund   —    3,557,561**   30,260,646**   10,663,719**   —    —    —    44,481,926 
Moderate Growth Allocation Fund   —    —    35,744,603**   9,127,657**   —    —    —    44,872,260 

 

* The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. The Act makes changes to several tax rules impacting the Funds. The provisions of the Act became effective for the Funds’ fiscal year ending December 31, 2012. Although the Act provides several benefits, including the unlimited carryover of future capital losses, there may be a greater likelihood that all or a portion of each Fund’s pre-enactment capital loss carryovers may expire without being utilized due to the fact that post-enactment capital losses must be utilized before pre-enactment capital loss carryovers may be utilized. Under the Act, new capital losses may now be carried forward indefinitely, and retain the character of the original loss as compared with pre-enactment law, where capital losses could be carried forward for up to eight years, and carried forward as short-term capital losses, irrespective of the character of the original loss.

 

** Utilization may be limited by current income tax regulations.

 

The capital loss carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.

 

The Funds have analyzed their tax positions taken on federal income tax returns for all open tax years (tax years ended December 31, 2012 and July 31, 2009 through 2012) and have concluded that no provision for income tax is required in their financial statements.

 

As of June 30, 2013, the Trust had the following federal tax cost resulting in net unrealized appreciation (depreciation) as follows:

 

               Net 
       Gross   Gross   Unrealized 
   Federal Tax   Unrealized   Unrealized   Appreciation 
Fund  Cost   Appreciation   Depreciation   (Depreciation) 
Dynamic Equity Fund  $69,390,129   $9,033,602   $(1,478,299)  $7,555,303 
Balanced Allocation Fund   122,143,048    6,008,061    (1,173,362)   4,834,699 
Conservative Allocation Fund   69,714,199    2,123,201    (627,074)   1,496,127 

 

65
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

               Net 
       Gross   Gross   Unrealized 
   Federal Tax   Unrealized   Unrealized   Appreciation 
Fund  Cost   Appreciation   Depreciation   (Depreciation) 
Growth Allocation Fund  $74,391,234   $5,541,591   $(724,120)  $4,817,471 
Moderate Growth Allocation Fund   143,766,011    10,061,406    (1,082,197)   8,979,209 

 

6. Commitments and Contingencies

 

The Funds indemnify the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect the risk of loss to be remote.

 

7. Risks Associated with Leverage

 

By investing the proceeds received from selling securities short, the Dynamic Equity Fund is employing leverage, which creates special risks. The use of leverage may increase the Fund’s exposure to long or short equity positions and may cause the Fund’s NAV to be more volatile than if the Fund had not used leverage. This could result in increased volatility of returns.

 

8. Fund Mergers

 

On February 10, 2012, the Shareholders of the Old Mutual Funds I (the “Reorganizing Funds”) approved an Agreement and Plan of Reorganization (the “Plan”) providing for the transfer of all assets and liabilities of each Reorganizing Fund to the corresponding Touchstone Fund as noted below. The merger took place on April 13, 2012. The fiscal year end of the Reorganizing Funds was July 31. After the fiscal year end July 31, 2012, the Funds year end changed to December 31.

 

      Net   Shares 
Reorganizing Funds*  Touchstone Funds  Assets   Outstanding 
Old Mutual Analytic Fund  Dynamic Equity Fund  $56,128,406    5,182,646 
Old Mutual Asset Allocation Balanced Portfolio  Balanced Allocation Fund   54,581,260    4,909,161 
Old Mutual Asset Allocation Conservative Portfolio  Conservative Allocation Fund   35,536,596    3,274,555 
Old Mutual Asset Allocation Growth Portfolio  Growth Allocation Fund   38,970,804    3,527,780 
Old Mutual Asset Allocation Moderate Growth Portfolio  Moderate Growth Allocation Fund   68,462,430    6,232,923 

 

*Fund had Class Z shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund.

 

At the meeting held on March 13, 2012, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Plans”) providing for the transfer of all the assets and liabilities of the Fifth Third Life Model Moderate Fund, Fifth Third Life Model Conservative Fund, Fifth Third Life Model Moderately Conservative Fund, Fifth Third Life Model Aggressive Fund, and Fifth Third Life Model Moderately Aggressive Fund (the “Acquired Funds”) to the corresponding Touchstone Funds shown below. The merger took place on September 10, 2012.

 

Acquired Funds Touchstone Funds
Fifth Third Life Model Moderate Fund Balanced Allocation Fund
Fifth Third Life Model Conservative Fund Conservative Allocation Fund
Fifth Third Life Model Moderately Conservative Fund Conservative Allocation Fund
Fifth Third Life Model Aggressive Fund Growth Allocation Fund

 

66
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Acquired Funds Touchstone Funds
Fifth Third Life Model Moderately Aggressive Fund Moderate Growth Allocation Fund

 

The following is a summary of shares outstanding, net assets, net assets value per share and unrealized appreciation (depreciation) immediately before and after the September 10, 2012 reorganization for the Allocation Funds:

 

           After 
   Before Reorganization   Reorganization 
   Fifth Third         
   LifeModel   Touchstone   Touchstone 
   Moderate   Balanced   Balanced 
   Fund   Allocation Fund   Allocation Fund 
Class A*               
Shares   3,650,589(A)   856,628    4,507,217 
Net Assets  $41,600,137   $9,761,746   $51,361,883 
Net Asset Value  $11.40(A)  $11.40   $11.40 
Class C               
Shares   191,231(B)   3,356,100    3,547,331 
Net Assets  $2,174,823   $38,167,906   $40,342,729 
Net Asset Value  $11.37(B)  $11.37   $11.37 
Class Y**               
Shares   6,276,974(C)   132,241    6,409,215 
Net Assets  $71,649,327   $1,509,480   $73,158,807 
Net Asset Value  $11.41(C)  $11.41   $11.41 
Institutional Class               
Shares   —    2,683    2,683 
Net Assets  $—   $30,489   $30,489 
Net Asset Value  $—   $11.36   $11.36 
Fund Total               
Shares Outstanding   10,277,468    4,347,652    14,466,446 
Net Assets  $115,424,287   $49,469,621   $164,893,908 
Unrealized Appreciation (Depreciation)  $5,211,794   $3,570,090   $8,781,884 

 

(A) Reflects a 0.9853:1 stock split on Class A Shares and a 0.9807:1 stock split on Class B Shares which occurred on the date of reorganization, September 10, 2012. 

(B) Reflects a 0.9820:1 stock split which occurred on the date of reorganization, September 10, 2012. 

(C) Reflects a 0.9845:1 stock split which occurred on the date of reorganization, September 10, 2012. 

* The Acquired Fund had Class B Shares outstanding immediately prior to the reorganization, which were exchanged for Class A Shares of the corresponding Touchstone Fund.  

** The Acquired Fund had Institutional Class Shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund.

 

               After 
       Before Reorganization       Reorganization 
       Fifth Third         
   Fifth Third   LifeModel   Touchstone   Touchstone 
   LifeModel   Moderately   Conservative   Conservative 
   Conservative   Conservative   Allocation   Allocation 
   Fund   Fund   Fund   Fund 
Class A*                    
Shares   912,961(A)   1,457,284(B)   778,704    3,148,949 
Net Assets  $10,038,678   $16,023,820   $8,562,424   $34,624,922 
Net Asset Value  $11.00(A)  $11.00(B)  $11.00   $11.00 
Class C                    
Shares   72,314(C)   89,383(D)   1,541,709    1,703,406 
Net Assets  $791,586   $978,429   $16,876,314   $18,646,329 
Net Asset Value  $10.95(C)  $10.95(D)  $10.95   $10.95 

 

67
 

 

Notes to Financial Statements (Unaudited) (Continued) 

 

               After 
       Before Reorganization       Reorganization 
       Fifth Third         
   Fifth Third   LifeModel   Touchstone   Touchstone 
   LifeModel   Moderately   Conservative   Conservative 
   Conservative   Conservative   Allocation   Allocation 
   Fund   Fund   Fund   Fund 
Class Y**                    
Shares   1,658,986(E)   1,806,406(F)   198,245    3,663,637 
Net Assets  $18,249,300   $19,870,935   $2,180,756   $40,300,991 
Net Asset Value  $11.00(E)  $11.00(F)  $11.00   $11.00 
Institutional Class                    
Shares   —    —    119,726    119,726 
Net Assets  $—   $—   $1,318,057   $1,318,057 
Net Asset Value  $—   $—   $11.01   $11.01 
Fund Total                    
Shares Outstanding   2,869,464    3,603,186    2,638,384    8,635,718 
Net Assets  $29,079,564   $36,873,184   $28,937,551   $94,890,299 
                    
Unrealized Appreciation (Depreciation)  $705,303   $3,126,125   $1,614,689   $5,446,117 

 

(A) Reflects a 0.9206:1 stock split on Class A Shares and a 0.9190:1 stock split on Class B Shares which occurred on the date of reorganization, September 10, 2012. 

(B) Reflects a 0.9301:1 stock split on Class A Shares and a 0.9270:1 stock split on Class B Shares which occurred on the date of reorganization, September 10, 2012. 

(C) Reflects a 0.9235:1 stock split which occurred on the date of reorganization, September 10, 2012. 

(D) Reflects a 0.9309:1 stock split which occurred on the date of reorganization, September 10, 2012. 

(E) Reflects a 0.92200:1 stock split which occurred on the date of reorganization, September 10, 2012. 

(F) Reflects a 0.9311:1 stock split which occurred on the date of reorganization, September 10, 2012. 

* The Acquired Fund had Class B Shares outstanding immediately prior to the reorganization, which were exchanged for Class A Shares of the corresponding Touchstone Fund. 

** The Acquired Fund had Institutional Class Shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund.

 

           After 
   Before Reorganization   Reorganization 
   Fifth Third   Touchstone   Touchstone 
   LifeModel   Growth   Growth 
   Aggressive   Allocation   Allocation 
   Fund   Fund   Fund 
Class A*               
Shares   1,982,555(A)   905,293    2,887,848 
Net Assets  $23,010,705   $10,507,403   $33,518,108 
Net Asset Value  $11.61(A)  $11.61   $11.61 
Class C               
Shares   86,836(B)   2,187,151    2,273,987 
Net Assets  $971,379   $24,466,210   $25,437,589 
Net Asset Value  $11.19(B)  $11.19   $11.19 
Class Y**               
Shares   2,547,823(C)   73,550    2,621,373 
Net Assets  $29,855,473   $861,864   $30,717,337 
Net Asset Value  $11.72(C)  $11.72   $11.72 
Institutional Class               
Shares   —    1,267    1,267 
Net Assets  $—   $13,568   $13,568 
Net Asset Value  $—   $10.71   $10.71 

 

68
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

           After 
   Before Reorganization   Reorganization 
   Fifth Third   Touchstone   Touchstone 
   Life Model   Growth   Growth 
   Aggressive   Allocation   Allocation 
   Fund   Fund   Fund 
Fund Total               
Shares Outstanding   4,576,737    3,167,261    7,784,475 
Net Assets  $53,837,557   $35,849,045   $89,686,602 
Unrealized Appreciation (Depreciation)  $3,817,238   $3,056,427   $6,873,665 

 

(A) Reflects a 1.0117:1 reverse stock on Class A Shares and a 0.9675:1 stock split on Class B Shares which occurred on the date of reorganization, September 10, 2012. 

(B) Reflects a 1.0019:1 reverse stock split which occurred on the date of reorganization, September 10, 2012. 

(C) Reflects a 1.010:1 reverse stock split which occurred on the date of reorganization, September 10, 2012. 

* The Acquired Fund had Class B Shares outstanding immediately prior to the reorganization, which were exchanged for Class A Shares of the corresponding Touchstone Fund.  

** The Acquired Fund had Institutional Class Shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund.

 

           After 
   Before Reorganization   Reorganization 
   Fifth Third   Touchstone   Touchstone 
   Life Model   Moderate   Moderate 
   Moderately   Growth   Growth 
   Aggressive   Allocation   Allocation 
   Fund   Fund   Fund 
Class A*               
Shares   5,396,673(A)   1,340,687    6,737,360 
Net Assets  $61,461,849   $15,268,777   $76,730,626 
Net Asset Value  $11.39(A)  $11.39   $11.39 
Class C               
Shares   221,281(B)   4,305,668    4,526,949 
Net Assets  $2,482,569   $48,305,735   $50,788,304 
Net Asset Value  $11.22(B)  $11.22   $11.22 
Class Y**               
Shares   4,909,444(C)   78,182    4,987,626 
Net Assets  $56,310,746   $896,739   $57,207,485 
Net Asset Value  $11.47(C)  $11.47   $11.47 
Institutional Class               
Shares   —    738    738 
Net Assets  $—   $8,431   $8,431 
Net Asset Value  $—   $11.42   $11.42 
Fund Total               
Shares Outstanding   10,118,280    5,725,275    16,252,673 
Net Assets  $120,255,164   $64,479,682   $184,734,846 
Unrealized Appreciation (Depreciation)  $13,091,873   $5,016,633   $18,108,506 

 

(A) Reflects a 1.0437:1 reverse stock split on Class A Shares and a 1.0329:1 reverse stock split on Class B Shares which occurred on the date of reorganization, September 10, 2012.  

(B) Reflects a 1.0475:1 reverse stock split which occurred on the date of reorganization, September 10, 2012. 

(C) Reflects a 1.0378:1 reverse stock split which occurred on the date of reorganization, September 10, 2012. 

* The Acquired Fund had Class B Shares outstanding immediately prior to the reorganization, which were exchanged for Class A Shares of the corresponding Touchstone Fund.  

** The Acquired Fund had Institutional Class Shares outstanding immediately prior to the reorganization, which were exchanged for Class Y Shares of the corresponding Touchstone Fund.

 

69
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Assuming these September 10, 2012 reorganizations had been completed on August 1, 2012, the Balanced Allocation Fund, Conservative Allocation Fund, Growth Allocation Fund and Moderate Growth Allocation Fund results of operations for the five months ended December 31, 2012, would have been as follows:

 

               Touchstone 
   Touchstone   Touchstone   Touchstone   Moderate 
   Balanced   Conservative   Growth   Growth 
   Allocation   Allocation   Allocation   Allocation 
(Unaudited)  Fund   Fund   Fund   Fund 
Net investment income  $2,451,480   $1,210,897   $1,323,552   $2,716,948 
Net realized and unrealized gain (loss) on investments   11,632,977    5,230,795    10,153,370    22,183,410 
Net increase (decrease) in asset from operations   14,084,457    6,441,692    11,476,922    24,900,358 

 

Because the combined investment portfolios have been managed as single portfolios since the reorganizations were completed, it is not practical to separate the amounts of revenue and earnings to the Acquiring Funds that have been included in their statements of operations since the reorganizations.

 

9. Subsequent Events

 

Subsequent events occurring after the date of this report have been evaluated for potential impact to this report through the date the financial statements were issued. There were no subsequent events that necessitated recognition or disclosure on the Funds’ financial statements.

 

70
 

 

Other Items (Unaudited) 

 

Proxy Voting Guidelines

 

The Sub-Advisors are responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Sub-Advisors use in fulfilling this responsibility is available as an appendix to the most recent Statement of Additional Information, which can be obtained without charge upon request by calling toll free 1.800.543.0407 or by visiting the Touchstone website at www.touchstoneinvestments.com or on the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov. Information regarding how those proxies were voted during the most recent twelve-month period ended June 30 is also available without charge by calling toll free 1.800.543.0407 or on the Commission’s website at www.sec.gov.

 

Quarterly Portfolio Disclosure

 

The Trust files a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the Commission’s website; (ii) may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; (iii) will be made available to shareholders upon request by calling 1.800.543.0407; or (iv) can be obtained on the Touchstone website at www.touchstoneinvestments.com. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330.

 

Schedule of Shareholder Expenses

 

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including reinvested dividends or other distributions; and (2) ongoing costs, including investment advisory fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

 

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, (January 1, 2013 through June 30, 2013).

 

Actual Expenses

 

The first line of the table below for each share class of a Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six Months Ended June 30, 2013” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

 

The second line of the table below for each share class of a Fund provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line for each share class of a Fund in the table below is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

71
 

 

Other Items (Unaudited) (Continued) 

 

      Net Expense   Beginning   Ending   Expenses 
      Ratio   Account   Account   Paid During 
      Annualized   Value   Value   the Period 
      June 30,   January 1,   June 30,   Ended 
      2013   2013   2013   June 30, 2013* 
Touchstone Dynamic Equity Fund
Class A  Actual   1.88%  $1,000.00   $1,015.47   $9.81**
Class A  Hypothetical   1.88%  $1,000.00   $1,012.80   $9.39 
                        
Class C  Actual   2.63%  $1,000.00   $1,099.40   $13.69**
Class C  Hypothetical   2.63%  $1,000.00   $1,011.75   $13.12 
                        
Class Y  Actual   1.63%  $1,000.00   $1,104.30   $8.50**
Class Y  Hypothetical   1.63%  $1,000.00   $1,016.71   $8.15 
                        
Institutional Class  Actual   1.58%  $1,000.00   $1,105.10   $8.25**
Institutional Class  Hypothetical   1.58%  $1,000.00   $1,016.96   $7.90 
                        
Touchstone Balanced Allocation Fund***
Class A  Actual   0.33%  $1,000.00   $1,041.70   $1.67 
Class A  Hypothetical   0.33%  $1,000.00   $1,023.16   $1.66 
                        
Class C  Actual   1.08%  $1,000.00   $1,037.90   $5.46 
Class C  Hypothetical   1.08%  $1,000.00   $1,019.44   $5.41 
                        
Class Y  Actual   0.08%  $1,000.00   $1,043.00   $0.41 
Class Y  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Institutional Class  Actual   0.08%  $1,000.00   $1,043.20   $0.41 
Institutional Class  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Touchstone Conservative Allocation Fund***                    
Class A  Actual   0.33%  $1,000.00   $1,016.80   $1.65 
Class A  Hypothetical   0.33%  $1,000.00   $1,023.16   $1.66 
                        
Class C  Actual   1.08%  $1,000.00   $1,012.10   $5.39 
Class C  Hypothetical   1.08%  $1,000.00   $1,019.44   $5.41 
                        
Class Y  Actual   0.08%  $1,000.00   $1,017.10   $0.40 
Class Y  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Institutional Class  Actual   0.08%  $1,000.00   $1,017.10   $0.40 
Institutional Class  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Touchstone Growth Allocation Fund***
Class A  Actual   0.33%  $1,000.00   $1,065.60   $1.69 
Class A  Hypothetical   0.33%  $1,000.00   $1,023.16   $1.66 
                        
Class C  Actual   1.08%  $1,000.00   $1,061.80   $5.52 
Class C  Hypothetical   1.08%  $1,000.00   $1,019.44   $5.41 

 

72
 

 

Other Items (Unaudited) (Continued)

 

      Net Expense   Beginning   Ending   Expenses 
      Ratio   Account   Account   Paid During 
      Annualized   Value   Value   the Period 
      June 30,   January 1,   June 30,   Ended 
      2013   2013   2013   June 30, 2013* 
Touchstone Growth Allocation Fund*** (Continued)
Class Y  Actual   0.08%  $1,000.00   $1,067.30   $0.41 
Class Y  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Institutional Class  Actual   0.08%  $1,000.00   $1,066.30   $0.41 
Institutional Class  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Touchstone Moderate Growth Allocation Fund***
Class A  Actual   0.33%  $1,000.00   $1,054.60   $1.68 
Class A  Hypothetical   0.33%  $1,000.00   $1,023.16   $1.66 
                        
Class C  Actual   1.08%  $1,000.00   $1,051.80   $5.49 
Class C  Hypothetical   1.08%  $1,000.00   $1,019.44   $5.41 
                        
Class Y  Actual   0.08%  $1,000.00   $1,056.40   $0.41 
Class Y  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 
                        
Institutional Class  Actual   0.08%  $1,000.00   $1,056.60   $0.41 
Institutional Class  Hypothetical   0.08%  $1,000.00   $1,024.40   $0.40 

*Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period).

 

**Excluding interest and dividend expenses on securities sold short, your actual cost of investment in Class A, Class C, Class Y and Institutional Class would be $8.09, $11.97, $6.52 and $6.78, respectively.

 

***The annualized expense ratios for the Allocation Funds do not include fees and expenses of the Underlying Funds in which the Allocation Funds invest.

 

Advisory Agreement Approval Disclosure

 

At a meeting held on November 15, 2012, the Board of Trustees (the “Board”) of the Touchstone Strategic Trust (the “Trust”), and by a separate vote, the Independent Trustees of the Trust, considered and approved a new sub-advisory agreement (the “New Sub-Advisory Agreement”) between Touchstone Advisors, Inc. (“Touchstone”) and Analytic Investors, LLC (“Analytic”) with respect to Touchstone Dynamic Equity Fund (the “Fund”), a series of the Trust, to be effective on January 1, 2013. At the meeting, Touchstone informed the Board that the current sub-advisory agreement, dated April 16, 2012, as amended, between Touchstone and Analytic (the “Prior Sub-Advisory Agreement”) was expected to be automatically terminated on or about December 31, 2012 due to an expected change in control at Analytic. Analytic was expected to undergo a restructuring in which its employees would purchase the shares owned by Old Mutual Intermediary, LLC, a subsidiary of Old Mutual (US) Holdings, Inc., which was the majority owner of Analytic. Touchstone recommended the Fund continue to use Analytic as its sub-advisor. Touchstone reported the change in control would not affect Analytic’s management of the Fund. Analytic’s management team and key investment personnel would continue to manage the Fund and Analytic would operate the Fund under the same terms and conditions as previously agreed to by the Board.

 

Touchstone and Analytic provided the Board with various written materials in advance of the meeting to assist with the Board’s consideration of Analytic as sub-advisor to the Fund. Touchstone provided written and oral information stating the basis for its recommendation to continue engaging Analytic. The information also included details regarding Analytic’s: (a) investment philosophy and investment process; (b) investment management services proposed to be provided to the Fund; (c) investment management personnel; (d) operating history, infrastructure, and financial condition; (e) proposed sub-advisory fee that would be paid to Analytic by Touchstone;

 

73
 

 

Other Items (Unaudited) (Continued) 

 

and (f) reputation, expertise, and resources as an investment advisor. The Board then discussed the written materials that it received before the meeting and all other information that it received at the meeting.

 

In approving the New Sub-Advisory Agreement, the Board considered various factors, among them: (1) the nature, extent, and quality of services to be provided to the Fund, including the personnel who would be providing such services; (2) the Sub-Advisor’s proposed compensation; (3) the Sub-Advisor’s past performance; and (4) the terms of the New Sub-Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.

 

Nature, Extent, and Quality of Services Provided; Investment Personnel. The Board considered information provided by Touchstone regarding the services to be provided by Analytic. The Board considered Analytic’s level of knowledge and investment style. The Board reviewed the experience and credentials of the investment personnel who would continue to be responsible for managing the investment of portfolio securities with respect to the Fund. The Board also noted that it is familiar with Analytic, as the sub-advisor already served as investment manager to the Fund. The Board also recognized that there would be no personnel change relating to the management of the Fund. The Board also took into account certain information and materials it received and considered in connection with its initial approval of the Prior Sub-Advisory Agreement between Touchstone and Analytic with respect to the Fund at a meeting held in February 2012.

 

Analytic’s Compensation. The Board took into consideration the financial condition of Analytic and any direct and indirect benefits to be derived by Analytic and its affiliates from Analytic’s relationship with the Fund. In considering the anticipated level of profitability to Analytic and its affiliates, the Board noted the proposed contractual undertaking of Touchstone to maintain expense limitations for the Fund. The Board also noted that the sub-advisory fee under the New Sub-Advisory Agreement would be paid by Touchstone out of the advisory fee that Touchstone receives from the Fund, and that the sub-advisory fee is negotiated at arm’s length. Finally, the Board noted that the proposed sub-advisory fee schedule contains breakpoints that would reduce the sub-advisory fee rate on Fund assets above specified levels.

 

The Board also considered certain comparative fee information concerning the current sub-advisory fee paid to Analytic for managing the Fund. The proposed sub-advisory fee was identical to the fee previously approved by the Board and shareholders of the Fund. The Board considered the amount of the advisory fee to be retained by Touchstone and the amount to be paid to Analytic with respect to the various services to be provided by each. Finally, the Board noted that from April 16, 2012 through the fiscal year end July 31, 2012, Analytic received from Touchstone sub-advisory fees totaling $149,381. Based upon their review, theTrustees concluded that the Fund’s proposed sub-advisory fee under the New Sub-Advisory Agreement was reasonable in light of Analytic’s services to the Fund.

 

Fund Performance. The Board also considered Analytic’s investment performance and the Fund’s performance under Analytic’s management. The Trustees reviewed Analytic’s investment performance across various sectors, highlighting its strong performance in the large-cap value universe. The Board was mindful of Touchstone’s focus on the performance of sub-advisors, including Analytic, and Touchstone’s ways of addressing underperformance.

 

Conclusion. The Board reached the following conclusions regarding the New Sub-Advisory Agreement: (a) Analytic is qualified to continue managing the Fund’s assets in accordance with the Fund’s investment goal and policies; (b) Analytic maintains an appropriate compliance program; (c) the Fund’s proposed sub-advisory fee is reasonable in relation to the fees of similar funds and the services to be provided by Analytic; and (d) Analytic’s proposed investment strategies are appropriate for pursuing the investment goal of the Fund. In considering the approval

 

74
 

 

Other Items (Unaudited) (Continued) 

 

of the New Sub-Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee attributed different weights to the various factors. Based on its conclusions, the Board determined that approval of the New Sub-Advisory Agreement was in the best interests of the Fund and its shareholders.

 

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PRIVACY PROTECTION POLICY

 

We Respect Your Privacy

 

Thank you for your decision to invest with us. Touchstone and its affiliates have always placed a high value on the trust and confidence our clients place in us. We believe that confidence must be earned and validated through time. In today’s world, when technology allows the sharing of information at light speeds, trust must be reinforced by our sincere pledge to take the steps necessary to ensure that the information you share with us is treated with respect and confidentiality.

 

Our Pledge to Our Clients

 

•We collect only the information we need to service your account and administer our business.

 

•We are committed to keeping your information confidential and we place strict limits and controls on the use and sharing of your information.

 

•We make every effort to ensure the accuracy of your information.

 

We Collect the Following Nonpublic Personal Information About You:

 

•Information we receive from you on or in applications or other forms, correspondence, or conversations, including, but not limited to, your name, address, phone number, social security number, assets, income and date of birth; and

 

•Information about your transactions with us, our affiliates, or others, including, but not limited to, your account number and balance, payment history, parties to transactions, cost basis information, and other financial information.

 

Categories of Information We Disclose and Parties to Whom We Disclose

 

We do not disclose any nonpublic personal information about our current or former clients to nonaffiliated third parties, except as required or permitted by law.

 

We Place Strict Limits and Controls on the Use and Sharing of Your Information

 

•We restrict access to nonpublic personal information about you to authorized employees who need the information to administer your business.

 

•We maintain physical, electronic and procedural safeguards that comply with federal standards to protect this information.

 

•We do not disclose any nonpublic personal information about our current or former clients to anyone, except as required or permitted by law or as described in this document.

 

•We will not sell your personal information to anyone.

 

We May Provide Information to Service Your Account

 

Sometimes it is necessary to provide information about you to various companies such as transfer agents, custodians, broker-dealers and marketing service firms to facilitate the servicing of your account. These organizations have a legitimate business need to see some of your personal information in order for us to provide service to you. We may disclose to these various companies the information that we collect as described above. We require that these companies, including our own subsidiaries and affiliates, strictly maintain the confidentiality of this information and abide by all applicable laws. Companies within our corporate family that may receive this information are financial service providers and insurance companies. We do not permit these associated companies to sell the information for their own purposes, and we never sell our customer information.

 

This policy is applicable to the following affiliated companies: Touchstone Funds Group Trust, Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone Tax-Free Trust, Touchstone Variable Series Trust, Touchstone Institutional Funds Trust, Touchstone Securities, Inc.* and W&S Brokerage Services, Inc.

 

* Touchstone Securities, Inc. serves as the underwriter to the Touchstone Funds.

 

A Member of Western & Southern Financial Group®

 

The Privacy Protection Policy is not part of the Semi-Annual Report. 

 

78
 

 

 

 

 

 

Touchstone Investments

 

Distributor 

Touchstone Securities, Inc.*

303 Broadway 

Cincinnati, Ohio 45202-4203 800.638.8194

www.touchstoneinvestments.com

 

Investment Advisor 

Touchstone Advisors, Inc.* 

303 Broadway 

Cincinnati, Ohio 45202-4203

 

Transfer Agent 

BNY Mellon Investment Servicing (US) Inc. 

4400 Computer Drive 

West borough, MA 01581

 

Shareholder Service 

800.543.0407

 

* A Member of Western & Southern Financial Group

 

TSF-54CC-TST-SAR-1306

 

 
 

 

Item 2. Code of Ethics.

 

Not applicable.

  

Item 3. Audit Committee Financial Expert.

 

Not applicable.

  

Item 4. Principal Accountant Fees and Services.

 

Not applicable.

  

Item 5. Audit Committee of Listed registrants.

 

Not applicable.

 

Item 6. Investments.

 

(a)Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.

 

(b)Not applicable.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not applicable.

  

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

Not applicable.

 

 
 

  

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable.

 

Item 10. Submission of Matters to a Vote of Security Holders.

 

There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

  

Item 11. Controls and Procedures.

 

(a)The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

  

Item 12. Exhibits.

 

(a)(1)Not applicable.

 

(a)(2)Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

 

(a)(3)Not applicable.

 

(b)Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

 

 
 

 

SIGNATURES

 



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant) Touchstone Strategic Trust  

 

By (Signature and Title)* /s/ Jill T. McGruder  
  Jill T. McGruder, President  
  (principal executive officer)  

 

Date 08/29/13  

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)* /s/ Jill T. McGruder  
  Jill T. McGruder, President  
  (principal executive officer)  

 

Date 08/29/13  

 

By (Signature and Title)* /s/ Terrie A. Wiedenheft  
  Terrie A. Wiedenheft, Controller and Treasurer  
  (principal financial officer)  

 

Date 08/29/13  

 

 

 

* Print the name and title of each signing officer under his or her signature.

 

 
 

 EX-99.CERT 2 v353785_ex99-cert.htm CERTIFICATIONS

 

Certification Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act

 

 

 

I, Jill T. McGruder, certify that:

 

1.I have reviewed this report on Form N-CSR of Touchstone Strategic Trust;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
 
 

 

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: 08/29/13     /s/ Jill T. McGruder  
        Jill T. McGruder, President  
        (principal executive officer)  

 

 

 

 
 

 

Certification Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act

 

 

 

I, Terrie A. Wiedenheft, certify that:

 

1.I have reviewed this report on Form N-CSR of Touchstone Strategic Trust;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
 
 

 

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: 08/29/13     /s/ Terrie A. Wiedenheft  
        Terrie A. Wiedenheft, Controller and Treasurer  
        (principal financial officer)  

 

 

 
 

 EX-99.906 CERT 3 v353785_ex99-906cert.htm CERTIFICATIONS

Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act

 

I, Jill T. McGruder, President of Touchstone Strategic Trust (the “Registrant”), certify that:

 

1.The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

 

Date: 08/29/13     /s/ Jill T. McGruder  
        Jill T. McGruder, President  
        (principal executive officer)  

 

I, Terrie A. Wiedenheft, Controller and Treasurer of Touchstone Strategic Trust (the “Registrant”), certify that:

 

1.The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

 

Date: 08/29/13     /s/ Terrie A. Wiedenheft  
        Terrie A. Wiedenheft, Controller and Treasurer  
        (principal financial officer)  

 

 

 

 
 

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